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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Webb & Anor v Environment Agency [2011] EWHC B30 (QB) (05 April 2011) URL: http://www.bailii.org/ew/cases/EWHC/QB/2011/B30.html Cite as: [2011] EWHC B30 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		05/04/2011

MR. JUSTICE SWEENEY :

1. CPR 38.6(1) provides as follows:

"38.6—(1) Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom he discontinues incurred on or before the date on which notice of discontinuance was served on him."

2. In Brookes v. HSBC Bank plc [2011] EWCA Civ 354, which was decided last week, the Court of Appeal approved the following formulation of the principles to be derived from a number of authorities dealing with costs on discontinuance, as follows:

"(1) when a claimant discontinues the proceedings, there is a presumption by reason of CPR 38.6 that the defendant should recover his costs; the burden is on the claimant to show a good reason for departing from that position;

(2) the fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason for doing so;

(3) however, if it is plain that the claim would have failed, that is an additional factor in favour of applying the presumption;

(4) the mere fact that the claimant's decision to discontinue may have been motivated by practical, pragmatic or financial reasons as opposed to a lack of confidence in the merits of the case will not suffice to displace the presumption;

(5) if the claimant is to succeed in displacing the presumption he will usually need to show a change of circumstances to which he has not himself contributed;

(6) however, no change in circumstances is likely to suffice unless it has been brought about by some form of unreasonable conduct on the part of the defendant which in all the circumstances provides a good reason for departing from the rule."

3. Moore-Bick LJ, with whom Arden LJ and Wall LJ agreed, went on to examine the case of Messih v. MacMillan Williams [2010] EWCA Civ 833. Then at page 10 of the judgment, he said this:

"It is clear, therefore, from the terms of the rule itself and from the authorities that a claimant who seeks to persuade the court to depart from the normal position must provide cogent reasons for doing so and is unlikely to satisfy that requirement save in unusual circumstances. The reason was well expressed by Proudman J. in Maini v Maini [2009] EWHC 3036 (Ch) a claimant who commences proceedings takes upon himself the risk of the litigation. If he succeeds he can expect to recover his costs, but if he fails or abandons the claim at whatever stage in the process, it is normally unjust to make the defendant bear the costs of proceedings which were forced upon him and which the claimant is unable or unwilling to carry through to judgment. That principle also underlies the decision of this court in Messih v MacMillan Williams. There may be cases in which it can be said that the defendant has brought the litigation on himself, but even that is unlikely to justify a departure from the rule if the claimant discontinues in circumstances which amount to a failure of the claim."

4. By a judgment and order on 4th December 2009, Penry-Davey J discontinued civil proceedings brought by the claimants for negligence and/or breach of duty, and/or nuisance, and in which the claimants sought to recover more than £270,000 in damages, but reserved the costs arising from those proceedings, pending the resolution of the dispute before the Lands Tribunal. The background to those decisions is fully set out in the judgment of Penry-Davey J, which was in the following terms:

"1. The claimants are owners and occupiers of a property called 4 Shelton Lane, Halesowen, West Midlands, which is bounded by a water course that rejoices in the name of The Lutley Gutter. This action seeks damages for loss suffered during flooding in July 2009.

2. Although this is formally the defendant's application to strike out the claim, it is common ground that the appropriate course now is for these proceedings to be discontinued at the request of the claimants, who seek permission so to do, and for any further claim that may be to be pursued in the Lands Tribunal.

3. The issue that I am asked to resolve is the issue of the costs of these proceedings to date. The defendant contends that the normal order on discontinuance, namely that the party seeking to discontinue should pay the costs, should follow. The claimants resist that application and submit either that the costs should be theirs in any event, or at least that the costs of these proceedings should be reserved for determination at the conclusion of any proceedings there may be in the Lands Tribunal.

