Jersey Unreported Judgments

Court of Appeal - costs order made in favour of respondent following dismissal of appeal.

[2014]JCA174

Court of Appeal

17 September 2014

	Before     :		J. W. McNeill, Q.C., President N. Pleming Q.C. Sir David Calvert-Smith
Between		The Minister for Planning and Environment		First Appellant
		Bernard William Fairman and Julia Lumsden Fairman nee Coleman		Second Appellant
And		Andrew Alvin Hobson and Maureen Audrey Hobson		Respondents

Advocate D.J. Benest for the First Appellant.

Advocate J.D. Kelleher for the Second Appellant.

Advocate N.M.C. Santos-Costa for the Respondents.

JUDGMENT

PLEMING jA:

Introduction

1.        On 25^th July, 2014, the Court dismissed the substantive appeal.  The history of the applications for planning permission, and the consequential proceedings, are there set out and not here repeated. 

2.        Two costs issues remain to be determined.  First, the costs of the hearing before the Royal Court and, in particular, that part of the decision made on 24^th March, 2014, when the Deputy Bailiff, sitting alone, ordered the Minister to pay to the Respondents (then the Appellants) their costs of and incidental to the proceedings up to 29^th January, 2014, on the indemnity basis.  Second, the costs of this appeal - the Respondents again seeking their costs on the indemnity basis. 

The applicable principles relating to an award of indemnity costs

3.        The correct approach to indemnity costs is not controversial and has been summarised in Leeds United v Weston [2012] JCA 088, in the judgment of Jones JA, at paragraphs 4-7:-

"4.      The circumstances in which it may be appropriate to award costs on the indemnity basis have been considered on a number of occasions by this court. In Dixon v. Jefferson Seal Ltd. [1998] JLR 47, Collins J.A., with whom Harman and Southwell JJ.A. agreed, concluded that there had to be "some special or unusual feature in the case" to justify such an award. (Page 59) In Marett v. Marett [2008] JLR 384, Pleming J.A., Sumption and Nutting JJ.A. concurring, said this:-

"A court may make an indemnity costs order only where there has been some culpability, some abuse of process such as deceit, underhanded or unreasonable behaviour, abuse of court procedures, or the submission of voluminous and unnecessary evidence. There are many examples in decided cases of the application of these broad principles (see Dixon v. Jefferson Steel Ltd. (6) (1998 JLR at 52-53); Maçon v. Quérée (née Colligny) (20); and Jones (née Ludlow) v Jones (No.2) (11), noting the reference to "some special or unusual feature" to justify the award of indemnity costs). There are also examples of cases where the court has made an indemnity order, even in the absence of culpability or abuse ... ... relying on the court's general discretion, in England and Wales, under the CPR, r.44.3." (Paragraph 73)

4.        In Leeds United Association Football Club Limited and Another v The Phone-In Trading Post Limited t/a Admatch [2011] JCA 110, at paragraph 11, this court pointed out that the limitation placed on the exercise of the court's discretion by the use of the word "only" in the first sentence of the foregoing passage must be regarded as an error. 

5.        In C v P-S [2010] JLR 645, the court rejected a submission that an indemnity costs order should only be considered where the actions of the paying party are malicious or vexatious. Beloff J.A., who delivered the judgment of the court, said this:-

"We do not accept that it is appropriate to impose such a restrictive approach on the discretion of the court to make an award of costs on the indemnity basis. The question will always be-is there something in the conduct of the action by one of the parties or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs, recognizing that there will usually be some degree of unreasonableness? We do not consider that there is a need for the claiming party to show a lack of moral probity or conduct deserving of moral condemnation, or malicious or vexatious conduct". (Paragraph 11)

6.        In making an award of indemnity costs on the ground of unreasonableness, the court is seeking "to achieve a fairer result for the party in whose favour it is made than would be the case if he were only able to recover costs on the standard basis; in the end, it is a question of what would be fair and reasonable in all the circumstances." (Pell Frischmann Engineering Limited v Bow Valley Iran Limited and Others [2007] JLR 479, paragraph 25, cited with approval in C v P-S at paragraph 7). 

7.        As observed by Beloff JA in C v P-S [2010] JLR 645, and set out in the extract from the judgment in Leeds United v Weston - "The question will always be-is there something in the conduct of the action by one of the parties or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs, recognizing that there will usually be some degree of unreasonableness?".

8.        The focus, inevitably, will be on "conduct of the action or the circumstances of the case", but those phrases are broad enough to allow the Court to examine (although with some care and caution) acts and omissions prior to the action, such as the response to offers of settlement. 

9.        The principles have been considered and applied in a number of Royal Court decisions since 2010, and the Deputy Bailiff referred to Leeds United in his March 2014 decision, and to his decision in Dalemont v Senatorov [2013] JRC 209, at paragraph 9. 

