Medcalf v Weatherill & Anor [2002] UKHL 27 (27 June 2002)

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United Kingdom House of Lords Decisions

You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Medcalf v Weatherill & Anor [2002] UKHL 27 (27 June 2002)
URL: http://www.bailii.org/uk/cases/UKHL/2002/27.html
Cite as: [2002] NPC 89, [2002] UKHL 27, [2002] PNLR 43, [2002] CP Rep 70, [2002] CPLR 647, [2003] 1 AC 120, [2002] 3 Costs LR 428, [2002] 3 WLR 172, [2002] 3 All ER 721, [2003] AC 120

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Judgments - Medcalf v Weatherill and Another

HOUSE OF LORDS

Lord Bingham of Cornhill Lord Steyn Lord Hoffmann Lord Hobhouse of Wood-borough Lord Rodger of Earlsferry

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

MEDCALF
(RESPONDENT)

WEATHERILL AND ANOTHER
(APPELLANTS)

ON 27 JUNE 2002

[2002] UKHL 27

LORD BINGHAM OF CORNHILL

My Lords,

In this appeal two barristers (Mr Bernard Weatherill QC and Ms Josephine Hayes) challenge a wasted costs order made against them by the Court of Appeal. They do so on two grounds: first, that the court had no jurisdiction to make the order; and second, that such an order should not have been made when they were precluded by legal professional privilege from answering the complaints made against them. The appeal requires the House, for the first time, to consider the wasted costs order regime introduced by section 4 of the Courts and Legal Services Act 1990 and expressed in section 51(6)(7) and (13) of the Supreme Court Act 1981.

The proceedings

The proceedings in which the wasted costs order was made against the barristers concerned a snooker-based television quiz game, originally conceived by Mr Michael Kemp in about 1984 and developed in its early stages in 1987, first by Mr Kemp and Mr Roger Medcalf and then by these two with the addition of Mr Mardell, who had professional experience of developing and exploiting television game shows and was involved both personally and through his company, originally named Createl Ltd and then the Terry Mardell Organisation Ltd ("the TMO"). The plans for this new game show went through various different versions and were the subject of much discussion and refinement. Presentations were made on several occasions to the BBC, which was slow to respond. In the end, however, the BBC did respond. It bought the new game show and programmes were transmitted. They have proved to be a continuing success. But from about the end of 1987 Mr Medcalf was excluded from any part in the development and exploitation of the project, which were handled by Mr Mardell and his company and Mr Kemp.

In July 1993 Mr Medcalf issued proceedings against Mr Mardell, Mr Kemp, the BBC (which settled before the action came to trial and played no further part) and the TMO. Mr Medcalf's claim at that stage was based on alleged infringement of copyright and breach of confidence. The action came on for trial before Lightman J in January 1997 but was aborted on the third day of trial to enable Mr Medcalf's advisers to re-plead his case so as to include an additional claim in partnership. A stringent order in costs was made against Mr Medcalf as a condition of the postponement. Mr Medcalf's case was then re-pleaded and a second trial took place before Lloyd J in May 1998. At this trial the judge preferred the evidence of Mr Medcalf to that of Mr Mardell and Mr Kemp. He found that there had been a partnership between the three men to be inferred from their conduct and that there had also been a breach of confidence. The defendants were ordered to provide an account of the profits of the partnership and to make an interim payment of £100,000 into court.

Mr Mardell and the TMO (but not Mr Kemp) at once appealed against the judge's decision and there was a second appeal against certain orders made by the judge in a later decision on the taking of the partnership accounts. No satisfactory account was provided in compliance with the judge's order and in July 1999 Mr Medcalf applied to strike out the defendants' third attempt to provide the account ordered. In response the defendants served witness statements making, for the first time, serious allegations of fraud against Mr Medcalf and his solicitors in connection with the conduct of the action before Lloyd J. It was alleged that Mr Medcalf or his solicitors had tampered with the transcripts of evidence given at the trial, that Mr Medcalf's solicitors had attempted to pervert the course of justice during without prejudice discussions with Mr Kemp and that Mr Medcalf's signature on his witness statement had been forged. No transcripts of evidence had been available to the judge when he had given judgment and Mr Medcalf in evidence had vouched the proof of his witness statement, but these points were relied on as impugning the credibility of Mr Medcalf, and the reliability of his evidence had been an important issue at the trial. The master referred the striking out application to Lloyd J, who was to have heard it on 26 November 1999 but who was in the event unable to hear it until 2 December 1999.

Neither of the appellant barristers had up to then represented Mr Mardell or the TMO. Ms Hayes was instructed shortly before 24 November. On 25 November she informed leading counsel for Mr Medcalf (Mr Romie Tager QC) of an application she intended to make (and shortly thereafter did make) to the judge, that he should direct the police to investigate the allegations made concerning the transcripts and the perversion of the course of justice and that Mr Medcalf's application to strike out the account should meanwhile be stayed. Mr Medcalf's solicitors intimated an intention to apply for a wasted costs order against the defendants' solicitors, although this was not pursued. In her skeleton argument for the hearing before Lloyd J on 2 December Ms Hayes included the allegations of misconduct already mentioned but with the addition of certain serious allegations of a similar character. An amended notice of appeal was drafted, although not formally served, including these and additional allegations of impropriety.

On 6 December 1999 Lloyd J rejected the defendants' application and refused permission to appeal. He went on to hear Mr Medcalf's application to strike out the defendants' third partnership account. Mr Weatherill, appeared before the judge with Ms Hayes on 8 December 1999 (having been instructed on that date or shortly before) when application was made that the judge should defer giving judgment on the striking out application pending receipt of evidence from the United States Department of Justice which might substantiate one of the allegations of fraud made against Mr Medcalf. This application was refused. On Mr Medcalf's application to strike out the judge refused to make the order sought, but held that the third account which the defendants had given did not comply with his order and that they should have a last opportunity to comply.

There was intense interlocutory activity on the part of Mr Medcalf and the defendants over the next two months. Relevantly for present purposes, the defendants' appeal against the judge's substantive decision in favour of Mr Medcalf, coupled with an application by the defendants to amend their notice of appeal so as to include the allegations of impropriety against Mr Medcalf already referred to, were due to be heard by the Court of Appeal on 14 February 2000. At a hearing on 28 January 2000 Clarke LJ gave directions to ensure that that date would be effective: among other things he ordered that evidence in the defendants' possession relevant to matters raised in the draft amended notice of appeal be served that day, with an indication in writing of any further evidence the defendants might wish to put before the court, and that the defendants should by 4 February 2000 issue and serve an application to amend their notice of appeal and to introduce fresh evidence, serve and file a bundle comprising all witness statements and evidence intended to be relied on, and serve and file a draft amended notice of appeal and supporting skeleton arguments covering those of the existing grounds of appeal still advanced and identifying any which were abandoned.

In response to that order of Clarke LJ, the defendants served certain reports and listed evidence which was not in their possession but which they hoped would follow. A draft amended notice of appeal dated 3 February 2000, bearing the names of both barristers, was served on the following day. Skeleton arguments dated 4 February 2000, including a supplementary skeleton argument in support of the application to amend the notice of appeal signed by both the barristers, were also served on 4 February. The supplementary skeleton argument advanced submissions in support of each of the new allegations of fraud, forgery and other impropriety. Two additional bundles of evidence were served on Mr Medcalf. In the course of Friday 4 February 2000, for reasons which have not been disclosed, instructions were withdrawn from the defendants' solicitors. The barristers ceased to be instructed and the solicitors came off the record on Monday 7 February. During the following week Mr Medcalf's advisers prepared and filed evidence to rebut the allegations of fraud and impropriety raised in the draft amended notice of appeal. This evidence was not served on the barristers, who were no longer acting, but they were again instructed at about midday on Friday 11 February and the evidence was then made available to them.

