“PUT BLUNTLY THESE ARGUMENTS ARE MISCONCEIVED”: ADMINISTRATIVE COURT IN A VERY ROBUST MOOD OVER COSTS

In Kay, R (On the Application Of) v Scan-Thors (UK) Ltd & Anor (Costs) [2018] EWHC 2842 (Admin) the Divisional Court dealt robustly with arguments made by an interested party attempting to resist an order for costs.

“Put bluntly, these submissions are misconceived.”

THE CASE

In an earlier judgment the court had set aside summonses for offences of fraud. The summons had been issued by a private prosecutor. The court held that there had been a breach of the duty of candour. The court then adjourned the matter to consider issues in relation to costs. The costs were liable to be paid by the interested party.

THE ARGUMENTS

The interested party put up a number of points in response.

A DEEMED ORDER FOR NO COSTS: AN ARGUMENT THAT “SHOULD NEVER HAVE BEEN ADVANCED”

  1. In his Response, the Interested Party sought first to submit that, under Civil Procedure Rules 44.10(1), a deemed costs order had been made and that therefore each side would have to pay its own costs.
  2. As the Claimants pointed out in their Reply, this was a surprising argument given that, between the provision by the Court of a draft of its judgment to the parties and the handing down of the judgment, Leading Counsel for the Claimants and then-Leading Counsel for the Interested Party had been in communication about a timetable in relation to costs, a form of Order had been agreed, and an Order in that form had been made by the Court on the day that judgment had been handed down. In any event, the Claimants argued, the Interested Party’s submission was wrong in law.
  3. In his Further Response, the Interested Party asserted that he was not fully aware of the correspondence that had been exchanged between Leading Counsel prior to the judgment being handed down – but made clear that he withdrew his first submission and no longer argued that a deemed costs order had been made
  4. For our part, it suffices to say, with emphasis, that the deemed costs order argument should never have been advanced.

NO SCHEDULE OF COSTS SERVED: “THE POINT IS WHOLLY ARID”

  1. The Claimants accept that they failed to serve a costs schedule, as required by paragraph 9.5 of Practice Direction 44, 24 hours prior to the judicial review proceedings – asserting that there was no prospect of the Court determining the claim, drafting and handing down judgment, and dealing with costs issues, all on the day of the hearing. The Claimants point out that the Interested Party also failed to serve a costs schedule and argue that that was no doubt for the same reason. In the result, the Claimants submit that, in the terms of paragraph 9.6 of the Practice Direction, there was therefore a reasonable excuse for not filing a schedule in advance of the hearing of the case, and thus no justification for any sanction on them.
  2. Given the factual complexity of the case, and the number and importance of the legal issues involved, it was realistically unlikely that costs would be considered on the day of the hearing of the claim. It is therefore unnecessary to reach a conclusion on this submission, as nothing turns on it. While we draw back from holding that the Claimants had a reasonable excuse, no consequences followed from their failure to produce a schedule timeously. There is, accordingly, no justification for any sanction on them on this ground; the point is wholly arid.

ORDER SHOULD BE MADE BY THE MAGISTRATES: AN ARGUMENT THAT IS “MISCONCEIVED”

