Fattal & Anor v Walbrook Trustees (Jersey) Ltd & Anor (Rev. 1) [2009] EWHC 1674 (Ch)

Case No CH/2007/APP/0419[2009] EWHC 1674 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 5 th June 2009
Before
THE HONOURABLE MR JUSTICE CHRISTOPHER CLARKE
Between
(1) WILLIAM SIMON FATTALClaimants(2) ELIAS SIMON FATTALClaimantWALBROOK TRUSTEES (JERSEY) LTDDefendantsand ANOTHERDefendant
Digital Transcript of Wordwave International, a Merrill Communications Company101 Finsbury Pavement London EC 2A 1ERTel: 020 7422 6131 Fax: 020 7422 6134Web: www.merrillcorp.com/mls Email: mlstape@merrillcorp.com(Official Shorthand Writers to the Court)
MR A ULLSTEIN QC appeared for ClaimantsMR T SEYMOUR and P BOWDEN appeared for Defendants
Judgment
[1]This is an appeal from two aspects of the decision of Master O'Hare given on 28th April 2007, upon a detailed assessment of certain bills of costs. I have had the advantage of sitting with two assessors, Master Campbell and Mrs Elisabeth King.[2]In order to understand the nature of the dispute, it is necessary to set out some of the details of a complicated dispute between the two appellants - William and Elias Fattal - who are brothers ("the Fattal brothers") and two trust companies and others. Berkeley Court ("the property") is a valuable property at the corner of Baker Street and Marylebone Road consisting of 133 flats and, on the ground flat, commercial units.[3]The property was originally acquired in 1989, pursuant to a joint venture agreement to which the Fattal brothers were parties. Legal title to the property is vested in Berkeley Court Investments Limited ("BCIL"), a company incorporated in England and Wales as a special purpose vehicle. In 1995 Baker Street Limited ("BSL"), a company incorporated in the Isle of Man (which now owns BCIL) purchased the equitable interest in the property from BCIL. In 2000, Baker Street 2000 Limited ("BS 2000"), a company incorporated in Jersey, purchased an equitable interest in the commercial units at the property from BSL.[4]The whole of the capital of BSL and BS 2000 is owned by the trustees of five settlements or trusts:(1) the WS Fattal settlement;(2) the ES Fattal settlement;(3) the EL Sofaer Discretionary Settlement; (4), the Sharet Trust, and (5) the Delta Trust. (I refer to the settlements and trusts collectively as "the trusts"; and to the two Fattal settlements of which the Fattal brothers are respectively the settlors, protectors and income beneficiaries as the "Fattal trusts".)[5]The trusts are the entities in which the interests of the original parties to the joint venture agreement are now vested. The first three trusts have as trustees Walbrook Trustees (Jersey) Limited ("Walbrook Jersey"), Jersey company, and Walbrook International Trust Company Limited ("WITCO"), an Isle of Man company. The trustees of the Sharet Trust are Walbrook Jersey and a Mr Cuttiford. The trustee of the Delta Trust is Walbrook Jersey. (I refer to the several trustees collectively as "the trustees".)[6]BSL is a company limited by guarantee whose members are Walbrook Jersey and WITCO. These companies hold their membership rights in BSL on trust for the trusts pro rata. The interest of each of the Fattal trusts is 12.5 per cent. The interest to each of the other trusts is 25 per cent. BS 2000 is a company whose shares are held in four equal amounts by four nominee companies who each hold ten shares as nominees for the respective trusts (the Fattal trusts being treated as one for this purpose).[7]The dispute between the Fattals and the trustees began in 2003 as a dispute as to whether the trustees were bound to deliver transactional documents to the Fattals relating to the property. That was the subject of a Part 8 claim issued on 31st January 2003 by the Fattal brothers against Walbrook Jersey, WITCO and Mr Cuttiford and BCIL, BSL and BS 2000. The trustees' response to the request for documentation was defensive, their contention being that they either could not or should not exercise their powers so as to provide documents to the principal beneficiaries of the Fattal trusts.[8]The dispute about the production of documentation gave rise to suspicions and concerns on the part of the Fattals as to the way in which the trusts were being run and about decisions made about the sale of the property and in relation to leases of carparking spaces.[9]In March 2003 the Part 8 claim was amended so as to seek extensive further relief. In essence, the Fattal brothers claimed that the property could only be sold under a special procedure laid down by the joint venture agreement and sought injunctive relief relating to any sale of the property.[10]On 6th May 2003, the trustees brought a Part 20 claim in response to the Part 8 claim with a view to establishing that the property could be sold otherwise than under the provisions of the joint venture agreement. To that claim there were joined, as defendants, five intended representative beneficiaries. Most of the costs are attributable to this property issue.