Mr Justice Park:
Introduction
- This is a judgment about costs in a protracted and highly contentious partnership action. The case is a striking example of how, in some court proceedings which the parties are unable to settle, the costs escalate out of all proportion to the amounts and issues which are truly at stake. In connection with a relatively small property investment partnership and a fractious but not exceptionally difficult dispute between two former partners they have between them incurred costs of over £0.5m. This judgment is about whether either partner should be liable to pay some or all of the costs of the other. The amounts of costs in contention between the parties dwarf the figures about which any significant dispute arose. That is not to say that there were not disputes. There were many, and there was much ill-feeling between the former partners. But not much of real financial magnitude turned on the contentious issues upon which large costs have been incurred
- The partnership broke down in 1998. There had been two partners. One was either Mr Sahota or Mrs Sahota. For the most part I refer to them collectively as 'the Sahota interest', an expression that I explain later (see paragraph 6 below). The other partner was Mr Sohi. The case was commenced by Mrs Sahota on 25 February 2000. There was a trial before me over four days from 13 to 17 May 2002. I gave a quite short oral judgment on 17 June 2002. I will say a little more about that judgment later. The amounts involved in winding up the partnership were not particularly large. Two properties had to be sold and the proceeds shared, or one partner had to buy the other out. In the event the latter happened. There was nothing significantly contentious about this aspect of winding up the partnership's affairs. There also had to be an accounting between the partners to resolve how much each owed to the other, leaving the net balance between the two amounts to be paid from one former partner to the other. In the event around £50,000 changed hands, being paid by Mr Sohi to the Sahota interest, built up as follows. There were four payments by cheque amounting to £31,342.75, of which the last one was for £1 7,500. That last cheque represented the final compromise figure to bring the dispute to an end -except, significantly, as to costs. In addition Mr Sohi had paid off a partnership mortgage debt of almost £37,000. Half of that payment (the precise sum being £18,247) was the equivalent of a payment by Mr Sohi to the Sahota interest (because the effect of it was to discharge a debt, half of which would otherwise have fallen to be borne by the Sahota interest). £3 1,342.75 plus £18,247 is £49,689.75, hence my reference earlier in this paragraph to around £50,000.
- As respects many of the figures which entered into the accounting exercise, the end result of which was the payment of just below £50,000 to the Sahota interest, there was no major dispute. It was not as if Mr Sohi was denying that he owed the Sahota interest anything but ended up conceding liability for £50,000. The disputes were mostly about marginal issues. Nevertheless it took a long time and the exchange of many letters between solicitors before they agreed on a compromise final payment of £17,500. As I read the correspondence Mr Sohi's solicitors were accepting that he still owed a sum in the region of £13,000, but he would offer £17,500 to settle the matter; the Sahota interest's solicitors were saying that Mr Sohi still owed £26,000 or so, but their clients would accept the £17,500.
- However, one matter on which the parties could not agree was how the costs of this action should be borne. Mr Sohi's solicitors originally offered £17,500 with each side bearing its own costs. The Sahota interest's solicitors offered to accept £17,500 subject to Mr Sohi paying all of the Sahota interest's costs (to be assessed on the standard basis if not agreed). Eventually they resolved the impasse on the basis that the £17,500 was agreed as a final sum to resolve the substantive issues, but the court should determine what order should be made as to costs. That is the context in which the matter came before me again, three and a half years after the previous hearing and three years and two months after my last written direction.
The factual background
- I am writing this judgment on the basis that the persons who will be most concerned with it know what the case was about, and that I do not need to rehearse the underlying facts in any detail. For any reader who is unfamiliar with the background I will describe some aspects of the facts and the underlying issues from time to time as this judgment progresses. At this introductory stage all that I need say is that the partnership was formed between Mr Sahota and Mr Sohi in 1988 to carry on a property investment business. It bought three properties: one at Ilkeston, one at Hillingdon, and one at Battersea. The Ilkeston property had been sold in 1995, before the partners fell out. The properties at Hillingdon and Battersea were still owned at the time of the trial. They had been let to tenants (except for periods after a tenant had left and a property had not yet been relet). They were registered in the name of Mr Sohi, and at least from around the time when the relationship between him and Mr Sahota broke down in about 1998 they had been managed by him. The partnership bank account was in his name, and, with one exception, he was the person who received the income which arose from the properties. The exception was that income from advertising rights on a hoarding at the Hillingdon property was received by Mr Sahota. Although notice of dissolution of the partnership had been given in November 1998 it remained the case that, for as long as the properties were not sold, the profits from them ought to be shared equally between Mr Sohi (who was actually in receipt of most of the partnership income) and the Sahota interest.
- This is as convenient a point as any for me to explain the expression 'the Sahota interest'. I can do so by the following short quotations from my 2002 judgment:
"The present case was commenced as an action between Mrs Sahota and Mr Sohi. One of Mr Sohi's defences was that Mrs Sahota was not his partner. There is now an alternative claim by Mr Sahota against Mr Sohi, in case Mr Sohi's defence in that respect might be correct."
"Mr and Mrs Sahota were divorced in 1994. They say that, as part of the financial arrangements for the divorce, Mr Sahota informally transferred his interest in the partnership to Mrs Sahota, but that Mr Sahota was to continue to be responsible for managing the partnership properties. They say that Mr Sohi knew about this and agreed to it. Mr Sohi says that he did not agree to it. Mr and Mrs Sahota are still divorced, but they are reconciled and live in the same house. There is no dispute between them now, whether or not there may have been in the past.
"Given that there are now alternative claims pleaded by each of them, it makes no difference to Mr Sohi which of them is the partner. I do not need to decide this issue and I am not going to decide it. I shall refer to Mr and Mrs Sahota together as the Sahota interest."
- I would now like to quote a few sentences from the introductory part of my 2002 judgment.
"When the partnership was formed Mr Sahota and Mr Sohi and their families were very close friends; they have fallen out comprehensively now. The falling out seems to have occurred in the 199711998 period."
"The Ilkeston property had been sold in 1995 but the parties are still quarrelling about the division of funds derived from it. The Hillingdon and Battersea properties have still not been sold and there are numerous continuing quarrels about them, most but not all of the quarrels being in my opinion petty."
"In my opinion the various disputed issues do not need an extended discussion and they will not receive one in this judgment. They do require firm decisions, directed towards bringing the disputes to an end, and I intend to provide those decisions as far as I am able. Unfortunately, there are some issues which I cannot resolve finally myself and which I will have to refer for determination by a Master. I add, however, an encouragement to the parties and their legal advisers, having considered this judgment and the matters which I will decide in it, to try to resolve all the outstanding issues by agreement, and not to have this dispute drag on further, with yet another expensive and time consuming hearing before the court."
