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||Neutral Citation Number:  EWHC 2162 (QB)
||Case No: HQ12X02165, HQ14X02001
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Strand, London, WC2A 2LL
||22nd August 2016
B e f o r e :
HIS HONOUR JUDGE SEYS-LLEWELLYN QC
(sitting as a Judge of the High Court)
|| M A LLOYD & SON LTD
||- and -
||PPC INTERNATIONAL LIMITED
(T/A PROFESSIONAL POWERCRAFT)
||- and -
||MR RODERICK McCARTHY
Mr Caley Wright (instructed by Smithfield Partners Solicitors) for the Applicant
Mr Simon Butler (directly instructed) for the Respondent
Hearing date: 25th July 2016
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
HHJ Seys-Llewellyn QC
- This is the written judgment upon an application by PPC International Limited (t/a Professional Powercraft) ("PPC") for a wasted costs order against Mr Roderick McCarthy ("Mr McCarthy") in three related actions brought by MA Lloyd & Son Ltd ("MAL") against PPC.
- The applicable law. The jurisdiction to make a wasted costs order is defined by s.51(6) of the Senior Courts Act 1981 which states, "in any proceedings mentioned in sub section (1), the Court may disallow, or (as the case may be) order the legal or other representative concerned to meet the whole of any wasted costs or such part of them as may be determined in accordance with the rules of Court". This provision is supplemented by provisions of the CPR. I deal below with guidance in the reported cases.
- PPC allege that Mr McCarthy acted as legal representative for MAL; that the conduct of the proceedings by him was improper or unreasonable; and further that it was "solicitor-led" by him, within the meaning given in the reported cases upon the wasted costs jurisdiction.
- The issues in the present case are:
(i) whether Mr McCarthy has been shown to be a solicitor "conducting the litigation" or "issued proceedings or performed any of the ancillary functions such us entering an appearance associated with the conduct of litigation on behalf of a client" (within the meaning of s.119(1) of the Courts and Legal Services Act 1990) either generally, or for certain periods of time, or in respect of particular steps taken in the proceedings;
(ii) whether the relevant steps, of which PCC complains, were improper and unreasonable by Mr McCarthy, and/or "solicitor-led" as described in the authorities as being appropriate for an Order for wasted costs, as opposed to acting on the instructions of the client;
(iii) whether it has been shown that the waste of costs of which PCC complains were "caused" by the acts of Mr McCarthy, as opposed to acting on the instructions of the client, or may have been incurred instead because of the stance overall or wishes of the client.
- The history of the failed proceedings. In barest outline, in 2011 MAL brought proceedings against PPC for alleged breach of a confidentiality agreement and passing off. PPC is incorporated in Brunei. These, the First Proceedings, were by action Claim No. HQ11X02186 ("HQ11X") issued on 14 June 2011. MAL purported to serve the Claim Form on PPC out of the jurisdiction without permission. On 23 May 2012 MAL applied for permission to serve outside the jurisdiction, itself an application for retrospective permission to serve out of the jurisdiction; but the application was dismissed on 30 May 2012 by Master Kay QC who also struck out the First Proceedings and ordered that MAL pay PPC's costs summarily assessed at £1,250 within 21 days.
- The Second Proceedings, by claim form in action HQ12X02165 ("HQ12X"), were issued on the same day that the First Proceedings were struck out namely 30 May 2012. The Claim Form and Particulars of Claim were identical to those in the First Proceedings. Put very shortly indeed, judgment in default was entered against PPC and was set aside on 30 May 2013 by Master Kay QC who, in the same order, stayed the Second Proceedings pending determination of an appeal outstanding in the First Proceedings or the payment by MAL of the costs ordered on 30 May 2012; and MAL was further ordered to pay PPC's costs for a given time period.
- Case management proceeded fitfully, despite the efforts of judges to progress proceedings. The delay included dealing with an allegation by MAL that PPC no longer had legal personality or was entitled to litigate in the UK. This came to an end when Turner J dismissed an application by MAL, stating that he found MAL's conduct to be "yet another example of a litigant treating an Order of the Court as if compliance were an optional indulgence". He debarred MAL from raising the issue at trial (Bundle 3/24/214, 219).
- At the conclusion of a number of procedural excursions by or on behalf of MAL, on 1 May 2014 Master Kay QC made an Order confirming several previous costs orders, ordered payment into Court of £30,000 (on account of the summary assessment of costs pending an assessment as ordered by Hamblen J), and ordered that failure to pay those sums would result in the Second Proceedings being dismissed. MAL failed to pay that sum into Court as required. On 7 July 2014, in a judgment which includes matters of importance, Master Kay QC confirmed that the Second Proceedings were dismissed by reason of failure to pay that sum (Bundle 3/24/266-267).
- Thirteen days later, on or about 14 May 2014 MAL issued the Third Proceedings, by Claim Form and Particulars of Claim in Action HQ14X02001, which broadly repeated the allegations in the First and Second Proceedings and added further claims in fraud and conspiracy and certain further parties.
- On 8 July 2014 Master Kay QC summarily assessed, in the sum of £70,293, costs which, on 30 January 2014 Hamblen J had ordered to be assessed and paid by MAL; and he made further orders in respect of hearings which had taken place since 30 January 2014, totalling some £22,825, to be paid by MAL (see Order at Bundle 3/24/268 at 269). On 28 November 2014, upon an application made by PPC on 17 October 2014, Master Kay QC stayed the Third Proceedings until payment of the costs ordered in the previous proceedings, and also ordered MAL to pay costs to PPC and to another Defendant each in the sum of £3,250. After a further excursion by MAL, and an unsuccessful application for permission to appeal the Order of 28 November 2014 which stayed their Third Proceedings – when MAL applied out of time, and permission was refused on 20 January 2015 – MAL went into administration on 29 January 2015. Those representing PPC regard the prospects of recovering the costs ordered in favour of PPC against MAL, by now totalling some £120,000, as nil or minimal.
- The parties. MAL is a company in which Mr John Ernest Key was a director. He describes it as a diverse engineering business, in a witness statement dated 3 May 2016. He first had a beneficial interest in the shareholding in 1991; from 1999 onwards he and his wife were the beneficial owners of that company, save for 20% of the shares in MAL sold in August 2011.
- Mr McCarthy is a qualified solicitor. From a date at some time during 2012, he was employed by "Charles Henry" which is not a firm of solicitors or limited legal partnership, but which Mr Leigh Ellis the solicitor for PPC (in his Thirteenth Statement dated 1 February 2016) 'understands to be a company limited by guarantee and a charity, which describes itself as 'providing legal support to members of the public' and which states on its formal notepaper that it "retains solicitors and other lawyers as consultants and enjoys direct access to the Bar" '.
- The legislation in this field provides that only certain persons or bodies are licensed or authorised to carry out "reserved legal activities" (including advocacy and the conduct of litigation). Charles Henry was registered with the SRA (Solicitors Regulatory Authority) and Leigh Ellis in that witness statement states his understanding that it was not at any time licensed or authorised to carry out reserved legal activities. By comparison a qualified solicitor, doubtless subject to maintaining his practising certificate, would be authorised to carry out those activities. Mr McCarthy was a qualified solicitor. It is not suggested that he was not authorised or licensed to carry out the relevant activities.
- I find the role of Charles Henry in this litigation, as a body not authorised or licensed to carry out reserved legal activities, at least opaque. In this, I am in good company. In proceedings between Norseman Holding Limited –v- Warwick Court (Harold Hill) Management Company Limited  EWHC 3868 (QB) Coulson J, stated that 'certain aspects of NHL's conduct of the litigation generally, and this appeal in particular, can only be described as extraordinary':
"Throughout all this game playing, an issue arose – and continues to arise – in relation to the nature of those representing NHL. Charles Henry are on the record as solicitors, and indeed that is confirmed in a witness statement dated 18 January 2013 signed by Keith Gregory, who describes himself as a trainee legal executive at Charles Henry.
However it appears that Charles Henry are not an authorised body recognised by the Solicitors' Regulation Authority for the purpose of carrying out litigation, and, at the contested hearing in front of Judge Davies on 21 January 2013, that was expressly confirmed by NHL's Counsel, Mr Shrimpton who described Charles Henry as 'not a firm and not able to conduct litigation'…..
Even for the purposes of this appeal, the issue as to who is acting for NHL as their solicitor is wholly muddled. In his skeleton argument, at paragraph 22, Mr Butler said that it was common ground that Dr Eiland was the solicitor conducting the litigation on behalf of NHL. I have seen nothing to confirm that Dr Eiland is or was NHL's solicitor. Orally, I was told that this was wrong and that NHL's solicitor is Mr Rory McCarthy, but again I have seen nothing to suggest that he is acting on the record as NHL's solicitor.
There is, therefore, an unacceptable muddle as to who – if anyone – could be said to be the solicitor acting on behalf of NHL. That muddle lies at the heart of what happened next. At the hearing of 21 January 2013, before Judge Davies, NHL were represented by Mr Shrimpton of counsel. Mr Gregory and Mr McCarthy sat behind him. Dr Eiland was not in Court……"
(Coulson J at paragraphs 7 – 10).
- Guidance in the reported authorities. Mr Caley Wright appeared as counsel for PPC the Applicant; and, acting pro bono, Mr Simon Butler appeared as counsel for Mr McCarthy. Each cited relevant authorities; the difference between them was principally one of emphasis.
