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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Day v Day [2006] EWCA Civ 415 (14 March 2006) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2006/415.html Cite as: [2006] EWCA Civ 415

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT CHANCERY DIVISION
(MR L HENDERSON QC)

		Royal Courts of Justice Strand London, WC2
		14 March 2006

1. LORD JUSTICE WARD: The background to this appeal is this, stating the matter very shortly. It is a sad and sorry dispute between a mother and her son about the beneficial ownership of the net proceeds of sale, amounting to nearly £194,000, of a property in Chorleywood which was sold in September 2001 following the death in April of that year of the registered proprietor of the property, the late Mrs Elsie Day, whom I shall call Elsie.
2. The property itself was a council house built at the end of the Second World War. Elsie and her husband William were the original tenants and lived in that property from 1947 onwards. There they brought up their five children. In due time the children left to make their independent lives. William died in 1978, leaving Elsie as the sole tenant of the property. She eventually lived there alone. The claimant, now the appellant, Mrs Lillian Day, married Elsie's eldest son John in 1952. John died in 1992. The claimant and John had seven children, the eldest being Phillip, the defendant. By her last will Elsie left the property to Phillip, and her executrix accordingly paid the net proceeds of sale to Phillip after it had been sold.
3. John and the claimant lived nearby in a council house which they originally rented in 1955, and there they brought up their seven children. In about 1978, before the introduction of the right to buy legislation, they were able to buy that property from the local council and clearly thought that was a good idea. Consequently, in about 1985, John recommended to his mother that she exercise her right to buy the property under the legislation then in force. The property was agreed to be worth £37,250 and she was entitled to a 60% discount, leaving a balance to be paid of £14,900. John agreed to put up the money, which it seems likely that he borrowed from his bank, Elsie agreeing to charge the property to the bank as security for that loan.
4. But what precisely was agreed or understood between Elsie and John was the main issue at the trial. Mr Lancelot Henderson QC, the Deputy Judge of the Chancery Division, summarised the rival contentions of the parties in this way, at paragraphs 28, 29 and 30:

"28. The Claimant's primary contention is that it was the common intention of Elsie and John, when the Property was bought from the Council in 1985 that it should be a home for Elsie for the rest of her life, and thereafter should belong to John. It is therefore alleged in paragraph 9 that the Particulars of Claim are that Elsie held the property 'on a common intention constructive trust for herself for life, with remainder to [John].' An alternative contention in paragraph 10 of the Particulars of Claim that she held the Property on a resulting trust for John absolutely is no longer pursued, and the Claimant's fallback position is that Elsie held the Property on a resulting trust for herself and John in the ratio of 60:40, treating the value of her right to buy discount for this purpose as a contribution to the purchase price."

"29. Phillip's primary contention, by contrast, is that the sum of £14,900 which John contributed towards the purchase of the Property was intended by him and Elsie to be a gift, and took effect as such. The result on this analysis is that Elsie was the sole beneficial owner of the Property, and was entitled to dispose of it by her will as she thought fit. Her initial intention, given effect in her 1985 will, was to leave the Property to John, but in 1989, in the light of John's financial difficulties and the risk that he might be made bankrupt, she made her second will leaving the Property to Phillip."

"30. Phillip's fallback position is the same as the Claimant's, namely that Elsie held the Property on resulting trust as to 60 per cent for herself and as to 40 per cent for John."

5. The claimant impressed the Deputy Judge as:

"a patently sincere witness, but she was prone at times to confusion and her recollections were often hazy as she was then a woman of some 72 years of age."

6. He considered that Kevin, her second son, was the driving force in the litigation and he made a most unfavourable impression on the judge, coming across as an:

"aggressive, self-satisfied bully ready to tell lies whenever it suited him."

7. The judge found that Phillip's treatment of his mother was:

"in general distant and cold-hearted, and he did not enjoy a close relationship with her or indeed with any of his younger brothers and sisters."

That said, the judge considered him to be:

"in general a truthful witness, although always concerned to try and put everything in the best possible light from his point of view."

