Nelson v Greening & Sykes (Builders) Ltd [2007] EWCA Civ 1358

[2007] EWCA Civ 1358Case No A3/2007/0007 & 0008
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue LEEDS DISTRICT REGISTRY
HIS HONOUR JUDGE LANGAN QC
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18/12/2007
Before
LORD JUSTICE WARDLORD JUSTICE WALLLORD JUSTICE LAWRENCE COLLINS
Between
DAVID NELSONAppellant/ClaimantGREENING & SYKES (BUILDERS) LIMITEDRespondent/DefendantSHIRENE HANLEYAppellant/
Mr David Nelson appeared in person for in personMr Geraint Jones QC (instructed through the General Council of the Bar Public Access Scheme) for Ms Shirene HanleyMs Sarah Richardson (instructed by Messrs Chadwick Lawrence) for Greening & Sykes (Builders) LimitedHearing Hearing date : November 22, 2007
Judgment

I Introduction

[1]The management of Greening & Sykes (Builders) Limited (“G&S”) must be ruing the day in October 1997 when they agreed to sell a small building plot in Dewsbury, West Yorkshire, to David Nelson (“Mr Nelson”) for the modest sum of £38,500. As a result, they have been embroiled in ten years of litigation with Mr Nelson and his friend or associate Shirene Hanley (“Ms Hanley”).[2]Judge Langan QC described the litigation as “regrettably pointless” and, through no fault of G&S, “little more than an exercise in futility.” G&S have expended what their counsel estimated to be more than £100,000 in costs. The point on this appeal is whether they can recover some of the assessed costs awarded in their favour through a charge on the property or through a non-party costs order against Ms Hanley.[3]Ms Hanley threatened G&S’s solicitors more than 7 years ago that “the matter between your client and me will become a long running saga along a costly course from Dewsbury to Strasbourg.”[4]These appeals by Mr Nelson and Ms Hanley concern, in the first place, the question whether G&S can enforce, against the property which they sold, some of the many costs orders which they obtained against Mr Nelson, none of which has been satisfied. In the light of the enormous cost to them of these proceedings, the amount which they seek to enforce is modest, about £18,000. That question concerns, primarily, the application of section 2(1)(b)(i) of the Charging Orders Act 1979 (“the 1979 Act”).[5]The second set of issues concerns the question whether G&S are entitled to a non-party costs order against Ms Hanley, and whether the judge was entitled to make an order that she pay the already assessed costs without giving her an opportunity to re-open the assessments. That question turns, in part, on the construction of section 51(3) of the Supreme Court Act 1981.

II The background

[6]A contract was exchanged between G&S and Mr Nelson for the sale of a Plot 9, High Meadows, Low Road, Thornhill, Dewsbury (“the property”) on October 6, 1997 for £38,500.[7]Completion was due on about November 13, 1997. Mr Nelson required the transfer to be in the names of Ms Hanley and her daughter Dionne Hanley, and objected to the form of transfer put forward by G&S’s solicitors. It seems that Mr Nelson took exception to certain covenants in the transfer and claimed that they had not been agreed as part of the contract.[8]On November 13, 1997 G&S’s solicitors said that the transfer submitted by Mr Nelson was not acceptable, and that the new transferees were also not acceptable.[9]On November 17, 1997 Mr Nelson wrote to G&S to say that he had satisfied the purchase price of £38,500 (by paying a banker’s draft for £35,300) and required by December 1, 1997 a duly executed transfer in the form executed by Ms Hanley and her daughter. On the same day G&S’s solicitors wrote to Mr Nelson’s solicitors to say that Mr Nelson had indicated that he had paid the sum of £37,000 direct to G&S’s bank account and: “if so this money will be held to your clients order pending formal completion. This leaves a shortfall of £1,000 which is to be held by ourselves pursuant to special condition 18 of the contract...”.[10]On November 19, 1997 G&S’s solicitors served a formal notice to complete. Time for completion was subsequently extended to December 15, 1997. On January 2, 1998 Mr Nelson directed G&S to convey the property to Ms Hanley and her daughter within seven days in the terms of the accompanying transfer. G&S refused. III The litigation A The first action

III The litigation

[11]On December 1, 1997 Mr Nelson issued proceedings seeking, inter alia, rectification of the contract and specific performance of the contract as rectified. The statement of claim in those proceedings were struck out by HH Judge Cooke on April 28, 1998 and Mr Nelson was ordered to pay G&S’s costs.