At the hearing before the Court of Appeal (Peter Gibson and Schiemann LJJ and Wilson J) on Monday 14 February, Mr Weatherill and Ms Hayes, acting (as it is accepted that they did throughout) on instructions, opened the defendants' application to amend the notice of appeal and to adduce new evidence. The application to amend failed in respect of the allegations of impropriety. In the course of argument Mr Weatherill abandoned some of the allegations in the face of judicial hostility. In relation to the remaining allegations, the Court of Appeal rejected the application to amend (although other parts of the application to amend were conceded or were successful). This application occupied about one and a half days of court time, although no oral answer on behalf of Mr Medcalf was called for. A further two and a half days were devoted to argument on the substantive appeal. On 2 March 2000 the Court of Appeal handed down a unanimous reserved judgment, giving its reasons for rejecting the application to amend in respect of the defendants' allegations of fraud and impropriety and dismissing the substantive appeal. Counsel for Mr Medcalf indicated that he would be seeking a wasted costs order against the barristers. This matter was adjourned to enable Mr Medcalf to state his case and to enable the barristers to respond. At a hearing on 2 July 2000 the Court of Appeal ordered that this application proceed to a second stage.

Before that application was resolved, Mr Medcalf compromised his action against Mr Mardell, Mr Kemp and the TMO. The terms of the compromise are not material, save to note that it expressly preserved and excluded Mr Medcalf's claim for wasted costs against the barristers. The principal basis upon which counsel for Mr Medcalf advanced the application for wasted costs against the barristers was that it had been improper of them as counsel for the defendants to have advanced allegations of fraud and other improprieties in the draft amended notice of appeal, in the supplementary skeleton argument and at the hearing of the appeal when, in contravention of paragraph 606 of the Code of Conduct of the Bar of England and Wales, they could not have had before them reasonably credible material establishing a prima facie case of fraud. Mr Medcalf sought to recover as wasted costs the costs said to have been incurred in investigating and rebutting the allegations made, both by way of written evidence and oral argument at the hearing.

Paragraph 606 of the Code of Conduct

Paragraph 606 of the Code of Conduct, headed "Drafting pleadings and other documents", at the relevant time provided:

Section 51 of the Supreme Court Act 1981

So far as relevant to this appeal, section 51 of the Supreme Court Act 1981, as substituted by section 4 of the Courts and Legal Services Act 1990, provides:

Sections 111 and 112 of the 1990 Act make provision for wasted costs to be awarded in criminal proceedings and civil proceedings in the magistrates' court.

The wasted costs jurisdiction

In Ridehalgh v Horsefield [1994] Ch 205 the Court of Appeal heard a composite group of six test appeals. Both the Bar and the Law Society were represented by leading counsel. At the invitation of the court, the Attorney General nominated two counsel to represent the general public interest. In a reserved judgment of the court, the Court of Appeal (Sir Thomas Bingham MR, Rose and Waite LJJ) reviewed at some length the history of the court's jurisdiction to order payment of costs by legal practitioners whose conduct had led to the incurring of unnecessary costs, made detailed reference to the rules and legislation governing the exercise of this jurisdiction, drew attention to certain obvious dangers to which the jurisdiction was subject and gave guidance on the future handling of such applications. Save that this judgment must now be read subject to the decision of the House in Hall (Arthur) JS v Simons [2000] 3 WLR 543 , and subject to what is said in paragraph 23 below, I would endorse and need not repeat what the Court of Appeal said in Ridehalgh. It does however appear, from material laid before the House, that the clear warnings given in that case have not proved sufficient to deter parties from incurring large and disproportionate sums of costs in pursuing protracted claims for wasted costs, many of which have proved unsuccessful. The House is grateful for the perceptive commentary on the weaknesses of this jurisdiction made by Hugh Evans, "The Wasted Costs Jurisdiction" 64 MLR 51 (January 2001).

The decision under appeal

The decision of the Court of Appeal now under appeal is reported at [2001] Lloyd's Rep PN 146. Opinion was divided. Peter Gibson and Schiemann LJJ (for reasons given by Peter Gibson LJ on behalf of both) held that a wasted costs order should be made against the barristers. Wilson J dissented.

In paragraph 25 of the majority judgment, Peter Gibson LJ recorded that there was no dispute as to the jurisdiction to make a wasted costs order nor as to the principles to be applied. Full reference was made to Ridehalgh. The crux of Mr Tager's case (for Mr Medcalf) was that the barristers had acted improperly, in breach of paragraph 606 of the Code of Conduct, in making allegations of fraud unsupported by any reasonably credible material establishing a prima facie case: see paragraph 35 of the judgment. The defence advanced by Mr Davidson QC on behalf of the barristers was summarised in paragraph 39 of the judgment:

The majority began by considering the allegations of fraud in the draft amended notice of appeal in order to assess whether there was a possibility that the barristers had had other material. This review was prefaced by certain preliminary observations. First, the majority emphasised the importance of paragraph 606, which gave litigating parties a measure of redress against potentially very damaging allegations for which (because of the law of absolute privilege) they could obtain no redress. Thus a barrister must be instructed to make the allegation in question, and should have reasonably credible material establishing a prima facie case before drafting such an allegation. The judgment continued (paragraph 40):

Secondly, it was said that paragraph 606 applied not only to allegations of fraud but also to other allegations of dishonest or dishonourable conduct. Thirdly, the majority made plain that counsel must maintain his independence and not compromise his professional standards in order to please the client. In its review of 10 allegations made by the defendants, the majority held that no reasonably credible material had been produced to the court to justify seven, while concluding that there was some evidence to support the remaining three. In considering whether, on the material put before the court, the conduct of the barristers had been shown to be improper, unreasonable or negligent, the majority commented on the peripheral character of these allegations in relation to the main issues in the action (paragraph 54) and based its finding against the barristers primarily on the failure to produce evidence to the court to support the allegations made. In paragraph 58 of its judgment the majority said:

before him

as it stands

prima facie

In paragraph 59 the majority held that the propriety of the pleading had to be assessed in the light of the material put before the court. It was not persuaded (paragraph 60) that the inability of the barristers to reveal privileged or confidential material made the hearing of the application unfair or contrary to article 6 of the European Convention. While acknowledging the high professional standing of the barristers, the majority found no reasons why, in the exercise of the court's discretion, it should deny Mr Medcalf the order he sought (paragraph 64).

In his dissenting judgment Wilson J compressed into six the seven allegations on which the majority had found against the barristers. He agreed that, at the hearing, no reasonably credible evidence had been placed before the court which prima facie established the validity of those six allegations made against Mr Medcalf (paragraph 72). But in his opinion that was not the point. The point was whether the barristers had had such material before them. Wilson J first considered the barristers' position on 3-4 February when the draft amended notice of appeal had been finalised and the skeleton arguments delivered. He said (in paragraphs 78-80):

Wilson J raised a series of questions relating to the material which might have been before the barristers on 3-4 February and concluded:

Ridehalgh v Horsefield

Of the hearing on 14-15 February he said (in paragraph 85) that "There was therefore an element of professional impropriety in articulation of these serious allegations at the hearing" in the absence of evidence to support them. In the exercise of his discretion, however, Wilson J would have declined to make an order against the barristers on this limited ground. In reaching this conclusion he was impressed by the extremely difficult circumstances in which both barristers, but particularly Mr Weatherill, had been called upon to act in this complex and highly contentious matter.

Jurisdiction

The barristers' argument on jurisdiction was first raised in the House. It was said, first, that section 51 conferred no right on a party to seek a wasted costs order against any legal representative other than his own. Thus the court had no power to make an order against the legal representative of any opposing party. This submission was based on the wording of section 51(13) quoted above, and in particular the words "on his behalf": it was argued that a party could only seek a wasted costs order against a person exercising a right of audience or a right to conduct litigation on his behalf or any employee of such a person.

