Neutral Citation Number: [2006] EWHC 236 (Ch)
Case No: HC04C02628
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Wednesday, 18th January 2006

Before:

MR. JUSTICE MANN
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Between:

	THE SQUARE MILE PARTNERSHIP LIMITED	Claimant	
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	FITZMAURICE McCALL LIMITED	Defendant	

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Digital Transcription by Marten Walsh Cherer Ltd.,
Midway House, 27/29 Cursitor Street, London EC4A 1LT.
Telephone No: 020 7405 5010.  Fax No: 020 7405 5026
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MR. ANTHONY TRACE QC and MR RICHARD MORGAN (instructed by Messrs. Reynolds Porter Chamberlain) for the Claimant
MR. MICHAEL GADD (instructed by Messrs. William Blakeney) for the Defendant

Re: Costs, Interest and Appeal
On Summary Judgment Application

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Judgment

MR. JUSTICE MANN: 

1.	As a result of argument which took place before me yesterday, various post judgment matters have to be dealt with.  The principal one is one of costs.   The debate on costs arises because of the nature, form and course of these proceedings.  It raises some difficult assessments and difficult questions.   
2.	The claim was for some £583,000-odd.  (In this judgment I shall refer to the sums at stake in round terms.)   The claim itself was admitted from the outset.  It was admitted in the first form of the defence and that admission never varied.   From the outset the defence was that there was a counterclaim in the equivalent amount plus a claim to set off.   Neither party has urged on me that this is a technical set-off case and I do not treat it as such although it does seem to be common ground that the judgment that I shall grant in this case will be for the balance due when measuring the counterclaim against the claim. 
3.	The originally pleaded counterclaim extended to the whole of the sum claimed or to a sum equivalent to the whole of the sum claimed in the action.  Before the action was commenced, and by virtue of an odd calculation, an amount of £50,583 was paid by Group to the claimant but, because of the reasons set out by me in my separate judgment of 22nd July 2005, it does not technically fall to be treated as a part payment of the debt although it was retained as such by the claimant.   Shortly before a summary judgment application in this action, on 17th November 2004, a further £23,741 was paid.   
4.	In the action I ruled in favour of the defendant on the principles involved in the counterclaim and in respect of the vast bulk of the counterclaim but subsequently delivered rulings in favour of the claimant on the £50,000 just referred to, that is to say I ruled that it did not fall to be treated as a part payment of the claim and on a further £54,000-odd which was part of the defendant’s counterclaim.   Judgment in favour of the claimant on those issues means that there is a balance still owing of just over £100,000 in favour of the claimant.   When one adds in the £23,000 paid in November 2004, the claimant has therefore recovered roughly £130,000 of its original claim of £583,000.  
5.	The claim itself was admitted so all the issues that I tried arose on the counterclaim apart, as I say, from the limited issue as to the proper technical treatment of the £50,000.   Within the counterclaim the principal matter was the construction of the Share Sale Agreement.  It was to that that the vast bulk of the evidence and effort in the case was directed apart from time devoted to procedural disputes.  It seems to me to be likely that most of the pre-trial work would have related to that as well. 
6.	Since the trial there was a hearing on 22nd July which was devoted to the question of the validity of the £50,000 and £54,000 deductions; a further hearing on 29th July devoted to post-trial matters during which I recalled part of my earlier judgment; a hearing on 16th January last, which was a re-argument of one of the deduction points; and a hearing of yesterday which dealt with costs, interest and other post-judgment matters.   The effect of the post-trial matters is that the claimant has won on the relevant deductions points.   The position is, therefore, that the claimant has succeeded to the extent of getting a judgment of over £100,000 and has obtained another £23,000 during the course of the action, an aggregate of £130,000-odd.   On the other hand, it has failed in its claim for another £450,000 roughly and lost on the principal issue of the trial.   This has led to significantly diverging submissions on costs.