4. Correspondence in relation to a potential claim started on 7th August 2007, when the claimants wrote to the defendant alerting them to the damage caused to them by flooding on two occasions, 20th and 26th July 2007. It was common ground that a grate had been installed by the defendant on the water course concerned, but denied at all times that that had been in any way causative of the flood. It was further argued that the permissive/discretionary nature of the defendant agency's powers, rendered it not liable for damage caused. That contention was repeated in later correspondence.

5. In relation to the second flood, the later flood on 26th July, the developers to whom the claimants had written, responded also by contending that the flood had been caused by the grate installed by the defendant, and subsequently removed by them following the blockage that it is suggested had occurred as a result of the grate being there.

6. The claim was issued on 6th March 2009. The defence that was served on 27th April 2009, alleged that a new screen had been fitted in February 2007 following "A consent in 2006." It was alleged that the new screen had been fitted due to Health & Safety concerns regarding the previous screen. Negligence and causation were denied. It was averred that rather than authorising or requiring the developers to create obstructions to the flow of the water course, a mere diversion of the water course had been consented to.

7. There was a request for further information served on the defendant, with answers requested before 3rd July. Within the documents served on 13th August, which included an amended defence and the strike out application and reply, the defendant referred to a copy of the consent provided to the developers for the placement of a bung to divert the water course from the old to a new culvert during the course of the works. That document was finally provided following further request, on 14th October.

8. In the amended defence served in draft, the assertion was made for the first time that the installation of the grate was made pursuant to Section 165 of the Water Resources Act 1961, and that any dispute as regards the obligation to pay compensation should be heard and dealt with in the Lands Tribunal. Further, it was asserted that the authorisation given by the defendant to the developers works was adopted pursuant to Sections 109 and 110 of the Water Resources Act 1991.

9. A strike out application was made on the basis that the sole remedy available in respect of negligence and/or nuisance in the course of the replacement works, lay in the statutory scheme. The defendant does not contend that there is no remedy available to the claimants, although they deny responsibility. The suggestion is that any remedy the claimants may have, now lies in the Lands Tribunal and not in this court. The claimants indicated before the case management conference of 19th August 2009, that they were minded to consent to the claim proceeding in the Lands Tribunal, and suggested that this action should be stayed in the interim.

10. The position is then this: in essence, the defendant contends that any remedy the claimants may have lies in the Lands Tribunal, in respect of the allegation of negligence or nuisance with regard to the first flood. Secondly, that any negligence in the course of the removal of the grate, is properly classified as an omission, and not actionable in accordance with the principles laid down in the case of Stovin v. Wise [1996] AC 923. Thirdly, that there is no common law duty of care or liability in nuisance on the facts alleged in relation to the second flood.

11. Mr. Hogan submits on behalf of the defendant, that their position has been essentially consistent throughout; their stance being that there is no duty of care. This is not a case, he submits, where the defendants have in any way misled the claimants, and now that it is accepted that the case should not proceed in this court, it is appropriate for the defendants to have their costs in the normal way. That suggestion is resisted on behalf of the claimants, and it is contended on their behalf and they suggest demonstrated by authority, that the private land owner's right to compensation in respect of faults by way of negligence and nuisance actions, continues unless it clearly runs contrary to the statutory scheme.

12. As to the second flood, the claimants contend that describing the removal of the grate and the restoration of the status ante quo as an omission, is nonsense, and that the action gave rise to the foreseeable risk of damage, so that it was no answer to respond that the dismantling of the works had recreated a historical position and thus amounted to an omission. But it is fair just and reasonable, they contend, that a duty of care be imposed for negligence in the course of the removal operations. In all the circumstances, they contend that the strike out application was inappropriate.

13. It is clearly appropriate that these proceedings be discontinued in the light of the stance taken by the claimants, that they are content for matters to be pursued in the Lands Tribunal, and that continuing with these proceedings would be disproportionate. They suggest however, that the defence relating to a statutory scheme, was not only raised at a late stage, but they do not accept that the original claim either should never have been brought or was in any sense hopeless, and accordingly it is submitted by the claimants, that they should have their costs of these proceedings, rather than the defendant.

