TIMES NEWSPAPERS LTD v KEITH BURSTEIN [2002] EWCA Civ 1739

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SUPREME COURT COSTS OFFICE
(Deputy Costs Judge JEFFERSON)
[2002] EWCA Civ 1739Case No Case No: A2/2002/1045Venue Royal Courts of Justice, Strand,, London, WC2A 2LL
Between
TIMES NEWSPAPERS LTDAppellantKEITH BURSTEINRespondent
Before
Lord Phillips MrLord Justice ManceLord Justice LathamRichard Wilson (instructed by Times Newspapers Legal Department) for the Appellant David Holland (instructed by David Price of London) for the RespondentDate 28 November 2002

Lord Justice Latham:

This

[1]is the judgment of the court. It gives our reasons for dismissing this appeal on the 4 th November 2002 without calling on counsel for the respondent.[2]This appeal is the culmination of litigation between the parties which commenced with the issue of a writ by the claimant, the respondent to this appeal, against the appellants dated the 2nd June 1998 claiming damages for libel contained in an article appearing in the diary column of The Times for the 3rd June 1997. On the 3rd March 2000, after a trial before HHJ Richard Walker and a jury the respondent obtained judgment for £8,000 and costs which were to be the subject of a detailed assessment. The appellants appealed. On the 20 th February 2001 the Court of Appeal dismissed the appeal, but, for reasons which are immaterial for the purposes of this appeal, only awarded the respondent 50% of his costs, also to be the subject of a detailed assessment. The appellants, for the purposes of those detailed assessments, sought to argue that the respondent's claim for costs offended against the indemnity principle in that in truth the respondent had at no time been liable to pay any costs to his solicitors, David Price & Co, and sought directions effectively for a trial of that issue. On the 28th January 2002, Deputy Costs Judge Jefferson rejected the appellants' submissions. The appellants appealed; and the appeal has been remitted to this court by order of Jacob J dated the 13th February 2002.[3]The hearing before the Deputy Costs Judge was the third occasion during the course of the litigation on which the appellants had sought to raise the question of the respondent's liability to pay his solicitors' costs. The respondent is a musician and composer. His complaint was about a passage in the relevant edition of The Times which described him as someone who "used to organise bands of hecklers to go about wrecking performances of modern atonal music." The writ was issued on the 2nd June 1998. By a summons dated the 23rd Apri11999, the appellants applied for orders that unless the respondent's solicitors provided an undertaking to the appellants to indemnify them against such costs in the action that should prove to be irrecoverable from the respondent, the action should either be dismissed or stayed. That summons was supported by an affidavit from Alastair Brett, the appellants' solicitor, which averred that the respondent was an impecunious musician and that the action was a form of blackmail. He said at paragraph 9:
"In the above circumstances, I verily believe that the plaintiff in this case is not in the slightest concerned with his reputation but rather attempting to extract damages from The Times by threatening us with time consuming and expensive litigation when he personally cannot afford to instruct a solicitor but has somehow persuaded Messrs David Price & Co to take on his case on a conditional fee basis."
[4]In response, David Price, the respondent's solicitor, made an affidavit in which he said:
"My firm is not acting for the claimant on a conditional fee basis, as Mr Brett chooses to infer. The claimant remains liable for all my fees regardless of the outcome of the litigation. Furthermore I have no reason to doubt that all my fees will be paid in the event that the claimant was to lose."
