Case No: A2/2011/2989 
Neutral Citation Number: [2012] EWCA Civ 1456
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON CIVIL JUSTICE CENTRE
(HIS HONOUR JUDGE BIRTLES)

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Tuesday 9th October 2012

Before:

MASTER OF THE ROLLS
LORD JUSTICE DAVIS
and
LORD JUSTICE TREACY
- - - - - - - - - - - - - - - - - - - - - - - -

Between:

	Hussain	
Appellant	
	- and -		
	
(1) Amin

(2)  CHarters insurance ltd	

Respondents	

		

- - - - - - - - - - - - - - - - - - - - - - - -
(DAR Transcript of 
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No:  020 7404 1400  Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - 
Mr Boyd Morwood (instructed by Clyde and Co) appeared on behalf of the Appellant.

Mr Robert Marven (instructed by Vensus Law) appeared on behalf of the Respondents.
- - - - - - - - - - - - - - - - - - - - -
Judgment
Lord Dyson:

1.	This is an appeal against the costs order made by HHJ Birtles on 25 October 2011 in the Mayor’s and City of London County Court. 

2.	The case concerned a claim for damages by Mr Hussain arising out of a road traffic accident which occurred on 10 January 2010.  He was driving his car in Streatham, South London, when he was involved in a collision with a car which was being driven by Mr Amin. That car was insured by Charters Insurers, the second defendant.  By its defence, the second defendant put Mr Hussain to proof and expressed a "number of significant concerns in relation to the parties and the claim intimated".  There was no allegation, although the so called "concerns" came very close to being an allegation.  The defence was conducted on the basis that the accident had been staged in order to generate an insurance claim.  Although the terms of the pleaded defence are not relevant to the issues that have been raised in this appeal, I am bound to register my concern with the way in which what in substance is an allegation of fraud was pleaded.  

3.	At trial the defence relied to a considerable extent on a number of inconsistencies in the claimant's evidence.  The judge referred to them as "pretty fundamental".  They included mistaken references in the witness statements to the accident as having taken place at 12.30am as opposed to 12.30pm and mistaken references in the statements to the location of the principal damage on Mr Hussain's car.  The judge referred to these inconsistencies in his judgment and said that they were the result of poor preparation by Mr Hussain's solicitors.  He said this:

"30.  I should mention a factor which has caused me some concern and which is greatly relied upon by the Second Defendant, and that is internal consistency. In cross-examination Mr Morwood elicited a number of factual circumstances or inconsistencies contained in the witness statement of Mr Hussain and his two witnesses. Having heard those witnesses I am satisfied that the errors are as a result of sloppy preparation by the Claimant's second firm of solicitors, rather than any real internal consistency.  It is quite apparent that the accident happened at or about 12.30pm. That is in the middle of the day. That is clear from the photographs taken by Mr Tahir Hussain and it is clear from the police officers’ notebooks.

31.  The fact that unfortunately the first solicitors made a mistake, which was carried through by the second solicitor and not corrected by the Claimant and his witnesses until 16 October, is unfortunate.  Similarly the mistake to the part of the Claimant's car where the principal damage was caused is crystal clear from the photographs and from his own engineer's report. The fact that two solicitors have transcribed that incorrectly seems to me to be obvious; I do not find anything untoward in that at all.

32.  As I say, I am deeply unhappy about the way both sets of solicitors have prepared this case. It is epitomised by a meeting of Mr Jenaid's car near Euston Station on 16 October. It would appear that, in a desperate effort to get the case ready for trial, the Claimant's solicitor Mr Chowdhury was in London and arranged to meet the Claimant and his two witnesses close to Euston Station. 

33. Instead of doing the sensible thing and hiring a room for a short period or finding somewhere quiet in a hotel, of which there are a number in the Euston area, Chowdhury saw each of these witnesses, according to two of them, together; according to Mr Jenaid, separately, in Mr Jenaid's motor car, where rough notes were made, which have been produced by Chowdhury, which have been transposed into longer witness statements. That is not the way to conduct civil litigation in 2012.  

34. The late application and late disclosure of documents as late as 10.30am this morning show to me clearly that the Claimant's case has not been prepared by his solicitor. I do not think that any errors in witness statements are principally the fault of the Claimant and his two witnesses. They are, of course, to be criticised because they failed to spot the errors when they signed the witness statement but that, unfortunately, as this Court knows only too well, is a fairly common occurrence.

4.	Having reviewed the evidence, the judge found Mr Hussain a credible witness and accepted his account and awarded damages in the sum of £11,118.33.  In short, he found that this was a genuine accident.  

5.	There was then discussion about costs.  The claimant's case was that the usual order for costs should be made, namely that the costs should follow the event: see CPR 44.3(2)(a).  The court could, however, make a different order: see CPR 44.3(2)(b).  

6.	In deciding whether to make a different order, CPR Rule 44.3(4) states that: 

"In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including (a) the conduct of all the parties."