  1. The Interested Party points out that s.19 of the Prosecution of Offences Act 1985 provides Magistrates’ Courts with the power to make a costs order, and submits that the Magistrates’ Court would be able to make any order that it deemed appropriate arising from his breach of the duty of candour. The Interested Party further submits that the judicial review proceedings were entirely separate, and that it should be borne in mind that the District Judge had considered the material that had not been disclosed originally and had ruled against the Claimants. It is further submitted that the judicial review proceedings related to the District Judge’s decision and whether she failed to engage with issues raised on behalf of the Claimants, and that hence the costs of the judicial review were entirely separate to the costs incurred in the Magistrates Court.
  2. The Claimants submit that the Interested Party’s argument is misconceived. They argue that (whether by virtue of s.51 of the Senior Courts Act 1981 or s.66 of the Courts Act 2003) this Court has the power to order costs for both these proceedings and the proceedings in the Magistrates’ Court; that there is no good reason why this Court should not determine the application now (which will avoid further time and expense being incurred by either party); that this Court has had the advantage of having seen, in the recent past, all the material that is relevant to the costs application (whereas the Magistrates Court gave its decision two years ago) and that this Court is therefore best placed in time to consider the question of costs globally; that (given the basis upon which judicial review was granted) this Court is far better placed to make a judgment on the conduct of the Interested Party in the Magistrates’ Court than the District Judge would be; and that the two sets of proceedings were not separate given that, after the Interested Party’s failure to comply with his duty of candour, when most (but still not all) of the relevant material was put before the District Judge, the Interested Party invited her to take the course that she eventually did and which the Interested Party tried (unsuccessfully) to defend in this Court. Ultimately, the Claimants submit that, simply put, if the Interested Party had acted properly, and in accordance with the Court’s judgment, then the Claimants would not have incurred the costs in both courts that they have.
  3. For the reasons advanced by the Claimants, we agree that the Interested Party’s argument is misconceived. It is plainly appropriate for this Court, not the Magistrates’ Court, to determine the Claimants’ application for costs incurred below. It is time to bring these proceedings to a close, without either party incurring further delay and costs.

NOT EVERY ARGUMENT MADE BY THE CLAIMANT WAS SUCCESSFUL: NO WARRANT FOR REDUCING THE COSTS PAYABLE TO THE CLAIMANT ON THIS GROUND

  1. The Interested Party submits that any costs order should reflect the fact that, whilst the Claimants’ application for judicial review was successful, not every argument advanced by them was successful. It is submitted that the principal point advanced by the Claimants was the assertion that it was not appropriate for the Magistrates’ Court to grant a summons to a private prosecutor in English criminal proceedings to commence a prosecution, when he had previously given the Defendant a formal undertaking not to do that very thing. The Interested Party argues, against the background that the agreement was governed by the Polish law of contract, that this was a complex issue and that a great deal of time was spent upon it in both the Magistrates’ Court and this Court, but that this Court’s judgment is quite clearly silent on that issue. Thus, it is said, whilst the Claimants’ application was ultimately successful, they did not succeed in their principal submission, and that any costs order, irrespective of the party against whom it is made, should reflect that fact.
  2. In response, the Claimants underline, by reference to their Judicial Review Claim Form, that the remedy that they sought was the quashing of the summonses issued on 19 May 2016 and the quashing of the decision made by the District Judge on 7 October 2016 – which was precisely what they achieved. They were thus, it is said, entirely successful in their claim. The Claimants submit that the fact that, in order to determine the claim as a whole, this Court did not consider it necessary to adjudicate upon one of their arguments does not affect their ability to recover costs from the unsuccessful Interested Party. By reference to paragraph 44.2.13 of the White Book, to the decision of the Court of Appeal in Kastor Navigation v AGF M.A.T. [2004] EWCA Civ 277 (in which the Claimants succeeded to the full extent of their claim, but on only one of the alternative ways in which they put it), and to the decision of Gloster J (as she then was) in HLB Kidsons v Lloyds Underwriters [2007] EWHC 2699 (Comm), the Claimants submit that the successful party is the party successful in the proceeding, rather than successful on a particular issue; that the general rule is that the unsuccessful party should pay the successful party’s costs; and that the Court can properly have regard to the fact that any winning party is likely to fail on one or more points in the case, unless they were unreasonably taken. Against that background, the Claimants submit that, in fact, they did not fail on any part of their claim – rather, the Court did not need to uphold every argument for their claim to succeed; they succeeded in their claim as a matter of substance, reality and common sense; and that thus there is no lack of success to reflect in any costs order.
  3. In our view, the Claimants are clearly right on this issue. The point on the undertaking was reasonably taken, it did not fail, and the Claimants were clearly the successful party in the proceedings. Looked at justly and overall, there is no warrant for reducing the costs payable to the Claimants on this ground.

