Cockell (t/a Cockell Building Services) v Holton

This judgment is concerned with the costs of an application by the Defendant (“Mr. Holton”) to discontinue against the Second Defendant to the Counterclaim, Mr. Keith Cockell. Mr. Holton submits that the usual order that the discontinuing claimant should pay the costs of the defendants should not apply in this case.

The claim is bought by Mr. Simon Cockell for payment of sums that he claims are due to him in respect of work that he carried out to repair fire damage to Mr. Holton’s Grade II listed house. The fire occurred in December 2010. By the counterclaim Mr. Holton alleges that the work was so defectively carried out that it has had to be redone. However, Mr. Holton also alleged that Keith Cockell, Simon Cockell’s father, was in partnership with his son and was therefore also liable for the defective work.

The case has a very unhappy history. Simon Cockell alleges that, under duress from Mr. Holton, he signed an admission that he had been overpaid by £238,000. In addition, he says that his partner, also acting under duress, was persuaded to grant Mr. Holton a charge over a property that she owned. Indeed, it is alleged that Mr. Holton threatened to kidnap her children if she did not sign the charge. Although these allegations are strenuously denied by Mr. Holton they have had the inevitable result that this litigation has been conducted against a background of strong ill feeling.

Mr. Holton says that he began to suspect that he was being overcharged by Simon Cockell during the latter part of 2011 after the insurers had instructed Simon Cockell to stop work on site on account of the rising costs. In December 2011 or January 2012 he instructed a Mr. David Kendall, a partner in a firm of accountants, Impenza, to investigate the charges for the building work.

It emerged later, although seemingly not during the course of this investigation, that Simon Cockell, who traded under the name Cockell Building Services, used a bank account that was in the name “Keith Cockell, trading as Cockell Building Services”. Mr. Holton has said that he first became aware of this in March 2013.

However, Mr. Holton discovered earlier, apparently in January 2012, that Simon Cockell was an undischarged bankrupt, having been declared bankrupt in 2003. On the basis, essentially, of this knowledge, Mr. Holton concluded that Simon Cockell was trading in partnership with his father, Keith, and not as a sole trader, which is what he assumed at the time when Cockell Building Services were engaged to carry out the repairs to Mr. Holton’s house.

Simon Cockell issued proceedings against Mr. Holton on 9 December 2013, and Particulars of Claim were served on 13 March 2014. Mr. Holton’s Defence and Counterclaim was served on 14 May 2014. It was to that Counterclaim that Keith Cockell was joined as a second defendant, on the ground that Simon Cockell carried on business in partnership with his father. That joinder did not come completely out of the blue; it had been preceded by some cursory correspondence between solicitors acting for Mr. Holton and solicitors acting for Keith Cockell in March 2014. In effect, the solicitors acting for Mr. Holton provided no details of the allegation beyond a bare assertion that evidence in their client’s possession showed that Keith Cockell was “… involved in the Business known as Cockell Building Services”.

On 3 October 2014 Keith Cockell made an application for summary judgment against Mr. Holton. The basis for the application was that the allegation that Keith Cockell had carried on business in partnership with his son was bound to fail. At a case management conference which took place on 10 October 2014 it was directed that the date fixed for the hearing of the application for summary judgment, 31 October 2014, should be vacated and that there should be a fresh hearing for: i) the hearing of the application for summary judgment; and/or ii) if necessary, a trial of the preliminary issue of whether Simon and Keith Cockell carried on business in partnership at the material time.

Directions were also given, in relation to the re-listed hearing concerning the partnership issue, for disclosure by 31 October 2014 and the exchange of witness statements on 21 November 2014. The hearing itself was to take place on the first available date after 1 December 2014. It was subsequently fixed for 23 January 2015.

On 19 November 2014 Mr. Holton made an application against Simon and Keith Cockell for extensive specific disclosure directed to the issue of whether or not they were in partnership. Against Simon Cockell the disclosure sought included, for example: all correspondence relating to any account in the name of Keith Cockell, or Keith Cockell trading as Cockell Building Services, and other variants of the name; all correspondence with his accountant in relation to the business of Cockell Building Services; all documents dealing with his VAT registration and returns, income tax returns and all correspondence with HMRC, HMC&E or the Inland Revenue; all correspondence with any third party dealing with the business of Cockell Building Services or Simon Cockell Building Services and Design; statements or other documents provided to the Official Receiver during the period of his “insolvency restriction” concerning his employment or earnings; all business insurance applications, certificates and correspondence with insurers or brokers.