14. Rule 38.6 provides for a defendant against whom a claim is discontinued, to have his costs unless the court otherwise orders. In deciding issues of costs, it is well established and indeed embodied in the rules, that the court must have regard to all the circumstances, including the conduct of the parties, conduct including, under the Rules, the question of whether it was reasonable for a party to pursue or contest a particular allegation, and the manner in which a party has pursued or defended his case; that is Rule 44.3(5).

15. In the result, it is clear in my judgment, that I should permit the claimants to discontinue these proceedings, and I also consider, having regard to all the circumstances, including the history of this litigation, that the appropriate order in relation to costs, is for me to reserve the determination of liability for costs, to await the outcome of proceedings in the Lands Tribunal. At that stage, the court is likely to be in a significantly better position with the result of the further proceedings known, to decide the question of costs.

16. Although the defendant is fully entitled to pray in aid the usual rule on discontinuance in the course of events in these proceedings, and in particular the raising of Section 165 of the Act at the stage at which it was raised, it would in my judgment be inappropriate to make the usual order that the defendant have its costs of these proceedings, at this stage. Equally, in all the circumstances, it would be inappropriate, the claimants having consented to the discontinuance of these proceedings, for me to order costs in their favour in any event at this stage.

17. Once the proceedings that are to be taken in the Lands Tribunal have been determined, the picture is likely to be considerably clearer, and it is in my judgment right in all the circumstances, that the position should be preserved until then, when a fair and informed decision can be made on the important issue of costs of these proceedings.

18. Accordingly, the order that I make, is that I grant permission to the claimants to discontinue these proceedings, and the costs of these proceedings, excluding any costs in respect of which any order has already been made, will be reserved pending the determination of any proceedings there may be in the Lands Tribunal."

5. Subsequently, the case was settled in the Lands Tribunal, with the claimants accepting£10,000 and the defendant agreeing to pay a substantial proportion of the claimants' costs of, and incidental to, the Lands Tribunal proceedings in the inclusive total sum of £71,648.52.
6. Against that background, the purpose of this hearing, which has been listed by order of Bean J, is now finally to determine the incidence of costs in the original proceedings.
7. On behalf of the claimants, Mr. Thomann argues that this is an unusual case where there are cogent reasons for departing from the normal position of costs being awarded to the defendant on discontinuance. Indeed, he argues that it is the defendant who should pay the whole of the claimants' costs in these proceedings, given the claimants' success in the Lands Tribunal, and the defendant's failure to mention its reliance on Section 165 of the Water Resources Act 1961, which only it could know applied, until very late in the proceedings, which resulted in the effective transfer of the case to the Lands Tribunal. Given the success of the claimants, as Mr. Thomann describes it, in the proceedings in the Lands Tribunal, he submits that costs should effectively follow the event.
8. On the defendant's behalf, Mr. Hogan argues, in summary, that in the light of the principles identified in Brookes, to which I have already made reference, and despite the fact that he accepts that there were failings to some degree on behalf of the defendants in the proceedings, that the normal rule should apply, and that the defendant should have its costs. In the alternative he submits that at its highest, the claimants' case can only reasonably be that there should be no order for costs at all, rather than any sort of positive order in their favour.
9. During the course of their submissions, counsel on both sides have taken me through the correspondence before proceedings were issued and the various events after proceedings had been issued, each seeking to cast a different light on what happened.
10. As already touched on in the judgment of Penry-Davey J, the correspondence began by a letter on the claimants' behalf on 7th August of 2007. There then followed a series of letters back and forth – on 4th September 2007, 16th November 2007, 14th January 2008, 17th January 2008, 6th February 2008, 7th February 2008, 10th March 2008 and 20th July 2008.
11. The central themes adopted by each side are essentially these. On the claimants' behalf, it is asserted that it was made clear at all stages in the correspondence that the claimants were asserting that there was a positive act by the defendants, namely the installation of a new grid, which had inevitably become blocked and had inevitably flooded thereafter, in circumstances which gave rise to liability in the defendant. The defendant for its part, in replying to that correspondence, so it is submitted on the claimants' behalf, proceeded at all times upon the basis that there had been a failure to act which gave rise to no liability, rather than that there had been any positive obstruction of the culvert. In contrast, on the defendant's behalf, it is pointed out that the claimants were responsible for setting running what is described as the hare of negligence/nuisance, and that, in effect, the correspondence demonstrates that the defendant, as it were, ran with the hare, without in any way being at fault, in failing to mention what was eventually to become its defence, that Section 165 applied, and that therefore to the extent that the claimants had any remedy, it was in the Lands Tribunal not in the High Court.

