Turvill & Anor v Legal Services Commission [2004] EWCA Civ 457

Case No B1/2003/1760

[2004] EWCA Civ 457

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE LINCOLN COUNTY COURT

(HIS HONOUR JUDGE O'RORKE)

Venue Royal Courts of Justice

Date Wednesday, 24 March 2004

Strand

London, WC2 2LL

B E F O R E:

LORD JUSTICE BROOKE

(Vice-President of the Court of Appeal, Civil Division)

LORD JUSTICE JONATHAN PARKER

LORD JUSTICE MAURICE KAY

Between

MARK TURVILLAppellant

PAULINE TURVILLAppellant

-v-

Between

THE LEGAL SERVICES COMMISSIONRespondent

(Computer-Aided Transcript of the Stenograph Notes of

Smith Bernal Wordwave Limited

190 Fleet Street, London EC4A 2AG

Tel No: 020 7404 1400 Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

MISS NICOLA RUSHTON (instructed by Messrs CKFT, London NW3 1QN) appeared for Respondent

MR NICHOLAS BACON, MESSRS IRWIN MITCHELL, SHEFFIELD S1 2EL (instructed by Messrs Irwin Mitchell, Sheffield S1 2EL) appeared for Appellants

J U D G M E N T

Wednesday, 24 March 2004

LORD JUSTICE BROOKE:

[1]I will invite Lord Justice Jonathan Parker to give the first judgment.

LORD JUSTICE JONATHAN PARKER: Before the court is an appeal by Mr Mark Turvill and his wife Mrs Pauline Turvill, the defendants in the action, from an order made by His Honour Judge O'Rorke in the Lincoln County Court on 7 July 2003 in an action brought against them by the Legal Service Commission, formerly the Legal Aid Board (I will refer to it as "the LSC"). Permission to appeal was granted by Brooke LJ on the papers on 21 October 2003.

[3]Also before the court is an application by the LSC for permission to cross-appeal. We granted such permission at the outset of the hearing and proceeded to hear the cross-appeal.

[4]In action, the LSC seeks to enforce its statutory charge under section 16(6) of the Legal Aid Act 1988 over Mr and Mrs Turvill's matrimonial home at 2 Maple Drive, Sudbrooke, Lincoln, which is registered in their joint names. The charge is in respect of costs incurred by the LSC on behalf of Mr and Mrs Turvill in their defence of mortgage possession proceedings in respect of 2 Maple Drive brought against them by one Michael Kelly, a former business associate of Mr Turvill. Legal aid had been granted to Mr and Mrs Turvill to defend the possession proceedings, and they were each issued with a separate legal aid certificate.

[5]After the commencement of the action, but prior to trial, Mr and Mrs Turvill paid the outstanding balance of the principal sum secured by the statutory charge. Accordingly, the only issues falling for decision at trial were issues as to interest and costs. By his order, Judge O'Rorke, in the exercise of his discretion, rejected the LSC's claim for interest in its entirety. However, he ordered Mr and Mrs Turvill to pay the LSC's costs of the action. Mr and Mrs Turvill appeal against the order for costs. The LSC seeks permission to across-appeal against the judge's rejection of its claim for interest.

[6]This seemingly straightforward matter has had an unusual and, to say the least, unfortunate history, to which I shall have to refer in a little detail.

[7]Mr and Mrs Turvill were represented in the possession proceedings by Gilbert Blades, solicitors.

[8]On some date in 1996 Mr Kelly offered to withdraw the possession proceedings on the basis that there would be no order for costs, save a legal aid taxation (as it was then called) of Mr and Mrs Turvill's costs. A draft consent order was duly drawn up by Gilbert Blades who advised Mr and Mrs Turvill to accept these terms. In the event, however, no further steps were taken in the proceedings by Mr Kelly and no further orders were made in relation to costs.

[9]In September 1996 the LSC wrote to Gilbert Blades confirming that the statutory charge over 2 Maple Drive had arisen on Mr Kelly's abandonment of the proceedings, on the footing that 2 Maple Drive represented property recovered or preserved in the proceedings. Indeed, so much is not disputed by Mr and Mrs Turvill.

[10]In early 1997 Mr and Mrs Turvill's legal aid certificates were discharged.

