N J Rickard Limited v Holloway & Anor [2015] EWCA Civ 1631

Case No B2/2014/2156

[2015] EWCA Civ 1631

IN THE COURT OF APPEAL (CIVIL DIVISION)

N APPEAL FROM TRURO COUNTY COURT

(District Judge Mitchell)

Venue Royal Courts of Justice

Date Tuesday, 3 November 2015

Strand

London, WC2A 2LL

Before

THE LORD JUSTICE OF ENGLAND AND WALES

LORD JUSTICE TOMLINSON

LORD JUSTICE VOS

Between

N J RICKARD LIMITEDClaimant/ Respondent

(1) PAUL HOLLOWAYDefendants/ Appellants

(2) LARAINE HOLLOWAYAppellant

(DAR Transcript of WordWave International Limited

A Merrill Communications Company 165 Fleet Street, London EC4A 2DY

Tel No: 020 7404 1400 Fax No: 020 7404 1424

Official Shorthand Writers to the Court)

Miss Georgia Bedworth (instructed by Pender Law) appeared for Respondent/Claimant

The Appellants/Defendants appeared through Mr Holloway in person for in person

Judgment

[1]This appeal concerns the proper approach to an award of costs where there are claims and cross-claims and where there was an unbeaten offer purportedly made under Part 36 of the CPR. The factual background was a little complicated but can be summarised quite briefly as follows.

[2]The property at Orchard Cottage, Tresavean Farm, Lanner, Near Redruth, Cornwall, outbuildings and some 17 acres of ground (the "property") was owned by a Mr Nigel James Rickard ("Mr Rickard") and a Mr Treve Flamank ("Mr Flamank"). The property was, however, let under a tenancy agreement dated 30 March 2008 (the “tenancy agreement”) by the claimant, NJ Rickard Limited (the “claimant” or the “landlord”), which was a company owned by Mr Rickard, to the defendants, Mr Paul Holloway (“Mr Holloway”) and his wife, Mrs Laraine Holloway (“Mrs Holloway”) (together the “tenants”).

[3]The tenants had wanted to purchase the property, but that was never to be. Instead, they occupied it as tenants from March 2008 until October 2010, when they moved out, although they did not formally surrender possession until 14 November 2011.

[4]The landlord claimed arrears of rent, which were not in themselves disputed, together with damages for physical damage to the property allegedly caused by the tenants and for removal of certain items allegedly taken by the tenants. The Re-amended Particulars of Claim itemised the claims at some £20,000 worth of damage, together with loss of rent caused by the damage. The tenants counterclaimed for damages for breach of the covenant for quiet enjoyment, and for the landlord’s alleged breach of its duty to repair the property under section 11(1) of the Landlord and Tenant Act 1985. The damages counterclaimed were substantial and fell under three heads: discomfort and inconvenience, costs of alternative accommodation and damage to possessions.

[5]The proceedings themselves were issued as long ago as 25 January 2011. It appears that there were extensive settlement discussions between the parties’ solicitors, but most importantly for the purposes of this appeal, the landlord’s solicitors wrote a letter dated 22 September 2011 headed “without prejudice save as to costs and pursuant to Part 36 CPR” in which the landlord offered to withdraw its rent claim so long as the tenants discontinued their counterclaim for disrepair and handed back possession, all on the basis that there would be no order for costs. This was described as the landlord’s “drop hands” offer. It concluded by saying that it related to the whole of the claim and cross-claims and was intended to have the consequences of Part 36 of the CPR and that the relevant period for the purposes of CPR 36.2(2)(c) (now Part 36.5(1)(c)) was 21 days from the date of service of the offer.

[6]The matter ultimately came on for trial before District Judge Mitchell over some three days in September and October 2013 and resulted in a liability judgment dated 5 November 2013, a supplemental quantum judgment dated 27 November 2013 and a costs judgment delivered on 13 December 2013. It is important to take a moment to summarise what the judge found on each of these three occasions. The District Judge’s decisions

[7]In the liability judgment, the judge found as follows. I have adjusted the order of his decisions for the sake of clarity:(i) The tenants’ challenge to the identity of the landlord failed.