B The second action and judgment of Mr Robert Englehart QC

[12]On October 28, 1998 Mr Nelson issued another set of proceedings against G&S claiming that the contract with G&S did not comply with section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989, but that G&S were bound by a proprietary estoppel in favour of Mr Nelson which required G&S to transfer the property (free of any of the terms of the transfer) to Mr Nelson or his nominees.[13]This matter came before Mr Robert Englehart QC (sitting as a High Court Judge) who gave judgment on February 2, 2000.

The judge said:

“It must be said at the outset that the legal expense to which this dispute has given rise is out of all proportion to the subject matter of the dispute and indeed the total value of this property. ... One cannot help but feel that with a modicum of good sense the dispute could and should have long since been resolved by agreement.”
[14]The judge said that the problem had arisen because Mr Nelson had resolutely refused to accept the engrossed form of transfer tendered by G&S’s solicitors, because he objected to many of its conditions and wished to have a transfer to Ms Hanley and her daughter. The judge decided that there was no doubt that what both Mr Nelson and G&S intended to be annexed was the form of transfer supplied by G&S’s solicitors. He found that the terms and form of the transfer were those put forward by G&S and ordered specific performance. Mr Nelson was to execute a transfer in the terms as scheduled. Alternatively he could procure that Ms Hanley and her daughter execute the transfer in that form. Mr Nelson was also ordered to pay G&S’s costs, less adeduction of £1,000.

C G&S’s application to set aside the order of Mr Robert Englehart QC

[15]Despite this order Mr Nelson refused to execute the transfer or to procure that Ms Hanley and her daughter executed the transfer.[16]Instead, on July 12, 2000 Ms Hanley wrote to G&S’s solicitors to say that she had provided the purchase price for the property, and had owned the land since 1997 but had not been given possession. Her ownership derived from her having provided the purchase price. She called upon G&S to transfer the legal title. G&S’s solicitors said that her position was not agreed, and on August 3, 2000 she wrote to say that if they were unable or unwilling to recognise her title “the matter between your client and me will become a long running saga along a costly course from Dewsbury to Strasbourg.”[17]When Mr Nelson refused to complete either in his own name or by his nominees, G&S sought an order to set aside the order for specific performance on the ground that Mr Nelson had failed to comply.[18]Ms Hanley also commenced proceedings against G&S on July 1, 2002 for an injunction restraining G&S from preventing or obstructing access by her or her contractors or agents to the property. An interim injunction was refused by Judge McGonigal on July 2, 2002.[19]These matters came before Etherton J in November 2002, when, as an alternative to the primary relief sought by G&S, namely that the order for specific performance be set aside, an order was sought by G&S that a Master, or some other fit and proper person, execute a transfer of the property on behalf of Mr Nelson in order to give effect to the order for specific performance.[20]Etherton J accepted that the purchase price was funded entirely by Ms Hanley. He said (paras 25, 31):
“I find the stance taken by Ms Hanley and Mr Nelson quite baffling, both in relation to their conduct and in relation to their submissions of law. I remain wholly perplexed as to why it is that since the order of Mr Englehart QC, made over two and half years ago, Mr Nelson has persistently refused to comply with the order for specific performance bearing in mind that it is Mr Nelson’s own case before me that the Property, for which Ms Hanley, through Mr Nelson, has paid under £40,000, is now worth in excess £90,000 on a forced sale basis. None of the evidence before me explains this extraordinary conduct. … It is perfectly clear that Ms Hanley who, for reasons which have never been explained in evidence, used Mr Nelson as a conduit for the payment of the purchase price and the acquisition of the property, has at all times been aware of, and been behind, the persistent failure of Mr Nelson to execute the transfer in the appropriate form.”
[21]He said that he bore in mind that it was open to G&S to apply for a costs order against Ms Hanley on the basis that in reality Mr Nelson was acting on her behalf and at her behest. Bearing in mind that discharging the order for specific performance might give a substantial financial windfall to G&S, and that Ms Hanley had indicated that she was willing to take a transfer, he directed that a Master should sign the transfer on behalf of Mr Nelson. He dismissed Ms Hanley’s proceedings. He ordered Ms Hanley and Mr Nelson to pay 85% of G&S’s costs.[22]The transfer was signed by Master Moncaster but he did not date it. On April 30, 2003 Neuberger J ordered that G&S be allowed to date the transfer with the date of April 30, 2003, and made a without notice freezing order against Mr Nelson in respect of the unsatisfied costs orders which had been made against him.[23]On June 13, 2003 Peter Smith J ordered that the court sign a Form TP1 and execute the transfer of the property to Mr Nelson. It would seem that, although no land certificate was before this court, Ms Hanley became registered at HM Land Registry as proprietor in February 2004. This was after the charging orders which are at the heart of this appeal.