[5]At the hearing of the application before Gray J on the 14 th May 1999, the appellants submitted that in the absence of any evidence from the respondent himself rebutting the allegation of impecuniosity, the court should infer that the action was being unlawfully maintained. Gray J came to the conclusion that there was no basis for inferring that the claimant was impecunious on the material before him, and that in the face of the sworn assertion by David Price that he had entered into a proper agreement rendering the respondent liable for his costs, there was no basis for making either of the orders applied for by the appellants.[6]Meanwhile, after receipt of the affidavit from David Price, the appellants set in train enquiries into the respondent's financial situation. In an affidavit of 28 th July 1999, Alistair Brett stated that the private investigator who had been instructed had discovered that the respondent had been claiming income support which he received weekly, and that he was also in receipt of full rent rebate. Accordingly he sought orders at a directions hearing on the 30 th July 1999 that; the respondent should swear an affidavit as to his means; that David Price should swear an affidavit setting out in detail the basis on which his firm had been retained by the respondent, and that the appellants' application heard on the 14 th May 1999 be restored for the judge to make such further orders as may be necessary. Gray J dismissed those applications.[7]The next relevant event in the story was that the respondent's solicitors informed the appellants by letter of the 10 th February 2000 that they had entered into a conditional fee agreement with the respondent to cover the trial and the trial preparations. The appellants were further informed that the respondent did not have any insurance to cover the appellants' costs. The letter giving this information confirmed that up to the making of the conditional fee agreement, the arrangements between the respondent and his solicitors had been set out in David Price's affidavit of the 6 th May 1999.[8]The respondent commenced the detailed assessment of costs proceedings arising from the trial and the appeal on the 3 rd July 2001. On the 5 th October 2001, the appellants sought an order requiring the respondent's solicitors to give full particulars of their dealings with the respondent both in relation to their original retention as his solicitors, and the conditional fee agreement. The order requested was somewhat discursive; but in effect it required the respondent's solicitors to provide information both by way of disclosure of documents and otherwise to support the contention that there had in truth been an agreement whereby the respondent was liable for the solicitor's costs prior to February 2000 and as to the validity of the conditional fee agreement. The appellants further sought a preliminary hearing as to whether or not there had in truth been any agreement imposing on the respondent liability for costs in the first instance and a valid conditional fee agreement in the second instance, and that the appellants be permitted to cross-examine the relevant witness for the respondent The application was supported by a statement from Alastair Brett dated the 5 th October 2001.[9]In response to this application, the respondent's solicitors served three statements. In the first statement David Price confirmed the contents of his affidavit of the 6 th May 1999 and asserted that he had signed the relevant bill of costs and confirmed that its contents were correct. He further set out the circumstances in which he entered into the conditional fee agreement and set out its terms. The second statement was made by Barney Monahan, an assistant solicitor also on the 22 nd October 2001, who confirmed that the conditional fee agreement had indeed been entered into in the circumstances described by David Price. The third statement dated the 31 st October 2001 was from Paul Fox who had been a solicitor employed by David Price at the relevant time, and who had been the solicitor who had dealt personally with the respondent in relation to his original instructions. He exhibited to his statement a copy of the letter of the 27 th October 1998 from the respondent's solicitors to the respondent confirming receipt of instructions, and the basis upon which fees would be charged. The letter on its face made it clear that the respondent would be personally liable for the fees. He stated that he reiterated orally to the respondent that he would be liable for the fees regardless of the outcome of the litigation. In paragraph 4 of the statement he said as follows:
"I knew that the claimant was not a wealthy man, but understood him to be a working musician. I did not know that he was in receipt of State benefits (if that is correct). I knew that if he lost a libel action he would be in a severe financial situation. However that did not place him in a minority. In my experience very few beyond the very rich can view libel actions with financial equanimity. My assessment was that the article was clearly libellous and that the case would settle quickly. However, it was made perfectly clear to the claimant that in the event that the case was fought and he lost, he would be liable to pay this firm's costs. Whether the firm would or could, as a matter of financial practicality, seek to enforce its claim for costs if the claimant lost was not discussed. He was made aware of his liability to pay and I was happy to proceed without payment because of my opinion of the strength of his case and my belief that it would be resolved fairly swiftly."