There are in my opinion very compelling reasons why this construction cannot reflect the intention of Parliament. It is clear that in the exercise of its inherent jurisdiction the court could order a solicitor to compensate a party who was not the client of that solicitor, as it did in Myers v Elman [1940] AC 282. In Orchard v South Eastern Electricity Board [1987] QB 565, 571, 581, the Court of Appeal expressly dissented from the view, advanced obiter by Lord Denning MR in Kelly v London Transport Executive [1982] 1 WLR 1055, 1065, that this jurisdiction could be exercised against counsel also. In the context of the 1990 Act, which among other things provided for a substantial extension of solicitors' rights of audience in the higher courts, this inequality of treatment as between advocates performing the same professional function was plainly indefensible, and the object of section 51(6) and (7) was to put barristers and solicitors, for this purpose, effectively in the same position. Section 51 only applies in civil proceedings, but (as was accepted on behalf of the barristers) it is quite clear from section 111 of the 1990 Act (amending the Prosecution of Offences Act 1985) and section 112 of the 1990 Act (amending the Magistrates' Courts Act 1980) that in criminal proceedings in the Court of Appeal, the Crown Court or a magistrates' court and civil proceedings in a magistrates' court a wasted costs order may be made in favour of a party to the proceedings against the legal representative of any other party. No reason has been advanced why Parliament should have wished to lay down a different rule governing barristers in civil proceedings in the High Court, and it is to my mind inconceivable in the context of the 1990 Act that Parliament should have wished to afford to barristers in civil proceedings (otherwise than in a magistrates court) a ground of exemption not enjoyed by solicitors. Against arguments of this weight, any submission based on the wording of subsection (13) would have to be irresistible. The barristers' argument is not. The subsection is intended to make plain that no liability can attach to any practitioner not involved in the litigation giving rise to the claim. I note without surprise that a similar conclusion was reached by Neuberger J in Brown v Bennett (No 2) [2002] 1 WLR 713.

The barristers' second argument on jurisdiction was also based on the language of subsection (13). It was to the effect that any order made against them could only relate to their conduct when exercising a right of audience in court. This was because they had no right to conduct litigation, as defined in sections 28 and 119(1) of the 1990 Act. Thus (it was said) they could not be liable in wasted costs for anything done when settling the draft amended notice of appeal or the skeleton arguments, the activities which had in fact given rise to most of the wasted costs claimed against them. A similar argument was advanced to and rejected by Leveson J in Worsley v Tambrands Ltd (unreported, 8 November 2000) and also by Neuberger J in Brown v Bennett (No 2). Both judges were right to reject it. Section 4 of the 1990 Act substituted a new section 51 in the 1981 Act. Once inserted that section was to be read as part of the 1981 Act. Its interpretation was to be governed by its own terms and any other terms of the 1981 Act. I would question whether it would be permissible in principle to construe subsection (13) in the light of definitions imported into the 1990 Act for quite different purposes: see Bennion, Statutory Interpretation 3rd ed, (1997), p 213. The section was intended, as already stated, simply to make plain that no liability could attach to any practitioner not involved in the litigation giving rise to the claim. For the reasons convincingly given by Leveson J it would stultify the section if a barrister were not potentially liable for conduct immediately relevant to the exercise of a right of audience but not involving advocacy in open court. If one might have thought subsection (13) to be unnecessary, the facts of Byrne v Sefton Health Authority [2002] 1 WLR 775 show that it was not.

The construction of paragraph 606 of the Code of Conduct

As is evident from the quotations from the judgments of the majority and the minority in the Court of Appeal set out in paragraphs 16 and 17 above, there was a difference of opinion on the interpretation of paragraph 606. The majority held that, when putting his signature to an allegation of fraud or dishonesty, counsel must have before him evidence in a form to be put before the court to make good the allegation. Wilson J held that counsel must have "material" but that it need not be evidence in admissible form.

Paragraph 606(c) lays down an important and salutary principle. The parties to contested actions are often at daggers drawn, and the litigious process serves to exacerbate the hostility between them. Such clients are only too ready to make allegations of the most damaging kind against each other. While counsel should never lend his name to such allegations unless instructed to do so, the receipt of instructions is not of itself enough. Counsel is bound to exercise an objective professional judgment whether it is in all the circumstances proper to lend his name to the allegation. As the rule recognises, counsel could not properly judge it proper to make such an allegation unless he had material before him which he judged to be reasonably credible and which appeared to justify the allegation. At the hearing stage, counsel cannot properly make or persist in an allegation which is unsupported by admissible evidence, since if there is not admissible evidence to support the allegation the court cannot be invited to find that it has been proved, and if the court cannot be invited to find that the allegation has been proved the allegation should not be made or should be withdrawn. I would however agree with Wilson J that at the preparatory stage the requirement is not that counsel should necessarily have before him evidence in admissible form but that he should have material of such a character as to lead responsible counsel to conclude that serious allegations could properly be based upon it. I could not think, for example, that it would be professionally improper for counsel to plead allegations, however serious, based on the documented conclusions of a DTI inspector or a public inquiry, even though counsel had no access to the documents referred to and the findings in question were inadmissible hearsay. On this point I would accept the judgment of Wilson J.

Legal professional privilege

In Ridehalgh v Horsefield [1994] Ch 205 the Court of Appeal addressed the issue of legal professional privilege which may arise where an applicant seeks a wasted costs order against lawyers acting for an opposing party and at page 237B-D of its judgment it said:

I do not for my part consider this passage to be inaccurate or misleading, and counsel did not criticise it. Read literally and applied with extreme care, it ought to offer appropriate protection to a practitioner against whom a wasted costs order is sought in these circumstances. But with the benefit of experience over the intervening years it seems clear that the passage should be strengthened by emphasising two matters in particular. First, in a situation in which the practitioner is of necessity precluded (in the absence of a waiver by the client) from giving his account of the instructions he received and the material before him at the time of settling the impugned document, the court must be very slow to conclude that a practitioner could have had no sufficient material. Speculation is one thing, the drawing of inferences sufficiently strong to support orders potentially very damaging to the practitioner concerned is another. The point was well put by Mr George Laurence QC sitting as a deputy High Court judge in Drums and Packaging Ltd v Freeman (unreported, 6 August 1999) when he said, at paragraph 43:

Only rarely will the court be able to make "full allowance" for the inability of the practitioner to tell the whole story or to conclude that there is no room for doubt in a situation in which, of necessity, the court is deprived of access to the full facts on which, in the ordinary way, any sound judicial decision must be based. The second qualification is no less important. The court should not make an order against a practitioner precluded by legal professional privilege from advancing his full answer to the complaint made against him without satisfying itself that it is in all the circumstances fair to do so. This reflects the old rule, applicable in civil and criminal proceedings alike, that a party should not be condemned without an adequate opportunity to be heard. Even if the court were able properly to be sure that the practitioner could have no answer to the substantive complaint, it could not fairly make an order unless satisfied that nothing could be said to influence the exercise of its discretion. Only exceptionally could these exacting conditions be satisfied. Where a wasted costs order is sought against a practitioner precluded by legal professional privilege from giving his full answer to the application, the court should not make an order unless, proceeding with extreme care, it is (a) satisfied that there is nothing the practitioner could say, if unconstrained, to resist the order and (b) that it is in all the circumstances fair to make the order.

It was not submitted to the House that a relaxation of the existing rules on legal professional privilege could or should be permitted in a case such as the present: the decision of the House in R v Derby Magistrates' Court, Ex parte B [1996] AC 487 gave no encouragement to such a submission, and subordinate legislation introduced to modify that decision for purposes of the wasted costs jurisdiction was held to be ultra vires in General Mediterranean Holdings SA v Patel [2000] 1 WLR 272 and was revoked. No attempt has been made to modify the rule by primary legislation. The result no doubt is that in a context such as the present the scope for making wasted costs orders is very limited. This is not necessarily to be regretted. In Ridehalgh v Horsefield [1994] Ch 205, 238-239 the Court of Appeal considered that wasted costs hearings should be measured in hours and urged the courts to be astute to control what threatened to become a new and costly form of satellite litigation. In Harley v McDonald [2001] 2 AC 678 , reviewing the exercise by the New Zealand courts of the inherent jurisdiction to order barristers and solicitors to pay costs unnecessarily incurred, the Judicial Committee of the Privy Council observed (at p 703, para 50):

Save in the clearest case, applications against the lawyers acting for an opposing party are unlikely to be apt for summary determination, since any hearing to investigate the conduct of a complex action is itself likely to be expensive and time-consuming. The desirability of compensating litigating parties who have been put to unnecessary expense by the unjustified conduct of their opponents' lawyers is, without doubt, an important public interest, but it is, as the Court of Appeal pointed out in Ridehalgh at page 226, only one of the public interests which have to be considered.