(ii) The tenants’ challenge as to the extent of the demise succeeded.

(iii) The undisputed arrears of rent were recoverable by the landlord.

(iv) Interest was payable on the rent at the contractual rate of 15 per cent per annum, because the tenants’ challenge under the Unfair Terms in Consumer Contracts Regulations 1999 failed.

(v) The landlord’s claim to recover damages for damage caused to the property and removal of items failed in its entirety.

(vi) The tenants’ counterclaim for breach of the covenant for quiet enjoyment succeeded but only as to nominal damages.

(vii) The tenants’ counterclaim for damages for disrepair succeeded on some of the issues raised, namely the water penetration to the property, the electrical system and an electric shock caused to Mr Holloway by that electrical system’s disrepair, the heating system and a leakage caused from the shower. Moreover, it was found that the tenants had given notice of the defects as they had claimed. Damages were awarded only for discomfort and inconvenience and not under the other heads of claim.

(viii) The tenants’ counterclaim for damages for the cost of alternative accommodation and damage to possessions failed.

(ix) The tenants’ additional claims against Mr Rickard and Mr Flamank personally also failed on the basis that they were not the landlord but that the claimant was the landlord.

[8]In the quantum judgment the District Judge found that:(i) The arrears of rent had been agreed at £12,639.84 plus interest of £5,001.95, totalling £16,841.79.

(ii) The tenants’ damages for discomfort and inconvenience should be assessed, according to the judge, for the period from June 2008 to October 2010 at a rate of 30 per cent of the rent, totalling, for the relevant period £6,960.

(iii) The net sum due to the landlord for which the judgment would be given was assessed by the judge at £9,881.79.

[9]In the costs judgment, the judge found that the reality of the litigation was that the counterclaim was a defence to the claim, and the landlord was the successful party because the amount awarded exceeded the amount of the set- off. That was, according to the judge, “only cemented” by the offer of 22 September 2011 which he found was a valid Part 36 offer based on Hildyard J’s decision in Procter & Gamble Company v Svenska Cellulosa Aktiebolaget SCA [2013] 1 Costs LR 97. The judge said that the consequences in CPR Part 36.14 should be applied as it was not unjust to do so. The judge considered a modest percentage reduction, as part of the landlord’s case was unsuccessful, but:

“…this was de minimis in terms of time and costs so that I have concluded there should be no percentage reduction.”

[10]The District Judge ordered that the tenants should pay the landlord’s costs of the claim and counterclaim on a standard basis up to 17 October 2011, 21 days after the drops hands offer, and from 18 October 2011 on the indemnity basis, with interest at 8 per cent per annum. The tenants were to pay £20,000 on account of the landlord’s costs by 10 January 2014, and they were to pay Mr Rickard’s and Mr Flamank’s costs on a standard basis. The applications for permission to appeal

[11]Teare J refused permission to appeal on all points except the question of whether the tenants ought to have been ordered to pay indemnity costs. He dealt with the matter on paper and indicated that the issue was whether the drops hands offer was strictly in accordance with Part 36.

[12]I heard the matter orally and gave permission to appeal to the tenants on the remaining costs orders on the basis that it was:

“…at least arguable that the judge may not properly have concluded under CPR Part 44.2 that the tenants should pay all the costs when he did not find they behaved improperly in relation to their conduct of the claim.”

I stayed the order on the basis that it might turn out that money was payable to the tenants, but I refused permission to appeal on a range of other grounds relied upon by the tenants. The issues before this court

[13]Against the above background, the issues that arise for our determination may be shortly summarised as follows:(i) Whether the drops hands offer dated 22 September 2011 was a valid Part 36 offer?

(ii) If so, and even if not, whether the judge was wrong to make the costs orders that he did in respect of the claim and counterclaim and in respect of indemnity costs?

(iii) If so, what order as to costs ought to have been made?