[11]In June 2003, the Fattals sought declarations in Part 7 proceedings against the trustees and the companies that certain carparking leases were void.[12]In July 2003, the Vice Chancellor struck out the property related claims and made an order for the payment by the Fattal brothers of the trustees' costs of the Part 8 property claims. In August 2003, the appeals of the Fattal brothers from his decision were dismissed with costs.[13]In September 2003, the outstanding issues, namely the Part 7 claim and the claim in respect of documents, were compromised, save as to costs.[14]On 2nd and 3rd October 2003, Hart J dealt with the costs of these various issues. The order made by Hart J on 3rd October incorporated various undertakings which were given as part of the compromise and made various orders as to the payment of costs out of the assets of the Fattal trusts.[15]For present purposes the material costs orders are two-fold:(i) an order that the trustees' costs of and incidental to certain parts of the Part 20 claim relating to the property dispute be paid by the Fattal brothers, subject to detailed assessment if not agreed, and that save insofar as they were recovered from the Fattals under that order they should be paid pro rata out of the assets of the Trusts;(ii) an order that the Fattal brothers' costs in relation to the documentation issue should be paid to them by Walbrook Jersey and WITCO, subject to detailed assessment.[16]In 2007 Master O'Hare carried out a lengthy assessment, extending over some 15 days in two sessions, of all the costs ordered to be assessed by the orders of 3rd October 2003. By his final certificate of 13th September 2007, he ordered the Fattals to pay the defendants £274,739.87. I assume that by "defendants" the certificate refers to "the trustees" as defined in the order of 3rd October 2003. The figure of £247,739.87 represents the figure at which he assessed the costs to be paid by the Fattals, namely £193,568.12, together with £54,171.75, the cost of the assessment. He also ordered that the date from which interest was to commence was 3rd October 2003, ie the date of Hart J's order, save for the costs of the assessment in respect of which the date was 11th July 2007. Master O'Hare assessed the costs payable to the Fattal brothers at £58,852.82. He declined to order that Walbrook Jersey or WITCO should pay the costs of the assessment of the costs payable to the Fattal brothers.[17]The Fattals contend that Master O'Hare was wrong to order interest to run from 3rd October 2003 or to make any order in respect of interest in favour of the trustees and also wrong in failing to make any order in favour of the Fattals in respect of the costs of the assessment of the costs awarded to them.[18]Mr Augustus Ullstein QC, on behalf the Fattal brothers, submits that Master O'Hare was in error in awarding interest because, as it happened, the money necessary to pay the costs was provided by BS 2000 as an interest free loan. Accordingly, the trustees in whose favour the order was made have suffered their loss from having to pay the costs of defeating the Fattals' claims other than the amount of the cost themselves. BS 2000 which had not received any interest is not the person in whose favour the order was made.[19]Master O'Hare approached the matter in this way. He pointed out that the basic rule under the Judgments Act 1838 used to be that the court had no discretion in respect of interest on costs. Section 17 of that Act used to provide that every judgment debt should carry interest from the time of entering up the judgment until the same should be satisfied. Section 18 makes an order for costs a judgment debt within the meaning of section 17. In Hunt v Douglas Roofing [1990] 1 AC 398, the House of Lords decided that interest on costs runs from the date of the judgment or order, even though costs may have been paid years beforehand (the incipitur rule). The date of entering up the judgment was when it was signed, not when the taxing master issued his certificate.[20]In 1998 the Judgments Act was amended so as to give the court a discretion. That discretion has, as Master O'Hare pointed out, been used to allow additional interest in respect of a period before the order as in Douglas v Hello Magazine [2004] EWHC 65 Ch, where interest was awarded from the date on which payment by the defendants had actually been made to their solicitors and in Powell v Herefordshire Health Authority [2002] EWCA Civ 1786, the discretion was used to reduce interest on costs where the incipitur rule might have allowed interest on costs from 1994, although they had only be incurred for the most part in 2000.