So it is quite clear that there was, and sadly, it seems to me, is very bad blood between the defendant and the other members of his family.

8. The judge came to these conclusions at paragraphs 38 and 39:

"38. It was accepted by Counsel on both sides … that their fallback position was logically the starting point, and that it should prevail unless I was positively satisfied on the evidence either that there was a common understanding in the terms contended for by the Claimant, or else that John made a gift of his contribution to his mother."

"39. Having heard the oral evidence, and carefully considered the submissions on each side, I have come to the clear conclusion that there is no solid evidence to displace the resulting trust analysis, and accordingly that the Property was held by Elsie when she acquired it upon trust for herself and John in undivided shares of 60 per cent and 40 per cent respectively."

He dismissed the claimant's primary claim, holding in paragraph 40:

"The fatal obstacle to this contention is the lack of any firm evidence that there was indeed an agreement or understanding between Elsie and John at the time when the Property was acquired, to the effect that the Property was to be hers for the remainder of her life and that it should then belong to John absolutely."

He rejected Phillip's primary case that John made a gift of his contribution to his mother, because (paragraph 44):

"It seems to me inherently most improbable that John would have been content to provide the whole of the cash needed to purchase the Property without requiring any stake in it."

9. Accordingly, on 23 June 2005 the Deputy Judge declared that the parties were beneficially entitled to the net proceeds of the sale in shares of two fifths to the claimant and three fifths to the defendant. The defendant was entitled to credit in respect of certain amounts he had paid out of the proceeds of sale to his brothers and sisters, and indeed a small sum to the claimant herself; and allowing for that credit, he ordered that the defendant pay the claimant the sum of £53,185.65 together with interest eventually agreed at £10,214.16.
10. He then heard argument on the question of costs and ordered that the defendant pay the claimant's costs until 14 February 2005, but with no order for costs thereafter. The appellant now appeals, with permission granted by Jacob LJ, against the Deputy Judge's refusal to award her all of the costs of her claim.
11. In his judgment on costs the judge said this in paragraphs 9,10 and 11 of his judgment:

"9. That leaves the questions of costs of the action. I have already debated this at some length with both counsel in the course of the exchanges we have had this afternoon, so I do not propose to give a lengthy judgment. It will be apparent, for reasons I have already given, that I do take the view that the hearing before me last month can only sensibly be treated as a draw because each side failed to make good its primary contention to be entitled to a 100 per cent of the net proceeds of the sale of the Property, and I have held that the fallback position of each side was in fact the correct position, that is to say 40 per cent of the proceeds going to the claimant by route of the various assignments referred to in the judgment and 60 per cent to the defendant.

"10. It seems to me the greatest pity that the parties were not able to agree on that before the hearing, since it is indeed the outcome of the hearing and one which therefore has really added nothing from either side's point of view to the obvious fallback position which was based on contributions to the purchase price.

"11. On that basis it seems to me the only order I should make in relation to the costs of the hearing itself is no order as to the cost. However the Claimant does say, and I see some force in this, that if this action had not been brought it is most improbable that the defendant would ever had agreed to pay anything to her, and I think it can therefore be said that it was necessary to bring this action even if only to succeed on the fallback basis of 40 per cent. No appropriate offers were made on either side to deal with the matter by agreement, or at least none which, it seems to me, I can usefully or helpfully take into account, but bearing in mind the point I have just made it seems to me that it would be right to order the defendant to pay the claimant's costs of the action on the standard basis down to the date I would propose, which is the end of January 2005, that being shortly after the last date for service of witness statements made by the learned master on 11 November 2004. It seems to me that when the evidence was complete, and preparation for the trial was essentially complete, that was a stage when the parties should, if not earlier, have reached a sensible agreement on the basis of each other's fallback position, but after that point I think it can be said with justice that the claimant was justified in bringing these proceedings and almost certainly would not have made any progress unless she had."

