British Transport Police v Soods Solicitors [2012] EWHC 3780 (Admin)

Case No CO/11584/2011[2012] EWHC 3780 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Venue Royal Courts of JusticeDate Thursday, 17 July 2012
Strand
London WC2A 2LL
B e f o r e:
LORD JUSTICE MOSES
MRS JUSTICE NICOLA DAVIES
Between
CHIEF CONSTABLE OF BRITISH TRANSPORT POLICEClaimantv
Between
SOODS SOLICITORSDefendant
Computer-Aided Transcript of the Stenograph Notes ofWordWave International LimitedA Merrill Communications Company165 Fleet Street London EC4A 2DYTel No: 020 7404 1400 Fax No: 020 7404 1424(Official Shorthand Writers to the Court)
Mr R Lööf (instructed by DS Taylor (BTP)) appeared for ClaimantMr M S Gill, QC and Mr M Hashim (instructed by Metro Law) appeared for Defendant
J U D G M E N T

LORD JUSTICE MOSES:

[1]This is an appeal by way of case stated from a decision of District Judge Purdy at the City of Westminster Magistrates' Court on 3 May 2011. In that decision he refused a wasted costs order sought against the respondent, Soods Solicitors limited.[2]The history of the matter is set out both in the ruling that was attached to the case stated and to the case stated. The application, which was unopposed, for the forfeiture of cash seized from a Mr Yuri Harris in the sum of approximately £100,000, was sought pursuant to section 298 of the Proceeds of Crime Act 2002. It was due to be heard on 23 June 2010. Shortly before then, on 11 June 2010, the City of Westminster Magistrates' Court received a letter from Soods Solicitors purporting to act on behalf of SFK Holdings Limited (SFK). It purported to be a company incorporated in Uganda. It requested to be joined to proceedings pursuant to section 301 of the 2002 Act. Nobody attended on 18 June, at which there was supposed to be a preliminary hearing, but on 23 June a Mr Semuguenze attended. The applications were adjourned for enquiries. A further application on behalf of SFK was made on 23 July. The application was refused because the court was not satisfied that there was sufficient information about SFK in order to proceed. Again, the matter was adjourned. On 30 July, the Chief Constable of the British Transport Police was represented by counsel and resisted SFK's attempt pursuant to section 301. It had become apparent that apart from a Ugandan affidavit sworn by a Mr Kavuma claiming to be the director of SFK, there was no significant documentation relating to SFK.[3]On 10 September 2010 it became apparent that SFK did not exist. The Chief Constable's enquiries established that the Ugandan equivalent of Companies House had no record that SFK existed. Documentation which had been produced some time before the hearing on 10 September purporting to show the existence of SFK was forged. Further, it emerged that Mr Kigongo had spent some two months with the pleasure of sharing a cell with Mr Harris who had been convicted of, amongst other things, money laundering of the very cash seized. In those circumstances, the forfeiture proceeded unopposed since the District Judge was not, as he put it, remotely satisfied that the cash seized had anything to do with SFK.[4]Following the conclusion of the forfeiture proceedings, on 25 November 2010, the Chief Constable of the British Transport Police sought a wasted costs order against Soods Solicitors pursuant to section 145A(1) of the Magistrates' Courts Act 1980. In his ruling dated 3 May 2011, that application was refused. It is important for the purposes of these proceedings to emphasize at this stage that what was sought was an order for costs against Soods Solicitors on the basis of their fault in failing to discover that SFK did not exist earlier. The ruling, in more full terms than that which is contained in the case stated for reasons that I shall come to, explained the basis upon which the wasted costs order was sought. The basis depended upon the well-known principles in Ridehalgh v Horsefield & Anor [1994] Ch 205 at 231F. Wasted costs orders will be made on the application of a three-stage test. First, has the legal representative of whom complaint is made acted improperly, unreasonably or negligently? Second, if so, did such conduct cause the applicant to incur unnecessary costs? Thirdly, if so, is it just to order that legal representative to compensate the applicant of a whole or any part of the relevant costs? (See 231F to G): "...'Negligent' should be understood in an untechnical way denote failure to act with the competence reasonably to be expected of ordinary members of the [solicitors'] profession." (233B to C)[5]The British Transport Police did contend that Soods had been at fault, both in negligently, in that untechnical sense, failure to enquiry properly into the existence of SFK and also in failing to undertake enquiries in accordance with their obligations contained in the Money Laundering Regulations 2007, (SI/2007/2157), particularly the obligation imposed under Regulation 5 to identify a customer and verify the customer's identity.[6]There is no doubt that the Regulations impose an important duty upon solicitors in circumstances where the Regulations bite so as to fulfil the purpose identified in the recital number 19 to the Directive 2005/60/CC October 2005. But the District Judge, having listened to the submissions and in particular the evidence advanced on behalf of Soods which was not the subject of any cross examination, declined to find any fault. He asked two questions. Firstly, whether the failure of Soods to discover that SFK was, as he put it, a shame (he probably meant a sham), asked whether the failure was negligent and, secondly, whether wasted costs should follow. He answered both questions in the negative. He said:
"Having considered this case at length I find Soods should have been very cautious indeed given the nature of the proceedings. Nonetheless B.T.P. would, I find, have made enquiries of any person or document submitted whether submitted by a solicitor or individual claiming these monies. Had Soods declined to act costs would have been incurred as the SFK claimed, meritless though I found it to be, would have been advanced. Accordingly although I feel bound to conclude Soods should have been more cautious the proceedings and time and money required to litigate would still have been necessary. In those circumstances in my judgment even if Soods could be said to be at fault under 2007 Regulations or at all, in the exercise of my discretion, applying the interests of justice test to wasted costs I decline to make the order B.T.P. seek."
