England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LIVERPOOL COUNTY COURT
(Mr Recorder Braithwaite QC)

		Royal Courts of Justice Strand London WC2 Thursday, 22nd November 2001

Thursday, 22nd November 2001

1. LORD JUSTICE PETER GIBSON: I will ask Chadwick LJ to give the first judgment.
2. LORD JUSTICE CHADWICK: This is an appeal from a costs order made on 2 November 1999 by Mr Recorder Braithwaite QC sitting in the Liverpool County Court. The order was made against a firm of solicitors, Messrs Dooley & Co, in proceedings brought by Mr Gerard Byrne against South Sefton Health Authority. The proceedings had been commenced by the issue of a county court summons on 2 July 1998. It is a striking feature in this appeal that the solicitors, Dooley & Co, had ceased to act for the claimant, Mr Byrne, in May 1996 - that is to say, some two years or more before the commencement of the proceedings in which the costs order was made against them.
3. The underlying facts may be summarised as follows. Mr Byrne received injuries to the head in the course of an assault upon him in the early hours of 18 May 1989. He was then aged 19 years. He did not, at the time, regard the injuries as serious; and he did not seek immediate medical treatment. But, over the next days and weeks, he suffered from headaches of increasing intensity and he consulted his general practitioner. On 25 June 1989 his father had become so concerned about his condition that he took Mr Byrne to the Accident and Emergency Department at the Walton Hospital; a hospital for which the defendant health authority had responsibility. Mr Byrne was seen there by a Dr De Vitt, who was, I think, a house officer in the Accident and Emergency Department. On examination Dr De Vitt thought that he had identified a possible papilloedema - that is to say, a swelling of the optic discs - in Mr Byrne's left eye. Dr De Vitt sought a further medical opinion within the hospital. That opinion refuted the presence of papilloedema. Mr Byrne was sent home on 25 June 1989 without treatment.
4. Mr Byrne's condition did not improve. He re-attended at Walton Hospital on 12 July 1989. He was examined then by a third doctor who diagnosed disc blurring caused by myopia. Co-dydramol was prescribed, and Mr Byrne was discharged.
5. Six days later, on 18 July 1989, Mr Byrne attended the Casualty Department at St Paul's Hospital. He was then found to be suffering from "bilateral barn door papilloedema". He was referred immediately to the neurosurgical unit at Walton Hospital. By the afternoon of the next day he had undergone neurosurgery to relieve the pressure behind his eye. He was discharged on 24 July 1989; but required further surgery over the next month or so to remove an infection. He was finally allowed home on 18 August 1989. His persistent headaches cleared up after a further 12 months.
6. On or about 18 September 1989 Mr Byrne consulted solicitors, Dooley & Co. The solicitors say - and there is no reason not to accept - that they were consulted primarily with a view to a claim for criminal injuries compensation in respect of the assault in May 1989. Be that as it may, by February 1990 a claim against the Health Authority for damage was in contemplation. On 14 February 1990 Dooley & Co wrote to the medical administrator at Walton Hospital in these terms:

"We act for Gerard Byrne" [giving his address] "who was on 18th August 1989 discharged from Walton Hospital, Liverpool ... pursuant to treatment administered to him for a blood clot.

On our present instructions our client is likely to be a Plaintiff in subsequent legal proceedings in which a claim in respect of personal injuries to him is likely to be made against you."