Against Keith Cockell similar classes of documents were sought, although to a slightly narrower extent. Before the application was made a solicitor, a Mr. Herbert, who was employed by Keith Cockell’s solicitors and who had been dealing with Keith Cockell’s affairs for 20 years, made a witness statement in which he said that he had never known Keith Cockell to be in business partnership with his son, whether as Cockell Building Services or under any other style or name. Had there been such a partnership, he would have expected that he would have been made aware of it.

The application was heard by Akenhead J on 12 December 2014. He ordered Simon and Keith Cockell to give further disclosure but on unusual terms. The terms were that the disclosure was to be limited to certain named lawyers in Mr. Holton’s legal team against an undertaking by those lawyers that they would not disclose the contents of the documents to anyone else, including their client Mr. Holton, without either the consent of Simon and Keith Cockell or an order of the court. An order in this form is not usually made unless the court has strong reservations about the likely relevance of the disclosure or the documents are unusually sensitive or confidential. Akenhead J reserved the costs of the application, no doubt on the basis that they should only be determined in the light of the relevance of the documentation that emerged.

It is a matter of record that Mr. Holton’s solicitors have not applied for permission to inform their client of the contents of any of the documents disclosed pursuant to the order of Akenhead J or to rely on any such documents. That speaks for itself.

On 20 January 2015 Mr. Holton applied for permission to discontinue his claim against Keith Cockell, but on the basis that Simon and Keith Cockell pay all his costs of pursuing the claim against Keith Cockell. No-one disputes that the discontinuance should be allowed: however, Simon and Keith Cockell strongly oppose the application in relation to costs.

On 21 January 2015 I directed that the parties were to make a written submissions in relation to costs and that any party should say if it objected to the question being determined on paper. Each of the parties has prepared detailed written submissions and none has requested an oral hearing although, without pressing the point, counsel for Keith Cockell submitted that an oral hearing might have been preferable since there were a number of possible permutations that might have to be addressed that could not necessarily be anticipated in written submissions.

I have decided that the very full submissions made by the parties do enable me to deal with the question of costs without an oral hearing.

CPR 38.6(1) provides as follows:

“Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which the notice of discontinuance was served on the defendant.”

Counsel for Mr. Holton has helpfully referred me to a summary of the relevant principles governing the award of costs following discontinuance that were given by HHJ Waksman QC in Teasdale v HSBC Bank plc [2010] EWHC 612 (QB). Judge Waksman’s summary, at paragraph 7 of his judgment, was to the following effect:

Both Simon and Keith Cockell submit that they should have their costs paid by Mr. Holton. More specifically:

As to the undertakings given in relation to the disclosure application, Keith Cockell submits that the undertakings given by Mr. Holton’s lawyers in relation to the documents that he disclosed should remain in place and that the documents disclosed (and, presumably, any copies of them) should be returned or destroyed.

Simon Cockell takes a similar position, but submits that any documents disclosed under the terms of the undertaking which are relevant to the other issues in the action should be re-disclosed, having been redacted as appropriate.

The position adopted by Simon and Keith Cockell is really quite simple. They say that there was never any basis for the allegation of partnership in the first place and so, unsurprisingly, nothing produced on disclosure has altered the position. The suggestion is that once Mr. Holton discovered that Simon Cockell was an undischarged bankrupt he wanted to find a basis for joining Keith Cockell to the action because he appeared to be a man of substantial means.

By contrast, Mr. Holton submits that he should not be ordered to pay the costs of either Simon or Keith Cockell. He submits that Simon Cockell should pay the costs of both himself and Keith Cockell. Alternatively, he submits that there should be no order for costs as against him.

So far as the undertakings are concerned, he does not put forward any proposals that are significantly different from those suggested by Simon and Keith Cockell.

