England and Wales Court of Protection Decisions

IN THE COURT OF PROTECTION

		Royal Courts of Justice Strand, London, WC2A 2LL
		07/10/2011

Mr Justice Henderson:

Introduction

1. This is my judgment on an application to show cause why the respondent solicitors, Hunters, should not pay the costs allegedly wasted after 8 December 2009 on an application which I heard in the Court of Protection. The applicants, Ms Ragny Sharma and her solicitor Mr Paul Judkins, are the executors of her late father, Mr Hari Ram Sharma ("Mr Sharma"), who died on 12 December 2010. Mr Sharma was a patient of the Court of Protection, and since her appointment by an order of the court dated 9 October 2007, after a contested hearing, Ragny Sharma had been his deputy.
2. In 2005, after he had suffered a stroke, Mr Sharma formed a close friendship with Mrs Jane Duke, a legal secretary employed by his then solicitors. She began to visit him regularly, and took on the role of his primary carer. Over a period of time, between January 2006 and March 2007, he gave her very substantial sums of money amounting in total to just under £550,000. He also executed an enduring power of attorney in her favour, and made her the residuary beneficiary under his will.
3. Mr Sharma had two daughters, from whom he had been estranged for a number of years, but in 2007 Ragny Sharma made renewed contact with her father. When she discovered what had happened, she applied in the Court of Protection to be appointed his receiver, and it was pursuant to this application that she was appointed his deputy on 9 October 2007, with power "to make decisions on behalf of [Mr Sharma] that he [was] unable to make for himself in relation to his property and affairs". She was appointed as his deputy, rather than his receiver, because the relevant provisions of the Mental Capacity Act 2005 had by then come fully into force. At the same time, Mrs Duke's power of attorney was revoked by the court.
4. In January 2008 Ragny Sharma applied for an order preventing Mrs Duke from contacting Mr Sharma, and she retained Mr Judkins' firm, Judkins Solicitors, to act on her behalf. Mrs Duke had previously instructed other solicitors, but at this stage she retained Hunters. On 1 April 2008 Hunters sent instructions to Professor Howard, a very eminent psychiatrist, and on 8 April he produced a report (his first) dealing with Mr Sharma's capacity to make a will, to make the gifts which he had made to Mrs Duke, and to choose his visitors. He concluded that Mr Sharma had the requisite capacity for all these purposes. Ragny Sharma eventually withdrew her application in respect of Mrs Duke's contact with her father, and since it was by now common ground between her and Mrs Duke that Mr Sharma had testamentary capacity, on 13 April 2008 he executed a new will which appointed his daughters as his residuary beneficiaries. This is the will of which Ragny Sharma and Mr Judkins are now the executors.
5. On 27 January 2009 Ragny Sharma began proceedings in the Chancery Division on behalf of her father against Mrs Duke, seeking the return of his gifts to her on the basis that they had been made under Mrs Duke's undue influence ("the Chancery Proceedings"). The particulars of claim were settled by counsel who has at all material times appeared for Ragny Sharma, Mr Paul Marshall, and they set out a strong prima facie case for Mrs Duke to answer. However, Mr Sharma was unhappy that these proceedings were being brought on his behalf. His clearly and forcefully expressed wishes, which he maintained until his death, were that Mrs Duke should retain the money which he had given her, and he strongly opposed the taking of legal proceedings in his name to recover them. Since Mr Sharma was agreed to have had full testamentary capacity less than nine months earlier, his objections clearly had to be taken seriously. Accordingly, on 6 July 2009 Mrs Duke made an application in the Court of Protection proceedings for determination of the question whether Mr Sharma had the requisite capacity to make decisions about the continuance, compromise or discontinuance of the Chancery Proceedings. This is the application which I eventually heard and determined, and in respect of which the wasted costs application now before me is made.
6. A full account of the background to this sad and difficult case, and of the progress of the application, including the proliferation of expert evidence to which it gave rise, may be found in the lengthy reserved judgment which I handed down on 4 October 2010, following a three day hearing in July of that year. Since Mr Sharma was then still alive, the names of the parties were replaced by initials in the judgment, and it is in the public domain as the case of D v R (the Deputy of S) and S [2010] EWHC 2405 (CoP). "S" is of course Mr Sharma, "R" is Ragny Sharma, and "D" is Mrs Duke. For the reasons given in the judgment, I concluded that Mr Sharma lacked capacity to make the decision whether or not to continue or settle the Chancery Proceedings, because in terms of section 3(1) of the 2005 Act he was unable (a) to understand the information relevant to the decision, (b) to retain that information, or (c) to use or weigh the information as part of the process of making the decision.
7. In the light of that decision, I then had to decide how the substantial costs of the application should be borne. The general rule, embodied in rule 156 of the Court of Protection Rules 2007, is that the costs of proceedings concerning the property and affairs of a patient – which these proceedings undoubtedly were – should be paid by the patient or charged to his estate. This was the rule that counsel for Mrs Duke, Mr Ulick Staunton, asked me to apply. However, rule 159 enables the court to depart from the general rule "if the circumstances so justify", and in deciding whether to do so the court is required to "have regard to all the circumstances", including the "conduct of the parties" (elaborated upon in paragraph (2) of rule 159) and "whether a party has succeeded on part of his case". Relying on this rule, Mr Marshall submitted on behalf of Ragny Sharma that Mrs Duke should be ordered to pay all the costs of the application, and should do so on the indemnity basis. I heard detailed argument on these rival submissions on 4 October 2010, after I had handed down the main judgment, and in a further extempore judgment I decided that the general rule should apply down to and including a hearing which took place before me on 8 December 2009, but that Mrs Duke should bear all of her own costs from 9 December 2009 onwards and should also pay 75% of the costs of the Deputy for the same period, on the standard basis. The neutral citation number of the costs judgment is [2010] EWHC 3748 (CoP).
8. My reasons for departing from the general rule after 9 December 2009 are very material to the wasted costs application, and I will therefore set out what I said in paragraphs 28 to 35 of the costs judgment:

"28. Thereafter, however, matters seem to me to take on a rather different complexion. I have set out in the judgment some of my criticisms of the procedural, I might almost call it the unilateral, declaration of independence on the part of [Mrs Duke] and her instructing solicitors, whereby, without returning to the court, they decided not to put any questions to Dr Barker, which had been what I envisaged when I made my order in December, but instead arranged for two further interviews between Professor Howard and [Mr Sharma] to take place, one in January and one in March, which led to the third and the fourth reports by him, and then also to the instruction of Professor Beaumont on behalf of the Deputy. The reason why Professor Beaumont had to be instructed was that Professor Howard's further reports, although not the subject of any prior authorisation, were plainly highly material. They could not simply be ignored, and fairness required that an equivalent opportunity should be afforded to the Deputy to obtain advice from an expert of equivalent standing to Professor Howard. That in due course was done, but it had the unfortunate result of leading to a proliferation of expert evidence, which was not what I originally envisaged and made the case a good deal more complicated than it need have been.

29. A further problem, or group of problems, is that Professor Howard's own instructions were deficient in a number of respects and he, himself, failed to comply with a number of elementary requirements, making it clear precisely what he had read and what he had been told. These unfortunately cannot be brushed aside as mere technicalities, because they go to the very heart of the issue which I had to decide. Mr. Marshall submits, with considerable force, that in view of those deficiencies Professor Howard was never actually in a position to put to [Mr Sharma] the precise issue on which he needed to express an opinion. What is more, Professor Howard was not aware even of something as elementary as the contents of the statements of case until he gave evidence in the witness box. The result, as I said in my judgment, is that his reports give the appearance of being considerably more solidly based than, in fact, they are. This only became apparent at the hearing and in the course of cross-examination.

30. Responsibility for those deficiencies must lie with [Mrs Duke] and her advisers, and although I am not concerned at the moment to pinpoint precisely where it must lie, it is certainly not something that can be laid at the door of the Deputy.

31. The result, in my view, is that the ultimate hearing was substantially longer and more complicated than it should have been. I consider that, in deciding to prosecute the matter in this way after the directions that I had given in December, [Mrs Duke] must, to a considerable extent, be regarded as having continued at her own risk. It seems to me that at this stage her own very strong personal interest in the matter begins to assume a preponderance in the overall picture which it did not have earlier on.

32. Nevertheless, it is still right to recognise that the case was on any view a difficult one. I did not make up my own mind about the right answer until I had reviewed all the evidence in the course of writing my judgment. It is equally clear that even as recently as March of this year, when Professor Howard had his last interview and made his fourth report, [Mr Sharma's] views about the matter remained as clear and forceful as they had always been. In my view a court hearing was probably always going to be necessary to resolve the matter, bearing in mind [Mr Sharma's] admitted testamentary capacity in 2008, the eminence of Professor Howard, and the clear nature of the conclusions which he reached. It is true that those conclusions were partly based on the flawed and unsatisfactory nature of some of the material placed before him, but nevertheless his clinical judgment still deserves the greatest respect, and it was only after some hesitation and considerable reflection that I thought it appropriate to disagree with his assessment.

33. At the end of the day, I have a balancing exercise to perform. I think it would be wrong to say that [Mrs Duke] should continue to have all of her costs out of the estate since last December. On the contrary, I think she was then substantially proceeding at her own risk; but I bear in mind that the matter did still need resolution, and I think that a contested hearing with cross-examination was probably unavoidable, although it should have been a shorter and more focused hearing with a good deal less expert evidence involved.

34. In the circumstances, I think the right order is that [Mrs Duke] should bear all of her own costs from December 2009 onwards (the cut off date should be after the hearing before me on the 8^th) and that she should also pay 75% of the costs of the Deputy for the same period. I do not think it appropriate to order costs on the indemnity basis, despite the criticisms which I have made of Professor Howard's report. I am not satisfied that this case is sufficiently abnormal to justify that further degree of penalty, and the fact that I have departed to a substantial extent from the general rule is in my judgment a sufficient penalty so far as [Mrs Duke] is concerned.

35. Accordingly, the order I propose to make is that the general rule should apply down to and including the hearing on 8 December last year. Thereafter [Mrs Duke] should bear all of her own costs and should pay 75% of the Deputy's costs on the standard basis."

9. As part of my order on 4 October 2010, I ordered Mrs Duke to make an interim payment on account of costs in the sum of £30,000 by 1 November 2010. On 7 October Hunters wrote to Judkins Solicitors saying that Mrs Duke was unable to pay the interim costs order, because she had no savings and her only resources consisted of two properties, in one of which she was living with her young son. This letter was written in the context of negotiations for a settlement of the Chancery Proceedings, which eventually bore fruit in a Tomlin Order dated 1 November 2010 which I approved at a hearing on that date on behalf of Mr Sharma. It was ordered in the usual way that Mr Sharma's claims against Mrs Duke should be stayed, save for the purpose of enforcing the scheduled terms of settlement, for which purpose the parties had liberty to apply; and it was also expressly provided that there should be "no order as to costs". The scheduled terms provided for Mrs Duke's two properties to be sold and the net proceeds to be paid to Judkins Solicitors in partial satisfaction of the claim, apart from the sum of £30,100 which was to be paid to Mrs Duke. The terms also provided for Mrs Duke to assign to the Deputy all her causes of action, rights and claims against her former solicitors, and to give such assistance as the Deputy might reasonably require in pursuing such claims. In the event of the claims ever yielding a sum in excess of the full value of the amount claimed in the Chancery Proceedings with interest at a specified rate, it was provided that the balance should be payable to Mrs Duke.
10. This order ("the Consent Order") brought the Chancery Proceedings to an end, save for the purpose of enforcing the terms of settlement. Further, although the Consent Order did not in terms deal with the costs of the application upon which I had ruled in October, Mr Marshall did not dispute that the Consent Order also embraced Mrs Duke's liability under the costs order which I had made on 4 October, including the order for an interim payment of £30,000. The intention on both sides was that the £30,100 payable to Mrs Duke under the Consent Order would be hers to keep, and nobody envisaged that it would immediately pass back to the Deputy in satisfaction of the interim payment order, or that a detailed assessment of the costs of the application would ever proceed. It follows that once the Consent Order had been made and approved on Mr Sharma's behalf, the Deputy (or after Mr Sharma's death, his executors) could no longer seek to recover any costs, either of the Chancery Proceedings or of the application, from Mrs Duke, because the right to recover such costs was one of the matters which had been compromised on the agreed terms, and Mrs Duke's liability (actual or prospective) to pay them was replaced by the obligations which she undertook under the Consent Order.
11. On 19 November 2010 Judkins Solicitors wrote to Hunters, intimating their intention to apply in due course for a wasted costs order against Hunters in respect of the costs of the application after 8 December 2009. The outline grounds for the application were that Hunters had allegedly acted unreasonably or negligently:

a) in seeking to circumvent the directions relating to expert evidence which I had given on 8 December 2009 and 25 January 2010, and by making arrangements for Professor Howard to see Mr Sharma again in the face of objections from the Deputy;

b) in their repeated failure to give adequate instructions to Professor Howard;

c) in their failure to provide Professor Howard with the statements of case in the Chancery Proceedings; and

d) in their failure to provide Professor Howard with all the information that it was necessary for Mr Sharma to weigh and evaluate in determining whether the Chancery Proceedings should be continued.

The consequence of these failures was said to be that Mr Sharma's estate incurred substantial expense in considering and meeting the further reports of Professor Howard after 8 December 2009. That expense was avoidable, and a direct consequence of the negligent or unreasonable conduct of the application by Hunters on behalf of Mrs Duke. Hunters should therefore bear the entirety of the costs incurred by the estate after 8 December 2009.

12. Some three weeks later, on 12 December 2010, Mr Sharma died. The wasted costs application presaged in the letter of 19 November 2010 was not in fact prepared until the middle of March 2011 (the application form and Mr Judkins' witness statement in support are both dated 14 March 2011), and appears not to have been formally issued until the end of the month, or even later.
13. The solicitor at Hunters who had conduct of the matter on Mrs Duke's behalf was Mr Richard O'Halloran, and on 24 June 2011 he made a witness statement in answer to the application. In his evidence he recorded that Hunters had written to Mrs Duke on 1 April 2011 to explain her rights in respect of legal professional privilege, but had received no response to the letter. It follows that legal professional privilege (which is of course vested in the client, not the lawyer) has not been waived, and Mr O'Halloran has been unable to disclose any privileged information to the court. The significance of this point, as I will explain, is that only in the most exceptional circumstances can a wasted costs order properly be made against the lawyers acting for an opposing party in circumstances where there has been no waiver of privilege.

Guiding principles

14. The procedure for making wasted costs orders in the Court of Protection is in practice the same as in the High Court, subject to such modifications as may be appropriate. This follows from rule 160(1) of the Court of Protection Rules, which applies the rules about costs in the CPR to costs incurred in the Court of Protection with the modifications in rule 160 (none of which is material) "and such other modifications as may be appropriate". In the High Court, the basic jurisdiction to make such orders is conferred by section 51(6) of the Senior Courts Act 1981, which provides that:

"… 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."

Section 51(7) goes on to provide that "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; or

(b) which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay."

By virtue of subsection (13), "legal or other representative" means any person exercising a right of audience or right to conduct litigation on the relevant party's behalf.

15. The relevant rules of court are contained in CPR 48.7 and paragraph 53 of the Costs Practice Direction (itself applicable in the Court of Protection by virtue of Practice Direction A supplementing Part 19 of the Court of Protection Rules). The following provisions in paragraph 53 are of particular relevance:

"53.1 Rule 48.7 deals with wasted costs orders against legal representatives. Such orders can be made at any stage in the proceedings up to and including the proceedings relating to the detailed assessment of costs. In general, applications for wasted costs are best left until after the end of the trial.

…

53.4 It is appropriate for the court to make a wasted costs order against a legal representative, only if –

(1) the legal representative has acted improperly, unreasonably or negligently;

(2) his conduct has caused a party to incur unnecessary costs, and

(3) it is just in all the circumstances to order him to compensate that party for the whole or part of those costs.

53.5 The court will give directions about the procedure that will be followed in each case in order to ensure that the issues are dealt with in a way which is fair and as simple and summary as the circumstances permit.

53.6 As a general rule the court will consider whether to make a wasted costs order in two stages –

(1) in the first stage, the court must be satisfied –

(a) that it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and

(b) the wasted costs proceedings are justified notwithstanding the likely costs involved.

(2) At the second stage (even if the court is satisfied under paragraph (1)) the court will consider, after giving the legal representative an opportunity to give reasons why the court should not make a wasted costs order, whether it is appropriate to make a wasted costs order in accordance with paragraph 53.4 above.

…

53.8 On an application for a wasted costs order under Part 23 the application notice and any evidence in support must identify –

(1) what the legal representative is alleged to have done or failed to do; and

(2) the costs that he may be ordered to pay or which are sought against him."