The history of the case so far as concerns costs
- Costs could not be dealt with immediately after I gave judgment in 2002. There were hopes that they could be decided by me on the basis of written submissions. In the event that was not achieved, and I gave a written direction on 11 October 2002. I quote a few sentences from it.
"[C]ounsel for Mr Sohi . . . proposed that submissions on costs should be made in writing and that I should give a decision on them in writing. Mr Norris (for Mr and Mrs Sahota) agreed. The purpose was to expedite matters and to save further costs being run up by another hearing. I agreed at the time, but it seems to be the fate of this case to be uncontrollable. I have received four substantial written submissions on costs (37 pages in total), and quite extensive files of correspondence and the like. I have also received a letter from Mr Norris (dated 17 September 2002) reluctantly suggesting that there might have to be an oral hearing after all. ... I have come to the conclusion that I must stand over my decision on costs until the outcome of the account or accounts on the questions which are still outstanding is known."
"Preserving proportionality in this case has been a lost cause for some time now, but I believe that I should still try to prevent the number of hearings and the running up of further costs becoming more disproportionate than they are already."
"There is one final matter. I am not optimistic about it, but I would urge both parties to give careful thought to whether the costs issues can be resolved by agreement and without a further hearing."
- All of that was in 2002. As time passed I largely forgot the case, and in so far as I thought about it I supposed that the parties must in the end have sorted everything out by agreement. In the circumstances it was depressing to be told that the case was relisted before me for hearing in December 2005 on the issue of the costs. It was decidedly more depressing when I saw the magnitude of the costs which the two sides had incurred as compared with the relatively small scale of the sums which were in truth disputed. The partnership had broken down in circumstances of considerable animosity between the partners. My memory of the trial in May 2002 is that the animosity was clearly perceptible, although the hearing was conducted with exemplary courtesy between counsel. Nevertheless, the matters which were contested in the trial (and there were quite a lot of them) did not in truth involve large amounts. I appreciate that partnership disputes are often expensive to resolve, and I am prepared to accept that some judges (who may well include myself) may exist in something of an ivory tower in which we are out of touch with the reality of how rapidly costs can mount up in contentious cases, even though the amounts involved may be quite small.
- Against that background Mr Weatherill QC, who appeared before me for the Sahota interest on the current hearing, leading Mr Norris (who had appeared for the Sahota interest in 2002), submitted that I must resist the temptation (which I confess I have felt) of saying 'a plague on both your houses' and sweeping the issue aside by an knee-jerk reaction that there should be no order as to costs. I accept the submission. I would much rather not have to decide the matters which are now raised before me, but it is my duty to decide them, and I must do my best to decide them in a principled way. I interpose at this stage that Mr Morgan QC, leading Mr Lederman (who had represented Mr Sohi at most earlier stages of the case, but had not been able to appear at the trial in 2002), appeared before me for Mr Sohi. Mr Morgan did not dissent from the proposition that I should approach the questions which I have to decide in a principled way and not on the basis of unconsidered instinct, but he qualified that to an extent by saying that the trial judge's immediate post-trial impression as to what costs order should be made should not be lightly discarded. The point of this is that in a brief discussion about costs immediately after I had given judgment three and a half years ago I said that my inclination was that there should be no order as to costs. However, I accept Mr Weatherill's submission on this, and I try to put out of my mind what my initial reaction, without having heard any submissions from counsel, had been. I well remember that at that stage the sentiment of 'A plague on both your houses' fairly reflected how I felt about the case.
- My task is to decide whether there should be an order for costs, and, if so, which party (the Sahota interest or Mr Sohi) should be ordered to pay what proportion of the other's costs. In my view (with which I think that both Mr Weatherill and Mr Morgan agreed) I should make a single order for one side to pay the whole or a specified proportion of the whole of the other side's assessed costs. To put the same point the other way, I should not make an 'issue based' costs order, whereby I make different orders for the costs on different issues. For me to do that would present the parties with an impossible task in trying to agree on the effect of the order, and would then mean that the Costs Judge would have an equally impossible task in trying to give effect to it. That does not mean that, in the analysis leading to a single order, I should not consider individually the various issues which arose in the case. On the contrary, I should do that, and I will do it. But, having looked at the various issues one by one, and to an extent asked myself what order for costs I would have made if each of them had stood alone and been the sole issue in the case, I will then step back and try to form an overall view of what the fairest (or, possibly, least unfair) order for costs would be. That will involve me going through several stages, which I will describe as I come to them.
- One point which I should stress is that, after I have given my decision as to which party should pay what proportion of the other party's costs (always assuming that my analysis does not end up with no order as to costs), so that my own task is over, there will remain the necessity for the quantum of the costs to be assessed, a process which (unless the assessment is agreed, an unlikely prospect given the history of this case so far) will fall to be carried out by a Costs Judge. There is no application for me to direct that the assessment should be made on the indemnity basis, so the Costs Judge will make it on the standard basis. It will be a matter for him, but, given the magnitude of the costs compared to the amounts truly in dispute in the case, four principles which might be important are: (i) costs which were unreasonably incurred will not be allowed (CPR rule 44.4(1)); (ii) costs which (even if reasonably incurred) were unreasonable in amount will not be allowed (ibid.); (iii) costs will only be allowed which were proportionate to the matters in issue (CPR rule 44.4(2)(a)); and (iv) doubts about the application of the above principles will be resolved in favour of the paying party.
- So far as the matters which are for me to decide, it is common ground that I should be guided by principles stated in rule 44.3, of which the most important are, in outline: the general rule is that the unsuccessful party will be ordered to pay the successful party's costs, but the court may make a different order (rule 44.3(2)); circumstances to which the court should have regard include the conduct of the parties before and during the proceedings (rule 44.3(4)(a) and (5)(a)); whether a party has been partly, even if not wholly, successfbl (rule 44.3(4)(b)); and any admissible offer to settle which a party made (rule 44.3(4)(c)).
- I now proceed to examine and evaluate the matters which, in my view, should have a bearing on my final decision. I shall do so in five stages, as follows.
i) I shall consider the implications for this case of the principle in Hamer v Giles (1879) 11 Ch D 942. I will outline the principle under the next subheading. Its relevance is that it could mean that on a proportion of the costs I should make no order, but leave each party to bear its own costs.
ii) I shall evaluate the various issues which were seriously in dispute in the case, and try to form a view as to which party overall was successful, and also to put a percentage on the extent to which that party was successful.
iii) I shall consider whether offers made by either party, being offers which were not accepted by the other party, should affect the outcome on the specific ground that the other party would have achieved more by accepting an offer than he or it achieved by going ahead with the litigation.
iv) I shall then consider whether the costs order which I would make by reference to the factors evaluated in (i), (ii) and (iii) should be varied on account of the conduct of the parties in the litigation.
v) Finally I shall step back, review the position overall, and form what I hope will be a balanced judgment as to what order for costs I will make.
