WASTED COSTS ORDERS AGAINSTS COUNSEL

Ian Geering QC and Matthew Parker of 3 Verulam Buildings discuss an important House of Lords decision on the wasted costs regime.

In Medcalf v Mardell [2002] 3 All ER 721, the House of Lords considered for the first time the court's jurisdiction to make wasted costs orders under s 51(6), (7) and (13) of the Supreme Court Act 1981, as introduced by s 4 of the Courts and Legal Services Act 1990.

Mr Medcalf was successful in a claim against Mr Mardell in relation to the development of a television show. Mr Mardell appealed. His two barristers signed a draft amended notice of appeal and skeleton argument in support of the appeal making serious allegations of impropriety against Mr Medcalf. The Court of Appeal refused permission to amend the notice of appeal so as to rely on those allegations, and the appeal was ultimately dismissed. Mr Medcalf applied for wasted costs orders against the barristers in respect of the costs incurred by him in dealing with the allegations of impropriety.

The barristers contended that, in settling the notice of appeal and skeleton argument, they had reasonably credible material establishing a prima facie case of impropriety for the purposes of para 606(c) of the Bar Code of Conduct. Their client had refused to waive legal professional privilege in respect of this material, however, and they were therefore unable to demonstrate that they had complied with the requirements of the code. Accordingly, they argued, it would be unfair of the court to draw inferences as to the available material or to exercise its discretion to make an order.

The Court of Appeal (Wilson J dissenting) held ([2000] All ER (D) 1969) that para 606 applied not only to allegations of fraud but also to other allegations of dishonest or dishonourable conduct. For the purposes of para 606, the material must be evidence which could be put before the court. The barristers had produced no reasonably credible material to justify seven of the allegations of impropriety relied upon on the appeal and had therefore behaved improperly for the purposes of s 51(7) of the 1981 Act. Their inability to reveal privileged or confidential material did not make the hearing of the application unfair or contrary to art 6 of the European Convention on Human Rights. Wasted costs orders were made.

On appeal, the House of Lords dealt with two jurisdictional arguments advanced on behalf of the barristers in relation to s 51 of the 1981 Act. They contended, in reliance upon the wording of s 51(13), that the court only had jurisdiction under s 51(5) to make an order against the applicant's own legal representatives. That argument was rejected. The court undoubtedly had power to make a wasted costs order against the legal representative of another party in criminal proceedings in the Court of Appeal, the Crown Court or a magistrates' court, under ss 111 and 112 of the 1990 Act. It was inconceivable that Parliament intended to afford to barristers in civil proceedings a ground of exemption not enjoyed by solicitors.

The barristers also argued that, because they had no right to conduct litigation, as defined in ss 28 and 119(1) of the 1990 Act, the court had no jurisdiction to make an order against them except in relation to their conduct when exercising a right of audience in court. That argument was also rejected. It would stultify s 51 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.

The House of Lords accepted, in relation to para 606 of the Code of Conduct, that counsel is entitled to lend his name to an allegation of fraud or dishonesty at a preparatory stage, provided there is reasonably credible material before him which appears to justify the allegation, even if that material would not be admissible in evidence. At the hearing stage, however, counsel cannot properly make or persist in an allegation which is unsupported by admissible evidence.

It was common ground that the court had no power to relax the rules relating to legal professional privilege so as to permit a barrister to defend himself against allegations of improper conduct. Their Lordships, approving the judgment of the Court of Appeal in Ridehalgh v Horsefield [1994] 3 All ER 848, stressed that where privilege applies, the court must be very slow to conclude that a practitioner could have had no sufficient material to justify his conduct. He is entitled to the benefit of any doubt. Furthermore, the court should not make a wasted costs order against a practitioner in those circumstances without satisfying itself that it is in all the circumstances fair to do so. Only exceptionally could these exacting conditions be satisfied. In this case the barristers had to be given the benefit of the doubt.

Their Lordships justified this restriction of the wasted costs jurisdiction on the basis that the introduction of the jurisdiction represents a significant inroad into the constitutional structure of the judicial system. The provisions of s 51 should be construed and applied so as not to impinge upon the advocate's constitutional position and the contribution he is required to make on behalf of his client in the administration of civil justice. They reiterated once again the danger of wasted costs applications giving rise to costly satellite litigation, and stressed that such applications should only be made in the clearest cases.