The present appeal

Proceeding from the undoubted fact (with which Wilson J agreed) that at the hearing on 14-15 February there was no reasonably credible admissible evidence before the court to substantiate the seven allegations held to be improperly made, the majority of the Court of Appeal concluded that the barristers could have had no such admissible evidence before them when signing the draft amended notice of appeal and the skeleton arguments. It would seem likely that they did not. But this was to apply too stringent a test. The question is whether, at that stage, the barristers had material of any kind before them which justified the making of the allegations. This is something which the court does not know and cannot be told. Hunch and suspicion are not enough. Like Wilson J, and for the reasons given in his persuasive judgment, I remain in doubt, and the barristers must have the benefit of that doubt. In a case of this complexity, I would moreover think it unfair and contrary to the appearance of justice to condemn them unheard. While the Strasbourg jurisprudence to which the House was referred fortifies that conclusion (see, for example, De Haes and Gijsels v Belgium (1997) 25 EHRR 1 at p 48, paras 80-81) I do not think it relies on any principle not recognised by the common law. Again like Wilson J, I would not think it right to base even a partial order on the barristers' failure to abandon the objectionable allegations at the outset of the proceedings on 14 February. They do not appear to have clung to these allegations with undue tenacity, and the matters relied on by Wilson J as influencing the exercise of discretion cannot be lightly discounted.

I am in full agreement with the reasons given by my noble and learned friends Lord Steyn and Lord Rodger of Earlsferry. Save in relation to the transcript allegation, I am also in full agreement with the opinion of my noble and learned friend Lord Hobhouse of Woodborough: on that matter I differ from him because the transcript allegation, although weaker on its face than the other allegations, was not different in kind; and also because I share the view expressed by Lord Rodger in paragraph 76 below.

Despite the highly regrettable outcome for Mr Medcalf, whose successful proceedings have had severe financial consequences for him, I would allow the barristers' appeal, quash the wasted costs order made by the Court of Appeal and award the barristers the costs of and occasioned by the wasted costs application both in the Court of Appeal and before the House (such order not to be enforced without leave of the Court of Appeal in relation to any period when Mr Medcalf was legally-aided).

Well after the conclusion of argument, at a stage when the opinions of the committee were in final draft, material was received from the barristers suggesting that Mr Mardell and the TMO were or might be willing after all to waive their entitlement to legal professional privilege. The committee met informally (without reviewing this material in detail) to consider whether it should explore this material further or remit the matter to the Court of Appeal. It was unanimously resolved that the appeal should be decided on the basis upon which it had been argued both in the Court of Appeal and before the House. It would be inconsistent with the clear objectives of the wasted costs regime to permit this issue to be the subject of yet further litigation.

LORD STEYN

My Lords,

I limit my remarks to the question whether the two barristers against whom wasted costs orders were made by a majority in the Court of Appeal had a fair opportunity to deploy their side of the case: Medcalf v Mardell [2001] Lloyd's Rep PN 146.

The legislation empowering the making of wasted costs orders did not expressly address the problem which arises where a barrister is prevented by legal professional privilege from explaining what instructions and material he received from his client: section 51 of the Supreme Court Act 1981. Subsequently, the decision of the House of Lords in R v Derby Magistrates Court, Ex p B [1996] 1 AC 487, 507D, ascribed to legal professional privilege an absolute character. It appears to pre-empt the creation of exceptions in the interests of justice. Doubts have been expressed about a perceived rigidity of the law: A A S Zuckerman, "Legal Professional Privilege - the Cost of Absolutism" (1996) 112 LQR 535; Colin Tapper, "Prosecution and Privilege" (1997) 1(1) International Journal of Evidence and Proof 5; Colin Passmore, "The Legal Professional Privilege" (1999) 3(2) International Journal of Evidence and Proof, 71.

It was common ground before the House that in the wasted costs jurisdiction under section 51, the court had no power to relax the privilege so as to enable a barrister to defend himself against allegations of improper conduct. Where a client seeks a wasted costs order against his barrister, a waiver of privilege in relation to all relevant matters will be implied by law: Lillicrap v Nalder & Son [1993] 1 WLR 94; Matthews and Malek, Disclosure, 2nd ed, (2001) p 297. Sometimes the jurisdiction will be invoked against a barrister by the opposite party in the proceedings. In that situation the barrister's client will usually have no incentive to waive privilege and will refuse to do so. Here lies the root of a systemic problem.

The jurisdiction provides compensation for an aggrieved litigant. It has, however, a penal effect on the practitioner against whom it is exercised: see Myers v Elman [1940] AC 282, 319; Harley v McDonald [2001] 2 AC 678 , 703, para 49. In wasted costs proceedings a barrister is therefore entitled to defend himself by placing before the court, without restriction, all logically relevant material about his side of the story.

The wasted costs jurisdiction is available in respect of costs incurred by a party "as a result of any improper, unreasonable or negligent act or omission": s. 51(7). An allegation of "improper" conduct is the most serious charge. The case against the barristers was throughout advanced and considered by the Court of Appeal on the basis that they had committed improper conduct.

The substance of the case against the barristers was that, contrary to paragraph 606 of the Code of Conduct, they made allegations of dishonesty against a litigant without having before them "reasonably credible material which as it stands establishes a prima facie case of [dishonesty]".

This particular professional duty sometimes poses difficult problems for practitioners. Making allegations of dishonesty without adequate grounds for doing so may be improper conduct. Not making allegation of dishonesty where it is proper to make such allegations may amount to dereliction of duty. The barrister must promote and protect fearlessly and by all proper and lawful means his lay clients interests: para 203 of the Code of Conduct. Often the decision will depend on circumstantial evidence. It may sometimes be finely balanced. What the decision should be may be a difficult matter of judgment on which reasonable minds may differ.

In the case before the House evidence is that the barristers were aware of the need for caution.

By their signatures to documents submitted to the court they vouched for the fact that they had before them material justifying the making of allegations of dishonesty.

Improper conduct under section 51(7) does not require proof of bad faith. Nevertheless, it is a highly material circumstance that the Court of Appeal accepted that the barristers believed in good faith that they had material which justified the making of the allegations: [2001] Lloyd's Rep PN 146, 158 para 60.

Furthermore, it is relevant that both barristers were acknowledged to be competent and experienced practitioners. Their bona fide views that there were materials before them justifying the allegations they made are therefore entitled to some weight. But, despite their best endeavours they failed to obtain a waiver of privilege from their client, and they were therefore unable to explain the grounds for their beliefs.

In these circumstances the question is whether the barristers' beliefs that they had material which objectively justified the allegations unquestionably fell outside the range of views which could reasonably be entertained. The burden of proof is on the party applying for the wasted costs order. In Ridehalgh v Horsfield [1994] Ch 205, at 239C, Sir Thomas Bingham MR observed that the wasted cost jurisdiction "recognises a shift in the evidential burden". This observation was plainly not intended to have any application where barristers are prevented by professional privilege from telling their side of the story.

The point narrows down to the question whether it has been proved that the materials on which the barristers in fact relied did not objectively justify their decision. The majority in the Court of Appeal (Peter Gibson and Schiemann LLJ), disagreeing with a strong dissenting judgment of Wilson J, answered this question in the affirmative. In doing so the Court of Appeal made a value judgment, based on inference, as to the nature and contents of the materials before the barristers. What exactly those materials included was and is unknown. Nevertheless, the majority in the Court of Appeal decided that even if the barristers had been permitted to tell their side of the story about the materials, which were before them, it would not have availed them in any way.