7.	In assessing the conduct of the parties, CPR Rule 44.3 (5) provides that: 

"The court should consider conduct before as well as during the proceedings…"

8.	I should also refer to CPR Rule 44.5(1):

“The court is to have regard to all the circumstances in deciding whether costs were –
(a) if it is assessing costs on the standard basis –
(i) proportionately and reasonably incurred; or
(ii) were proportionate and reasonable in amount…

(3) The court must also have regard to –
(a) the conduct of all the parties, including in particular –
(i) conduct before, as well as during, the proceedings…”

9.	The discussion before the judge was mainly taken up with the question of how what the judge had described as "sloppy preparation" by Mr Hussain's solicitors should be reflected in the costs order.  It was submitted on behalf of the second defendant that three options were available to the judge.  These were that he could make no order for costs, finding in effect that the defendant was right to raise the issues which it did, but that it had not succeeded in proving or disproving the claimant's case at trial.  The second was that the claimant should only have his costs from the first day of the trial, 20 October, when full and proper disclosure had been made; and the third was that the judge could make a costs order that the claimant should only have its costs at the trial.  I am not sure that there is a significant difference between the second and the third option, but that does not matter for present purposes.

10.	In the event, the judge rejected all three of these options.  He gave a brief judgment at the end of the discussion which appears as paragraph 83 of the document.  He said: 

"What I am going to say is that part of the order on costs is (1) the Second Defendant is to pay the Claimant's costs of the claim to be subject to a detailed assessment if not agreed; (2) all questions of the Claimant's solicitors’ conduct of the proceedings are reserved to the costs judge."

11.	During the course of the discussion on costs, the following exchanges took place between the judge and Mr Morwood, who was appearing then as today for the second defendant: 

"…there are various ways of dealing with this issue.  One is I could make specific findings myself about conduct, the second is to specifically record in that part of the order dealing with costs that all matters of conduct are open for decision by the taxing judge, who of course has the time, because one of the problems I find where conduct is raised, solicitor’s conduct is raised, is of course I do not have access to the correspondence. Normally I would not have, and I do not have today, access to the correspondence. 
Mr Morwood:  Yes, of course. 

HHJ Birtles:  Whereas a file could be compiled by your instructing solicitor for the costs judge and representations could be made upon it. I have made expressions of a view. The alternative way, which I have done sometimes, is to make a percentage deduction of the costs. But that again is a very rough and ready approach. I am just wondering, part of the difficulty I have had, I think as I have said, clearly mistakes in the first witness statement taken by the first solicitor have simply been carried through into a second, longer witness statement by the second solicitor. What is not clear to me, because obviously the first firm of solicitors, presumably there is a claim for costs by them as well?  

Mr Morwood:   Yes.  

HHJ Birtles:  And they are not here at all. What I do not know is to what extent each are going to blame the other and I do not know actually precisely even when the second firm of solicitors took over.  

Mr Morwood:   Yes.  

HHJ Birtles:  I am just wondering taking your point with which I have considerable sympathy, whether the best way to deal with it would be for me to formally record  in the order as to costs that all issues of conduct are open for determination of the costs judge.  

Mr Morwood:   I would have sympathy with you adopting that position normally. The difficulty that arises is this, in my submission, and it may be that the issue of costs simply cannot be resolved today as a consequence of the matters which I raise, but, in my submission, it might be wrong to put it over to the taxing master who will not have been seized of this matter and realise the difficulty that the defendant had until exploring these matters at trial.  

HHJ Birtles:  They are pretty experienced, you know."

After further discussion the judge gave the short supplementary judgment to which I have already referred.  

12.	When I read the papers in preparation for this appeal I thought that the principal issue was whether the judge had been wrong to leave the conduct question to be taken into account by the costs judge in the assessment rather than reflecting the conduct in the order for costs that he made himself.  The different functions of CPR 44 Rule 3 and 44 Rule 5 were authoritatively explained by this court in Drew v Whitbread Plc [2010] 1 WLR 1725.  Nobody has suggested that any modification of the guidance contained in that decision is called for.  But during the course of oral arguments this morning, it became clear that it is accepted by Mr Morwood, and rightly in my view, that the judge was entitled to leave the question of how to reflect the conduct to be dealt with by the costs judge at the stage of assessment.  It is clear that the judge thought that he was not himself in a position to make findings on the conduct question and that the most efficient way of dealing with it was to leave the matter to the costs judge.

13.	The sole ground of challenge that has been argued this morning is that the judge did not give any reasons for rejecting all of the three options suggested by the second defendant and instead ordering that the claimant should have his costs.  In my view there is no substance in this ground.  It is true that no reasons were given in the short supplementary judgment, but it must have been clear from the discussion that preceded it that the judge considered that the conduct point was not sufficient to justify a departure from the usual rule that costs should follow the event.  It was obvious that the judge thought that the conduct issue could be adequately dealt with in the assessment by the costs judge.  That is inevitable in the light of the nature of the arguments deployed before the judge and his decision.  That must have been clear, and no doubt is the reason why the judge was not asked for reasons in amplification of his judgment either at the time or at any time since.

