Whitney v Monster Worldwide Ltd & Anor [2010] EWHC 1298 (Ch) (26 May 2010)

Neutral Citation Number: [2010] EWHC 1298 (Ch) Case No: HC08C012127 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION The Court House Oxford Row Leeds LS1 3BG 26th May 2010 B e f o r e : His Honour Judge Behrens sitting as a Judge of the High Court in Leeds ____________________ Between: ROBERT LESLIE HOPE WHITNEY Claimant - and - (1) MONSTER WORLDWIDE LIMITED (2) MSL GROUP (TRUSTEES) LIMITED Defendants ____________________ Bruce Carr Q. C (instructed by McEwen Parkinson of 83 Wimpole Street, London W1G 9RQ) for the Claimant Thomas Croxford (instructed by Clyde & Co of 51 Eastcheap London EC3M 1JP) for the First Defendant Jonathan Hilliard (instructed by Macfarlanes LLP of 20 Cursitor Street, London EC4A 1LT) for the Second Defendant. Hearing dates: 29th April 2009, 26th May 2009 ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © Judge Behrens : 1. Introduction In November 2009 whilst sitting in London I was the trial judge in the action between Mr Whitney and the First Defendant ("Monster") his former employers. The claim concerned Mr Whitney's pension rights. Mr Whitney was employed by MSL Group Limited ("MSL") between 1975 and 1997. In February 1997 the share capital of the holding company of MSL was acquired by TMP Worldwide Holdings Limited ("Holdings"). In July 1997 the trading activities of MSL were transferred to a subsidiary of Holdings – TMP Worldwide Limited. TMP Worldwide Limited subsequently changed its name to Monster Worldwide Limited. Mr Whitney was employed by Monster from July 1997 until 31 st December 1997. Whilst employed by MSL Mr Whitney joined the HAY-MSL Pension Plan in January 1979 at the age of 33. In broad terms this was a final salary pension scheme which paid two thirds of final salary to members after 30 years membership. In 1989 the HAY-MSL Pension Plan was wound up. It was replaced by a money purchase scheme known as the MSL Money Purchase Scheme. It is not in dispute that the pension benefits under the MSL Money Purchase Scheme were likely to be significantly worse than under the HAY-MSL Pension Plan. It was Mr Whitney's case at trial that he (and about 27 other key employees) became legally entitled to what has been described as a "no detriment guarantee" ("NDG"). Under the NDG he was to be no worse off than he would have been under the HAY-MSL Pension Plan. Any shortfall between the amount payable under the MSL Money Purchase Scheme and the sum which would have been payable under the HAY-MSL Pension Plan was to be paid by MSL, his employer. Monster defended the claim on two main grounds. First Monster disputed that there was a legally enforceable contract between Mr Whitney and MSL under which Mr Whitney was entitled to the NDG. Second, even if the NDG was enforceable against MSL, it was not enforceable against Monster. There were a number of subsidiary issues at the trial both in relation to the terms of the contract and as to the quantum of the claim. The judgment [1] was handed down on 20 th November 2009. In summary I found for Mr Whitney on the two main grounds and resolved the subsidiary issues partly in Mr Whitney's favour and partly in Monster's favour. The judgment can be found at [2009] EWHC 2993 (Ch) so it is not necessary for me to set out the reasoning that led to my conclusions or to the facts that were found. As a result Mr Whitney became entitled to the sum of £908,303.78 inclusive of interest plus costs. Monster has been granted permission to appeal against the order. The appeal is due to be heard in October 2010. Mr Whitney is cross appealing on one of the subsidiary issues on which he lost. It will be necessary to trace the history of the proceedings in more detail later in this judgment. For the purpose of this introduction it is sufficient to note that Mr Whitney commenced proceedings against Monster on 7 th June 2007. The initial Defence was filed in July 2007 and the action was originally listed for trial in July 2008. After considering the documents that had been disclosed and taking specialist advice Mr Whitney decided that there was a potential claim against MSL Group (Trustees) Limited ("the Trustees") in respect of the surplus that was transferred to its predecessor as trustee in October 1990 after the HAY-MSL Pension Plan had been wound up. Following a contested hearing on 5 th June 2008 before Mr James Goudie QC Mr Whitney obtained permission to join the Trustees as Second Defendant and the original trial date was vacated. The proceedings were served on the Trustees in July 2008. An initial defence was filed by the Trustees on 22 nd August 2008. In or around October 2008 the hearing date for the trial was fixed for November 2009. Following a Beddoes application by the Trustees an Amended Defence was served on 14 th November 2008. Without prejudice negotiations between the solicitors for Mr Whitney and the Trustees began in June 2009. As a result of those negotiations there was an agreement (subject to formal contract) between the parties' solicitors to permit Mr Whitney to discontinue the proceedings against the Trustees on the basis that each side paid their own costs. At or about the same time a large number of documents (including the Minutes of many of the Meetings that were relied on at the trial) were discovered by Ms Gregory, the in house lawyer employed by Monster. These documents were formally disclosed by Mr Kraljevic of Clyde & Co on behalf of Monster on 9 th September 2009. Shortly before this, on 4 th September 2009 Miss Emson of Macfarlanes on behalf of the Trustees wrote to Mr McEwen of McEwen Parkinson on behalf of Mr Whitney informing him that the Trustees did not wish to proceed with the settlement negotiations. On 16 th October 2009 Mr Whitney formally discontinued the case against the Trustees. The present application is an application under CPR 38 r 6.1 in relation to the costs consequences of that discontinuance. Mr Whitney contends that there should be no order as to costs as between him and the Trustees. He also contends that Monster should be responsible for his costs in pursuing the Trustees. Furthermore if he is ordered to pay any of the Trustees' costs he should be indemnified by Monster in respect of those costs. Mr Whitney's principal complaint relates to the late disclosure by Monster. If proper disclosure had been made by Monster at the right time the Trustees would never have been joined. Furthermore the timing of the final disclosure had the effect of causing the Trustees to withdraw from the subject to contract negotiations. He contends that the Trustees should have disclosed the value of the fund earlier and that the circumstances in which the Trustees withdrew from the subject to contract agreement are such that there should be no order as to costs as between Mr Whitney and the Trustees. Both the Trustees and Monster seek to resist the application. Both contend that there is no reason to depart from the normal consequence of discontinuance. Mr Whitney should pay the Trustees' costs of the action. The Trustees contend that this was always a weak case. It was commenced against them without any protocol correspondence. It was continued far longer than it should have been. There were many reasons why it was going to fail and the February 1995 minute did not add significantly to them. Monster refutes the criticisms of its conduct of the litigation. It does not accept that it was in breach of its disclosure obligations or that there is any reason to depart from the usual consequences of discontinuance. It does not accept that this is an appropriate case for a Bullock order. 