It was against that broad background that a claim was eventually issued in the summer of 2008. I have already summarised the broad nature of it.

12. The Statement of Claim which followed was in similar vein. In April 2009, the defence was entered. Mr. Hogan inevitably accepts that that defence completely failed to mention Section 165. Section 165, as will be remembered from the judgment of Penry-Davey J, finally came into play in August 2009, when there was an application to strike out and other documentation served on behalf of the defendant, which finally indicated reliance upon it, and indeed, significantly, acceptance that there had been a deliberate obstruction, in contrast to the previous factual position, that there had been simply, if there had been anything, a failure to act. It was from that position that matters eventually advanced to the hearing before Penry-Davey J, as summarised in his judgment.
13. On behalf of the defendant, Mr. Hogan submits variously that:

(1) The relevant rule is CPR 38.6, and the principles to be applied are those identified in Brookes.

(2) The claimants' lawyers legal analysis of the case, was fundamentally flawed from the outset. Indeed, as he puts it in his skeleton argument, that they 'bodged' their research on alleging negligence and a common law claim, and had they researched matters appropriately, they would have realised that Section 165 inevitably came into play.

(3) Neither the defendant's claim handler nor the Zurich Insurance Company, who between them were responsible for the correspondence on the defendant's behalf, to which I have already made reference, picked up on the mistake and, as it is put in the skeleton, 'Why should they? Neither are qualified lawyers with an expertise in water law'.

(4) They had simply answered the case that was being made against them, as best they could, albeit indicating that liability was in issue throughout. The defendant was not prepared to admit liability, Mr. Hogan submits, or to make an interim payment, or to settle the claim, as is clear from that correspondence.

(5) At no point did the claimants' lawyers reconsider their position or check the law prior to issuing proceedings.

(6) Only after the defence had been lodged, did the defendant seek opinion from specialist counsel, and it was that which led understandably to the amendment of the defence and the application to strike out.

(7) The claimants' complaint is essentially that the defendant should have spotted their error at an earlier stage, and communicated that to the claimants, but there is no suggestion that the defendants actively misled the claimants in any way whatsoever. Indeed, the converse is true, and when the misconceived nature of the proceedings became clear, the defendant acted with dispatch to bring that matter to light.

