Newman v Framewood Manor Management Company Ltd

In a costs appeal, the starting point under CPR 44 of the Civil Procedure Rules 1998 is that the substantively successful party recovers its costs unless there is good reason for a different order. Overall proportionality between costs and recovery is ordinarily addressed on detailed assessment. Costs attributable to an unrealistic claim or unnecessary expert evidence may be excluded. Conduct will justify reducing costs only where it was materially unreasonable, including in relation to arbitration, commencement, mediation or settlement offers. An order under section 20C of the Landlord and Tenant Act 1985 may prevent the landlord’s costs of the action being treated as relevant service-charge costs.

The appellant appealed against a costs order made by Recorder Pullman QC in the Slough County Court following leasehold claims concerning disrepair and interference with her rights. The merits appeal had substantially reversed the Recorder’s view and was determined by the Court of Appeal in [2012] EWCA Civ 959.

There was no dispute that the appellant should recover the costs of her counterclaim. The dispute concerned the costs of her claims. The respondent relied on proportionality and alleged unreasonable conduct, including failure to arbitrate, premature commencement, inadequate engagement in mediation and unreasonable settlement conduct. The central issue was the appropriate costs order after the appellant had substantially succeeded on the merits.

1. Disposition. The appeal was allowed. The Recorder’s costs judgment and order were set aside because they proceeded on a view of the merits that had been substantially reversed by the Court of Appeal. The appellant was the overall substantive winner: she succeeded on six of seven heads of claim, and was treated as having won the doorway and jacuzzi claims. A 5 per cent deduction was appropriate for the tree-roots claim on which she lost.
2. Ordinary costs starting point. Under CPR 44 of the Civil Procedure Rules 1998, the starting point was that the appellant should recover her other costs unless there was good reason for a different order. The costs of the expert report concerning diminution in capital value were excluded. The report proceeded on a hypothesis that the work would not be done, was not maintained as a realistic claim, and did not require opposing expert evidence or trial time.
3. Proportionality. The fact that the appellant recovered substantially less than the amount claimed did not, by itself, qualify her right to recover costs. The proportionality of the costs of achieving the results obtained was a matter for detailed assessment, particularly where proceedings had been necessary to vindicate legal rights.
4. Conduct. The arbitration objection was unfounded because the respondent neither sought a stay nor required arbitration and had participated throughout. Commencing proceedings four days before the expiry of the period in a warning letter was immaterial because it had no effect on the proceedings. The unresolved disrepair and the respondent’s funding position did not make commencement unreasonable. The correspondence also showed that the appellant had not unreasonably refused mediation.
5. The respondent’s settlement offer, under which each party would bear its own costs and no compensation would be paid for interference with the appellant’s rights, was not sufficiently close to the result to make its rejection unreasonable or deprive the appellant of her ordinary costs entitlement.
6. Subject to the 5 per cent deduction and exclusion of the expert-report costs, the respondent was ordered to pay 95 per cent of the appellant’s costs below. An order was also made under section 20C of the Landlord and Tenant Act 1985, so that the respondent’s costs of the action up to and including trial were not relevant costs for determining the appellant’s service charge liability. Mummery LJ and McFarlane LJ agreed.

1. Court of Appeal (Civil Division): Allowed the costs appeal and set aside the costs order of Recorder Pullman QC.
2. Slough County Court: Recorder Pullman QC made the costs order under appeal. The judgment gives no separate citation for that order.