2. The History of the Litigation In the light of the submissions that have been made it is necessary to look at the history of the litigation in some detail. 2.1 Pre-action Mr McEwen of McEwen Parkinson has at all times acted for Mr Whitney. Mr Kraljevic has at all times acted for Monster. For part of the time he was a partner in Halliwells. Later he moved to Clyde & Co. Miss Emson of Macfarlanes has acted for the Trustees. On 10 th November 2005 Mr McEwen wrote to Monster giving advance notice that Mr Whitney intended to call upon Monster to honour the NDG and alleged a shortfall of £1.117 million. Mr Kraljevic, then a partner in Halliwells, replied on behalf of Monster on 18 th January 2006. By 9 th March 2006 Mr Kraljevic had made clear that Monster were aware of the background to the NDG, but at no time had it accepted liability for any pension shortfall and did not accept that there was a legally coherent analysis for such liability. On 9 th September 2006 Mr McEwen wrote a long letter to Mr Kraljevic in which he summarised Mr Whitney's case and sought advanced disclosure of 4 classes of documents. One of the classes sought were documents evidencing the existence of a NDG on the change in 1989 from a final salary scheme to a money purchase scheme. On 29 th September 2006 Mr Kraljevic provided a long and detailed reply to Mr McEwen's letter. Mr Kraljevic was of the opinion that Monster was not obliged to provide pre-action disclosure within the rules but was prepared to do so on a voluntary basis. He accordingly purported to give disclosure of documents within the category set out above commenting that there were very few documents within the category. According to Mr Carr Q. C some 10 documents were disclosed at this stage. It is perhaps worth noting that at that time there was no suggestion by either party that there was any potential liability on the Trustees. 2.2 Proceedings against Monster The proceedings were commenced in the Queens Bench Division on 7 th June 2007. In the Particulars of Claim Mr Whitney claimed a declaration that he was entitled to the NDG and the sum of £2.19 million or such sum necessary to give him an annual pension of £63,431 from the age of 60. The original Defence was filed by Monster on 18 th July 2007. Paragraph 6 is central to the Defence. It contains a denial that MSL agreed to ensure that Mr Whitney would be disadvantaged as a result of the adoption of the MSL Money Purchase Scheme. In paragraphs 6.1 and 6.4 the pleader asserts that it was MSL company policy to ensure that employees including the Claimant were not financially worse off as a result of the transfer but this was not a contractually binding obligation. Paragraphs 6.2 and 6.3 are relied on by Mr Whitney in this application. They provide: 6.2 When the HAY-MSL Scheme was wound up it was in surplus. The residual surplus was transferred into a Trustee Investment Fund. 6.3 Payments from the Trustee Investment Fund were entirely at the Trustee's discretion. At no point did MSL enter into any contract with the Claimant that it would use the monies in the Trustee Investment Fund or any other monies to ensure that is benefits on retirement were as good as those that he would have received under HAY-MSL Scheme. Monster's first disclosure statement was dated 29 th January 2008. In paragraph 6 of his first witness statement (dated 2 nd June 2008 and filed in support of the application to join the Trustees) Mr McEwen lists 8 documents which he asserts are relevant to the application. The first 5 of these contain references to the surplus being transferred and to various valuations of the surplus from £3.465m in November 1991 to £2.5 million in January 1994. They also contained references to the surplus being used to fund the NDG for various individuals. The Sixth document is the report dated 19 th January 1995 by Joan Blakeley to the Board which is referred to in paragraphs 103 and 104 of the judgment. It contained a proposal to "ring fence" a part of the surplus for the benefit of the members entitled to the NDG. The Seventh and Eighth documents were the Sale and Purchase Agreement and the Disclosure Letter which are summarised in paragraphs 110 and 111 of the judgment. In his second witness statement Mr McEwen says that he took the view that the initial disclosure was deficient and made requests for disclosure of Board Minutes. He was told that Monster did not have any Board Minutes containing references to relevant issues. However if searches revealed any relevant documents they would be disclosed. Mr Whitney had a conference with Mr Carr Q. C on 17 th April 2008. At that conference the decision was taken to seek the advice of specialist pension counsel with a view to joining the Trustees as the Second Defendant. At a second conference following the receipt of that advice the decision was taken to make the application to join the Trustees. In his second witness statement Mr McEwen acknowledged an element of risk involved in the decision. Mr Whitney had transferred out of the MSL Money Purchase Scheme in 1998 Included within documents held by Mr Whitney was a blank transfer form which said that the transfer was in lieu of his rights under the scheme. It was not known if Mr Whitney had signed the form. It was recognised that there was a risk that if he had signed it it would be argued that this also covered his rights under the surplus. On disclosure by the Trustees (perhaps unsurprisingly) it emerged that Mr Whitney had indeed signed the Transfer Form. The application to join the Trustees as Second Defendant was opposed by Monster but was successful. Mr Whitney was granted permission to amend and the original trial date was vacated. The Trustees were not a party to the application to amend. Furthermore as Mr Hilliard pointed out there was no pre-action correspondence or letter of claim sent to the Trustees. The first they knew about the claim was when they were served in early July 2008. 2.3 Proceedings against the Trustees The body of the Amended Particulars of Claim contained 3 paragraphs dealing with the claim against the Trustees – paragraphs 4A – 4C. In addition there were amendments to the relief claimed. Paragraphs 4A and 4C were relied on in the hearing before me: 4A In about October 1990 the surplus in the [HAY-MSL Pension Plan] was transferred …to the trustees of MSL Money Purchase Scheme. The surplus was transferred on terms that the trustees of MSL Money Purchase Scheme would hold the surplus on trust to (amongst other things) provide members who were entitled to the [NDG] with a pension from that surplus which was equivalent to the pension which each such member would have received from the [HAY-MSL Pension Plan], after giving credit for what the Member actually received from the MSL Money Purchase Scheme but for the [NDG]. In the premises the Claimant became and continues to be entitled to a pension from the surplus in MSL Money Purchase Scheme of such amount as is necessary to give effect to the [NDG]. 