[11]In due course Gilbert Blades submitted a bill of costs for work done under both the legal aid certificates. On 9 April 1998 the costs were taxed in the total sum of £15,934.41, excluding the costs of the taxation. As at that date, 2 Maple Drive was worth more than that, so that the statutory charge was for that figure.

[12]Subsequently, Mr and Mrs Turvill instructed Irwin Mitchell in place of Gilbert Blades.

[13]On 26 April 1999 the LSC, at its Nottingham Area Office, wrote to Irwin Mitchell confirming that a statutory charge had arisen but that, due to an administrative error, it had not been registered. The letter continued:

"I am arranging for a charge to be registered against property. I confirm that the amount required to satisfy the statutory charge is £15,934.41."

Mr and Mrs Turvill say that they never saw a copy of that letter. This is a matter of some significance, as will appear.

[14]On 13 May 1999 the LSC registered a caution against dealings with 2 Maple Drive. On being notified of this, Mr Turvill telephoned the LSC to inquire why a caution had been registered, and on 28 May 1999 the LSC wrote to him saying that they had written to Irwin Mitchell on 26 April informing them of the amount required to redeem the statutory charge and had been told that there were not sufficient funds available to enable that to be done. They explained that in such circumstances it was normal policy to register a caution. In this letter, the redemption figure was not repeated.

[15]On 27 August 1999 Mrs Turvill wrote to the LSC quoting both certificate numbers and saying that she understood from Irwin Mitchell that there was no liability for interest under the statutory charge. She asked the LSC to confirm this. She also asked how much was required to redeem the charge. The LSC replied by letter dated 13 September 1999. The letter is a typed letter with the figure being written in manuscript. It reads as follows:

"The amount needed to meet the charge at the date of this letter is..." - and then in manuscript the figure "£8,791.73" is written. The letter continues: "

At present no interest is being charged as a signed interest agreement form has not yet been received by this office. I have contacted our Area office with regards to this matter, however in the meantime the above redemption figure will hold good for fourteen days from the date of this letter. I confirm that upon payment of the required amount the Board will vacate its charge. You should make your cheque payable to the Legal Aid Board and send it to this office together with a copy of this letter." The letter is signed by Mr Matthew Lake, a caseworker in the LSC's Land Charge Department.

[16]On 18 September 1999 Mr and Mrs Turvill sent a cheque for £8,791.73 (the redemption figure which they had been given). In their covering letter they said this:

"We enclose a cheque for the amount which you have required. This now releases us from any obligations to the Legal Aid Board as full and final payment and therefore satisfies the Board from any financial interest in our property."

Mrs Turvill must have telephoned the LSC to make sure that the cheque had been safely received, for on 9 October 1999 the LSC wrote to her saying this:

"I write further to your recent telephone conversation with one of my colleagues. Sufficient monies have been received to satisfy the Board's Charge. An application to have the Charge removed [it may be a reference to the caution] will be made shortly."

The letter was signed by a different caseworker, Anjum Sheikh.

[17]That letter was followed by a standard form letter dated 13 October 1999 thanking Mrs Turvill for the cheque and saying that an application had been made to remove the caution. Such an application was duly made a few days later, and on 17 November 1999 the caution was vacated.

[18]Some four months passed with (so far as the evidence goes) no further communication between the LSC and Mr and Mrs Turvill. Then Mr and Mrs Turvill received a computer-generated letter dated 21 March 2000 showing a deficiency so far as the costs were concerned of £8,791.73. This was incorrect. The true balance was £7,142.68. £8,791.73 was the amount which Mr and Mrs Turvill had paid in response to the LSC's letter dated 13 September 1999. The letter continued:

"Interest does not accrue on this amount as we have not received a signed interest agreement form. Should you have not received the interest agreement form for signature, please contact the Area Office. Without this the Board cannot defer the charge and the payment will be required in full."

[19]The LSC's letter dated 21 March 2000 was signed by Mr Gareth Britten, the manager of its Land Charge Department. Mr and Mrs Turvill responded to it by letter dated 3 May 2000, enclosing copies of the earlier correspondence and saying this:

"We feel that an explanation is necessary as to why you are requesting this amount in your letter dated 21st March 2000? If you endeavour to check your records you will realise that the amount was paid in full on the 18th September 1999. As far as we are concerned the matter is closed and do not expect to receive any further demands from you."