IV Enforcement of costs orders: order of Peter Smith J dated June 13, 2003

[24]The matter came before Peter Smith J on June 13, 2003. The nature of the application before him is not clear, but it was probably an application to discharge the freezing order made by Neuberger J. By that time seven orders for costs had been made against Mr Nelson, three for costs which were summarily assessed and four for costs which were to be the subject of detailed assessment. Mr Nelson had not made any payment in respect of the summary assessments and G&S had not proceeded to have the detailed assessments carried out.[25]On June 13, 2003 Peter Smith J made the following orders:(1) that the freezing order of April 30, 2003 be discharged and substituted by a charge over the property and that Mr Nelson pay G&S’s costs of the application to discharge the freezing order, assessed at £2,500;(2) that the interest of Mr Nelson as judgment debtor in the property do stand charged with payment of all sums to be paid to G&S by Mr Nelson pursuant to orders made in the first proceedings and in the second proceedings. Those included costs orders in respect of costs which had not been assessed. It was accepted by G&S that the charging order could not stand in relation to those costs.[26]Ms Hanley and Mr Nelson issued applications for an order that the orders of Peter Smith J be set aside. On December 1, 2003 Lindsay J rejected an application by Ms Hanley to set aside those orders, and made a costs order both against Mr Nelson and Ms Hanley. On February 5, 2004 Lewison J dismissed Mr Nelson’s application.[27]Mr Nelson and Ms Hanley applied for permission to appeal against the decision of Lindsay J (and perhaps also of Lewison J’s order), and their applications were dismissed by Kennedy and Jonathan Parker LJJ on May 20, 2004. They were ordered to pay G&S’s costs assessed at £1,864. But Jonathan Parker LJ envisaged that Mr Nelson and Ms Hanley might wish to make an application under section 3(5) of the 1979 Act to vary or discharge the charging order.[28]On June 10, 2004 Lewison J dismissed Ms Hanley’s application to set aside the charging order, but she did not attend. On November 1, 2004 she issued an application that the order made by Lewison J in her absence be set aside. Mann J on December 6, 2004 set aside those parts of the order which dismissed the application. But he made a costs order against her, and ordered that she pay G&S’s costs of the application summarily assessed at £1,400.[29]At some time prior to October 28, 2004 G&S issued an application for a civil restraint order against Ms Hanley and Mr Nelson. The matter came on for hearing before HHJ Rich QC on 28 October 2004 and was adjourned. The judge ordered that the costs thrown away by the adjournment be Ms Hanley and Mr Nelson’s in any event. This was the only costs order in 10 years of litigation which was made in favour of Ms Hanley or Mr Nelson.[30]Ms Hanley’s application to set aside the charging order was issued for hearing on December 9, 2005 before HH Judge Weeks QC but she failed to attend for cross-examination, and on December 9, 2005 G&S handed a draft application to the judge indicating an intention to seek a non-party costs order against her. The judge transferred the action to Leeds and ordered that both applications be heard together.

V Judgments of HH Judge Langan QC

[31]Although the applications came on for hearing before Patten J on March 6, 2006 the hearing was adjourned after Ms Hanley’s counsel informed the court that he was no longer able to represent her. The applications were heard by HH Judge Langan QC on June 8 and 9, 2006 (in relation to the application to set aside the charging order) and on September 11, 2006 (in relation to the application for a non-party costs order).[32]There are three decisions of HH Judge Langan QC under appeal:(1) On June 9, 2006 he refused to discharge the charging order made by Peter Smith J on June 13, 2003.(2) On November 3, 2006, he held that a non-party costs orders should be made against Ms Hanley.(3) On November 28, 2006, he held that the non-party costs order should be in the sums previously assessed and there should not be a second detailed assessment of such costs. Permission to appeal to this court was given by Lloyd LJ to Mr Nelson and Ms Hanley.

A Order of June 9, 2006

[33]Prior to his judgment of June 9, 2006 Judge Langan QC had found as a fact that Mr Nelson did not purchase the property on his own account but as nominee for Ms Hanley and with money all of which (or all except an insignificant amount) was provided by Ms Hanley.[34]The judge rejected the submission on behalf of Ms Hanley that the charging orders were only directed at land which was owned or supposedly owned beneficially by Mr Nelson. The litigation was conducted by and against G&S on the basis that Mr Nelson was acting in the purchase of the property for his own benefit. He and Ms Hanley had for litigation purposes always been acting in tandem. Well before the hearing before Peter Smith J each had clearly asserted that the property was to be purchased for Ms Hanley and initially for her daughter as well.[35]G & S held the legal estate, but the purchase monies had been fully paid and they held the legal estate on trust for Mr Nelson beneficially, and Mr Nelson, by reason of the provision of the purchase price by Ms Hanley was trustee of the beneficial interest for her. The orders for costs were rightly to be regarded as having been made against Mr Nelson as a trustee, since he had litigated throughout on the basis that he was no more than a nominee for Ms Hanley and was supported in that stance by her[36]Consequently he refused to discharge the charging order.