[14]Before dealing with those issues, I should mention that the tenants have, since they were granted permission to appeal by me, applied to amend their notice of appeal to restrict their grounds of appeal to what they were permitted to appeal and to adduce further evidence. From 30 October 2015, Christopher Clarke LJ dealt with the application on paper and adjourned it to the full Court. For my part, I would allow the tenants to file the amended grounds of appeal. That is not seriously resisted by Miss Georgina Bedworth, counsel for the respondent landlord before us. I would, however, refuse permission to file any additional evidence. I cannot see that any of the conditions of Ladd v Marshall [1954] EWCA Civ 1 are satisfied in relation to other settlement discussions that may have occurred but were not brought to the attention of the judge when costs were being decided upon. This is not a case where no settlement discussions took place or where one party refused to discuss the case. It was a hard-fought piece of litigation in which serious allegations and cross-allegations were made. It may be thought with hindsight that the battle was hardly worth the time and expense incurred upon it by either side (a matter to which I shall return) but that does not mean that the tenants can now seek to reposition their arguments as to costs. I would, however, expressly allow the appellants to raise the matter of the landlord’s express refusal to mediate the claim as part of its argument in support of the costs appeal. The relevant provisions of the CPR

[15]It is necessary to set out the relevant provisions of the CPR at the time the District Judge heard this claim. They have been amended on several occasions and it is, therefore, the old provisions of the CPR that I set out as regards Part 36, although I set out the new provisions which have not significantly changed as regards Part 44. Part 44.2 of the CPR provides as follows: “(2) If the court decides to make an order about costs –(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order. … (4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including – (a) the conduct of all the parties; (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c) any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply. (5) The conduct of the parties includes – (a) conduct before, as well as during, the proceedings ... (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and

(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim. (6) The orders which the court may make under this rule include an order that a party must pay – (a) a proportion of another party’s costs; (b) a stated amount in respect of another party’s costs; (c) costs from or until a certain date only; … (f) costs relating only to a distinct part of the proceedings; and (g) interest on costs ... (7) Before the court considers making an order under paragraph (6)(f), it will consider whether it is practicable to make an order under paragraph (6)(a) or (c) instead. (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but (b) the court may make a different order. … (a) the conduct of all the parties; (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and (c) any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply. (a) conduct before, as well as during, the proceedings ... (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and (d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim. (a) a proportion of another party’s costs; (b) a stated amount in respect of another party’s costs; (c) costs from or until a certain date only; … (f) costs relating only to a distinct part of the proceedings; and (g) interest on costs ...

[16]As I say, Part 36 has been amended since the judge’s decision in this case; on the last occasion with effect from 6 April 2015. I set out, therefore, the un- amended version from the 2014 White Book as follows:

[17]Part 36.1 provided as follows:

“(1) This Section does not apply to an offer to settle to which Section II of this Part applies. (2) Nothing in this Section prevents a party making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14.”

[18]Part 36.2 provided as follows:

“(1) An offer to settle which is made in accordance with this rule is called a Part 36 offer. (2) A Part 36 offer must – (a) be in writing; (b) state on its face that it is intended to have the consequences of Section I of Part 36; (c) specify a period of not less than 21 days within which the defendant will be liable for the claimant's costs in accordance with rule 36.10 if the offer is accepted; (d) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and (e) state whether it takes into account any counterclaim ...” (a) be in writing; (b) state on its face that it is intended to have the consequences of Section I of Part 36; (c) specify a period of not less than 21 days within which the defendant will be liable for the claimant's costs in accordance with rule 36.10 if the offer is accepted; (d) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and (e) state whether it takes into account any counterclaim ...”

[19]Then Part 36.10 provided as follows: “(1) Subject to rule 36.10A and to paragraphs (2) and (4)(a) of this rule, where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror. (2) Where –(a) a defendant’s Part 36 offer relates to part only of the claim; and

(b) at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim, the claimant will be entitled to the costs of the proceedings up to the date of serving notice of acceptance unless the court orders otherwise. (3) Costs under paragraphs (1) and (2) of this rule will be assessed on the standard basis if the amount of costs is not agreed ... (6) The claimant’s costs include any costs incurred in dealing with the defendant’s counterclaim if the Part 36 offer states that it takes into account the counterclaim.” (a) a defendant’s Part 36 offer relates to part only of the claim; and (b) at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim, the claimant will be entitled to the costs of the proceedings up to the date of serving notice of acceptance unless the court orders otherwise.

