Costs News

11 April 2019
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Relief granted over late payment on account needed to challenge default costs certificate

A bid to set aside a default costs certificate can go ahead despite a payment on account ordered as a condition of the challenge arriving late, the Court of Appeal has ruled.

In Khandanpour v Chambers [2019] EWCA Civ 570, the appellant was the landlord and the respondent was the tenant of a property in Canterbury. The respondent issued proceedings claiming damages for unlawful eviction and breach of the covenant of quiet enjoyment, together with an injunction requiring the appellant to readmit the respondent to the premises. The respondent obtained judgment for £6,874 following a fast-track trial, together with costs. Permission to appeal was refused.

The appellant did not pay the judgment debt, so the respondent took steps to enforce it, obtaining interim charging orders over three properties he owned.

The respondent also began the process for the costs assessment, but the appellant did not engage with it. As a result, the respondent obtained a default costs certificate for £27,824, with payment to be made within 14 days. The appellant did not pay but applied to have the certificate set aside.

A deputy district judge made the order subject to two conditions: that the appellant pay £10,000 on account of costs and also file and serve points of dispute to the bill, both by 4pm on 15 June 2017. At the same hearing, the interim charging orders were made final.

The appellant filed his points of dispute on time, and arranged for two people to pay the money on his behalf. On the day, he was in hospital having emergency surgery. One payment of £4,000 reached the respondent's solicitors before the 4pm deadline, but the balance of £6,000 arrived before 9am the following morning.

The respondent’s solicitors said that only the £4,000 was received in compliance with the order and chose to treat the £6,000 as going towards satisfaction of the judgment, although it would be appropriated by the legal aid charge. As a result, they said the appellant had failed to comply with the court order.

After hearings before deputy district judges, His Honour Judge Simpkiss in Canterbury held that the appellant had failed to make the payment required to set aside the default costs certificate and refused to grant relief from sanctions.

He acknowledged that the timing and amount of the £6,000 supported the existence of an “implied intention” that it go towards the £10,000, but “there was no sufficient indication or no sufficient circumstantial evidence from which any implied appropriation could be inferred”. Therefore, the right to appropriate remained with the respondent as the creditor and he had successfully appropriated the payment to the judgment debt and legal aid charge.

This meant that compliance with the payment condition was not merely a few hours late, but that £6,000 of the £10,000 had not been paid at all. Had it just been a matter of late payment, HHJ Simpkiss said, he would have granted relief from sanctions.

On second appeal, the Court of Appeal ruled it was “obvious” that the £6,000 was intended as payment of the balance of the £10,000, and indeed the respondent acknowledged as much.

Lord Justice Davis said: “It is evident that, by seeking to appropriate the payment as they did, the respondent's solicitors were taking advantage of what they regarded as a slip by the appellant. I do not doubt that they believed that they were entitled to do so, and that they were frustrated by the long-drawn-out litigation and the appellant's failure to pay the judgment debt, but it remains the case that they knew that their purported appropriation was contrary to the appellant's obvious intention in making in payment.

“In these circumstances, I would hold that the payment of £6,000, albeit late, was impliedly appropriated by the appellant to fulfilment of the payment condition for setting aside the default costs certificate.”

Davis LJ went on to grant relief from sanctions given the circumstances – with the appellant in hospital on the day – and the minor delay that had no effect at all on the conduct of the litigation.

“Refusal of relief from sanctions would mean that the default costs certificate in the sum of £27,824.40 would stand unchallenged which, on the face of it, seems like a high figure having regard to the value of the claim. It may be that this sum or something like it can be justified and that the costs were unnecessarily increased by the appellant's conduct of the litigation, but that is what the process of detailed assessment is intended to determine.

“Ultimately, a sense of perspective is necessary. For the delay of a few hours which made no practical difference whatever, it would be disproportionate and unjust to deprive the appellant of an opportunity to challenge the default costs certificate.”

Davis LJ added that, if the respondent had not acted as he did, “the process of assessment would have been completed long ago”.

Tina Kumar-Jacob (instructed by Hallett and Co) represented the appellant, with Robert Denman (of Holden and Co) for the respondent.



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