B Judgment of November 3, 2006 : Non-Party Costs Order

[37]The costs orders which were the subject of this judgment ultimately were those of December 9, 2003 (assessed by a costs judge £13,340.51); June 13, 2003 (£2,500, summarily assessed by Peter Smith J); and February 5, 2004 (£2,600, summarily assessed by Lewison J). The figure of £900 claimed in relation to a hearing before Neuberger J on April 30, 2003 was not pursued because it had not been included in the sealed order. It was also accepted that Peter Smith J had no power to impose a charging order in respect of costs which had been ordered but not assessed.[38]The judge concluded that the case for making the order which was sought was overwhelming. Mr Nelson purchased the property with money provided by Ms Hanley and was nominee or trustee for her and he had conducted the litigation on the footing that she was the beneficial owner, with her knowledge and approval, and in tandem with her. Mr Nelson was never acting in the litigation for the benefit for anyone other than Ms Hanley. The case was one which was tailormade for a costs order against a non-party, and justice required that she should bear some part of the costs. The case did not have to be exceptional for the jurisdiction to be exercised, but this case was by any standards exceptional. He said (para 20):
“Greening entered into a straightforward contract for the sale of a piece of land which is of no great value. Greening was at all times willing to perform its obligations under the contract. Greening was nonetheless harassed (I do not think that I exaggerate by using the word) by litigation commenced on behalf of the purchaser. That litigation has been, through no fault of Greening, little more than an exercise in futility and has now been going on for approaching nine years. That Greening should be out-of-pocket through any inability of the nominal claimant in the second action to pay Greening’s costs when a non-party costs order could be made against the real purchaser would, in my judgment, be a grave injustice.”
C Judgment of November 28, 2006: Non-Party Costs

C Judgment of November 28, 2006: Non-Party Costs Order: indemnity

[39]In his judgment of November 28, 2006 the judge decided that Ms Hanley was not entitled to have the three relevant bills of costs subjected to an assessment by the court. Although the argument on her behalf that she had never had an opportunity to make submissions on the quantum and therefore it would be unjust to make an order of that kind, was an attractive one, questions of that kind could not be considered simply as a matter of abstract theory. One had to attend to the history of the litigation, the part played by those who had been involved in it and the opportunities which were open to those persons. By reference to his earlier judgment he emphasised that Ms Hanley was in no commercial sense a stranger to the litigation. The litigation was conducted by Mr Nelson with her approval and for her benefit. Opportunities which were open to Mr Nelson to make submissions as to costs might fairly be regarded as opportunities which were open to Ms Hanley.[40]Mr Nelson was present for at least part of the assessment hearing before a costs judge on December 9, 2003. It was true that Mr Nelson had no opportunity to make observations as to costs as regards the hearing before Neuberger J, but he was present at the hearing before Lewison J. Mr Nelson also had the opportunity before Peter Smith J. VI Conclusions A The charging order