7.	Mr. Trace, for the claimant, says he has won, or mostly won, and in particular he has recovered a substantial sum albeit not 100 per cent of his claim.   In those circumstances he said he should recover his costs or, if it is necessary to reflect the fact that he has not won on everything, then there should be a limited deduction of, say, 25 per cent to reflect the extent to which he was not successful.   He strongly resists the submission made by Mr. Gadd that he should have to pay any of the defendant’s costs on the footing that a defendant who has to come to court to recover his claim should not have to pay any part of the defendant’s costs where he has made any recovery at all or at least any recovery of significance.    A defendant, he says, can protect himself or itself by making a payment into court and if it does not do so then it pays the price of having to pay costs even if the defendant has been successful on some issues.  I should record that there has been a payment into court in this case of £20,000 made in April 2005 but neither party suggested that this was of any significance for the purpose of the arguments before me. 
8.	Mr. Trace relied on three authorities.  The first was Nicholson v. Little [1956] 1 WLR 829.   That was obviously a case significantly before the CPRs.    The case started with a surveyor who had been acting for the claimant retaining moneys technically payable to the claimant by way of compensation.   When the claimant sued to recover the amount in question (which was £84-odd) the surveyor counterclaimed for £105 worth of fees.  At the trial the trial judge found that the surveyor was entitled to £61 in respect of his fees and gave judgment to the plaintiff for the balance of £22.   Having done that, the trial judge then nevertheless gave the plaintiff the whole of his costs.   The surveyor appealed on the costs point, obviously complaining that since he had been successful in the counterclaim he should not have to pay the plaintiff’s costs of the whole matter.   
9.	Reasoned judgments were delivered in that case by Denning and Birkett LJJ and Parker LJ agreed with the other two judges.   Putting the matter shortly, both Lords Justices who delivered judgments considered that the trial judge had made a decision well within his discretion.   It is impossible to extract any principle from that case other than that the costs at the time were entirely discretionary.   It is not possible, in my view, to get from that case the principle that a claimant should be regarded as successful provided that he has recovered something.   Denning LJ seems to have been impressed by the fact that the surveyor had retained something which he described (see page 831 at the foot of the page) as 
“the house owner’s money, and the surveyor was clinging on to it and claiming it as being his, the surveyor’s, money; he wished to put it in his pocket for his fees, and he did put it in his pocket for his fees, and it would have remained there but for the fact that the house owner brought this action.”
10.	On the basis of that and other considerations Denning LJ considered that the claimant was justified in bringing his proceedings and therefore the county court judge was justified in making the order for costs that he did.   Birkett LJ came to a similar conclusion effectively saying that the county court judge was entitled to reach the decision that he did and the claimant was justified in suing.   That is merely, in my view, an example of a case in which a court felt it proper to award  a successful claimant all his costs notwithstanding that the defendant had been successful on the main issue in the case which was the defendant’s counterclaim.   That was, of course, a case where the claimant made a net recovery as indeed is this case.   I do not get a lot of assistance from that other than the fact that it would be open to me to make an order in Mr. Trace’s favour if I thought it fit to do so reflecting the fact that he has won over all, but I do note that that case, as indeed are all the cases cited by Mr. Trace, is a pre-CPR case. 
11.	The next case is the case of MB Building Contractors Limited v. Ahmed in the Court of Appeal, unreported, 18th November 1998.    That was a case in which builders sued for building fees and were met with defences and counterclaims which were partially but only partially successful.   There was a net sum owing to the builders at the end of the day.  But one of the defences, the most substantial one, was advanced only late in the day.   The actual counterclaims for faulty work were relatively small sums.     The trial judge made no order as to costs and one of the things that the trial judge took into account was the fact that the claimant was facing a pensioner on income support as an opponent. 
12.	The leading judgment of the Court of Appeal was delivered by Hirst LJ.   He set out the principles then applicable observing that: 
“(i) costs are in the discretion of the court. (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (iii) The general rule does not cease to apply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or part of his costs.  (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs, but may order him to pay the whole or a part of the unsuccessful party’s costs.”    