7. Dooley & Co asked for disclosure of the records and notes that a hospital might be expected to have in a case of this nature; and they set out the grounds upon which it was alleged that the hospital had been negligent in failing to make a correct diagnosis of papilloedema in June 1989.
8. There is little evidence of further progress thereafter. Mr Byrne's claim for criminal injuries compensation was refused by the Criminal Injuries Compensation Board. The claim was pursued to an appeal. That appeal was unsuccessful. Dooley & Co billed Mr Byrne for fees in relation to that claim and the appeal. Those fees were unpaid. It appears that Dooley & Co obtained judgment and a warrant of execution against their client. It is, perhaps, not surprising in those circumstances that Mr Byrne did not maintain contact thereafter with his solicitors in relation to his personal injury claim.
9. In the meantime - with some difficulty and after some delay - Dooley & Co obtained a medical report from a consultant neurosurgeon, Mr Leggatt. That was received in June 1994. Counsel was consulted and advised that the evidence then available was not sufficient to support a claim for clinical negligence. He recommended that a further medical report be obtained. Legal aid funding was obtained for that purpose. A medical report which provided support for Mr Byrne's claim was received from Mr Bache, a consultant in accident and emergency care, in July 1995. By that time, of course, the primary limitation period of three years prescribed by section 11 of the Limitation Act 1980 had long since expired.
10. In February 1996, following receipt of the report from Mr Bache, Mr Byrne consulted new solicitors, Messrs Steinberg & Co. It took a little time for the legal aid certificate to be transferred from Dooley & Co to Steinberg & Co; but that was effected by the beginning of May 1996. Thereafter Dooley & Co have not acted for Mr Byrne.
11. Steinberg & Co obtained a further medical report from Dr Vakil, a consultant neurologist. That report is dated 23rd February 1997 and supports a claim for damages arising out of the negligence identified in Mr Bache's report of July 1995.
12. In August 1997 the solicitor at Steinberg & Co who had had conduct of Mr Byrne's case against the Health Authority - a Mr Price - left his employment with Steinberg & Co and moved to another firm, Messrs Carter Hodge. The legal aid certificate was transferred to Carter Hodge by the end of that month. Thereafter Carter Hodge acted for Mr Byrne in place of Steinberg & Co. On 3rd April 1998 the new solicitors, Carter Hodge, wrote to the solicitors for Merseyside Regional Health Authority, with a copy of a letter before action addressed to South Sefton Health Authority. That was followed by the issue of the summons, to which I have already referred, on 2nd July 1998. That was some nine years after the cause of action accrued; and three years, almost to the day, after the report of Mr Bache had been received in July 1995. It is, therefore, no surprise to find that in paragraph 17 to the particulars of claim served with the summons there is an allegation that the claimant did not know that his injury was significant - or that it was attributable to the acts or omissions of the servants or agents of the Health Authority -until receipt of Mr Bache's report on 3rd July 1995. Paragraph 18 of the particulars of claim assert that, notwithstanding that the relevant period of limitation under section 11 of the Limitation Act 1980 might have expired, it would be equitable for the court to permit the claim to proceed in the exercise of the power conferred by section 33 of that Act. Nor is it a matter of any surprise to find that the Health Authority took a limitation defence - although, in fairness, it should be noted that they also denied negligence.
13. On 26th October 1998 the county court ordered that the limitation defence should be tried as a preliminary issue. That issue came before Mr Recorder Braithwaite QC on 27th April 1999. After referring to section 14 of the Limitation Act 1980, which defines the date on which a person has knowledge for the purposes of section 11 of that Act, the Recorder held that the claimant had had the relevant knowledge in September 1989 when he first consulted solicitors; in the alternative, that he had had that knowledge in February 1990 when Dooley & Co wrote the letter before action to the hospital to which I have referred; and, in the further alternative, that he had that knowledge in June 1994 when Mr Leggatt's report had been received. Whichever of those three were the correct date, the three-year limitation had expired before the proceedings were issued in July 1998. The Recorder held also that this was not a case in which he should exercise the discretion conferred by section 33 of the Limitation Act 1980 to allow the proceedings to continue notwithstanding that the limitation period had expired. He then considered the question what order as to costs he should make. He made an order in these terms, so far as material:

"... the Defendant's costs to be paid on scale 2, such costs to be paid by the Plaintiff's solicitors (either Dooley & Co or Messrs Steinberg but not Carter Hodge) unless the aforementioned show cause within 56 days as to why they should not pay such costs personally."