VI Conclusions

[41]Section 2 of the 1979 Act provides (in material part) “2.-(1) ... a charge may be imposed by a charging order only on:(a) any interest held by the debtor beneficially:- (i) in any asset of a kind mentioned in subsection (2) below, or (ii) under any trust; or(b) any interest held by a person as trustee of a trust (“the trust”), if the interest is in such an asset or is an interest under another trust and:- (i) the judgment or order in respect of which a charge is to be imposed was made against that person as trustee of the trust, or (ii) the whole beneficial interest under the trust is held by the debtor unencumbered and for his own benefit… ... (a) any interest held by the debtor beneficially:- (i) in any asset of a kind mentioned in subsection (2) below, or (ii) under any trust; or (b) any interest held by a person as trustee of a trust (“the trust”), if the interest is in such an asset or is an interest under another trust and:- (i) the judgment or order in respect of which a charge is to be imposed was made against that person as trustee of the trust, or (ii) the whole beneficial interest under the trust is held by the debtor unencumbered and for his own benefit… ... (2). The assets referred to in subsection (1) above are:- (a) land, . ...”[42]The grounds of appeal on behalf of Ms Hanley were that Peter Smith J had no power to make the charging order because(a) the costs orders in respect of which the charging order was made was not against Mr Nelson as trustee under section 2(1)(b)(i); and(b) section 2(1)(b)(ii) did not apply because the whole beneficial interest under any trust (none being alleged by G&S) was not held by the debtor (Mr Nelson) under any trust.[43]Since it is agreed that section 2(1)(b)(ii) has no application, it is not necessary to develop the second point. Nor was the first point developed before us. In his written submissions on behalf of Ms Hanley Mr Geraint Jones QC confused the question whether the costs orders were made against Mr Nelson as trustee with the question whether the charging orders were made against him as trustee. The true question is the former. But no challenge to the judge’s finding that the litigation had been conducted on the basis that Mr Nelson had conducted the proceedings as trustee for Ms Hanley was developed at the hearing before this court.[44]The point was a bad one. It was open to the judge to find that the costs orders were made against Mr Nelson in his capacity as trustee. Mr Nelson and Ms Hanley had always acted in tandem. Throughout they had asserted that the property was to be purchased for Ms Hanley (and initially her daughter as well): Mr Nelson’s affidavit of November 6, 1998, paras 3, 9-10, and 40; Ms Hanley’s witness statement of July 1, 2002, paras 5, 14, 29.[45]The fact that Mr Nelson did not describe himself as a trustee in the litigation is not critical. Nor did it matter that G&S put Mr Nelson and Ms Hanley to proof that Ms Hanley provided the purchase monies and that Mr Nelson held his interest in the property on trust for Ms Hanley.[46]The main point put on behalf of Ms Hanley was not, it seems, made before Judge Langan, and is not reflected in the notice of appeal, but was developed in Mr Jones’ skeleton argument and at the hearing before this court. It was supported by Mr Nelson, who did not add any new substantive points on this aspect of the appeal.[47]The argument can be summarised in this way.(1) Upon payment of the purchase price, G&S held the property upon a bare trust for Mr Nelson (with whom it had contracted);(2) Mr Nelson, in turn, held that interest upon a bare trust for Ms Hanley: Saunders v Vautier (1841) 4 Beav 115; Grey v IRC [1958] Ch 690, 715 per Lord Evershed MR;(3) Mr Nelson then disappeared from the picture, leaving G&S holding upon a bare trust for Ms Hanley;(4) accordingly, Mr Nelson did not hold any interest qua trustee, because under the rule in Saunders v Vautier he had dropped out of the picture;(5) therefore the order could not have been made against Mr Nelson as trustee because it was found as a fact that Ms Hanley had provided all the purchase money and that Mr Nelson held the property upon a bare trust for Ms Hanley.[48]The argument was developed after the hearing in written submissions to deal with the consequences of the fact that, as at the date of the imposition of the charging order in June 2003, completion of the contract for the sale and purchase of the property had not taken place.[49]The argument was that it did not matter that, despite payment of the purchase price, completion had not taken place because G&S did not deliver an executed transfer upon receipt of the purchase monies in January 1998. If the vendor/purchaser trust remained in being the result would be the same as if there had been full completion. This was because(1) even if G&S held on a hybrid vendor/purchaser trust, they could not contend that they retained any beneficial interest in the land because they had been paid in full;(2) once G&S had received the entire purchase monies, regardless of whether full completion had taken place, they held the beneficial interest on trust;(3) they held the interest for Mr Nelson, who in turn held it upon trust for Ms Hanley;(4) provided that there was certainty concerning the beneficiary it was irrelevant as a matter of trust law whether or not the trustee was aware of the identity of the beneficiary.