I cannot accept the view of the majority. The law reports are replete with cases which were thought to be hopeless before investigation but were decided the other way after the court allowed the matter to be tried. Without knowing the barristers' side of the story, I am unwilling to speculate about the nature of the documents before them. In these circumstances it is unnecessary to examine the particulars of the allegations against the barristers which they had no opportunity to answer. Lawyers are also entitled to procedural justice. Due process enhances the possibility of arriving at a just decision. Where due process cannot be observed it places in jeopardy the substantive justice of the outcome. In my view the analysis of Wilson J was realistic and correct.

It was impossible to determine the issue fairly. It follows that the wasted costs orders must be quashed.

This conclusion has relevance for other cases involving the wasted costs procedure where the privilege prevents barristers from explaining their conduct. I am in full agreement with the guidance given by my noble and learned friend, Lord Bingham of Cornhill, in paragraph 23 of his reasons.

For the reasons given by Lord Bingham of Cornhill and Lord Rodger of Earlsferry, as well as the reasons contained in this opinion, I would allow the appeals.

LORD HOFFMANN

My Lords,

I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill and Lord Steyn. For the reasons they have given I too would also allow the appeals.

LORD HOBHOUSE OF WOODBOROUGH

My Lords,

This appeal has raised for consideration the wasted costs jurisdiction of civil courts under s.51 of the Supreme Court Act 1981 as amended by the Courts and Legal Services Act 1990. The 1990 Act restructured the legal professions and the interrelation between the roles of solicitors and barristers. It recognised that advocacy functions could be carried out by both branches and extended the power to make orders for costs not only against solicitors exercising the right to conduct litigation on behalf of a party but also against any advocate exercising a right of audience: s.51(13). Section 51 is a provision dealing generally with the jurisdiction to make orders as to costs including a general power to determine by whom and to what extent costs of the proceedings are to be paid: s.51(3). The 'wasted costs' jurisdiction is supplementary and subsection (6) empowers the court both to disallow costs which have been wasted by a legal representative as between the lawyer and his own client and to order that the legal representative meet the whole or part of any wasted costs.

The present appeal is concerned only with the problems arising from the second limb of this power. The order in the present case was an order made on the application of the claimant in the action, Mr Medcalf, against the two barristers who had acted as the advocates for the defendant, Mr Mardell, and his company on their unsuccessful appeal to the Court of Appeal from a judgment given by Lloyd J in favour of Mr Medcalf. The complaint against the barristers made by Mr Medcalf and substantially upheld by the majority of the Court of Appeal (Peter Gibson and Schiemann LJJ, Wilson J dissenting) was that the barristers had caused him, Mr Medcalf, to incur wasted costs which the barristers ought to be ordered to meet.

"Wasted costs" is a defined expression. Subsection (7) provides that it means -

"any costs incurred by a party -

The phrase "legal or other representative" is that to which I have already referred; it is defined as covering those who, in respect to a party, are exercising either a right of audience or a right to conduct litigation on the party's behalf. The aspect of these provisions with which this appeal is concerned is therefore alleged improper, unreasonable or negligent conduct by someone exercising rights of audience (ie acting as an advocate) on behalf of one party which the opposing party says should lead the court to make an order that the advocate should bear part of the costs incurred by that opposing party.

At first sight, this power to make costs orders against such advocates seems sensible and straight forward. However this simplicity is deceptive as the subsequent history of the exercise of this jurisdiction has shown. These complications and pitfalls were discussed in the judgment of the Court of Appeal in the group of cases reported as Ridehalgh v Horsefield [1994] Ch 205 (a judgment to which my noble and learned friend Lord Bingham of Cornhill was, as the then Master of the Rolls, a party) and principled and authoritative solutions provided. It is apparent from what your lordships have been told from the bar that, notwithstanding that judgment, many of the adverse consequences have persisted. The same message is given in the valuable article by Mr H Evans published at (2001) 64 MLR 51. In the present case the Court of Appeal, both the majority and the minority, were following the Ridehalgh judgment although this led them to different conclusions. For myself, I would wish to take this opportunity to endorse and reaffirm what was said in that judgment. But it is clearly necessary to emphasise again some of its features.

The Constitutional Aspect:

The starting point must be a recognition of the role of the advocate in our system of justice. It is fundamental to a just and fair judicial system that there be available to a litigant (criminal or civil), in substantial cases, competent and independent legal representation. The duty of the advocate is with proper competence to represent his lay client and promote and protect fearlessly and by all proper and lawful means his lay client's best interests. This is a duty which the advocate owes to his client but it is also in the public interest that the duty should be performed. The judicial system exists to administer justice and it is integral to such a system that it provide within a society a means by which rights, obligations and liabilities can be recognised and given effect to in accordance with the law and disputes be justly (and efficiently) resolved. The role of the independent professional advocate is central to achieving this outcome, particularly where the judicial system uses adversarial procedures.

It follows that the willingness of professional advocates to represent litigants should not be undermined either by creating conflicts of interest or by exposing the advocates to pressures which will tend to deter them from representing certain clients or from doing so effectively. In England the professional rule that a barrister must be prepared to represent any client within his field of practice and competence and the principles of professional independence underwrite in a manner too often taken for granted this constitutional safeguard. Unpopular and seemingly unmeritorious litigants must be capable of being represented without the advocate being penalised or harassed whether by the Executive, the Judiciary or by anyone else. Similarly, situations must be avoided where the advocate's conduct of a case is influenced not by his duty to his client but by concerns about his own self-interest.

Thus the advocate owes no duty to his client's opponent; inevitably, the proper discharge by the advocate of his duty to his own client will more often than not be disadvantageous to the interests of his client's opponent. (Orchard v S E Electricity Bd [1987] QB 565, 571) At times, the proper discharge by the advocate of his duties to his client will be liable to bring him into conflict with the court. This does not alter the duty of the advocate. It may require more courage to represent a client in the face of a hostile court but the advocate must still be prepared to act fearlessly. It is part of the duty of an advocate, where necessary, appropriately to protect his client from the court as well as from the opposing party. Similarly, the advocate acting in good faith is entitled to protection from outside pressures for what he does as an advocate. Thus, what the advocate says in the course of the legal proceedings is privileged and he cannot be sued for defamation. For similar reasons the others involved in the proceedings (eg the judge, the witness) have a similar immunity.

The professional advocate is in a privileged position. He is granted rights of audience. He enjoys certain immunities. In return he owes certain duties to the court and is bound by certain standards of professional conduct in accordance with the code of conduct of his profession. This again reflects the public interest in the proper administration of justice; the public interest, covering the litigants themselves as well, is now also expressed in Part I of the Civil Procedure Rules. (See also Practice Direction 16 §9.) The advocate must respect and uphold the authority of the court. He must not be a knowing party to an abuse of process or a deceit of the court. He must conduct himself with reasonable competence. He must take reasonable and practicable steps to avoid unnecessary expense or waste of the court's time. The codes of conduct of the advocate's profession spell out the detailed provisions to be derived from the general principles. These include the provisions relevant to barristers which preclude them from making allegations, whether orally or in writing, of fraud or criminal guilt unless he has a proper basis for so doing. Paragraph 606(c), which has already been quoted by my noble and learned friend, requires express instructions and reasonably credible material which as it stands establishes a prima facie case of fraud. All this fits in well with an appropriate constitutional structure for a judicial system for the administration of justice.

The introduction of a wasted costs jurisdiction makes an inroad into this structure. It creates a risk of a conflict of interest for the advocate. It is intended and designed to affect the conduct of the advocate and to do so by penalising him economically. Ideally a conflict should not arise. The advocate's duty to his own client is subject to his duty to the court: the advocate's proper discharge of his duty to his client should not cause him to be accused of being in breach of his duty to the court. (Arthur Hall v Simons [2000] 3 WLR 543 ) But the situation in which the advocate finds himself may not be so clear cut. Difficult tactical decisions may have to be made, maybe in difficult circumstances. Opinions can differ, particularly in the heated and stressed arena of litigation. Once an opposing party is entitled to apply for an order against the other party's legal representatives, the situation becomes much more unpredictable and hazardous for the advocate. Adversarial perceptions are introduced. This is a feature of what happened in the present case. The factors which may motivate a hostile application by an opponent are liable to be very different from those which would properly motivate a court.

