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Northstar Systems Ltd & Others v Fielding & Others, Court of Appeal, 6 December 2006

20 December 2006
The issues

Costs – Aaron v Shelton – whether in respect of detailed assessment the paying party should seek an Order from the Judge reflecting allegations of misconduct which they wished to raise before the Costs Judge.

The facts

The parties were concerned in a commercial action which took some 99 days to hear at Trial and concerning design and manufacture of conservatory roofs. In the main judgment the Judge found the Respondents to the appeal guilty of serious dishonesty but also made findings by reference to which later the Judge would say that the Respondents and not the Appellants were “the winners”. The Appellants were ordered to pay costs but he made a reduction to reflect the dishonesty he had found. The issue for the Court was whether the reduction that the Judge had made (20%) was appropriate.

The decision

The Judge had not misdirected himself. He had fully recognised the relevance of the allegations of the dishonesties of the litigation as a whole and to which aspects of the litigation any discount he found should be applied. Neither the percentage, nor the issues to which the discount would apply would be interfered with.

In Aaron v Shelton the High Court Judge had found that allegations as to conduct could not be raised at an assessment of costs if they had not been raised before the Judge and if a party wished to raise such issues they should not consent to an Order for Costs without reference to the issue of conduct.

In the view of the Court of Appeal this was too broad as a statement of principal. In the case that the Judge had been dealing with there had been no decision by the Court that the receiving party had been guilty of misconduct. By adopting the Consent Order, without reference to misconduct, the paying party accepted the converse. But it could not be the case that in an action where dishonesty had been found by the Judge that the mere fact that the paying party had not sought an Order from the Judge reflecting that misconduct, should deprive the party of referring on the assessment to the Judge’s overall findings on dishonesty with regard to whether or not the costs should be reduced.

Consideration of a party’s conduct should normally take place both at the stage when the Judge is considering what Order for Costs he should make (ie as to whether a percentage reduction should be made) and also during assessment of costs. If the Judge had ordered a reduction of 20% then, in the absence of anything in the Order to the contrary, it could not be the case that the party guilty of dishonesty should say that the issue of dishonesty could not be further raised before the Costs Judge.

However, the Court must ensure that whilst dishonesty is penalised, that the party guilty of it is not placed in double jeopardy. The question is one of the proper construction of the Order made by the Judge. Where dishonest conduct is reflected in an Order made by the Trial Judge, Judge’s should make clear whether they are making the Order on the basis that on the assessment the paying party will still be entitled to raise dishonesty in arguing that costs incurred in supporting the particular dishonesty were unreasonably incurred or not. Judges might also want to make an Order under Rule 44.14. (Courts power to penalise the receiving party in respect of the detailed or summary assessment there has been failure to comply with the rule practice direction or Court Order and that party’s conduct during the proceedings which gave rise to the assessment were unreasonable or improper)

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