The principle in Hamer v Giles (1879) 11 Ch D 942
- This case, of some antiquity now but none the less authoritative for that, is commonly cited as authority for the proposition that, in cases where the assistance of the court is required for the winding up of a partnership's affairs, the costs are ordinarily borne out of the partnership's assets before the final division of them between the partners. In Lindley on Partnership, 18th Edition at paragraph 23-120, the point is put as follows:
"Prior to the advent of the Civil Procedure Rules it had long been an established rule that all the costs of proceedings consequent on a dissolution should be paid out of partnership assets, unless there was some good reason for making some other order. Although the court now has a wide discretion on costs, and must have regard to a number of factors in exercising that discretion, it is thought likely that the old rule will continue to be applied in most cases."
Mr Morgan submits that the Hamer v Giles principle applies to at least some of the costs incurred in this case.
- If and to the extent that the principle applies to costs incurred in connection with a partnership action the effect strictly depends on whether in the first instance costs are met out of the partnership funds or are met by the separate partners individually. If they are met out of the partnership funds they are simply left to lie where they fall, and reduce the fund falling to be divided between the partners. The effect is much the same as 'No order as to costs'. If costs have been met by the partners separately but are fairly to be regarded as going to the sorts of matters covered by Hamer v Giles, each partner should strictly be required to contribute to an aliquot share of the costs incurred by the other partners. In a simple case (like this one) of two partners with equal shares, each partner should be liable to reimburse to the other 50% of the other's Hamer v Giles costs. However, in this case Mr Morgan does not press for an order of that nature. He contends on pragmatic grounds (and I do not think that Mr Weatherill disputed this) that, to the extent that either partner's costs of this case ought realistically to be regarded as Hamer v Giles type costs, the order should be 'no order as to costs'.
- It seemed to me that Mr Weatherill's position on whether any of the costs of this case were Hamer v Giles type costs changed to some extent in the course of the hearing. Initially his position was that every aspect of this case was hostile inter-partes litigation, and that there was no room for the Hamer v Giles principle. Mr Morgan, on the other hand, said that, although some of the costs of the parties were undoubtedly attributable to contentious issues and should be dealt with on the principles set out in rule 44.3 of the Civil Procedure Rules, other costs which simply related to the final accounting between the partners and the winding up of the partnership's affairs, ought to covered by a direction for 'no order as to costs' by analogy to Hamer v Giles. His instructing solicitor, Mr Birang of West London Law (formerly of Balsara & Co), had acted for Mr Sohi throughout and, as Mr Morgan informed me, said that at least 50% of the costs were of that nature. Mr Weatherill in reply accepted that in principle some part of the costs incurred by each of the parties could be governed by (or at least by analogy with) Hamer v Giles, but he said that that part was not remotely as large as 50%.
- In the circumstances I believe that the first questions which I need to consider are (1) whether some proportion of the costs of the two parties should, by reason of the Hamer v Giles principle, be excluded from the argument about who should pay a proportion of the other's costs, and (2), if so, what should the proportion be.
- My answer to the first question is: yes. Suppose that, after the Sahota interest and Mr Sohi had realised that they did not want to be in partnership with each other any more, they had agreed on a reasonably amicable winding up of the partnership's affairs, possibly including a reference of one or two detailed questions to the court as the most convenient way of sorting them out. How would the costs of any court proceedings have been dealt with? I am confident that either they would simply have been paid out of partnership funds or each partner would have borne its own costs. There would not have been a protracted wrangle, with each side blaming the other and asserting that the other side should pay, not just its own costs, but also the costs of its former partner. And if each partner had been advised by its own solicitors, and the solicitors had managed to agree everything without the need of an intervention by the court, there would have been no question of either party being able to compel the other to pay any part of its solicitors' bill. Each partner would have paid its own solicitors' bill, and that would have been an end to it. In fact it did not turn out that way, because there was a lot of hostility between the Sahota interest and Mr Sohi. But a lot of the legal costs of each side were incurred on the same matters that would have had to be sorted out in any event. The level of the costs of that nature may have been a good deal larger because of the contentious background, but, at least to the extent that they were directed towards matters which would have had to be dealt with whether the background had been contentious or not, it appears to me appropriate that they should be dealt with in the same manner: with each side bearing its own costs.
- The second question is, in my view, more difficult. In trying to think it through for myself after the oral argument and in preparation for writing this judgment, I constantly found my thoughts taking the structure of: 'On the one hand "x", but on the other hand "y" '. Let me try to illustrate what I mean. The central matters to be dealt with to wind up the partnership were, as it seems to me, the following.
i) What should be done about the Hillingdon and Battersea properties? The answer was that they should be sold, or that one partner should buy out the interest of the other partner. That would have been the answer whether the parting between the partners had been amicable (which it was not) or hostile (which it was). There was never any real argument about this aspect, which in the end was resolved by the Sahota interest buying Mr Sohi's interest in the two properties for negotiated prices. In so far as each side incurred legal costs in connection with this aspect it seems to me wrong for the Sahota interest to say that Mr Sohi should pay any part if its (the Sahota interest's) costs or vice versa.
ii) What had been the profit of the partnership for the periods after the last set of accounts had been drawn up (which was, if my memory is correct, the year to 5 April 1996)? The exercise of ascertaining that profit was complicated by several eircums tances.
iii) One was that Mr Sohi had been in receipt of most of the partnership income (rents from lettings of the two properties), but not all of it: Mr Sahota had been collecting the income derived from a hoarding at Hillingdon. The partnership bank account was in the name of Mr Sohi. Hepaid most of the partnership income into it, but not all of the partnership income. Two of the flats at Hillingdon were let to his son, who used to pay the rent in cash. Mr Sohi said that he kept half of the cash himself and spent it; the other half (which was the Sahota interest's half) he just kept in a safe at the shop where he lived and worked. Aspects of that situation were obviously untidy, but they were how things were when the affairs of the partnership had to be wound up, and the amount of the partnership income would have needed to be calculated whatever the relationship between the partners had been like.
iv) Another question which would have had to be sorted out in any dissolution was: what had the expenses of the partnership business been? If I understand correctly this is complicated because (a) some expenses on partnership matters were paid out of the partnership bank account; (b) some expenses on partnership matters were paid by Mr or Mrs Sahota out of their own money; (c) some expenses on partnership matters were paid by Mr Sohi out of his own money.