[50]Thus the principle that if A holds a beneficial interest upon trust for B who in turn holds it on trust for Mr Nelson, B falls out of the equation and A holds the beneficial interest directly upon trust for Mr Nelson, and this applies equally upon either legal analysis. In June 2003 when Peter Smith J made the charging orders:(1) Mr Nelson had no beneficial interest in the land;(2) he was not the trustee of the beneficial interest;(3) the order was made against a beneficial interest that was not vested in him.[51]In my judgment, the argument fails. The crucial facts are these. First, Mr Nelson at all material times was Ms Hanley’s nominee, and therefore he held any proprietary interest in the property on trust for her. Second, Ms Hanley provided all of the purchase monies. Third, the purchase monies were transmitted by Mr Nelson to G&S’s solicitors, who wrote to Mr Nelson’s solicitors on November 17, 1997 to say that if the money had been transmitted:
“… this money will be held to your clients order pending formal completion.”
[52]Fourth, although a transfer was executed by the court (it seems on behalf of Mr Nelson rather than Ms Hanley) prior to the hearing before Peter Smith J legal title to the property was not transferred until February 2004, when the transfer was registered at HM Land Registry. The court was told that the registered proprietor is Ms Hanley.[53]The legal consequences are as follows. As from the date of contract in October 1997, the property was held by G&S for Mr Nelson under the vendor/purchaser trust. After contract, and until completion, the vendor becomes in equity a trustee for the purchaser, albeit “a trustee, no doubt, with peculiar duties and liabilities” (Egmont v Smith (1877) 6 Ch D 469, at 475, per Sir George Jessel MR) or “a trustee in a qualified sense only” (Rayner v Preston (1881) 18 Ch D 1, 6, per Cotton LJ). In its Report on Transfer of Land: Risk of Damage After Contract for Sale (Law Com No 191, 1990), at para 2.8, the Law Commission said:
“The trust concept which has developed is a useful, flexible tool enabling a degree of control over the vendor to be exercised in the very varied situations which arise. …”
The authorities are reviewed in my judgment in Englewood Properties Ltd v Patel [2005] EWHC 188 (Ch), [2005] 3 All ER 307.[54]Mr Nelson was a nominee for Ms Hanley, and held that quasi-trust interest on trust for Ms Hanley. He had received the purchase monies from Ms Hanley on a purpose trust, and G&S held the money on trust for Mr Nelson pending completion. Mr Nelson and Ms Hanley made it clear to G&S that any transfer was to be to Ms Hanley (or Ms Hanley and her daughter), but the legal title did not vest in Ms Hanley until 2004.[55]It is true that under the rule in Saunders v Vautier a beneficiary with a vested and indefeasible interest can require a trustee to transfer trust property to the beneficiary.[56]It is also true that in Grey v IRC [1958] Ch 690 (affirmed [1960] AC 1) at 715, Lord Evershed MR (dissenting, but not on this point) said that where a person who is the owner beneficially of property (and the legal estate is vested in another as trustee for him) makes a declaration of trust the practical effect would seem, in common sense, to amount, or be capable of amounting, to the “getting rid of” a trust or equitable interest then subsisting. It is said in Snell, Equity (31st ed. McGhee, 2005), para 19-11 that “where property is transferred to T ‘on trust for B absolutely’ …[i]f B in turn becomes a bare trustee of his equitable interest for C, T will hold directly in trust for C ...”, citing Head v Lord Teynham (1783) 1 Cox Eq. 57 (which only holds that where trustees and the beneficiary are before the court, an intermediate trustee of the equitable interest need not be made a party).[57]These authorities do not bind this court to hold that as a matter of law an intermediate trustee ceases to be a trustee. I accept the submission for G&S that saying (as Lord Evershed MR said) that the practical effect would seem to amount to or be capable of amounting to the “getting rid” of the trust of the equitable interest then subsisting, is not the same as saying that as a matter of law it does get rid of the intermediate trust. What he was saying was that in the case of a trust and sub-trust of personal property the trustees may decide that as a matter of practicality it is more convenient to deal directly with the beneficiary of the sub-trust.[58]But in any event it seems to me that the authorities have no application to a case where the trust property is the purchaser’s interest in land created by the existence of an executory contract for sale and purchase. Ms Hanley did not require Mr Nelson to transfer his interest as nominee for Ms Hanley in the quasi-trust to her prior to the making of the charging orders. In the absence of any such direction, the bare trust continued and at the date of the hearing before Peter Smith J, Mr Nelson held his beneficial interest on trust for Ms Hanley. The contract was specifically enforceable against Mr Nelson. On June 13, 2003 G&S held the beneficial interest in the property on trust for Mr Nelson and Mr Nelson held it on trust for Ms Hanley. Consequently, Mr Nelson had the interest in the property required by the 1979 Act.