- The leading case is that of Ridehalgh –v- Horsfield CA  Ch 205. It was there affirmed that Courts should apply a 3 stage test when a wasted costs order is contemplated.
"(1) Has the legal representative of whom complaint is made acted improperly, unreasonably or negligently?
(2) If so did such conduct cause the Applicant to incur unnecessary costs?
(3) If so, is it in all the circumstances just to order the legal representative to compensate the applicant for the whole or any part of the relevant costs?".
Mr Wright cited the following passages:
" "Improper" means what it has been understood to mean in this context for at least half a century. The adjective covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalty. It covers any significant breach of a substantial duty imposed by relevant code of professional conduct.But it is not in our judgment limited to that which will be regarded as improper according to the consensus of professional (including judicial) opinion can be fairly stigmatised as such whether or not it violates the letter of a professional code.
"Unreasonable" also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather that advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct can not be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner's judgment, but it is not unreasonable.
[As to "negligent", which is not prominent in the application before me, the courts said, "We "are clear that "negligent" should be understood in an un-technical way to denote failure to act with a competence reasonably to be expected of ordinary members of the profession".]
In adopting an un-technical approach to the meaning of negligence in this context, we would however wish firmly to discountenance any suggestion that an applicant for a wasted costs order under this head need prove anything less than he would have to prove in an action for negligence: "Advice, acts or omissions in the course of their professional work which no member of the profession who is reasonably well-informed and competent would have given or done or omitted to do"; an error "such as no reasonable well-informed and competent member of that profession could have made"…..
We were invited to give the three adjectives (proper, unreasonable and negligent) specific self contained meanings, so as to avoid overlap between the three. We do not read these very familiar expressions in that way. Conduct which is unreasonable may also be improper, and conduct which is negligent will very frequently be (if it is not by definition) unreasonable. We do not think any sharp differentiation between these expressions is useful or necessary or intended" (at 232D – 233E).
I add that counsel for Mr McCarthy would wish me to note the further observation that,
"A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail……" (page 233F-G).
- The Court of Appeal considered the wasted costs jurisdiction further in the case of Fletamentos Maritimos SA –v- Effjohn International BV Lloyd's Law Reports  PN26. The Court was satisfied that a hopeless case was being litigated on the advice of the lawyers involved. They had no hesitation in affirming a wasted costs order where it was to be regarded as "solicitor-led litigation" where, e.g. Simon Brown LJ (as he then was) cited with approval the observations from Ridehalgh, that
"Legal representatives will, of course, whether barristers or solicitors, advise clients of the perceived weakness of their case and of the risk of failure. But clients are free to reject their advice and insist that cases be litigated. It is rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved…
It is, however, one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are in abuse of the process of the Court…. It is not entirely easy to distinguish by definition between the hopeless case and the case which amounts to an abuse of the process, but in practice it is not hard to say which it is and if there is doubt the legal representative is entitled to the benefit of it".
- This authority offers some support also, by way of obiter dictum, for the proposition that attempts to pursue appeal may be different from attempts to secure an order at first instance, in that "where the appellate proceedings may be and have been brought without leave it may well be unreasonable to pursue the matter further….. Thus, as it seems to me, the fact that the proceedings are appellate is an important additional ingredient relevant to the consideration of the question whether the costs were incurred due to the unreasonable act or omission of the legal representative….." (Morritt LJ at 43). The point made is that where the proceedings are appellate, the Appellant will by definition have had "his day in court". Ordinarily, this observation might have little relevance; in the case before me, the respective appeals and grounds of appeal advanced by MAL and/or its representatives are repeatedly embarrassing to read in their lack of quality or substance.
- Mr Wright drew my attention to Morris –v- Roberts (Inspector of Taxes)  EWHC 1040 (Ch) where – to condense paragraphs 49-53 of his judgment, Lightman J said that in considering whether a solicitor has acted in proceedings that constitute an abuse of process in this context, it is relevant to consider the ability and or willingness of his client to (a) bear the costs consequences of those proceedings and or (b) give effect to previous orders made against him in connected litigation and,
"The fact that there is some small prospect of success in proceedings or on an appeal does not preclude a finding that the proceedings are abusive and this is most particularly the case where the solicitor knows that his client "cannot or will not pay" [citing Fletamentos].
- Last, there is long standing authority, reflected in the modern case of Warner –v- Merriman White  EWHC 1129 (Ch) that if a legal representative professes authority to act on behalf of a client "it is in my opinion essential to the proper conduct of legal business that a solicitor should be held to warrant the authority which he claims of representing his client" (Young –v- Toynbee  1KB215 at 225-227, Swinfen Eady LJ). The judge found Merriman White had no authority to act on behalf of the client and that in these circumstances the opposing party was entitled to an order that Merriman White pay the relevant costs (HHJ Toulmin Companies Court at 84-87).
- The wasted costs jurisdiction is one which is to be exercised summarily, with due regard to fairness to both parties but without full trial. That is well established, and is summarised by Morgan J in the more recent case of Centrehigh Ltd –v- Karen Amen and others  EWHC 625 (at paragraphs 41-42 in particular). Having recited earlier authority that such are ancillary proceedings and should not grow out of control into satellite litigation, Morgan J said
"Normally, an Applicant for an Order under s.51 is not entitled to have a full trial with pleadings, disclosure, cross examination of witnesses on every matter of fact which is potentially material to the outcome of the s.51 Application. Normally, the Court attempts to do justice by having regard to the material before it, having regard to the documents which have been made available, and having regard to witness statements which in some cases will be in conflict. The Court does the best it can in an attempt to be fair to both parties and achieve a just result."
- Counsel for Mr McCarthy, Mr Simon Butler, appeared pro bono and was instructed at relatively short notice. Nonetheless he was of admirable assistance to the Court and in command fully of the case.
- First, Mr Butler drew attention to the authority of Byrne –v- Sefton HA  EWCA Civ 1904 which made clear that the jurisdiction to award costs against a solicitor under s.51(6) of the 1981 Act applied only in relation to someone who by virtue of the definition in s.51(13), read together with s.119(1) of the Courts and Legal Services Act 1990, had either exercised rights of audience (not the case here), issued proceedings, or performed any of the ancillary functions such as entering an appearance associated with the conduct of litigation on behalf of a client (see Chadwick LJ at paragraphs 26-30).
- Second he identified, correctly, by reference to Byrne and Fletamentos that the Court must be satisfied that the conduct of the person against whom the wasted costs order is sought was causative of the costs which have been incurred. In the absence of a causative link, whether or not the solicitor acted with conduct of the proceedings or fulfilled ancillary functions in the conduct of the litigation, no wasted costs order should be made.
- Originally, the application for a wasted costs order was made against both Mr McCarthy and Mr Key. Mr Key served a witness statement dated 3 May 2016 in response to the application that he should pay costs of the three claims which MAL brought against the Defendant. In it, he stressed the good faith of bringing proceedings against PPC and his belief that there was wrongdoing on their part, but also made complaint that Charles Henry did not always ask MAL before taking steps in the litigation, that he generally left Charles Henry to get on with the litigation which he assumed was appropriate, and that he had been left in ignorance of a number of matters.
- I deal with the latter in more detail below, but this includes assertion that he had no idea that there had been a hearing on 30 May 2012 (that which dismissed the First Action and ordered MAL to pay PPC's costs in the sum of £1,250) and at paragraph 57, "I should make clear that MAL could have paid the costs order and would have done so if I had been advised by Charles Henry that it was appropriate. Charles Henry led me to believe that it was appropriate to try to avoid having to pay it" (emphasis supplied).
- By Consent Order on 13 July 2016 PPC withdrew its application for a wasted costs order against Mr Key with no order as to costs.
- Directions had been given in the wasted costs proceedings by Master Kay QC by Order of 4 March 2016. This directed that the Respondents should by 4pm on 4 April 2016 file and serve evidence in response to the application, (extended to 3 May 2016 by a consent order of 20 April 2016), with provision for the Applicant to file and serve evidence in reply. It will be seen that Mr Key complied with that Order; Mr McCarthy did not. The Respondents were given liberty to apply for cross examination of PPC's witnesses or each other's witnesses by no later than 1 April 2016 failing which no party would be allowed to examine the witnesses of any other party at the hearing (see the Order of 4 March 2016 at Bundle 1/3). Put shortly, by an application dated 19 April 2016 on its face (but it seems not issued until 10 May 2016) Mr McCarthy applied for security of costs of the present application, an application not served until 23 May 2016, but on 30 June 2016 Master Kay QC handed down judgment which dismissed the application for security and ordered Mr McCarthy to pay PPC's costs summarily assessed at £13,944.
- Thus Mr McCarthy had failed to file any evidence in opposition to the application; had not applied for any extension of time; and he had not applied for permission to cross examine witnesses. By an application notice, dated on its face 7 June 2016 but it seems not issued until 21 June 2016, Mr McCarthy sought relief from sanction and permission to file a witness statement in response to the application, and for vacation of the hearing listed for 25 July 2016, but his application was heard and dismissed by Singh J on 27 June 2016 with costs of some £1,300.