4C In further premises the trustees of the MSL Money Purchase Scheme and/or MS: and (following the transfer) TMP, were, and are, under a duty to ensure that the surplus in the MSL Money Purchase Scheme was and is at all times sufficient to give effect to the [NDG] in the manner referred to above, both in respect of the Claimant, and in respect of all other members who were entitled to it. The relief was amended to include declarations that Mr Whitney was entitled as against the Trustees to a pension from the surplus at the rate necessary to give effect to the NDG, and also to ensure that the surplus in the MSL Money Purchase Scheme was and is at all times sufficient to give effect to the NDG. It also claimed an order that the Trustees pay Mr Whitney such pension. In paragraphs 9 to 23 of her witness statement Miss Emson sets out a number of background facts most of which are contained in the judgment. In summary she notes: 1. Mr Whitney was a director of the original trustee from 1987 to May 1996 [2] . He was also a director of the sponsoring employer. In addition he was a member of the MSL Money Purchase Scheme until November 1998 when he transferred out of the scheme 2. The surplus has been used for a number of purposes including for employer contribution holiday both for MSL and Monster and to enhance the benefits of some members in a number of different respects. [This, of course, includes the payments that were in fact made to those "entitled" to the NDG]. Macfarlanes were instructed by the Trustees on 4 th August 2008. There were two initial concerns. The first was that the details set out in paragraphs 4A – C of the Amended Particulars of Claim were inadequate to enable it to understand the nature of Mr Whitney's claim. The second was whether it should remain neutral. Accordingly on 8 th August 2008 Macfarlanes served a part 18 Request for Further Information. After some correspondence a Defence was filed on 22 nd August 2008. During the course of that correspondence Mr McEwen asked for details of the amount remaining in the surplus. Those details were not provided at that time. The Defence made it clear that, at that time, the Trustees were neutral and required Mr Whitney to prove his case against them. On 12 th September 2008 Mr Whitney replied to the Request for Information. In paragraphs 4.2 - 4.4 of the Replies he particularised the alleged trust as being partly oral and partly written. The written document relied on was the position paper from Joan Blakely prepared for the Board Meeting 18 April 1989 [See paragraph 43 of the judgment]. It was alleged that there was an oral agreement at that meeting and reliance was placed on the later report of Joan Blakeley dated 19 th January 1995 referred to above. However the part of the report relied specifically quoted in the reply did not include the proposal to ring fence part of the surplus for the benefit of those members entitled to the NDG. Following a Beddoes application the Trustees filed an Amended Defence on 14 th November 2008. In paragraph 7 of the Amended Defence the Trustees contended that the surplus was transferred to be held by it at its discretion. Its discretion was not transcribed by any obligation to hold the surplus on trust for members who were allegedly entitled to the NDG and the Trustees were not obliged to maintain a sufficient level of fund for that purpose. In paragraph 9 the Trustees refute the suggestion that the trust came into operation as a result of the 18 th April 1989 meeting and assert that no agreement was reached at that meeting. In paragraphs 13 – 18 the Trustees seek to rely on the Transfer Request Form that was signed by Mr Whitney as constituting a release of all his rights against the Trustees. On 12 th December 2008 the Trustees served their disclosure list. Amongst the documents disclosed was the Transfer Acceptance Form signed by Mr Whitney. It also became clear at about this time that the surplus fund had been reduced to about £150,000. According to paragraph 29 of Mr McEwen's witness statement by the end of February 2009 Mr Whitney and/or his advisors had formed the view that the claim against Monster was more likely than not to succeed. Furthermore there was a prospect of having a valueless judgment against the Trustees. 2.4 Settlement negotiations On 24 th March 2009 Miss Emson sent an open letter to Mr McEwen. In it she pointed out that the maximum recovery was less than £150,000. She asserted that the claim against the Trustees was without merit relying on the lack of detail in the witness statements and the release of rights in the Transfer Request Form. The letter invited Mr Whitney to withdraw his claim against the Trustees. On 2 nd June 2009 there was a telephone conversation between Miss Emson and Mr McEwen. According to Miss Emson's file note there was a without prejudice discussion on the possibility of a compromise of the claim against the Trustees. Miss Emson agreed to take instructions. On 18 th June 2009 there was a further without prejudice conversation. According to Miss Emson she offered for a limited period to allow Mr Whitney to withdraw his claim against the Trustees without being pursued for costs. The offer was said to expire on 10 th July 2009. On 13 th July 2009 Miss Emson wrote to Mr McEwen noting that there was no response and drawing the inference that Mr Whitney had elected to decline the offer. Mr McEwen replied on 21 st July making the point that "there was no offer", only an informal dialogue between solicitors. He invited Miss Emson to continue the dialogue. There were three further telephone conversations between Miss Emson and Mr McEwen – on 24 th and 28 th July and 5 th August 2009. In the first conversation Miss Emson stated she was willing to continue the without prejudice negotiations. In the second conversation Mr McEwen offered to drop the proceedings against the Trustees on a no costs basis. Miss Emson said she would take instructions. In the third conversation Miss Emson said that the Trustees were (subject to a formal agreement) prepared to accept the drop hands proposal but made a number of points about the costs of the Trustees (then estimated to be £170,000), the lack of merit in the claim against the Trustees, the absence of pre-action correspondence. On 5 th August 2009 Mr McEwen wrote to Miss Emson confirming the telephone conversation. In the letter he acknowledged the need for the written agreement between the parties. He made the point that the clients had different views on the prospect of success. He invited Miss Emson to respond to the letter. There was in fact no response from Miss Emson until 4 th September 2009 despite two chasing letters dated 13 th August and 1 st September 2009. In the letter she informed Mr McEwen that the Trustees did not wish to proceed with the settlement discussions. 