13.	He then considers questions of set-off and then considers the arguments of the parties.   Towards the end of the transcript he says this: 
“In my judgment, the proper approach was, first, to ascertain which side had won overall, applying the Hanak v. Green principle, which of course treats the counterclaims, which to a minor degree reduced the amount claimed, as equitable set-offs.   Here, the figures themselves demonstrate clearly that the plaintiff was the substantial winner overall, having recovered £11,500.” – I would pause to intervene that that was £11,500 out of £15,500-odd.  – “Then, of course, the judge would be right to consider whether there was any conduct on the plaintiff’s part which warranted depriving him of all or part of his costs.  Applying the Elgindata principles, there was nothing on the plaintiff’s side which elongated the length of the trial.   The principal point which caused the judge trouble only arose for the first time at the trial, and the plaintiff had to do his best to meet it at very short notice.   So far as Mr. Singh’s evidence is concerned, I take fully into account that the judge was not impressed by his evidence, but it does seem to me, as Mr. Walker rightly argued, that the position is very much palliated, so far as Mr. Singh is concerned, by the fact that this point about the shortfall was raised out of the blue at the last moment during the course of the trial, and therefore something on which there had been no possibility of Mr. Singh considering the matter and preparing his evidence in the normal way.   There was also the difficulty about Mrs. Crawley which was not of the plaintiff’s making.   
In my judgment, those factors do not add up to a situation where, in Jenkins LJ’s words, the plaintiffs behaved particularly badly: nor do they justify the reduction of the costs which the judge awarded.  
I would therefore allow the appeal and award the plaintiffs their taxed costs in full.”  -- Then he makes some other remarks to which I need not refer. 
14.	Again, that is an example of the exercise of the costs jurisdiction rather than a case laying down any principles, but Mr. Trace is certainly entitled to rely on it as demonstrating that it is appropriate, or may be appropriate, to give a claimant the costs of the action where the claimant has been substantially successful notwithstanding the fact that the defendant has actually succeeded on some of the issues and has succeeded in effecting reductions of the claim.
15.	The third case relied on by Mr. Trace is Universal Cycles PLC v. Grangebriar Limited, a case decided in the Court of Appeal on 8th February 2000.   This was a two-judge Court of Appeal.   Hale LJ delivered the principal judgment and Lord Woolf, MR agreed with her.   Mr. Trace describes this as a “post-CPR case”.   That may be true in terms of chronology as to when the judgment was delivered (although I am not even wholly sure about that) but it is not apparent that the court treated it as a case in which it was applying the CPRs.   The first instance judgment in question in that case was delivered in 1998 which was, of course, pre-CPR.    While Hale LJ refers to CPR 44.3(4) it is not immediately apparent that she was actually clearly applying the provisions of that rule.   I am therefore not convinced, contrary to the submissions of Mr. Trace, that the court was treating that case as an actual application of the provisions of the CPR although I do not think it is in any way inconsistent with those provisions.  Be that as it may, it is a case from which I may be able to derive some assistance.   Mr. Trace has referred to it and I should deal with it.
16.	This was a case in which the claim was a claim for the cost of some bicycles that were sold.   As a claim and subject to a counterclaim it appears there was no dispute about it and the defendant made payments of roughly half the claim.    The defendant resisted payment of the balance, some £106,000-odd on the footing that it had a counterclaim for faulty bikes and other matters.   It was successful at the trial on the counterclaim to the extent of some £25,000 and the judge at the trial gave judgment for the defendant for £25,000 and gave judgment for the claimant on a total of £109,000-odd.  It is thought that the difference between the £109,000 judgment which the claimant got and the £106,000 it was claiming is probably accounted for by interest but nothing in particular turns on that. 
17.	The costs order that the judge made in relation to that was that the claimant pay half of the defendant’s costs save that the defendant pay the costs up to the service of the defence and counterclaim and the costs of setting down.    That was principally on the footing that the substance of the dispute in the case was whether the claimant or the defendant was responsible for the defective state of the bicycles and on that issue the defendant won.  He found that the time and money at the trial had been spent mostly on establishing matters which the claimant denied.  However, since the defendant had not succeeded to anything like the extent claimed, the defendant did not get all its costs and the judge made the costs order I have referred to.