[21]Master O'Hare expressed a conclusion that the court should not exercise its discretion readily but only in exceptional circumstances; otherwise the court will become embroiled in disproportionate enquiries into funding arrangements. The rule laid down by the House of Lords had the advantage of simplicity. If one was to depart from it, it was necessary to consider the indemnity principle. He did not think that compensation was the underlying purpose or rationale of the Judgments Act 1938 "although it is the realm in which it works". He thought that it would be injudicious to exercise a discretion to depart from the ordinary rule in anything but exceptional cases of which Powell was an example but the instant case was not.[22]It is in my judgment necessary to consider the now applicable terms of the statute and the rules. Section 17 of the 1838 Act, as amended by Article 3 of the Civil Procedures (Modification of Enactments) Order 1998, provides:
"Every judgment debt shall carry interest from such time as shall be prescribed by the rules of court until the same shall be satisfied."
[23]CPR 40.8 provides:
"(1) Where interest is payable on a judgment pursuant to section 17 of the Judgments Act 1838 or section 74 of the County Courts Act 1834, the interest shall begin to run from the date that judgment is given unless – (a) a rule in another Part or a practice direction makes different provision; or (b) the court orders otherwise. (2) The court may order that interest shall begin to run from a date before the date that judgment is given."
[24]CPR 44.3 provides:
"(6) The orders which the court may make under this rule include an order that a party must pay ... (g) interest on costs from or until a certain date, including a date before judgment."
[25]The combined effect of the Act and the Rules is that save where a rule or Practice Direction otherwise provides, interest will run from the date the judgment is given unless the Court orders otherwise. There is nothing in the statute as amended or in the Rules, which indicates that a different order is only to be made in exceptional circumstances. No doubt there must be a good reason to make such an order, but the Court must not, in my judgment, need to be able to label the circumstances as exceptional. The Rules expressly indicate that the court may order interest to begin from the date before judgment and the circumstances in which it is likely to do so include cases where substantial sums have been paid in costs before the judgment is given - a not exceptional occurrence.[26]The most important criterion is that any order should reflect what justice requires. The primary purpose of an award of interest on a debt, damages or costs is to compensate the recipient for the fact that he has been precluded from obtaining a return on the money which he has had to expend on costs and has thus been out of pocket - London Chatham & Dover Railway Company v South Easter Railways Company [1893] AC 429 at 437; Earl of Malmsbury v Strutt & Parker[2008] EWHC 616 (QB) paras 5 and 6.[27]The ability of the High Court to depart from the incipitur rule was conferred in order that the court could take account of the fact that money would often be expended before any judgment. Conversely, where money has not been expended, for example where the bulk of the costs have been paid at a date long after the relevant judgment, justice requires that the date for the commencement of the interest is postponed beyond the date of that judgment.[28]If and insofar as Master O'Hare proceeded on the basis that an order could or should only be made providing for interest to run from a date other than the date of judgment if the circumstances were "exceptional", I respectfully disagree with him. If that were so, it could significantly reduce the circumstances in which the court could order interest to be paid on costs expended before the judgment. There is no reference to exceptionality in the applicable rule. I note that in Hadji-Ioannou v Frango [2005] EWHC 279 (Ch), Lindsay J declined to import into the power of the court to disallow costs under CPR 44.14 any requirement that that should only be done in exceptional circumstances if there had been a disallowance of interest under CPR 47.8.[29]At the same time, the circumstances in which in practice the just order is that no interest shall accrue on the costs from any date are likely to be highly exceptional. It may be that that was what Master O'Hare meant when he said that the court should not exercise its discretion readily, but only in exceptional circumstances.