2.5 Disclosure in September 2009 As already noted Ms Gregory is and was Monster's in house lawyer. She was also secretary to the Trustees. She has filed a witness statement dealing with Monster's compliance with its disclosure obligations. She points out that Monster did not become involved with Mr Whitney until 1997, some considerable time after the NDG came into existence. She points out that there was no-one within Monster with first hand knowledge of this. Furthermore the individuals involved in 1997 when Mr Whitney left Monster had also left. In paragraphs 10 – 17 she sets out in some detail the searches and steps she took in respect of the disclosure that took place before September 2009. In paragraphs 18 – 22 she deals with the disclosure that took place in September 2009: 1. In late July 2009 Ms Gregory received an excel version of Monster's then current archive list. The list was 1,923 pages long. On looking through the list she noted that some 115 boxes under the "legal" tab. There was a proposal to destroy 50 of these boxes. Ms Gregory decided she needed to have a look at the boxes. 2. The boxes arrived early to mid August 2009. Much to her surprise she discovered that one box contained two sets of minute books – one for MSL Group Ltd and one for MSL Advertising Ltd. Another contained a file of papers that appear to have been generated at the time of Mr Whitney termination. Ms Gregory cannot say why these documents were archived or when. In any event she sent them to Monster's solicitors. On 9 th September 2009 Clyde & Co on behalf of Monster served a Supplemental List of Documents It comprised some 428 new documents including the Minute of the Board Meeting on 15 th February 1995 and the Minutes of the other Board Meetings that were referred to at the trial. The 15 th February 1995 Minute included: The draft announcement to members on the proposed changes was received. It was noted that the proposal to 'ring fence' part of the surplus for the no detriment undertakings from the pension fund surplus had been dropped. Although we expect to fund the no detriment undertakings from the pension fund surplus they ultimately remain, as now, a company undertaking. Copies of all the documents were sent on 17 th September 2009. On 18 th September 2009 Mr McEwen wrote to Mr Kraljevic of Clyde & Co stating that the late delivery of these documents could have profound cost consequences and asked for an explanation of why they had only just come to light. Mr Kraljevic provided the explanation on 23 rd September 2009 in substantially the same terms as that provided in Ms Gregory's witness statement. Thus I do not need to summarise it. 2.6 Discontinuance and subsequent events On 14 th October 2009 Miss Emson wrote to Mr McEwen pointing out that the trial was less than 3 weeks away, that substantial further costs would be incurred and invited him to withdraw his claim against the Trustees. The letter states that the settlement negotiations broke down as a result of the Trustees' view that the merits of Mr Whitney's claim against them had deteriorated further following recent extensive disclosure by Monster. Mr McEwen wrote back asking when and in what circumstances Miss Emson and/or the Trustees received the documents recently disclosed. No doubt he had in mind that Miss Emson's letter terminating settlement negotiations was dated 4 th September 2009, 5 days before the disclosure by Clyde & Co of the supplementary list of documents. On 15 th October 2009 Miss Emson replied that list was served on 9 th September 2009 and copies of the documents received on 18 th September 2009. On 16 th October 2009 Mr McEwen wrote to Miss Emson enclosing the Notice of Discontinuance. In the letter he made the point that if Mr Whitney had seen the Minutes that have now been produced he would not have brought proceedings against the Trustees or would have discontinued them earlier. The letter also foreshadows the application now before me in respect of costs. Between 16 th October 2009 and the middle of November 2009 Mr McEwen attempted to pursue the question of when the Trustees became aware of the documents in the Supplemental List. On 2 nd November 2009 Miss Emson replied stating that the Trustees first became aware of the documents on 9 th September 2009. Further light on this issue is contained in Miss Emson's witness statement. In paragraph 31 she acknowledges that her contact with the Trustees has been through Ms Gregory who was appointed as their Secretary in January 2005. In paragraphs 59 and 63 of her statement she states that she received no instruction from Ms Gregory on behalf of the Trustees to withdraw from settlement discussions until 25 th August 2009. On that date Ms Gregory informed her that Monster had discovered further documentation relevant to the claim and that the Trustees did not want to continue settlement discussions. Miss Emson did not see the documentation at that stage. She was however satisfied that it was not in the Trustees best interest to continue settlement discussions until after the documents had been disclosed. When she reviewed the documentation she took the view (as expressed in her letter of 14 th October 2009) that the merits of Mr Whitney's case against the Trustees had deteriorated further. 3. Discontinuance CPR r.38.6(1), which provides: "Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant." As Chadwick LJ pointed out in paragraph 24 of his judgment in Walker v Walker [2006] 1 WLR 2194 the normal order on discontinuance is that the Claimant bears the Defendant's costs up to the date on which the notice of discontinuance is served. Whilst the Court may make a different order the burden is on the Claimant to persuade the Court that there is some good reason to depart from the normal order. In Teasdale v HSBC [2010] EWHC Judge Waksman QC derived at paragraph 7 of his judgment the following principles from the cases that were cited to him: 1. When a party discontinues, there is a presumption by reason of CPR38.6 that the Defendant will get his costs. The burden is firmly upon the Claimant to show that there is good reason to disapply it; see the judgment of Chadwick LJ in Walker at paras. 