16. The meaning of the words "improper, unreasonable or negligent" in the definition of wasted costs in section 51(7) of the Senior Courts Act 1981 was considered by the Court of Appeal, presided over by Sir Thomas Bingham MR, in Ridehalgh v Horsefield [1994] Ch 205 at 232C – 233E. In summary, the Court held that "improper" covers "any significant breach of a substantial duty imposed by a relevant code of professional conduct", and extends to any conduct "which would be regarded as improper according to the consensus of professional (including judicial) opinion … whether or not it violates the letter of a professional code"; that "unreasonable" denotes conduct which is vexatious and designed to harass the other side rather than advance the resolution of the case, the acid test being "whether the conduct permits of a reasonable explanation"; and "negligent" does not necessarily involve an actionable breach of the legal representative's duty to his own client, but "should be understood in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession". The Court added, at 233C, that in adopting an untechnical approach to the meaning of negligence in this context, it wished "firmly to discountenance any suggestion that an applicant for a wasted costs order under this head need prove anything less than he would have to prove in an action for negligence". The Court also observed that the three adjectives (improper, unreasonable and negligent) could overlap, and that it was neither useful nor necessary to differentiate sharply between them.
17. The Court of Appeal in Ridehalgh v Horsefield also considered, among other matters, the question of privilege where an applicant seeks a wasted costs order against the lawyers on the other side. After pointing out that it is the client's privilege, which he alone can waive, the Court said this at 237B:

"The respondent lawyers are in a different position. The privilege is not theirs to waive. In the usual case where a waiver would not benefit their client they will be slow to advise the client to waive his privilege, and they may well feel bound to advise that the client should take independent advice before doing so. The client may be unwilling to do that, and may be unwilling to waive if he does. So the respondent lawyers may find themselves at a grave disadvantage in defending their conduct of proceedings, unable to reveal what advice and warnings they gave, what instructions they received. In some cases this potential source of injustice may be mitigated by reference to the taxing master, where different rules apply, but only in a small minority of cases can this be procedure be appropriate. Judges who are invited to make or contemplate making a wasted costs order must make full allowance for the inability of respondent lawyers to tell the whole story. Where there is room for doubt, the respondent lawyers are entitled to the benefit of it. It is again only when, with all allowances made, a lawyer's conduct of proceedings is quite plainly unjustifiable that it can be appropriate to make a wasted costs order."

18. The House of Lords, presided over by Lord Bingham of Cornhill as he had by then become, returned to this theme in the leading modern authority on the subject, Medcalf v Mardell [2002] UKHL 27, [2003] 1 AC 120. In paragraph 23 of his speech Lord Bingham quoted the passage which I have set out from Ridehalgh v Horsefield and continued, in a passage which I need to cite at length:

"I do not for my part consider this passage to be inaccurate or misleading, and counsel did not criticise it. Read literally and applied with extreme care, it ought to offer appropriate protection to a practitioner against whom a wasted costs order is sought in these circumstances. But with the benefit of experience over the intervening years it seems clear that the passage should be strengthened by emphasising two matters in particular. First, in a situation in which the practitioner is of necessity precluded (in the absence of a waiver by the client) from giving his account of the instructions he received and the material before him at the time of settling the impugned document, the court must be very slow to conclude that a practitioner could have had no sufficient material. Speculation is one thing, the drawing of inferences sufficiently strong to support others potentially very damaging to the practitioner concerned is another. The point was well put by Mr George Laurence QC sitting as a deputy High Court judge in Drums and Packaging Limited v Freeman (unreported) 6 August 1999 when he said, at para 43:

"As it happens, privilege having been waived, the whole story has been told. I cannot help wondering whether I would have arrived at the same conclusion had privilege not been waived. It would not have been particularly easy, in that event, to make the necessary full allowance for the firm's inability to tell the whole story. On the facts known to D3 at the time it launched this application, D3 might very well have concluded that the firm would not be able to avoid a wasted costs order, even on the "every allowance" basis recommended by Sir Thomas Bingham MR."

Only rarely will the court be able to make "full allowance" for the inability of the practitioner to tell the whole story or to conclude that there is no room for doubt in a situation in which, of necessity, the court is deprived of access to the full facts on which, in the ordinary way, any sound judicial decision must be based. The second qualification is no less important. The court should not make an order against a practitioner precluded by legal professional privilege from advancing his full answer to the complaint made against him without satisfying itself that it is in all the circumstances fair to do so. This reflects the old rule, applicable in civil and criminal proceedings alike, that a party should not be condemned without an adequate opportunity to be heard. Even if the court were able properly to be sure that the practitioner could have no answer to the substantive complaint, it could not fairly make an order unless satisfied that nothing could be said to influence the exercise of its discretion. Only exceptionally could these exacting conditions be satisfied. Where a wasted costs order is sought against a practitioner precluded by legal professional privilege from giving his full answer to the application, the court should not make an order unless, proceeding with extreme care, it is (a) satisfied that there is nothing the practitioner could say, if unconstrained, to resist the order and (b) that it is in all the circumstances fair to make the order.

24. It was not submitted to the House that a relaxation of the existing rules on legal professional privilege could or should be permitted in a case such as the present … The result no doubt is that in a context such as the present the scope for making wasted costs orders is very limited. This is not necessarily to be regretted. In Ridehalgh v Horsefield … the Court of Appeal considered that wasted costs hearings should be measured in hours and urged the courts to be astute to control what threatened to become a new and costly form of satellite litigation. In Harley v McDonald [2001] 2 AC 678, reviewing the exercise by the New Zealand courts of the inherent jurisdiction to order barristers and solicitors to pay costs unnecessarily incurred, the Judicial Committee of the Privy Council observed, at p703, para 50:

"As a general rule allegations of breach of duty relating to the conduct of the case by a barrister or solicitor with a view to the making of a costs order should be confined strictly to questions which are apt for summary disposal by the court. Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples. The factual basis for the exercise of the jurisdiction in such circumstances is likely to be found in facts which are within judicial knowledge because the relevant events took place in court or are facts that can easily be verified. Wasting the time of the court or an abuse of its processes which results in excessive or unnecessary costs to litigants can thus be dealt with summarily on agreed facts or after a brief enquiry if the facts are not all agreed."

Save in the clearest case, applications against the lawyers acting for an opposing party are unlikely to be apt for summary determination, since any hearing to investigate the conduct of a complex action is itself likely to be expensive and time-consuming. The desirability of compensating litigating parties who have been put to unnecessary expense by the unjustified conduct of their opponents lawyers is, without doubt, an important public interest, but it is, as the Court of Appeal pointed out in Ridehalgh v Horsefield, at p226, only one of the public interests which have to be considered."

