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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Raja v Van Hoogstraten [2007] EWHC 2551 (Ch) (09 November 2007) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2007/2551.html Cite as: [2007] EWHC 2551 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		9/11/2007

Mr Justice Lightman:

INTRODUCTION

1. After a ten day hearing extending (with breaks) over the period from the 22^nd February 2007 to the 3^rd May 2007, on the 26^th July 2007 I gave judgment ("the Judgment") dismissing claims by Tombstone Limited ("Tombstone") for damages for trespass and conversion against the Estate ("the Estate") of the late Mohammed Sabir Raja ("Mr Raja") and the Estate's former solicitors Healys ("the Solicitors"). I shall refer to the Estate and the Solicitors together as "the Defendants". The Solicitors were legally represented at the trial. The Estate was not so represented but effectively adopted the case made by the Solicitors. The claims arise from an order in this action which was made (but which should not have been made) on a without notice application by the Defendants on the 13^th December 2002 ("the Order"). The Order appointed sequestrators of the assets of Tombstone ("the Sequestrators") and authorised the Sequestrators to enter upon the properties and dispose of assets of Tombstone. At issue in the claim is the liability of the Defendants in trespass and conversion for acts of the Sequestrators pursuant to the powers conferred on them by the Order. The full facts and surrounding circumstances are set out in the Judgment and it is unnecessary to repeat them.
2. The claims for damages for trespass and conversion were only two of a number of claims made by Tombstone against the Estate. The two claims were set out in section G of the Particulars of Claim and are referred to as the "Section G Claims". The claims for damages for trespass and conversion were the only claims made against the Solicitors. Accordingly as a result of the Judgment the action against the Estate may proceed in respect of the other claims made against the Estate, but as against the Solicitors the action is dismissed.
3. By the Judgment I held that, though Tombstone succeeded on a number of issues, they failed on other issues which were crucial to the outcome and that in the circumstances the action failed and should be dismissed. The issue immediately arose as to what order should be made as to costs. The Defendants contended that, in particular because the action failed, Tombstone should pay all their costs and (in the particular circumstances) their costs should be assessed for this purpose on an indemnity basis. Tombstone contended that in view of their success on the various issues, the most favourable order to which the Defendants were entitled was no order as to costs.
4. In view of the substantial sums at stake, I directed the parties to exchange skeleton arguments and set aside a day (the 18^th October 2007) for hearing argument. Valuable skeleton arguments were lodged on behalf of Tombstone, the Solicitors and the Estate which I carefully considered together with the oral submissions made by counsel for all three parties. I have had the benefit of a full citation of authority, though it is unnecessary in this judgment to refer to any. I now hand down judgment on the issue of costs.