10.      It is accepted, therefore, that by referring to unreasonableness, and "taking the case out of the norm", the Court has a wide discretion as to when it orders that costs should be assessed on the indemnity basis.  It is not necessary that the costs paying party should have acted maliciously or vexatiously (although such conduct may form a clear basis for an indemnity costs award), but the Court will need to identify conduct that justifies an award - such as abuse of process, flagrant non-compliance with the rules of procedure, contemptuous or unreasonable behaviour.  It is however to be borne in mind that an indemnity costs order carries with it an element of stigma for the paying party, even if the purpose of the award is "to achieve a fairer result for the party in whose favour it is made than would be the case if he were only able to recover costs on the standard basis". 

11.      As the deciding Court has a wide discretion when making a costs order, the appeal court should not interfere unless it is satisfied that: the judge misdirected himself with regard to the principles in accordance with which his discretion was to be exercised; the judge in exercising his discretion has taken into account matters which he ought not to have done, or has failed to take into account matters which he ought to have done; or the decision is plainly wrong.  See United Capital Corporation-v-Bender [2006] JLR 269, and Alhamrani-v-Alhamrani [2008] JCA 187A (noted at [2008] JLR Note 45), both dealing with the test for the grant of leave to appeal.  The correct approach was re-stated by this Court in 2012, adding change of circumstances as a fourth ground for possible interference by the appellate court - see Flynn v Reid [2012] (2) JLR 226 Beloff JA:-

"15.    The exercise of a discretion such as that in awarding costs is immune from review by the Court of Appeal unless vitiated by matters almost too well known to repeat (United Capital Corp. Ltd. v. Bender (16)), i.e. that the Court of Appeal should only interfere if it is satisfied that one or more of the following has occurred:

The judge misdirected himself with regard to the principles in accordance with which his discretion should be exercised.

The judge, in exercising his discretion, has taken into account matters of which he ought not to have taken account or not taken into account matters he should.

The decision is plainly wrong, in the sense that no reasonable judge properly directed could reasonably have reached the same decision.

There has been a change of circumstances since the lower court's decision, which would have justified a different decision.

I recognize that self-restraint is particularly appropriate in any appeal on costs, see Fleming v. Chief Const. (Sussex Police) (8) ([2005] 1 Costs LR 1, at para. 32):

".-�.-�. [T]he Court of Appeal must exercise self-restraint in substituting its views for the view of the judge who has the feel of the case he has tried, as well as knowledge of its progress and nuances of detail which are not suitable for investigation on an appeal concerning costs."

12.      I draw attention to Lord Diplock's conclusion in Hadmor Prods Ltd v Hamilton (11) [1983] 1 A.C. at 220 (which was approved in United Capital Corp Ltd-v-Bender ([2006] JLR 269, at para. 26)):-

"It is only if and after the appellate court has reached the conclusion that the judge's exercise of his discretion must be set aside for one or other of these reasons, that it becomes entitled to exercise an original discretion of its own.""

13.      I now apply those principles to the costs issues I have to determine. 

The costs of the Royal Court proceedings

14.      The Deputy Bailiff made an award of indemnity costs on the basis that, although the development plans for the garage were materially different from those which were presented on the first application, the Deputy Bailiff could not see anything in the officer advice or the Minister's decision-making process "which gave any substantial indication that the Court's reasons for its decision on the first application had been considered in relation to the second application" - see paragraph 11 of the judgment.  It is clear, therefore, that the focus was not on the conduct of the action, but on the decision-making process, the decision impugned by the Court challenge.  

15.      The Deputy Bailiff granted permission to appeal his costs decision, essentially on the basis that there was a substantive appeal - see paragraph 16 of the judgment. 

16.      The costs order is challenged by the Minister on the summarised basis that although it is accepted that pre-litigation conduct can be considered by the Court: "the Court's expression of disapproval of the Minister's conduct prior to the commencement of proceedings is unlikely to have anything but a negative effect on the Department for which the Minister is responsible: increasing expenditure and therefore burden on the public purse; the fostering of a culture of blame within the Department".  In summary, the Minister's position is that a public official, such as the Minister, should be in a different position from the private litigant. 

17.      The response on behalf of the Hobsons, in summary, is that there should be no such distinction, and that it is wholly irrelevant that costs awarded on the indemnity basis are paid out of public funds of the Department for which the Minister is responsible.  Their written submissions close as follows:-

"If the Minister's conduct is such as to justify an award of indemnity costs, why should Justice be denied to the receiving party because of their opponent's source of funds? On the contrary, it is right that the Minister should be subject to orders for indemnity costs just as any other litigant should so that the financial consequences of unreasonable conduct on his part in the discharge of his public duties can be brought to the attention of the States and to the taxpayers to whom he is accountable."