In my judgment, the jurisdiction must be approached with considerable caution and the relevant provisions of s.51 construed and applied so as not to impinge upon the constitutional position of the advocate and the contribution he is required to make on behalf of his client in the administration of civil justice. The judgment in Ridehalgh referred to most of the relevant points.

First, from the point of view of the advocate the jurisdiction is penal. It involves making a finding of fault against the advocate and visiting upon him a financial sanction. Unlike the position between the advocate and his own client where the potential for liability will encourage the performance of the advocate's duty to his client (see Arthur Hall v Simons, sup) and the order would be truly compensatory, the jurisdiction to make orders at the instance of and in favour of the opposing party gives rise to wholly different considerations for the advocate. The risk of such an application can, at best, only provide a distraction in the proper representation of his own client and, at worst, may cause him to put his own interests above those of his client. The construction of the section and the application of the jurisdiction should accordingly be no wider than is clearly required by the statute.

Secondly, the fault must, in the present context, relate clearly to a fault in relation to the advocate's duty to the court not in relation to the opposing party, to whom he owes no duty.

Thirdly, the terms used in subsection (7) should receive an appropriately restrictive interpretation in relation to advocates. The judgment in Ridehalgh spelled this out at p.232 of the report. The use of the first two terms, improper and unreasonable, call for no further explanation. The word negligent raises additional problems of interpretation which are not material to the present appeal since the respondents' allegation against the appellants is impropriety not negligence. But it would appear that the inclusion of the word negligent in substitution for "reasonable competence", is directed primarily to the jurisdiction as between a legal representative and his own client. It is possible to visualise situations where the negligence of an advocate might justify the making of a wasted costs order which included both parties, such as where an advocate fails to turn up on an adjourned hearing so that a hearing date is lost. The breach of the advocate's duty to the court will be clear and if the breach was not deliberate, the term negligent would best describe it. For a person exercising a right to conduct litigation (ie a litigation agent) it is less difficult to think of apt examples affecting the other side as was the situation in Myers v Elman [1940] AC 282. The use of the same language in subsection (7) in relation to both categories of legal representative does not mean that it will have the same breadth of application for both categories.

Fourthly, it is the duty of the advocate to present his client's case even though he may think that it is hopeless and even though he may have advised his client that it is. (Ridehalgh pp.233-4) So it is not enough that the court considers that the advocate has been arguing a hopeless case. The litigant is entitled to be heard; to penalise the advocate for presenting his client's case to the court would be contrary to the constitutional principles to which I have referred. The position is different if the court concludes that there has been improper time-wasting by the advocate or the advocate has knowingly lent himself to an abuse of process. However it is relevant to bear in mind that, if a party is raising issues or is taking steps which have no reasonable prospect of success or are scandalous or an abuse of process, both the aggrieved party and the court have powers to remedy the situation by invoking summary remedies - striking out - summary judgment - peremptory orders etc. The making of a wasted costs order should not be the primary remedy; by definition it only arises once the damage has been done. It is a last resort.

Practical Consequences:

The practical consequences of the wider use of the jurisdiction, particularly where the client's opponent is the applicant, were also commented upon in Ridehalgh. The first and most striking is that it creates satellite litigation which too easily gets out of proportion to the litigation which has spawned it. The present case provides an educational but far from extreme illustration. The principal trial was not wholly straightforward, involving successive amendments of the pleadings, questions of legal analysis and bitterly contradictory oral evidence but the trial judge was able to deliver his judgment at the end of the trial without having to reserve it. He held in favour of the existence of a partnership and ordered an account of profits. After various contested interlocutory applications both to the judge and to the Court of Appeal, the Court of Appeal, in March 2000, unanimously dismissed Mr Mardell's appeal, dismissing also his application to amend the notice of appeal and adduce fresh evidence. A month later the main action was settled. The wasted costs application has occupied the following two years with a further full hearing in the Court of Appeal and an appeal to your Lordships' House. If the policy of the wasted costs jurisdiction is to reduce the costs of litigation and to save court time, it too often fails to achieve this objective (as is confirmed by the Modern Law Review article already referred to). The jurisdiction is discretionary and should be reserved for those cases where the unjustifiable conduct can be demonstrated without recourse to disproportionate procedures. (See also Harley v McDonald [2001] 2 AC 678 ) The jurisdiction does not exist as an end in itself; it is distinct from the professional disciplinary structures. The procedures appropriate for wasted costs applications were discussed in Ridehalgh at pp.238-9.

Once the power to initiate wasted costs procedures is extended to the opposite party in the litigation, that party is provided with a weapon which it is too much to expect he will not on occasions attempt to use to his own advantage in unacceptable ways. It must not be used as a threat to intimidate the lawyers on the other side. (Ridehalgh at p.237, citing Orchard v S E Electricity Bd [1987] QB 565) It should not be motivated simply by resentment at an inability to obtain an effective order for costs against an assisted or impecunious litigant. (Ridehalgh at p.231, citing Symphony v Hodgson [1994] QB 179) Nor should it be used as a means of continuing contentious litigation by other means or to obtain from a party's lawyers what cannot be obtained from the party himself. The legitimate interest of an applicant for a wasted costs order is financial, a reduction in the costs he has to bear, but the application must be merits based and clearly made out; it must not raise a suspicion of being itself abusive.

A further consequence of exercising the jurisdiction on the application of an opposite party is that it raises questions of the legal professional privilege of the lawyer's client. The client very probably will have no interest in waiving the privilege. Indeed the client may stand to gain if his opponent can look to the client's lawyer for an indemnity rather than to the client himself. This situation creates a serious problem which may lead to the emasculation of the wasted costs jurisdiction as between the opposing party and the advocate. The appellants argue that in cases such as the present it should do so: fairness requires that the privileged material should be before the court; if it cannot be, the application for wasted costs should fail. They submit that this argument must be conclusive.

Legal Professional Privilege:

As already observed by my noble and learned friend Lord Steyn, the nature and extent of legal professional privilege has not been in question on this appeal nor has it been the subject of any argument. Its absolute and paramount character has been accepted by the respondents, citing R v Derby Magistrates' Court, ex parte 'B' [1996] AC 487 and General Mediterranean Holdings v Patel [2000] 1 WLR 272 However, the need of a lawyer to be able to ask a court to look at privileged material when a lawyer's conduct is in question may not be so intractable. The material in question may be confidential rather than absolutely privileged. (Parry-Jones v The Law Society [1969] 1 Ch 1) It may be possible to restrict the use which can be made of the disclosed material so as to reduce or remove the infringement of the client's privilege. (See per Glidewell LJ in R v Commissioners of Inland Revenue ex parte Taylor (No.2) 62 TC 578 at p.588.) It may be that partially inquisitorial procedures can be adopted, as in the inter partes taxation of costs. It should be remembered that the subject matter of the wasted costs application is an alleged breach of the lawyer's duty to the court and it is not unique that a lawyer may have to refer to privileged material in the context of explaining himself to the court and defining his relationship to the court as, for example, when a litigation agent is applying to come off the record or a barrister is ceasing to represent an assisted defendant during the course of a criminal trial. It may be that, as in the context of Articles 6 and 8 of the European Convention on Human Rights, the privilege may not always be absolute and a balancing exercise may sometimes be necessary. (Campbell v UK (13590/88) 15 EHRR 137 and Foxley v UK (33274/96) 31 EHRR 25) But on the present appeal it must be taken that the material which the appellants say is relevant may not directly or indirectly be made available to the court with the result that it is open to the appellants to argue that the Court of Appeal must have acted unfairly in making a wasted costs order against them..

The point was specifically considered in Ridehalgh at pp.236-7:

Where there is room for doubt, the respondent lawyers are entitled to the benefit of it.