14. A curiosity of that order is that the solicitors who have to show cause why they should not pay the defendant's costs are not the solicitors who took the decision to commence the proceedings which failed. The solicitors who did take that decision were not at risk as to costs.
15. Both Dooley & Co and Steinberg & Co sought to show cause why they should not pay the costs incurred by the Health Authority in proceedings in which they had not been acting as the claimant's solicitor. The hearing to show cause came before the Recorder on 2 November 1999. After rehearsing the facts, the Recorder directed himself that the question which he had to consider was whether either firm had acted unreasonably or negligently. It is, I think, reasonably clear that he took that test from the definition of wasted costs in section 51(7)(a) of the Supreme Court Act 1981, which I shall read:

"...`wasted costs' means any costs incurred by a party-

a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative."

16. The Recorder accepted that this was not a case in which it was, or could be, suggested that either firm had acted improperly. He found, however, that Dooley & Co had acted unreasonably and negligently. He said this (at page 3 of the transcript of his judgment between letters A-F):

"In my judgment, they [that is Dooley & Co] did act unreasonably and negligently. In my judgment, they had failed between September 1989, when instructed, and June or July 1992, when the three-year period of limitation had expired, to take reasonable and prompt steps to obtain satisfactory medical reports on negligence and causation. Although in argument I was asking counsel about whether reports could and should have been obtained which were positive (that is to say, supportive of the claimant's case), I bear in mind that one option available was to obtain satisfactory reports (that is to say, reports which gave the appearance of being competent and well-reasoned) even though they were negative. In my judgment, Dooley & Co failed to obtain satisfactory liability (that is to say, negligence and causation) reports within the three-year period.

My second finding is that they were also unreasonable and negligent in failing, in the alternative, to do what Mr McKeon, for the Health Authority, suggested; namely commence proceedings within the three-year period, if necessary by emphasising to the Health Authority that the writ issued was protective only and that the Health Authority should not incur cost."

17. It was the Recorder's view that the unreasonable and negligent conduct which he had identified extended over the whole of the period from September 1989 - when Dooley & Co were first instructed - until May 1996 when that firm transferred the papers to Steinberg & Co and ceased to act - see his observation at page 5 C of the transcript. The Recorder then considered whether the conduct which he had found to be unreasonable had caused the Health Authority to incur unnecessary costs. He said this (at page 5 D-E):

"In my judgment, the factual position is that the Health Authority incurred the costs of contesting the limitation issue which was tried before me; whereas, if Dooley & Co had behaved reasonably and non-negligently, the Health Authority would not have faced any costs related to a limitation issue. That therefore is my factual finding."

18. He rejected the submission that, if Dooley & Co had done what he held they ought to have done - that is to say, had obtained supportive negligence and causation reports in time, or had protected the limitation position by issuing proceeding within the three-year period - the Health Authority would have been faced not with an issue of limitation but with a trial on liability and, perhaps, also a trial on quantum.
19. On the basis that Dooley & Co's unreasonable and negligent conduct had caused the Health Authority to incur relevant costs, the Recorder asked himself a third question - whether in all the circumstances it was just to require Dooley & Co to compensate the Health Authority for the whole or part of those costs. He held that it was. He said this (at page 7):

"When I turn to this third question I assume that, when deciding whether it is just to make an order, I ought to take a wider view of the circumstances of the case and that is in fact what I do. If I take a wide view of the circumstances of this claim against the Health Authority, I emphasise that, in my judgment, it is unreasonable and negligent to fail to achieve satisfactory negligence and causation reports within six and a half years of original instruction."