v) Mr Sahota's records of what he or his wife had spent were in good order, and eventually the expenditure which the Sahota interest claimed it had laid out was, I believe, accepted in full by Mr Sohi's advisers before the final payment of £17,500 was agreed. Indeed, I do not remember there ever being an argument of any significance about the Sahota interest's expenditure claims. vi) In contrast Mr Sohi's records of his expenditure were by no means so good, and not all of it was admitted by the Sahota interest. Nevertheless the difference which that made to the amount of the final settlement cannot have been great, and is trivial compared to the amounts of legal costs about which the parties are now arguing. In correspondence in June 2000 Mr Sohi had claimed that he had expended £22,307 on partnership matters; the Sahota interest's solicitors accepted £17,940 of it. By the time of the final agreement in 2005 the figures had changed somewhat. Mr Sohi had claimed to have expended a total of about £27,000. The Sahota interest admitted £18,410 of that sum, and the final compromise was negotiated on the basis of partnership expenditure of £1 8,410 having been laid out by Mr Sohi. I mention here that, of the £27,000 or so which Mr Sohi said he had spent, £4,814 related to a matter referred to as 'Punjabi Kitchen', of which I say more later, and as respects which Mr Sohi, through his legal advisers, now accepts that his claim was incorrect. I do not think that his advisers have accepted that his claim was incorrect as respects the rest of the gap between £27,000 and £18,410, but I do think that they tacitly accept that Mr Sohi's records were inadequate, and that he could not demonstrate that any more than £1 8,410 was spent by him on partnership matters.
vii) In the last few subparagraphs the context in which I have referred to the incurring of expenditure by one partner or the other out of his or her own money (instead of out of the partnership bank account) has been the working out of the partnership expenses so as to ascertain the profit to be divided between the two partners. The same matter is relevant to another issue which would inevitably have arisen in any account taken between the former members of this partnership, whether it was an account conducted against an amicable background or not. On a distribution of the final amount of partnership funds after all receipts had been collected in and all expenses paid or provided for, the first stage would be to repay to each partner the amount of money which he or it had contributed. Only after these amounts of the partners' capital accounts (as they would commonly be called) had been repaid would any balance be distributed in the equal proportions in which the partners shared.
- The foregoing subparagraphs indicate that many of the matters which have been of central significance to the division of the partnership assets and funds between the Sahota interest and Mr Sohi would have arisen anyway in a partnership dissolution action to which the principle of Hamer v Giles would on any view have applied. That suggests that quite a high proportion of the costs of the Sahota interest on the one hand and of Mr Sohi on the other should be dealt with on the basis that each side should simply bear its own costs. But there are factors which tend to push for a lower proportion.
- One relates to the matter referred to in paragraph 20(vi) above. Mr Sohi was not able to substantiate all of the expenditure which he claimed, but in the trial he was certainly claiming the full amount. It is true that (as I have said) the amount by which his accepted expenditure fell short of the amount which he claimed was quite small in the overall context, but his inability to make good the whole of the case which, in that respect, he was contending for must have some impact, adverse for him, on his final costs position. But on this particular matter there is an 'on the other hand' aspect which I must mention. It is now clearly accepted by the Sahota interest that Mr Sohi did incur some expenditure, met with his own money, upon the partnership business. But in the trial the Sahota interest put its case more highly, and did not succeed to the full extent for which it contended. The Sahota interest submitted to me that, because Mr Sohi's evidence of his expenditure was inadequate whereas Mr Sahota's corresponding evidence was excellent, I should refuse to allow Mr Sohi, in the accounting exercise which was to follow my decision, to take credit for any of his alleged expenditure at all. I did not accept that submission, as my judgment spelt out. I do not think that I knew then, whereas I do know now, that the Sahota interest's solicitors had written two years before that the Sahota interest admitted expenditure of £17,940. In the circumstances I am all the more glad that I did not accept the submission which was put to me. This aspect, to my mind, should reduce the extent to which I take into account against Mr Sohi the feature that he has not been able to substantiate all of the expenditure which he claimed to have incurred.
- In my judgment there is another matter which should influence my evaluation of the proportion of the parties' costs which should, by analogy with the Hamer v Giles principle, be covered by no order as to costs. It reflects a submission put to me by Mr Weatherill, with which I am in general sympathy. The submission is that effectively the Sahota interest had to commence a legal action and bring the matter to court in order to make Mr Sohi do something about winding up the affairs of a partnership which had been determined in 1 998.
- The background to this is that, the Sahotas and Mr Sohi having fallen out in 1996 or $997 so that the partnership relationship was effectively defunct, the Sahota interest's solicitors on 18 November 1998 wrote to Mr Sohi a letter, in the nature of a letter before action, giving formal notice of dissolution of the partnership and stating what the Sahota interest required. It expressed a preference for the matter to be resolved amicably without the need for court proceedings. The writer of the letter was Mr Barda, at that time a partner in Barda & Co. (Mr Barda has at all times had the legal conduct of the matter on behalf of the Sahota interest, although the firm of which he has been a partner has changed on a few occasions. In general, where I name the Sahota interest's solicitors, I shall simply write 'Mr Barda', rather than naming the firm of which he was a partner at the time. Mr Sohi's solicitor, Mr Birang, was at most relevant times employed by Balsara & Co, so in his case I shall refer to the firm name.) Mr Sohi replied to Mr Barda's letter on 12 December 1998. Essentially he ignored the substantive issues raised in the letter and raised an issue of whether it was proper for Mr Barda to represent the Sahota interest against him. He is criticised for this by Mr Weatherill. In my view it would have been better if Mr Sohi had addressed the issue of winding up the partnership's affairs instead of ignoring it, but some of what he said about Mr Barda's position seems to me to have been not unreasonable. However that may be, Mr Sohi showed no sign of doing anything to move forward the resolution of the partnership issues which were still outstanding between himself and the Sahota interest.
- The result was that the Sahota interest commenced this action on 25 February 2000. Only after then did Mr Sohi instruct his solicitors, Balsara & Co. In their first letter (dated 6 March 2000) they said that the main issues appeared not to be seriously controversial. In particular an account between the former partners needed to be taken, and the two remaining properties would have to be sold so that the net proceeds could be divided between the partners. However, when pleadings were exchanged Mr Sohi attacked Mr Sahota with a series of allegations by way of counterclaim which left the Sahota interest with little alternative but to fight the case. In my view there is force in Mr Weatherill's point that, even if some of the issues which have finally been determined in this case were relatively simple matters of accounting between former partners and would normally have been decided by the court on the basis that each partner bore its own costs, the Sahota interest had to bring the action to force Mr Sohi to face up to the issues. I still think that there is quite a lot of scope for the Hamer v >Giles principle to apply, but there is not as much as there would have been if Mr Sohi had responded more constructively to Mr Barda's initial letter of 18 November 1998.
- I must now weigh up the factors which I have sought to explain in the foregoing paragraphs, and come to a conclusion about how far the parties should bear their own costs of this case in accordance with, or by analogy to, the Hamer v Giles principle. This is a matter of subjective impression. I cannot give a mathematically justified explanation of my view, but in my judgment each party should bear 40% of its own costs, leaving 60% of the costs to be the subject of the remainder of this judgment.
Which party has been successful overall, and to what extent, on the disputed issues in the case?