The answer given therefore was not to treat the existence of privileged material as an absolute bar to any claim by an opposite party for a wasted costs order but to require the court to take into account the possibility of the existence of such material and to give the lawyers the benefit of every reasonably conceivable doubt that it might raise. So, all that the lawyer has to do is to raise a doubt in the mind of the court whether there might not be privileged material which could affect its decision whether or not to make a wasted costs order and, if so, in what terms and the court must give the lawyer the benefit of that doubt in reaching its decision, including the exercise of its statutory discretion. I see nothing unfair about this approach. Further, if the use of the jurisdiction on the application of an opposite party is kept within the proper bounds, the frequency with which the problem arises of taking into account the existence of possibly relevant but unseen privileged material should be much reduced.

The contrary submission of the appellants on this appeal treats the existence of privileged material as a kind of trump card which will always preclude the making of a wasted costs order on the application of an opposite party. They ask how can a court evaluate whether privileged material which, ex hypothesi, it has not seen would affect its decision without first seeing that material. But this argument does not reflect what was said in Ridehalgh. Once the lawyer is given the benefit of any doubt, any element of unfairness is removed. It must depend upon the circumstances of each particular case. For example, a lawyer who has to ask for an extension of time or an adjournment because, say, he has forgotten about a time-limit or has accidentally left his papers at home, would not be able to say that any privileged material could possibly excuse his incompetent mistake. To make a wasted costs order against him would not (absent some additional factor) be inappropriate or unfair. In other situations privileged material may have a possible relevance and therefore require assumptions favourable to the lawyer to be made. Thus, in the present case it is assumed that in all respects the appellant barristers were acting on the express instructions of their lay clients although a finding of fact to that effect could only be made after the consideration of privileged material. The assumption removes the unfairness which might otherwise, in this respect, exist.

Therefore, for myself, I would not qualify what was said in Ridehalgh. But I agree that it may be salutary to remind parties that each case must depend upon its own facts and that the power to make an order is discretionary and material which could affect the exercise of that discretion is also relevant. I agree with my noble and learned friend Lord Bingham of Cornhill that the court must be satisfied before it makes the wasted costs order that there is nothing that the lawyer could say, if unconstrained, to resist the order and that it is in all the circumstances fair to make the order.

The Present Case:

The facts leading up to the making by the Court of Appeal of the wasted costs order against the barristers are fully set out in the Court of Appeal judgments and have been summarised in the Opinion of my noble and learned friend. The difference between the majority and the minority in the Court of Appeal was not in the test to be applied. All agreed that the barristers should be given the benefit of any doubt: see Peter Gibson LJ, [2001] Lloyd's Rep 146, at pp.153 and 157. The difference lay in the outcome of applying the test. Thus Peter Gibson LJ said at p.158 on behalf of himself and Schiemann LJ:

On the other hand, Wilson J said (at p.162):

Ridehalgh v Horsefield

With the one exception of the transcripts allegation, I agree that the preferable view is that the wasted costs order should not have been made. The complaint made on behalf of Mr Medcalf was that an application had been made to the Court of Appeal to allow the amendment of the notice of appeal and for the admission of fresh evidence which included allegations which could not properly be made. The application for a wasted costs order was based upon the draft amended notice and the accompanying skeleton argument. These documents were effectively simultaneous although dated one day apart (3 and 4 February 2000) and they were signed by the barristers. It was a consequence of these documents that additional time was taken up on the first two days (14 and 15 February) at the hearing of the appeal but there was not any additional waste of time caused by counsel taking excessive time to argue Mr Mardell's case. All the relevant points upon which the applications to amend and admit fresh evidence were based were hopeless and were roundly rejected by the Court of Appeal both at the time and in their unanimous written judgment dismissing the appeal. With the one exception already mentioned, I would put these points into the category of arguing a hopeless case. How they would ever persuade the Court of Appeal to allow the appeal and reverse the judge's judgment escapes me. They related to peripheral matters and, although the credibility of Mr Medcalf was central to the judge's decision and the attempt to upset it on appeal, they could not be thought sufficient, nor were they all novel. Speaking for myself, I would put these points into the category, not of impropriety, but of counsel discharging their duty to present even a hopeless case if instructed to do so, in which case no question of making a wasted costs order against them should have arisen. It must be remembered that the good faith of the barristers and their consciousness of the rules of their profession are not challenged nor is their statement that they acted upon their clients' express instructions. If it is considered that the barristers' inclusion of these points was improper, I would not arrive at that conclusion without feeling doubts which I would not wish to resolve without knowledge of the surrounding circumstances and the privileged material covering the relationship between the advocates and their client. I do not believe that in these circumstances it would be fair to exercise the discretion against the appellants.

The Transcripts Allegation

This allegation was included in Ground 45 of the proposed amendments to the notice of appeal. It was in the following terms:

This is an allegation of serious fraud and conspiracy involving not only Mr Medcalf but also the official court transcribers and, presumably, the plaintiffs' solicitors. The accompanying skeleton argument in 12 paragraphs identified the evidential material relied on, going back to the previous summer.

There are three important features which are essential to the proper evaluation of the allegation made in the proposed Ground 45. The appellants' argument failed to have any regard to them and the same could fairly be said of the dissenting judgment of Wilson J.

The first and most important is that the allegation was made as part of and was dependant upon a Ladd v Marshall (see [1954] 1 WLR 1489 ) application to admit fresh evidence in the Court of Appeal on appeal from a final judgment. The applicant has to identify and place before the Court of Appeal in documentary form the fresh evidence the subject of the application. The fresh evidence to support the relevant ground of appeal has thus to be fully disclosed. There is no room for the applicant to say that if you grant my application to adduce the fresh evidence then there is other evidence not adduced at the trial and not included in my application upon which I will also want to rely. The application is exhaustive of the opportunity to adduce fresh evidence in the Court of Appeal. In any event, the position was put beyond argument by an order of Clarke LJ on 28th January directing that any evidence to be relied on should be served by 4th February. The evidence placed before the Court of Appeal on behalf of Mr Mardell was the only evidence upon which Mr Mardell could rely in support of Ground 45 and upon which the advocates could rely as justifying the allegation in Ground 45 in compliance with Paragraph 606 of the Code of Conduct.

There has been a discussion whether Paragraph 606 is satisfied by an expectation of obtaining admissible evidence which has not yet been obtained. I do not wish to enter upon this discussion save to say that it is misconceived: the emphasis should be upon whether the existing material discloses a prima facie case, which is a concept well understood in many areas of procedural law, not least in the criminal law. The question which the advocate must ask is: is there a prima facie case of the fraud which I am going to allege? It is important not in any way to devalue the important principle encapsulated in Paragraph 606. But, in any event the 'expectation' excuse cannot, and could not on any hypothesis, assist the appellants here. At the early stages of litigation, before the close of pleadings, some of the relevant evidence supporting an allegation may not yet have been put into a form which can actually be used at the trial; discovery may yet have to take place but a party may know what documents will have to be produced on discovery. At the stage of trial, evidence which has not been given and the advocate cannot adduce cannot be relied upon to justify an allegation. After trial and judgment, the situation is even more clear cut. Only evidence already adduced in the action or for which leave to adduce is given by the Court of Appeal under Ladd v Marshall can be relied upon as justification. This was the position here in relation to Ground 45. Ground 45 and the accompanying skeleton argument made allegations which came within the scope of Paragraph 606 and clearly should have been (and the barristers say it was) seen as engaging the professional responsibility of an advocate to the court. Since the allegations related to matters occurring after trial and judgment, the principle in Ladd v Marshall was inevitably critical to the ability to sustain the allegation. A specific application to admit fresh evidence had to be made. The allegation had to be made on the evidence which Mr Mardell as the appellant was asking the Court of Appeal to admit. If that evidence did not disclose even a prima facie case against Mr Medcalf, it follows that a breach of Paragraph 606 and the advocates' duty to the court occurred.