20. I should add, for completeness, that the Recorder was not satisfied that Steinberg & Co had acted unreasonably or negligently and so, in the event, he made no costs order against that firm.
21. After he had completed his judgment and had heard submissions in further argument arising out of that judgment, the Recorder thought it appropriate to deal with a point which had been raised by counsel for Dooley & Co but which had not been addressed in the judgment itself; namely, whether the phrase "legal or other representative", which appears in section 51(6) of the Supreme Court Act 1981 and which is defined by subsection (13) of that Act, was apt to include a solicitor who had ceased to have conduct of the case some two years before proceedings were issued. He held that (to use his expression) it would be unconscionable if Dooley & Co were not covered by section 51 simply because they had ceased acting some time previously. He saw no important distinction in the fact that the solicitors had ceased acting before proceedings were commenced, as distinct from afterwards; and he rejected the argument that previous solicitors and representatives are not covered by section 51 of the 1981 Act.
22. The order made on 2nd November 1999 requires Dooley & Co to pay the Health Authority's costs of the action to be assessed on county court scale 2 and the Health Authority's costs of the hearing to show cause - which the Recorder assessed summarily at £2,550. The Recorder refused permission to appeal.
23. The defendant appeals to this court with permission granted on 18th February 2000 by Lord Justice Otton. For the reasons that I shall explain, I am in no doubt that the appeal should be allowed.
24. The jurisdiction to make an order for the payment of costs of, and/or incidental to, proceedings in the Civil Division of this Court, in the High Court or - as in the present case - in the county court, is conferred by section 51 of the Supreme Court Act 1981 as substituted by section 4 of the Courts and Legal Services Act 1990 and subsequently amended by section 31 of the Access to Justice Act 1999. Section 51(1) entrusts those costs to the discretion of the court. Section 51(3) provides that:

"The court shall have full power to determine by whom and to what extent the costs are to be paid."

25. Section 51 (6) is in these terms:

"In any proceedings mentioned in subsection (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 rules of court."

26. Section 51(7) defines wasted costs in terms which include those to which I have already referred.
27. Section 51(13) defines the expression "legal or other representative". It is in these terms:

"In this section `legal or other representative', in relation to a party to proceedings, means any person exercising a right of audience or right to conduct litigation on his behalf."

28. There is no suggestion in the present case that Dooley & Co have ever exercised, or sought to exercise, rights of audience on behalf of Mr Byrne. The expression "right to conduct litigation" in the context of section 51(13) of the Supreme Court Act 1981 -which, as I have said, was introduced in its present form by section 4 of the Courts and Legal Services Act 1990 - takes its meaning from section 119(1) of the 1990 Act. That section defines both "right of audience" and "right to conduct litigation". In my view it is plain that it does so not only for the other purposes of the 1990 Act but also for the purposes of the new section 51 of the 1981 Act which the 1990 Act introduced:

"`[a] `right to conduct litigation' means the right-

(a) to [issue] proceedings before any court; and

(b) to perform any ancillary functions in relation to proceedings (such as entering appearance to actions)..."

29. The answer, therefore, to the question whether Dooley & Co are or ever have been persons exercising a right to conduct litigation on behalf of Mr Byrne as a party to this proceedings must be "No".
30. The complaint against Dooley & Co is that they did not issue proceedings, or perform any ancillary functions in relation to proceedings which they had issued. In those circumstances, it seems to me beyond argument that Dooley & Co are not legal or other representatives within section 51(13) of the Supreme Court Act 1981 in relation to these proceedings. In particular, they are not legal or other representatives against whom wasted costs orders can be made under section 51(6).
31. We have been referred to a decision of Neuberger J in Brown & Another v Bennett & Others (No.2) reported in the Times on 21 November 2001 and delivered a few days earlier on 16 November. The question in that case was whether solicitors and counsel who had acted for the claimants from the inception of proceedings - the writ having been issued by the solicitors - were legal or other representatives for the purposes of section 51, notwithstanding that they had ceased to act because the legal aid certificates under which they had been instructed had been withdrawn before the trial. That, of course, is a situation in which counsel and solicitors did fall squarely within section 51(13) having regard to the provisions of section 119 of the 1990 Act. They were persons who had exercised rights of audience and rights to conduct litigation on behalf of the claimant. That case provides no assistance in relation to the position of a solicitor who has ceased to act before proceedings have been commenced. The judge's observations in the present case - that he could see no distinction between the position of a solicitor who ceases to act before proceedings are commenced and the position of a solicitor who, having commenced proceedings, ceases to act thereafter - are not observations with which I can agree. Those observations are inconsistent with the decision of Mr Justice Aldous in Kleinwort Benson v De Montenegro (15 March 1994 - noted at [1994] NPC 46).
32. It follows, in my view, that there was simply no jurisdiction to make an order against Dooley & Co under section 51(6) of the Supreme Court Act 1981. Faced with that difficulty, which he recognised, Mr McKeon (for the Health Authority) suggested that the judge had had power to make an order under section 51(3) which is in perfectly general terms.
33. There are, as it seems to me, a number of difficulties in the way of that submission. The first is that it is perfectly clear that the judge never thought that he was exercising a power under section 51(3). All the references in his judgment to unreasonable or negligent acts are clearly directed towards a wasted costs order under section 51(6).
34. Second - notwithstanding the decision in Kleinwort Benson v De Montenegro to which I have referred - of section 51(3) has, in practice, been regarded as applicable to cases in which the person against whom the order for costs is to be made has in some way maintained, promoted or encouraged the litigation in circumstances in which it would be just to make an order for costs against him, as the real protagonist, in circumstances where an order will not be enforceable against the nominal protagonist. It would be remarkable if the court were to make orders under section 51(3) against the other party's solicitors who had done no more than carry out their client's proper instructions in the course of litigation, however inadequately they may have performed. Indeed, as it seems to me, it was in order to deal the position of solicitors and other legal advisers who acted unreasonably or negligently in carrying out their client's instructions that Parliament thought it right to introduce the special provisions of sections 51(6) and 51(7). The decision in Kleinwort Benson v De Montenegro - to which reference is made in Civil Procedure (at note 48.7.15) - must, I think, be confined to its special facts.
35. Third, it cannot be right to make an order under section 51(3) of the 1981 Act unless the court is satisfied that the conduct of the person against whom the order is to be made has been causative of the costs which have been incurred by the person making the order. There must be a sufficient causal link between the person who is to pay the costs and the incurring of those costs. What is necessary is to determine whether the conduct complained of is really an effective cause of the costs incurred. In the present case the costs of these proceedings were incurred because Mr Byrne, with the advice of Carter Hodge in 1998, decided to issue proceedings at a time when the primary limitation was long since passed. Carter Hodge may have thought that it was worth taking the risk that the proceedings would be struck out or dismissed if the court could not be persuaded to exercise its powers under section 33 of the Limitation Act. It may have been thought that that was a risk worth taking in circumstances in which the action was to be publicly funded. If the risk failed, the costs would fall on the Legal Aid Board on the one side; and on the Health Authority on the other side.
36. It is that decision that led to the costs in this action being incurred. It has not been suggested that that decision was either improper, negligent or unreasonable; and - although I confess to finding the decision a surprising one - I make no such suggestion. Nor has it been suggested that the further prosecution of the proceedings by Mr Byrne and his new solicitors was improper, negligent or unreasonable. The real question is whether the action or inactions of Dooley & Co - which enabled the Health Authority to obtain an order dismissing the proceedings on the grounds that there was a limitation defence -can be said to have been causative in any real sense of the costs which the Health Authority incurred. To my mind the answer to that question is plainly "No". There is no difference, in principle, between the position of Dooley & Co, whose action enabled the action to be dismissed, and the position of the original assailant, whose conduct enabled the claim to arise in the first place.
37. As I have said, I would allow this appeal.
38. LORD JUSTICE LONGMORE: I agree.
39. LORD JUSTICE PETER GIBSON: An order for the payment of costs by a non-party is always exceptional and, whilst undoubtedly there is power under section 51(3) to make such an order, every judge to whom an application is made for such an order must treat that application with considerable caution.
40. For the reasons given by my Lord Chadwick LJ in his judgment, with which I am in entire agreement, it seems to me plain that the judge in this case came to an erroneous conclusion.
41. I too would allow this appeal.
Order: Appeal allowed with costs.