Mr. Holton’s argument, stripped to its essentials, proceeds as follows: first, that he was fully justified in bringing the action against Keith Cockell in the first place, “… there being ample evidence to support his case”. Second, the true position about the relationship between Simon and Keith Cockell was not fully or properly explained or clear until service of witness statements on 9 January 2015 and full disclosure which did not take place until 19 January 2015 (in breach of the order made on 12 December 2014). Third, Simon Cockell, and to a lesser extent Keith Cockell, went out of their way to give the impression that they were trading together. This was done by opening bank accounts for Simon Cockell’s business in the name of his father (without his consent) and by opening trade accounts in the name of a business that Keith Cockell was not in fact operating.

So Mr. Holton submits that since there was no full and proper explanation of the relationship between Keith and Simon Cockell until, at the earliest, the delivery of witness statements on 9 January 2015, and the disclosure given up to that date was undoubtedly incomplete (and, it is submitted, in Simon Cockell’s case, deliberately evasive) Simon and, to a lesser extent, Keith Cockell are the authors of their own misfortune.

Mr. Holton’s witness statement of 20 January 2015 refers to four “… matters that principally led to the conclusion and supported the view that I adopted”, namely the view that Simon Cockell and his father, Keith Cockell, had been trading as partners. Those matters were:

The first and second of these points are really to the same effect. The third does not, it seems to me, go anywhere towards establishing a partnership; rather it suggests that Simon Cockell might have used accounts or facilities in the name of his father because, as a bankrupt, he could not open such accounts or arrange facilities in his own name.

In relation to the fourth of these, one example given by Mr. Holton is the existence of a credit account with Building and Plumbing Supplies Ltd in the name of “Keith Cockell trading as Cockell Building Services”. On the application form for a credit account there are various boxes to describe the business type. The one ticked is marked “Sole Trader”: the box marked “Partnership” was left blank. Overleaf the form was signed by Simon Cockell alone, just below an instruction that said “In the case of partnerships ALL partners must sign”.

In the light of the way in which this credit application form was completed, it was hardly a promising start for an allegation that Simon Cockell was trading in partnership with his father. Mr. Holton also relies on the fact that there was a further trade account with Jewsons in the name of Cockell Building Services, and that Keith Cockell has accepted that he signed a guarantee for this account. However, as Keith Cockell has pointed out, if he was a partner he would be liable in any event and there would have been no need for a guarantee. Again, this does not take Mr. Holton’s case forward.

But rather more significantly, none of these matters has, in my view, in any way been cast in a fresh light or undermined by the content of witness statements subsequently given by Simon and Keith Cockell or by the subsequent disclosure given in the action, which Mr. Holton says is what caused him to discontinue the claim against Keith Cockell.

If the matters relied on Mr. Holton were, as a matter of law and fact, sufficient to support the allegation that between 2010 and 2012 there was a partnership between Simon and Keith Cockell, then that position has not altered.

However, in my judgment those matters were never sufficient to support an allegation that Simon and Keith Cockell traded in partnership, still less so once it had been explained (as it was in paragraph 15 of the Reply) that the account was used by Simon Cockell because he was an undischarged bankrupt and could not obtain a bank account in his own name. Mr. Holton now says (at paragraph 56 of a witness statement dated 9 January 2015) that his response to this explanation was to say: “… this sounds very unlikely to me indeed”.

It is in my view relevant that, although in late-2011 Mr. Holton had instructed accountants to investigate the level of charging by Simon Cockell, there was no suggestion by them in their detailed report dated January 2012 that Simon Cockell was in partnership with Keith Cockell. Furthermore, since Mr. Holton appears to be saying in his witness statement dated 9 January 2015 that he discovered in January 2012 that Simon Cockell was an undischarged bankrupt and that he then concluded that he must been in partnership with his father (see paragraphs 35-37), one might have expected him to have discussed that conclusion with those accountants, whose report was produced at about the same time.

On 16 December 2013 Mr. David Kendall, the same accountant who had carried out the 2011/2012 investigation, wrote to the Insolvency Service making a series of allegations regarding the financial conduct of Simon Cockell and, to a lesser extent, Keith Cockell. These included allegations of money laundering. The letter ran to over five closely typed pages. It is noteworthy, as Keith Cockell’s counsel has pointed out, that nowhere in this letter is there any suggestion that there was a partnership between Simon and Keith Cockell, even though Mr. Holton maintains that he appreciated that they were in partnership about nine months earlier, in March 2013.

