In Conlon -v- Royal Sun Insurance plc  EWCA Civ 92 the Court of Appeal refused to re-allocate a costs at the appeal stage when the application was made solely for the purpose of attempting to recover costs.
The claimant appealed an order in relation to the appropriate rate for car hire necessary as a result of damage to her car. The matter had proceeded in the Small Claims track before the District Judge and the Circuit Judge.
The case was listed together with another case on car hire which related to the same issue.
The defendant then decided that it did not wish to contest the appeal because of the costs involved and the fact that the other case was progressing to a full hearing in the Court of Appeal. The defendant offered to pay the claimant’s full claim but argued that there should be no order for costs.
- The defendant had not acted unreasonably in defending the matter and costs could not be awarded on that basis.
- The court declined to transfer the case from the Small Claims track solely for the purpose of allowing the appellant to recover costs.
THE APPELLANT/CLAIMANT’S APPLICATION
The claimant argued that the defendant had acted unreasonably and/or the matter should be re-allocated so that costs could be recovered.
- CPR rule 27.14 provides that, once a claim has been allocated to the small claims track, the court may not order a party to pay a sum to another party in respect of that other party’s costs, fees and expenses, including those relating to an appeal, save (so far as relevant to this appeal) such costs as the court may assess by the summary procedure and order to be paid by a party who has behaved unreasonably.
- Mr Butcher also drew our attention to the decision of this court of 8 July 2014 in Akhtar v Boland  EWCA Civ 943 which makes it absolutely clear that rule 27.14 applies to second appeals. I recognise that, prior to this decision, it may have been generally understood that the rule applied only to first appeals, and the notes to the Supreme Court Practice appear to have supported that understanding. But, since 8 July, that is to say a few days before the decision of Judge Gosnell and some weeks before the filing of the notice of appeal, there can have been no doubt as to the correct position.
- It follows, and Mr Butcher accepts for the purposes of this appeal, that we cannot make an order for costs on this appeal unless we decide that RSA’s behaviour has been unreasonable or we re-allocate the claim to the multi-track pursuant to CPR 26.10. He invites us to find that RSA’s behaviour has indeed been unreasonable. He also invites us to make an order for re-allocation and to backdate it to the commencement of the appeal or at least to the date of the application.
- Mr Butcher’s submissions in relation to RSA’s behaviour are commendably concise and may be summarised as follows. RSA has failed properly to engage in the appeal process at any point. It chose to argue the claim on both the rate and period issues; it obliged Mrs Conlon (and, in reality, AEL) to pursue a first appeal to overturn an unsustainable decision on the period issue; and then it put Mrs Conlon to the trouble of issuing a further notice of appeal on the rate issue and pursuing all of the steps of a second appeal. At this late stage it has conceded on the issue of liability, yet it seeks to avoid responsibility for all of the costs and expenses Mrs Conlon has incurred. Further, it failed to comply with the court’s directions by failing to serve a skeleton or list of authorities by 19 January 2015 and failed even to inform Mrs Conlon’s solicitors who would be representing it at the appeal until after 20 January 2015, this being the date set by the court for counsel to produce an agreed bundle of authorities.
- As for re-allocation, Mr Butcher argues that the need for this only became apparent after the decision in Akhtar. Further, it is appropriate that the case should be re-allocated because this is a highly contentious area of law; RSA deployed a series of unsustainable defences and did so, at least in part, because it thought it would not be at risk as to costs; and both AEL and RSA are substantial companies and the points raised in the appeal were of general importance to both of them and to other companies operating in this field. He continues that, in all these circumstances, it is appropriate that the losing party, here RSA, should bear the costs of the appeal.
- I find myself unable to accept these submissions, attractively presented though they have been. First, I see nothing unreasonable about RSA’s behaviour. The claim was properly allocated to the small claims track and RSA defended it as it was entitled to do. The deputy district judge had a wide discretion as to how he dealt with the hearing and, in accordance with the rules, conducted it in a relatively informal way, no doubt in an attempt to arrive at a just decision but at proportionate cost.