19. The other members of the Court (Lord Steyn, Lord Hoffmann, Lord Hobhouse and Lord Rodger) all agreed with the guidance given by Lord Bingham in these paragraphs. Lord Hobhouse also emphasised (at paragraphs 51 and following) the constitutional position of professional advocates, and the need to construe and apply the relevant provisions of section 51 accordingly. In paragraph 61 of his speech, dealing with legal professional privilege, he quoted the same passage from Ridehalgh v Horsefield as Lord Bingham had done, and continued:

"The answer given therefore was not to treat the existence of privileged material as an absolute bar to any claim by an opposite party for a wasted costs order but to require the court to take into account the possibility of the existence of such material and to give the lawyers the benefit of every reasonably conceivable doubt that it might raise. So, all that the lawyer has to do is to raise a doubt in the mind of the court whether there might not be privileged material which could affect its decision whether or not to make a wasted costs order and, if so, in what terms and the court must give the lawyer the benefit of that doubt in reaching its decision, including the exercise of its statutory discretion. I see nothing unfair about this approach."

20. The passages which I have cited from Medcalf v Mardell could hardly make it more clear that it is only in extremely rare cases that a wasted costs order should be made against a legal representative who is prevented by legal professional privilege from giving his full answer to the application. The court should make an order only if, proceeding "with extreme care", it is satisfied that there is nothing (my emphasis) the practitioner could say to resist the order, had privileged been waived, and, in addition, that it is in all the circumstances fair to make the order. As Lord Hobhouse put it, the lawyer must be given the benefit of every reasonably conceivable doubt that might be raised by privileged material which might possibly exist. The House also emphasised the need to prevent the jurisdiction from generating "a new and costly form of satellite litigation", and the need for an application against the lawyers acting for an opposing party to be apt for summary determination at a hearing the length of which should be measured in hours rather than days.

The complaints against Hunters

21. The complaints against Hunters, as articulated in Mr Judkins' statement and amplified in Mr Marshall's skeleton argument, are essentially twofold.
22. The first complaint is that Hunters (a) decided to disregard the court's orders of 8 December 2009 and 25 January 2010 by instructing Professor Howard to undertake further unauthorised examinations of Mr Sharma, and then (b), on the basis of those further examinations, presented to the court as a fait accompli the third and fourth reports of Professor Howard at the hearing on 31 March 2010.
23. The second complaint is that Hunters failed to provide Professor Howard with the statements of case that set out the issues in the Chancery Proceedings, or with other material reasonably sufficient to enable him to understand those issues, when the central question in the application was Mr Sharma's capacity to understand those issues and whether the conditions in section 3(1)(a) to (c) of the 2005 Act (that is to say his ability to understand the information relevant to the decision whether or not to continue the proceedings, to retain that information, and to use or weigh that information as part of the decision-making process) were satisfied. The result, it is said, is that Professor Howard was never given the material necessary for him to form a proper expert opinion on the very question which lay at the heart of the application.
24. Some support for each of these complaints can be found in paragraphs 28 to 35 of the costs judgment (quoted in paragraph 8 above), and in my discussion and criticism of some aspects of Professor Howard's evidence in the main judgment: see in particular paragraphs 108 to 119, dealing with Professor Howard's cross-examination, and paragraphs 144 to 147 and 149-150. In particular, I found (paragraph 146) that there was substance in at least some of the severe criticisms of Professor Howard's second report which Mr Marshall had advanced in his closing submissions; and in paragraph 147, I referred to the unsatisfactory way in which Professor Howard's third and fourth reports had been produced, apparently on the basis of oral instructions given at conferences with counsel, and without prior authority from the court. The overall result, I said, was that I had been obliged to treat Professor Howard's evidence with "considerably more reserve than would normally be the case", although I added that I did not question his personal integrity or good faith in any way, I fully accepted the accuracy of his record of what Mr Sharma had said to him during their interviews, and I had the greatest respect for his skill and experience as a clinical psychiatrist. It was precisely for those reasons, I said, that I found it a difficult and worrying case to resolve.
25. Mr Marshall referred me to the provisions relating to experts in Part 15 of the Court of Protection Rules, which largely mirror the provisions of CPR Part 35. In particular, he relied on rule 121, which states that "Expert evidence shall be restricted to that which is reasonably required to resolve the proceedings", and on rule 123(1), which provides (subject to an immaterial exception) that "no party may file or adduce expert evidence unless the court or a practice direction permits". Mr Marshall submitted that the directions given by the court in October and December 2009 laid down a proportionate and carefully crafted scheme for obtaining the expert evidence that the court would need, and that when Professor Howard found he could not usefully put written questions to the court-appointed special visitor, Dr Barker, matters should then have proceeded in accordance with the written directions which I gave in January 2010, requiring Professor Howard and Dr Barker to meet to discuss Mr Sharma's capacity and then to file a joint statement identifying the areas of agreement and disagreement between them. Unless Professor Howard and Dr Barker were able to reach agreement, I directed that they should both attend for cross-examination when the application was restored for further hearing, with a provisional time estimate of one and a half days. Had those directions been complied with, says Mr Marshall, the application would have been resolved much more quickly and economically than in fact it was. The result of Hunters' unilateral action in instructing Professor Howard to produce his third and fourth reports was to put the court in a position where it could not realistically disregard them, and fairness then required that the Deputy should be given an opportunity to instruct an expert of comparable standing. It was for these reasons, says Mr Marshall, that he did not oppose the admission in evidence of Professor Howard's third and fourth reports when Mrs Duke's application for permission to instruct a further expert came before the court in March 2010.
26. In his oral submissions to me, Mr Marshall went even further and submitted that, if Professor Howard had been fully and properly instructed from the beginning, and had addressed his mind to the specific decision that Mr Sharma was required to make, he could only have concluded, in agreement with Dr Barker, that Mr Sharma lacked the necessary capacity. On this basis, the case should have been capable of final resolution in December 2009, and responsibility for all the costs incurred thereafter can therefore properly be attributed to Hunters' failure to ensure that Professor Howard was adequately instructed. In support of this submission Mr Marshall fastens on a point to which I attached significance in paragraph 144 of the main judgment, namely the comment made by Professor Howard in re-examination to the effect that Mr Sharma could not hold information in his working memory for longer than a couple of minutes. Since it was common ground that Mr Sharma's semantic memory was severely impaired, with the result that any information which he retained would have to be held in his short-term memory alone, I said that "a period of two minutes at the most cannot possibly be long enough for a proper understanding of all the information relevant to the decision, let alone for an evaluation of the issues in the Chancery Proceedings". Mr Marshall suggested that if Professor Howard had directed his mind to the real issue, he would inevitably have come to the same conclusion as I did, with the result that the statutory test of capacity could not be satisfied in relation to the decision which Mr Sharma had to take.

