Summit Property Limited v Pitmans (a firm)

Costs ordinarily follow the event, but the court may make separate orders reflecting success and failure on discrete issues. In a suitably exceptional case, an issue-based order may require the party successful overall to pay the unsuccessful party’s costs of an issue. Improper or unreasonable conduct is not a prerequisite.

An appellate court may interfere with a costs discretion only where the judge erred in principle, considered irrelevant matters, omitted relevant matters or reached a plainly wrong, perverse conclusion. The possibility that another judge would have made a different order is insufficient. When allocating costs between issues, the court may account for overlapping work and general factual preparation which contributed to the successful issue.

Summit Property Limited, a property investment company, claimed damages for breach of contract and negligence against Pitmans, a firm of solicitors. Stanley Hetherington, a property developer whose company, Longwood Estates, had negotiated a favourable property purchase, introduced Summit as a proposed funder. Pitmans accepted a retainer to act for Summit in purchasing through a company owned by Summit. After the proposed profit-sharing arrangement broke down, Pitmans exchanged contracts on Hetherington’s instructions for another company, excluding Summit.

Park J found that Pitmans had breached their exclusive retainer. He nevertheless dismissed Summit’s damages claim because the purchase opportunity had been disclosed in confidence by Longwood. Without an agreed entitlement to retain profits, Summit would have been accountable to Longwood for them. The breach finding was not appealed.

Taking an issue-based approach to costs, Park J ordered Summit to pay 30 per cent of Pitmans’ costs and Pitmans to pay 65 per cent of Summit’s costs. Pitmans appealed that exercise of discretion. The central questions were whether the adverse costs order required improper or unreasonable conduct and whether the judge had properly allocated costs between the issues.

The appeal was dismissed unanimously. Longmore LJ gave the leading judgment. Tuckey LJ agreed, and Chadwick LJ expressly agreed with Longmore LJ’s reasons while adding an explanation of the issue-based approach.

1. The general rule that costs followed the event remained the starting point under the Civil Procedure Rules. The court nevertheless had a wide discretion to reflect the outcome of discrete issues. In a suitably exceptional case, it could both deprive the successful party of the costs of a failed issue and require that party to pay the other party’s costs of that issue. Improper or unreasonable conduct was not a prerequisite. The approach in Phonographic Performance Limited v AIE Rediffusion Music Ltd, [1999] 1 WLR 1507, supported that conclusion. Any contrary requirement formerly derived from Re Elgindata Limited (No.2), [1982] 1 WLR 1207, no longer applied under the new rules.

2. The court was bound by Johnsey Estates (1990) Limited v Secretary of State for the Environment, [2001] EWCA CIV 6535. Appellate intervention required an error of principle, consideration of irrelevant matters, omission of relevant matters or a conclusion so plainly wrong as to be perverse. The appellate court should first establish such a flaw before considering how it would itself exercise the discretion. The trial judge’s familiarity with the proceedings required appropriate restraint.

3. Park J had expressly considered overlap between the breach and confidentiality issues. His allocation allowed for general factual preparation which contributed to the successful confidentiality defence. A proposed re-examination of six days of transcripts to reassess time spent on each issue was inappropriate and disproportionate on this appeal. The circumstances were capable of supporting the exceptional order, and its substantial financial effect did not make it perverse.

4. Universal Cycles v Grangebriar established no requirement that an issue must have been raised improperly or unreasonably before an adverse issue-based costs order could be made. Its concern about costs exceeding the claimant’s recovery arose from its particular facts.

5. The judge could make no order on the loss-of-a-chance issue. That issue ultimately required no decision, and each party could plausibly claim some success. Chadwick LJ added that an issue-based approach ordinarily required identification of the successful party on each issue, followed by allocation of that issue’s costs accordingly. The costs order stood. The appeal was dismissed with costs, to be assessed if not agreed.

• Court of Appeal (Civil Division): In [2001] EWCA Civ 2020 , unanimously dismissed Pitmans’ appeal against the costs order. The appeal was dismissed with costs, to be assessed if not agreed.
• High Court, Chancery Division: Park J dismissed Summit’s damages claim despite finding that Pitmans had breached their retainer. He ordered Summit to pay 30 per cent of Pitmans’ costs and Pitmans to pay 65 per cent of Summit’s costs. He made no order for costs attributable to the loss-of-a-chance issue. No citation for the decision was supplied.