[20]Then Part 36.14 provided as follows:

“(1) Subject to rule 36.14A, this rule applies where upon judgment being entered – (a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or (b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer. (1A) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, ‘more advantageous’ means better in money terms by any amount, however small, and ‘at least as advantageous’ shall be construed accordingly. (2) Subject to paragraphs (6) and (7), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to – (a) costs from the date on which the relevant period expired; and (b) interest on those costs. (3) Subject to paragraph (6), where rule 36.14(1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to – (a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate(GL) for some or all of the period starting with the date on which the relevant period expired; (b) his costs on the indemnity basis from the date on which the relevant period expired; and (c) ) interest on those costs at a rate not exceeding 10% above base rate(GL); and (d) an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is – (i) where the claim is or includes a money claim, the sum awarded to the claimant by the court; or (ii) where the claim is only a non-monetary claim, the sum awarded to the claimant by the court in respect of costs – Amount awarded the court by Prescribed percentage up to £500,000 10% of the amount awarded; above £500,000 up £1,000,000 to 10% of the first £500,000 and 5% of any amount above that figure (4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case including – (a) ) the terms of any Part 36 offer; (b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made; (c) the information available to the parties at the time when the Part 36 offer was made; and (d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.” (a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or (b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer. (a) costs from the date on which the relevant period expired; and (b) interest on those costs. (a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate(GL) for some or all of the period starting with the date on which the relevant period expired; (b) his costs on the indemnity basis from the date on which the relevant period expired; and (c) ) interest on those costs at a rate not exceeding 10% above base rate(GL); and (d) an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is – (i) where the claim is or includes a money claim, the sum awarded to the claimant by the court; or (ii) where the claim is only a non-monetary claim, the sum awarded to the claimant by the court in respect of costs – Amount awarded the court by Prescribed percentage up to £500,000 10% of the amount awarded; above £500,000 up £1,000,000 to 10% of the first £500,000 and 5% of any amount above that figure (a) ) the terms of any Part 36 offer; (b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made; (c) the information available to the parties at the time when the Part 36 offer was made; and (d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.”

Authorities on Part 36

[21]In F&C Alternative Investment (Holdings) Limited v Barthelemy (No.3)

[2013] 1 WLR 548

, the Court of Appeal considered certain offers that were said to have the same effect as Part 36 offers, even though they were expressly stated not to be Part 36 offers. The Court of Appeal held that such an offer which did not comply with Part 36 in all respects was not a Part 36 offer so that the court’s jurisdiction as to costs fell to be exercised under Part 44.2 of the CPR (then Part 44.3 of the CPR).

[22]Davis LJ (with whom Arden and Tomlinson LJJ agreed) held at paragraphs 52 to 53 that, if an offer was not a Part 36 offer, it was not open to the court to award indemnity costs by analogy with Part 36.

[23]In paragraph 57, the court made clear that:

“Parliament has decided what the ambit of Part 36 is to be. It is to be regarded as self-contained for these purposes and it is not for the parties or the courts to go around looking for asserted glitches or asserted omissions so as to bring a case indirectly within the reach of Part 36 when it cannot directly be so brought in. As stated by Moore-Bick LJ in the course of his judgment in Gibbon v Manchester City Council [2010] 1 WLR 2081 (a case apparently not cited to the judge): ‘(4) In seeking to settle the proceedings, therefore, parties are not bound to make use of the mechanism provided by Part 36, but if they wish to take advantage of the particular consequences for costs and other matters that flow from making a Part 36 offer, in relation to which the courts’ discretion is much more confined, they must follow its requirements. (5) Part 36 is drafted as a self-contained code…’”

[24]In Procter & Gamble (above) Hildyard J had to consider whether an offer could be a Part 36 offer if it failed to comply with the mandatory requirements of CPR Part 36.2(2)(c) that it must:

“…specify a period of not less than 21 days within which the Defendant will be liable for the Claimant’s costs in accordance with r 36.10 if the offer is accepted.”

Hildyard J held, paragraphs 47-50, that it could, distinguishing F&C (above) on the basis that the issue there was:

“…whether an offer accepted not to be within Part 36 could be given by analogy the same consequences as would have followed if it had been compliant and intended to be so.”