B The non-party costs orders

[59]The main attacks on behalf of Ms Hanley on the non-party costs orders were(a) that it had not been shown that anything done by her was causative of Mr Nelson causing G&S to incur costs;(b) that it was contrary to principle for a beneficiary to be liable for costs incurred by a trustee; and(c) that the court had no power to order Ms Hanley to pay costs already assessed against Mr Nelson: in effect he ordered costs on an indemnity basis, when his only power was to order costs to be subject to detailed assessment, or to assess the costs summarily himself.[60]On the first point, causation, it was submitted by Mr Jones QC, that the judge made no finding that anything done or not done by Ms Hanley was in any way causative of G&S incurring costs that it would not otherwise have incurred.[61]I regard this argument as absurd in the circumstances of this case. It is well established that proof of causation is a necessary pre-condition of an order against a non-party: see, e.g. Hamilton v Al Fayed (No. 2) [2002] EWCA 665, [2003] QB 1175, at [54]; Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39[2004] 1 WLR 2807, at [18]-[22]; Goodwood Recoveries Ltd v Breen [2005] EWCA 414, [2006] 1 WLR 2723at [60]-[66].[62]But the judge took account of the fact that Mr Nelson and Ms Hanley had been running their litigation in tandem, and as early as August 3, 2000, she told G&S that if they did not accept her position “the matter between your client and me will become a long-running saga along a costly course from Dewsbury to Strasbourg.” I regard the notion that G&S would have incurred the costs in any event even if Ms Hanley had not supported Mr Nelson’s campaign as wholly fanciful.[63]The second point taken is that it is contrary to principle for a beneficiary to be liable for costs incurred by a trustee. The argument is that the judge found as a fact that Mr Nelson held and had at all material times held the property upon a bare trust for Ms Hanley. Thus it was established that a trustee/beneficiary relationship existed. In such circumstances it was entirely usual and right that a trustee should have regard to the wishes of the beneficiaries and give effect thereto. Such a trustee is under a statutory duty to do so: Trusts of Property and Appointment of Trustees Act 1996, section 11. The judge’s conclusion logically applies to almost all other cases where, with the concurrence or encouragement of the beneficiaries, a trustee has litigated and lost.[64]There is nothing in this point. In Globe Equities Ltd v Globe Legal Services Ltd [1999] BLR 232, 240, Morritt LJ said:
“Ultimately the test is whether in all the circumstances it is just to exercise the power conferred by subsections (1) and (3) of section 51, Supreme Court Act 1981 to make a non-party pay the costs of the proceedings. ...[I]t will be a matter for judgment and the exercise by the judge of his discretion to decide whether the circumstances relied on are such as to make it just to order some non-party to pay the costs. Thus, as it seems to me, the exceptional case is one to be recognised by comparison with the ordinary run of cases not defined in advance by reference to any further characteristic.”
[65]The order was a matter of discretion. It depended on the facts. By the Trusts of Land and Appointment of Trustees Act 1996, section 11, the trustees of land shall in the exercise of any function relating to land, so far as practicable, consult the beneficiaries and so far as consistent with the general interest of the trust give effect to the wishes of those beneficiaries. But this is as far removed from the normal case of a trustee consulting a beneficiary as it is possible to be. This was obsessive and pointless litigation conducted by Mr Nelson with the active encouragement and support of Ms Hanley.[66]The third main point taken is that the judge had no power to order Ms Hanley to pay costs already assessed. In effect he ordered costs on an indemnity basis, when his only power was to order costs to be subject to detailed assessment, or to assess the costs summarily himself.[67]The argument is that under section 51(3) of the Supreme Court Act 1981 there are only two types of costs order that can be made:(a) costs to be subject to detailed assessment, or(b) costs summarily assessed in a specified sum. In this case the judge did not purport summarily to assess costs. Ms Hanley has been denied natural justice. She was not a party to the costs assessment proceedings in 2003 and 2004. She has had no opportunity to be heard upon the propriety of any sum(s) claimed as costs. The judge was wrong to treat Mr Nelson as the agent of Ms Hanley.[68]In my judgment this objection also fails. Section 51(3) of the Supreme Court Act 1981 gives the court the power to:
“determine by whom and to what extent the costs are to be paid.”
I do not think that the phrase “to what extent” is limited to issues of proportion, and I reject the submission that it does not extend to quantum. I accept the submission for G&S that the court has power under section 51(3) to order, in an appropriate case, that a non-party pay a sum of costs which have already been assessed. In my judgment this was an appropriate case.[69]Mr Nelson and Ms Hanley were acting in tandem. Mr Nelson was present for at least part of the assessment hearing before the costs judge on December 9, 2003. Mr Nelson was present at the hearing before Lewison J, and he also had the opportunity before Peter Smith J to challenge the summary assessment of costs.[70]In the course of the hearing I referred the parties to the decision of Sir Robert Megarry V-C in Gleeson v J Wippell & Co [1977] 1 WLR 510 in the different but related context of res judicata where the parties to the two proceedings are not the same. He referred (at 515) to the “sufficient degree of identification between the two parties to make it just to hold that the decision to which one was party should be binding in proceedings to which the other was party.” That test was approved and applied in Johnson v Gore Wood & Co [2002] 2 AC 1, at 32. There is certainly a more than sufficient degree of identification between Mr Nelson and Ms Hanley in the conduct of these proceedings to make it just for Ms Hanley to be ordered to pay those costs.