[7]In the case he stated, the District Judge set out those conclusions. It emphasises that it was not of the view that it was in the interests of justice to make a wasted costs order. The questions, after apparently some negotiations that eventually he agreed to state, were firstly, "In the circumstances of this case did I apply the correct test for causation on the application for wasted costs? Secondly, if the test that I applied for causation was incorrect, would that have an impact on the interests of justice test?"[8]In full submissions, Mr Lööf, on behalf of the Chief Constable, supported by substantial written argument, submits that the judge misdirected himself as to the appropriate test of causation. He says that it is inevitable that substantial, if all the costs incurred, flowed from the failure of Soods Solicitors. There is, in my view, a fatal flaw in that argument. No wasted costs order can remain pursuant to section 145A of the Magistrates' Court Act unless and until there is a finding of fault in the sense that I have identified. In his ruling, the District Judge found no fault. There is no question before us as to whether the judge was correct or incorrect in so concluding. It is abundantly plain, both from the ruling attached to the case stated and the case stated itself in the words I have quoted that no such finding was made. As Mr Manjit Gill, QC, points out on behalf of the solicitors, the judge was astute in the face of the evidence he received from Soods Solicitors not to make any such finding. If the Chief Constable wished to challenge that then he should have obtained a case stated which exposed that issue. He should have requested the magistrate to set out his findings of fact as to the course of conduct pursued by Soods Solicitors once they were instructed and as to his findings as to whether they fell below the standard reasonably to be expected of a competent solicitor or were in breach of the Money Laundering Regulations. Instead, the case stated focused on questions of causation and asked questions in relation to them which simply did not arise unless and until findings of fault were made. If the Chief Constable had wanted to raise those issues then his remedy was to apply for the case to be amended pursuant to the section 28A of the Senior Courts Act 1981. No such application was made.[9]I am far from saying that it could successfully have been made in a wasted costs application, since the one thing that no court would wish to see would be the costs to be aggravated by endless applications and litigation taking up the time of the courts. But that was the appropriate procedure. Nothing daunted, Mr Lööf bravely contends that the court should assume a finding of fault, otherwise causation simply would not arise. But the way the District Judge cast both his ruling in the case stated makes it clear that he wished to deal with both issues and, as I have already recalled, made it clear that he was making no finding of fault against Soods Solicitors. There is simply nothing it would be proper for this court to say about that since the issue is not before the court and it would be quite wrong to assume in any way that Soods Solicitors were at fault because the court has not seen the evidence let alone been in a position to query it.[10]The case does highlight, however, a point that perhaps the Chief Constable would wish to highlight. Unfortunately it is not an issue before the court at all. There is material that the diligence of Mr Lööf has unearthed which goes to suggest that there was no need for any finding of fault on the part of the District Judge. The District Judge could have been invited to exercise his inherent jurisdiction if such exists in the Magistrates' Court, which may be very much open to doubt, to order that a solicitor who acts without authority should pay the costs of the other side. There is undoubtedly such inherent jurisdiction within the High Court or above of which Kekewich J speaks in Geilinger v Gibb [1897], 1 Ch 479 at page 483 and more recently the Court of Appeal in Yonge v Toynbee [1909] 1 KB 215, particularly at page 227 in the judgment of Buckley LJ. In such cases, even if a solicitor innocently misrepresents he has authority, because he has professed to act as agent in circumstances where he has no client, he may be ordered to pay the costs of the other side. But this was not the basis upon which the application was made to the magistrate. I wish to emphasise against there may be no right to make such a claim to the magistrates or District Judge since, as is now clear upon authority, the magistrates or District Judge may have no inherent authority. The Magistrates' Court may have authority only derived from statute but I am not deciding that question today since the issue was never deployed before the District Judge.[11]For the reasons I have given I would dismiss this appeal. The real point was never stated in the case and never fell for decision before us. In those circumstances, I would dismiss this appeal.

MRS JUSTICE NICOLA DAVIES: I agree.

[13]MR GILL: My Lord, my Lord, I am asking for my costs of the appeal to go assessed if not agreed.[14]MR LÖÖF: My Lord, this case was always conducted by a junior counsel myself and, until the skeleton argument was submitted by Mr Gill, there was no indication whatever that such resources would be deployed by those resisting this application. I would contest the need to instruct a Queen's Counsel in this case and to deploy, as it were, the attendance of a private (Inaudible) to the application as well, but the resources which you see on the opposing side in this matter. I would also emphasise that the even though this case is only -- clearly it was certainly as it were an attempt by a public authority to protect the jurisdiction that it has and the duties that it had under statute and the extent to which they can do so. So in those circumstances I would dispute the need for a silk on the other side and for costs to be restricted to those which have been incurred by a junior preparing the case.

LORD JUSTICE MOSES: Yes, thank you. I shall say that costs to be assessed. It is a very serious matter, seeking a wasted costs order against an officer of the court and these solicitors and they were perfectly entitled to deploy all that they could to resist the appeal. In those circumstances they shall have their costs to be assessed if not agreed. Thank you very much.