Preliminary objections

27. I need to deal first with two preliminary objections taken by counsel for Hunters. The first objection is that the present application was made too late, and the court should therefore not entertain it. The second is that the Consent Order anyway precludes the applicants from seeking to recover from Hunters the same costs as those which were included in the compromise.

(1) The timing of the application

28. Paragraph 53.1 of the Costs Practice Direction provides that wasted costs orders can be made "at any stage in the proceedings up to and including the proceedings relating to the detailed assessment of costs". The relevant proceedings for present purposes can only be Mrs Duke's application in the Court of Protection. Those proceedings were determined by my judgment and order of 4 October 2010, but remained in existence for the purpose of implementing and enforcing the orders for costs, namely the order for detailed assessment of 75% of the Deputy's costs and the order for an interim payment of £30,000 by 1 November 2010. Clearly, therefore, the court had jurisdiction to entertain an application for a wasted costs order at any time until the detailed assessment had taken place. However, the position then changed when the Consent Order was made in the Chancery Proceedings on 1 November 2010. As I have already explained, it is common ground that the costs orders made on Mrs Duke's application were included in the compromise. It must follow, in my view, that once the Consent Order had been made, the Deputy could no longer seek to enforce the original costs orders, and no detailed assessment of her costs could ever take place. Her rights to costs under the order of 4 October had been irrevocably replaced by her rights under the Consent Order, and although the Chancery Proceedings were stayed rather than dismissed, they only remained alive for the purpose of enforcing the settlement terms. As for Mrs Duke's application, it seems to me that it must be treated as having come to an end when the Consent Order was made. It was not even in a state of suspended animation, because the only matters still outstanding had been dealt with by the compromise, and the proceedings that were kept alive for the purpose of enforcing the compromise were the Chancery Proceedings, not Mrs Duke's application in the Court of Protection.
29. In these circumstances I can see no answer to Mr Phipps' simple point that the present application was made too late, because the proceedings in which it was made had been finally concluded. The application was not made until late March 2011 (as the earliest), and the letter before action from Judkins Solicitors which gave notice of the Deputy's intention to make the application was dated 19 November 2010, 18 days after the Consent Order had been made. The importance of making a wasted costs application promptly has been stressed in a number of authorities, and in Melchior v Vettivel [2002] C.P.Rep 24, Patten J, while pointing out that section 51(6) of the Senior Courts Act 1981 does not itself lay down any time limit for the making of such an application, said that the question had been addressed by the Rules Committee in paragraph 53 of the Practice Direction:

"Applications for wasted costs orders need not be made, and indeed should not be made normally, during the course of the trial, but can be made at any stage in the proceedings up to and including the detailed assessment of costs. That does, therefore, impose a time limit upon the making of such applications … I entirely follow that some time limits ought to be set to these procedures for the reasons that [counsel] has submitted to me but, as I have indicated, those concerns have been met in the form of the Practice Direction which has been made."

See too the judgment of Neuberger LJ in Gray v Going Places Leisure Travel Limited [2005] EWCA Civ 189, [2005] PNLR 26, at paragraphs 14 to 15.

30. It is true that the argument which Patten J had to consider in Melchior v Vettivel was different from the point now before me. The argument which he rejected was that all aspects of costs, including wasted costs, had to be dealt with as a single exercise, with the result that an application for a wasted costs order could not be made at any time after an order determining the incidence of costs between the parties has been drawn up. Unsurprisingly, he had little difficulty in disposing of that argument, given the express terms of paragraph 53.1 of the Practice Direction and the implausibility of attributing such an inflexible intention to Parliament. Nevertheless, the point remains that, by virtue of section 51(6) of the 1981 Act, wasted costs orders may only be made "in accordance with rules of court"; and the relevant rules and practice direction lay down a time limit for that purpose, the effect of which is that an order can no longer be made once the proceedings in question are at an end.

(2) The Consent Order

31. The second objection, in essence, is that by freely entering into the compromise embodied in the Consent Order the Deputy must be taken to have obtained full satisfaction for the benefit of the costs orders made in her favour on 4 October 2010, with the result that she is now precluded from seeking to recover part of the same costs from a third party, Hunters. Mr Phipps supported this argument by reference to the decision of Sumner J in D v H (Costs) [2008] EWHC 559 (Fam), [2008] 2 FLR 824, where the issue was described by the judge in paragraph 2 of his judgment as follows:

"The appeal concerns less than £2,300 but raises an important point. Where a husband obtains a costs order against his wife and applies also for a wasted costs order against her solicitors in respect of the same costs, can that wasted costs order survive and be enforced against her solicitors when the husband has subsequently waived his costs claims against the wife?"