[20]The LSC wrote to Mr and Mrs Turvill on 25 May 2000, the letter being signed by yet another caseworker. In its letter, the LSC explain that in giving a redemption figure of £8,791.73 Mr Lake had taken the outstanding figure on Mrs Turvill's legal aid certificate only, and apologised for the error. The letter went on to ask for payment of the balance of the total sum of £15,934.41, pointing out that this figure had been given to Irwin Mitchell in the LSC's letter dated 26 April 1999.

[21]On 1 June 2000 Mr and Mrs Turvill wrote to the LSC asserting that it had accepted the sum of £8,791.73 in full and final settlement, and refusing to pay any more.

[22]The LSC replied by letter dated 21 June 2000. The letter was signed by Miss Sinem Mehmet, of the Customer Services Department of the LSC. It asserted, incorrectly, that two cautions had been registered against the property, only one of which had been vacated. In fact, only one caution had been registered, and that had already been vacated. The letter continued:

"... the amount needed to meet the Caution is £8,791.73."

That, too, was an error. In fact the true figure was £7,142.68.

[23]By letter dated 26 June 2000 Mr and Mrs Turvill wrote to the LSC reiterating their refusal to pay any more, and stating that Irwin Mitchell had advised them that the LSC had no power to levy a further charge or to require payment of interest.

[24]On 29 June 2000 Mrs Mehmet wrote to Mr and Mrs Turvill again. This time she gave the correct redemption figure and apologised for the error in her earlier letter.

[25]On 14 July 2000 Mr and Mrs Turvill wrote again complaining that the LSC had provided no evidence to verify the further sum demanded, and reiterating their previous position.

[26]Further correspondence followed. Mr and Mrs Turvill contacted their MP and he initiated a complaint to the Ombudsman.

[27]By letter dated 1 October 2001 Miss Alison Macnair, a Senior Legal Adviser at the LSC wrote to Mr and Mrs Turvill explaining the errors which had been made, and apologising for them. In the course of her letter she said this:

"The sum due is £6,962.68, being the total liability of £15,934.41 less £8,971.73 which has been repaid."

The arithmetic was correct, but of course the sum which had been paid was not £8,971.73, but £8,791.73. So the figure of £6,962.68 was wrong. It should have been £7,142.68.

[28]On 11 October 2001 the Ombudsman upheld Mr and Mrs Turvill's complaints relating to delay in registering the statutory charge and giving inaccurate information. She also concluded, however, that Mr and Mrs Turvill had suffered no financial loss as a result of the mistakes, and that the mistakes did not absolve them from liability under the statutory charge.

[29]By letter dated 9 November 2001 Miss Macnair wrote again to Mr and Mrs Turvill offering them £50 as a "botheration" payment, but pointing out that they remained liable for the outstanding sum under the statutory charge. The "botheration" payment was not accepted.

[30]A further ten months or so passed, until by letter dated 29 August 2002 CKFT, the LSC's solicitors, wrote a letter before action to Mr and Mrs Turvill in which they repeated the erroneous figure of £6,962.68. In that letter CKFT invited Mr and Mrs Turvill to execute an interest-bearing charge, making it clear that if they did not do so enforcement proceedings would be taken. In the course of the letter, CKFT said this:

"It is our client's usual practice to leave open the offer for you to sign the Interest Bearing Charge at a later stage if you wish to do so. However, if our client is forced to incur legal costs progressing proceedings, it will be entitled to recover those costs and will seek to do so. In the event that you remain unwilling to sign the charge documentation, we would expect the Court to grant our client an order for possession and sale of your property and to order costs. You will appreciate that we are not able to advise you and we remind you again that we encourage you to seek advice if you are unclear as to the significance of this correspondence or the documentation we are asking you to sign. If, however, you disregard this correspondence, further action will ensue and without further notification. We therefore would encourage you not to ignore this important correspondence."

There was no response to that letter and on 24 September 2002 CKFT wrote a chaser.

[31]It appears that, once again, there was no response, and on 3 March 2003 the present action was commenced, claiming payment of £7,142.86 (the correct figure, of course, was £7,142.68) plus interest. There is also a claim for orders for possession and sale of the property.

[32]On 18 March 2003 Mr and Mrs Turvill made a witness statement in which they denied any further liability to the LSC, whether in respect of principal or interest. A Defence was also served denying any further liability.

[33]By letter dated 2 May 2003 Irwin Mitchell made an open order of £7,142.68 in final settlement of the claim. In the course of that letter they said this:

"We shall set out our clients' position explaining why they do not feel it is appropriate to make any payment with respect to either costs or interest in a separate letter."

