London Borough of Hackney v Campbell & Anor

Costs remain a matter of judicial discretion, but that discretion must be exercised on proper principles. The general rule is that costs follow the event, subject to a different order where justice requires. Where a party succeeds on some identifiable issues and fails on others, the court should ordinarily reflect that overall success through an appropriate proportion of the costs. An issues-based order should be used only where other forms of order cannot significantly reflect the justice of the case, because it can make assessment disproportionately complex. Where the relevant costs cannot sensibly be apportioned and the circumstances run both ways, a no-order costs outcome may be appropriate. The appellate court may interfere with a costs order where the judge’s discretion was flawed by a mistake of principle.

Hackney brought possession proceedings concerning a flat occupied by Mrs Burley Campbell and her son, Lawrence Campbell. The Shoreditch County Court dismissed the possession claim, upheld Mrs Campbell’s right-to-buy counterclaim, and ordered Hackney to pay costs to both defendants.

Hackney appealed only against the costs awarded to Lawrence Campbell. The appeal concerned whether he had succeeded on his separate counterclaim issues, whether the trial judge had properly distinguished the parties’ legal positions, and how costs should be dealt with under the Civil Procedure Rules.

Appeal allowed. Arden LJ gave the leading judgment. Judge LJ agreed that the trial judge’s discretion was flawed and that the appropriate order was no order as to costs on the defence and counterclaim.

1. The Court of Appeal should interfere with a first-instance costs order only where the judge was wrong in principle. The trial judge’s close familiarity with the issues and conduct of the trial justified appellate restraint, but that restraint did not prevent intervention where the discretion had been exercised on a mistaken basis.
2. Under CPR 44.3, the court has discretion as to whether costs are payable, their amount and when they are to be paid. The general rule is that the unsuccessful party pays the successful party, although the court may make a different order.
3. The trial judge had treated Lawrence Campbell as being in the same position as his mother. Their legal positions were distinct. Mrs Campbell was the tenant with the right to buy; Lawrence Campbell failed to establish that he was also a tenant or entitled to relief on the other counterclaim issues. The issues concerning repair and harassment were separate and identifiable. The alleged adverse-possession claim could not be adjudicated because the relevant freeholders were not parties, and the operative order made no order on it.
4. The court should seek to reflect success and failure on identifiable issues. However, an issues-based order should be made only where another form of order cannot significantly reflect the justice of the case. The guidance in English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409 indicated that, where possible, a proportion or percentage of overall costs will often be fairer and more proportionate than an order tied to particular issues.
5. Hackney could not identify a sensible proportion of the overall costs attributable to the unsuccessful counterclaim issues, which had occupied little of the trial. The parties’ respective successes meant that the circumstances ran both ways. The costs order in Lawrence Campbell’s favour was therefore set aside and replaced with no order as to the costs of his defence or counterclaim. There was also no order as to the costs of the appeal.

• Court of Appeal (Civil Division) — On appeal from the Shoreditch County Court, the court allowed the appeal, set aside the costs order in Lawrence Campbell’s favour, substituted no order as to the costs of his defence and counterclaim, and made no order as to the costs of the appeal. [2005] EWCA Civ 613
• Shoreditch County Court — His Honour Judge Cotran dismissed the possession claim, upheld Mrs Campbell’s right-to-buy counterclaim, and ordered Hackney to pay the costs of Mrs Campbell and Lawrence Campbell.