24 and 36. See also the judgments of Lightman J in RBG at para. 48 and Proudman J in Maini at para. 11; 2. The fact that the Claimant would have, or might well have succeeded at trial (a point sometimes advanced by a discontinuing Claimant) is not itself a good reason. This is because the Claimant has, by discontinuing, chosen not to have a trial by which the claim could be determined. Once there is to be no trial, it is not the function of the Court to attempt to decide whether or not the claim would have succeeded. See Walker paragraph 12; 3. I would only add this: if it is plain to the Court that the claim would have failed at trial that must be a relevant factor against disapplying the presumption because it suggests that all that discontinuance has done is to bring forward the day of defeat; see the judgment of Nicholas Strauss QC in Far Out at para. 9. See also the final sentence of para. 12 of the judgment in Walker which shows that it could be relevant that the claim could have been struck out as having no real prospect of success; 4. The mere fact that the Claimant's decision to discontinue may have been motivated by practical, pragmatic or financial reasons as opposed to a lack of confidence in the merits of the case will not, without more, assist. This is because the Claimant has taken the risk of litigation by commencing it and exposing the Defendant to the costs involved in defending it. See Maini at para. 11 and Far Out at para. 3. Thus a simple re-evaluation of the commercial point in proceedings, as with a re-evaluation of the merits, is not enough. See paragraph 11 of Maini; 5. In most cases, in order to show good reason, the Claimant will need first to show a change of circumstances since the claim was made. This will demonstrate at least that there is something more than a simple re-evaluation. See Far Out at para. 3. But even if circumstances have changed since the commencement of the claim, if they result from the very fact of the claim, for example the Defendant has run out of money because he has spent it all on defending it, the Claimant cannot invoke that. It may be different where the Defendant has rendered the Claimant's claim worthless because of something he has done on his own initiative, for example embarking on some other unsuccessful proceedings which led to his own bankruptcy. See Walker para. 39 commenting upon the decision in Everton v World Professional Billiards and Snooker Association 13 December 2001. Equally, if the chances of success had reduced in the Claimant's eyes because of what the Defendant produces on disclosure or because of some argument raised in the Defence it would be very unlikely that this would assist the Claimant on costs if he then discontinues. That is because such changing "circumstances" are part and parcel of litigation; 6. In truth it is difficult to see how any change of circumstance could amount to good reason unless it is connected with some conduct on the part of the Defendant which deserves to sound in costs against him. Thus paragraph 11 of Maini refers to "active misconduct". And at p541 of RTZ Potter LJ refers by way of example to the case of a Defendant "who perversely encourages a plaintiff into action by concealing the existence of a defence although reasonably invited prior to proceedings to make disclosure." Another example is the unnecessarily aggressive approach and totally unreasonable and unjustified stance taken by the Defendant in relation to negotiations before discontinuance, as found by Lightman J in para. 53 of RBG. Or the failings by the Defendant accountant in his professional obligations to the liquidator in Doshi; it is to be noted that in the last two cases the result was a percentage reduction in the Defendant's recoverable costs, not an order that they pay any part of the Claimant's; 7. And even if there has been some conduct by a Defendant which has caused a change of circumstances this should not have an adverse impact against him if, having regard to all the circumstances it does not amount to a good reason to disapply the presumption; so a change of circumstances is simply the beginning of the enquiry, not the end of it; 8. Thus the context for the Court's mandatory consideration of all the circumstances under CPR 44.3 is the determination of whether there is a good reason to depart from the presumption imposed by CPR 38.6. 4. Costs as between the Trustees and Mr Whitney 4.1 Mr Carr Q. C's submissions Mr Carr Q. C accepted that the normal rule was that Mr Whitney should be responsible for the Trustees' costs and it was for Mr Whitney to provide good reason for the Court to make a different order. He submitted that in all the circumstances of the case it would be appropriate for there to be no order as to costs. In support of this submission he relies on two matters First, when Mr Whitney issued proceedings against the Trustees he did not know the value of the surplus. This was material information because it affected the proportionality of the claim. Mr McEwen asked for this information in August 2008 but it was not provided until disclosure in December 2008. If he had been provided with the information more timeously it is likely that he would have been able to conclude the agreement reached (subject to contract) in August 2009. Second, both Mr Whitney and the Trustees were (subject to contract) prepared to agree to a drop hands settlement on 5 th August 2009. The Court should infer that the compromise fell through because Ms Gregory tipped off the Trustees as to the existence of the documents that formed the basis for the September 2009 disclosure with the result that the Trustees instructed Ms Gregory to inform Miss Emson on 25 th August not to proceed with the compromise. If, as at the middle of August the Trustees were content with the drop hands arrangement, it is not a fair and just outcome from a cost perspective that as a result of late disclosure from Monster Mr Whitney should be deprived of the deal he had reached with the Trustees. It is unfair on Mr Whitney that he should find himself in a worse position as a result of Monster's late disclosure and the tip off to the Trustees which caused the Trustees to walk away from the deal that had been provisionally reached. 4.2 Mr Hilliard's submissions Mr Hilliard drew my attention to the authorities on CPR 38.6 which have been summarised above. He submitted that there was no good reason why the normal order should not apply. He relied on a number of matters: First he submitted that the litigation against the trustees was always speculative and extremely likely to fail. He drew my attention to the vagueness of the original pleading in the Amended Particulars of Claim and to the fact that the Particulars supplied appeared to rely on an April 1989 agreement in relation to a floor plan which never came into existence. There was no reliance in the pleaded case on the proposal to "ring fence" any portion of the surplus. He drew my attention to the release of rights document signed by Mr Whitney in October 1998. He made the point that Mr Whitney was plainly aware when he commenced the proceedings against the Trustees that he might have signed the document but commenced proceedings in any event. He reminded me that Mr Whitney was a director of the original trustee of the MSL Money Purchase Scheme. As such he must have been aware that the surplus was being used in part to fund a contribution holiday for the employer. He referred me to Inland Revenue approval for the use of the surplus inter alia to provide a contribution holiday for the employer. Second, he criticised Mr Whitney's conduct of the litigation against the Trustees. He made the point that there