32. The waiver had taken place in a settlement of the wife's claim for ancillary relief, pursuant to which the husband agreed to pay her £62,000 and also agreed that all previous costs orders made against her in respect of his costs should be set aside, with no order for costs against her. The settlement was embodied in a consent order, and contained no saving for the possibility of a subsequent wasted costs application against the wife's solicitors. Sumner J decided that in these circumstances the husband no longer had any continuing loss in respect of the costs covered by the consent order, which removed the necessary causal link from his claim to recover part of those costs from the wife's solicitors. He reasoned as follows:

"29. A wasted costs application is a punitive remedy to enable a litigant to recover costs not otherwise recoverable caused by a solicitor's improper conduct. Here the costs were otherwise recoverable. He both gave the wife a lump sum and waived his rights to the very costs he subsequently sought to recover from the appellants.

30. He could in all likelihood have safeguarded his claim against the appellants by appropriate wording in the consent order of 8 January 2007. He did not do so. As a result I am not satisfied that the respondent can show that any waste of costs resulted.

31. Furthermore, where the wasted costs application is not protected in the agreement with his wife, there is a risk that the respondent may obtain double recovery. He would be giving credit to the wife for specified costs, and then seeking to recover the same costs from the appellants. This he cannot do without appropriate safeguards in the wording of the agreement with the wife.

32. Whilst the amount of costs claimed is identifiable, there is, therefore, the difficulty for the respondent in showing that he has not already recovered part or all of it from the wife. The fact that it was done by way of a waiver rather than payment does not, in my judgment, alter the situation.

…

34. … The respondent's act in waiving his orders for costs against the wife without ring-fencing his claim for a wasted costs order against the appellants removes the causal link against the appellants. He no longer has a loss to claim – if he does have, then some or all of it has been accounted for, in effect paid, by the waiver."

33. I do not doubt that Sumner J reached the right conclusion on the facts of D v H (Costs). My only quibble is with his description of the wasted costs jurisdiction as "punitive", when the Court of Appeal said in Ridehalgh v Horsefield that the jurisdiction is "compensatory and not merely punitive": see [1994] Ch. at 227E. But is it correct in the present case to regard the Deputy as having received full consideration for the October 2010 costs orders, so as to preclude her from invoking the wasted costs jurisdiction against Hunters in respect of the same costs? Mr Phipps submitted that this is indeed the case. He argued that by entering into the compromise the Deputy gained substantial benefits, which would not have been available to her if the Chancery Proceedings had gone to trial. In particular, she avoided:

a) incurring her own costs of trial, which would in practice have been irrecoverable, if the claim had succeeded, because Mrs Duke would have had insufficient assets to satisfy the judgment, let alone any costs order;

b) the depletion of Mrs Duke's assets, and thus of the amount that could be recovered from her, by her own trial costs; and

c) the further costs she would incur in seeking to enforce a judgment against Mrs Duke, who was a single mother, living with her child in one of the properties.

34. Mr Phipps also pointed out that the Consent Order did not simply strip Mrs Duke of all her assets, but permitted her to retain £30,100 from the proceeds of sale of one property, and any surplus proceeds which might arise following the assignment of her claims against her former solicitors. In these circumstances, says Mr Phipps, it is clear that the Deputy has received substantial consideration for her costs order against Mrs Duke. The precise value of that consideration is not something which the court should attempt to weigh in summary proceedings of the present kind.
35. There is much force in Mr Phipps' contentions, and I have not found this an easy question. In the end, however, I have come to the conclusion that the Consent Order should not be treated as an automatic bar to the wasted costs application. Although the effect of the settlement was to bring the Deputy's costs order against Mrs Duke within the scope of the compromise so far as Mrs Duke herself was concerned, I do not think it would be reasonable or realistic to infer that the Deputy thereby received full value for the costs order, in circumstances where the costs order related to different proceedings from those in which the Consent Order was made, and where in the Chancery Proceedings themselves Mrs Duke's immediately available assets were plainly insufficient to satisfy a judgment against her at trial. I have little doubt that the primary purpose of allowing Mrs Duke to take £30,100 under the compromise was to reflect, albeit to a limited extent, Mr Sharma's strong desire that she should keep the gifts he had made to her. It did not depend on a carefully calibrated assessment of her chances of success in defending the very strong prima facie claim against her. Nor can I regard the possibility of Mrs Duke ever benefiting from a claim brought against her former solicitors as anything but remote in the extreme. In substance, it seems to me, the settlement was indeed one where Mrs Duke was stripped of her assets, subject only to the payment of £30,100 to reflect Mr Sharma's wishes, and to the remote possibility which I have mentioned. Against that background, the inference which I draw is that the parties intended to leave open any recourse that the Deputy might have against third parties for her costs of Mrs Duke's application, and that any issues of double recovery should be addressed if and when they arose, but should not be treated as an immediate bar to any claim against a third party.
36. I should add that I was referred by Mr Marshall to the decision of the Court of Appeal in Wagstaff v Colls [2003] EWCA Civ 469, [2003] CPRep 50, where it was held that a wasted costs application may still be made after the proceedings in question have been settled by a Tomlin order, and that it is not necessary first to lift the stay in order to pursue the wasted costs application. I did not find that case of assistance, however, because the court was not directing its mind to the question which I now have to consider, and which Sumner J had to consider in D v H (Costs), which is whether the effect of the Tomlin order is to deprive the applicant of any loss in respect of the disputed costs which he can still seek to recover from a third party.
37. For these reasons, I conclude that the first of the preliminary objections succeeds, but the second does not. Since I have upheld the first objection, it is strictly unnecessary for me to go on to consider the merits of the application; but in case I am wrong in relation to the first objection I will do so, although (in view of the summary nature of the jurisdiction, and the conclusion which I have already reached) as briefly as I can.