12. Mr Adrian Davies who appears for the appellant as he did below submits succinctly that the judge was in error in characterising the outcome of this mitigation as a draw, that he was wrong to penalise her for having failed to make any Part 36 offer, since the duty primarily lay on the defendant to make such an offer or pay money into court. On the other hand Mr Daniel Margolin, equally concisely – and I am grateful to counsel for their succinct submissions – submits essentially that, costs being a matter for the exercise of the judge's discretion, this court should be slow to interfere; the judge was entitled to treat this as a draw and no order for costs was the appropriate result.
13. It is well known that the court does have a broad discretion on the matter of costs. The rules assist in showing the judges how to exercise that discretion; thus Part 44 of the CPR is relevant. That confirms first that the court has the discretion, secondly that the general rule is that an unsuccessful party would be ordered to pay the costs of the successful party but the court may make a different order. The fourth paragraph of CPR 44(3) reminds us that the court must have regard to all the circumstances, including (a) he conduct of all the parties; (b) whether a party has succeeded in part of his case, even if he has not been wholly successful; and (c) any payment 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. Paragraph 5 defines conduct, and it includes conduct as to whether it is reasonable for a party to raise, pursue or contest a particular allegation or issue. It includes the manner in which the litigation has been conducted and it includes "whether a claimant who has succeeded in his claim in whole or in part exaggerated his claim".
14. The court, as it is now well known, has wide powers, including the power to apportion costs or to make issue-related orders for costs. Our attention has been drawn by both counsel to an unreported case of Johnsey Estates v Secretary of State for the Environment [2001] EWCA Civ 535, a landlord and tenant case where there was a claim, broadly speaking, of about one million pounds, a payment into court of about £200,000 and a judgment for a further £236,000. In his judgment, with which the other members of the court agreed, Chadwick LJ stated the applicable principles to be these (paragraph 21):

"(1) Costs cannot be recovered except under an order of the court; (2) the question whether to make any order as to costs – and, if so, what order – is a matter entrusted to the discretion of the trial judge; (3) the starting point for the exercise of discretion is that costs should follow the event; nevertheless (4) the judge may make different orders for costs in relation to discrete issues – and in particular, should consider doing so where a party has been successful on one issue but unsuccessful on another, and, in that event, may make an order for costs against the party who has been generally successful in the litigation; (5) the judge may deprive a party of costs on an issue on which he has been successful if satisfied that the party has acted unreasonably in relation to that issue; (6) an appellate court should not interfere with the judge's exercise of discretion merely because he takes the view that it would have exercised that discretion differently."

"22. The last of those principles requires an appellate court to exercise a degree of self restraint. It must recognise the advantage which the trial judge enjoys as a result of his 'feel' for the case which he has tried. Indeed, as it seems to me, it is not for an appellate court even to consider whether it would have exercised the discretion differently unless it had first reached the conclusion that the judge's exercise of his discretion is flawed. That is to say, that he has erred in principle, taken into account matters which should have been left out of account; left out of account matters which should have been taken into account; or reached a conclusion which was so plainly wrong that it can be described as perverse – see Altrans Express Ltd v CVA Holdings Ltd [1994] 1 WLR 394, per Lord Justice Stephenson at page 400C-F and Lord Justice Griffiths at page 403G-H."

15. The first question, therefore, is whether the judge was correct in characterising the outcome of this litigation as a draw. Mr Margolin contends in effect – these are not his words but mine – that it was a no-score draw in the sense that both parties' main shots at goal missed, and neither managed to score any goal at all. The case therefore petered out as a stale draw because the fallback position was maintained by the judge.
16. We must ask ourselves whether the primary rule applies in this case – the general rule, that is, that the unsuccessful party will ordinarily be ordered to pay the cost of the successful party unless the court thinks otherwise. The question is, which, if any, of these parties did enjoy success in this litigation? We were referred to a judgment of Lightman J in Bank of Credit and Commerce International SA v Ali (no.3) [1999], NLJ 1734 Vol. 149 where he said that:

"For the purposes of the CPR success is not a technical term but a result in real life, and the question as to who has succeeded is a matter for the exercise of common sense."