[10]The respondent's solicitors also disclosed the full details of the conditional fee agreement entered into on the 9 th February 2000, and ultimately their file and attendance notes.[11]In seeking to cast doubt on the genuineness of both the original retainer as deposed to by David Price and Paul Fox, and the conditional fee agreement, the appellants relied in particular on the following matters arising from the documents, as well as the circumstances surrounding the retainer and the conditional fee agreement which had emerged in any event from the affidavits and statements:(i) The writ had been issued by Messrs Peter Carter-Ruck and Partners. When serving the writ personally, the respondent had been asked by Alastair Brett, according to his first affidavit and his statement of the 5 th October 2001, why it had not been served by the solicitors. The respondent said that they were not fully conversant with the new rules concerning conditional fee agreements for libel actions and, in particular, that they had not got insurance cover and they were not therefore prepared to handle the action on his behalf.(ii) In a letter dated 21 st December 1988, which Paul Fox wrote to the respondent when informing him of the fact that the appellants were proposing to take the point that he could not afford the action, he said the following:
"Brett's final point relates to your relative impecuniosity which he says, means that we must be maintaining the action. It is unfortunate that this issue has arisen following your conversation with Brett but my attitude is that if he wants such an application then let him." (iii) A file note of the 24 th April 1999 of an attendance with the respondent included the following: "
Discussed KB's [the respondent] financial circumstances re forthcoming application. KB confirmed that he understood the financial consequences of losing (see PF [Paul Fox] letter of 27 October). KB is not a wealthy man but does earn money and has friends and relation who have agreed to assist him to pay DP's [David Price] costs. He guaranteed that DP's fees would be paid come what may. DP said that he accepted KB's assurances. He remained confident that the case would settle, but KB had to accept the risk of it not. KB asked whether DP would consider a CFA [Condition Fee Agreement] agreement. DP said that he may do if it seemed the case would not settle, but that KB would be responsible for all costs incurred before the CFA agreement." Before us it was accepted that the appellants could not challenge the accuracy of the file note; but, it was said, there was no indication that any enquiry was thereafter made as to how the respondent might be able to pay his solicitor's fees, or who might be prepared to support him. iv) There were no file notes dealing with any of the interlocutory hearings nor, in particular, any file notes relating to the need to fund those hearings. Nor was any interim bill of cost submitted to the respondent either before or after the making of the conditional fee agreement. v) A file note of the 9 th February 2000 stated:
"DP said that if AB [Alastair Brett] makes an offer of £10k (otherwise KB would be gambling with DP's costs), he would advise KB to accept it ... However if an offer of £10k to £15k is made and KB doesn't accept it but will write £20K as the settlement figure in the CFA. However if an offer of £10k to £15k is made and KB doesn't accept it & subseq doesn't beat the payment into court, it was agreed that DP said that he would take his costs out of the damages" vi) A letter from David Price to the respondent of the 15 th February 2000 including the following: "
In the event that you win the case and fail to beat the settlement offer, then I may have to resort to the damages in order to satisfy any legal costs which are unpaid by Times Newspaper." vii) In a letter to David Price of the 27 th March 2000 the respondent stated:
"At trial ... as we left court you said to me: "
Lets split your damages. I will hang on to half because I have a cash flow problem" .... I believe you have a professional duty to serve the interests of your client. But the above was just one of the several occasions when you have revealed exactly the opposite intention – to serve your own personal interests – at my expense. It became clear to me at that moment that you were determined to hang on to my damages, come what may .... you also told me at the pre-trial meeting at your office ... that if there was to be any liability on my part for your costs to come out of my damages that would be because I had caused unnecessary problems" viii) In a letter of the same date David Price said to the respondent:
"The position is therefore as follows. I am holding the damages. You allege you have a moral right to them. I disagree. In any event you have no legal right to them, pending the resolution of the costs claim. We have discussed whether, as a goodwill gesture I would let you have a share before the costs are resolved. I am now concerned that if I give you the money now or any part of it, you will jeopardise the recovery of my costs." ix) In a letter of the 28 th March 2000, David Price said to the respondent: "
Despite my warnings to you, you simply do not appear to realise that if the Times successfully appeal, you will get nothing in damages and you may end up paying their costs. It will also affect my ability to recover the costs from them." x) In a letter of the 16 th June 2000, David Price said to the respondent:
"As I said I would regard as a very prudent insurance policy for you to make a without prejudice offer to take £5,000. I am so certain that the Times will not take the offer that I am prepared to reduce my costs by £3,000 and send the difference to you in the event the offer is accepted." xi) In a letter of the 20 th December 2000, David Price said to the respondent: "
I will now be away for two weeks and will need to get together in the New Year to discuss the consequence of the 50% disallowance of your costs." xii) In a letter of 21 st December 2000, the respondent said to David Price:
"[The Appeal Court ruling] is not a circumstance under which it is appropriate for you to be writing yourself a blank cheque for costs.... you and your company have known from the start the hand to mouth existence that I lead, that I have neither assets nor income and that it is unrealistic to expect to recoup what you regard as missing from your costs from me.... When you took this case on you took a calculated risk to advocate for a client without resources and it seems this paid off for you and that my determination to go to trial, again against your advice, paid dividends for you."