There is an inconsistency in Mr. Holton’s evidence as to when he first appreciated that Simon and Keith Cockell were in partnership. I have already mentioned paragraphs 35-37 of his witness statement of 9 January 2015, from which the only possible inference is that in January 2012 Mr. Holton suspected that Simon and Keith Cockell were in partnership. In broad terms this is consistent with paragraph 3 of Mr. Holton’s Defence where it is alleged that he discovered on about 15 February 2012 that Simon and Keith Cockell carried on business in partnership. Yet at paragraph 24 of his witness statement dated 9 January 2015 he says that he did not realise until 19 March 2013 that Simon and Keith Cockell were in partnership.

Having read all the documents to which I have been referred (and several to which I was not referred), I am in no doubt that the frantic efforts on the part of Mr. Holton to obtain disclosure were nothing but a Micawberish search in the hope that something would turn up. Or, as counsel for Simon Cockell put it in his written submissions, it was a fishing expedition that yielded no fish.

Mr. Holton’s witness statement of 9 January 2015 pointed to one further fact that was said to support the existence of a partnership: that Keith Cockell was seen driving a vehicle owned, apparently, by his son (see paragraphs 25 and 26).

The other grounds that were put forward in Mr. Holton’s witness statement of 9 January 2015 in support of the existence of a partnership were, in reality, nothing more than matters of speculation. These included the following:

It is Mr. Holton’s case that the true position in relation to Simon Cockell’s business activities was not fully or properly explained or made clear until service of witness statements (on 9 January 2015) and full disclosure which, it is said, did not take place until 19 January 2015. Mr. Holton submits that the reason why the allegation of the existence of a partnership was made in the first place was because Simon Cockell, and to a lesser extent Keith Cockell, “… went out of their way to give the impression that he and his father were trading together”.

Whatever one may think about the use by Simon Cockell of his father’s name and bank accounts in order to carry on business whilst an undischarged bankrupt, to suggest that he and his father went out of their way to give the impression that they were trading together, i.e. in partnership, seems to me to be verging on the ludicrous. At least, as from mid June 2014, I see no reason why Mr. Holton should have doubted that they did what they did for the reason given at paragraph 15 of the Reply.

The difficulty facing Mr. Holton’s complaint about the Cockells’ business activities not being clear or fully explained until very late in the day is that, so far as I can tell, at no point until service of his witness statement dated 9 January 2015 did Mr. Holton alert either of the Cockells to the concerns that he raised in that witness statement. One might have expected some of these unexplained concerns to have been raised in the application for specific disclosure, but the witness statement that supported that application did not mention them.

Until Mr. Holton served his witness statement dated 9 January 2015 Simon and Keith Cockell were facing the bare assertion, at paragraph 4 of the Defence, that Simon Cockell was “… an undischarged bankrupt and carried on business in partnership with his father”. In responding to applications for disclosure they found themselves having to prove a negative.

In relation to Mr. Holton’s application for specific disclosure, paragraph 67 of his witness statement of 9 January 2015 contains a surprising assertion. There Mr. Holton said that he appreciated that no document had been disclosed to his solicitors which said that there was a partnership, for example tax returns, but that this was because the Cockells were refusing to disclose such documents. Curiously, he then goes on to say that he had been advised by his lawyers that there did not need to be any such documents and so he “… would not expect there to be any”. If this statement is true, then one wonders on what basis he thought that making applications for disclosure would produce any relevant documents. He said: “The Cockells seem to have been aware of difficulties for a bankrupt of obtaining credit and are reluctant to put down the true position on paper”.

The reality is that the position taken by Simon and Keith Cockell throughout is that set out at paragraphs 4 and 15 of the Reply. It was not a position that allowed for much embellishment or clarification.

In my judgment, there was never any good basis for making or, once made, for pursing the allegation that Keith Cockell was trading in partnership with his son.

I accept that the fact that Simon Cockell was using a bank account in the name “Keith Cockell trading as Cockell Business Services” would have raised the question of whether or not Keith Cockell was an undisclosed partner in Simon Cockell’s business. But since by the time of the litigation in 2014 Mr. Holton knew that Simon Cockell had been made bankrupt in 2003 and had not been discharged by the time he carried out the work at Mr. Holton’s house, it was also an obvious possibility that Simon Cockell was conducting his business through a bank account in the name of his father because he was not able to open or operate a bank account in his own name.