- In the following subparagraphs I will list what appear to me to have been the issues which were to any significant extent disputed in the case, and then I will give my view on who, if anyone, was effectively successful upon them. In order to keep the length of this judgment within reasonable bounds I will for the most part not describe the issues in any detail, but will assume that most readers of this judgment will know something about them. After considering the issues one by one I will then attempt to form an overall view of the impact of them all taken together.
i) The Mrs Sahota issue. When the claim was first brought the claimant was Mrs Sahota alone. One defence put forward on behalf of Mr Sohi was that Mrs Sahota had never been his partner. (See paragraph 6 above.) Whether that was right was never decided because on 12 December 2001 Mr Sahota brought an alternative claim in case the court agreed that his former wife had never become a partner. (The original claim, under which Mrs Sahota was the sole claimant had been commenced in February 2000.) After 12 December 2001 'the Mrs Sahota issue' no longer mattered, since Mr and Mrs Sahota were supporting each other. Nevertheless, right up to an early stage of the trial Mr Sohi continued to press the argument that, because (so he said) Mrs Sahota was never a partner, the claim had been brought by the wrong person. In my judgment that issue, to which quite a lot of effort was devoted, should rank as a draw so far as costs to 12 December 2001 are concerned, but as a success for the Sahota interest for costs after that date.
ii) Reopening the sharing of profits on the Ilkeston property. The Ilkeston property had been sold in 1995, before the partners fell out, and the profits had been divided. Unless I am mistaken 1995 was at a time when on any view the Sahota partner was Mr Sahota rather than Mrs Sahota, although it does not particularly matter if I am wrong about that. In this action, commenced in 2000, Mr Sahota sought to reopen the division of the partnership profits from the Ilkeston property (including the capital gain on the sale of it). He had a reasonable case that, looking at the figures again, the division of profit which had previously been agreed had been unduly favourable to Mr Sohi, and that Mr Sohi owed him an amount by way of correction. Mr Sohi's case was, in essence, that the division had been agreed and that Mr Sahota should not be allowed to reopen it; but, if Mr Sahota was allowed to reopen it, Mr Sohi had an adjustment in his own favour which he would argue for. I decided that Mr Sahota could reopen the issue, but only if he paid all the accounting and associated costs of both parties of doing so. Mr Sahota did not take advantage of that decision, so the division of the Ilkeston profit remained unopened. In my judgment that outcome should be regarded as a success for Mr Sohi.
iii) Allegations of mismanagement by Mr Sahota. Mr Sahota had been in general charge of managing the partnership business until he and Mr Sohi fell out. In the pleadings Mr Sohi advanced several allegations of mismanagement against Mr Sahota. For example, if there was ever a period when any part of the Hillingdon property or the Battersea properties was vacant, so that no rent on it was being earned by the partnership, Mr Sohi was likely to contend that the loss of income was caused by negligence on the part of Mr Sahota. I dismissed all of these allegations (which in my mind had the flavour of retaliation rather than anything else). That was a total success, and an important one, for the Sahota interest. It makes little or no difference that, at the trial, counsel for Mr Sohi virtually conceded the issue. It had been seriously advanced in the pleadings, and the Sahota interest had to be ready to deal with it at trial.
iv) Issues concerning the account between the former partners.
a) I do not take into account at this stage in my judgment the issue of whether there should be an account at all, since, as 1 have already said, there was no dispute about it.
b) However, I do attach some significance at this stage to another feature which I have already mentioned before. Although it was never argued on behalf of Mr Sohi that there should not be an account, he showed no inclination to do anything about it until the Sahota interest commenced their action against him. At that point he instructed his solicitors, who tried, albeit unsuccessfully, to bring about agreement on what amounts the former partners owed to each other. To the extent that the action stopped Mr Sohi unjustifiably ignoring the issue, the fact of the Sahota interest having brought it was in itself a success for them.
c) There was a minor issue about the date from which an account should be taken. I directed it to be taken from 6 April 1996, the logic behind which was that the last set of accounts of the partnership, to which the partners had signified their agreement at the time, had been drawn up to 5 April 1996. Each party favoured a different starting date for the accounting exercise, but I do not regard this as a sufficiently important issue, or as having been sufficiently contentious, for me to attach significance to it for present purposes.
d) As I have said earlier, two items which were important to the accounting between the partners were how much expenditure (i) the Sahota interest, and (ii) Mr Sohi had incurred on partnership matters. As regards the expenditure of the Sahota interest, Mr Sahota put forward his figures, and they were essentially accepted without challenge. This could be represented as a success for the Sahota interest, but I think that it is more fairly regarded as a draw, because there was no real dispute about it.
e) As regards Mr Sohi's expenditure I come to the same conclusion, but for different reasons. I have already described the circumstances. Mr Sohi claimed that he had incurred more expenditure than he was able to justify. This included claiming for a payment of £4,8 14 which he made to a tenant of a unit at Hillingdon where she carried on a business called Punjabi Kitchen. Mr Sohi now accepts that this payment was not a partnership expense but rather a personal liability of his own. I do not think that he makes a similar concession about other items of expenditure which he says he laid out but accepts that he cannot substantiate. However, to the extent that in the event he claimed more expenditure than he could produce evidence for, that aspect of the accounting exercise between the two former partners could be regarded as a loss for him. There is, however, another factor which should be evaluated against that loss. Mr Norris submitted that, because of the inadequacies of Mr Sohi's records, he should not be allowed credit for any expenditure at all. I did not accept that submission. It was potentially quite a far-reaching submission, and the Sahota interest failed on it: in win, loss or draw terms it was a loss for the Sahota interest. In the circumstances I think that the overall result as respects all aspects of Mr Sohi's claimed expenditure should be regarded as a draw.
v) The lease to Mr Sohi's son. At the Hillingdon property there were two shops on the ground floor with flats above them. At a time after Mr Sahota had withdrawn from management of the business the upper floors became vacant. In the event Mr Sohi let them to his son, who used them for the purposes of a business of providing bed and breakfast accommodation. A lot of attention was devoted to this in the trial. In the Sahota interest's first written submission about costs (prepared back in 2002) Mr Norris described it as the issue which dominated the trial. In retrospect it turned out to have been less important than had been seen as likely at the time. Nevertheless, in so far as it gave rise to issues which were seriously controversial at the time of the trial and one party or the other succeeded upon them, I should plainly accord weight to them in reaching my costs decision. I make the following observations about the lease to Mr Sohi's son.
a) There was some criticism directed at Mr Sohi for letting the premises to his son at all, but I do not think that I was influenced by that. If I was I now consider that I ought not to have been. That is because of a letter which I do not recall having been shown or told about in the trial. Mr Sohi had made no secret of the letting having been made to his son. His solicitors explained it as follows in a letter of 19 May 2000 to the Sahota interest's solicitors: 'Our client was forced to deal with this property in or around July 1998, and after 12 weeks of it remaining unoccupied he managed to lease his [sic] property to his son, Mr RS Sohi. ' (The first part of the sentence was an allusion to the situation which arose when Mr Sahota withdrew from involvement in the management of the partnership business.)