The merits of the application: discussion

(1)Professor Howard's third and fourth reports

38. Mr Phipps submits that the court cannot safely conclude that Hunters acted negligently, unreasonably or improperly in failing to seek the court's permission before instructing Professor Howard to produce his third and fourth reports. He submits that the following considerations need to be taken into account:

(1) The two separate instructions to Professor Howard arose out of conferences on 21 December 2009 and 3 March 2010 which were attended, not only by Hunters, but also by Mr Staunton, Professor Howard and Mrs Duke. Counsel also advised on other occasions as detailed in Mr O'Halloran's statement. Since privilege has not been waived, the court does not know what procedural advice may have been given by Mr Staunton or by Hunters, what views may have been expressed by Professor Howard, or what instructions may have been given by Mrs Duke. Such matters may not determine whether the course which was adopted was appropriate, but might be highly relevant to issues of blameworthiness.

(2) One advantage of obtaining Professor Howard's further reports before approaching the court was, or at least might reasonably have been thought to be, that the court would be much better informed as to the value and significance of the relevant evidence when deciding whether to admit it.

(3) Whether or not it would have been preferable to seek the court's approval before commissioning the third and further reports, there was no formal requirement for the court's permission to be obtained before Professor Howard's visits to Mr Sharma and before he expressed his conclusions. It was over the admission of the evidence thereby collected that the court exercised its formal control.

39. In oral argument, Mr Phipps submitted that Hunters' unilateral action in obtaining these reports was not "a hanging offence", and that it would anyway be unfair to hold that Hunters thereby acted in breach of their duty to the court when the court in fact decided to admit the evidence at the hearing on 31 March 2010. He also pointed out that Mr O'Halloran's immediate response to my order of 8 December 2009 had been to write to Professor Howard in accordance with its terms, and problems arose only when Professor Howard informed Mr O'Halloran by telephone on 16 December that he saw no purpose in preparing a list of questions for Dr Barker. This then led to the conference with counsel on 21 December, when Mr O'Halloran made "a lengthy and detailed note" which he is unable to place before the court. At the further conference with Mr Staunton on 3 March 2010, which was convened at Professor Howard's request after he had sent an email to Mr O'Halloran discussing the five specific issues which Dr Barker had been directed by the court to consider, there was again extensive discussion of the expert evidence and Mr O'Halloran made a detailed note which cannot be disclosed.
40. The combined force of these, and other, points which Mr Phipps developed in his written and oral arguments is in my judgment considerable; and although Mr Marshall had some strong counter-arguments, I find myself wholly unable to conclude that there is nothing Hunters could say, if unconstrained by privilege, to resist the making of a wasted costs order, or that it would in all the circumstances be fair to make one. I also attach considerable weight to the fact that no application was ever made on the Deputy's behalf to exclude Professor Howard's third and fourth reports, and her reaction was rather to seek permission (which was granted) to instruct Professor Beaumont. It seems to me that, having adopted this approach with the approval of the court, the Deputy cannot now plausibly seek to recover as wasted costs from Hunters the additional costs that were incurred. She is trying to have the best of both worlds, having had the great benefit of Professor Beaumont's evidence at trial, while attacking the procedural steps which led to its being obtained in the first place. In any event, for that reason among others I consider that the facts of the present case fall a long way short of satisfying the very stringent test laid down in Medcalf v Mardell.

(2) Professor Howard's instructions

41. The principal complaint under this head is that Professor Howard was never provided by Hunters with the statements of case in the Chancery Proceedings, and he saw them for the first time in the witness box. This was undoubtedly a serious oversight, and one for which Hunters must in my view bear the main responsibility. In my main judgment I also made a number of other criticisms about the nature and quality of the material which Professor Howard apparently had available to him when he produced his first three reports. These criticisms were to a considerable extent based on admissions which Professor Howard himself made under cross-examination. However, Mr Phipps has been able to satisfy me that the position was not in fact as unsatisfactory as Professor Howard, under pressure in the witness box, conceded. For example, he had in fact been provided at an early stage with fairly full details of Mr Sharma's gifts to Mrs Duke and of Mr Sharma's other assets. In addition, it is not in dispute that Hunters sent adequate details to Professor Howard in their email of 4 March 2010, well before the production of his fourth report and his joint statement with Dr Barker, and long before he gave oral evidence in July of that year. Mr Phipps also makes the valid point that many of the more serious criticisms arising out of Professor Howard's cross-examination related to his second report in June 2009, which was prepared in connection with Mrs Duke's application of the same date to the Court of Protection, but which pre-dated by several months the period in respect of which a wasted costs order is sought. More generally, Mr Phipps warned me of the danger of holding Hunters responsible for deficiencies in Professor Howard's evidence, or in his recollection of the material which had been provided to him, when what needs to be demonstrated is a breach by Hunters of their duty to the court.
42. There is a further point which I think it is worth mentioning. In paragraphs 42 to 47 of my main judgment I examined the nature of the decision which Mr Sharma had to make, and concluded that he needed to understand, at least in simple terms, the ingredients of a claim founded on a rebuttable presumption of undue influence. It was only with the benefit of this understanding that he could begin to reach a decision whether or not to pursue, or settle, the Chancery Proceedings. In coming to this conclusion I rejected what I described as a beguiling submission by Mr Staunton, to the effect that all Mr Sharma needed to understand was that he had a good claim to recover the gifts which he had made. If I had accepted that submission, the nature of the decision that Mr Sharma had to make would have been a great deal simpler, and the level of mental capacity needed to make it would have been correspondingly less. In that situation, many of my criticisms of Professor Howard's evidence might have fallen away, or at least been much reduced in their impact, and it is even possible that I would have found Mr Sharma to possess the necessary capacity. Yet for all I know – and this is the important point – the submission which Mr Staunton made to me may have reflected advice which he gave to Hunters and Professor Howard in conference, and may in turn have influenced Hunters' decisions about the nature and extent of the material which they needed to supply to Professor Howard. This is just one example of a real possibility that access to privileged material might provide Hunters with at least something which could be said to influence the exercise of the court's discretion. Once again, therefore, I consider that the stringent test in Medcalf v Mardell is not satisfied and that it would not be safe for the court to make a wasted costs order.

Conclusion

43. For the reasons which I have given this application must be dismissed.