- For completeness, I note that the application made by Mr McCarthy on 7 June 2016 asking for relief to file and serve a witness statement in reply to the wasted costs application stated
"9. On 24 May 2016 Mr Roderick McCarthy was to file evidence in response to the claim but unable to raise funds to properly instruct direct access counsel to look through the two ring binders served with the claim and draft a detailed statement in response without PPC International Ltd voluntarily placing monies into court or the court making an order for security of costs".
This is an application signed by Mr McCarthy, and on its face prepared by Mr McCarthy himself. It was by 3 May 2016 that he was required by Court Order to file the evidence, not 24 May 2016. It may not have been possible for him to raise funds to instruct Counsel to represent him but he was a qualified solicitor, he had been employed by Charles Henry from a date in 2012, and on any showing by his own acknowledgment had conduct of the litigation between MAL and PPC for some period. If there was factual inaccuracy in the witness statement of Mr Key in relation to Mr McCarthy himself, he would have knowledge of it; and if that of which Mr Key complained was done by, or was the responsibility of, others than Mr McCarthy within Charles Henry and for which he personally was not responsible he had knowledge of that too. In answer to my direct question why Mr McCarthy, a qualified solicitor, would not have been able himself to produce a witness statement as to what he did or did not do, Mr Butler was unable to assist me with an explanation.
- At the hearing, counsel each drew attention to documents of significance. Below, I recite sequentially the more salient points raised by either side before proceeding to my own discussion.
- The structure of the hearing was that I heard submissions on either side by way of overview as to the particular issues whether Mr McCarthy was shown to have had conduct of the litigation, and whether the litigation or chapters within it were instructed by Mr Key or were solicitor-led within the meaning of the authorities. I was then separately to proceed to consider in detail whether the costs incurred were caused by improper or unreasonable conduct or were an abuse of process. The latter might have involved, if either party urged it as necessary, scrutiny of the proceedings order by order and application by application.
- The thrust of the Applicant's case was that the conduct of the litigation after 30 May 2014 had been in pursuit of avoidance of paying the costs orders made to date, and/or to stifle a counterclaim brought by PPC and/or to exhaust the willingness of PPC to litigate further. (The counterclaim was one seeking repayment of £14,309.52 paid by PPC for two fuel tanks which it is common ground were not ever delivered by MAL).
- I expressed a provisional view that, on any showing, it was not uplifting to read the applications and or notices of appeal issued throughout the litigation by or on behalf of MAL. I gave counsel the opportunity to discuss the extent to which it was or was not necessary to explore item by item whether costs had unreasonably or improperly been caused to be incurred.
- Mr Butler considered the matter and was able to take instructions, which led a formal agreed Statement of Facts that "The costs in [the updated] attached Schedule were incurred as a result of the unreasonable manner in which the proceedings in claims numbered HQ11X02186, HQ12X02165 and HQ14X02001 (including issuing applications and appeals and commencing fresh proceedings) were pursued".
- Period of employment of Mr McCarthy. In his written opening submissions, Mr Butler stated that Mr McCarthy commenced working for Charles Henry in August 2012. Strictly speaking, this is a statement of fact which is not embodied in any witness evidence before the Court. The witness statement of Leigh Ellis in the present application as solicitor for PPC, asserts that Mr McCarthy was the solicitor "at all material times throughout the HQ12X Proceedings (Thirteenth witness statement 1 February 2016 paragraph 27(b)). Action HQ12X was instituted by claim form on 30 May 2012, some months before August 2102. However the earliest Order in respect of which PPC seek a wasted costs order is that dated 30 January 2013. Also the written "Retainer of Charles Henry for legal services" was signed by Mr Key on 3 June 2011 and made no reference to Mr McCarthy as opposed to naming a Mr Kevin Gregory as "the Legal Advisor". Therefore I see no reason materially to doubt that it was in 2012, and may have been in August 2012, that Mr McCarthy commenced working for Charles Henry.
- Those written submissions were prepared at short notice. In them, it was stated that at all material times Dr Murray Eiland, solicitor, had conduct of the proceedings; and also stated that Mr McCarthy commenced working for Thomas Moore on 15 August 2014. The last seven of the Orders in date for which PPC seek to recover wasted costs against Mr McCarthy are after August 2014 - albeit they total only £8,305.50 compared with the very much larger aggregate of costs which PPC seek to recover prior to August 2014. At this point, I simply observe that I have no evidence before me as to the date on which Mr McCarthy left the employment of Charles Henry.
- The respective factual submissions.
- Mr Wright, counsel for PPC, relied on the following.
(i) On 30 June 2016 Master Kay QC handed down judgment on Mr McCarthy's application for security of costs in the wasted costs proceedings. Mr Butler had been instructed as counsel, under direct access. The judgment states,
"On instructions it was stated Mr McCarthy was the qualified solicitor in charge of the claim for the purposes of the litigation on behalf of the Claimant….." (paragraph 9(a)); and
"It has to be borne in mind that Mr McCarthy has acknowledged that at least from a date in 2012 onwards, he was the supervising solicitor in circumstances where one Mr Gregory, himself unqualified as a lawyer, appears to have had much of the day to day conduct of the cases" (paragraph 13(d))
Bundle 1/7 at pages 7 and 11).
(ii) In an email on 26 April 2014 from Charles Henry to counsel Mr Shrimpton, authored by Mr Gregory, he wrote "as per paragraph 10 of the attached Order we have permission to make an application to amend the Reply to the Defence to Counterclaim by 20 February 2014 before 4.00 which is the day and time we filed and served the N161 signed by John [Mr Key]. We must therefore include the pleadings for deceit and conspiracy and claim for £72,327.00, plus for this. I believe it is best not to expose our office or yourself is that the application is made in John's name and the pleadings also have only John's name on it and we come off the record when they are filed" (emphasis supplied, Bundle 2/23/128). I interpolate that this was wholly improper, as Mr Butler readily acknowledged, saying however that it was not authored by Mr McCarthy.
(iii) In his witness statement for the present application Mr Leigh Ellis solicitor for PPC states that Mr McCarthy was the solicitor 'at all material times throughout the HQ12X Proceedings'. There has been no witness evidence filed to the contrary by Mr McCarthy.
(iv) It is true that only some documents are signed by Mr McCarthy himself, but a number of documents were signed without individual name, simply by or for "Charles Henry"; and Mr Key states that he never met Dr Murray Eiland, whose name appears on some of the documents (Mr Key statement paragraph 43, Bundle 1/15/10).
(v) There was direct evidence of Mr McCarthy attending Court in the statement of Mr Leigh Ellis dated 23 December 2013; namely that on 4 December 2013 he had appeared before Mr Justice Lindblom and was informed that Mr McCarthy had attended, seeking to withdraw the application, but although the judge decided to keep the matter in the list had left the precincts of the Court and not returned (Bundle 1/17 at 3-4 paragraph 11).
(vi) In a witness statement by Mr Key dated 25 October 2013 Mr Key had asked on behalf of the Claimant for an Order that included that "the Defendant solicitor Mr Leigh Ellis of Drukker LLP within 7 days of this Order received do supply the Claimant's solicitor Mr Rory McCarthy of Charles Henry the following…" (emphasis supplied, Bundle 1/18 Statement at paragraph 10).
(vii) An email dated 31 January 2014, from Mr Shrimpton counsel then instructed by MAL wrote as to change of counsel for MAL "It is a matter entirely for M A Lloyd and Rory but changes of counsel rarely help"; "I absolutely agree with Rory and John [Key] [as to a step outside the litigation]; and by email of 03 February 2014 wrote to Charles Henry as to whether he should continue to be retained by MAL, "this is a matter entirely for Rory and MA Lloyd…. What I am clear about is that MA Lloyd and Rory need to be in agreement about any decision to change Counsel" (emphasis supplied, Bundle 2/23/122 at 123, 124, 125 and 126).
For myself, I consider it significant also that in the email of 3 February 2014 Mr Shrimpton stated, "I very much wish that I had seen this morning's application. I thought with respect that we had started to work as a team, e.g. at the telephone conference on Monday. There was nothing to stop Kevin or Rory setting up a further telephone conference to ensure that a major tactical decision is taken in a structured way. Instead we had a series of phone calls over the weekend, leading to an application this morning, without my involvement. I was unaware of the application until Mr Graham sent me a copy" (emphasis supplied).
(viii) An email dated 11 October 2013 from the clerk to Mr Justice Walker stated, "Mr Justice Walker asks me to advise you of the following directions: 1. Rory McCarthy as the solicitor instructed by the Claimant Appellants in both cases, is hereby ordered to attend at Court 37, Royal Courts of Justice, at 2.00pm today….. Reasons: These two linked cases [HQ11X and HQ12X] have become bogged down in a procedural quagmire. I intend making an Order at 2.00pm today to resolve the quagmire, and I require the assistance of both sides to comment on that Order before I make it. Mr McCarthy seeks to excuse attendance by saying he needs to "establish who will be liable for our clients costs if the appeals are successful". However he accepts that he is the instructed solicitor….." (emphasis supplied, Bundle 2/23/116).