We have seen no such letter. In the event, the offer was not accepted. However, on 15 May 2003 Irwin Mitchell sent CKFT a cheque for £7,142.68. By letter dated 19 May CKFT acknowledged the payment as part payment which would stop any interest running. The cheque was cleared into the LSC's bank account on 23 May 2003.

[34]By letter dated 30 May 2003 Irwin Mitchell suggested an adjournment for negotiation, on the basis that it was not appropriate to run up costs on preparing witness statements when the only outstanding issues were interest and costs. CKFT replied on 3 June 2003 to the effect that the court would not be able to decide those issues without witness statements, and that in the circumstances an adjournment was not appropriate. CKFT repeated this view in a further letter dated 30 June 2003. In that letter it also encouraged Mr and Mrs Turvill to put forward proposals.

[35]The trial of the action took place on 7 July 2003 before His Honour Judge O'Rorke.

[36]The LSC was represented (as it is before us) by Miss Nicola Rushton of counsel. Mr and Mrs Turvill appeared in person (before us they are represented by Mr Nicholas Bacon of counsel). No oral evidence was called, but in the course of the hearing the judge's attention was directed to the contemporary correspondence, to a witness statement of Mr Turvill which had been prepared at an earlier stage in the action and to documents in the trial bundle.

[37]The day before the commencement of the hearing Mr and Mrs Turvill (through Irwin Mitchell) had made an offer of £3,500 in respect of interest and costs. Mr Turvill referred to this offer in open court in the course of the hearing before the judge. The offer was not accepted by the LSC.

[38]In advancing the LSC's claim for interest, Miss Rushton accepted that, under the legal aid regulations in force during the material time, interest did not accrue unless and until an interest-bearing charge was executed (which did not happen in the instant case). However, she contended that once enforcement proceedings were taken the court had a discretion to award interest as from the date on which the cause of action accrued, either under section 69 of the County Courts Act 1984, alternatively on the footing that the statutory charge is an equitable charge which carries interest. The judge, as we will see, proceeded on the basis that he had a discretion to award interest under section 69 of the County Courts Acts and so much is accepted by Mr Bacon in this court.

[39]Miss Rushton invited the judge to exercise his discretion to allow interest on the principal sum for the time being outstanding under the statutory charge from 9 April 1998 (the date when the costs were taxed) until 23 May 2003 (the date when payment of the outstanding balance of £7,142.68 was cleared into the LSC's bank account). The total period amounts to five years and 44 days, giving a total interest (calculated at the rate of 8 per cent) of some £2,900. However, Miss Rushton conceded in the course of the hearing before the judge that the LSC would not be entitled to interest for the period from 18 September 1999 to 25 May 2000, a period when (following Mr Blake's letter) Mr and Mrs Turvill mistakenly believed that the statutory charge had been redeemed in full. She accordingly sought an award of interest from 9 April 1998 to 18 September 1999, and from 25 May 2000 to 23 May 2003, a total period of 4 years and 159 days. That concession brought the figure down to £2,536.14.

[40]Miss Rushton took the judge through the history of the matter by reference primarily to the correspondence, acknowledging, as she did so, the numerous errors which the LSC had made. However, she relied on the fact that it was in the end the refusal of Mr and Mrs Turvill to acknowledge any liability following the LSC's acceptance of the payment of £8,791.73 which had led to proceedings being commenced.

[41]At page 17 of the transcript of the hearing Mr Turvill explained to the judge that, given the mistakes made by the LSC, they - that is to say Mr and Mrs Turvill - did not know what sum to pay. At page 18 of the transcript of the hearing the judge described the situation resulting from the LSC's errors as "shambolic".

[42]At the conclusion of Miss Rushton's submissions

the judge said this to her:

"Frankly, I am against you on the question of interest. I think although there was a certain amount of intransigence in the later period from the Turvills, I am not surprised, bearing in mind the accumulation of mistakes, but that is not really the largest sum here. The only time I would award you interest from is the time the actual sum was known, which would be not earlier than October 2001, so I do not think it was unreasonable for them to chase up further enquiries and complaints. But, even after that, other figures were given as well. In the circumstances, I do not think you can sensibly put forward a claim in equity for interest and, in any event, interest is discretionary in the main action and I am against you on interest. If you want me to elaborate, I will. It is not as though the mistake was realised and made known within a relatively short time, like six months after the first payment was made. These mistakes appear to be compounded and these letters are not easy to understand to a layman."

