Hutchinson & Anor v Neale & Anor

Factual and Procedural Background

This appeal concerns orders for costs made following the trial of a boundary dispute at Birmingham County Court. The defendants, owners of a property referred to as "Whitecrest," were sued by their adjoining neighbours to the east, the claimants, owners of "Headley." The dispute centered on the precise boundary line between the two properties, notably the position of a hedge and a garden shed. The claimants contended that the boundary was 72 feet from a western concrete post boundary, placing the hedge and shed on their land, while the defendants contended the boundary was 78 feet, placing these features on their land. The defendants succeeded in defending the claim but were found by the trial judge to have acted dishonestly in defending the claim, including falsifying a plan attached to a 1948 Abstract of Title. The appeal addresses the extent to which this finding of dishonesty should influence the judge's costs orders.

Legal Issues Presented

1. Whether the trial judge erred in his approach to costs by not starting with the general rule that costs follow the event in favour of the successful party.
2. How a finding of dishonesty by a successful party should affect the costs order under CPR 44.3.
3. Whether the defendants should recover their costs despite their dishonest conduct in the defence of the claim.
4. The appropriate costs consequences of the defendants' conduct, including their false allegations against the claimants and alteration of documents.
5. The treatment and weight to be given to settlement offers made by the defendants that did not comply strictly with Part 36 rules.

Arguments of the Parties

Defendants' Arguments

• The judge incorrectly failed to start with the general rule that the successful party is entitled to costs under CPR 44.3(2)(a).
• The defendants succeeded on the central issue and made repeated reasonable settlement offers rejected by the claimants.
• The defendants argued that the costs orders unfairly penalized them for conduct unrelated to the substantive boundary dispute.
• The defendants contended that the costs orders involved double counting the penalty for their dishonesty.
• They submitted that their settlement offers, though not formally compliant with Part 36, should be treated as such for costs consequences.
• The defendants argued that the costs of the first trial should not have been ordered against them as the adjournment was not their fault.

Claimants' Arguments

• The judge properly started with the general rule but was entitled to depart from it due to the defendants' deliberate dishonesty.
• The defendants' dishonesty in falsifying documents and making false accusations infected their defence and justified denying them costs.
• The claimants relied on the 1936 conveyance and were not influenced by the defendants' misconduct in bringing the claim.
• The defendants' settlement offers did not acknowledge their dishonesty and thus had little weight.
• The claimants sought indemnity costs for expenses incurred responding to the defendants' dishonest conduct.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Northstar Systems Ltd v Fielding [2006] EWCA Civ 1660	Whether dishonesty by the successful party displaces the usual costs rule; limits on awarding costs to dishonest parties.	The court confirmed that dishonesty does not wholly displace the usual rule but may justify disallowance of costs related to the dishonest case.
Multiplex Constructions (UK) Ltd v Cleveland Bridge (UK) Ltd [2008] EWHC 2280	Structured approach under CPR 44.3 for costs orders; starting point is costs follow the event, subject to conduct.	Reinforced that the court must consider all circumstances and may depart from the starting point based on party conduct.
Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Gida Sanayi Ve Pazarlama AS [2009] EWHC 1696	Impact of dishonest conduct on costs orders; no general rule displacing costs following event; possible sanctions for dishonest conduct.	The judge applied principles that dishonesty can justify disallowance of costs related to dishonest conduct and cost penalties.
Molloy v Shell UK Ltd [2001] EWCA Civ 1272	Serious misconduct may amount to abuse of process affecting costs.	Referenced as authority for the gravity of misconduct affecting costs orders.
AL Barnes Ltd v Time Talk (UK) Ltd [2003] EWCA Civ 402	Consideration of conduct in costs orders.	Supported the principle that misconduct influences costs decisions.
Grupo Torras v Al-Sabah (CA 1999)	Framework for costs orders in cases involving dishonesty.	Guided the court’s approach to balancing costs and misconduct.
AEI Rediffusion Music Ltd v Phonographic Performers Ltd [1999] 1 WLR 1507	Standard of appellate review for costs orders; error of principle or unfair balancing justifies interference.	The court applied this standard in assessing the trial judge’s costs decision.
Arrow Nominees Inc v Blackledge [2000] 2 BCLC 167	Serious misconduct may amount to abuse of process affecting costs.	Referenced in discussion of when dishonesty displaces costs rules.

Court's Reasoning and Analysis

The court began by reaffirming the starting point under CPR 44.3(2)(a) that costs follow the event in favour of the successful party. It emphasized that a finding of dishonesty by the successful party does not automatically displace this rule. Instead, the court must evaluate the nature, extent, and relevance of the misconduct to the litigation and its effect on costs. The court reviewed authorities confirming that misconduct may justify disallowing costs related to the dishonest case, ordering indemnity costs for expenses caused by dishonesty, or other tailored orders, but there is no general rule denying all costs to a successful but dishonest party.

Applying these principles, the court found that the defendants’ dishonesty in falsifying the plan and making false accusations against the claimants was serious and justified costs penalties. However, the dishonesty did not infect the substantive basis of the claim, which failed on legal and evidential grounds unrelated to the misconduct. The claimants’ challenge was reasonable, but ultimately unsuccessful. The defendants did not abuse the entire proceedings or bring the claim on themselves.

The trial judge’s approach, which started with no order for costs due to the defendants’ dishonesty, was held to be an over-simplification that obscured the proper structured approach. The court concluded that the defendants should recover a proportion of their costs on the standard basis, but should be deprived of costs related to advancing the dishonest parts of their defence, and should pay the claimants’ costs incurred in responding to the dishonesty on an indemnity basis. The court also considered the defendants’ settlement offers and found their weight limited due to the defendants’ failure to acknowledge dishonesty.

The court declined to disturb the trial judge’s costs order concerning the first trial, finding it was within his discretion. It also refined the costs order to avoid double counting penalties for the defendants’ misconduct.

Holding and Implications

The court ALLOWED THE APPEAL IN PART by modifying the costs orders made by the trial judge. The defendants, though successful in defending the claim, were ordered to recover only 70% of their costs on the standard basis, with detailed assessment to exclude costs incurred in relation to the dishonest aspects of their defence. The defendants were required to pay the claimants’ costs incurred in disproving the defendants’ dishonesty and false allegations on an indemnity basis, except for costs related to a particular expert argument based on historical Ordnance Survey maps, which were disallowed.

The previous order for an interim payment by the defendants was replaced with a direction that no further deductions or disallowances should be made solely on grounds of the defendants’ misconduct concerning the altered plan or reliance on OS maps.

The decision clarifies that a finding of dishonesty by a successful party does not automatically result in denial of costs but requires careful assessment of the misconduct’s impact on the proceedings and costs. It underscores the court’s discretion to tailor costs orders to ensure justice, including partial costs recovery for successful but dishonest parties and indemnity costs to compensate the innocent party for expenses caused by dishonesty. No new legal precedent was established, but the ruling reinforces existing principles and their application in boundary dispute litigation involving allegations of dishonesty.