Newall & Anor v Lewis & Ors

A consent order must be construed objectively, using ordinary contractual principles and the document read as a whole. Where one provision orders payment of costs of proceedings and another reserves costs incidental to them, both provisions must be given effect. The costs judge must therefore segregate the two categories.

Costs incurred before issue may be recoverable where they are materially relevant to the proceedings as ultimately constituted, the work product proves useful, and the circumstances reasonably led the party to apprehend that the matters investigated would form part of the litigation. Whether an item is of or incidental to proceedings, reasonably incurred, reasonable in amount and proportionate is ultimately a matter of legal analysis and fact, subject to appellate restraint.

The defendants appealed decisions of Master Campbell made during the detailed assessment of the claimants’ costs. The assessment followed a consent order made after Part 8 proceedings in which the claimants sought the retirement and replacement of trustees of family settlements.

The consent order required payment of the claimants’ costs of the proceedings and reserved for later determination whether the defendants should pay additional costs incidental to them. The appeal concerned the construction of those provisions and whether costs incurred investigating and preparing allegations of breach of trust were recoverable.

1. Construction of the consent order. The consent order was to be construed by ordinary contractual principles, subject to avoiding a construction apparently beyond the court’s jurisdiction. Relevant background known to the parties could be considered, but negotiations were prima facie inadmissible. The private dictionary principle was limited and did not assist on the evidence.
2. The phrase “costs of and incidental to” would ordinarily include incidental costs, but paragraph 1 had to be read with paragraph 2. The claimants’ construction would make paragraph 2 wholly redundant. The order therefore required the costs judge to distinguish costs of the Part 8 proceedings from costs incidental to them. The latter had to be identified under paragraph 2(a) and referred for determination under paragraph 2(b).
3. Master Campbell had not applied that distinction in the assessment begun on 2 and 3 May 2007. The detailed assessment therefore had to begin again.
4. Pre-issue investigative and breach of trust costs. Whether expenditure is of or incidental to proceedings is a matter of fact and legal analysis, not an unfettered discretion. Costs which are not of or incidental to the proceedings, or which are unreasonably incurred, unreasonable in amount or disproportionate, cannot be awarded under Supreme Court Act 1981 section 51 and CPR 44.4.
5. The Master was entitled to conclude that investigating the alleged breaches of trust and preparing draft particulars materially supported the claimants’ case that their loss of trust and confidence was well-founded. The work product was ultimately useful in the Part 8 proceedings, and the circumstances reasonably led the claimants to apprehend that the wider dispute would form part of the litigation. The later narrowing of the proceedings did not, with hindsight, make the earlier work irrecoverable.
6. The appeal on that issue failed. The Master could reconsider the allocation of those costs between paragraph 1 and paragraph 2 when the assessment was reheard.

• High Court (Chancery Division): Appeal from Master Campbell’s decisions of 1 March, 2 May and 3 May 2007. The construction issue was resolved in favour of the defendants, while the challenge to the recoverability of the investigative and breach of trust costs failed.
• Permission to appeal: Granted by David Richards J on 7 December 2007.