Webb Resolutions Ltd v JV Ltd (t/a Shepherd Chartered Surveyors)

This judgment concerns an application for costs by the Defendants following an order that I made at a case management conference held on 23 November 2012. The Defendants seek to recover the costs that they claim were incurred unnecessarily as a result of the unreasonable conduct of the Claimants’ solicitors, Rosling King, in refusing to agree the terms of an order in the form that was directed at the CMC.

The Claimants are assignees of a centralised mortgage lender and sue the Defendant surveyors in respect of three allegedly negligent valuations on the basis of which it advanced loans to the borrowers. In each case the lender sustained a loss. This action is one of many such claims brought by the Claimants against surveyors. Another was Webb Resolutions Ltd v E. Surv Ltd [2012] EWHC 3653 (TCC), which was decided by Coulson J in a judgment handed down on 20 December 2012.

The issues raised by this claim include the validity of the various assignments (the chain is not the same in all three cases), whether or not the lender was negligent, whether the lender failed to take reasonable steps to mitigate its loss and, of course, whether the individual valuations were made negligently.

At the CMC I took the view, rightly or wrongly, that the issues relating to the validity of the assignments and negligence in relation to the lending should be dealt with first and the issues in relation to the actual valuations should then be heard separately (if they arose). My reason for making this order was that I was told at the CMC, and I accepted, that there were genuine issues in relation to the validity of the assignments. If those issues were decided in favour of the Defendants, then that would be an end of the particular claim.

I was told also that the same witness would deal with issues of fact in relation to the lending in all three cases and that there would be one expert on each side in relation to lending practice. Whilst it is of course possible that the Claimants’ claims against the Defendants will fail in all three cases, making the issues in relation to the lending irrelevant, it seemed to me that it would be more cost-effective and therefore proportionate to have the lending issues in all three cases dealt with together at the same time as the assignment issues. As the judgment of Coulson J in Webb Resolutions v E. Surv shows, in order to determine whether or not the loans were made negligently the circumstances of the actual valuation and its outcome are irrelevant. Those matters only come into play at the final step, if reached, which involves an assessment of the relative culpability and/or causative potency of the negligence of the surveyor on the one hand and the lender on the other. It is perhaps worth pointing out that in the Webb Resolutions case Coulson J dealt with this aspect in one paragraph. However, I see no reason why the judge considering the valuation issues could not determine the degree of contributory negligence in the light of the findings made in the judgment on the first issue. If, as I am sure they will be, those findings are made in terms that are as clear and comprehensive as those in the judgment of Coulson J, I can see no reason why this should not be a perfectly practical approach. After all, the Court of Appeal frequently adjusts an apportionment in relation to contributory negligence without having heard the evidence.

During the hearing of the CMC I canvassed this approach with the parties, who were then at odds about the course that this litigation should take. I allowed the parties a few minutes to consider my proposals and to take instructions. Both parties returned to court and told me that, with some qualifications, they were prepared to agree to the course that I had proposed. The remainder of the hearing was then concerned with the details of the directions and I gave a short judgment giving my reasons for taking the course that I did.

As is the usual practice in the Technology and Construction Court, I asked the Claimants’ counsel and solicitors to prepare a draft order for agreement by those acting for the defendants. In the ordinary course of events, this process almost invariably results in the production of an agreed order which is then lodged with the court for approval by the judge. In my experience it happens occasionally that the parties cannot agree on precisely what the judge directed (or intended to direct) in relation to one or more particular matters, in which case the point or points in issue are usually raised with the court in correspondence and the matter is resolved by the judge without a hearing.

However, what happened in this case was quite different and, in my experience, unique. Three days after the hearing the Claimants’ counsel sent a draft order to the Defendants’ counsel that bore almost no relation to what I had directed. In effect, the draft order provided for disclosure, exchange of witness statements and expert evidence on all issues in the case after which there was to be a further CMC to consider the precise scope of the issues to be determined at the first hearing. By contrast, the directions that I had given limited disclosure and the exchange of evidence to the assignment and lending issues. This was, as I have already explained, intended to avoid the costs of dealing with the valuation issues in case the judgment at the first trial disposed of one or more of the claims altogether.

There was some delay before the Defendants’ counsel responded, but on 10 December 2012 he sent an e-mail to the claimant’s solicitors apologising for the delay in responding and explaining that the Defendants’ counsel and solicitors did not agree that the Claimants’ draft order properly reflected what the judge had ordered. Accordingly, he enclosed a draft order which, in the Defendants’ view, reflected accurately what had in fact been ordered at the CMC.

On 21 December 2012 Rosling King returned the Defendants’ draft with extensive amendments. The Christmas break then intervened. Rosling King chased the Defendants’ solicitors, RPC, for a response on 7 January 2013 and, on 11 January, RPC responded saying that they could not agree the Claimants’ amendments.

On 16 January 2013 Rosling King wrote to the court explaining that they were "experiencing great difficulty in drafting the order in a way which will give effect to the court’s wishes but will avoid duplication of time and costs". The letter also referred to the decision of Coulson J which was said (correctly) to provide guidance on contributory negligence in this type of case.

I regard this statement as disingenuous. Rosling King were having no such difficulty. They were, quite simply, trying to persuade the Defendants to agree to an order that was in different terms to that which had been directed by the judge. No application had been made to vary the order (under the provision giving permission to restore) or for permission to appeal (although an appeal would have faced difficulties since the Claimants had effectively consented to the terms of the order).