- Thereafter, Mrs Conlon, supported by AEL, appealed against the deputy district judge’s order but at that stage there was no suggestion the appeal was being treated as a test case. Both sides were represented on the appeal by junior counsel and Judge Gosnell appears to have derived a good deal of assistance from the submissions each of them made to him. I certainly detect no criticism of the behaviour of either side in his judgment. As I have indicated, he found that the deputy district judge had fallen into error both in relation to the BHR and the period for which it was recoverable and the effect of his order was to reduce the former but increase the latter.
- Only Mrs Conlon sought to appeal against Judge Gosnell’s order. Permission to appeal was granted by Lewison LJ in late October 2014 and not long thereafter the parties were told that this appeal was to be listed for hearing with that in Stevens. At that point it became clear that this was being treated as a test case. But, as Mr Turner has emphasised, that is not a designation which RSA ever sought. Until that time it had treated the claim in just the same way that it would have treated any other low value claim proceeding in the small claims track. After consideration of its position, it decided that it had no wish to incur the associated costs of engaging further with the substantive issues arising on the appeal and so made the offers to which I have referred. I am satisfied that was a perfectly reasonable and responsible course for it to have taken and I do not believe it can be criticised for so doing. I am prepared to accept that RSA failed to serve a skeleton or list of authorities by 19 January 2015 and failed to inform Mrs Conlon’s solicitors who would be representing it at the appeal until after 20 January 2015, but it seems to me that these failures must be seen in the light of the offers it had made and the clear indication it had given that it did not wish to oppose the appeal. In these circumstances the failures, such as they were, do not merit a special award of costs.
- I turn then to re-allocation. CPR rule 26.10 provides that a court may subsequently re-allocate a claim from one track to another. The costs position following re-allocation is addressed by CPR rule 46.13. This reads:
“(1) Any costs orders made before a claim is allocated will not be affected by allocation.
(2) Where –
(a) claim is allocated to a track; and
(b) the court subsequently re-allocates that claim to a different track,
then unless the court orders otherwise, any special rules about costs applying –
(i) to the first track, will apply to the claim up to the date of re-allocation; and
(ii) to the second track, will apply from the date of re-allocation.
(3) Where the court is assessing costs on the standard basis of a claim which concluded without being allocated to a track, it may restrict those costs to costs that would have been allowed on the track to which the claim would have been allocated if allocation had taken place.”
- I therefore accept that this court has the power to re-allocate this claim from the small claims track to the multi-track. It is also clear that, were we to make that order, any special rules applying to costs of claims proceeding in the small claims track would continue to apply to the claim up to the date of re-allocation, unless we were to order otherwise. It is, I think, implicit in rule 46.13 that the court has the power to order otherwise and so, effectively, backdate the re-allocation for costs purposes, though any court contemplating making such an order would need to be satisfied that there are good reasons for doing so.
- Nevertheless, in my judgment it is now far too late to make an order for re-allocation in this case. As I have explained, the application for re-allocation was not made until 19 December 2014, some four months after the filing of the notice of appeal. I accept that both AEL and RSA have substantial businesses. But up to that point RSA was entitled to assume that the special costs rule set out in rule 27.14 applied to the claim, including this appeal. It behaved entirely reasonably in conducting its defence as it did and it had no reason to suppose a special order would be made against it. Just a few days later, it indicated that that it did not wish to contest the appeal and, as I have indicated, it has now agreed that the judgment of Judge Gosnell should be set aside and judgment entered against it. Again, it cannot be criticised for taking that course. In all these circumstances Mr Butcher has failed to persuade me that it is appropriate to re-allocate this claim to the multi-track or make a costs order against RSA in respect of the whole or any part of Mrs Conlon’s costs of this appeal.
- I would therefore dismiss the application for re-allocation and make no order in respect of the costs of the claim, including the costs of this appeal.