[30]Since the payment of solicitors' costs involves the payment of money which could otherwise have been profitably employed, the overwhelming likelihood is that justice requires some recompense to be made in the form of interest. If the receiving party has financed the costs from his own money or from money that he has borrowed at interest, the case for his receiving interest on his costs, at least from some date, is likely to be overwhelming. The position might be different if the finance had been advanced entirely voluntarily, interest free, from a sympathetic relative or institution, as Akenhead J contemplated in Fosse Motor Engineers Limited v Conde Nast and National Magazine Distributors Limited [2008] EWHC 2527 QB, or conceivably from a lender which mistakenly failed to call for interest. In some cases it may be necessary to examine the underlying financial arrangements.[31]Does the fact that in the present case it is BS 2000 which has financed the costs make any difference? In my judgment, it does not. The trustees had to finance the payment of the costs. It no doubt made sense for BS 2000, a company which was owned by the trustees as an asset of the trusts, to advance the necessary funds without interest. The effect of BS 2000 making that advance was to deprive it of the use of that money. As a result, the trusts have been deprived of the benefit which they would have received indirectly from the use of the money. In effect, they have, through BS 2000, borne ultimately and indirectly the expense of the litigation. The interest received by the trustees will enure to the benefit of the trusts. It represents compensation to the trust estate for a company owned by the trust being unable to use the money in question.[32]Mr Ullstein submitted that such an approach ignored the distinction between the assets of BS 2000 and the assets of the Trusts. The trusts' assets consisted of shares in BSL and BS 2000 and the trust will be entitled to whatever dividends those companies chose to declare. But the trustees and beneficiaries had no interest in BS 2000's assets, nor is it established that the value of the shares in BS 2000 had been diminished by the amount of the interest paid. Further, BS 2000 must have decided to lend money without any stipulation as to interest for reasons which seemed good to its directors. In those circumstances, he submits, neither it nor the trustees can claim to be entitled to a bonus in the form of interest which it never sought nor required when it advanced the funds. The trustees as shareholders are not entitled to the benefit of something which the directors must have decided the company did not need.[33]Further, as he submits, what BS 2000 would have done with the monies which it was prepared to lend without interest if it had not made the loan is quite uncertain. There is no indication that, if the costs had not been financed by BS 2000, any monies would have come into the hands of the trustees from interest earned on the amount expended on the costs. The supposed loss is illusory and unestablished.[34]I regard this approach as losing touch with commercial reality and substantial justice. It is idle to suppose that the £275,000-odd advanced would not have been used to earn a return if not used to pay costs, and unrealistic to suppose that the fact that a company wholly owned by trustees for the benefit of the trusts was deprived of the use of that money represents no loss to the trusts, even if the loss be indirect and through the trusts’ wholly owned company.[35]In addition, it seems to me that the Master was entitled to look at the position of the defendants, who included BS 2000 which had advanced the monies, collectively. Between them they were out of pocket and the payment of interest to the trustees was a proper means of compensating them. The position was not that a benevolent third party with no personal interest in the dispute had advanced the funds.[36]I do not regard these considerations as in any way affected by the fact that any sale of the shares would or might have been subject to capital gains tax or that the company has made interest free loans to the other three trusts totalling over £550,000 of which the Fattals complain. Whether that complaint, the validity of which is in dispute, has any substance is not for me to decide.[37]Accordingly, whilst my formulation of the relevant approach differs from that of Master O'Hare, I do not regard the difference as invalidating his decision. On the contrary, it would in my judgment have been wrong to order that no interest should be payable on the costs.[38]Mr Ullstein submitted that Master O'Hare's order produced an absurdity. The result would be that in respect of 25 per cent of the interest the Fattal brothers would be paying out interest to the trustees which would be subject to tax. The Fattal brothers will, therefore, find themselves paying out 25 per cent of the interest and receiving back, as income beneficiaries of the trust, that sum net of tax. I do not regard this as unacceptably anomalous. The payment of interest by the Fattal brothers falls to be made because the court has decided that they should in their personal capacity pay the trustees’ costs of resisting their claims. The interest payable to the trustees for the trusts represents an income of the trusts, which like all other income is subject to tax. The supposed anomaly of paying gross and receiving net arises because the payment and receipt were made in different capacities - unsuccessful litigant in the one case and beneficiary in the other.