17. I would go further and say that in a case like this, the question of who is the unsuccessful party can easily be determined by deciding who has to write the cheque at the end of the case; and there is absolutely no doubt at all that the person who has to put his hand in his pocket and pay up the money that is in dispute was Phillip. He failed; his mother succeeded. She succeeded, all the more so, because Phillip adamantly and persistently refused to pay her a penny piece, notwithstanding his fallback position. So I am in no doubt at all that this case did not end in a draw, but ended in victory for mother. Therefore the ordinary rule should apply, and the judge was correct in applying it to the cut off point of 14 February; but was, I regret to say, in error in failing to apply it for the costs of the hearing. That hearing was necessary. This unfortunate mother had to pursue her son to the judgment seat in order to recover that which was rightfully found to be hers. There was in my judgment, therefore, a fundamental error of principle in the judge's analysis which itself allows this court to intervene.
18. There was moreover, in my judgment, a second error made by the judge in his observations that no appropriate offers were made upon either side with the matter by agreement. The rules, as I have indicated, require the court to have regard to any payment into court for any admissible offer to settle. The judge found that none had been usefully made. That is probably so. We have been shown a letter from the mother's solicitors written in September 2003, pursuant to CPR Part 36.10, when she offered to pay, in effect, six-sevenths of the proceeds of sale – that being, one readily understands, her perception of a fair division of this family property between the seven children of the family.
19. Phillip made no appropriate payment into court, or any payment into court at all. Nor did he make any offer, save the Calderbank without prejudice to costs offer on 4 May 2005, which was very shortly before the trial took place, when he was prepared to offer no more than £25,000 inclusive of costs and interest. Quite clearly the mother beat that offer by a very considerable extent, having regard to her recovery in total of some £63,000 and her recovery of costs up to the date ordered by the judge.
20. In my judgment the valuable use of payments into court and Part 36 offers to settle place an onus, in the first place, on the defendant. He had the ability to pay his fallback position into court and he could, if he took the view, have done so, confident that his greedy mother backed by his horrible brother Kevin would not have taken that money but would have fought him to the bitter end for the whole of the proceeds of sale, but that was his means of protecting his position. He failed to avail it, and it seems to me that that loses him the protection of the rules.
21. It is not incumbent, in my judgment, on the claimant to have made the offer to accept 40 per cent. Had she done so, as Mr Davies points out, that might have given her the advantage of being able to seek indemnity costs and interest on costs, had that offer been held to be appropriate, but it should not be used as some form of punishment for failing to exercise the right that she did have to make such an offer. In that regard, too, I fear that the judge fell into error for the first reason, and the second that enables this court to say the judge erred in principle. He took into account matters which he should not have done. He failed to take into account matters which he should. This court is therefore able to substitute its own discretion, and exercising my own discretion and applying the rule that costs follow the event unless, in all the circumstances set out in the rules which I have recited there are reasons for awarding otherwise, I would find no reason not to award this claimant all of her costs.
22. I would therefore allow the appeal, and substitute for it an order that she has her costs of the claim on a standard basis to be assessed if not appealed.
23. SIR MARTIN NOURSE: I agree. The judge based his decision on his view that the hearing could only sensibly be treated as a draw because each side failed to make good its primary contention to be entitled to 100 per cent of the net proceeds of sale of the property. In my judgment the judge's view was erroneous. It was not a draw; it was a victory for the claimant because, as the judge found in the next paragraph of his judgment, it was necessary for her to bring the action even if only to succeed on the fallback basis of 40 per cent. She had to go to judgment in order to obtain the sum of £53,181.65 plus interest which the judge awarded her. Had she not done so she would not have obtained that sum. She never received an offer from the defendant of more than £25,000 inclusive of costs and interest.
24. On that short ground, as well as for the other reasons given by my Lord, I think that this court is entitled, and indeed bound, to interfere with the judge's exercise of his discretion. I too would allow the appeal and make the order proposed by my Lord.
25. LORD JUSTICE WARD: So the appeal is allowed and the appellant has her costs of the hearing below assessed if not agreed.

Order: Appeal allowed.