Safavi & Anor v Strandview Ltd & Anor

A successful party's dishonest or improper conduct does not automatically displace the usual costs order. The court must evaluate the nature and degree of the conduct, its relevance to the issues, its effect on the trial, and whether it caused an unwarranted increase in costs. Relevant matters should be raised with the trial judge when costs are considered. A professionally represented party cannot ordinarily criticise a judge for failing to consider a factor that was known or available but was not put forward. Costs relating to abandoned issues or an unsuccessful defence of dishonesty may instead be addressed on detailed assessment.

The appellants, long lessees of flats, brought claims in negligence, nuisance, breach of covenant and breach of the Party Wall etc Act 1996 against the freeholder and a building company. Their claims largely failed. The freeholder succeeded on a counterclaim for service charges and repair contributions, and the County Court ordered the appellants to pay the respondents' costs.

After judgment, the appellants relied on forged invoices, an unsupported supervision fee and an incorrect VAT claim, seeking to challenge the costs order and related interim costs orders. Permission to appeal was granted only in relation to the costs of the counterclaim. The central issue was whether the trial judge's costs discretion had been vitiated by failing to take the alleged misconduct and written closing submissions into account.

1. Disposition. Mrs Justice Rose dismissed the appeal. Lord Justice Lewison agreed. Permission to challenge the other elements of the June 2015 order and the interim costs orders was refused.
2. Costs discretion. CPR 44.2 establishes the usual starting point that the unsuccessful party pays the successful party's costs, subject to all the circumstances, including the parties' conduct. A successful party's partly dishonest conduct does not automatically justify depriving it of all its costs. The court must assess the nature and degree of the misconduct, its relevance to and effect upon the issues, and its tendency to increase costs. The full range of measures remains available to prevent the dishonest party gaining, or the honest party losing, because of the wrongdoing. This approach was supported by Bank of Tokyo-Mitsubishi UFJ, Ltd & others v Başkan Gida Sanayi Ve Pazarlama AS & others [2009] EWHC 1696 (Ch) and Hutchinson v Neale [2012] EWCA Civ 345.
3. Application. The trial judge knew that the first-period invoices had been abandoned and knew that the VAT and supervision-fee claims were unsupported. However, no finding of dishonesty had been made, and the alleged dishonesty had not been squarely put to Mr Feeney. The counterclaim was largely successful, and the abandoned matters occupied only a small part of the trial. Neither the oral submissions on costs nor the written closing submissions invited the judge to deprive Strandview of its costs. The judge therefore had not been invited to exercise his discretion on the matters now relied upon.
4. Proper forum and appellate restraint. Costs of unsuccessfully defending dishonesty allegations and costs incurred on abandoned issues may be considered on detailed assessment, as explained in Ultraframe (UK) Ltd v Fielding [2006] EWCA Civ 1660, [2007] 2 All ER 983. The principle did not justify setting aside the trial costs order. In an adversarial system, a judge cannot ordinarily be criticised for failing to consider a factor known or available to professionally represented parties where no party invited consideration of it, as explained in Allen v Bloomsbury Publishing Ltd [2011] EWCA Civ 943. The appellants' later characterisation of the August hearing overstated what the judge had said. The final costs assessment had also superseded the interim costs orders.

1. Court of Appeal (Civil Division). On 20 March 2018, the court dismissed the appeal concerning the costs of the counterclaim. It refused permission to appeal against the remaining elements of the June 2015 order and the two interim costs orders: [2018] EWCA Civ 539.
2. County Court at Central London. On 18 June 2015, HHJ Bailey dismissed the appellants' claims apart from small sums, entered judgment for Strandview on its counterclaim, and ordered the appellants to pay the respondents' costs. On 8 August 2016, he declined to set aside or revise the costs order and reduced the interim payment.