[39]Further, the Fattal brothers are not the sole beneficiaries of the Fattal trusts, nor is the only possible use by the trustees of the money the payment of income to the Fattal brothers. The trustees are bound to recover the costs ordered to be paid with interest in order to ensure that the beneficiaries as a whole are not disadvantaged.[40]Nor am I attracted by the idea, put forward in the notice of appeal but not pursued further in argument, that interest should be payable only on 75 per cent of the costs and should be received only by the trustees of the trusts other than the Fattal trusts. Whether the Master had jurisdiction to order that is debatable. The rules appear to provide a discretion to determine whether interest is to run and, if so, from and until what date, rather than to provide that only a proportion of the interest shall be payable. In any event, it would not in my judgment have been appropriate for him to do so, not least because it is by no means clear that such an order would be equitable as between the Fattal and non-Fattal trusts. That would depend on how money advanced by BS 2000 would be provided for.[41]In those circumstances, I am not persuaded Master O'Hare's order was wrong.[42]Mr Thomas Seymour on behalf of the trustees submitted to me, although he did not make the submission to Master O'Hare, that the Master had no jurisdiction to make any order providing the interest not to accrue. This is because, so he submits, "thecourt" specified in CPR 40.8(1) (b) must mean the court which gives the judgment the costs on which, in the absence of some special order, interest is due from its date. Thus, in the present case it would be necessary for the Fattal brothers to have secured an order from Hart J that interest should not accrue. Alternatively, if Master O'Hare had power to make such an order, it would be an erroneous exercise in discretion for him to do so.[43]I do not accept these submissions. CPR 2.4 provides:
"Where these rules provide that the court do perform any act then, except where an enactment, rule or practice direction provides otherwise, that act may be performed – (a) in relation to proceedings in the High Court by any judge, Master or district judge of that court."
[44]In my judgment this rule, interpreted in accordance with the overriding objective of dealing with cases justly, expeditiously and fairly, permitted Master O'Hare to make the order which he did.[45]That conclusion is consistent with the decision of the Court of Appeal in Powell. In that case judgment was entered by consent for damages and costs in 1994. It was not until 2001 that judgment was given for the agreed measure of damages and costs. The Master, who had not had CPR 44.3(6)(g) referred to him, thought that he was bound to order interest to run from the judgment in 1994. The Court of Appeal drew attention to the latter provision and the parties comprised on a date from which interest should run, which must have been later than 1994. The Court of Appeal must have proceeded on the basis that the powers of "thecourt" under CPR 44.3(6) would be exercised by the Master and not only by whoever had given the original or the second judgment. It would be surprising in those circumstances if the powers of the court for the purposes of CPR 40.8(b) could in the present case only have been exercised by Hart J.[46]Such a conclusion ties with other provisions of the rules. CPR 47.8(3) provides:
"If – (a) the paying party has not made an application in accordance with paragraph (1); and (b) the receiving party commences the proceedings later than the period specified in rule 47.7, the court may disallow all or part of the interest otherwise payable to the receiving party under – (i) section 17 of the Judgments Act 1838…"