14.	During the course of argument Treacy LJ drew the court's attention to paragraph 17 of the judgment of this court in English v Emery Reinbold & Strick Ltd [2002] EWCA Civ 605, [2002] 1 WLR 2409.  It is sufficient to refer to paragraph 13 of the judgment of the court given by Lord Phillips, Master of the Rolls:  

"All of the Strasbourg decisions to which we have so far referred were considering judgments which determined the substantive dispute between the parties. The critical issue in each case was whether the form of the judgment in question was compatible with a fair trial. Where a judicial decision affects the substantive rights of the parties we consider that the Strasbourg jurisprudence requires that the decision should be reasoned. In contrast, there are some judicial decisions where fairness does not demand that the parties should be informed of the reasoning underlying them. Interlocutory decisions in the course of case management provide an obvious example. Furthermore, the Strasbourg Commission has recognised that there are some circumstances in which the reason for the decision will be implicit from the decision itself. In such circumstances Article 6 will not be infringed if the reason for the decision is not expressly spelt out by the judicial tribunal – see X v Federal Republic of Germany [1981] 25 DR 240; Webb v UK [1997] 24 EHRR CD 73."

15.	The decision on costs in this case was not a determination of the substantive dispute between the parties, nor was it an interlocutory decision in the course of case management. But the reason for the decision was obvious from the decision itself when read in the light of the detailed discussion that immediately preceded it.  I am in no doubt that the failure to give reasons in the supplemental judgment did not amount to a breach of Article 6, nor did it amount to a breach of the common law obligation to state reasons.  There has been no injustice in this case.  The second defendant could have been in no doubt as to why the judge decided to make the usual order that costs should follow the event and deal with the conduct issue by referring the matter to the costs judge, where it could be reflected in the assessment that was made.  

16.	For all these reasons I would dismiss this appeal. 

Lord Justice Davis:  

17.	I agree that this appeal should be dismissed for the reasons given by the Master of the Rolls.  To the extent that Mr Morwood today rather surprisingly argued that the trial judge's decision was vitiated for want of reasons, that argument cannot possibly succeed, as my Lord has explained.  As I had understood, the written grounds also had objected that the trial judge's order, in leaving consideration of questions of conduct to the costs judge, was wrong in principle.  That too is misplaced.  It involves, in my view, seeking to resurrect, as representing an inflexible principle, certain of the observations made in Aaron v Shelton [2004] 3 All ER 561, which were expressly disapproved by the Court of Appeal in Drew v Whitbread plc [2010] 1 WLR 1725; [2010] EWCA Civ 53.

18.	I would, however, particularly wish to add my own comments about the pleaded defence of the second defendant.  It was perfectly proper to join issue on the primary facts alleged in the Particulars of Claim and as to whether there had indeed been negligence and whether the claimed losses had been caused thereby.  But the pleaded defence went much further in paragraphs 7 and 9, setting out a number of matters which, it was alleged, raised "significant concerns" as to whether or not this had been a staged accident requiring further investigation.  Possibly, although I have my reservations, such a pleading could be justified as an initial holding defence.  But it is a case pleaded on insinuation, not allegation.  If the second defendant considered that it had sufficient material to justify a plea that the claim was based on a collision which was a sham or a fraud, it behoved it properly and in ample time before trial so to plead in clear and unequivocal terms and with proper particulars.  Thereafter the burden of proof would of course have been on the second defendant to establish such a defence.

19.	In the event, as I see it, the claimant was faced with a hybrid, he in effect being required at trial to deal with an insinuation of fraud without any express allegation to that effect pleaded.  Realistically, the trial judge dealt with the matter in the round, concluding that the claim was not fabricated or fraudulent and that the accident had not been staged.  But this sort of pleading should not be sanctioned.  It is in fact something of an irony that the second defendant seeks to criticise the conduct of the claimant's solicitors, when in part at least they were having to deal with an abusive defence.  But ultimately it will be a matter for the costs judge to assess what is an amount reasonable to be paid by way of costs having regard to all the circumstances.

Lord Justice Treacy:  

20.	I agree that this appeal should be dismissed for the reasons given.  In the context of an appeal relating to a costs order on the grounds of a failure to give reasons, I draw attention to paragraph 30 of English v Emery Reinbold, as cited by my Lord, the Master of the Rolls.  That paragraph is in these terms: 

"Where no express explanation is given for a costs order, an appellate court will approach the material facts on the assumption that the Judge will have had good reason for the award made. The appellate court will seldom be as well placed as the trial Judge to exercise a discretion in relation to costs. Where it is apparent that there is a perfectly rational explanation for the order made, the Court is likely to draw the inference that this is what motivated the Judge in making the order. This has always been the practice of the Court - see the comments of Sachs LJ in Knight v Clifton [1971] Ch 700 at 721. Thus, in practice, it is only in those cases where an order for costs is made with neither reasons nor any obvious explanation for the order that it is likely to be appropriate to give permission to appeal on the ground of lack of reasons against an order that relates only to costs."

Order: Appeal dismissed