[12]The appellants submitted to the Deputy Costs Judge that this material, against the background disclosed in the affidavits and statements, in particular the affidavit of Alastair Brett setting out the findings of the private investigator, showed at the very least a prima facie case for concluding that the respondent's solicitors must have appreciated that there was no prospect of their obtaining any of their costs from the respondent and that insofar as there purported to be any agreement between the respondent and the solicitors to pay those costs, any such agreement was a sham. They submitted that the material justified a full hearing of an issue as to the validity of that agreement together with an enquiry as to the validity of the conditional fee agreement at which the respondent and the respondent's solicitors, in particular David Price and Paul Fox, should attend to be cross-examined.[13]The Deputy Costs Judge was clearly unimpressed by the appellants' arguments. He considered that none of the material relied upon by the appellants in any way undermined the evidence of David Price and Paul Fox. He said, in particular, that the letter from the respondent of the 21 st December 2000 was the type of letter with which practising solicitors were familiar, and that it was interesting that nowhere in that letter did the respondent suggest that he either had no liability to costs, or that there had been any "deal" in relation to costs. Having dismissed the application, he said:
"A number of extremely grave allegations have been made without any substance. I asked this question, rhetorically - when does this became an abuse of the court's time?"
[14]Before us, whilst not resiling from the argument that the purported agreement was a sham, Mr Wilson for the appellants went further and submitted that a retainer is or becomes champertous, and therefore unlawful and unenforceable, if a solicitor is or becomes aware at any time that his client could not possibly have afforded to pay his costs, whatever might have been the formal agreement between them and continues to act thereafter. He submitted that if a solicitor was in that state of mind, then it did not matter whether that was when he first accepted the retainer, in which case that fact could justify the conclusion that the agreement was a sham, or later. If at any time during the course of an action, he submitted, a solicitor became so aware, but continued to act for the client, he thereafter maintained the action so that the arrangement was champertous. On this premise, the material before the Court provided ample support for the argument that David Price was aware that the respondent was impecunious; and the appellants were therefore entitled to cross-examine him as to his state of mind with a real and not simply fanciful, prospect of being able to establish that he had the requisite knowledge at some stage during the course of the proceeding, even if not at the outset when he was first retained. Before us, however, the appellants did not seek to pursue any argument in relation to the validity of the conditional fee agreement.[15]The present position as to conditional fees is governed by s. 58 of the Courts and Legal Services Act 1990, as substituted by the Access to Justice Act 1999, and the Conditional Fee Agreement Order 2000. Section 58, so far as relevant provides:
"(1) A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement; but (subject to s-s. (5)) any other conditional fee agreement shall be unenforceable. (2) For the purposes of this section and s. 58A – (a) a conditional fee agreement is an agreement with a person providing advocacy or litigation services which provides for fees and expenses, or any part of them, to be payable only in specified circumstances....."
[16]At the time relevant to the present proceedings, that is between the date of the retainer and the date of the conditional fee agreement, the provisions of the Courts & Legal Services Act, in its original form, dealt with conditional fee agreements in a different way. It provided that conditional fee agreements in a form prescribed by regulations "shall not be unenforceable". In Awwad –v- Geraghty & Co (A firm) [2001] QB 570 , this court held that, although there were competing public policy considerations, this wording indicated that it was Parliament's intention that, other than to the extent sanctioned by such regulations, conditional or contingent fee arrangements should be unenforceable as being champertous. The court was there considering a case where, on the trial of a preliminary issue between solicitor and client, the judge found that the solicitor had agreed to charge her normal hourly rate if the plaintiff was successful in the litigation and a lower rate of £90 per hour if he were unsuccessful. The court held that on those findings of fact, the agreement was champertous and unenforceable.[17]Mr Wilson sought to persuade us that the true principle goes wider than simply rendering such an agreement unenforceable but precludes a solicitor from continuing to act whenever he becomes aware that the client is unable to pay his bill. The first case he relied on in point of time was Mainwaring –v- Goldtech Investments Ltd [1991] CA, The Times 19/2/91. That was a case in which the plaintiff sought an order that the costs of two consolidated actions be paid by the solicitors for the defendant, a company which had failed to pay those costs. The plaintiff submitted that it was objectionable and improper for the solicitor to conduct litigation in the knowledge that there was no real likelihood of his ever having his costs and expenses reimbursed by or on behalf of the client save in the event of the litigation being successful. Counsel for the solicitor was prepared to accept the general correctness of that proposition. On that basis, the court was prepared to, and did, consider the facts, and concluded that the factual basis of the plaintiff's claim had not been made out. This court did so on the basis that it was "willing to make the same assumption" as the solicitor's counsel in relation to the proposition of law put forward by the plaintiff. Mr Wilson makes the point that there was no suggestion by the court that it doubted the correctness of that proposition. However, he had to accept that it does not constitute authority in favour of the proposition.