Richings Legal Update

Northstar Systems Ltd v Fielding [2006] EWCA Civ 1660. Northstar was a factually complex commercial claim. The claimants had been unsuccessful in the proceedings, but during the course of the trial the Judge found that the defendant had been guilty of serious dishonesty in that it had lied and sought to rely on forged documents. The claimant was ordered to pay the defendants costs, reduced by 20% to reflect the costs incurred by the claimant in proving the dishonesty. The claimant contended that the deduction should have been 60%. One of the issues was the degree to which the paying party (the claimant) could rely on the defendants conduct at the assessment when determining whether the defendants costs were reasonably incurred.

The court to considered Aaron in some detail, and Waller LJ at paragraph 28 said:

I am troubled as to the breadth of the principle as expressed by Jack J in his judgment, and as to how what Jack J said may be interpreted by others.

At paragraph 32 he said:

His statement of principle could, however, be said to go further than the decision in the case required and in my view with respect it is in fact too broadly stated.

He went on to state:

34. It seems to me that 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, and then during assessment. But the court will want to ensure that dishonesty is penalised but that the party is not placed in d0lo.22.uble jeopardy. Ultimately, the question is one of the proper construction of the order made by the Judge. Thus it will be important for the Judge, who is asked to take dishonesty into account at the end of a trial when considering the order as to costs, to consider what is likely to occur on assessment. Where dishonest conduct is being reflected in an order made by the trial Judge, it must be wise for the future for Judges to make clear whether they are making the order on the basis that, on the assessment, the paying party will still be entitled to raise the dishonesty in arguing that costs incurred in supporting the particular dishonesty were unreasonably incurred. Judges may also want to consider whether to make an order under rule 44.14 and it would be wise to do that before considering precisely what order to make in relation to the costs of a trial generally

Northstar has clarified the law to some degree, and provided guidance for both trial Judges and for Costs Judges. The judgment makes it clear that the paying party should raise issues of conduct before the trial Judge, and not leave the matter for assessment. Once the issue is raised before the trial Judge he must consider the effect of the order that he intends to make and how that order can be implemented on assessment to avoid the double jeopardy point. There remains a duty on the paying party to raise the issue of conduct before the trial Judge to allow him or her to perform the Northstar exercise referred to by Waller LJ at paragraph 34 of his judgment. The criticism levelled at the trial Judges in both Northstar and in Shirley was that they failed to appreciate in relation to matters abandoned prior to trial, or not pursued, that these costs would be disallowed in any event.