- Separately from the allegation that Mr McCarthy had conduct of the litigation and by his actions unreasonably or improperly incurred of costs, Mr Wright relied upon the witness statement of Mr Key in the present wasted costs proceedings as showing that Mr McCarthy had acted without authority, and therefore was in breach of warranty of authority. He made extensive reference to the statement from paragraphs 47 and 48 onwards, namely that,
"Charles Henry did not always ask us before taking steps in the litigation such as making applications or launching appeals. They did not always advise us when things happened in the litigation and they did not always give us advice when asking whether we wanted to take a particular step" (paragraph 47);
that (contrary to what the Court was told in respect of one hearing in the proceedings) he never instructed Charles Henry not to attend a hearing (paragraph 48);
that he had been informed that Holroyde J gave a judgment on 24 January 2013, saying that Charles Henry the Appellants solicitors "for their part have done what they could on the Appellant's behalf, without funds and instruction and were therefore unable to progress the matter as it should of (sic) been progressed", and that in this the judge had been outrageously misled (paragraph 66).
(Bundle 1/14/11 and 15 respectively).
- In reply to these submissions, Mr Butler drew attention to the following:
(i) The retainer signed by Mr Key was not with Mr McCarthy but with "Charles Henry". It stated, "… your claim will be handled throughout by Mr Kevin Gregory who is the Legal Advisor". It referred to hourly rates but naming two other persons, "the hourly rate for Mr Kevin Gregory, the Legal Advisor, who will handle the matter for you, is £90.00. The hourly rate for Ms Rosamond John-Phillip, the Solicitor, who will advise on the matter for you, is £180.00…". Also "27. We aim to provide you with a satisfactory service and Kevin Gregory as the Legal Advisor engaged would seek to ensure this is so." The retainer was signed on 3 June 2011 by Mr Key (Bundle 2/23/61 at 61, 63, 67).
(ii) In each of the three actions, the Claim Form and the Particulars of Claim ("P/C") were signed by Mr Key. These were respectively issued on 14 June 2011 (P/C 21 June 2011); 30 May 2012 (P/C 21 June 2011 (emphasis supplied, see further below); and 14 May 2014 (P/C 12 May 2014); respectively at Bundle 1/9, 10 and 11.
(iii) There was one notice of application for permission to appeal signed by Mr McCarthy himself, on 7 February 2014 (Bundle 1/13/11 at 16); but other notices of appeal bore a Statement of Truth signed by others, in particular that filed on 13 August 2012, by Dr Murray Eiland (Bundle 1/12/1 at 6); that filed on 3 March 2013, by Dr Murray Eiland (1/13 1 at 6); that filed on 24 June 2013, by Dr Murray Eiland (1/12/11 at 13, 16); and that filed on 7 January 2015 this time signed by Mr Key himself (1/12/35 at 40).
(iv) Of the various application notices in evidence, it is true that there is one under the name of Mr McCarthy, filed on 28 March 2013 (3/24/54); but others were signed by Dr Eiland on 19 August 2013 and 7 November 2013 (3/24/126 and 193) or indeed by Mr Key himself on 21 November 2013 (3/24/196).
(v) In the correspondence, none of the documents was signed by or in the name of Mr McCarthy. In more detail, see e.g. letter 14 June 2011 to the Defendant (2/23/72); and that while one can identify a considerable number of emails from Keith Gregory and on one occasion from a Sophie Watson, it is noteworthy that the bundles contain no email from Mr McCarthy himself (illustrations: 3 August 2011, 8 September 2011, 10 October 2012, 18 October 2012, 5 November 2012, 20 December 2012, 9 January 2013 all save one from Mr Gregory (2/23/81, 82, 100, 103, 107, 108, 109).
(vi) Mr Key states in his witness statement that he believes that he first came across Roderick McCarthy's name in November 2012, but "the first time I met him was at the hearing before Mr Justice Hamblen on 30 January 2014", and there is no, or virtually no, reference to Mr McCarthy in his witness statement thereafter.
(vii) It is conventional and required, says Mr Butler, that a solicitor must give notice of acting to go on the record if he or she is to act, and the applicant had produced no evidence of Mr McCarthy ever filing a notice of acting.
- Separately, Mr Butler drew attention to the fact that the application for a wasted costs order was also against Mr Key and that the witness statement of Mr Leigh Ellis had asserted that "Mr Key….. and its legal representative Mr McCarthy" conducted the HQ12X and HQ14X litigation; that 'Mr Key was responsible for bringing the proceedings…. that Mr Key caused the Claimant to engage in litigation which it could not afford, that the conduct of Mr McCarthy and Mr Key is clear from the sequence…. etc." (witness statement at paragraphs 9-10, 27 and 28). The sub-text is that Mr Key himself, a Director and part beneficial owner of MAL, was adopting the proceedings and their various stages so that it was not solicitor-led; and/or it could not be said that Mr McCarthy caused the respective wasted costs to be incurred.
- Further Mr Key in his witness statement acknowledged (at paragraph 95) that he was interested in the outcome of the claim as a beneficial owner of MAL, that he said he at all times acted in what he thought were the interests of MAL, (at paragraph 96) that he accepted that "I was responsible for bringing the proceedings in my capacity as a Director of MAL", but (at paragraph 97) he accepted that although Claim HQ12 was issued without authority from MAL he would have authorised it if asked; and (at paragraph 98) that Claim HQ14 was issued because of the discovery "that PPC was worthless" and that "we" therefore considered whether there were other parties with assets who might be liable to MAL: "To avoid any doubt, all of the claims were brought because MAL believed that the claims had merit" (paragraph 100).
- Discussion. The first issue is whether it has been shown that Mr McCarthy was conducting the litigation, and/or performing ancillary functions to the litigation other than the isolated incidents accepted by Mr Butler, of signature respectively of a Reply to Defence and Counterclaim, of the Statement of Truth in the notice of application for permission to appeal dated 7 February 2014, and the application notice signed by him on 28 March 2013.
- I was not unduly impressed by three of the points presented by Mr Butler, in the course of his very able submissions.
- The first was that Mr McCarthy's name did not appear on any of the correspondence. However, put simply, no name appeared on the correspondence and no reference was given in the letters such as would identify the author or the person on behalf of whom within Charles Henry it was sent. Likewise, as to an absence of notice of acting with his name upon it. Charles Henry as an entity was not authorised or licensed to conduct litigation and so notice of acting would have had to have been given by a solicitor. It was open to either party to identify a notice of acting signed by or offered on the part of a named person other than Mr McCarthy and none was put before the Court.
- Second, Mr Butler placed importance on the fact that Mr Key's signature appeared on the Claim Form, and on the Particulars of Claim, in each of the Three Proceedings.
- In the case of the Second Proceedings, it is plain that the identical Claim Form, and the identical Particulars of Claim signed by Mr Key were presented on the second occasion to the Court. These were proceedings issued by Claim Form on 30 May 2012; the Particulars of Claim served in them were signed by Mr Key on 21 June 2011, visibly identical to his signature and the date written in his handwriting upon issue of the Claim Form in the First Proceedings. A Claim Form contains a question whether the claim raises any issues under the Human Rights Act 1998, with a choice to fill in one of two boxes, yes or no: the Claim Form in the 2012 action is identical to that in the 2011 action in that a tick has been put in the yes box, and then scribbled out, the Claim Form itself being identical in 2011 and in 2012. This corroborates the complaint by Mr Key in his witness statement that he had no idea of the difficulty with service out of the jurisdiction of the 2011 action, and "had no idea that there had been a hearing on 30 May 2012 or what the outcome of that hearing had been" (paragraph 36), the order in question having been strike out of the First Proceedings.
- As to the Third Proceedings (and each of the actions) also I accept the submission by Mr Wright that the fact of a client signing a document, in itself and alone, is not exculpatory of a solicitor if the client does so without having been informed of the relevant material and or is being solicitor-led.
- Third, he submitted that if there were periods when Mr McCarthy was acting in conduct of the litigation, and it could be shown that there was impropriety in the conduct of the litigation, but others could be shown to have acted improperly, it could not be shown that Mr McCarthy was solely responsible and therefore an application for wasted costs should fail. On principle, it would suffice if Mr McCarthy was a person engaged in the improper or unreasonable conduct which incurred waste of costs, as Mr Butler accepted.
- In my judgment, there are three independent and mutually supporting elements which establish that Mr McCarthy was engaged in conduct of the litigation as a supervising solicitor.
- The first is that the number of individual occasions of direct evidence of him so acting, or evidence from which the inference can securely be made.
- On 28 March 2013 there was an application notice signed by Mr McCarthy (3/24/54).
On 27 June 2013 Mr McCarthy signed the Statement of Truth to the Reply and Defence to Defence and Counterclaim (1/10/12).
On 28 October 2013 Mr Key signed his Second Statement for the Claimant MAL, a statement plainly drafted by solicitors, which asked that the Court order the Defendants solicitor within 7 days to "supply the Claimant's solicitor Mr Rory McCarthy of Charles Henry the following copy documents…." (1/18 paragraph 10 at page 3).
On 4 December 2013 Mr McCarthy attended Court on the occasion to which I refer above when he sought to vacate the hearing, and did not return to it albeit the Judge had declined to take the matter out of the applications list (1/17/3 - 4 at witness statement paragraph 11).
On 30 January 2014 Mr McCarthy was present behind Mr Shrimpton of counsel at the hearing before Hamblen J, the first hearing which Mr Key attended.
On 31 January 2014 and 3 February 2014 Mr Shrimpton as counsel was writing his emails observing that decision was "entirely a matter for the Claimant and Rory".