Whereas, the issue in Procter & Gamble was:

“Whether CPR 36.2(2), and thus the gateway to CPR 36.10 and 36.14, is to be so strictly construed that it requires (by rule 36.2(2)(c)) the offer made to provide for the Defendant to be liable for the Claimant’s costs even if the claimant expresses his offer to be a Part 36 offer, but as part of that offer, agrees to forsake that entitlement and instead pay the Defendant his costs.”

Hildyard J thought that a contrary approach would undermine the central objective of Part 36, namely, to encourage claimants to make sensible offers and to provide an inducement to defendants to accept them. Issue 1: Was the 22 September 2011 letter a valid Part 36 offer?

[25]Ms Bedworth submits on behalf of the landlord that we should accept Hildyard J’s approach, according, as it does, with the view adopted by the District Judge. I cannot agree. It seems to me that Part 36, both now and at the time of the decision, was carefully and tightly drafted and must be taken to mean what it says. Davis LJ drew attention to Part 3.1 in Part 36.1 in paragraph 65 of his judgment in F&C where he drew attention to the provisions of CPR Part 36.1(2) which expressly provided that:

“[n]othing in this Section prevents a party making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14. (Rule 44.3 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs.)”

Rule 44.3 referred to in that citation is now rule 44.2.

[26]The central point in this case is that 22 September 2011 offer does not (and could not) comply with the mandatory provisions of CPR Part 36.2(2)(c) (now Part 36.5(1)(c)) which requires that a Part 36 offer must "specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.10 if the offer is accepted". Ms Bedworth submitted that that provision was merely a requirement as to period, which was complied with in the offer itself. In my judgment, that is an argument that cannot succeed since the provision makes a mandatory requirement that the offer specifies a period within which the defendant will be liable for the claimant’s costs in accordance with rule 36.10, if the offer is accepted. No such provision was contained in the drop hands offer in this case. Even accepting, therefore, that the landlord must be regarded as the claimant for the purposes of the rule and the tenants must be regarded as the defendant for the purposes of the rule, notwithstanding that what was really being settled, as Ms Bedworth accepts, was the counterclaim rather than the claim, the provisions of Part 36.2(2)(c) were not, in my judgment, complied with by the drop hands offer. In these circumstances, the consequences following judgment in CPR Part 36.14 (which are now contained in CPR Part 36.17) cannot have followed in this case. For the reasons given by Davis LJ in F&C above, it seems to me that the District Judge ought to have applied CPR Part 44.2 to the decisions on costs that he had to reach.

[27]Before leaving this point, however, I would like to echo what Hildyard J said at paragraph 32 of his judgment in Procter & Gamble about how the words in Part 36 have been used precisely and carefully. If the Rules Committee had wanted Part 36 to be of more general in application to every type of case, it could easily have made it so. It seems to me that they did not. Issue 2: Was the judge wrong to make the costs orders that he did in respect of the claim and counterclaim and in respect of indemnity costs?

[28]I have considered carefully the costs orders that the District Judge actually made in the light of the circumstances of the decisions he reached. It is true that issues based costs orders are no longer to be encouraged. It is also to be made abundantly clear that the court will not likely interfere with a judge’s discretion as to costs, when he has heard the case in its entirety, and all the evidence, and is therefore bound to have a far better feel than any appellate court for who won and who lost. This, however, seems to me to have been a somewhat unusual case in which the judge may have been taken in the wrong direction by his mistaken starting point and his mistaken approach to the drop hands offer. The point of principle, as it seems to me, is that where much of the court’s time has been taken up by one party arguing numerous points on which he has failed, the court can ignore the fact that just because on balance (taking interest at a high rate into account) the other party is making a net payment or, if not ignore the fact, certainly accord less weight to that fact than would normally be the case. The provisions of CPR Part 44.2 must be given careful scrutiny. For my part, try as I might, I have been unable to understand how the District Judge can have concluded, as he did, that the part of the landlord’s case that was unsuccessful was de minimus in terms of time and costs. I shall return to this point in a moment.