A similar provision is made in CPR 47.14(5).[47]Mr Seymour accepts that it is for the Costs Judge to disallow interest under these provisions. It seems to me to make little sense that he should not be similarly entitled under CPR 40.8. Mr Seymour was disposed to accept that it was open to the costs judge to fix the period over which interest would run, even if it was only for a few days, but not that he could order that interest should not run at all. This would be a curious result and involve a distinction not justified by the language of the rule.[48]Any other conclusion would also give rise to manifest difficulty. The judge who gives judgment for damages to be assessed together with costs may be wholly unaware of the facts which would be relevant to any determination of the date from which interest on costs should run - for example what costs have already been incurred; what costs are likely to be incurred in the future and whether there is any reason why no interest should be recoverable. It would be inappropriate for the parties to have to canvas those issues before him and for the judge to have to enter upon an enquiry as to funding arrangements in advance of the assessment. Complications would arise if, as here, the judge who made the first order was no longer available, or if two orders as to costs had been made, one in relation to liability and one in relation to damages by different judges. In addition, there are circumstances, eg upon an acceptance of a Part 36 offer or a discontinuance, when the claimant would be entitled to his costs when there would have been no judge who made an order for costs.[49]I have considered whether the fact that, by the terms of the Judgment Act and the Rules, interest will begin to run on costs ordered to be paid unless the court otherwise orders means that, once any order for costs has been made without any order that interest will not begin to run, interest is bound to continue, at any rate if the order has been perfected, and the Court has no power to stop it doing so. Mr Seymour submitted that the order made by Master O'Hare not only travelled outside the functions laid down by CPR 47 relating to detailed assessment, but also involved an impermissible retrospective variation of the order made by Hart J.[50]I do not accept that that is so. I do not regard the court as precluded from reaching a decision that interest will not begin to run from the date of the order for costs at some date after the original order for costs was made. That was what in effect happened in Powell where the Court of Appeal, by way of appeal from the costs judge, sanctioned the making of an order varying the date from which interest was commenced, even though the costs orders had been made previously by two different judges in relation to, first, liability and, later, quantum.[51]I turn now to the costs of the assessment of the Fattal brothers' costs. Mr Ullstein submits that the refusal of Master O'Hare to give the Fattal brothers their costs of the assessment of the costs ordered to be paid by the trustees was wrong in principle. He had failed to take into account the rebuttable presumption that a party should have its costs of the assessment - see CPR 47.18 and Horsford v Bird [2006] UKPC 55; Chrulew v Borm-Reid & Co [1992] 1 WLR 176.[52]In the latter case, the costs of the appellant were reduced by about a third, but the Privy Council declined to regard that as a reason for depriving him of the costs of the assessment. The board pointed out that the reduction was due as much to the disallowance of several large amounts as a whole, as it was to the product of the detailed assessment.[53]Further, Mr Ullstein points that in the present case there had been no Part 36 offer on the trustees' part.[54]CPR 47.18 provides:
"(1) The receiving party is entitled to the costs of the detailed assessment proceedings except where – (a) the provisions of any Act, any of these Rules or any relevant practice direction provide otherwise; or (b) the court makes some other order in relation to all or part of the costs of the detailed assessment proceedings. (2) In deciding whether to make some other order, the court must have regard to all the circumstances including – (a) the conduct of all the parties; (b) the amount, if any, by which the bill of costs has been reduced; and (c) whether it was reasonable for a party to claim the costs of a particular item or to dispute that item."
[55]In the present case the Fattal brothers' total costs were reduced from £152,358.72 to £58,852.82, a reduction of 61.4 per cent. Master O'Hare said that his reason for disallowing the claimants their costs of the assessment was:
"... principally down to the unusually low recovery rate at 40 per cent obtained by the Fattals, which in itself is exceptional. I note the court has far wider powers to punish exaggerated costs claims than it does exaggerated damages claims and refer to the Purfleet case in the Court of Appeal in the 1990s, which found that a winning party who had exaggerated his damages claim would nevertheless recover all his damages unless the exaggeration has led to an increase in costs. CPR 47.18 is specifically intended to prevent exaggeration of costs. The rationale behind this is that there is a greater danger of exaggeration of costs where the courts are essentially relying on the preparation of one party's supporting documentation. Where costs are knocked down by more than 20 per cent the costs of assessment may be disallowed."