On 1 February 2014, not noticed by Counsel on either side during the hearing before me, (or at least not mentioned by either counsel), Mr Key addressed a letter directly to Mr McCarthy arising from the hearing on 30 January 2014, expressing his concern that he did not agree with the concessions made on the outstanding appeal notices and that counsel was not instructed by himself to withdraw applications "nor did he seek my approval to do so. I constantly reserved my right to withdraw what I understand are also called a concession". This is a letter which makes representations and complaint in terms which could only be addressed to the solicitor with conduct of his litigation (2/20 at pages 1 – 4).
On 7 February 2014 Mr McCarthy was signing the notice of appeal and the Statement of Truth in it (1/13/11 at 13 and 16).
On 11 October 2015 the email from the clerk to Walker J recorded that Mr McCarthy as the solicitor instructed by the Claimant Appellants in both cases was ordered to attend, sought to excuse attendance that day, however accepted "that he is the instructed solicitor" (2/23/116).
- The second element is that Master Kay QC recorded the following in his judgment handed down on 30 June 2016 in the present proceedings for wasted costs, (I cite the judgment in slightly greater detail than above),
"Mr Butler explained that Charles Henry was a charity which was a licensed business entitled to carry on litigation through an unqualified litigator under the direction of a qualified solicitor. On instructions it was stated that Mr McCarthy was the qualified solicitor in charge of the claim for the purposes of the litigation on behalf of the Claimant…." (judgment paragraph 9(a), Bundle 1/7/7).
"The main applications is brought for wasted costs and although Mr Butler has submitted that there is a high threshold in such cases nonetheless it has to be borne in mind that Mr McCarthy has acknowledged that, at least from a date in 2012 onwards, he was the supervising solicitor in circumstances where one Mr Gregory, himself unqualified as a lawyer, appears to have had much of the day to day conduct of the cases" (emphasis supplied, judgment paragraph 13(d), Bundle 1/7/11).
This was an acceptance made on instruction in the present proceedings against Mr McCarthy for a wasted costs order.
- The third element is the absence of any evidence from Mr McCarthy in the present wasted costs proceedings.
- First, there is in consequence no evidence to challenge that brought against Mr McCarthy including the direct allegation by Mr Leigh Ellis in his witness statement supporting the application throughout.
- Second, it is trite that where a party has direct knowledge of facts and matters, and may reasonably be expected to lodge evidence on points of importance, a Court may properly draw adverse inference against the person who has failed to bring such evidence before the Court. In my judgment this applies to the question whether Mr McCarthy was conducting the litigation, but also to the questions whether the Court is satisfied that it was unreasonable or improper conduct on his own part as opposed to that of others, and to the question whether it is the conduct of the solicitor which has caused costs to be incurred as opposed to instruction by the client or following the wishes of the client as expressed to the legal representative.
- Conclusion as to whether Mr McCarthy had conduct of the litigation on behalf of MAL at all times in respect of which a wasted costs order is sought. The first hearing in time in respect of which the applicant seeks to recover against Mr McCarthy costs incurred is that on 18 March 2013 (costs incurred £600). Ten days later Mr McCarthy was signing the application notice of 28 March 2013 to which I refer above. I am satisfied, in accordance with the concession made on instructions before Master Kay QC, that from a date in 2012 Mr McCarthy was supervising the conduct of this litigation so as to come within the s.51(6) jurisdiction; in respect of the application dealt with on 18 March 2013 and of all matters thereafter the subject of the present wasted costs application, at least until 7 July 2014. I shall consider below, with care, whether I should be so satisfied thereafter, in the light of the assertion in the written submissions of Mr Butler that from August 2014 he was employed by another firm of solicitors, and more generally.
- Whether costs were unreasonably and/or improperly incurred. I refer above to the agreement as to the nature of the conduct of proceedings which resulted in the orders which PPC now seek to recover as wasted costs. The number of applications made by or on behalf of MAL, either simple applications or applications for permission for appeal, is extraordinary; as to be blunt is the vacuous nature of much of the material put forward under them. I would have had no hesitation in concluding that the conduct was improper and unreasonable in the sense explained in Ridehalgh, and that there was abuse of process in the refusal to pay previous costs orders which had been imposed, a continued series of purposeless and hopeless challenges and applications, which with few exceptions appear to have been for the ulterior purpose of attempting to outlast PPC's willingness to litigate, and a repeated willingness to embrace and or seek delay.
- Whether Mr McCarthy is or is not to be held responsible for the unreasonable and/or improper incurring of costs; and whether others or MAL itself are responsible. On 7 July 2014 Master Kay QC gave a short judgment dismissing the Second Proceedings in which he said, "What has now happened is that the [simple claim for breach of intellectual property rights] has degenerated into bush warfare in which the Claimant seeks to become engaged in more and more skirmishes all of which they lose. That has been the result of the three earlier decisions and an earlier decision of mine… I have therefore considered the Claimant's application today and I have come to the conclusion it should be dismissed. It seems to me that every opportunity has been given to the Claimant to comply with Orders in relation to the costs. It has failed to do so. The failure is, in my view, contumelious in relation both to this Order and a number of other Orders and it is high time that matter was moved forward". (2/24/266 – 267). The present issue is whether it has been shown that the conduct of Mr McCarthy has been causative of costs. If it has, there will be a further exercise whether it is reasonable to order Mr McCarthy to pay wasted costs.
- I accept the submission of Mr Wright that it is not required, for a Court to make a wasted costs order, that the Court should be satisfied document by document that it is made at the initiative of the person against whom a wasted costs orders is sought. The procedure is summary, as outlined by Morgan J in Centrehigh above. At the same time it is required that there be fairness to both parties in the exercise of such a summary jurisdiction.
- In the course of his "overview" submissions, in particular in support of the case that Charles Henry under the supervision of Mr McCarthy acted without and in breach of warranty of authority, Mr Wright took me to a number of passages in Mr Key's witness statement in the present proceedings. I do not recite each and every one. The following may suffice:
(i) "Charles Henry did not always ask us before taking steps in the litigation such as making applications or launching appeals. They did not always advise us when things happened in the litigation and they did not always give us advice when asking us whether we wanted to take a particular step." (paragraph 47).
(ii) "When somebody from Charles Henry contacted me or asked me for instructions, I always responded….. I never instructed Charles Henry not to attend a hearing." (paragraph 48).
(iii) Mr Key says, as recited above, that he was unaware of the difficulty of serving out of the jurisdiction without permission, or that there had been a hearing on 30 May 2012 (that which refused permission to serve out of the jurisdiction and dismissed the First Proceedings) (paragraph 56) and "I should make clear that MAL could have paid the costs order and would have done so if I had been advised by Charles Henry that it was appropriate. Charles Henry led me to believe that it was appropriate to try to avoid having to pay it." (paragraph 57).
- An overview of what went wrong. The First Proceedings were dismissed, having wrongly been served out of the jurisdiction without permission of the Court, and a costs order was made in favour of PPC against MAL. It is axiomatic that the Court would regard any attempt to pursue second identical proceedings, if defended, as an abuse of the process of Court unless the costs in the First Proceedings were paid. Such is elementary.
- It might have been better to agree the dismissal of the First Proceedings without any contested hearing, and to issue afresh with the permission of the Court. What happened was that, apart from securing default judgment against PPC in the Second Proceedings (which was set aside on application by PPC), attempt was made to pursue the Second Proceedings without first paying the costs in the First Proceedings; applications were made on behalf of MAL by Charles Henry time after time which were hopeless or improbable of success; would fail; quite often there would then be a hopeless attempt at a second application (thus with lesser prospect of success), or attempt to appeal (thus with yet lesser prospect of success); often attempts were made to salvage an intended appeal, for which permission had been refused, by fresh application; on one, ludicrous, occasion, application was made for permission for a second appeal from the decision of the High Court judge on appeal, when no-one sensibly could have thought that the stringent requirements for permission for a second appeal were met: see the succeeding paragraph.
- As an illustration, on 30 May 2012 an application for retrospective permission to serve the First Proceedings out of the jurisdiction was dismissed by Master Kay QC, who then struck out those proceedings. On 13 August 2012 (and therefore well out of time) MAL filed an Appellant's notice seeking to set aside the Order of 30 May 2012. (Mr McCarthy took up employment in August 2012). An extension of time for filing the Appellant's notice was granted by Lindblom J on 14 August 2012 and two extensions of time were given to file the appeal bundle; an application for a third extension was refused on 22 October 2012 by Evans J. MAL applied to set that order aside and for an extension of time; it was refused by Sweeney J on 8 November 2012. Bafflingly, MAL made a further application to set aside the order of Sweeney J and for an extension of time; it was refused by Griffith Williams J on 13 December 2012. On 21 December 2012 MAL made yet another application, to set aside the order of Griffith Williams J, an application which was refused by Holroyde J on 19 February 2013. MAL then took the step which I describe above as ludicrous by filing an appellant's notice seeking permission to appeal the Order of Holroyde J.
- The First Proceedings were issued in June 2011, and the original error in serving them out of the jurisdiction without permission was doubtless made shortly thereafter. It is at the very least unclear that Mr McCarthy had any responsibility for these proceedings as of May 2012, when MAL applied for retrospective permission to serve out of the jurisdiction, both from the absence of reference to him in the original retainer letter, and from his assertion that he was not employed by Charles Henry until August 2012, at least where, as here, those representing PPC appear to accept that it was only from a date in 2012 that he was so employed.