[18]He then referred us to British Waterways Board –v- Norman (1993) 26 HLR 232. In that case the appellants had been found by magistrates on a complaint by the respondent to have caused or permitted premises to become prejudicial to health. They imposed a fine and compensation. The respondent made an application for costs. The magistrates found that, when the solicitor was retained by the respondent, no mention was made of costs at any time until the magistrates retired to consider the substantive case when the respondent had been told "Not to worry" if the court did not make a costs order. The magistrates concluded that the solicitor only expected to be paid if the respondent was successful and an order for costs was made against the appellants and that it had never occurred to the respondent that she would have to pay any costs out of her own pocket. Accordingly there was no other conclusion but that there must have been an understanding amounting in law to an implied contract that the respondent's solicitors would not have looked to her for any costs if she lost the case. The Divisional Court concluded that the magistrates were correct. Mr Wilson sought valiantly to suggest that in some way this supported his argument, on the basis that the court was entitled to look at all the surrounding circumstances to determine the true nature of the retainer. In one sense he is right. The court clearly there decided that the facts justified only one conclusion, namely there was an implied contract that the respondent would not be liable for the solicitor's costs save in the event that they were paid by the appellants. But that does not support his argument that once a solicitor is aware that his client is impecunious and therefore unable or unlikely to be able to pay his costs, he is ipso facto from that moment maintaining the action unlawfully if he continues to act. Indeed Tuckey J said at page 243:
"My Lord has referred to the professional standards which apply to solicitors on the subject of costs. If that procedure is followed in the way suggested by My Lord, so that it is made clear that the client is liable for full costs irrespective of the outcome of the proceedings, there can be no objection to the solicitor agreeing that such liability need not be discharged until the outcome of those proceedings, if any, is known. At that stage, provided it is not formed the basis of the agreement with the client, it would be open to the solicitors, if the circumstances warranted it, to decide not to enforce their right to be paid, in the event that some or all of their costs were unrecovered from the other party to the proceedings."
[19]In Wells & Anr –v- Barnsley Metropolitan Borough Council (1999) QBD The Times 12 November 1999, another case relied upon by Mr Wilson, Kennedy LJ referred to this passage in the judgment of Tuckey J, and said that it underlined the fact that the court's concern was with the nature of the contract of retainer, and not with the behaviour of the solicitor subsequently, save in so far as it might throw light upon the true nature of the original agreement. Again this case does not provide Mr Wilson with any authority for his wider proposition.[20]On the contrary, it seems to us that these authorities make it clear that what the court is concerned with is establishing the true nature of the contract entered into between the client and the solicitor. Support for this case can be found in the judgment of Lloyd J, as he then was, in R –v- Miller and R –v- Glennie [1983] 1WLR 1056. These were two cases in which the question arose as to whether or not the litigants had incurred liability for costs in cases in which they had been supported by their employer. At page 1061C, Lloyd J said:
"It follows that I reject Mr Collins main argument that "costs incurred by" means "costs paid by"
. I would hold, following Adams –v- London Improved Motor Coach Builders Ltd [1921] 1KB 495 and the other cases I have mentioned, that costs are incurred by a party if he is responsible or liable for those costs, even though they are in fact paid by a third party, whether an employer, insurance company, motoring organisation, or Trade Union, and even though the third party is also liable for those costs. It is only if it has been agreed that the client shall in no circumstances be liable for the costs that they cease to be costs incurred by him, as happened in Gundry –v- Sainsbury [1910] 1KB 645 There was also some discussion as to the burden of proof. The initial burden of proving that Messrs Richards Butler were acting for Mr Glennie lay on Mr Glennie. But that burden could be discharged, as it was in the present case, by showing that Mr Glennie was the party to the proceedings, and Richards Butler the solicitors on the record. Once it was shown, as is now conceded, that Mr Glennie was indeed the client, then a presumption arose that he was to be personally liable for the costs. That presumption could, however, be rebutted if it were established that there was an express or implied agreement binding on the solicitors, that Mr Glennie would not have to pay those costs in any circumstances."