18.	The judgment of Hale LJ deals with various factors which the court should take into account.   It does not indicate the weight to be given to those factors but it contains if not an exhaustive list nevertheless a helpful list of relevant matters.   Perhaps the most important thing which emerges from it is that no factor is absolutely predominant in the sense that it is capable completely of outweighing the others.   In paragraph 20 she asks how the matter should be approached in principle and observes that the matter is one for the discretion of the judge.   At paragraph 21 she then says this: 
“It is also axiomatic that there are no hard and fast rules in cases such as these.   As will be apparent, established principles may point in different directions.   The first principle is that costs normally follow the event, as stated in RSC Order 62 rule 3(3).   It remains the general rule under CPR rule 44.3(2)(a).    The difficulty is in determining what is the ‘event’ in a case such as this.”   
19.	I pause at this point to observe that I respectfully completely agree with her in relation to her last sentence and the point arises, as will appear later, when one is considering the CPR terminology of a party being “successful”.   Hale LJ then extracts the following  points: 
“22.   There are two possible starting points. First, if it is a claim and counterclaim, the starting point is that the claimant gets the costs of the claim and the defendant gets the costs of the counterclaim: see Chell Engineering v. Unit Tool Engineering [1950] 1 All ER 378, CA, where there was a claim for work done and a counterclaim for breach of contract by delay and not doing the work properly.   It was a case where it was said that there was no question of a set off.”    
20.	She then observes that no one wanted the judge to make an order of that sort because it required a serious disentangling of costs which the parties did not want to achieve by virtue of a detailed taxation, as in the case before me.  The parties wanted the judge to take a view on costs.  
21.	Hale LJ then goes on to point out that there are potential qualifications to that principle.  At paragraph 24 she says this:
“On the other hand, the second possibility, if there is a legal or equitable set off, is that the claimant is regarded as the overall winner and has costs for an appropriate portion of them in proportion to his win: see Hanak v. Green [1958] 2QB 9.”  
22.	She also referred to the decision in Bayliss Baxter v. Sabath [1958] 1 WLR 529 where Parker LJ indicated that in a set off claim costs should be treated as going with the overall winner in terms of money.   At paragraph 25 she observes that the same approach was applied in  MB Building Contractors v. Ahmed.
23.	At paragraph 26, however, she then sets out further factors and says this: 
“However, there is an alternative principle that the costs should be considered according to the actual issues upon which they have been incurred.”   
24.	She then makes observations as to why that is but indicates in paragraph 28 that one has to be careful about taking that approach too far.   There she says: 
“Nevertheless, that approach can be taken too far as is clear from the leading case of Re Elgindata (No. 2) [1992] 1WLR 1207.  Where the claimant succeeds on some issues but not on others, it is one thing to award the claimant only a portion of his own costs; but it is quite another thing to order him to pay the costs of the other side in establishing his rights.   There are trenchant comments of Beldam LJ (at page 1214) on the deterrent effect on claimants who are in the right overall of so doing.”
25.	The matter which obviously principally troubled Hale LJ is referred to in paragraph 29 where she observes this:
“We understand that the defendant’s costs in this case are so large that the effect of the claimant having to pay them will more than wipe out what it recovers.”   
26.	Then she goes on to set out why it is that it is useful to clear irrelevant issues out of the way.   In paragraph 30 she reflects:
“Furthermore, if one is seeking to encourage good litigating practice in clearing out of the way those issues which should be cleared out of the way and concentrating on the rest, two further points must be relevant.   The first is whether the defendant has admitted liability or whether the defendant has effectively forced the claimant to go to court.   Our attention has been drawn, as was the attention of the judge, to what has been called the Dutch Match case.  ….  That was a case where liability was admitted, so it is right to say that all the argument was on the counterclaim.   It was distinguished by this court in the later case of Nicholson v. Little [1956] 1 WLR 829, where the court pointed out that it does not lay down a rule of law fettering the discretion of the trial court.    Emphasis was placed in that case on the defendant’s behaviour in forcing the claimant to go to court to recover his own money.   