- However after May 2012 the pattern established itself of applications which did not succeed, themselves to be succeeded by further applications to try to alter the decision, whether by fresh application or by appeal or both, and in either case with wholly improbable or no prospect of success.
- I give some illustration. As of January 2013, PPC were applying for judgment in default to be set aside and for a stay of the Second Proceedings given that there were extant appeals in the First Proceedings to be determined and MAL had not paid costs of the First Proceedings as ordered. On 30 May 2013 judgment in default was set aside by Order of Master Kay QC and the Second Proceedings were stayed pending the determination of appeal in the First Proceedings or payment by MAL of the costs ordered on 30 May 2012. On 26 July 2013, the costs ordered in the Order of 30 May 2013 were assessed at £8,640.00. This is the first substantial sum which PPC seek to recover as wasted costs against Mr McCarthy. (A smaller sum of £600, ordered to be paid on 18 March 2013, is also sought). To state the obvious, this order of costs of £8,640.00 in favour of PPC arose because a forlorn attempt was being made by or on behalf of MAL to retrieve the situation in the First Proceedings.
- The Court was interested in making progress towards resolution of the substantive claims in this matter: on 24 September 2013 Master Kay QC ordered the parties' to attend a CMC on 7 October 2013 in relation to the First and Second Proceedings. Rather than get on with the proceedings, on 3 October 2013 MAL made an application in the First and Second Proceedings (a) for the CMC of 7 October 2013 to be adjourned; (b) for PPC to give security for costs of the First and Second Proceedings by payment to its solicitors' client account; and (c) for PPC 'to show cause why all Orders in the First and Second Proceedings should not be set aside forthwith'. The latter bold submission was essentially on the basis that a witness statement of Mr Peter Kidd of PPC of March 2013 indicated that PPC had not traded since selling its assets – the "global point" as it came to be called. (The global point was in due course to fail completely).
- On 11 October 2013 Walker J made an Order for case management directions to progress the First and Second Proceedings in so far as not stayed; MAL did not attend and was not represented at the hearing; and, not having attended or been represented, nonetheless on 16 October 2013 application was made to set aside the Order of Walker J. The application was dismissed without hearing by Blake J on 29 October 2013. MAL applied to set aside that Order asking, remarkably, for it to be dealt with on paper: an application refused by Bean J on 12 November 2013. Not content with all this, MAL applied to set aside that Order and this third, consecutive, application to set aside was dismissed by Lindblom J on 3 December 2013.
- Retracing a little, MAL had made an application on 7 November 2013 for a stay of proceedings, an application dismissed by Master Kay QC on 26 November 2013 when he ordered MAL to pay PPC's costs in the sum of £2,250.00. That is the second sum of costs of substance sought against Mr McCarthy.
- What Mr McCarthy did not place before the court in the wasted costs proceedings. As someone who accepts he was supervising solicitor in the proceedings, either Mr McCarthy had knowledge of who did what within Charles Henry, or what was instructed by the client MAL, or, if he had no part in what was done and others acted without informing him, he had knowledge of that. Accordingly he could have placed evidence of these matters before the Court. He has not done so.
- Analysis of what individual wasted costs are sought. Counsel for PPC produced a skeleton argument, and a Schedule of Orders in respect of which PPC seek to recover costs against Mr McCarthy himself. At my request, and in order to avoid what might have been a day in Court itself trudging through the paperwork, counsel produced for me the following day a copy of that Schedule of Orders updated to include references to the relevant Order, and application, and source of hearing date, by reference to the application bundles. That updated Schedule, I am told, is agreed by Mr Butler as identifying the relevant documents.
- The updated Schedule is accompanied by an agreed Statement of Facts that "The costs in that Schedule were incurred as a result of the unreasonable manner in which the Proceedings in Claims numbered HQ11X02186, HQ12X02165 and HQ14X02001 (including issuing the applications and appeals and commencing fresh Proceedings) were pursued".
- I have accordingly turned to each of the documents and considered them.
- I do not propose to make this a "document by document" judgment. I remind myself that even if Mr McCarthy was the supervising solicitor in these proceedings for the period acknowledged on his instructions before Master Kay QC, it does not follow that each step was initiated or taken by him.
- I have reminded myself also of the evidence of Mr Key, in his witness statement, and also in the letter of 1st February 2014 directly to Mr McCarthy at Bundle 2/20 to which I refer above, that clearly, whether he was right or wrong in that perception, Mr Key perceived PPC as having sought or intended to pass off as their own a seat design of MAL's for installation in high speed craft in areas of the world where MAL hoped to sell, and Mr Key personally supported the "global point".
- Thus in that letter of 1 February 2014, Mr Key wrote, "We (and our representatives, Charles Henry) have been bombarded with legal activity and we have made strenuous efforts to determine "who" is funding their legal work and "why". The thrust of our case on 30 January 2014 [ie, the hearing before Hamblen J] was to elevate this issue particularly in respect of how a company with no assets can litigate and obtain costs against our company – with, seemingly, no risk to liability on their side to cover our costs or damages".
- Equally, whatever was being conveyed to Mr Key suggesting that it was PPC who were bombarding the opposing party with litigation, I can discern no disclosure to him by his own legal representatives of the difficulties for MAL in pursuing repeated applications by or on behalf of MAL itself of such poor quality and such little prospect of success - at the very least in the absence of evidence from Mr McCarthy to the contrary of what Mr Key says namely that "[the legal representatives] did not always advise us when things happened in the litigation" (Mr Key at paragraph 47 of his witness statement).
- Having myself conscientiously read the documents referred to in the updated Schedule of Orders, I intend to express my conclusions summarily as appropriate to this jurisdiction.
- Order 18 March 2013, costs incurred £600.00. The Order records that the Defendant had attempted without success personal service of an Order that Mr Key attend questioning in respect of the means of MAL; and gave permission for alternative service upon him. I note that Mr Key said that "Charles Henry – and Kevin Gregory in particular – always seemed very "bullish" about MAL's case, so we assumed that things were going well and that the lawyers knew what they were doing"; and that specifically here, "when I contacted Charles Henry I was told that the application by PPCI was disproportionate and a tactic of intimidation as the subject of the Order was under appeal" (paragraphs 47 and 58 at 1/15/11 and 13). Mr Gregory appears to have been an excitable person (see e-mails of counsel Mr Shrimpton as to his demeanour at the hearing also attended by Mr McCarthy on 30 January 2014). He was the Legal Advisor nominated in the original Retainer agreement. I can well imagine that Mr Key's enquiry on a minor matter was fielded by the bullish Mr Gregory. I am not sufficiently satisfied that Mr McCarthy was involved to make any Order against him.
- 26 July 2013, costs incurred £8,640.00. The Order is that of Master Kay QC. This followed an earlier Order of his on 30 May 2013 which gave clear and simple directions which the solicitors for MAL must have understood. The Order itself, of 26 July 2013, sets out in a preamble a litany of toing and froing including MAL not providing a substantive response to the Schedule of Costs as they had been directed; very late application by letter that the hearing of 26 July 2013 be vacated for want of time on the part of Charles Henry to prepare; and the fact that the Claimant did not appear. First, the volume of toing and froing must have been such as to come within the purview of Mr McCarthy. Second, that required was very much solicitors' work. Third, the attempt to vacate and postpone a hearing unsuccessfully and then simply not appearing mirrors completely what Mr McCarthy himself did, as to hearing on 4 December 2013, as deposed to by Mr Leigh Ellis in his witness statement of 23 December 2013 (1/17); evidence which is unchallenged in the absence of evidence from Mr McCarthy. I am satisfied that Mr McCarthy must have been supervising the steps taken (or more often, not taken) on behalf of MAL, in knowing default of compliance with the directions of the Court, and that it is proper and just that he be responsible for these costs.
- 26 November 2013 costs incurred £2,250. This was an Order made by Master Kay QC dismissing an application of MAL dated 8 November 2013. The updated Schedule does not identify the application in the bundles, but I have found it at 3/24/193. It is a garbled application, where the Statement of Truth is signed by Dr Murray Eiland. Through the thicket of confusion in its wording, there emerges the "global point" upon which not long after Mr Key sets such store in his letter addressed directly to Mr McCarthy of 1 February 2014 (at 2/20). In summary proceedings such as these, I am not satisfied that Mr McCarthy was sufficiently involved, alternatively that he sufficiently influenced matters in a causative way for the individual application to be made, and I make no order for wasted costs against him in respect of this.
- 30 January 2014, costs incurred £10,400.00. The Order of 30 January 2014 was that of Hamblen J. It was upon hearing a number of applications, including that by MAL issued on 25 June 2013 for permission to appeal the Order of Master Kay QC of 30 May 2013, by MAL for permission to appeal an Order of Master Kay QC of 26 July 2013 and by MAL to set aside or vary an Order of Master Kay QC of 24 September 2013 (relating to security for costs); together with one application by PPC for summary assessment of costs which had already been awarded in its favour by Master Kay on 30 May 2013. It also concerned PPC's application for a Civil Restraint Order (which got lost in the undergrowth); an application by MAL arising from its "global point"; and it also dealt on the hoof with the costs reserved by Mr Justice Turner on 20 January 2014 (on the occasion of his barbed comments about the Claimant's willingness to disregard direction given by the Court).