That was the explanation given very clearly in paragraph 15 of the Reply and Defence to Counterclaim.

The letter written by Mr. Holton’s solicitors on 14 March 2014, which was the first indication to Keith Cockell that he was said to have been “involved” in his son’s business, was thoroughly unsatisfactory. As I have already pointed out, it made no mention of the existence of a partnership, still less why such a partnership might have existed, so it was hardly surprising that Keith Cockell solicitors responded with a simple denial of the allegation and a request for further details. A further letter, dated 31 March 2014, to Simon Cockell’s solicitors, written in response to a letter of claim dated 3 March 2014, did no better. That said simply that the business known as Cockell Building Services was “… a Business conducted by Simon Cockell and Keith Cockell, his father”. Although that letter ran to nearly 100 numbered paragraphs, there was no reference to the bank account which was subsequently said to be one of the sheet anchors of Mr. Holton’s belief that there was a partnership. This is, to say the least, surprising.

Thereafter, no amount of denials by Simon and Keith Cockell that a partnership existed cut any ice with Mr. Holton or his solicitors. This did not change after witness statements by two solicitors who acted on behalf of Keith Cockell asserted that they were unaware of the existence of any partnership. The statement of Simon Pressdee explained why Simon Cockell operated the bank account in the name of his father, namely that as an undischarged bankrupt he was unable to open an account in his own name. Exhibited to that witness statement was a short letter from Simon Cockell’s accountant, a Mr. David Phillips, which made it clear that Keith Cockell was not connected with his son’s business.

Whilst I agree with the observation that this letter, coming as it did from an accountant, was couched in rather unusual terms, its meaning was plain enough.

In addition to the fact, as I find it to be, that there was never any legitimate basis for making or pursuing the allegation of partnership, Keith Cockell complains that almost no notice of the allegation of the existence of a partnership was made prior to his joinder as a defendant to the Counterclaim.

If those acting for Mr. Holton had written to Keith Cockell and the solicitors acting for Simon Cockell setting out in detail why it was alleged that there was a partnership between father and son, it may be that an explanation would have been given which would have discouraged Mr. Holton from pursuing a claim against Keith Cockell, although I have reservations about that. But since it did not happen it is a matter of speculation. Nevertheless, in my view it was unreasonable of Mr. Holton, or those advising him, not take the step of writing such a letter.

Such notice as there was consisted of a letter from Mr. Holton’s solicitors dated 14 March 2014 which, after referring to the fact that their client was being sued by Simon Cockell, said:

“Evidence in our client’s possession shows that you are involved in the Business known as Cockell Building Services and in the circumstances, you may accept this letter as notice that in the Defence & Counterclaim that will be served by our client, you will be joined as a party to these proceedings.”

Since the only grounds on which Keith Cockell could have been liable for the acts of his son were through either agency or partnership, it is remarkable that neither was mentioned. A father can be “involved” in his son’s business activities in many ways that do not attract vicarious or joint liability: for example, by lending money or giving advice. The response from Keith Cockell’s solicitors, unsurprisingly, was to deny the allegation and to ask for full details.

On 16 June 2014, following receipt of Mr. Holton’s Defence and Counterclaim, Keith Cockell’s solicitors wrote to Mr. Holton’s solicitors in the following terms:

“We have had an initial conversation with our client and we can inform you that our client will be defending your client’s Part 20 Claim against him in full. Our client will be relying on the evidence of his accountant which is that he has, at no time, traded in partnership with his son Simon Cockell and at all times relevant to Simon Cockell’s claim against your client and your client’s counterclaim, Simon Cockell acted as a Sole Trader and was registered as such with HMRC, CIS and VAT.

In view of this evidence we are satisfied that your client’s claim against our client is doomed to fail and we invite your client to discontinue his claim against our client at this stage failing which our client will be seeking his costs on an indemnity basis should your client’s claim against ours be unsuccessful. It is not unreasonable to believe that our client’s defence costs could be as much as £100,000 if the case was to continue to a fully contested trial. In those circumstances we reserve the right to produce this letter to the court in support of an application for costs on an indemnity basis.”

Unfortunately, this was not a warning that either Mr. Holton or those advising him appear to have heeded.