[29]I accept that it was open to the judge to conclude that, overall, the tenants had been unsuccessful and to take as his starting point the general rule in CPR Part 44.2(a) that the unsuccessful party should be ordered to pay the successful party’s costs. But I cannot accept Ms Bedworth’s main submission, which was that this case was only about the amount of an equitable set-off that was to be placed against the landlord’s claim for damages. The case was about more than that. The landlord sued for substantial damages in respect of claims in respect of which it failed. The judge was therefore obliged, having taken the general rule as his starting point, to have careful regard to all the circumstances, including the matters specifically listed in CPR Part 44.2(4). Those matters included the conduct of all the parties, whether the parties had succeeded in part on their cases, even if not wholly successful. It was these points that required a little more investigation here. As regards conduct, the relevant factors here included CPR Part 44.2(5), the reasonableness of pursuing certain issues, the manner in which issues were pursued and whether the claims were, in whole or in part, exaggerated. The judge should, of course, have had reference, as he did, to the offers that were made, but that was not the entirety of the story.

[30]The tenants had made repeated reference to alleged misconduct by the landlord. I disregard those submissions insofar as they are not made good by the findings of the judge, but it is clear from the judge’s judgment that he preferred the claimant’s evidence to that of the landlord on a number of issues, despite his having stated that parts of Mr Holloway’s evidence were overstated or exaggerated. He said expressly that Mr Holloway was the more likely to be a better historian than Mr Rickard or Mr Flamank.

[31]The points I find compelling here, and that the judge seems to have ignored or placed insufficient weight upon, are as follows:(i) The landlord brought a large claim for damage to the property, including removal of the landlord’s property that seems to have been wholly rejected by the judge. It must therefore have been wholly, not just partly exaggerated, if not downright dishonest. The judge said he did not “find any part of the claimant’s case in these respects to be substantiated”, reliant, as they were, on the evidence of a Mr Swan whom the judge did not find a “helpful witness”.

(ii) Whilst the judge found the tenants’ allegations about the state of the property to be somewhat overstated, the bulk of them were found to be substantiated on the expert evidence. These claims may not have sounded in huge damages, but the tenants were entitled to vindicate those claims and significant costs must have been taken up in the process.

(iii) The landlord’s rent claim was not itself contested, so no part of the landlord’s actual claim can actually have taken up any time or costs except its entirely failed claim for the damage to the property.

(iv) The issues that the tenants wholly lost were mostly points of detail or law, such as the claim as to ownership, the award of only nominal damages for breach of the covenant of quiet enjoyment and the technical point on the applicability of the Unfair Terms Regulations. The lost heads of damage must have occupied a little time, but perhaps not a huge amount in context.

(v) The tenant won important points of details based at least in part on their credibility, such as the fact that notice of disrepair was given and the extent of the property demised. Ms Bedworth told us, and she attended the trial, that the question of whether or not notice was given took up significant time in examination and cross-examination and argument at trial.

[32]In the light of these factors, I do not think that the judge’s determination that the tenant should pay the costs of both the claim and the counterclaim can stand. Why, one may ask rhetorically, should the tenants be fixed with the costs of the landlord advancing an entirely false claim for £20,000-odd worth of damage to its property that the judge dismissed completely?

[33]In these circumstances, it falls to this court to consider what a proper order for costs under CPR Part 44.2 would have been. Issue 3: What order as to costs ought to have been made?

[34]This is a difficult exercise. The court must take account of all matters that I have mentioned above. The detail of the judge’s judgments and the provisions of Part 44.2, including the drop hands offer made at a very early stage by the landlord, which was made when the rent arrears were the same as they were later, but the costs had largely yet to be incurred. That offer was very realistic and should have been given far more consideration by the tenants than it seems to have attracted. Moreover, it was reiterated in July 2012, as Ms Bedworth showed us in the course of argument, but it is also to be balanced against the fact that the tenants repeatedly asked the landlord whether it was prepared to go to mediation. No answer was received. As a result, no mediation occurred. In the course of argument, Miss Bedworth said that that was to be excused by the fact that this was an intractable dispute and that mediation would not have had any beneficial effect. Tomlinson LJ made it clear in the course of argument, with which I entirely agree, that if one were to say to any accredited mediator that any dispute was too intractable to be successfully mediated, he or she would roll their eyes. No dispute is too intractable to be mediated, as Briggs LJ made clear in the recent case of PGN II SA v OMFS Company 1 Limited

[2013] EWCA Civ 1288

at paragraph 34:

“... the time has now come for this court firmly to endorse the advice given in Chapter 11.56 of the ADR Handbook, that silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless whether an outright refusal, or a refusal to engage in the type of ADR requested, or to do so at the time requested, might have been justified by the identification of reasonable grounds.”