- I do not lose from view that the first of these applications by MAL, for permission to appeal Master Kay's Order of 30 May 2013, carried a Statement of Truth signed by Dr Murray Eiland (2/24/72 at 77) and likewise the application for permission to appeal issued 28 August 2013 (1/12/22 at 27). I remind myself equally - albeit it was not under consideration on 30 January 2014 before Hamblen J - that it was Dr Murray Eiland who signed the Statement of Truth in an application dated 7 November 2013.
- However this is a constellation of matters which cannot have been outside the purview and supervision of Mr McCarthy who I notice, in this same period of frenetic activity leading to 30 January 2014, signed the Statement of Truth in another application to set aside an Order of Master Kay of 11 October 2013 (signed 16 October 2013 but for reasons which are unclear only issued 24 October 2013 (3/24/181 at 182)).
- Mr McCarthy attended the hearing of 30 January 2014 itself at which this Order was made. It was to Mr McCarthy that Mr Key addressed his letter of 1 February 2014. The witness statement of Mr Key rings true that MAL's legal representatives did not always advise them when things happened in the litigation and there is nothing to indicate that those legal representatives gave any advice as to the usefulness of the bush warfare described by Master Kay QC in his judgment of 7 July 2014 (3/24/266).
- I am satisfied that Mr McCarthy had ample supervision, awareness, and engagement in the repeatedly unsuccessful applications on behalf of MAL; and in the absence of evidence from him as to any non engagement on his part or of advice being overridden by the client MAL, I am satisfied that an Order should be made against him in respect of the whole of the sum of £10,400.00 ordered against MAL on 30 January 2014.
- Order of 8 July 2014: total of sums assessed (in respect of the various applications) £70,293.00. The Order of 8 July 2014 was made by Master Kay QC. After dismissing a variation application of 15 May 2014 and a set aside application of 20 June 2014, he ordered that "3. The costs of the Defendant awarded consequent to the Order of The Honourable Mr Justice Hamblen dated 30 January are summarily assessed in the sum set out in the Scott Schedule of the Defendant, being in the total sum of £70,293.00".
- By that Order Hamblen J had dismissed the 'First Application' by MAL for permission to appeal Master Kay's Order of 30 May; 'the Second Application' by MAL to appeal the Order of Master Kay 26 July 2013; and 'the Third Application', by MAL to set aside refusal of security for costs in their favour; and had granted 'the Fourth Application' by the Defendant for summary assessment of costs awarded in their favour on 30 May 2013; and 'the Seventh Application'.
- The Order of Hamblen J directed at paragraph 12 that, "The Claimant do pay the Defendant's costs of the First, Second, Third, Fourth and Seventh Applications including costs reserved in respect thereof the summary assessment thereof being adjourned" (3/24/220 at 223 – 224).
- As between MAL and PPC, the Order of Master Kay of 8 July 2014 assessing these costs at £70,293.00, made on the basis of the Scott Schedule before him, stands. I adopt the views as to the responsibility of Mr McCarthy which I express immediately above in relation to the period running up to 30 January 2014. I therefore consider that an Order of wasted costs should be made against him in respect of this sum.
- 8 July 2014 costs incurred £5,500.00. These were the costs of the first of 5 separate hearings heard in 2014 in respect of each of which Master Kay ordered that the Claimant should pay the Defendants' costs.
- Respectively they were "(a) the hearing of 24 April 2014: £5,500.00 (b). The hearing on the 1 May 2014: £5,600.00. (c). The hearing of 6 June 2014: £1,325.00. (d). The hearing on 7 July 2014: £4,400.00. (e). The hearing on 8 July 2014: £6,000.00" (3/24/268 at 269).
- I consider that this period, in early 2014, merits particular caution. I have recorded above Mr Key's belief that PPC had acted wrongly and his witness statement goes out of its way to emphasise that MAL considered that it had a proper and moral claim against PPC.
- In his witness statement, (1/15 at 17), Mr Key says that the "global point" was really driven by MAL's lawyers:
"At around this time [October 2013] the existence of PPCI and whether it could litigate became a key issue. This is really driven by MAL's lawyers. Charles Henry were convinced that Mr Kidd's witness statement meant that PPCI did not exist and that this was a "silver bullet" for the litigation. What concerned me most, following receipt of Mr Kidd's witness statement of March 2013, was that PPCI was just a shell. I was also interested in who was funding PPCI's legal fees, but I basically was led by the lawyers and followed their advice".
This is layman's wording which might readily be translated, in the wasted costs jurisdiction, to allegation that the point was 'wholly solicitor-led'.
- Whilst Mr Kidd says that this was really driven by the lawyers, his letter of 1 February 2014 to Mr McCarthy indicates on the contrary a very strong emotional and moral commitment to the point on his own part. His letter questions concessions made on behalf of MAL at the hearing of 30 January 2014, and states,
"Mr Kidd signed a Statement as a 'day facto director' and we have no knowledge at to his authority to represent PPC, or any of the other trading names used; it seems on what we know now PPC has been nothing but a shell in this whole charade…. The thrust of our case on 30 January was to elevate this issue particularly in respect of how a company with no assets can litigate and obtain costs against our company…. How can it be possible for wholly disproportionate and seemingly unconstrained legal costs to be allowed to be presented to the Court on behalf of the client with no assets?.... on this basis we do not approve of the Draft Order….we are now withdrawing the concession made by Mr Simon Butler for the judgment to be set aside on 30 May 2013… it is clear to me the directors and the staff of M A Lloyd and Sons Ltd that there is a serious sham being perpetrated against us to extort money by persons unknown and we want the appeals to move this case forward. I would like this letter to go to the Mr Justice Hamblen so he will know our deep concerns" (2/20).
- The updated Schedule does not identify to me, and I have not successfully located, an Order or note as to the hearing of 24 April 2014 in respect of which costs were assessed at £5,500.00. It appears, by the preamble to an Order made on 1 May 2014, to have been a hearing for summary assessment (3/24/253). Before dealing with the key question, of whether a wasted costs order should be made in respect of it, I identify what orders were made individually in respect of this period.
- 08 July 2014 costs incurred £5,600.00. On the face of the Order of 8 July 2014, this relates to hearing on 1 May 2014. The first of three provisions of the Order made on 1 May 2014 were that MAL shall pay individually identified costs totalling a fraction under £20,000.00, should pay into Court on account of the summary assessment the sum of £30,000.00, (all of these by 4.00pm on 15 May 2014), and if payment of any of those sums was not made by that date the then extant First and Second Proceedings should be dismissed and MAL should pay certain costs. The rest of the Order was procedural, and dependent upon payment of those sums into Court; there is nothing to indicate that MAL then or later achieved success in respect of any of the matters set out in the Order of 1 May 2014.
- In short, the hearing on 1 May 2014 went against MAL, but the preamble to the Order of 1 May 2014 refers to the "Fourth Witness Statement of John Key dated 29 April 2014" and "Draft Amendment to the Reply and Defence to Counterclaim and Part 20 Claim which had not been served by the Claimant"; such must have been relevant to the making of the order; and it is to a degree opaque to me what might have been contained in them.
- 8 July 2014 costs incurred £1,325.00. This related to a hearing on 6 June 2014. The Order made on 6 June 2014 speaks for itself in its preamble, namely that upon considering MAL's application notice dated 27 May 2014 "and upon considering the email dated 12:40 on the 6 June 2014 from the Claimant's solicitors seeking an adjournment of the hearing of their own application AND UPON noting that the application notice was unsigned and did not have a completed Statement of Truth so there was no evidence in support of the application". The application was dismissed. The Order directed that MAL was to pay PPC's costs. This incident bears all the hallmarks of being the sole responsibility of MAL's legal representatives.
- 8 July 2014 costs incurred £"4,400.00". This concerned the hearing on 7 July 2014. This was the occasion when Master Kay QC considered that every opportunity had been given to MAL to comply with orders in relation to costs, including the failure to pay into court a sum in respect of summary assessment, as a result of which the Second Proceedings HQ12X were to stand dismissed (the First Proceedings HQ11X having already been struck out).
- On one hand, Mr Key does say in his witness statement that as to the original order to pay the sum of £1,250.00 (on initial failure retrospectively to secure permission to serve out of the jurisdiction) MAL could have paid the costs ordered and would have done so if advised that it was appropriate (cited above) and that
"At the outset of the litigation, MAL could have afforded to pay adverse costs. We had borrowed £75,000.00 in July 2011, so we had liquid assets. It was on Charles Henry's advice that the costs orders were not in fact paid. Litigation only became unaffordable in the second half of 2014, because of the number of costs orders in PPCI's favour. I believe that those costs orders were not the result of any improper conduct by me but rather the failings of Charles Henry".
- This statement is general in its terms. If MAL's legal representatives had advised them in the course of 2014 up to July 2014 that in order to keep the proceedings alive, they would have to pay the sums in respect of costs into Court as directed by Master Kay but MAL refused to do so and insisted on struggling on to try to set aside or escape from those Orders, such much have been within the supervision purview and knowledge of Mr McCarthy and it would have been the simplest matter to place before this Court evidence of it.
