Nelson’s Yard Management Company v Eziefula [2013] EWCA Civ 235
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Summary: A party who unilaterally discontinues legal proceedings is usually required to pay the other side’s costs. That ought always to be borne in mind when an adjoining owner is considering whether to issue legal proceedings to restrain what he fears are notifiable works that have been commenced without proper notice first being served in compliance with the Act. If such proceedings are issued, and no agreement can be reached with the building owner as to the costs of those proceedings, then the adjoining owner might have to proceed to trial in order to ensure that his costs are paid – even though the substantive issues that prompted the proceedings may no longer be ‘live’ (save as to costs). In this case, however, the Court of Appeal considered that the adjoining owner claimants who unilaterally discontinued ought nevertheless to have some of their costs paid by the defendant. That is because the building owner had ignored all pre-action correspondence and protocols.
Court: This is a decision of the Court of Appeal and therefor binds the County and High Courts. However, decisions on costs such as this one are inherently fact-specific and, on different facts, a different decision might be reached.
Facts: The claimants observed excavation works being carried out on a neighbouring property and became concerned that the works were notifiable works for which notice had not been served. Four letters were written, all of which requested that the claimants surveyor be permitted to have access to the site to inspect. The first two letters were written by the claimants themselves requiring compliance with “the party wall regulations”. The third letter was from solicitors and asserted that excavations were being carried out without proper compliance with the 1996 Act. The right to seek injunctive relief was reserved. The fourth letter was also from solicitors and required the defendant to undertake to cease all development works, in default of which injunctive proceedings would be issued. All those letters were ignored by the defendant. The claimants therefore issued proceedings. Thereafter, however, (1) the defendants permitted the claimant’s surveyor to have access to the site; (2) a structural engineer suggested that it was not possible for the works to have caused damage to the foundations of the claimants’ property; (3) a defence was filed denying that the excavations were notifiable works and suggesting that, insofar as any excavations were too close to the claimants’ property, those works were unauthorised works by independent contractors; (4) the proceedings were stayed to permit the parties engineers to meet and attempt to agree what works, if any, might be required to ensure that the foundations were not damaged; (5) notice pursuant to s. 6 of the Act was served – the defendant contended that the said notice referred only to future works (and to any of the earlier works to which the claimants had taken exception); (6) An award was agreed which made provision for how the defendant’s works could be carried out; (7) Compensation under the 1996 Act of £850 was awarded by the surveyors for minor damage caused by the defendant’s works – again the defendant maintained this related to the works pursuant to his notice and not to the earlier works. Eventually, the claimants applied to discontinue their proceedings, but on terms that the defendant pay their costs of the litigation. At first instance, the Deputy Judge held that there was no reason to depart from the usual rule that a party who unilaterally discontinues legal proceedings is usually required to pay the other side’s costs. The claimants appealed to the Court of Appeal. They relied on the defendant’s complete failure to engage with them properly or at all prior to the issue of proceedings; and that once proceedings were issued, the defendant started to engage and complied with the Act.
Decision: The Court of Appeal allowed the appeal. They applied the principles that had been distilled by Moore-Bick LJ in sub nom Brookes v HSBC Bank [2011] EWCA Civ 354. The starting point is that when a claimant discontinues proceedings it is presumed that the defendant should recover his costs; it is for the claimant to show a good reason for departing from that usual rule. The mere fact that the claimant might have obtained most or all of what he might realistically have obtained at trial does not justify a claimant from relying on the avoidance of a trial which would be solely about liability to recover costs as a reason to depart from the usual rule. Further, as there has been and is to be no trial, the Court ought not to take a view as to what might have happened at trial. At para [33] Beatson LJ (giving the unanimous judgment of the Court) asked, and answered: “Is the claimant obliged, absent agreement as to costs, to proceed to a trial which in reality would be solely about liability to recover costs? Where a defendant’s position is one deserving of argument at trial, the general answer must be ‘yes’.” The Court of Appeal recognised that it might have been likely or very likely that the claimant would have succeeded at trial but, without a trial, it could not proceed on the basis that the claimants would have won.
In order not to pay the defendant’s costs, a discontinuing claimant would have to show some change of circumstances to which he had not contributed; and no change of circumstances is likely to suffice unless it was bought about by the defendant’s unreasonable conduct. It was on those two considerations that the appeal was determined. Beatson LJ noted that, when permission to appeal had been granted, it had been commented by the Lord Justice who granted permission that, because of the defendant’s conduct, the claimants had been given no real choice but to commence the proceedings. He concluded that the Judge at first instance had not taken any sufficient account of the defendant’s failure to respond to the pre-action correspondence. The Judge’s order should therefore be set aside. Exercising its discretion afresh, the Court of Appeal considered that the claimants’ concern for the structural integrity of their foundations was reasonable. The defendant’s failure to respond to any of the pre-action letters was unreasonable. Issuing proceedings was therefore justified. The position changed once the defence was served. That defence was not obviously spurious; thereafter, both parties were at the usual litigation costs risk. The defendants therefore ought to pay the claimants’ legal cost up to the point at which the defence was served; and thereafter there was to be no order as to costs.
Discussion: On the one hand, there is little about this case that can be said to be novel. It is not uncommon for a building owner to ignore the adjoining owner’s concerns and these sorts of issues are regularly fought in the county courts and high court. However, it is relatively unusual for such ‘knock-about’ issues to be ventilated in the relatively rarefied atmosphere of the Court of Appeal, and the Court of Appeal’s view on the relative conduct of the parties is interesting. It has always been known that a defendant who ignores all reasonable pre-action correspondence is at risk on costs – whether or not the works he is pursuing are genuinely notifiable. It is nevertheless helpful that the Court of Appeal has given comfort to adjoining owners who are being ignored that the Courts will be sympathetic if they reasonably consider that they have no choice but to issue proceedings. On the other hand, it is important to note that the Courts’ sympathy will only extend so far. A claimant who issues proceedings seeking injunctive relief commences litigation that may be contested and, if it is contested, he runs all the usual costs risks that are associated with contested litigation. If litigation is being used to force a building owner to engage with the adjoining owner, all issues arising in the litigation should immediately be reassessed by the adjoining owner and his advisers once the building owner starts to engage.