[56]The reference to 20 per cent may have been a reference to section 70(9) of the Solicitors'Act 1974, which provides for the solicitor to pay the costs of taxation of the solicitor's bill if one fifth of the amount is taxed off. If that was the reference intended, it is to be noted that the taxation of a solicitor's bill to his own client is a different exercise to a detailed assessment of interpartes costs on a standard basis and is one to which a 20 per cent rule is more appropriate. I do not, however, regard Master O'Hare as having proceeded on the basis that a 20 per cent reduction on an assessment on the standard basis was one that in general required the disallowance of the costs of assessment.[57]Master O'Hare rejected the submission that the use of only one fee earner was a good ground to explain the matter of attendance notes, and added that:
"The effect of a lack of attendance notes is well-known: it produces a situation where a Costs Judge has to guess at the correct level of reasonable costs and in such situations the Costs Judge will always guess low."
[58]Master O'Hare reduced the defendant's costs from £311,072.38 to £214,053.04, a reduction of some 31.4 per cent. He declined to deprive them of any of their costs of the assessment of their bill (they did not seek to recover their costs of dealing with the Fattals' bill) on the ground that there could be no serious criticism of the Walbrook companies relating to the method of preparation of the bill, the reductions in which were "ordinaryreasons".[59]Mr Ullstein submits that it was unfair for the trustees to recover 100 per cent of the cost of assessment of their own costs when the Fattals recovered nothing in respect of the costs of the assessment of their costs. In the absence of misconduct, which was not shown, the mere fact of reduction, even a substantial reduction, was no ground to disclose the presumption and deprive them of all the costs of the assessment. Master O'Hare's conclusion if not wrong in principle was plainly wrong in the result.[60]I disagree. Although the Fattal brothers cannot be said to have misconducted themselves, they had failed to recover over 60 per cent of what they had sought. That was largely because of the absence of attendance notes, but also because certain items, such as counsel's bills, were severely marked down. The fact that a bill is reduced is not necessarily a ground for disallowing the costs of assessment. Most bills are reduced at least to some extent, but a very large reduction may justify such a disallowance. It is right that in appropriate cases it should.[61]Here the reduction was very large and the reason for the reduction was in large measure because the solicitors had failed to keep attendance notes. Such a failure materially contributes to the length and cost of assessment proceedings. As Mr Phillip Bowden of Masters Legal Costs Services, who conducted this part of the argument for the respondents, put it, it leads to a scrambling around among the papers when the costs are queried to seek to work out what was done at different stages often without any clear answer, followed by a guessing game on the part of the costs judge. The amount of the reduction shows that it was unreasonable for the Fattals to claim as much as they did.[62]I decline to accept that Master O'Hare was either unaware or lost sight of the presumption in CPR 47.18 to which he specifically referred, albeit his emphasis must have been on CPR 47.18(1)(b). His decision to award the Fattal brothers no portion of the costs of assessment was, in the light of the factors to which CPR 47.18(2) refers and which extend beyond misconduct, well within the confines of the discretion which the rules conferred on him. Nor was there anything unfair in his awarding the trustees their costs of the assessment of their costs. In their case the reduction was, in percentage terms, half as much as it was in the case of the Fattal brothers and was for reasons which had nothing to do with any lack of attendance notes. The reduction and the reason for it were not out of line with what happens in a run-of-the-mill case.[63]I do not regard the absence of a Part 36 offer as determinative. In fact, as I was told, the Fattals had made a "drop hands" offer that each side's costs should be set off against the other with nothing payable either way. That was understandably rejected. I was told that no offer was made in respect of the Fattal brothers' costs on the basis that their bill was so large that no offer would be likely to be acceptable. Further, an assessment of the costs to be paid out of the assets of the Trusts was necessary in any event.[64]A Part 36 offer might have had the effect not only that the Fattals were disentitled to the costs of the assessment of their costs, but also that the trustees were entitled to their costs of dealing with that assessment, but its absence does not invalidate the exercise by Master O'Hare of his discretion in relation to the Fattals' costs of the assessment of their costs.[65]Accordingly, I shall dismiss the appeal.

Cited in 9 later judgments