31. Also relevant to good litigating behaviour must be the extent to which either side can protect themselves against costs by making a realistic assessment of the likely outcome.   In this particular case the defendant could clearly have made a payment into court.   Instead they made what turned out to be a grossly inflated counterclaim with a view to extinguishing the whole debt.  Even in the days before the Civil Procedure Rules the claimant could have made a Calderbank offer accepting that there were some defects and proposing a discount.   In this case it was particularly difficult to do because of the late stage at which the particulars of loss were given.” 
27.	Having considered those principles she came to the conclusion that the trial judge had erred in the weight that he gave to various factors and she imposed the Court of Appeal’s own order which was that the claimant would have the costs of the action other than the hearing of the trial itself and there was to be no order as to the costs of the trial.  That was obviously the way in which she saw the rules would operate in favour of a claimant when faced with what she called a “grossly inflated counterclaim”.   
28.	Mr. Trace relies on that case as demonstrating what the approach of the court should be where a claimant has succeeded in recovering moneys notwithstanding the fact that a counterclaim has knocked down the moneys which the claimant was claiming.   As I have observed, I think that falls to be treated as a pre-CPR case although the principles and points that Hale LJ made seem  to be to be equally applicable to considerations of the CPR. 
29.	Mr. Gadd started as indeed did Mr. Trace by reminding me of the provisions of CPR 44.3(1).   The relevant provisions of that rule are as follows:
“44.3(1) The court has a discretion as to – 
(a) whether costs are payable by one party to another; 
(b) the amount of those costs; and 
(c) when they are to be paid.   
(2)  If  the court decides to make an order about costs – 
(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but 
(b) the court may make a different order …. 
(4)  In deciding what order if any to make about costs, the court must have regard to all the circumstances including – 
(a) the conduct of the parties; 
(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and 
(c) any payment into court or admissible offer to settle made by a party which is drawn to the court’s attention (whether or not made in accordance with Part 36).  
(Part 36 contains further provisions about how the court’s discretion is to be exercised where a payment into court or an offer to settle is made under that Part.) 
(5) The conduct of the parties includes – 
(a) conduct before, as well as during the proceedings, and in particular the extent to which the parties followed any relevant pre-action protocol; 
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; 
(c) the manner in which a party has pursued or defended his case or a particular allegation or issue; 
(d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim. 
(6)  The orders which the court may make under this rule include an order that a party must pay – 
(a) a proportion of another party’s costs; 
(b) a stated amount in respect of another party’s costs; 
(c) costs from or until a certain date; 
(d) costs incurred before proceedings have begun; 
(e) costs relating to particular steps taken in the proceedings; 
(f) costs relating only to a distinct part of the proceedings; and 
(g) interest on costs from or until a certain date, including a date before judgment. 
(7) Where the court would otherwise consider making an order under paragraph (6)(f), it must instead, if practicable, make an order under paragraph (6)(a) or (c).”  
30.	Having done that, Mr. Gadd then started his submissions by taking me to and adopting the note immediately following on those provisions in the current White Book at paragraph 44.3.1, in the following terms:
“Although this rule preserves the general rule that the unsuccessful party will be ordered to pay the costs of the successful party, Lord Woolf MR was anxious to move away from the position that any success is sufficient to obtain an order for costs.  He therefore envisaged far more partial orders for costs which more accurately reflect the level of success achieved by the receiving party: see AEI Rediffusion Music Ltd. v. Phonographic Performance Ltd. [1999] 1 WLR at 1507.”