14. Further, Mr. Hogan submits that the proceedings before the Lands Tribunal, can hardly be termed a success in so far as the claimants are concerned, given that the initial claim was for more than £270,000, whereas the settlement achieved was£10,000, together with 80 per cent of base costs and all disbursements. On a mathematical basis, he therefore points out that the settlement achieved was just 3.5 per cent of the sum claimed. This is, Mr. Hogan submits, a simple case of mistaken legal analysis on behalf of the claimants and those representing them, rather than any fault of the defendant. He further submits that there was no duty in the defendant to correct the claimants' case or to suggest an alternative case, and that the claimants took a risk in launching the litigation, and they failed when the defendant found out, as he puts it, that their position was even stronger in law than it thought that it originally was.
15. In his skeleton argument, if not in his considerably more moderate submissions, Mr. Hogan suggested that this case represented an unbecoming exercise in greed on the part of those representing the claimants, and that there is nothing in the case that displaces the usual presumption, and even if it did, that there should be no order, as I have indicated, for costs, rather than a positive order in the claimants' favour.
16. During the course of his submissions, Mr. Hogan was nevertheless moved to accept, no doubt given the contrast between the factual assertions made in the correspondence and the factual basis eventually accepted in the amended defence, that in a perfect world it would have been better, if not appropriate, for those representing the defendant to point out what, after all, only the defendant positively knew, which was that it had created an obstruction using its statutory power under Section 165. He further accepted that that certainly should have featured in the defence which, as I have indicated, it did not. However, those concessions apart, he repeats his essential submissions.
17. On the claimants' behalf, Mr. Thomann argues that the acceptance that this could and should have been mentioned in correspondence, is significant, as is also the concession – although not a particularly surprising one – that the statutory position should have been mentioned in the original defence. However, in relation to the more general points made on the defendant's behalf, Mr. Thomann submits firstly, in so far as any alleged lack of legal expertise in those representing the defendants at the correspondence stage is concerned, that there is nothing to the stage, as indeed perhaps on reflection Mr. Hogan accepted at one point, albeit under some pressure from the court. The point, Mr. Thomann submits, is not their qualifications, though certainly one of them had a law degree, but rather that their replies on behalf of the defendant were consistently to the effect of denying that any obstruction to a water course had been created at all, let alone been intended. He also submits that set against that background, continuing as it did throughout the pre-action stage, (albeit unintentionally no doubt) were misled as to the position, in circumstances where in view of the over-riding objective and the general spirit of the pre-action protocol, they had every reason to expect that a positive action, which was eventually claimed, would be revealed, as would the statutory basis eventually said to underlie it.
18. Mr. Thomann refers to the case of Ford v. GKR Construction Ltd [2000] 1 WLR 1397, referred to in the White Book, which indicates that in reaching a decision on costs, the judge should consider whether or not the parties have conducted litigation in accordance with a system of civil litigation which is designed to enable the parties to know where they stand at the earliest possible stage and at the lowest practicable cost, so that they may make informed decisions about their prospects and the sensible conduct of cases. Mr. Thomann further submits that it is not at all clear that Section 165 applied in either the circumstances which were portrayed in the pre-action correspondence, or indeed in the eventual defence itself. I am bound to say that the terms of Section 165 do not make it obvious, at least to me, that in the circumstances of this case it inevitably applied, albeit that it eventually became clear that it did.
19. In so far as the application of CPR 38.6 is concerned, Mr. Thomann accepts, inevitably, that the principles are correctly indentified in Brookes. Nevertheless, he asserts that, in the particular circumstances of this case, my discretion can properly be exercised in favour of the application that he makes. As to the merits of the civil claim, Mr. Thomann submits that there were and remained prospects of success, and that the issues were not as black and white as those suggested on the defendant's behalf in that respect, not least, he submits, because the defendant's suggestions depend upon a misreading of the judgment of the Court of Appeal in Marriage v. East Norfolk River Catchment Board [1950] 1 KB 284. Finally, Mr. Thomann points out that so far from this being an exercise in greed, the costs sought are in fact, in the scheme of things, relatively modest.
20. Drawing the strings together therefore, Mr. Thomann submits that the failing on the part of the defendant which led to the incurring of additional costs, is a perfectly simple one; it failed, at any stage prior to August 2009, to raise what was actually its defence – a statutory defence – in these civil proceedings. That defence, he points out, resulted not in the dismissal of the action, but its continuance, with the consent of both parties, in the Lands Tribunal.
21. I remind myself that CPR 44.3(4) and (5) are in the following terms:

"(4) 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;

(b) whether a party has succeeded on 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).

(5) The conduct of the parties includes—

(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed any relevant pre-action protocol;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c) the manner in which a party has pursued or defended his case or a particular allegation or issue; and

(d)whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim."