The second feature is partly a consequence of the first. It is not possible to make a Ladd v Marshall application without waiving any privilege in the material which is the subject of the application. Ground 45 starts with the words - "the ... Defendants have fresh evidence that since the trial there has been interference with the official transcripts of the trial". They cannot at the same time claim any privilege against disclosing what that evidence is. The suggestion that there was material capable of justifying the allegation which Mr Mardell could rely on without waiving any privilege and disclosing the material to the opposite side and the court is patently unsustainable.

The third feature is peculiar to the present case. The allegation of fraudulent interference with the transcript had been unsuccessfully relied upon by junior counsel for Mr Mardell on previous occasions using the same material. In particular, on 2nd December, she applied to Lloyd J for an order that proceedings on the account should be stayed and the police should be directed to investigate the transcript question as an attempt to pervert the course of justice. The judge dismissed the applications and refused leave to appeal. The reaction of the Court of Appeal on the hearing of the substantive appeal should have come as no surprise to the barristers. It was entirely in line with what had been said by the judge earlier. There was no evidence whatever that Mr Medcalf or anyone acting for him had anything to do with the defective transcripts. The evidence disclosed regrettably familiar deficiencies in the system whereby mechanical recordings and transcripts are made in the Royal Court of Justice in London. The primary tape is in the court-room where the trial is taking place and depends upon a court official each day keeping a log of the proceedings and switching the tape on and off at the right times. The tape recording should be of a reasonably good quality but the transcriber, who has no independent knowledge of the proceedings, is entirely dependant upon what the court officials have done. (The court officials may indeed have had to look after several courts at the same time.) What happened in the present case was that the court officials did not keep a complete log and did not always switch on or off the tape recorder at the times they should. Also, at times the voice on the tape was not clear. All this was confirmed by the investigations carried out and the statements and affidavits lodged. In the Royal Courts of Justice there is also a back-up multitrack tape which runs throughout the working day covering all courts. Inevitably its quality is not as good as the primary tape. A transcript is not made unless asked for. The transcript will normally be made by one of the Lord Chancellor's Department contractors from the daily court-room tapes if available. This was what was done initially in the present case. When the defects in the first transcript and, hence, in the tapes from the court room were discovered and the solicitors complained, the senior contractors were called in and a further complete transcript was made using both types of tape. This is the second transcript to which Ground 45 refers and which those representing Mr Mardell consider to be satisfactory.

It was an unhappy incident but it was fully explored and explained in the evidence which was put before the Court of Appeal. In my judgment no competent and reasonably experienced advocate or litigator should have seen anything remotely sinister about it let alone treat it as evidence of a conspiracy to pervert the course of justice. As previously stated, there was nothing to implicate Mr Medcalf or any one acting for him in any wrong doing in this connection whatever. It disclosed no prima facie case against him. Yet the advocates put their signature to Ground 45 and to the supporting skeleton argument.

In my judgment this was just the type of situation Paragraph 606 was designed to prevent. Unjustifiable allegations of fraud have been made. Like Peter Gibson LJ and Schiemann LJ, I cannot conceive of any privileged material which could possibly make any difference to the culpability of making this irresponsible allegation or justify it. The allegation is on its face implausible and suggests an abandonment of the objectivity and sense of proportion which a court is entitled to require of an advocate. Further it was the duty of the advocate to put before the court on the Ladd v Marshall application the material which was said to justify the allegation. If the material was not reasonably capable of justifying it, even on a prima facie basis, the allegation should not have been made.

Therefore I would for myself only allow the appeal in part. But your Lordships consider otherwise and would allow the appeal wholly. Since matters of discretion are involved and since I do not feel confident that, if the transcript allegation had stood alone, the Court of Appeal would still have thought that a wasted costs order was appropriate, or at least felt no doubt about it, I will with reluctance concur in the order proposed. Subject to what I have said in this Opinion, I agree with what has been said by my noble and learned friends Lord Bingham of Cornhill and Lord Steyn; I also agree with what the former has said in paragraph 28 of his Opinion.

LORD RODGER OF EARLSFERRY

My Lords,

I have had the advantage of considering the speeches of my noble and learned friends, Lord Bingham of Cornhill and Lord Steyn, in draft. I agree with them and, for the reasons they give, I too would allow the appeal.

Like my noble and learned friend, Lord Hobhouse of Woodborough, I was much troubled by the allegation, in ground 45 of the proposed amendments to the notice of appeal, of fraudulent interference with the transcript. None the less, the appellants have not been able to tell their side of the story. A court making a wasted costs order under section 51 of the Supreme Court Act 1981 exercises a discretion. All kinds of mitigatory circumstances may be relevant to the exercise of that discretion. In my view, therefore, it was wrong for the Court of Appeal to make an order against the appellants in a situation where the full facts about the circumstances in which the appellants had been instructed and had prepared the relevant documents were not known and where the appellants were prevented from putting them before the court.

The majority of the Court of Appeal held that the appellants' conduct, in drafting the amended notice of appeal on 3 February 2000 and in preparing the skeleton arguments the following day, had been "improper" in terms of section 51(7)(a). That decision was based on the view that their conduct on those dates was governed by paragraph 606 of the Code of Conduct of the Bar of England and Wales (7th ed (2000)). Paragraph 606 provides that, before making any allegation of fraud, counsel should have before him "reasonably credible material which as it stands establishes a prima facie case of fraud". The majority held that, in terms of the rule, the "material" had to be "evidence which can be put before the court to make good the allegation": [2001] Lloyd's Rep (PN) 146, 154, para 40 per Peter Gibson LJ. Since it was clear from what happened subsequently that no such evidence had been available to counsel on 3 and 4 February, the majority held that counsel had breached the rule in paragraph 606.

The interpretation of the paragraph 606 that the majority adopted is, perhaps, not surprising since the rule of professional conduct was formerly understood to be to that effect. For instance, in Associated Leisure Ltd (Phonographic Equipment Co Ltd) v Associate Newspapers Ltd [1970] 2 QB 450, 456E - F Lord Denning MR indicated his understanding that the duty of counsel was not to put a charge of fraud on the record "unless he has clear and sufficient evidence to support it." The passage is cited in Bullen & Leake & Jacob's Precedents of Pleadings 13th ed (1990), p 428. The same approach is to be found in the extrajudicial remark of Lord Macmillan that, where a person's reputation is at stake, the pleader should not "trespass … a hair's breadth beyond what the facts as laid before him and duly vouched and tested, will justify": "The Ethics of Advocacy" in Law and Other Things (1937), p 192, approved in Oldfield v Keogh (1941) 41 SR (NSW) 206, 211 per Jordan CJ.

But the current rule is that stated in paragraph 606. Wilson J held that the term "material" in paragraph 606 went wider than evidence in proper form: [2001] Lloyd's Rep (PN) 146, 161 para 80. The paragraph states a rule of professional conduct rather than a rule of law, but I agree with his interpretation of it. The current rule of conduct is slightly less strict than the rule as at one time understood. While, usually, the material before counsel will comprise evidence in an admissible form, something less can satisfy the requirements of the current rule, provided that it establishes a prima facie case of fraud. A report of an official inquiry, or accurate reports of evidence given in a civil or criminal trial, are examples that come to mind. A professional rule that permits counsel to draft pleadings on such a basis, before the actual evidence is to hand, achieves a sensible balance: it gives due protection to defendants, while not putting unnecessary obstacles in the way of claimants and their counsel raising proceedings promptly. So interpreting the rule, I am unable to infer from the circumstances that the appellants were necessarily in breach of it on 3 or 4 February 2000.

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	United Kingdom House of Lords Decisions
You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Medcalf v Weatherill & Anor [2002] UKHL 27 (27 June 2002) URL: http://www.bailii.org/uk/cases/UKHL/2002/27.html Cite as: [2002] NPC 89, [2002] UKHL 27, [2002] PNLR 43, [2002] CP Rep 70, [2002] CPLR 647, [2003] 1 AC 120, [2002] 3 Costs LR 428, [2002] 3 WLR 172, [2002] 3 All ER 721, [2003] AC 120