I have not the slightest doubt that the application for specific disclosure was a fishing expedition. It yielded absolutely nothing but must have involved Simon and Keith Cockell in substantial time and expense.

It is all the more strange that Mr. Holton now appears to be saying that he never expected there to be any documents that would show clearly the existence of a partnership.

In the circumstances I am quite satisfied that both Simon and Keith Cockell are entitled to their costs of that application and, given that not a single relevant document emerged from the exercise, those costs should be on an indemnity basis.

As the principles set out by HHJ Waksman QC show, a claimant who discontinues his claim must show that there is a good reason for disapplying the presumption that he should pay the costs of the claim. A simple re-evaluation of the legal or commercial merits of the claim is not sufficient to displace the presumption. The claimant needs to show a change of circumstances since the claim was made that justifies him in withdrawing the claim. But, of course, it is implicit in this that the claim was properly and reasonably brought in the first place.

If the claim was never viable from the outset, no amount of changes in circumstances could save the claimant from the liability to pay the costs on discontinuance. In my view, that is the position here.

But even if I am wrong about this, I do not consider there has been any change in circumstances. The only possible change in circumstances is that Mr. Holton’s expectation, if he had one, that disclosure of all documents relating to the Cockells’ affairs would demonstrate the existence of a partnership, was shown to be unfounded.

Since I have concluded that the allegation of the existence of a partnership as against Mr. Keith Cockell never had a good basis from the outset or, if it did, that basis did not survive the explanation given in paragraph 15 of the Reply, it seems to me that Keith Cockell is entitled to his costs of the claim against him on an indemnity basis. Those costs must be the subject of a detailed assessment if they cannot be agreed.

I accept that there may have been shortcomings in the disclosure given initially by Simon Cockell, but in my view that falls far short of conduct that should attract the sanction of depriving him of the costs to which he would otherwise be entitled on discontinuance. Some application for specific disclosure would probably have been made anyway, because disclosure was the only possible route by which Mr. Holton could hope to obtain any ammunition with which to pursue his allegation that there was a partnership.

So I consider that Simon Cockell is also entitled to recover from Mr. Holton the costs that he has incurred in relation to the allegation that there was a partnership between him and his father. However, I do consider that matters have been complicated slightly by Simon Cockell’s manner of conducting business and the initial shortcomings in his disclosure. For these reasons I am not prepared to award Simon Cockell costs on an indemnity basis. Indeed, I do not read the skeleton argument that was filed on his behalf as suggesting that I should do so. In my view, that was a wise approach.

I am not prepared to embark on a summary assessment of the costs of the partnership issue in relation to either Simon or Keith Cockell. Whilst the preliminary issue might only have taken a day to hear, the costs claimed relate to that issue from the time of service of the Defence and Counterclaim. Those costs must be referred to detailed assessment, and that will be on the indemnity basis in relation to Keith Cockell.

As to the costs of the disclosure application, I assess Keith Cockell’s costs in the sum of £3,460.20. Simon Cockell’s costs are disputed, and I will assess them separately.

For the avoidance of any doubt, I direct pursuant to CPR 38.6(1) that the costs of the partnership issue for which Mr. Holton is liable are the costs up to and including the time when the skeleton arguments in relation to costs were filed with the court on behalf of Simon and Keith Cockell.

In the case of Simon Cockell, the costs of resubmitting the schedules of costs (if they are resubmitted so that the costs of the disclosure application can be summary assessed) are not to be paid by Mr. Holton.

In the case of Keith Cockell, the undertakings are to remain in force and the documents disclosed that are subject to those undertakings, and any copies of them, are to be destroyed or returned to his solicitors. If they are destroyed, Mr. Holton’s solicitors are to notify Keith Cockell’s solicitors when this has been done and they are to confirm that all such documents have been destroyed.

In the case of Simon Cockell, the undertakings are to remain in force and the same direction is to apply in relation to the documents disclosed. However, if it is said that any of those documents relate to other issues so that they should have been disclosed in any event, Mr. Holton’s solicitors are to identify such documents and notify Simon Cockell’s solicitors that they intend to retain them for use in the proceedings on the usual terms. If it is proposed to use any such documents only if the contents of them are to be redacted in part, then copies of such documents showing the proposed reductions are to be provided to Simon Cockell’s solicitors for their agreement to the use of the documents in that form.