22. It is unnecessary to set out the familiar terms of the over-riding objective, nor to refer in any more detail to the pre-action protocol; its general thrust is clear.
23. Taking everything into account, it seems to me that this is one of those rare cases where the usual approach should not apply. It was no doubt in anticipation of the fact that, if the claimants won in the Lands Tribunal, that might be the result, that caused Penry-Davey J to adjourn consideration of the issue of costs until that result was indeed clear. Here the position is that the defendant alone knew that Section 165 was applicable, and that it had indeed obstructed the water course. Only the latter was obvious to the claimant and was denied for much of the proceedings by the defendant. Certainly in my judgment, it is no fault of those acting on behalf of the claimants that they failed to recognise that Section 165 was in play. To state the obvious, although proceedings are adversarial, that does not preclude a defendant from narrowing the issues and identifying its true stance at the earliest stage, rather the over-riding objective and the general thrust of the pre-action protocol make clear, unsurprisingly, that the reverse is the case.
24. Here, the defendant's failure, indeed its blatant failure in some respects, was that it did not reveal its true position until it amended its defence. Up until then, it had represented a factual situation which it later abandoned, and had failed to mention the statutory foundation which it later relied upon as conclusive.
25. In those circumstances, I must return to the principles identified in Brookes. This of course is an exercise of my discretion. But it is a discretion in which I must respect the principles which I have enunciated, which were identified in that case. I remind myself therefore, that the burden is on the claimants to demonstrate that the normal course should not be followed, and that if the claimants are to displace the presumption that costs will normally go to the defendant, they need to show a change of circumstance to which they have not themselves contributed, and even then a change in circumstances is unlikely to be sufficient unless it has been brought about by some sort of unreasonable conduct on the part of the defendant, which in all the circumstances provides a good reason for departing from the Rule. Equally, that there must be cogent reasons why that is the case, and anything less than that is likely to be insufficient.
26. The first unusual, and perhaps principal unusual circumstance of this case, is the fact that having been discontinued in this court, for the reasons that are obvious, it continued in another place – the Lands Tribunal. In that tribunal, albeit achieving a settlement which was very significantly below the figure originally sought, the claimants could truly say that they had won the case, the more so as they obtained a substantial percentage of their costs.
27. Against that wholly exceptional background, I return to the defendant's conduct in the original proceedings. As I have indicated, it appears to me that that conduct fell down on two fronts, both factual and legal. However charmingly Mr. Hogan has sought to dress up those failures, and however reluctant he was to go back in time whilst under pressure from the court to identify when failure first began, it is clear to me that there was a consistent failure throughout the pre-trial correspondence and even after the proceedings had been issued, up to the point of the amended defence, to identify the basic facts upon which the defendant was relying, and to identify the basic proposition which only it knew for sure, that it had acted on the basis of Section 165. Had it revealed the correct position, as it eventually did in its amended defence, from the outset I have no doubt whatsoever that matters would have taken an entirely different course from that which they did, with a consequent and very substantial saving of costs. The defendant's conduct was therefore unreasonable. That is why in my judgment, this case does come within the exception to the otherwise firm rule, and the claimants have indeed cogently demonstrated that that is the position.
28. That however is not the end of the task that I face. Whilst the claimants won, they did not win the whole of their claim, and that is why they only achieved a proportion of their costs before the Lands Tribunal. It seems to me only right therefore, again as a matter of my discretion, that they should not, even though demonstrating the merit of their claim in principle, obtain the full costs that they incurred. It seems to me that the justice of the situation is met by an order along the lines of the costs agreed on the settlement in the Lands Tribunal. As I have indicated, as I understand it, that was a settlement of 80 per cent of base costs and all disbursements. The order, subject to any further argument, that I therefore propose to make, is one of the costs of these proceedings in favour of the claimants, at 80 per cent of base costs and all disbursements, to be agreed or taxed.

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