was no pre-action correspondence between Mr Whitney and the Trustees and that the first they know of the proceedings was when they were served with the Amended Particulars of Claim in July 2008. If there had been pre-action correspondence the question of the value of the surplus fund could have been canvassed at more leisure. He criticised the delay by Mr Whitney in seeking to negotiate a withdrawal of his claim. On any view the disclosure in December 2008 had seriously weakened the claim against the Trustees yet there was no attempt to withdraw at that stage. There was no reply to the open letter of 24 th March 2009. Negotiations did not begin until June 2009. In the light of the weakness of Mr Whitney's case he should have jumped at the offer to drop hands made on 18 th June 2009 and not allowed the offer to lapse. Third, he submitted that the Trustees' conduct of the litigation was beyond criticism. He accepted that in August 2008 Mr McEwen requested the value of the surplus fund. However he pointed out that the correspondence at that time related to an extension for the drafting of the Defence. Even though the allegations against the Trustees were vague and not properly understood Mr McEwen insisted on the filing of the original Defence. The Trustees properly took a neutral stance until authorised by the Court to file a Defence on the merits. The Amended Defence and the disclosure highlighted the weaknesses in Mr Whitney's claim. In March 2009 Miss Emson wrote the open letter drawing Mr Whitney's attention to these weaknesses. Fourth, he submitted that there was nothing improper in the Trustees' decision to withdraw from the negotiations at the beginning of September 2009. The documents were not in the Trustees custody, possession or power so the Trustees could not be criticised for the late disclosure. There was nothing improper in Ms Gregory informing the Trustees that she had discovered more relevant documents and nothing improper in the Trustees acting on that information. The new documents were " changing circumstances [that] are part and parcel of litigation" 4.3 Discussion and Conclusion I prefer the submissions of Mr Hilliard to those of Mr Carr Q. C. In my view neither of the two grounds relied on by Mr Carr Q. C are, collectively or individually, sufficient to amount to a good reason to depart from the normal consequence of discontinuance. I agree with Mr Hilliard that the claim against the Trustees was both speculative and weak. I am not, however, prepared to hold that it was always hopeless. It was, after all, advanced with the benefit of specialist Counsel's advice. Following the filing of the Amended Defence and Disclosure it became weaker. I do not find it necessary to decide that it was hopeless at that stage; plainly, however, prospects of success were substantially less than 50%. I do, however, agree with Mr Carr Q. C that after the September 2009 disclosure the case against the Trustees had become impossible. Apart from all other factors the 15 th February 1995 Minute made it clear that the liability for the NDG was " a company undertaking". In my view Mr Carr Q. C's first ground does not bear close examination. First I agree with Mr Hilliard that Mr Whitney should have taken up the size of the surplus before the issue of proceedings against the Trustees. In failing to do so Mr Whitney plainly took the risk that the size of the surplus would not be sufficient to justify expensive litigation. The size of the surplus was not a change of circumstance arising after the issue of proceedings such as to amount to a good reason. Equally I do not think that any serious criticism can be levelled at the Trustees for failing to answer Mr McEwen's query in August 2008 at a time when they were under pressure to file a Defence. Finally Mr Whitney did not discontinue when he discovered the size of the surplus. He did not start negotiations till June 2009 some months later. It seems likely, as Mr Carr Q. C submits, that the tip off by Ms Gregory affected the Trustees' decision to continue the settlement negotiations. That after all is what Miss Emson said in the letter of 14 th October 2009. It is, however, plain that the Trustees regarded the claim against them as very weak and unmeritorious. To my mind, however, there was nothing improper in Ms Gregory in informing the Trustees of the existence of the new documents when she discovered them. The fact that they were not formally disclosed to the parties for a week or so does not affect this. Equally, as there was, at that stage, no concluded agreement for settlement there was nothing improper in the change in the Trustees' position. I agree with Mr Hilliard that this was a changing circumstance that is part and parcel of the litigation process. In his closing submissions Mr Carr Q. C made the point that Mr Whitney was at a disadvantage because he did not learn about the new disclosure until some time after the Trustees. Whilst this may be so it does not in my view affect the position that the Trustees were entitled to withdraw from the negotiations when they discovered about them. I conclude that Mr Whitney should pay the Trustees to the date of Discontinuance on a standard basis. 5. Costs as between Monster and Mr Whitney 5.1 The relevant principles The issue between Mr Whitney and Monster is whether Monster should be ordered to pay the costs that he has been ordered to pay the Trustees and the costs he incurred in prosecuting the claim against the Trustees. In effect Mr Whitney is asking for a Bullock Order [ Bullock v London General Omnibus Company [1907] 1 KB 264 ] in respect of those costs. There have been a number of relatively recent authorities on the making of Bullock Orders. I was helpfully referred to Irvine v Com of Police [2005] EWCA Civ 129 , Moon v Garrett [2006] EWCA Civ 1121 and Whitehead v Searle [2007] EWHC 2046 . 81. Irvine was a personal injury action where the Claimant had sued three Defendants and succeeded against only one. The trial judge declined to make a Bullock Order . Her decision was upheld by the Court of Appeal. The leading judgment was given by Peter Gibson LJ and there are a number of passages that give helpful guidance: In paragraph 22 Peter Gibson LJ set out the rationale for a Bullock Order : 22. There is no doubt that the jurisdiction to make a Bullock or Sanderson order has survived the introduction of the CPR, though the exercise of discretion to make such an order must be guided by the overriding objective and the specific provisions of Rule 44.3. The jurisdiction is a useful one. It is designed to avoid the injustice that when a claimant does not know which of two or more defendants should be sued for a wrong done to the claimant, he can join those whom it is reasonable to join and avoid having what he recovers in damages from the unsuccessful defendant eroded or eliminated by the order for costs against the claimant in respect of his action against the successful defendant or defendants. However, it must also be recognised that it is a strong order, capable of working injustice to the