Mr and Mrs Turvill then addressed the judge. At page 22 of the transcript Mr Turvill explained to the judge that they were not prepared to accept the accuracy of any figure put forward by the LSC, but that "if we went to court, whatever figure was set, that's the figure we had to pay".

[43]At page 23 of the transcript

the judge said this to Mr and Mrs Turvill:

"But the legal position is this, Mrs Turvill. First of all, you have had the benefit of public funding which otherwise you would have had to pay yourself on the main action, which was then discontinued. Mr Kelly's action. So you have, as it were, had the value for the money. Then you were misled by the statements made in respect of the first payment and that was ultimately corrected. The situation being that either you have a charge on the property and if you sign an interest agreement then interest accumulates (and if you waited 20 years before you redeemed it, it would be an enormous sum) or you pay it off and no interest is charged. You thought you had paid it off and therefore the question of deferring payment and interest accumulating on it did not arise, and I am finding in your favour in respect of that and I am not going to give the Legal Aid Board any interest on it at all. The fact remains that they were claiming from you a further capital sum in respect of the costs that had been incurred in this action of some £7,000 or so. You were give different figures, a few hundred pounds less than that, and this is one of the reasons why I am not going to award interest, because you have been messed around. However, it seems to me very clear that no later than 11th October 2001 you must have realised that the matter had been thoroughly investigated and you were liable to pay a further capital sum. Now, the question is, on the issue of costs of this action, whether it was reasonable for you not to pay any further sum because you had not been given a definitive figure, or whether you should have taken positive steps to ensure that legal action was not taken against you."

[44]The judge went on to refer to the letter before action. He then asked Mr and Mrs Turvill whether they could point to any letter which they had sent to the LSC indicating an acceptance of liability, subject to being satisfied as to the right figure to be paid. Mr and Mrs Turvill said that they had not written such a letter because they were in a difficult family situation at that time, and that if the LSC had given them the correct figure initially they would have paid it.

[45]After referring to CPR 44.3 (relating to orders about costs), the judge said this (at page 26 of the transcript), in response to Miss Rushton's observation that the bottom line was that Mr and Mrs Turvill had refused to pay any sum to the LSC in respect of their outstanding liability under the statutory charge:

"The issue on interest, you see, is whether the conduct of the party seeking interest has led to a delay in payment of the moneys over which period interest is claimed. In circumstances like that, the court legitimately looks to see whether in the circumstances conduct on the part of the person asking for interest has actually caused or contributed to the delay, and then you look at the overall justice of the case. The question of costs is different. The question is whether these proceedings were necessary in the first place, and in the absence of Mr Turvill being able to point to any documentation as from at least the middle of 2002 saying: 'Yes, we will pay up, but what do we pay up and we need an assurance that there will be no further claim against us', and matters like that, no such approach was made. So really you are left with no option but to issue proceedings and once proceedings were issued and once they had appropriate advice, they paid up very promptly."

The judge went on to observe once again (at page 27) of transcript that Mr and Mrs Turvill had left the LSC with no option but to issue proceedings.

[46]Later,

the judge said this to Mr and Mrs Turvill (on page 35 of the transcript):

"... I think I am bound to find as a fact that since the end of 2001 you have not only fully realised that more money was payable and that the sum that was payable was, within £200 or so, £7,142, although another figure of £6,900-something, was also being booted about. By your own concession, I think you have to concede it, throughout 2002 up until the issue of proceedings you were contesting any further liability to pay at all. I do not see in those circumstances the Legal Aid Board, the Legal Services Commission, were given any other option [that is a reference to any other option but to commence enforcement proceedings]."

At Page 36 of the transcript

the judge said this:

"... sympathetic as I am, and I have seen if I can strike out of any particular costs reasonably, I cannot let my sympathy for you deprive the Legal Services Commission of what otherwise it seems to me they are entitled to."

Later in the same passage he says: "I do not see there is any alternative to me ordering payment of these costs as set out in accordance with this schedule..." (a reference to the LSC's costs statement).

