United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR P CHAPMAN (Solicitor) Messrs Mitchells Solicitors 2 Peckitt Street Clifford Street York YO1 9SF
For the Respondent	MS N TWINE (of Counsel) Instructed by: Messrs Raworths LLP Solicitors Eaton House 89 Station Road Harrogate N Yorkshire HG1 1HF


 


SUMMARY

PRACTICE AND PROCEDURE: Costs

After the Claimant's discrimination claim failed the Respondents sought an order for costs against her or a wasted costs order against her solicitors for pursuing a hopeless case ab initio after the third day when the hopelessness was manifest. The Tribunal rejected the application for costs against the Claimant but made a wasted costs order against the solicitors on the basis that they ought to have advised her after Day 3 and before the hearing resumed 6 weeks later that her case would fail. On the solicitors' appeal

Held:

(i) The Tribunal were not referred to the guidance in Ridehalgh v Horsefield (CA) and Medcalf v Weatherill (HL) or even to the summary in Harvey.

(ii) The Tribunal erred in principle in not applying that guidance and in

(a) failing to consider whether the pursuing of a hopeless case was not only very negligent but amounted to an abuse of the Court.

(b) failing to consider whether the solicitor between the 3rd and 4th days made any assessment of the merits, and if so what it was and how he reached it.

(c) failing to consider whether the solicitors' failure had caused the costs of the 4^th and 5^th days i.e. whether, if advised, the Claimant would have withdrawn

(iii) Therefore appeal allowed; the parties not seeking a remission, wasted costs application dismissed.


 


HIS HONOUR JUDGE BURKE QC

The Nature of the Appeal

1. In this appeal Mitchells Solicitors challenge a wasted costs order made by the Employment Tribunal sitting at Leeds, chaired by Employment Judge Hildebrand and sent to the parties with written reasons on 3 July 2007. Mr David Scott, a partner in Mitchells, had before that Tribunal represented the Claimant, Mrs Wright, who had brought claims against her employers, the Respondent, of sex discrimination and unfair dismissal. The trial of those claims took place over five days, the first three days on 3 to 5 October and the last two days on 21/22 November 2006. By their reserved judgment sent to the parties on 18 December 2006 the Tribunal dismissed all of those claims. The Respondent subsequently sought a wasted costs order against Mitchells and a costs order against Mrs Wright.
2. At a case management discussion for the purposes of those costs applications on 26 February 2007 the Tribunal made various orders for the substantive hearing of those costs applications.
3. On 3 July 2007 the Tribunal dismissed the costs application against Mrs Wright but ordered Mitchells to pay to the Respondent as wasted costs the sum of £3,325, £2,125 of which consisted of the Respondent's solicitors and counsel's fees for the two hearing days in November 2006 and £900 of which consisted of such costs for the day on which the wasted costs application itself was heard.
4. There is no challenge to the quantification of the wasted costs order if the Tribunal were correct in law to make it. Mitchells contend by this appeal that the Tribunal's making of that order was in error of law; the Respondent contends the opposite. Mitchells have before us been represented by Mr Chapman, a senior partner. The Respondent has been represented by Miss Twine of Counsel, who has appeared for it at all stages. We are grateful to both of them for their helpful submissions.
5. Mrs Wright has not been represented on this appeal or even formally joined as a party to it. Mitchells continue to act for her; for reasons to which we will come she has nothing to gain by or lose as a result of this appeal.