[21]Although, clearly, Lloyd J was there dealing with a different type of problem from the one with which we are concerned, these passages nonetheless seem to us to be helpful in identifying the true nature of the question which has to be asked in all cases, where for one reason or another, it is suggested that there was no true liability on the litigant to meet his solicitor's costs. Whilst the client's impecuniousity may be relevant to determining what the true nature of the agreement was, the mere fact that the solicitor may have been conducting the action on credit or continuing an action in the knowledge of his client's lack of means does not justify a conclusion that he was unlawfully maintaining the action.[22]In A Ltd –v- B Ltd [1996] 1WLR 665, Sir John Vinelott, in a preliminary judgment in which such a submission was made, said:
"The difficulty with that argument is that it has never been suggested, so far as I am aware, that a solicitor must cease to act as soon as it becomes apparent that his client is likely to become unable to pay his costs unless the action succeeds."
He then adjourned the matter for the Law Society to be instructed. He was referred to Mainwaring –v- Goldtech Investments Ltd , and observed in his judgment at the adjourned hearing that this did not provide any authority to the contrary because the court had merely made assumptions as to the approach that it should take to the facts of that case. He found support for his preliminary view, however, in a decision of this court on an application for leave to appeal in Singh & Anr –v- Observer Ltd [1989] 3 All ER 777. In that case the solicitor of an apparently impecunious litigant had been required to disclose the name and address of any person or persons financing the action. On appeal, the solicitor submitted an affidavit that he had been conducting the action on credit. The court concluded that in those circumstances he had not been maintaining the action. It was not suggested by the Court of Appeal that there was anything improper in his continuing to act in the litigation on that basis. Sir John Vinelott considered that that supported the preliminary view that he had formed.[23]In our view the point is made clear in the judgment of Schiemann LJ in Awwad –v- Geraghty & Co. He set out extensively the public policy arguments, as he saw them, both in favour and against the enforceability of the sort of agreement that was in question in that case. Amongst the points which he considered to favour enforceability, he said at page 588 F:
".... (6) If the lawyer's client has no assets then a conditional, normal fee agreement merely gives legal form to what is a practical reality – the lawyer only gets paid if the client wins. Yet it is accepted as laudable for lawyers to act in such circumstances. (7) There is nothing improper in the lawyer agreeing to act for the client for his normal fee whilst having it in his mind for reasons of friendship or wishing to foster future work from that client, not to exact his fee if the client should lose. It seems odd that an open contractual statement of what is unobjectionable in a solicitor's mind should render unenforceable an agreement which would have been enforceable had the solicitor not shared his thoughts with his client and promised not to change his mind."
[24]It follows that the wider proposition for which Mr Wilson contends cannot be supported upon the authorities. The question, however, still remains as to whether, on the facts, there was material which could support the argument that the agreement purportedly set out in the letter of retainer was a sham, or, perhaps, that even if not a sham at the outset, there was some contractual variation affecting the respondent's liability to meet his solicitors' costs, so that the only fair way of resolving the matter was to order a preliminary issue in the terms requested by the appellants. Mr Wilson submitted that, unless it could properly be said there was no material which could be said to raise the issue, then the appellants were entitled to the order which they sought and that the failure so to order rendered the proceedings unfair. He submitted that, although there is a presumption that a litigant who instructs solicitors is liable for their costs, that is only a presumption; and if that presumption is challenged on a reasoned basis, then it is for the litigant to establish that he was indeed liable for his solicitors' costs. If, in doing so, he puts material before the court, the paying party must be entitled to challenge that material, if necessary by cross-examination.[25]Mr Wilson is again in one sense right. The presumption was referred to by Lloyd J in R –v- Miller and R –v- Glennie . And in Hazlett –v- Sefton Metropolitan Borough Council [2000] 4 All ER 887, the Divisional Court held that where the paying party had raised a genuine issue as to whether or not the litigant had properly incurred costs in he proceedings, the litigant would be at risk if he failed to support the presumption by the production of documents. The court made it clear that it was a matter for the trial judge to determine whether or not the paying party had raised an issue which called for proof by the receiving party of his liability to costs. Harrison J giving the judgment of the court which consisted of himself and Lord Bingham of Cornhill CJ said at page 894:
"The defendant must show that there is a genuine reason for believing that it is not a proper private fee agreement before the complainant should need to consider producing evidence to support the presumption in his favour."