b) The major criticism of Mr Sohi as respects the letting to his son was that the premises appeared to have been let at below a fullmarket rent. I dealt with this by directing a mechanism for ascertaining market rents, which were then to be compared with the actual rents. To the extent that the actual rents were lower than the market rents Mr Sohi was to be liable to the Sahota interest for half of the deficiency. In the event the post-judgment negotiations which eventually led to the final compromise included Mr Sohi conceding that there had been a shortfall of rent below the market level, but only a small one. My judgment also prescribed a formula for compensating the Sahota interest to the extent, if any, that the existence of the lease in favour of Mr Sohi's son caused the value at which the Hillingdon property was sold to be lower than it otherwise would have been. In the event nothing came of this, since the negotiations which led up to the final compromise did not allow anything to the Sahota interest on this account. If I recall correctly, when it was agreed that Mr Sahota would buy out Mr Sohi's interest in the Hillingdon property, Mr Sohi's son was willing to surrender the lease without payment. I am not sure whether Mr Sahota took him up on that or not, but either way the Sahota interest could not realistically complain that its 50% interest in the property continued to be devalued by the existence of the lease.
c) If I understood correctly Mr Sohi received rent from his son in cash. He ought to have paid it into the partnership bank account, an account which was in his sole name but was beneficially owned -or borne if it was in overdraft -by himself and the Sahota interest as 50/50 partners. Instead Mr Sohi kept half the rent himself and spent it as he chose, and put the other 50% in cash into a safe at his business premises. He ought not to have done that, and I made critical observations about it in my 2002 judgment. All the same, it is not as if Mr Sohi took for himself and spent the half of the rent which belonged to the Sahota interest. He kept it, and he accounted for the amount of it when required to do so. Nevertheless I do accept that he was at fault in how he dealt with it.
d) The foregoing subparagraphs indicate respects in which the arguments about the lease to Mr Sohi's son can be regarded as successes for the Sahota interest, even if not much has in the event turned on the successes. There was another respect in which the Sahota interest failed to achieve a success. They attempted to argue that Mr Sohi was in some way accountable to them for a part of the profit which his son made from operating a bed and breakfast business in the premises. I could see no justification for that, and did not mention it in my 2002 judgment. On this aspect of the lease to the son, the outcome for the Sahota interest was a loss, not a win or a draw.
e) Overall, however, I would accept that, on the totality of the issues about the lease to Mr Sohi's son, the Sahota interest was successful to a greater extent than it was unsuccessful.
- So, in the light of the foregoing subparagraphs, what is my evaluation of which party was successful overall, and to what extent? In my judgment the Sahota interest was the more successful party. Nevertheless, I do not think that it was successful to the decisive extent that is submitted to me by Mr Weatherill. In terms of wins, draws and losses it scored more wins than Mr Sohi and had fewer losses. But the wins did not, as it seems to me, make large contributions to the financial outcome of the case. The Sahota interest was the loser on some issues, and there were quite a number of draws. Overall I consider that the Sahota interest was successful to the extent of 40%. (That does not of course mean that Mr Sohi was successful to the extent of 60%. Overall Mr Sohi was a loser, but when I take into account the issues on which he won and the issues on which the outcome was a draw, I assess the Sahota interest as the victor in the case, but only to the extent of 40%.
Offers to settle
- There are several situations in which an offer to settle a prospective case can be relevant to costs if the offer is not accepted and the case goes ahead. The situation which is relevant to this part of my judgment is the following:
i) Legal proceedings have been commenced between A and B, but have not yet gone to trial.
ii) Before the trial begins B makes to A an offer to settle the proceedings on terms set out in the offer. The offer is made in open correspondence (or in open oral exchanges). Or, if the offer is made on a without prejudice basis, it is expressed to be without prejudice except as to costs. (That is, it cannot be referred to at the trial, but it can be referred to in the costs arguments after the trial.)
iii) A does not accept the offer.
iv) The trial takes place.
v) Overall A is successful at the trial, but he is not as successful as he would have been if he had accepted B's pre-trial offer. This is often succinctly expressed as A not having beaten the offer.
vi) A seeks an order from the court that B should pay his costs.
- In such a case the court will be informed by B of the offer which B made but which A turned down. In general (an important qualification which may be relevant in this case, as I will explain later) the outcome is likely to be that, although A has won the case, (i) he will not be awarded his costs for the period after B's offer, and (ii) he will be ordered to pay B's costs for that period. Sometimes offers such as B's will be structured to come within the precise terms of Part 36 of the Civil Procedure Rules, in which case the costs consequences which I have described are prescribed by Part 36. But an offer which is not precisely within Part 36 may still be taken into account by the court, and will still be likely to have the same consequences. The applicable provision of the Rules is rule 44.3(4)(c):
"In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including -
(c) any payment made into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not made in accordance with Part 36)."
The proposition that an offer can be relevant in the manner which I have described without being a Part 36 offer is confirmed by Stokes Pension Fund Trustees v Western Power Distribution (South West) Ltd [2005] EWCA Civ 854, [2005] 1 WLR 3595.
- . I wish now to enlarge on the qualification implicit in the words 'in general' which I included early in the previous paragraph. Rule 44.3(4)(c) does not provide that, if a party who wins at trial (A in my example) has not beaten the other party's (B's) pre-trial offer, there is an automatic consequence that the court will not award A his costs for the period after he turned down the offer, but will rather make a costs award in favour of B. It states only that B's offer is a circumstance to which the court must have regard. In having regard to the offer the court will normally deny an order for costs to the party (A) who declined to accept it and then failed to beat it at trial. But that will not always be so. It is not a simple matter of mathematics: was the financial outcome to A worth less than the value of B's offer? The real question, as it seems to me is not 'Did A beat B's offer?', but rather 'Was B's offer one which A ought clearly to have accepted?' (See the way that Neuberger J expressed the point in Locksley Brown v Mcasso Productions [2005] EWCA Civ 1546, especially at paragraph 12: 'it cannot be said to be a letter containing an offer which Mr Brown clearly ought to have accepted because ... '[detailed reasons are then explained] .)
- I should add that what I have said in the previous paragraph is not necessarily true of an offer which comes within the detailed terms of Part 36 of the Civil Procedure Rules. Where B's offer was a Part 36 offer strictly so called, and with hindsight it can be seen that A did not beat B's offer, it is specifically enacted as a general rule that A must pay B's costs after the latest date on which he could have accepted the offer: rule 36.20. Even that result is qualified by the words 'unless it [the court] considers it unjust'. But in most cases of a Part 36 offer the working out of the costs consequences is a matter of mathematics.