RPC responded to this in a letter to the court dated 21 January 2013. The letter enclosed their proposed draft order. On 4 February 2013 my clerk, on my behalf, replied to the parties to say that I considered that the order should be in the form of the draft prepared by RPC and that, whilst it was open to the Claimants to apply to vary the order, any such application would have to be made on compelling grounds.

In spite of his clear indication from the court in relation to the form of the order, Rosling King still refused to agree to an order in the form proposed by RPC. Indeed, consent was withheld until 5 March 2013, and was then given only to avoid the costs of attending the CMC, which had been restored for hearing on 8 March 2013.

Because I was concerned at the way in which the Claimants had refused to agree the order until the last minute and because, by the afternoon of the day before the CMC, no agreed order had been lodged with the court, I directed that the hearing on 8 March 2013 was to go ahead.

In response to the Claimants’ offer to agree to an order in the form proposed by the Defendants, RPC invited the Claimants to pay their costs "incurred wholly as a result of you not agreeing to the order made by the court, total £5,960". Rosling King would not agree to this. They pointed out also that the order in the form that had now been agreed included a provision that the costs of the CMC on 23 November 2012 and of the application made by the Defendants on 13 November 2012 should be reserved to the judge hearing the first trial. In this they were correct. However, when making that direction in the order it had not crossed my mind that it would take 3½ months to agree the terms of the order and that one party would seek to introduce fundamental changes to it. I therefore made an order at the hearing on 8 March 2013 that paragraph 7 of the order of 23 November 2012 was to be varied so that the costs incurred in agreeing and/or drawing up the terms of the order would be excluded from the costs to be reserved to the trial judge. I then indicated that I would deal with those costs.

Mr de Verneuil Smith, who appeared for the Claimants (but who was not instructed until early this year), submitted that there should not be any order for costs in favour of the Defendants because, first, such costs formed part of the costs which were reserved to the trial judge. I have now already dealt with that point. Second, the Defendants should have made a claim for those costs much sooner than they did and, in any event, before the issue about the form of the order had been determined by the court on 4 February 2013. Third, that the Claimants’ conduct was not unreasonable. Fourth, that it was disproportionate for the Defendants to have pressed for the CMC solely in order to have their costs determined. That, he said, could have been done on paper.

Whilst Mr de Verneuil Smith is to be commended for the moderation and care in which he presented his submissions, he was seeking to defend the indefensible and his submissions must be rejected. I will deal with his second to fourth points compendiously.

If a party is charged with drawing up an order it is the duty of its solicitors and counsel to produce a draft that fairly reflects what they think the judge decided or directed. Save for the most complicated directions, this seldom presents any difficulty. What Rosling King did in this case was to produce an order that reflected the directions that they or their clients would like to have, and not the directions that the court in fact ordered. That is wholly unacceptable: it is not just unreasonable, it is verging on the contumelious (to use an old fashioned, but completely apt, adjective). Rosling King's professed difficulty in the drafting of the order was nothing of the sort: their difficulty was in persuading RPC to agree to an order in terms which had not been made. RPC were wholly justified in resisting this and, indeed, their version of the order reflected what I had ordered as Rosling King, by their final and unwilling consent to it, must be taken to have accepted.

Whilst I agree with Mr de Verneuil Smith that RPC could have indicated that they wished to make a claim for costs sooner than they did, it must be remembered that this was a developing situation and they were not to know until the end just how intransigent their opponents would prove to be. As to the point about insisting on the restored CMC, the hearing in fact went ahead at my direction for the reasons that I have already given.

In my judgment, what occurred in this case must not happen again. Solicitors and counsel are to give effect to court orders; they are not to attempt to manipulate them to their own or their client’s perceived advantage. I see no reason at all why the Defendants should have to pay the costs that were quite unnecessarily incurred as a result of the Claimants’ manoeuvres. However, as Mr Fowler, who appeared for the Defendants, has I think accepted, it would not be right for the Defendants to recover all the costs incurred in dealing with the drafting of the order because some costs would have been incurred in any event even if all had gone smoothly.

The Defendants now seek to recover £8,609, being £5,859 of RPC’s costs and £2,750 in respect of counsel's fees. However, it is accepted that £525 of RPC’s costs and £575 of counsel's fees reflect sums that would probably have been incurred in any event. Those figures seem reasonable and I am prepared to accept them. That leaves a claim for £5,334 in respect of RPCs fees and £2,175 in respect of counsel's fees, both of which include the costs of attending the restored CMC on 8 March 2013.

In my judgment, the Defendants are entitled to recover the costs which were unnecessarily incurred by their solicitors and counsel in their protracted attempts to obtain agreement to an order in the form that had been directed by the court. However, I consider that the fees claimed by RPC probably represent a little more than the true amount of the costs unreasonably incurred and so I propose to reduce the sum claimed of £5,334 to £4,750. However, the fees said to have been unnecessarily incurred by counsel of £2,175 seem to me to be reasonable in the circumstances.

Accordingly, I direct that the Claimants are to pay £6,925 to the Defendants’ solicitors within 14 days. Otherwise, there is to be no order in relation to the costs of the hearing on 8 March 2013 or the costs of agreeing the terms of the order following the CMC on 23 November 2012, save that the balance of the £8,609 claimed by RPC (£1,684) are to be Defendants’ costs in the case.