ISSUES IN ACTION

5. Speaking broadly, the core issue in the case was whether the wrongful (but successful) application by the Defendants for an order appointing Sequestrators over the assets of Tombstone rendered the Defendants liable for the loss occasioned to Tombstone by the exercise of the Sequestrators' powers conferred by the Order. This is an area of law on which there is a considerable body of mainly 18^th and 19^th century authority, which is far from easy to follow and apply and a dearth of modern authority. The trial saw us all, judge and counsel alike, proceeding through a learning experience in the endeavour to arrive at a comprehensible and comprehensive understanding of where the law stands today. I am grateful to counsel for their assistance in hacking the way through the undergrowth. I say this because the obscurity of the law explains how the parties and the court only gradually as the trial proceeded perceived and focused on the principles and issues which are set out in the Judgment.
6. It is possible by different analyses to state any number of different issues of law and fact raised and determined in this case. As I stated in the Judgment I did not seek to determine all the issues ventilated, but only those which required determination. I do not think that for the purposes of the order for costs it is necessary or proper in this case to draw any inference as to the likely outcome or take into account any of the issues which I did not find it necessary to decide. In the Judgment I stated that the trial raised three core issues. For the purposes of a decision on the proper order as to costs I think that the proper analysis is to recognise five essential issues as raised and determined. The first issue was whether the Defendants were legally responsible for the acts of the Sequestrators which (but for the Order which appointed them and authorised the acts in question) constituted acts of trespass or conversion by the Sequestrators. The second issue was whether the Order provided the Defendants with protection and (if so) what protection. This required determination whether the Order failed to provide the Defendants with protection from claims in conversion and trespass on the ground that: (a) the Order was a nullity; or (b) the Order was obtained irregularly and in particular that, by reason of misrepresentation and non-disclosure on the without notice application for the Order, the court had power in its discretion to deprive the Defendants of that protection. The determination of this issue required determination whether (if the Order was obtained irregularly) Tombstone was precluded from seeking an order depriving the Defendants of protection by reason of the fact that the Order had been set aside on grounds of other than irregularity. The third issue was whether (assuming that the Order was not a nullity and that the court did have a discretion to withdraw the protection and Tombstone was not precluded from making the application) the court should exercise that discretion. The fourth issue was whether Tombstone's claim should be struck out as an abuse of process. The fifth issue was whether (assuming that Tombstone did otherwise have a claim in damages which it was not an abuse of process to prosecute) Tombstone made out an arguable claim to any recoverable loss.
7. In the Judgment I decided the first issue in favour of Tombstone and that (unless protected by the Order) the Defendants were legally responsible for any acts of conversion and trespass by the Sequestrators. On the second issue I held that the Order was not a nullity, but that by reason of the misrepresentations and non-disclosure of the Defendants the court had a discretion to withdraw retrospectively the protection otherwise afforded to them by the Order. I also held that Tombstone was not precluded from making the application by reason only of the fact that the Order had not been set aside on grounds of irregularity. On the third issue I held that for the reasons stated the discretion ought not to be so exercised in favour of withdrawing the protection of the Order and that the claim must accordingly fail. On the fourth issue I held that the claim should also fail on the ground that it was an abuse of process. On the fifth issue, I held that the claim also failed on the ground that Tombstone had no arguable claim to any recoverable loss.
8. With that factual background I turn to the relevant rules regarding the award of costs set out in CPR Rule 44.3.
9. I shall first précis the relevant provisions of CPR 44.3. CPR Rule 44.3(1) provides that the court has a discretion as to whether costs are to be payable by one party to another, the amount of those costs and when they are to be paid. CPR Rule 44.3(2) provides that, if the court decides to make an order about costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order. CPR Rule 44.3(4) provides that, in deciding what order (if any) to make about costs, the court must have regard to all the circumstances including: (a) the conduct of all the parties; and (b) whether a party has succeeded on part of his case, even if he has not been wholly successful. CPR Rule 44.3(5) provides that the conduct of the parties includes: (a) conduct before as well as during the proceedings; (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; and (c) the manner in which a party has pursued or defended his case or a particular allegation or issue. CPR Rule 44.3(6) provides that the court may order a party to pay a proportion of another's costs or costs from or until a certain date or costs relating to a distinct part of the proceedings. CPR Rule 44.7 provides that, where the court would otherwise consider making an order relating to a distinct part of the proceedings, the court must if practicable make an order for payment of a proportion of the other party's costs or costs from or until a particular date.
10. I now turn to the application of those principles to the facts of the present case. CPR Rule 44.3(1) vests in me the general discretion there set out. CPR Rule 44.3(2) sets out the general rule that, if I decide to make an order about costs, the unsuccessful party (and by common consent Tombstone is the unsuccessful party) should be ordered to pay the Defendants' costs, but I may make a different order.