31.	It seems to me that that note has significant force nowadays.   Having done that, Mr. Gadd then took me to the case of Summit Property Limited v. Pitmans (A Firm) [2001] EWCA (Civ) 2020, a decision of the Court of Appeal given on 19th November 2001.   That was not a counterclaim case.  That was a case in which a claimant sued solicitors in professional negligence.    The claimant had to succeed both on duty of care and on causation in order to succeed and it did not succeed on both.   Because of the time taken on the issues on which the claimant won and lost, the order made by the trial judge, Park J, was that the unsuccessful claimant paid to the successful defendant 30 per cent of the successful defendant’s costs and ordered the successful defendant to pay 65 per cent of the costs of the unsuccessful claimant.    The costs of each of the parties were within the same range so that the effect of Park J’s order was that the successful defendant was nevertheless ordered to pay net costs to the unsuccessful claimant.    That particular order was upheld by the Court of Appeal.   Mr. Gadd did not rely on that particular order for the purpose of his submissions but I do note that in an appropriate case it does emphasise that a party who might be considered to be successful (and the defendant in that case can certainly be regarded as falling within that category) can none the less be ordered to end up paying net costs to the unsuccessful party, in that case, the claimant. 
32.	The real purpose for which Mr. Gadd took me to this case was paragraph 13 in which the relevant extract from Phonographic Performance Limited and AIE Rediffusion was set out.   It is useful to look at this case for that purpose because this case is certainly a post-CPR case and should be treated as such.   The relevant passage from the case emphasises the extent to which the court should be willing to make separate orders which reflect the outcome of different issues.  The passage reads as follows: 
“I draw attention to the new rules because, while they make clear that the general rule remains that the successful party will normally be entitled to costs, they at the same time indicate the wide range of considerations which will result in the court making different orders as to costs.  From 26 April 1999 the ‘follow the event principle’ will still play a significant role, but it will be a starting point from which a court can readily depart.   This is also the position prior to the new rules coming into force.   The most significant change of emphasis of the new rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues.   In doing this the new rules are reflecting a change of practice which has already started.  It is now clear that a too robust application of the ‘follow the event principle’ encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take.  If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”
33.	In my view the difficulty in the present case comes from a tension between various considerations.   First, the claimant has had to come to court to get any money at all and has recovered some money which is substantial albeit it is nothing like the whole of the claim, and on that footing the claimant has good grounds for saying that it should recover its costs and certainly should not pay the other side’s.   The claimant can say in this case, and Mr. Trace does say, that the defendant can protect itself by paying in and that is how the defendant can shift the costs burden in an appropriate case.  If the defendant fails to do that, then it cannot complain if it ends up paying the costs of the action or a substantial part of them even if it has succeeded in knocking out part of the claim.   
34.	On the other hand, the main issue in this case was a question of the construction and effect of the Share Sale Agreement, on which the defendant won and on the basis of which the defendant was able to resist a large part of the claim in terms of quantum (something like three-quarters).  It is no answer to the resolution of this sort of problem to say that costs should follow the event or, in the parlance of the CPR, that costs should go to the successful party because as Hale LJ observed in Universal Cycles it all depends on how one identifies a successful party.  In a case such as the one before me, both parties can be said to have been successful: the claimant in getting a significant, if not substantial, judgment; and the defendant in resisting a very large part of the claim and succeeding on the counterclaim.   To treat the parties as both being successful would, in my view, be entirely in accordance with the note in the White Book which I have identified above.    It is also provided for in CPR 44.3(4)(b) when applied to the defendant.   If identifying a party as the successful party requires one to find and identify who it is that recovers net sums at the end of the day, then the claimant is a successful party in those terms.   If it requires identifying who is successful on each of the claim and counterclaim then both parties have been successful.   In a case like this where the claim has been admitted all along, I do not think that the latter is an artificial, technical or misplaced analysis.   This is particularly so when the defendant has established a very substantial counterclaim in money terms as here.   I think it is the preferable analysis in this case.   
35.	It still does not, however, provide a ready answer to the costs problem.    It immediately leads to the possibility of an order awarding the claimant the costs of the claim and the defendants the costs of the counterclaim.    There are two problems with doing that, however.  First, as in Universal Cycles the parties do not want me to do that and so far as it is the equivalent of an issue-based assessment, the provisions of CPR 44.3(7) discourage me as well.   Second, it would not be fair on the claimant because a material part of the hearing involved an issue within the counterclaim on which it won, the £54,000 point.    