defendant against whom the claim has succeeded, to be made liable not only for the claimant's costs of the action against that defendant, but also the costs of the other defendants whom the claimant has chosen to join but against whom the claimant has failed. In paragraphs 24 to 26 Peter Gibson LJ discusses whether the Defendants need to be sued "in the alternative". In paragraph 26 he concludes that the Court has power to make a Bullock Order when the claims are not in the alternative. But that is not the ordinary case. In paragraph 27 to 29 Peter Gibson LJ made the point that it is relevant to consider whether the causes of action are connected. In so doing he cited part of the judgment of the Court of Appeal in Mulready v JH & W Bell Ltd [1953] 2 All ER 215, 219: It does not appear to us that it is an appropriate order to make where a plaintiff is alleging perfectly independent causes of action against two defendants where the breaches of duty alleged are in no way connected the one with the other. In paragraph 29 he stated that this factor is not necessarily determinative but it is relevant. In paragraphs 30 and 31 Peter Gibson LJ identified two further factors that he described as important or significant. The first was the reasonableness of the Claimant's conduct in joining and pursuing a claim against the Defendant against whom he did not succeed. The second was whether one Defendant blames the other. 87. Moon was also a personal injury action where the Claimant sued three Defendants and succeeded against one. The trial judge decided that the unsuccessful Defendant should pay the costs of the successful Defendants (a Sanderson order). His decision was upheld by the Court of Appeal. The leading judgment was given by Waller LJ (though it is to be noted that Sir Peter Gibson was part of the Court). In paragraph 34 of the judgment Waller LJ set out in full and adopted paragraphs 17 – 19 and 22 – 31 of Peter Gibson LJ's judgment in Irvine as spelling out the relevant considerations. In paragraphs 38 and 39 Waller LJ said: 38. It seems to me that the above citation demonstrates that there are no hard and fast rules as to when it is appropriate to make a Bullock or Sanderson order. The court takes into account the fact that, if a claimant has behaved reasonably in suing two defendants, it will be harsh if he ends up paying the costs of the defendant against whom he has not succeeded. Equally, if it was not reasonable to join one defendant because the cause of action was practically unsustainable, it would be unjust to make a co-defendant pay those defendant's costs. Those costs should be paid by a claimant. It will always be a factor whether one defendant has sought to blame another. 39. The fact that cases are in the alternative so far as they are made against two defendants will be material, but the fact that claims were not truly alternative does not mean that the court does not have the power to order one defendant to pay the costs of another. The question of who should pay whose costs is peculiarly one for the discretion of the trial judge. 90. Whitehead appears to have been a complicated case. The nature of the claims does not appear fully in the judgment on costs. The Claimants were suing in two capacities against two Defendants. The claims in the personal capacity failed. The claim of the First Claimant in a representative capacity against the Second Defendant succeeded. The judge also concluded that the claim in a representative capacity against the First Defendant succeeded to a more limited extent. In the costs judgment Griffith Williams J declined to make a Bullock Order. In paragraphs 15 and 16 of the judgment he quoted from paragraphs 22, 30 – 32 of Irvine and 38 and 39 of Moon . In paragraph 24 of the judgment he said this: 24. Mr Stuart Smith, who accepted it was reasonable for the first claimant in his representative capacity to join both defendants in that part of the estate's claim which related to the undervalued settlement submitted there is no reason why a Bullock or Sanderson order may not be made but to exclude the costs of the personal claims in the alternative action. I reject that submission and reject the applications for a Bullock or Sanderson order. In my judgment they are appropriate nowadays only in those cases where the claimant does not know which party is at fault and it is inappropriate to make either order when both defendants succeeded in defending a large part of the claim. I consider also that it would be contrary to the objective of r.44.3 to make a qualified Bullock or Sanderson order. 5.2 Mr Carr Q. C's submissions Mr Carr Q. C submitted that Monster should pay the costs. He relied on a number of matters. First he made the bold submission that Monster should have admitted liability for the claim. If it had done so the Trustees would never have been joined as a party to the action. Second he submitted that the piecemeal disclosure made by Monster has had a direct impact on the decision to join and then to discontinue the claim against the Trustees. If the September 2009 documents had been disclosed in December 2008 Mr Whitney would not have joined the Trustees. The decision to join the Trustees was a reasonable one in the circumstances of the case. In those circumstances it would be harsh if Mr Whitney ends up paying the Trustees' costs. Furthermore the timing of the September 2009 disclosure and/or the tip off had a direct impact on the settlement negotiations between Mr Whitney and the Trustees. Although the relevant events took place a long time ago Mr Carr Q. C made the point that Monster had had plenty of opportunity to discover the documents prior to September 2009. In particular he drew my attention to the following matters: 1. Mr Whitney intimated a claim in 1997 when he left Monster. 2. Following investigation Monster's then solicitors made a claim against Mr Long [see paragraphs 136 – 139 of the Judgment]. 3. There were negotiations between Mr Mather and Mr Lilley and Monster between 1998 and 2005 over the NDG. [See paragraphs 139 – 144 of the Judgment]. Thus he submitted that when Mr McEwen wrote the first letter (on 10 th November 2005) Monster had been aware of the issue since 1998 and thus had more than enough time to unearth all the relevant documentation. In all the circumstances he submitted that a Bullock Order is the fair order for the Court to make. In his closing submissions he emphasised that the Court had discretion in the matter and reminded me of paragraphs 38 and 39 of the judgment of Waller LJ in Moon. 5.3 Mr Croxford's submissions Mr Croxford provided a detailed skeleton argument extending to some 43 paragraphs. I do not intend to lengthen this judgment by setting out all the points he made. I will however summarise the main points. Mr Croxford submitted that there was no reason to depart from the normal consequence of discontinuance as set out in CPR r 38.6. He submitted that this was not an appropriate case for a Bullock Order as none of the relevant considerations were satisfied. He made the point that where the