18.      There is much to be said in favour of what is said there, but in my opinion there is a flaw at the heart of the Deputy Bailiff's reasoning, repeated in the submission that a Minister (or other public official discharging a public function) should be the subject of an indemnity costs award when his conduct is unreasonable.  The flaw is that the test of unreasonableness (whether within Article 109 of the 2002 Law, or the higher hurdle imposed by the Wednesbury line of cases) can be a basis for a ruling that the decision of a public official is wrong, in the public law sense.  There is a real danger, therefore, that if the costs award is based on unreasonableness in the decision-making process, or the decision itself, rather than in the conduct of the litigation, not only will the case be lost by the public body, but there will be an additional costs burden imposed.  This would be regrettable, and, in my opinion, wrong in principle. 

19.      There is no criticism of the Minister's conduct of the action or the circumstances of the case which takes the case out of the norm (in public law challenges) in a way which could be said to justify an order for indemnity costs.  In any event, having considered the decision-making process, and the decision itself, even if such pre-action conduct could properly be taken into account when costs of considered in a public law case, I do not consider it could properly be described as so unreasonable as to justify an award of indemnity costs. 

20.      For these reasons, notwithstanding the constraints imposed on this Court when considering an exercise of discretion by the Royal Court when making a costs award, my conclusion is that the indemnity costs award should be set aside, and substituted with an award on the standard basis.  I make no other changes to the costs order below. 

The costs of the appeal

21.      Written submissions have been lodged by the Minister, the Second Appellants (the Fairmans) and the Hobsons. 

22.      No order for costs is sought by the Hobsons against the Fairmans, and the Minister has not advanced any positive grounds why the Fairmans should contribute to any costs order made against him.  In those circumstances, although the Court retains a general discretion in relation to costs, I do not consider it fair and just to make any costs order against the Fairmans, and it follows that they must carry the burden of their own legal costs of the appeal.  

23.      The Minister accepts that there should be an award of costs in favour of the Hobsons, on the standard basis, but urges the Court to consider the matter on an issue basis.  The Minister invites the Court to order that he should pay two thirds of the Hobsons' costs of and incidental to the proceedings in court below, and to order that he should pay two thirds of the Hobsons' costs of the Minister's (as distinguished from the Fairmans') appeal to the Court of Appeal. 

24.      The Hobsons seek an order that the Minister pays their costs of and incidental to the appeal to this Court, and that such costs should be paid on the indemnity basis (or, in the alternative, on the standard basis).  The summarised basis for the indemnity costs application is that the approach of the Minister has been unreasonable and oppressive, forcing the Hobsons is to incur costs to rebut wide-ranging legal argument where the impact of those arguments on the particular case was minimal.  The argument can perhaps be encapsulated in two brief extract from the written submissions: "the present appeal was fundamentally misconceived and should never have been brought because it could effectively be reduced to the same arguments as those which had failed before the Royal Court"; and "it was a rerun of the rerun and was, therefore, both unreasonable and highly prejudicial to the Respondents, who have had to fund appellant proceedings and unnecessary litigation which the Royal Court found was precipitated by the Ministers unreasonable conduct."

25.      I have considered and re-read these submissions, and re-read the judgment of the Deputy Bailiff and this Court's judgment.  I do not see anything in the conduct of the proceedings by the Minister that would take this case out of the ordinary such as to justify an award of indemnity costs.  Nor do I consider that this is a case where an issue-based approach should be adopted. 

26.      In my judgment, applying the principles set out at the beginning of this judgment, the proper costs order is that the Minister should pay the Hobsons' costs of resisting the Minister's appeal, to be assessed if not agreed on the standard basis.  If and in so far as there are additional costs arising from the Fairmans' appeal, such costs should not be the responsibility of the Minister.  

MCNEILL JA:   

27.      I agree. 

CALVERT-SMITH JA: 

28.      I also agree. 

Authorities

Leeds United v Weston [2012] JCA 088.

Leeds United Association Football Club Limited and Another v. The Phone-In Trading Post Limited t/a Admatch [2011] JCA 110.

C v. P-S [2010] JLR 645.

Pell Frischmann Engineering Limited v. Bow Valley Iran Limited and Others [2007] JLR 479.

Dalemont v Senatorov [2013] JRC 209.

United Capital Corporation-v-Bender [2006] JLR 269.

Alhamrani-v-Alhamrani [2008] JCA 187A (noted at [2008] JLR Note 45.

Flynn v Reid [2012 (2) JLR 226.

Hadmor Prods. Ltd. v. Hamilton (11) [1983] 1 A.C. at 220.