The Facts

6. It is not necessary to consider the facts in great detail. Mrs Wright is a graduate in electrical engineering and was employed as such by the Respondent from 6 October 2003. Difficulties arose from an early stage of her employment; concerns over her competence were expressed within the Respondent and from a major client. In January 2006 Mrs Wright was informed that, in the absence of any alternative resolution, disciplinary proceedings (relating to capability and not misconduct, we should make clear) would be commenced. Mrs Wright alleged harassment and victimisation (but, at that stage, not on the grounds of sex discrimination) and presented a grievance. Before either a disciplinary hearing or a grievance hearing took place, she resigned on 14 February 2006. She claimed that she had been constructively dismissed; central to that claim was her case that the allegations relating to her capability were without substance and trumped up. She particularised five specific acts of sex discrimination.
7. The Tribunal rejected the sex discrimination claim on two bases; firstly, they found that all the five alleged discriminatory acts had occurred well before the period of three months prior to the presentation of the claim and were out of time. No suggestion had been made that it was just and equitable to extend time. Secondly, they found in any event that the allegations were without substance and that there was no preferential or differential treatment.
8. As to the unfair dismissal claim, to which it seems at the stage of final submissions Mr Scott on behalf of Mrs Wright had added an unpleaded claim of direct discrimination, the Tribunal found that the central core of Mrs Wright's case was unsustainable in view of the voluminous documentation which evidenced the history of serious concerns about her competence going back to 2004, and that Mrs Wright resigned because she was not prepared to face imminent disciplinary action.
9. In their costs judgment, the subject of the present appeal, the Tribunal said that the allegation that the concerns about Mrs Wright's competence were trumped up was wholly unfounded and unsupported; and it is clear from their liability judgment that that was their conclusion, albeit not expressed in those words.
10. The Tribunal, constituted of course as before, heard the costs applications some six months or so after their reserved judgment on the merits of Mrs Wright's claims. They decided, first, at paragraph 6, that an order for costs should not be made against Mrs Wright in circumstances in which she had received advice throughout from her representative. They said in that paragraph:

"6. The Tribunal carefully considered the Respondent's submissions, but concluded that it would be inappropriate to exercise the discretion against the Claimant in circumstances where the Claimant received advice throughout from her representative. It was clear that the Claimant had not received advice regarding the weakness of the case, but merely that the outcome would depend on what the Tribunal believed. She was never advised that it might be sensible to withdraw from the case."

and continued as follows at paragraphs 7 and 8:

"7. The advice on the merits of the claim which the Claimant had received was that in September, shortly before the Hearing, the Claimant was advised she stood between a 50 and 55% chance of success. Earlier the Claimant had been informed in February 2006 that she stood a 55-60% chance of success. Even if the claim technically comes within the statutory definition of "misconceived" on the grounds that it had no reasonable prospect of success, the Tribunal was satisfied that this Claimant held a strong conviction that the claim stood a prospect of success in accordance with the advice which she received from her Solicitor. That advice seems to have had no detailed basis in the factual analysis of the respective allegations in the claim, and it is difficult to see how the Claimant could have been called upon to interrogate her Solicitor further regarding the basis on which he made that assessment of her prospects of success.

8. Accordingly, we did not find that the Claimant acted unreasonably in her conduct of the proceedings."

11. The Respondent, as is clear from paragraph 9 of the Tribunal's judgment, put its wasted costs application on the basis that Mrs Wright's claims never had any prospect of success; but it alternatively submitted that, after Mrs Wright had given evidence, it was clear that she could not win, that on four occasions it told Mr Scott that, if Mrs Wright withdrew, it would not pursue a costs application against her - with the implication, of course that if she did not it would pursue such an application - and that, nevertheless the claims proceeded to the end of evidence and submissions over the two days in November.
12. The Tribunal's reasons for making the wasted costs order against Mitchells are set out quite shortly at paragraphs 11 – 16 of their judgment. It is simpler and perhaps wiser to set them out than to attempt to summarise them. They are as follows:

"11. The Tribunal's analysis of the conduct of the case was that the Claimant's statement was rambling and unfocussed and far longer than it need have been if properly drafted. The effect of this was that the cross–examination of the Claimant and the preliminary reading took the first two days of the Hearing. One of the Respondent's witnesses was dealt with on the third day, and that concluded the Hearings of the 3^rd, 4th and 5^th October 2006. The Hearing resumed on 21^st and 22^nd November 2006, with the final witness being taken on 22 November 2006 and the submissions concluding at 4 pm on that day. The Tribunal deliberated on the final day, 23 November, and reached its conclusion.

12. Our analysis of the case was that although often discrimination cases turn on the way in which particular witnesses give evidence, the Claimant's evidence in this case had a strangely disengaged approach to the serious issues faced. It may be that the Claimant's representative should have been aware that the evidence would be given in this way in advance of the first set of Hearings because of the deficiencies in the preparation of the witness statement and the failure to focus the case on potentially successful claims of sex discrimination and the Claimant's unfair constructive dismissal case. The first set of Hearings was occupied with the Claimant's case and one Respondent's witness. Whatever could be said prior to the first set of hearings, it was certainly clear by the time the Claimant's evidence had been completed and Mr Davies had been heard for the Respondent that the Claimant's prospects of succeeding in this case were extremely limited. To have allowed the Claimant to proceed in those circumstances without making clear to the Claimant the fact that any realistic assessment of her chances put them well below the figures previously quoted amounted to conduct on the part of the Claimant's representative leading this Tribunal with no alternative but to make a wasted costs order.