- The importance of the foregoing in this case is that Mr Sohi made five offers to settle in this case, none of which the Sahota interest accepted. The offer letters referred to Part 36, but none of the offers was a Part 36 offer strictly so called. They were not supported by payments into court (as to which see rule 36.3). Nevertheless it is argued on Mr Sohi's behalf that the court can and should take them into account on the basis which I described in paragraphs 29 to 31 above. It is argued that some of the offers that the Sahota interest did not accept were offers which it did not beat at trial. Alternatively they were, as Mr Morgan put it, 'there or thereabouts'. Either way the submission is that, because the Sahota interest did not accept them, the court should award Mr Sohi his costs from the date of the offers. Were Mr Sohi's offers ones which the Sahota interest clearly ought to have accepted? If the offers were too complicated the answer must be: no.
- In my judgment, however, although the offers which Mr Sohi made are relevant to the question which I consider in the next section of this judgment, they do not have the consequence which I am considering at this point. That is to say, in the case of none of the offers do I accept that, because the Sahota interest did not accept it, the Sahota interest should be deprived of any order for costs for the period after declining it and, on the contrary, should be ordered to pay Mr Sohi's costs for that period. There are three specific points to be made in this connection.
i) I will not prolong this judgment by setting out the detailed terms of the offers, but they were complicated, and not easy to evaluate at the times when they were made. For that reason alone I do not think that it can be said that the Sahota interest clearly ought to have accepted them. At the very least the offers required further clarification and discussion between the two parties' solicitors before the Sahota interest could realistically have been expected to make a definitive decision to accept any of them. Mr Morgan submits on behalf of Mr Sohi that the main reason why they did not receive clarification and discussion was because the Sahota interest, through its solicitors, showed little interest in pursuing them: the Sahota interest was more interested in total surrender. I think that there is some truth in that. However, it is a consideration which could be relevant to the subject matter of the next section of this judgment, and it does not assist Mr Morgan on the question which I am considering now. If the offers were too complicated it cannot be said that the Sahota interest clearly ought to have accepted them.
ii) In any case it is not clear as respects any of the offers that the Sahota interest failed to beat it through the combined result of the trial and the negotiated post-trial compromise. Each party adduced expert accountancy evidence in which the experts analysed whether the eventual outcome did or did not beat the various offers. The experts agree that the Sahota interest did beat some of the offers, but they do not agree about all of them. The arguments are, in my view, difficult and in some respects inconclusive. There is much room for differences of opinion both about what the composite value of the various offers would have been to the Sahota interest if any of them had been accepted, and about what the composite value of the various elements of the eventual outcome actually was. I confess that, even with the help of the analyses in the two experts' reports, I find it impossible to reach a clear conclusion on whether the value to the Sahota interest of accepting any of the offers would have been greater than the value of the eventual outcomes. accept that some of the offers can now be seen to have been (in Mr Morgan's phrase) 'there or thereabouts', but I cannot confidently say anything more definite than that. Given that the question is not 'Did the Sahota interest fail to beat one or more of Mr Sohi's offers?', but rather 'Was one or more of the offers one which the Sahota interest ought clearly to have accepted?', the difficulty of working out whether the outcome did or did not fail to beat any of the offers suggests that it would be wrong to make a positive award of costs to Mr Sohi on this ground.
iii) A very important point is that, in my view, the offers were inadequate in the way that they dealt with the possible recoupment to the Sahota interest of the costs which it had already incurred. A Part 36 offer strictly so-called does not deal with the costs, since Part 36 itself prescribes the costs consequences of acceptance of the offer or of rejection of it followed by failure to beat it at trial. However, an offer which, while not being a Part 36 offer strictly so called, is relied on by the offeror after the trial in the way in which Mr Sohi now seeks to rely on some of his offers, does need to say something about costs, and in particular about the costs which the offeree has already incurred. Mr Sohi's offers did mention the Sahota interest's costs, but offered very little towards them. In some cases they offered to pay the Sahota interest's costs for the short period between receiving the offer and deciding to accept it. In one case the offer included £20,000 towards the Sahota interest's costs so far. Mr Sohi's advisers must have known that those costs would be much more than £20,000, even if they did not realise the full and alarming level which they had reached. The experts' evaluations left this factor out of account. The Sahota interest had been compelled (or at least thought that it had been compelled) to commence the proceedings and to run up costs upon them in order to bring Mr Sohi to a point where he applied his mind seriously to resolving the partnership dispute. An offer to settle on terms which did not give any serious recognition to the costs which the Sahota interest had incurred in getting Mr Sohi to that point cannot have been one which the Sahota interest clearly ought to have accepted.
- For the foregoing reasons I do not accept that Mr Sohi should receive a costs order in his favour on the ground that he made offers to settle, and that in the event the Sahota interest did not succeed in beating all of them.
Conduct, especially reluctance of the Sahota interest to negotiate
- As I have already noted, Part 44 of the Civil Procedure Rules specifically enacts that, in deciding what order to make about costs, the court must have regard to all the circumstances, including the conduct of the parties, which includes their conduct before, as well as during, the proceedings: rule 44.3(4)(a) and (5)(a). Each party has presented me with a litany of complaints about numerous aspects of the conduct of the other party. For example the Sahota interest has complained about the way in which Mr Sohi and his advisers persistently referred to the lady who ran the Punjabi Kitchen business at one of the units in the Hillingdon premises as Mr Sahota's mistress, despite persistent denials of this scurrilous and essentially irrelevant allegation. On behalf of Mr Sohi Mr Morgan has made various complaints about aspects of the conduct of the Sahota interest. This case has undoubtedly exhibited distasteful elements, and it would have been better without them. I would not, however, think it right to allow complaints of that nature to affect my decision as to costs.
- There is, however, one far more fundamental aspect of the conduct of the case which I do consider to be important, and which does affect my conclusion. It is the manner in which the Sahota interest would not negotiate and appeared to be largely unconcerned about the disproportionate level at which costs were being incurred. Mr Sohi must himself bear some responsibility for the case having got out of control to the extent that it did, but 1 am in no doubt that by far the greater responsibility lies with the Sahota interest.
- I have looked through most of the voluminous correspondence in the case. I have mentioned some aspects of it already. It started with Mr Barda's letter before action of 18 November 1998. Mr Sohi's reply (ignoring the substantive issue and complaining about Mr Barda representing Mrs Sahota against him) was unsatisfactory, and Mr Sohi cannot complain about the Sahota interest having commenced litigation against him: he was showing no signs of doing anything to sort the matter out. However, from the time when Balsara & Co were instructed by Mr Sohi they were pressing for a meeting with a view to resolving the matter. In some letters they expressed concern about the unacceptable levels of costs being incurred. Further, as I have indicated in the previous section of this judgment, they made several formal offers by way of attempts to have the case resolved by a negotiated settlement. In contrast, although it is not all one way on these matters, the Sahota interest and its solicitors seem to me to have been far less concerned about the costs being incurred, and they did not respond creatively to settlement offers.
