Forcelux Ltd v Binnie

Factual and Procedural Background

This opinion follows the handing-down of draft judgments in July and addresses consequential matters related to costs and procedural orders following the main appeal. The case concerns an appeal involving a possession order and relief from forfeiture under a lease, with disputes over costs and the interpretation of whether a hearing constituted a "trial" for procedural purposes. The judgment is issued immediately following the main appeal decision, dealing primarily with costs associated with the proceedings before different judges and the appellate court.

Legal Issues Presented

1. Whether the contractual covenant in the Lease entitles the lessor (Forcelux) to recover all costs of the appeal and earlier proceedings from the lessee (Mr Binnie).
2. The proper interpretation of the term "trial" in the context of the appeal and its impact on costs orders.
3. The exercise of the court’s discretion to depart from contractual costs provisions in light of the conduct of the parties and the outcome of the appeal.
4. Whether an order for payment on account of costs should be made.
5. Whether permission to appeal to the Supreme Court should be granted.
6. The appropriateness of continuing the stay on enforcement of the possession order pending any further appeal.

Arguments of the Parties

Appellant's Arguments (Forcelux)

• Forcelux relies on the Lease covenant to claim entitlement to all costs incurred in the proceedings, including the appeal.
• The covenant covers all costs in relation to steps or proceedings under sections 146 or 147 of the Law of Property Act 1925.
• The court’s discretion to depart from the contractual position should be exercised in line with the contract unless exceptional circumstances exist.
• Forcelux contends that it should have its costs up to the point the Respondent’s notice was served before the hearing before HH Judge Hampton.

Respondent's Arguments (Mr Binnie)

• Mr Binnie contends that the court should exercise its discretion to depart from the contractual position on costs due to the circumstances and conduct of the parties.
• He argues that he was the substantial winner on the appeal, particularly on the "trial" issue and the exercise of discretion concerning relief from forfeiture.
• Mr Binnie seeks costs on an indemnity basis from 5 February 2009 due to Forcelux’s rejection of a "drop-hands" offer to settle the appeal.
• He disputes that the contractual provision should automatically dictate the costs order, particularly given the appeal’s outcome and conduct.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by considering the contractual covenant in the Lease, which obliges the lessee to pay all costs incurred by the lessor in connection with enforcement steps under sections 146 or 147 of the Law of Property Act 1925. The court relied on the Fairview Investments Ltd v Sharma decision to construe that possession proceedings to enforce forfeiture following a section 146 notice are proceedings "under" that section, thus falling within the covenant's scope.

However, the court emphasized that the contractual entitlement to costs is subject to the court's discretion. The court noted that although the general principle is to follow the contract, discretion may override this in particular cases to avoid injustice.

Applying this, the court found that Mr Binnie was the substantial winner on the appeal, having succeeded on the "trial" issue and the exercise of discretion regarding relief from forfeiture. Given Forcelux’s conduct, including appealing the relief from forfeiture after it was clear Mr Binnie was entitled to it, the court exercised its discretion to depart from the contractual position and did not award Forcelux all of its costs.

The court declined to disturb the costs orders made by the lower judges (DJ Hudson and HH Judge Hampton), noting that those orders reflected conduct and procedural developments. It also rejected an indemnity costs order against Forcelux, recognizing that the "trial" issue was arguable and not straightforward.

Regarding payment on account of costs, the court ordered a reasonable sum to be paid, rejecting arguments that such an order would breach indemnity principles.

On permission to appeal to the Supreme Court, the court found no significant point of public interest justifying intervention and left that decision to the Supreme Court itself.

The court continued the stay on enforcement of the possession order to allow Forcelux to petition the Supreme Court, considering factors such as the property's condition and Mr Binnie’s intentions.

Holding and Implications

The court allowed the appeal in part by exercising its discretion to make a costs order departing from the contractual provision in the Lease, awarding costs to Mr Binnie rather than Forcelux for the appeal and related proceedings. It upheld the costs orders made by the lower courts and refused indemnity costs to Mr Binnie.

The court ordered a payment on account of costs and maintained the stay on enforcement of the possession order pending any Supreme Court appeal.

The decision directly affects the parties by confirming the court’s discretion to override contractual costs provisions in appropriate circumstances, particularly where the conduct and outcome of the litigation justify such a departure. No new legal precedent was established beyond reaffirming existing principles on costs discretion and lease covenant interpretation.