After the drop hands offer and other desultory attempts to settle the case, as so often happens, the parties settled into litigation mode and later attempts to settle were always unsuccessful. It is extremely unfortunate that no mediation ever took place and even more unfortunate that so much time and costs have been incurred in the resolution of these disputes.

[35]Doing the best I can, however, on the questions that are raised under Part 44.2, it seems to me that the tenants won more of the issues than the landlord, even if the landlord won the day financially. The tenants’ case was accepted to a far greater extent than was the landlord’s. In my judgment, a fair and balanced award, taking all the matters that I have mentioned into account, and particularly the drop hands offer and the failure to mediate, and balancing the relevant factors and all the circumstances under CPR Part 44.2, a fair order would have been to say that there should be no order as to costs on claim and counterclaim.

[36]That does not, however, include the costs ordered in favour of Mr Rickard and Mr Flamank personally. The tenants decided to join them as personal parties and the judge’s order cannot be criticised once the tenants lost their claim against them.

[37]The question has however arisen in the course of argument as to whether, as a matter of sensible proportionality, the judge ought to have assessed the amount of costs payable by the tenants to the landlord in respect of Mr Flamank and Mr Rickard’s costs. Mr Rickard appeared in person and has not attended this court hearing. He did however put in a claim for his costs as a litigant in person amounting to £3,300, calculated on the basis of a rate of £40 per hour, which is more, as I understand it, than the rate normally allowed for a litigant in person. Ms Bedworth, who acts only for Mr Rickard before us, has invited us not to assess the costs payable to Mr Rickard because she has no instructions in court today and her solicitor is not present.

[38]In my judgment, it would have been proportionate and appropriate for the judge to assess the costs payable by the tenants to Mr Rickard and Mr Flamank. There is no justification in this case for requiring the parties to go to a detailed assessment of their costs for such small sums. Having regard to what Mr Flamank has said and taking account of the fact that Mr Rickard was already represented by the solicitors and counsel for the company which he owns and of which he is the sole director, it seems to me that an appropriate figure for the costs of Mr Rickard and Mr Flamank of defending the claim brought by the tenants in this case was £1,000 each. I would therefore be minded to assess those costs in that sum so as to avoid the need for a further assessment.

[39]I am conscious of the fact that Ms Bedworth asked us not to assess the costs in respect of Mr Rickard and, on that basis, I would be minded to grant Mr Rickard liberty to apply, if he wishes to put forward some other figure in respect of the costs that he incurred. I would however say that I would not, in any way, encourage him to make that application, since I would not regard it as likely that a larger award would be made. Disposal

[40]For the reasons I have sought to give, I would allow this appeal and replace the judge’s orders as to costs on the claims as between the landlord and the tenants with an order that there be no order as to costs on the claims and counterclaims and I would, as I have said, assess the costs payable by the tenants to Mr Rickard and Mr Flamank at £1,000 each, giving Mr Rickard liberty to apply, without encouraging him to do so.

[41]I should not leave this case without commenting on the very surprising figures that the parties gave us as to the costs they incurred in this dispute. The tenants have said that they had incurred legal costs amounting to nearly £100,000 and Ms Bedworth told us that the landlord had incurred legal costs amounting to some £85,000. It might perhaps be commented that these circumstances make as strong a case as there could possibly be for there to be some limitation on the recoverable costs in cases of this kind.

[42]I would, for the reasons I have given, allow this appeal. LORD JUSTICE TOMLINSON: I agree. THE LORD CHIEF JUSTICE OF ENGLAND AND WALES: I also agree.