[47]At the conclusion of the argument the judge delivered a short judgment which, in effect, summarised the observations which he made during the course of the hearing, some of which I have quoted earlier. I must, however, read two paragraphs from this judgment. I read first from paragraph 2: "My decision has to be based on judicial principles, on the basis as to whether or not this litigation was made necessary by effectively your refusal to pay any further sums of money and I think I am bound to find as a fact that since the end of 2001 you have not only fully realised that more money was payable and that sum that was payable was within £200 or so of £7,142, although another figure of £6,900-odd was also being booted about, and by your own concession I think you have to concede..." - and he continues in the same terms as the quotation to which I have already drawn attention.

[48]In paragraph 3 of his judgment he says this:

"I have already indicated I am not going to award any interest. I have a discretion in respect of that and I think the conduct of the Legal Services Commission through negligence, not bad faith, and mistakes in the office have dragged this matter out and directly contributed to that."

Then he continues in the same vein. In the result, the judge ordered Mr and Mrs Turvill to pay the LSC's costs in the sum £7,547.41, the figure which appear in its statement of costs.

[49]In her helpful written skeleton argument in this court Miss Rushton has reduced the LSC's interest claim still further. The LSC now seeks an award of interest at the rates which Mr and Mrs Turvill would have had to pay had they executed an interest-bearing charge (that is to say interest at the rate of 8 per cent until 31 March 2002, and at the rate of 5 per cent thereafter). That brings the total claim for interest down to £2,289.76.

[50]Miss Rushton submits that the judge's exercise of his discretion was unreasonable and wrong, and (in the well-known phrase taken from the speech of Lord Fraser of Tullybelton in G v G (Minors)

[1985] 1 WLR 647

, 652) outside the generous ambit within which reasonable disagreement is possible. She submits that if interest is not awarded Mr and Mrs Turvill will have gained an unjustified windfall by refusing to discharge the balance of their liability under the statutory charge. She submits that in exercise of his discretion the judge failed to take into account or to give sufficient weight to the following factors: 1. The fact that the balance of the principal sums secured by the statutory charge had remain unpaid for a period of over five years. 2. The fact that from 3 May 2000 onwards Mr and Mrs Turvill refused to accept that they were liable to pay anything more. 3. The fact that the LSC has a statutory duty to collect funds unsecured by the statutory charge. 4. The fact that the LSC's mistakes were simply human errors, compensation for which was adequately reflected in the offer of £50 by way of botheration payment. 5. That to disallow interest in its entirety was a disproportionate sanction for the LSC's mistakes. And 6. The fact that Mr and Mrs Turvill were not willing to make any payment until ordered to do so by the court.

[51]As to costs, Miss Rushton submits first, that if the cross-appeal succeeds, there can be no grounds for interfering with the order which the judge made. In any event, Miss Rushton submits, in so far as costs were within the judge's discretion, his exercise of that discretion is not susceptible of challenge on appeal. She stresses that, as the judge pointed out a number of times in the course of the hearing, proceedings were necessary because Mr and Mrs Turvill were refusing to admit any liability or to make any payment. Moreover, even if Mr and Mrs Turvill had agreed to pay the accepted interest, the LSC would still have had to go to court to get its costs. As a result of the hearing, the LSC was, even on the order which the judge made, in a significantly better position with an order for costs in its favour, than it was when the payment was made on 19 May 2003 - most of its costs having been incurred before that date. In the course of argument she told us that some £5,500 worth of costs had been incurred by the LSC prior to that payment, and some £2,250 of costs thereafter. She points out that the most that Mr and Mrs Turvill had offered in respect of interest and costs was £3,500, an offer which was made on the Friday before the hearing before the judge commenced on the Monday. That, of course, was a figure considerably less than the figure of costs awarded by the judge. She submits, therefore, that the LSC was, even on the basis of the judge's order - and ignoring the interest claims - successful in the litigation and that costs should accordingly follow the event.

[52]As to interest, as I indicated earlier Mr Bacon does not take issue with Miss Rushton's contention that interest may be awarded as a matter of discretion under section 69 of the County Courts Act 1984, and that interest may be awarded from the date when the cause of action arose.

[53]The issue, therefore, so far as interest is concerned is whether the judge erred in principle in exercising his discretion and, if so, how this court should re-exercise it.