[26]This warning, that the court must look carefully at the situation to determine the extent to which the enquiry as to costs should extend, echoes what was said by Judge LJ in Bailey –v- IBC Vehicles Ltd [1998] 3 All ER 570 . In that case, where the successful plaintiff's claim had been supported by his union, the defendants raised the question as to whether or not the solicitors were entitled to make a full solicitor/client charge and applied in the taxation for an order the plaintiff should file and serve an affidavit and documents and produce a particular document. The District Judge granted the application but the Circuit Judge, allowing the plaintiff's appeal, held that while the District Judge had the jurisdiction to make an order for discovery, the defendants were not entitled to discovery since there was nothing in the available information which could lead to an inference that the indemnity principle had not been observed. In dismissing the appeal Judge LJ said at page 572 h:
"The taxing officer is exercising a judicial function with substantial financial consequence for the parties. To perform it, he is trusted properly to consider material which would normally be protected from disclosure under the rules of legal professional privilege. If, after reflecting on the material available to him, some feature of the case alerts him to the need to make further investigation or causes him to wonder if the information with which he has been provided is full and accurate, he may seek further information, no doubt he would begin by asking for a letter or some form of written confirmation or reassurance as appropriate. If this were to prove inadequate he might then make orders to discovery or require affidavit evidence... This jurisdiction having been acknowledged, an emphatic warning must be added against the over enthusiastic deployment of these powers particularly at the behest of the party against whom the order for costs has been made."
[27]Further, at page 574 j he said:
"As officers of the court, solicitors are trusted not to mislead or allow the court to be misled. This elementary principle applies to the submission of a bill of costs."
[28]In the present case, the Deputy Costs Judge undoubtedly had jurisdiction to make the order requested by the appellants, and if it were necessary to make such orders in order to ensure a fair determination of the issue raised by the appellants, he should have acceded to the application. But what is fair will depend on the circumstances. The mere fact that the issue has been raised is not of itself sufficient. If there is no prospect that cross-examination could either undermine or further elucidate the respondent's case, to refuse to accede to the application will not be unfair and it would not breach the requirement of the overriding objective that the parties are on equal footing but would save expense and deal with the issues proportionately and expeditiously.[29]Despite Mr Wilson's submissions, we have no doubt that the Deputy Costs Judge came to the correct conclusion on the facts of this case. Although the issue had been raised, the documents, affidavits and statements overwhelmingly established that cross-examination and further disclosure were not appropriate. The letter of retainer clearly imposed liability on the respondent; the affidavits of David Price and Paul Fox were in terms which made it clear that the appellants would have to establish that they had lied if they were to undermine the validity of that agreement; the attendance notes and correspondence were entirely consistent with the respondent's case; the respondent's own letters do not provide any support for the contention that he considered that there was an agreement or "deal" that he would not be responsible for the solicitors' costs; in other words there was nothing to suggest that the agreement was a sham. The evidence was accordingly overwhelming; and the Costs Judge was right to conclude as a matter of proper case management that it was not appropriate to make any further orders, in particular to order cross-examination. In those circumstances there was no unfairness to the appellants either in domestic law, or under Article 6(1) of the European Convention on Human Rights. The Deputy Costs Judge is to be commended for ensuring that the detailed assessment did not become an excuse for further expensive litigation at the behest of a disappointed but persistent litigant. Satellite litigation about costs has become a growth industry, and one that is a blot on the civil justice system. Costs Judges should be astute to prevent such proceedings from being protracted by allegations that are without substance.

Order

Appeal dismissed with costs as agreed between counsel leave to appeal to House of Lords refused. (Order does not form part of the approved judgment)

Cited in 3 later judgments