COSTS SHOULD COME FROM CENTRAL FUNDS: “PUT BLUNTLY, THESE SUBMISSIONS ARE MISCONCEIVED”

  1. The Interested Party submits that this Court’s judgment made it quite clear that the application for judicial review was successful because of the non-disclosure of the six matters set out in the judgment, the Interested Party’s breach of the duty of candour, and the District Judge’s failure to engage with that breach. The Interested Party further submits that it is important to recognise that the Claimants did make the District Judge aware of the non-disclosure at the hearing in the Magistrates’ Court – including the existence (but not the detail, as it had still not been disclosed) of the Polish Regional Prosecutor’s second written justification for discontinuing the investigation, and the appeal to the Regional Court. Thus, it is submitted, the District Judge was well aware of the entirety of the non-disclosure and of the breach of the duty of candour, including the fact of the Regional Prosecutor’s second written justification – despite which, she ruled against the Claimants. In the result, the Interested Party submits, it was the District Judge’s failure to engage with whether the Interested Party’s breach of the duty of candour should result in the quashing of the summonses which resulted in the judicial review proceedings, and the Interested Party should not have to pay the costs which have resulted from her error.
  2. In the alternative, the Interested Party submits that if the Court is nevertheless minded to make a costs order against him, he should only be liable for a proportion of the costs. It is asserted that the costs order should reflect the fact that the District Judge had all the relevant information about the Interested Party’s non-disclosure before her and failed to dismiss the summonses.
  3. The Claimants submit that the Interested Party’s submission is untenable, given that the failures identified by this Court are those of the Interested Party and the District Judge followed his express invitation in her treatment of the application before her; that the Magistrates’ Court did not defend the application in this Court, whereas the Interested Party defended it vigorously; that it was the Interested Party (not the Magistrates’ Court) who was responsible for the fundamental failures that this Court has identified in its judgment, for inviting the District Judge to adopt the course that she took, and for defending the claim (even after permission was granted); that there is no good reason why the public should incur the expense of the proceedings (whether in the Magistrates Court or in this Court) which has come about entirely because of the Interested Party’s failure to comply with his duty of candour and to act as a Minister of Justice; that, in any event, in view of paragraph 23.11.3 of the Judicial Review Guideline, costs in Administrative Court proceedings are not recoverable from central funds; that the Magistrates’ Court played no part at all in the proceedings in this Court; and that this Court will generally not impose costs against a Court or Tribunal unless it has acted obstructively or improperly. Further, the Claimants submit that whether or not an order is available against central funds says nothing as to whether it is appropriate (which in this case it is said to plainly be) to make an award of costs against the Interested Party.
  4. In our view there is no merit in either the Interested Party’s principal or alternative submissions under this heading. He was the driving force in obtaining the summonses in significant breach of his duty of candour, and in persuading the District Judge to act as she did (whilst still failing to disclose the content of the Polish Regional Prosecutor’s second written justification). In all the circumstances we conclude that it is not appropriate to make an order for costs out of central funds in relation to the proceedings in the Magistrates’ Court or in this Court, nor to order that the Interested Party should only be liable for a portion of the costs. Put bluntly, these submissions are misconceived.

 

COSTS ON AN INDEMNITY BASIS: “WE HAVE NO HESITATION IN CONCLUDING THAT COSTS SHOULD BE ASSESSED ON AN INDEMNITY BASIS”