[54]Mr Bacon submits that the judge's refusal to award the LSC interest was based essentially on the inexcusable conduct of the LSC in failing to identify correctly the sum required to redeem the statutory charge. He points out that the statutory charge was not registered until 24 April, and that Mr and Mrs Turvill promptly paid the sum which they were originally asked to pay. He also relies, as one might expect, on the judge's description of the situation which had arisen as a result of the LSC's mistakes as "shambolic".

[55]Mr Bacon accordingly submits that there are no grounds on which this court should interfere with the judge's refusal to award interest, and that the judge was entitled to exercise his discretion in the manner that he did. He submits that the inexcusable conduct of the LSC infected the entire claim for interest.

[56]As to costs, Mr Bacon submits that the judge erred in principle in failing to take adequate account of the payment of £7,142.68 which was made on 19 May 2003, and that, having taken that payment into account, he ought to have drawn a distinction between costs incurred before that date and costs incurred thereafter. He submits that that approach is also appropriate even in the event that the cross-appeal is allowed to some extent and an award of interest is made. He also submits that it is relevant to take into account CKFT's refusal to narrow the issues at trial in the interest of saving costs. He reminds us that under CPR 44.3 in making orders about costs the court will have regard to the conduct of the parties. He submits that the judge gave insufficient weight to the fact that LSC's claim for interest had failed in its entirety before him, and he submits in any event that the costs incurred by the LSC in relation to the progress of the action after the payment on 19 May were disproportionate to the interest claim.

[57]My conclusions on these issues are as follows. As to interest, it seems to me that the judge failed to give proper weight to the fact that, given Mr and Mrs Turvill's stance that they would only make a further payment if ordered to do so by the court, enforcement proceedings were inevitable. That, indeed, was a factor which the judge mentioned at a number of points during the hearing and in the course of his short judgment, to which I referred earlier.

[58]In my judgment, the judge's failure to give proper weight to that factor undermines his exercise of discretion in relation to interest. Accordingly, it falls to this court to re-exercise that discretion.

[59]Whilst I would agree with the judge that in the particular circumstances of this case the lamentable series of mistakes made by the LSC prior to the commencement of proceedings (including the giving of an incorrect redemption figure in the letter before action itself) justifies a refusal to award interest prior to the commencement of proceedings, the plain fact is that, given Mr and Mrs Turvill's denial of any further liability, the LSC had no alternative but to issue enforcement proceedings. It seems to me highly regrettable that Mr and Mrs Turvill should have taken that attitude which, so far as I could see, was completely misguided. Nor is there any conduct of the LSC after the commencement of proceedings which could possibly justify depriving it of interest as from the commencement of proceedings (by commencement of proceedings I refer of course to the date of service of the proceedings on Mr and Mrs Turvill).

[60]Accordingly, I can, for my part, see no good grounds for depriving the LSC of interest for the period from service of the proceedings until payment of the outstanding principal sum on 19 May 2003. In my judgment, the judge's decision not to allow interest for that period is plainly wrong and must be put right by this court.

[61]I would accordingly allow the cross-appeal to that extent. At a rate of 5 per cent, the interest recoverable amounts, as is common ground, is something slightly less than £90.

[62]I turn, then, to the issue of costs. As to costs, the judge was, in my judgment, plainly entitled to award the LSC its costs up to the date of the payment on 19 May. The question is whether there are any proper grounds upon which this court can interfere with his decision also to award the LSC the remainder of its costs of the action incurred after that date.

[63]Of course the position with which this court is faced in relation to costs is different from that which the judge faced, in that in the light of our decision as to interest, the LSC has succeeded in part on its cross-appeal, albeit only to the extent of some £90. To that extent the LSC's position on the issue of costs is stronger than it was before the judge.

[64]In my judgment, having taken full account of the arguments addressed to us by Mr Bacon as to the disproportionate relationship between the costs incurred and the amount recovered, it nevertheless seems to me that the course which the judge took was one which he was entitled to take; and in this court, following the partial success of the LSC's claim in relation to interest, it is also an order that should be upheld.

[65]I therefore accept Miss Rushton's submission that there are no proper grounds on which this court can interfere with the order which the judge made in awarding the LSC its costs of the proceedings up to and including the hearing before the judge.

[66]I would accordingly disallow the appeal.

LORD JUSTICE KAY: I agree.

LORD JUSTICE BROOKE: I also agree. (Appeal dismissed; cross-appeal allowed in part; Appellants do pay Respondent's costs of the appeal and cross-appeal in the sum of £5,000).