- It has not been suggested that legal privilege prevented or inhibited Mr McCarthy from doing so. Equally, it would on any showing have been open to him to place evidence before the court he knew nothing of these matters during early 2014, but he has not done so.
- 8 July 2014 costs incurred of £6,000.00. This is the sum assessed on 8 July 2014 in respect of the hearing of 8 July 2014; a hearing which arose out of various matters in the proceedings up to 30 January 2014 before Hamblen J. These are proceedings which I have resolved in favour of responsibility of Mr McCarthy to a wasted costs order.
- Conclusion as to the sums of £5,500.00, £5,600.00, £1,325.00, "£4,400.00" and £6,000.00 discussed at paragraphs 94 to 107 above. Accordingly, I do not consider it correct to make any order against Mr McCarthy in respect of the sums of £5,500.00 and £5,600.00: in the first case it is possible that matters were driven by the moral view of Mr Key and MAL and in the second case the circumstances are opaque to me; but I consider it proper to make order against him in respect of the sums of £1,325.00 and £4,400.00. (To be pedantic the sum of £4,400 should have been £4,440.00 on the face of the Order) and £6,000.00.
- Discursus: the Third Proceedings and whether Mr McCarthy ceased to be employed in respect of any proceedings from August 2014. The Third Proceedings were issued by Claim Form on 14 May 2014. They were issued against PPC and other parties including Mr Kidd. They made claim of deceit and civil conspiracy. As Mr Butler pointed out, the Statement of Truth in the Claim Form, and the Particulars of Claim, were each signed by Mr Key himself.
- Above, I refer to the unfortunate email of 26 April 2014 in which Kevin Gregory suggested that Charles Henry come off the record in order to protect themselves in respect of costs. That was an email sent to Mr Shrimpton, and copied to Mr Key. He says in his witness statement that he did not appreciate the significance at the time.
"At around that time, Mr Gregory told me that it would be better if MAL acted in person, because (a) Charles Henry had some difficulties with the Law Society (b) PPCI's solicitor was using criticism of Charles Henry to muddy the case and (c) The personal antagonism between PPCI's solicitor and Mr Gregory was a distraction from the real issues. However I was reassured that the same people would continue to advise MAL behind the scenes and that a new organisation, Thomas Moore, would come back on the record for us in due course." (witness statement paragraph 91/1/15/20).
- In the written submissions by Mr Butler for the present hearing, it is asserted that Mr McCarthy commenced working for Thomas More on 15 August 2014. Mr Butler acknowledged that there was no evidence before the court of when Mr McCarthy commenced, and finished, employment with Charles Henry; but submitted that Mr McCarthy, as a solicitor and officer of the court, will have amply understood his obligations to the Court of truthfulness and the professional consequences, were he not to comply.
- However there is substantial material to indicate the contrary. (i) There is the email to Mr Shrimpton of 26 April 2014 with its awareness and its avowed wish to avoid costs consequences for the legal representatives. (ii) The evidence from Mr Key, that the same people would continue to advise MAL behind the scenes under the guise of a new organisation, 'Thomas Moore', is unchallenged. (iii) Mr McCarthy could have submitted evidence of when he ceased employment with Charles Henry and or ceased engagement in any capacity with these proceedings, and one would expect him to, but he has not done so. (iv) All this is buttressed by the acknowledgment on his instructions to Master Kay QC in July 2016 that Mr McCarthy was the qualified solicitor in charge of the claim for the purposes of the litigation on behalf of the Claimant, at least from a date in 2012 onwards – without qualification that such had ceased at any point.
- I am driven to conclude that Mr McCarthy continued to be a supervising solicitor in respect of the Third Proceedings also.
- The next Order in time in respect of which PPC seek order for wasted costs is that of 28 November 2014, an Order in the Third Proceedings. I remind myself that I have to consider not only whether costs were unreasonably or improperly incurred, and whether Mr McCarthy continued to act, but also whether the asserted conduct was causative of the costs incurred.
- 28 November 2014 costs incurred £3,250.00. The Order was by Master Kay QC on application made not by the Claimant, but by Mr Kidd and PPC, The order stayed proceedings against PPC pending payment of sums ordered in the earlier proceedings, with an Unless Order that should such sums not be paid by 4.00pm on 7 January 2015 the Claim against PPC should be struck out without further Order; and ordered MAL to pay into Court security of £40,000.00 for the costs of Mr Kidd. In itself, therefore, it was consequent upon and arose from the institution of the Third Proceedings themselves.
- 18 December 2014 costs incurred £397.00. This again was an Order of Master Kay QC, and again upon application of MAL's opponents, and was a minor matter as reflected in the sum of costs incurred.
- 29 December 2014 costs incurred £3,000.00. This was again an Order of Master Kay QC, when MAL had not paid the costs directed to be paid by his Order of 28 November 2014 but had on application without notice, secured a stay of execution of the former proceedings from Master McCloud. Master Kay QC ordered that the stay by Master McCloud be set aside, and stayed enforcement of a Writ of Control but only in respect of sums in excess of £25,000.00 and only until 7 January 2015. (It appears that in December 2014 Mr Key had made an offer on behalf of MAL to the Defendant to bring a conclusion to proceedings, in terms of which I am unaware). In any event, Master Kay QC ordered costs of £3,000.00 as summarily assessed to be paid by MAL to PPC.
- 16 January 2015 costs incurred £98.50. This was an Order of Master Eyre, but upon application by the Defendant and a relatively trivial matter as reflected by costs of only £98.50.
- By now, MAL was in administration. This was an Order by Master Bancroft-Rimmer which by consent ordered that each of three appeals (8 March 2013, 7 February 2014, and 20 February 2014) were dismissed with MAL to pay PPC's costs in respect of each of the appeals in sums respectively agreed at £1,056.00, £336.00, and £168.00. First, this was a step to bring matters sensibly to a conclusion. Second, and self evidently, it was agreed by administrators on behalf of MAL not by MAL or by legal representative of their own initiative.
- I remind myself that in respect of each of the Orders on dates after institution of the Third Proceedings it is agreed that the costs in the Schedule were incurred as a result of the unreasonable manner in which the Proceedings were pursued. I conclude that Mr McCarthy continued to supervise the litigation until the administration supervened, and thereby the legal representatives of MAL could neither prompt it to issue proceedings, nor issue proceedings, nor to any purpose give advice to MAL.
- However it is clear, from all the authorities and in particular Fletamentos and Byrne –v- Sefton HA that the conduct of the legal representatives must have been causative of the costs incurred.
- I have recorded above the emotional and moral commitment of Mr Key to a claim in respect of behaviour which he at least perceived to be wrongful and deceitful. The Third Proceedings were issued against Parties in addition to PPC and including Mr Kidd whose statement as to having sold PPC or its assets had troubled or angered Mr Key.
- Having considered the matter with care, I cannot be satisfied that the legal representatives, or Mr McCarthy individually, were responsible for the costs incurred in, and incurred inherently as a result of the issue of, the Third Proceedings. I note further that in the course of the Third Proceedings the issuing of repeated applications by MAL of improbable success and skirmishing bush warfare did not resume. One might say, logically, that the last three sums of costs (£1,056.00, £336.00 and £168.00) were the consequence of appeals sought to be launched in March 2013 and February 2014, within the period for which I have held Mr McCarthy accountable, but this intended to be a summary procedure and I decline to make an Order in respect of them.
- To summarise the above, I consider that it has been established on the balance of probabilities that wasted costs have been caused to be incurred by conduct of the proceedings on the part of Mr McCarthy which has been unreasonable and improper, (within the meaning of s51(6) of the Senior Courts Act 1981 and the authorities to which I have referred above), and that it is proper to order him as legal representative of MAL to meet those wasted costs. The costs so caused to be incurred are identified at paragraphs 81 onwards above. They are respectively £8,640.00 (para 82); £10,400.00 (para 88); £70,293.00 (para 92); and £1,325.00, £4,400.00 and £6,000.00 (para 107): a total of £101,058.00. I make no order in respect of the balance of the costs which had been sought, a total of £22,255.50.
- For the record, it was submitted on behalf of Mr McCarthy that no order should be made against him to meet wasted costs, in respect of the various costs orders, on the grounds which I have related above which include argument that others within Charles Henry and not Mr McCarty were responsible (in particular Dr Eiland and/or Kevin Gregory). No submission was made that if inherently it was proper to order him to meet those costs, on the basis that he was responsible, the court should attenuate the amount he should pay to reflect that fact that others within Charles Henry may have contributed to the improper and unreasonable incurring of costs; and no authority in support of such a submission was put before me.
- I hope that I have dealt with all matters in issue.
- In order to minimise costs, I hand down judgment in writing in the absence of the parties, reserving judgment as to any consequential matters for either oral hearing, or more likely hearing on short submissions in writing on paper, which shall be an adjourned hearing on the handing down of judgment. Counsel are invited if possible to agree the form of the Order, including consequential matters, but Counsel for PPC shall in any event lodge a form of Order for approval within 21 days of formal handing down of judgment, and shall if consequential matters are not agreed inform the Court of the extent of disagreement so that directions may be given either for written submissions on the matters outstanding or for restoration for oral argument.
Handed down 22 August 2016
His Honour Judge Seys Llewellyn QC sitting as a Deputy Judge of the High Court
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