    1. The Interested Party submits that his conduct does not warrant costs to be assessed on the indemnity basis rather than the standard basis. It is said that his non-disclosure occurred during the original application for the summonses, and that thereafter the non-disclosure was rectified by the Claimants and the District Judge was informed of all relevant matters; that he did not deny that the material had not been disclosed and provided an explanation for the non-disclosure; that, given that the District Judge had ruled in his favour, he was perfectly entitled to intervene in the judicial review proceedings; that, in those proceedings, he had conducted himself in a perfectly reasonable manner; and that not all of the Claimants’ arguments in the judicial review had been successful, and the Interested Party was perfectly entitled to advance the arguments that it did before this Court.
    2. The Claimants submit that the interests of the proper administration of justice require that a litigant should be penalised in costs where his unreasonable conduct has caused a waste of court time and resource. They argue, by reference in particular to the judgment of Henderson J in Franses v Somar [2007] EWHC 2442 and to the proposition that the opportunity to go to court ex parte is a privilege the abuse of which the Court should be astute to prevent, that it is well established that a culpable breach of a duty of full and frank disclosure should attract indemnity costs as a matter of public policy. The Claimants also rely on the cases cited in Volume 1 of the White Book at CPR44x4.3, and on paragraph 23.2.4.1 of the Judicial Review Guide which provides that the indemnity basis is reserved as a sanction, which the Court will apply in cases where the losing party has acted unreasonably in bringing or maintaining the claim, or in any other way.
    3. Against that background, the Claimants assert that the Interested Party’s unreasonable behaviour has included:
(1) Failing to comply with either the duty of candour or the duty to act as a Minister of Justice in applying for the summonses.
(2) Inviting the District Judge to defer consideration of the Claimants’ application to the Crown Court, which invitation she accepted.
(3) Attempting to elicit an agreement from the District Judge in respect of his interpretation of her ruling, in ex parte communications with the Magistrates’ Court of which the Claimants were entirely unaware, in advance of the judicial review proceedings in this Court.
(4) Withholding the second written justification of the Regional Prosecutor from the Court and the Claimants, until the Court raised the issue.
(5) Submitting to this Court that a deemed costs order had been made – without addressing the correspondence between the parties and the Court, and the Order in respect of costs made by the Court.
  1. The private prosecution was commenced on foot of culpable breaches of the fundamental duty of candour. The Interested Party then sought to continue the prosecution on a wholly inappropriate basis. When the case came before this Court there was deliberate non-disclosure of an obviously relevant document, followed ultimately (when there had been a change of leading counsel for the Interested Party, but junior counsel and instructing solicitors remained the same) by a wholly inappropriate attempt to argue that a deemed costs order had been made. Thus, from first to last, the Interested Party’s prosecution of the litigation has involved unreasonable conduct which has resulted, overall, in a significant waste of court time and resource. In those circumstances, and applying the principles that we have identified above, we have no hesitation in concluding that costs should be assessed on an indemnity basis.
THE AMOUNT OF COSTS (£250,000)
  1. Based on their Amended Costs Schedules, the Claimants invite the Court, in the exercise of its discretion, to make an Order in the sum of £144,382.78 (including VAT) in relation to the proceedings in the Magistrates’ Court, and an Order in the total sum of £162,400.64 (including VAT) in relation to the proceedings in this Court. The total sum sought is therefore £306,783.42.
  2. The Interested Party underlines that his total costs (for both the proceedings in the Magistrates’ Court and this Court) amounted to approximately £131,000. From the available detail the Interested Party points to a number of aspects in relation to which he asserts that the amounts claimed were excessive, including money spent on photocopying, travel fees, and meals in the Magistrates’ Court proceedings; the fees claimed for the Claimants’ Polish lawyer in both proceedings; the hourly rates of the Claimants’ solicitors; the fees paid to the Claimants’ counsel (particularly when compared with the fees paid to the Interested Party’s counsel); and the hours claimed in relation to the Claimants’ Costs schedules.
  3. The Claimants underline that, for Orders on an indemnity basis, proportionality is irrelevant. They submit that Mr Kay is a man of 71 of impeccable good character who, when faced with serious charges of fraud, was entitled to instruct lawyers with the necessary skill and experience to deal with such a case, and that the amount of work that was carried out by his lawyers was entirely reasonable – including proper delegation with the majority of his solicitors’ work being done at associate rather than partner level. The Claimants draw attention to R (Haigh) v City of Westminster Magistrates’ Court [2017] EWHC 232 in which the Court made an Order for costs of £190,000 against a private prosecutor for the Magistrates’ court proceedings alone (albeit that two sets of defence lawyers were involved). The Claimants went on to rebut each of Interested Party’s submissions in relation to particular items of expenditure.
  4. We have considered these submissions and the Amended Costs Schedules, having regard to s.51 of the Senior Courts Act, CPR 44.2 and s.19 of the Prosecution of Offences Act 1985. In the result we have decided, in the exercise of our discretion, to assess costs summarily in the total amount of £250,000. We are satisfied that, looked at robustly and in the round, this figure does justice to both parties. Accordingly, we propose to make an Order in favour of the Claimants, here and below, in that total sum – payable within 28 days. The Claimants must draw up a draft Order accordingly.