11. The question has arisen as to the meaning of the words: "if the court decides to make an order about costs" in CPR Rule 44.3(2) and whether in deciding if the court is to make an order about costs, the court should take into account the other provisions of the Rule and in particular whether or not it is a proper case to order a party to make any payment of costs to another party. In my judgment upon the true construction of the rule the court is required to decide whether to make an order for costs in any case where there is an application by one party for an order for costs or the court for any reason is under a duty to consider whether to make an order. The court is not so required if no such application is made or the court is under no such duty e.g. if the parties of full age and capacity agree that no order is to be made or if a mortgagee or trustee decides not to apply for an order but instead to rest on his security or lien. I should emphasise that, if the judge decides on an issue as to costs to make no order as to costs, that is as much a decision by the judge to make an order as to costs as a decision to make any other order as to costs.
12. The question before me is whether I should make a different order from that laid down as the general rule. CPR Rule 44.3(4) and (5) require me to have regard to all the circumstances including the parties' conduct before and after the proceedings commenced and whether a party has succeeded on part only of his case.
13. I have set out (so far as relevant) the core issues on which the parties succeeded and failed. Other issues were raised. For example the Defendants sought to make a case of estoppel and abuse of process relying on matters occurring before the 13^th December 2002 as well as after the 13^th December 2002 and adduced evidence and cross-examined Tombstone's witnesses in a vain effort to make this case, but abandoned this contention in their final speech. In the circumstances of this case and in particular in the way the case developed over the course of the trial I do not think that the Defendants acted unreasonably in raising and pursuing this and the other issues on which they failed (whether or not the issues extended the length or cost of the trial). The one issue in respect of which I have felt concern is with regard to the issue whether the court could in its discretion set aside the Order on the grounds of irregularity. But it is clear that Tombstone did not invite the court to set aside the Order on this ground until final speeches. Until then Tombstone's case was that the Order was a nullity and this case failed. In the circumstances the failure of the Defendants to concede the issue or irregularity is fully understandable. The hearing was unnecessarily extended by the raising and pursuing of the issues on which the Defendants failed only to a limited extent. In particular the necessary exploration of the facts rarely (if ever) served no other purpose.
14. I do however think that the conduct of the Defendants in respect of the manner of their obtaining the Order was highly reprehensible and indeed disgraceful, as set out in the Judgment, and that I should take this conduct into account in the order for costs. As something of a counterweight, the extraordinary delay of Tombstone in taking any steps to apply to set aside the Order though (through Mr van Hoogstraten) it knew that it was entitled to have the Order set aside was unreasonable, though in nowise equally reprehensible, conduct which is to be taken into account.
15. It is clear and cannot be disputed that in the exercise of my discretion I must decide what (if any) proportion to award to the Defendants of the costs to which the Defendants would otherwise be entitled under the general rule. Taking full account of the issues on which the Defendants failed and Tombstone succeeded and the conduct of the parties, I have decided that Tombstone should pay to the Defendants 60% of their costs. There is in my judgment no reason for this purpose to draw any distinction between the two Defendants.
16. I turn to the question whether the costs should be assessed (as contended for by Tombstone) on the standard or (as claimed by the Defendants) on the indemnity basis. I should make it clear that for this purpose I proceed on the basis that Mr van Hoogstraten had ceased to be a director of Tombstone when these proceedings were commenced and fought, and I do not think that it is proper on the material before me to proceed on the basis that the directors proceeded otherwise than independently of him in all relevant decisions relating to the litigation of Section 8 Claims. The contrary was not suggested at the trial, still less was it put in cross-examination to Mr van Hoogstraten or any other witness. In all the circumstances I can see no reason or justification for treating the proceedings in respect of the Section G Claims (for the purposes of the exercise of my jurisdiction as to costs) as other than ordinary and there is no sufficient reason to order payment of indemnity costs. The primary reason the case failed was Mr van Hoogstraten's evidence that he knew all along that the Order would be set aside on appeal and nevertheless decided not to take any steps to set it aside until at a very late stage. There is no reason to believe and no evidence that Mr van Hoogstraten communicated his knowledge of this fact to the directors or legal advisers of Tombstone before he gave his evidence to this effect. I have felt concern that Tombstone did not appear to have given full and proper consideration to the question whether it had an arguable claim to any recoverable loss, but the Defendants likewise failed to direct attention to this issue until very late, when they did so (at least in part) at my prompting. The claim in conversion was well arguable until the House of Lords gave judgment in OBG v. Allan [2007] 2 WLR 920 on the 2^nd May 2007 (see the dissenting speeches in that case).

CONCLUSION

17. Accordingly I direct Tombstone to pay 60% of the Defendants' costs in the case of the Solicitors of this action and in the case of the Estate of the trial of the Section G Claims to be assessed on the standard basis.