36.	I shall, however, make a costs order which I consider starts from that point and reflects the following adjustments or adjusting factors.   
37.	(1) While it is true to say that the claim has not been an issue, technically one point on the quantum of the claim was in issue, namely, the £50,000 sum on which I ruled in my judgment on 22nd July 2005.   My ruling was to the effect that the payment made before the action was commenced could not technically be considered to be a payment of the claim.   That is part of the sum for which judgment is ultimately ordered in this case.   This was not a particularly attractive point for the claimant to take but it was entitled to take it.   It succeeded and it took a significant, although not a large amount, of time, effort and costs to deal with it. 
38.	(2)  The defendant succeeding in knocking £54,000 off the amount of the counterclaim: that was the point on which I delivered judgment yesterday and indeed on which I delivered judgment but I recalled it on 22nd July.   It was a meritorious point and again required significant time, effort and costs.  
39.	(3)  The defendant failed to recognise that its counterclaim was at least £23,000 short of the claim until it carried out its recalculations and made its payment in that amount immediately before the summary judgment application in November 2004.
40.	(4)  While the hearing before me concerned the counterclaim almost exclusively, apart from the time devoted to the £50,000 matter referred to above, a significant amount of time at the beginning of the trial was devoted to getting the evidence in order.   About half a day was taken in my considering, and, to a large extent, acceding to, an application made by the claimant to strike out parts of the defendant’s witness statements on the grounds of irrelevance and invalidity.   This was an appreciable part of the trial costs and the creation of those struck out parts of the witness statements would have been a significant part of the costs of the preparation of witness statements.    The defendant should have to pay the costs attributable to the time wasted in court and should not recover the costs of creating defective witness statements.
41.	(5)  While it is true that the defendant made an effort to work out what net sum was or might be payable to the claimant and to pay it, the correspondence demonstrated that it made rather a confusing mess of it and the subsequent payment of £23,000 and the £54,000 issue that I decided on Monday of this week demonstrated that it got it wrong.   The claimant was justified in pursuing the defendant for those amounts and recovering payment and judgment.   This may be little more than an aspect of the fact that the claimant succeeded on those issues in this case but it does emphasise the claimant’s justification in terms of its pursuit of the defendant at least to some extent.
42.	For the record I should record that I give no weight to other factors urged on me by Mr. Trace as operating in his favour.    First there were the costs of an application to amend made by Mr. Gadd.   It is true that an application was made by Mr. Gadd for permission to amend but effectively the disputed part was abandoned after the amendment had been made.   Those costs are not significant in the overall costs of this case and it is neither necessary nor appropriate for me to make special provision for them nor to give them any particular weight in the assessment which I shall carry out hereafter.
43.	Secondly, there was an application for disclosure made by Mr. Gadd which was abandoned.   Mr. Trace said that I should give him the costs of that or at least make an order which took into account the fact that he should have the costs of that application.   Again, I shall not give that factor any particular weight in my assessment of the costs.   It is true that Mr. Gadd made an application which was abandoned but the reason that he abandoned it was that Mr. Trace himself abandoned a point in the action to which the disclosure went.   In the event and in the overall picture of the costs of this action – bearing in mind I am to carry out a rough and ready exercise in order to do justice between the parties on costs – to try to reflect the costs of that exercise would be wholly impossible.   
44.	I should also record that there was a payment in of £20,000 made by the defendant in April 2005 but neither party urged on me that that had any particular significance.
45.	On the footing that I am treating each party as successful, I have to net off those various factors both in financial terms and adding such additional features as each has in their favour in order to achieve the overriding objective.   In particular, I do add in Mr. Trace’s favour the fact that he has had to sustain a claim in order to recover (as he will recover) a judgment of over £100,000 and I do not overlook the fact that if the £23,000 had not been paid before the trial, he would have got judgment for that as well.
46.	What I have to do is a particularly rough and ready exercise since I have little costs information to go on, but the parties wish me to do it.   I have taken all factors into account in carrying out notional and quantifiable setting-off and adding appropriate weight to the other relevant matters, and taking into account the matters in the CPR which I have set out.   I think the appropriate order in this matter is to make no order as to costs leaving each side to bear their own.    