- I note from correspondence in 2000 that Mr Sohi's solicitors, Balsara & Co, were consistently urging the Sahota interest and its solicitors to attend a without prejudice meeting, and had much difficulty in getting them to agree. On one occasion a meeting was arranged, but appears from the correspondence to have been cancelled by Mr Sahota at short notice. Eventually a meeting was held on 22 June 2000, but I gatherthat it became acrimonious and collapsed without achieving anything. This could be an example of the responsibility for the way that the case has dragged on not being all one way, because there are some indications that the main reason why the meeting collapsed lay with the aggressive attitude displayed by Mr Sohi. If that is right it would not greatly surprise me. My memory of the trial, more than three and a half years ago, is that, whereas Mr Sahota was a controlled and temperate witness, Mr Sohi bristled with resentment throughout the time that he was being asked a series of entirely reasonable questions by Mr Norris. I felt that he was on the brink of an explosion during most of his time in the witness box.
- That, however, does not change the fact, apparent from correspondence over a period of years, that Balsara & Co were regularly trying to work towards a resolution of the partnership dispute, whereas I cannot say the same about the Sahota interest and its solicitors. All the offers to settle to which I referred in the previous section of this judgment were made by Balsara & Co. It is true that I have said that none of them was such that the Sahota interest clearly ought to have accepted it, but the point which I make now is that the Sahota interest made no counter offers, and made no effort to negotiate. As far as I can see, in the case of several offers the Sahota interest did not even reply.
- An offer in the case of which Mr Barda did reply on behalf of the Sahota interest was one made by Balsara & Co in a letter dated 21 May 2001. Mr Barda replied on 15 June 2001. He made several entirely fair and valid observations, to the effect that the offer was difficult to understand, and required clarification. (This links up with the point which I have made in paragraph 34(i) above.) However, the critical point for this stage of my judgment is that he had already flatly rejected the offer in the opening paragraph of his letter, and he gave no indication whatever that his clients would be willing to negotiate with a view to reaching an agreed resolution of the dispute. In the opening paragraph he wrote: 'For the reasons set out below, we are unsure precisely what your client is offering, but on any view of our [sic] considers that the offer, however interpreted, is insufficient and is accordingly rejected. ' Several criticisms of the detailed way in which the offer had been set out in Balsara & Co's letter of 21 May 2001 then follow, and in my view they make fair points. But the letter does not close with even the faintest hint that, if the obscurities in the offer could be clarified, it might be possible for the solicitors to negotiate and see if they could formulate possible terms to put to their respective clients. There is nothing to the effect that, if Mr Sohi made an offer which took a more realistic view of the need for him to compensate the Sahota interest for the costs which it had already incurred, the matter might be reconsidered. Generally there is no suggestion that the Sahota interest would be interested at all in settling the dispute out of court.
- Nevertheless Balsara & Co did reply. They wrote on 29 June 2001, reformulating the offer and attempting (not entirely successfully in my view) to clarify some of the obscurities which Mr Barda had identified in their earlier letter. Their letter concluded: 'Again if you have any sensible alternative suggestions to make with a view to settling this part of the litigation we will give them our consideration. ' Unless I have overlooked something Mr Barda did not reply. The same seems to have happened in relation to other offer letters from Balsara & Co. One offer was made in a letter of 10 March 2002, and another, offering a total of £55,000, on 23 April 2002. The papers include a letter of 2 May 2002 in which Balsara & Co write: 'We refer to our letter dated 10 March 2002 and note that you have failed to respond to the same along with our most recent letter in relation to the £55,000 offer. '
- I accept that, if the Sahota interest had shown a willingness to negotiate, it is far from certain that an agreement would have been reached. The terms which the Sahota interest wanted might have been too demanding; for example they might have included the Sahota interest's excessive demand for a half share of any profits earned by Mr Sohi's son from the bed and breakfast business carried on by him in the upper floors of the Hillingdon premises. Whatever terms the Sahota interest wanted, Mr Sohi (not temperamentally a compromiser) might have refused to agree to them. But in my judgment it is not acceptable that the Sahota interest, in the context of a dispute which cried out that it was disproportionately costly and ought to be resolved without expensive court proceedings, should simply have turned down or ignored offers made to it, without anything in the nature of a counter offer or even an indication of the lines upon which it would be prepared to enter into discussions.
- In my judgment this was an aspect of conduct on the part of the Sahota interest of which I should take account in my final award of costs. I consider that it merits a serious reduction of the level of costs which I would otherwise have been minded to award to the Sahota interest. In my judgment that level of costs should be reduced by 50%.
Overall review and conclusion
- The result of what I have said so far is as follows.
i) By reason of the rule in Hamer v Giles I consider that each party should pay 40% of its own costs on the basis that they related to matters which were essentially non-contentious and arose from the partnership dissolution.
ii) That leaves 60% of each partner's costs to be argued about. With reference to that 60% 1 then ask: which party was successful overall and to what extent? My answer is: the Sahota interest to the extent of 40%. Two results follow. First, the Sahota interest will not be liable to pay any proportion of Mr Sohi's costs. Second, subject to any alteration which may arise from the remaining matters which I take into account, Mr Sohi will be liable to pay 24% of the Sahota interest's costs.
iii) I then consider whether, notwithstanding the position which I have reached so far, Mr Sohi should be entitled to an order for his costs incurred after any of the offers which he made and which was not accepted. My answer is that he should not.
iv) Next I consider whether the costs order which I would otherwise have made (that Mr Sohi should pay 24% of the Sahota interest's costs) should be reduced on account of conduct. My conclusion is that the costs which I would otherwise have awarded to the Sahota interest should be reduced by 50% because of the unreasonable unwillingness of the Sahota interest to enter into negotiation and discussion with a view to settling the dispute without litigation. The result so far is that Mr Sohi should be liable to pay 12% of the Sahota interest's costs.
- There is one stage left. I step back and reflect on the case as a whole, and as I do so I ask myself whether an order that Mr Sohi should pay 12% of the Sahota interest's assessed costs is reasonable and fair in the circumstances. In my view it is a little on the low side. Up to a point that is an intuitive reaction rather than one reached for specifically identifiable reasons, but one consideration which does weigh with me is that 12% feels to be too low because it would not give sufficient weight to the Sahota interest having effectively been compelled to make Mr Sohi do something to sort out the consequences of the partnership dissolution. Nevertheless, having reached the 12% figure in a systematic and structured way (as I have described), I think that it would be wrong for me to make a substantial departure from it. In the circumstances I will shade up the percentage by another three points, making it 15.
- For all of the foregoing reasons my conclusion is that Mr Sohi must pay 15% of the Sahota interest's costs, those costs, if not agreed, to be determined by detailed assessment on the standard basis.