Court was satisfied that there was "good reason" under CPR 38.6 to make a different order it often gave effect to that by a percentage reduction of the costs which the Claimant had to pay. It was not however possible to make a qualified Bullock Order . He submits that there was no "active misconduct" on the part of Monster. In paragraph 23 of his skeleton argument he submitted that Monster's disclosure fully complied with CPR r 31.7. In summary he relies on Ms Gregory's evidence as to the searches that were carried out, the difficulties of the disclosure exercise. He makes the point that it was in fact mere chance that the documents were discovered, that Monster did not know the documents existed, they were found amongst documents concerned with unrelated matters and were disclosed promptly when discovered. He also makes the point that Mr Whitney was in fact present at the two relevant board meetings and would no doubt have had the Minutes in his possession. He submitted that none of the usual criteria for a Bullock Order are present. Monster did not encourage Mr Whitney to pursue a claim against the Trustees. Indeed it opposed the joinder in the application to amend. It did not "blame" the Trustees. The claims against Monster and the Trustees are not "alternative claims". The causes of action are independent and not connected with each other. He criticised Mr Whitney's conduct in a number of respects. The action against the Trustees was speculative in that it was commenced without any documents supporting the existence of the alleged trust, and in the knowledge that Mr Whitney might well have signed the release form. There was no pre action correspondence between Mr Whitney and the Trustees. If there had been he might have discovered the signed transfer form and the size of the surplus fund. Finally he criticised the substantial delay by Mr Whitney in commencing settlement negotiations. The weakness of Mr Whitney's case was apparent after disclosure in January 2009. There was no response to the letter of 24 th March 2009. Settlement negotiations did not begin until June 2009. If Mr Whitney had acted more promptly he might well have achieved the drop hands agreement with the Trustees before the 2009 documents came to light. 5.4 Discussion and Conclusion Mr Carr Q. C's first submission must, in my view, be too broad. The question whether Monster should pay the Trustees' costs must be determined on the principles applicable to Bullock Orders. This in my view applies just as much in a claim which is discontinued before trial as to a claim decided at trial. Although I do not think it arises in this case I do not myself understand why it is inappropriate in an appropriate case for a court to order a partial Bullock Order - that is to say that there should be an indemnity of a percentage of the costs that a claimant has been ordered to pay to a successful defendant. I do not for my part see why such an order is inconsistent with the objective of CPR 44.3. I agree with Mr Croxford that it is necessary to consider the criteria identified in Moon and Irvine. I agree, too, that Monster did not seek to blame the Trustees, or invite Mr Whitney to join the Trustees into the action. Indeed Monster opposed the joinder application. There is nothing in paragraphs 6.2 or 6.3 of the Defence which suggests that there is any or any potential liability on the Trustees in respect of the NDG. The causes of action are independent and there is limited connection between them even though there is a common factual matrix. The claims are not made in the alternative. Thus this is not the usual case for a Bullock order. Furthermore none of the criteria identified by Peter Gibson LJ in Irvine are present. I turn to consider how far Mr Whitney was acting reasonably in seeking to join the Trustees into the action. As I have already stated I think the claim against the Trustees was always speculative and weak. It was speculative for the reasons given by Mr Croxford. There was never any documentary evidence of a trust or of an agreement to ring fence. Joan Blakeley's memorandum referred simply to "a proposal". Mr Whitney was aware that there was a real possibility that he had signed the Release of Rights document. In reality it was highly likely that he had signed it. Furthermore there was no pre action correspondence between Mr Whitney and the Trustees. If there had been Mr Whitney might have discovered the size of the surplus or the existence of the signed Release of Rights. Mr Carr Q. C made the point that it is arguable that Mr Whitney only released his rights in respect of the MSL Money Purchase Scheme and not in respect of the NDG. To my mind that is likely to be a very difficult argument. I have not been provided with the advice of Counsel on which the decision to join the Trustees was made. However, in all the circumstances, I cannot be satisfied that it was reasonable for Mr Whitney to join the Trustees. Furthermore I also think it was unreasonable for him to delay until June before commencing settlement negotiations. It should have been readily apparent to him after disclosure that he ought to try and extricate himself from the litigation. If he had done so he might well have achieved the drop hands settlement that was so nearly agreed in early August 2009. Finally I turn to the September 2009 disclosure. There is no reason to doubt the evidence of Ms Gregory as to how the documents in fact came to light. Thus the question is whether Ms Gregory was earlier in breach of the obligation under CPR 31.7 to make a reasonable search for disclosable documents. It may well be true, as Mr Carr Q. C points out, that Monster had had to consider the NDG in 1998 and in relation to the claims against Mr Long, Mr Mather and Mr Lilley. That does not mean that Ms Gregory was or ought to have been aware of the Minutes. In my view the searches carried out by Ms Gregory as set out in paragraphs 10 – 18 of her witness statement were reasonable. In those circumstances there was no breach of the disclosure obligation by Monster. The disclosure of the September 2009 documents was part of the continuing duty of disclosure. The fact that it occurred at a critical time in the negotiations between Mr Whitney and the Trustees is part and parcel of the changing circumstances of litigation and not a result of any breach by Monster of its disclosure obligation. In all the circumstances I have decided that it is not appropriate to make a Bullock Order. It follows that Mr Whitney must pay the Trustees' costs and he is not entitled to any indemnity from Monster. Note 1 References in this judgment to “the judgment” are references to my judgment of 20th November 2009. [Back] Note 2 In his closing submissions Mr Carr Q. C said that Mr Whitney was not in fact a trustee director. I am not in a position to deal with this conflict save to note that if evidence had been filed in reply it would have been possible to obtain the relevant records which would have put the position beyond doubt. [Back] BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII