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 THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR JUSTICE TREACY)

		Royal Courts of Justice Strand London, WC2
		24th October 2006

1. LORD JUSTICE RIX: This is the judgment of the court. Owing to the urgency of these proceedings, Gloster J standing by since yesterday to hear a four-day appeal listed before her, this judgment is in much briefer form than we would otherwise have wished. However, it will probably and hopefully suffice. It is vital that the parties and Gloster J know where they stand without delay.
2. We introduce Angel Airlines SA ("Angel") as the claimant in these proceedings and the appellant in this court; Lyndales as their solicitors in these proceedings; and Dean & Dean as Angel's former solicitors, the defendant in these proceedings and in this court the respondent. The proceedings arise out of Angel's dispute with Dean & Dean as to the taxation of Dean & Dean's Bill of Costs.
3. Angel are granted permission to appeal to this court and their appeal is allowed. Dean & Dean's original points of dispute of November 2005 stated their objections as follows:

"The claimant company applied to the Romanian court in July 2004 to enter liquidation. A judicial administrator was appointed by an order of the Romanian court dated 30 September 2004. The proceedings were prosecuted thereafter by Messrs Lyndales without authority and/or instructions from the judicial administrator in Romania by what purports to be a letter from the judicial administrator dated 20 April 2005. The claimant first authorised Messrs Lyndales to act in and continue with the proceedings. Accordingly the claimant did not incur any liability and costs to Messrs Lyndales from 30 September 2004 to 20 April 2005. The defendant is not liable for costs in relation to the aforesaid period."

4. We read that plea from Dean & Dean's points of dispute in the underlying proceedings as accepting the validity of Lyndales' retainer by Angel's judicial administrator from 20 April 2005 but putting in dispute the period only from 30 September 2004 to 20 April 2005. That period was put in dispute not as a matter of Romanian law but simply as a matter of fact: had the liquidator authorised Lyndales' retainer? We draw attention to the date of Dean & Dean's points of dispute, viz 3 November 2005.
5. That reading of Dean & Dean's points of dispute is underlined, not undermined, by Dean & Dean's earlier invocation of Romanian law in April/May 2005, when they served on Angel reports by Romanian lawyers, Dr Piperea and Dr Stanescu. These reports related to a period before 20 April 2005 and therefore did not mention the judicial administrator's letter of 20 April 2005. These reports, essentially the report of Dr Piperea with which Dr Stanescu agreed, were to the effect that, by virtue of various provisions of Romanian law, Lyndales could not have been validly retained by the judicial administrator, Mr Ion Constantine. At this period, again prior to 20 April 2005, Angel also served a witness statement dated 11 April 2005 of a third Romanian lawyer, Dr Dobrescu, intended to support the report of Dr Piperea and also to annex evidence that the judicial administrator had been visited by Dr Dobrescu and by representatives of Dean & Dean on 23 March and/or 4 April 2004, and had confirmed to them that he did not know of Lyndales and had not instructed them.
6. However, no such case was subsequently advanced by Dean & Dean in their points of dispute in respect of the period after 20 April 2005. Moreover, their acceptance of Lyndales' retainer by the judicial administrator as from 20 April 2005 was inconsistent with reliance on the matters of Romanian law referred in the report of Dr Piperea.
7. On or shortly after 3 May 2005, Angel served a report of Dr Sabau, another Romanian lawyer, to the effect that an existing retainer would remain following liquidation until revoked by the judicial administrator. In any event, the continuance of the English proceedings had been recognised not only by the judicial administrator but also by a creditors' meeting and an order of the Romanian court in February 2005.
8. On 10 May 2005, ie before the points of dispute were served in November 2005, Dean & Dean sought to strike out the London proceedings for the assessment of their Bill of Costs on the basis of Angel's Romanian liquidation and the argument that Lyndales were no longer retained by the judicial administrator. HHJ Seymour QC declined to do so. In his judgment he said:

"Bearing in mind the nature of the issues the hotly [contested] questions of Romanian law which seemed to arise and the allegations of lack of good faith it seems to me that it is very appropriate and important that if any claim is hereafter to be pursued against Lyndales it be pursued by means of proceedings in which the allegations to be made against Lyndales are clearly formulated and Lyndales have a proper opportunity to answer them formally in the defence."

He therefore dismissed the application and did not, as invited by Dean & Dean, merely adjourn it.

9. It is against the background of that judicial ruling that ultimately Dean & Dean came to draft their points of dispute in the limited terms set out above. That is a fortiori why those points of dispute are to be read as not invoking Romanian law or as putting into issue anything beyond the period between 30 September 2004 and 20 April 2005.
10. On 16 January 2006 the parties came before Master Seager Berry to debate four preliminary issues which the Master had on 5 December 2005 ordered to be determined. The fourth of those issues was, as recorded in the skeleton argument of Dean & Dean's own counsel, Miss Kennedy-McGregor:

"The status of the retainer of Angel Airlines with Lyndales solicitors between the dates 30 September 2004 and 20 April 2005 following the liquidation of Angel Airlines."

That preliminary issue was premised on the November 2005 points of dispute.

11. In her skeleton argument Miss Kennedy-McGregor sought to go beyond the points of dispute and the defined issue ordered for determination, for instance by referring, albeit very briefly, to:

"a clear legal argument between Romanian experts as to whether Lyndales are now or have ever been properly instructed by the liquidator and indeed what the effect is of the purported instruction by the liquidator of 20 April 2005 as to whether it is valid and as to whether it is retrospective."

However, Miss Kennedy-McGregor did not go further in her skeleton argument than to commend Dean & Dean's "3 expert opinions" as against Angel's "1 opinion".

12. In argument before the Master, Miss Kennedy-McGregor repeatedly acknowledged the judicial administrator's letter of 20 April 2005, and thus the significance of that date, but her main point appears to have been that Angel's disclosure had been inadequate. She made no detailed, barely any, submissions on Romanian law. She concluded by submitting, quite erroneously, that due to lack of disclosure:

"We still have no way of knowing whether Angel Airlines, and we suspect not, have any liability to pay for that period." (emphasis added, referring to the period ending with 20 April 2005).

Miss Kennedy-McGregor continued immediately:

"I would ask you Master now to do one of two things. Either to find, as we say is the position, that Angel Airlines are not obliged to pay Lyndales anything since September 2004, or alternatively to order Lyndales to answer the part 18 requests and to provide the client care letter and their estimate of costs to the liquidator and the liquidator's letter of retainer."

13. Mr Simon Browne, counsel for Angel then and in this court, emphasised to Master Seager Berry the point that Dean & Dean's points of dispute were confined to the period ending on 20 April 2005. As for that period, he emphasised Angel's position that it was sufficient that Lyndales' retainer had not been revoked and that the Romanian court documents indicated that in February 2005 the judicial administrator, the creditors and that court were acknowledging the importance of the continuation of the English proceedings. He said, however, that if it was unreal to ask the Master to decide the dispute between Romanian lawyers, the Master could in any event rely fully on the liquidator's own letter (of 20 April 2005) stating that he was aware and approved of these proceedings.
14. In her reply, Miss Kennedy-McGregor again submitted that:

"There was no authority for anything between 30 September and 20 April".

So she again properly addressed herself to that limited period. She then for the first time raised the question of an amendment to say that, for the reasons given in the expert evidence, there was no authority from the judicial administrator to Lyndales to act at any time to date.

15. Mr Browne submitted that it was far too late to amend. Miss Kennedy-McGregor acknowledged that the new point she wished to amend to make:

"… is going to require expert evidence on Romanian law. Those are my instructions".

16. Finally the matter was left on the basis that there was no immediate application to amend in relation to the period after 20 April 2005. The Master said:

"The short point is this. If there is a need at this very late stage to amend the points of dispute then it must be done on notice in the usual way and a detailed assessment is set for Monday of next week … It lies entirely in the hands of Dean & Dean as to what they wish to do. It is not a matter which can be canvassed here. There is no formal application before me. This is not a case where I can hear an urgent application and deem an application to be before the court on an undertaking to issue and serve."

Miss Kennedy-McGregor expressly agreed.

17. The matter was therefore left on this basis, that the Master would resolve the preliminary issue relating to the period ending on 20 April 2005 before him on the submissions that had been made before him, and that Dean & Dean would consider whether they wished to make any application to amend. If any application to amend was to be made, it had in the circumstances to be made without delay. There was no application to amend.
18. The Master notified his decision on the next day but reserved his judgment. His decision on the fourth preliminary issue was in favour of Angel. His reserved judgment was handed down on 15 February 2006. He gave detailed consideration to all the materials before him, including the reports of the Romanian experts, but he preferred Angel's case. He found as a fact that in the light of the Romanian court's own file documents:

"It is readily apparent that once Lyndales had been appointed their retainer continued in the absence of any discharge by the liquidator … the Romanian court and the liquidator were fully appraised of the position."

19. Following that judgment, there was still no application from Dean & Dean to amend. In the meantime, the detailed assessment of Dean & Dean's costs proceeded. There were hearings on 23, 24 and 25 January; 15, 20 and 21 February; and 3 March 2006. The existence of those hearings only serves to emphasise the point we have already made, that if any application to amend was to be made it had to be made without delay.
20. On 7 March 2006 Dean & Dean applied for permission to appeal from the judgment of Master Seager Berry. Their grounds of appeal and skeleton argument were entirely premised on submissions that the Master's decision was unjust, in that he had proceeded to decide the issue at all "on a summary basis" (ie without hearing witnesses), inter alia because it depended on Romanian law, and that it was a perverse decision in the light of Dean & Dean's Romanian law evidence. There was, Dean & Dean submitted, a compelling need for cross-examination of the Romanian law experts. The appeal was also premised on the retainer issue relating throughout the whole period of the liquidation to date.
21. Holland J considered this application on the papers. He made an order on 28 March 2006. He agreed that there was a compelling reason for an appeal and that such an appeal should be a complete re-hearing; that one possibility was that Lyndales had never been retained by the judicial administrator and that the answer depended in great part on Romanian law. He considered himself "bound" to give permission to appeal.
22. We consider that Holland J was seriously misled by the papers put before him. It may be true that Angel had an opportunity to make written representations to him to avoid that possibility. We consider nevertheless that if Holland J had known what we know or had been taken to the points of dispute, or had known of the discussions concerning amendment of the points of dispute, he would never have given permission to appeal. He would certainly not have ordered a complete re-hearing. Nor in the absence of a transcript of the proceedings before Master Seager Berry was he in any position to know that it was wholly untrue that the Master had acted unjustly or unfairly in deciding the issue at all; a most unfair remark to make about the Master. He had done simply what he had set out to do in ordering a preliminary issue on the fourth point and what he had been left by the parties to do following their submissions on 16 January.
23. As Mr Semken, counsel for Dean & Dean, was subsequently to say to Langstaff J on 8 May 2006:

"[Holland J] envisages that the argument will be much wider than the very small three [sic] month period when frankly I doubt there would have been an appeal at all in respect of that sort of cost."

24. It was not until 16 June 2006 that Dean & Dean put forward in the appeal a draft amendment of their points of dispute. That for the first time relied on Romanian law and extended the issue beyond 20 April 2005 thus:

"… any purported retainer of Messrs Lyndales by the judicial administrator was unlawful and of no effect because the judicial administrator did not have the authority of the creditors' assembly and/or of the syndic judge to retain Messrs Lyndales or to continue those proceedings on behalf of the claimant … Such purported authority even if given by the judicial administrator was in the premises of no effect. Accordingly … the defendant is not liable for costs … from 30 September 2004."

25. That application for amendment came before Treacy J on 17 July 2006. He granted it after very brief argument. Mr Bishop, standing in for Mr Browne on behalf of Angel, sought to tell the judge on instructions, and in the absence of a transcript of the hearing before Master Seager Berry, that Dean & Dean had been given the opportunity to amend before but had not taken it; but those submissions were, again on instructions, repudiated by Mr Semken who, like Mr Bishop, had not been present on 16 January 2006. Treacy J declined in the absence of a transcript to entertain the conflicting accounts submitted before him and gave leave for the amendment. He recognised that it would be "to expand the area of argument". But he could not possibly have known by reference to the whole history of these proceedings how great that expansion would be, and how unfair it would be to burden Angel at this late stage with such an expansion when Dean & Dean had, in our opinion, deliberately drafted their points for dispute in their original narrow terms despite the warnings of HHJ Seymour QC before and long maintained them despite the warnings of Master Seager Berry after.
26. Treacy J, despite widening the area of dispute so greatly without realising it, also refused Angel permission to obtain a second expert opinion on Romanian law in addition to that of Dr Sabau or to substitute that second Romanian lawyer for Dr Sabau if Angel were to be limited to only one expert witness. As we now understand the position, such a direction refusing Angel's applications would have been gravely unjust. It would have left Dean & Dean in a position to call three Romanian lawyers against Angel's one. Dr Sabau had been criticised in the meantime, justly or unjustly we know not, by Dean & Dean as being insufficiently independent and insufficiently senior. It may be true that Mr Bishop was unable to call up from the resources of his knowledge of the case, and was not instructed to inform the judge, that a possible reason for preferring a new expert witness to Dr Sabau was to be found in the very criticisms which had been levelled at Dr Sabau by Dean & Dean in the meantime. However, we now know better.
27. We allow Angel's appeal in respect of both rulings of Treacy J. Our decision in respect of the amendment probably in any event makes unnecessary any reference to Romanian law, other than might possibly be necessary to present the Romanian court papers to the English court or to deal with Angel's point that existing contracts continue until revoked. But that would, in any event, not extend to any issue as to the judicial administrator's authority under Romanian law to continue or initiate Lyndales' retainer.
28. As it is, we consider that Holland J was misled and if we have power, we would revoke his grant of permission to appeal. We consider that the existing appeal as obtained by Dean & Dean from Holland J, and, subject to our decision herein, as directed by Treacy J, is contrary to the interests of justice. A short preliminary point ordered in respect of a very limited issue in the points of dispute with very limited financial consequences (compared to the overall dispute between the parties) of some £20,000 or so, in respect of which as Mr Semken said before Langstaff J there would be no need for any appeal at all, which was argued succinctly before Master Seager Berry and in respect of which he delivered a careful reserved judgment which went well beyond the requirements of the brief submissions put before him, has now grown into an appeal by way of rehearing with numerous witnesses of fact and law, many of whom come from abroad, listed for four days, in respect of which Dean & Dean have within the last few days served ten bundles of documents (unagreed).
29. The question is whether we do have power to revoke that grant of permission to appeal. We have been taken by Mr Browne to CPR 52.9, which plainly grants to an appeal court -- for present purposes that would be the High Court as represented by Gloster J this week -- to strike out the whole or part of an appeal notice or to set aside permission to appeal in whole or in part, et cetera. Those would be the powers of the High Court.
30. However in relation to the current appeal, this court has all the powers of the lower court (see CPR 52.10), including powers to affirm, set aside or vary any order or judgment made or given by the lower court.
31. Mr Browne submits that this court, having heard full argument and having given an opportunity to Mr Semken to deal with this point of revocation, which it is fair to say only arose during the hearing of this appeal itself, should bite the bullet itself and should not leave over to another judge, viz Gloster J, to go through the whole process of argument again. He submits that we have power both under CPR 52.10 and under the inherent jurisdiction of the court to remedy the situation.
32. Mr Semken on the other hand submits that it is unfair for the point to emerge during these appeal proceedings in the way that it has, that Angel had every opportunity by written submissions to Holland J, either before his order of 28 March or indeed after his order had been served upon Angel, to make submissions asking him to reject the application for permission to appeal before his order or to reconsider the matter after his order. However, Angel had not taken those opportunities.
33. Mr Semken also submits that it would be preferable for this issue to be left to Gloster J to consider later this week in the light of a reconsideration of all the matters that have been put before us yesterday and today, including consideration of other aspects of this beanstalk litigation, such as an appeal for which permission has been granted by Penry Davey J in respect of a second bill of costs, now assessed, with its own points of dispute of July 2006 which, coming as they did at that date, have been drafted in terms of the retainer dispute in much wider terms.
34. However we consider that, having heard the full argument that we have had the benefit of on these two days, we should bite the bullet ourselves. It would be entirely unsatisfactory for the matter to be reargued before Gloster J, particularly as she would in any event have to consider those submissions in the light of our remarks in this judgment.
35. As for other matters, such as the appeal for which Penry Davey J has given permission, those matters will have to take their own course. It is, we consider, important for us in relation to the injustice of the appeal which we are in the process of revoking permission for that there be a clearing of the ground. Therefore we do revoke Holland J's grant of permission to appeal. It follows that, in any event, even if we had not considered that the directions of Treacy J would have to be overruled by us on this appeal, it transpires that there no longer exists any appeal from the judgment of Master Seager Berry in which such directions could have been sought.
36. For these reasons we allow this appeal and also revoke the permission for appeal granted by Holland J. We will deal with any consequential orders such as relating to costs as may now be necessary.
(discussion between counsel and judges)
37. LORD JUSTICE RIX: Our decision on the issue of costs is that Angel should have its costs of this appeal and of the hearing before Treacy J, and also of the proceedings before Holland J, of and occasioned by them. As to the question of the money in court, we take the view that we should not, on the information available to us today, make any order. We consider it of importance that the matter is resolved at the earliest possible opportunity given what we have been told about by both counsel, and it may be that the appropriate venue for that will be the judge who is in charge of the appeal as to the second bill of costs. I think that is about the best we can say.

Order: Appeal allowed.