47.	I am strengthened in that conclusion by stepping back and considering its overall effect and by giving some thought to the apparent justice or injustice of giving either side substantial costs.   If I consider the possibility of giving the claimant a significant portion of its costs I consider that that is not just because it fails to reflect the extent to which it was effectively the counterclaim -- on which the claimant substantially failed -- that the parties fought.   If I consider giving the defendant a substantial portion of its costs, then I would consider that harsh on the claimant in this case which has, after all, succeeded in getting significant sums out of the defendant as a result of this litigation even though it lost on the major part of the counterclaim.
48.	I shall therefore make the order that I propose, or not make any costs order, whichever is the correct way of looking at it.   I should say that that costs order covers all the costs of the trial and it also covers the hearings since judgment was delivered, that is 22nd July, 29th July and all the hearings of this week.   That deals with costs.  
49.	The next point which I should record as being dealt with is one as to which there is no dispute.  It is that of interest.   There is no dispute as to that.   The parties will record what they both accept as being the correct interest order in a minute of order. 
50.	The last point on which I am required to rule is the fate of an additional matter which was before me on the occasion of the trial but to which my earlier judgment makes no reference; that is to say, an appeal from Master Moncaster on the summary judgment application.   I have referred to that application above.   It was an application made by the claimant in November 2004 seeking summary judgment on the grounds that the defendant’s case was hopeless and there was nothing worthy of trial.    The Master ruled against the claimant on that and dismissed the application.   The claimant seeks to appeal that to me and was given permission to appeal by Lewison J.
51.	Realistically Mr. Trace does not advance that appeal.   It would obviously be hopeless as I have actually decided the main issue against him.   But the logistical problem arises of what to do with that bearing in mind that Mr. Trace may well appeal my main judgment and I have indeed already given him permission to do so.      
52.	Mr. Trace proposes a practical solution.  What he wants to avoid is what would happen were I to dismiss the appeal and he to be successful on his appeal to the Court of Appeal.   He accepts if he were unsuccessful on an appeal, then the appeal from the Master would effectively have to be dismissed.   But if he were successful on his appeal from me, he would wish to be able to argue that he should have succeeded in the summary judgment application and to get the Master’s decision reversed or at least reverse such costs consequences as that decision may have.   The question is, how that possibility – which I cannot discount – should be dealt with.   Logically, I should dismiss the appeal from the Master’s order.   Then if Mr. Trace were successful on his appeal from me, he would have to take such steps as he thought to upset my judgment on that.  But before that he would have to get permission to appeal from my judgment dismissing his appeal from the Master because it would be a second appeal.    Then there would be a question of how the matters are to be dealt with thereafter
53.	What Mr. Trace proposes is the practical expedient that his appeal should stand dismissed if he does not serve a notice of appeal within a period of time, let us say, 28 days from today’s date.   If he does not serve a notice of appeal within that time or within such other time as limited for appealing, then there would be no basis for his upsetting the Master’s decision.   However, if he were to appeal from my decision, then his appeal from the Master’s decision should stand adjourned generally with liberty to restore.   Then its fate could be considered at this level rather than at Court of Appeal level when the effect of the Court of Appeal’s judgment is made.
54.	Mr. Gadd, commendably and moderately, if I may say so, does not take a particularly strong line on this.   He does not insist that the appeal stand dismissed and he accepts that the practical expedient suggested by Mr. Trace would be one appropriate way of dealing with the matter.   He does not feel strongly about it either way.   I think that Mr. Trace’s proposals for dealing with this have some considerable merit.   It means that the matter can be considered at an appropriate level which is this court level rather than Court of Appeal level in the event that Mr. Trace is successful on his appeal.   
55.	I propose to make an order in relation to that appeal along the lines suggested by Mr. Trace.   It does not have any particularly serious costs consequences at present.   I do not understand that there are any significant costs which are attributed to that small corner of this overall dispute. 
(For proceedings after judgment: see separate transcript)