[71]Mr Nelson appeared in person, and put in separate skeleton arguments and addressed the court briefly. He did not raise any points of substance which were not covered by Ms Hanley’s appeal. I would therefore dismiss the appeals.[72]I have had the advantage of reading Lawrence Collins LJ’s judgment on this appeal in draft. I am in complete agreement with it, and like him, I would dismiss these appeals.[73]I acknowledge that I reach this result with an element of relief, notwithstanding my firm view that it is the right conclusion. When, as part of my preparation for the hearing of these appeals, I read the three judgments of HH Judge Langan QC of June 9, 2006, and November 3 and 28, 2006, I was struck by their clarity and good sense. As a relative stranger to the Charging Orders Act 1979 (the 1979 Act) in commercial litigation, however, I was acutely conscious that Lloyd LJ, on paper, had taken the view that there were arguments in relation to the 1979 Act and to orders under section 51 of the Supreme Court Act 1981 which were “reasonably arguable on the appeal”. I was thus concerned lest, notwithstanding what I perceived as the total absence of any merit in the appellants’ cases, there might nonetheless be a point of law which required us to allow one or both of the appeals. At the conclusion of the argument, however, I was reinforced in my view that the judge was entirely right.[74]In my judgment, there was abundant material upon which the judge could properly find, as he did in paragraph 17 of his reserved judgment dated June 9,2006, that Mr. Nelson and Ms Hanley “have, for litigation purposes, always been acting in tandem”. The judge was equally entitled to find, in the same paragraph, that it could not be said that the litigation had been conducted on the basis that Mr. Nelson was acting in the purchase of Plot 9 for his own benefit, or on the footing that Mr. Nelson was the beneficial owner of Plat 9. In these circumstance, I respectfully agree with the judge’s analysis in paragraph 19 of his judgment dated June 9, 2006, where he says: - I return to the words of [the 1979 Act]. By section 2(1)(b)(i) a charging order may be imposed on any interest held by a person as trustee of a trust if the interest is in (amongst other assets) land, or if the interest is an interest under another trust, the judgement or order in respect of which a charge is to be imposed was made against that person as trustee of the trust. As at 13 June 2003, the legal estate in Plot 9 was still held by Greening & Sykes, the purchase monies had been fully paid and Greening & Sykes accordingly held the legal estate on trust for Mr. Nelson beneficially. Mr. Nelson, by reason of the provision of the purchase price by Ms Hanley, was, as I found yesterday, trustee of the beneficial interest for her. The beneficial interest was held by Mr. Nelson as trustee for Ms Hanley and was itself an interest under the trust to which Greening & Sykes were subject. Further, Mr. Nelson, having litigated throughout on the basis that he was no more than a nominee for Ms Hanley, and having been supported in that stance by her, the orders for costs are rightly to be regarded as having been made against him as a trustee, even though they do not expressly say so.[75]This passage, to my mind, disposes of the principal argument raised before the judge on the propriety of the charging orders. In this court, however, Mr. Jones developed a different argument, which Lawrence Collins LJ has summarised in paragraphs 47 to 50 of his judgment. I respectfully agree that this argument fails. It seemed to me that Ms Richardson, for the respondent, had the complete answer to it. Completion only takes place when a completed transfer is received by the vendor. In this case, therefore the position was that until registration, the respondent held the legal title, and the beneficial interest was held by the respondent on trust for the purchaser. The payment of the purchase money by Ms Hanley created another trust, under which Mr. Nelson held the beneficial interest on trust for Ms Hanley. Mr Nelson did not, accordingly, “drop out of the picture” as Mr. Jones argued.[76]Lawrence Collins LJ explains the matter more fully in paragraphs 51 to 58 of his judgment. As he points out, and as Mr. Robert Englehart QC had found, the contract was specifically enforceable against Mr. Nelson. Costs orders relating to his refusal to complete were properly made; and what Lawrence Collins LJ describes as “the bare trust” continued. In my view, accordingly, the correctness of the judge’s analysis, as set out in paragraph 19 of the judgment given on June 9, 2006 is unaffected.[77]As to the non-party costs orders, there is only one point which I wish to add to Lawrence Collins LJ’s analysis, with which I am in complete agreement. It is that the judge was, in my view entirely correct in paragraph 24 of the judgment handed down on November 3, 2006 to make the following comment, when dealing with the submission that applications for non party costs should normally be made after the trial of the action concerned to the judge who had tried it: ….. In a case like the present, where the litigation has come before many judges and it is only at the end of the litigation that one is able to look back over the years and see the picture as a whole, there is much to be said for a composite application to a single judge. Indeed, from the point of view of Ms Hanley, such a composite application is advantageous because it is bound to result in a saving in costs.[78]Rarely, in my experience, as the judge himself remarked, has litigation been so “long drawn out and regrettably pointless”. I also respectfully agree with the judge that it is properly described as “little more than an exercise in futility”. The costs incurred are wholly disproportionate to the issues involved. It is high time that it was brought to a final conclusion, although I fear that may be a naïve thought, since the respondent is still faced with the question of enforcement. The only irony is that the value of the property has increased substantially over the 10 years of the litigation and now probably exceeds even the enormous amount of costs so unnecessarily incurred.[79]I agree with both judgments.

Order

indemnity

Cited in 10 later judgments

and 1 more case