13. We appreciate the importance attached by the Appellate Courts to representation being available to allow Claimants to pursue claims in the field of discrimination. In addition, therefore, to any natural reluctance to make a wasted costs order, given the very serious finding on which such an Order must be based, there is in the context of a discrimination case an additional component imposing on us a duty to consider very carefully whether such an Order might discourage a representative such as Mr Scott from pursuing cases in discrimination when other representatives might not be available.

14. Having said that, we did not consider that it would be appropriate to make an Order against the Claimant's representative in respect of the costs incurred in the first three days of the Hearing. While it may be that Mr Scott acted improperly, unreasonably or negligently in allowing the case to proceed to Hearing, we accept that it would be reasonable for him to allow the Claimant to give her evidence in-chief and put forward her view of the facts and her case that it was sex discrimination which she experienced. However, once the Claimant had completed her evidence and Mr Davies had given his evidence, any competent advisor would have been obliged to point out to the Claimant the fact that after her case had been heard and her evidence had been challenged there was very little factual basis on which a Tribunal was likely to find a case of sex discrimination or constructive dismissal in her favour.

15. There is nothing to suggest that, despite a significant number of costs warnings on the part of the Respondent, Mr Scott gave the Claimant anything approaching a critical analysis of the strengths and weaknesses of her case after the first set of Hearings was concluded. It therefore follows that the Respondent in this case was put to the cost of the second set of Hearings without any true need for that work to be undertaken.

16. In those circumstances, we consider that a wasted costs order against the Claimant's representative is amply justified in this case. We computed the amount thereof on the basis that there were two brief refreshers at £650 and 12 hours of Solicitor's work, that is £1,125 - a total of £2,425. We also considered it right that the Claimant's representative should pay the costs of the Hearing today incurred by the Respondent in the sum of a further £650 refresher for Counsel and £250 Solicitor's costs - a total of £900."

13. Those reasons can be distilled into one simple conclusion, that by the end of the third day, when the hearings were adjourned to late November, Mr Scott as a competent solicitor should have told Mrs Wright that her case was now very likely to fail; he had not done so; as a result the costs of the two days in November were wasted. The nub is to be found in the last sentence of paragraph 14 and in paragraph 15.

Submissions

14. Mr Chapman's submissions, put we hope without disservice into summary form, were:

(1) The Court of Appeal in Ridehalgh v Horsefield [1994] 3 AER 848 gave guidance as to the correct approach to wasted costs applications, which guidance was adopted by the House of Lords in Medcalf v Weatherill [2002] 3 WLR 172. In so far as relevant to this appeal that guidance was that:

i. The wasted costs jurisdiction should only be exercised with great caution and as a last resort.

ii. A wasted costs order should be made only if the court or tribunal is satisfied that the conduct of the impugned representative was properly to be characterised as improper, unreasonable or negligent; see, so far as Employment Tribunals are concerned, rule 48(3)(a) of Schedule 1 to the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004.

iii. A legal representative, solicitor or counsel, should not be held to have acted improperly, unreasonably or negligently simply because he acts on behalf of a party who pursues a hopeless case.

iv. The Tribunal can only make a wasted costs order in such a case if it is shown (i) that the legal representative has presented a case which he regards as bound to fail; and (ii) that, in so doing, he has failed in his duty to the court and that the proceedings amount to an abuse of the process.

v. The Tribunal, must in deciding whether to make a wasted costs order, take into account that, unless the legal representative's lay client waives privilege, the cloak of confidence between client and legal representative is likely to prevent that representative from being able to explain why he has pursued his client's case as he has.

vi. It must be shown that the conduct of which complaint is made caused the applicant to incur unnecessary costs.

vii. The court or tribunal must exercise a discretion at two stages; it must first consider whether the merits and circumstances of the application render the application justified and proportionate; if it exercises its discretion in favour of the complaint proceeding at that first stage, the application will proceed to a hearing at which the court or tribunal has to exercise a further discretion if the central prerequisites for an order are made out, as to whether to make an order or not.

(2) The Tribunal failed to comply with that guidance and therefore erred in law in the following respects:

i. There had been no waiver of privilege. Any waiver was given only under unfair pressure from the Tribunal; the Tribunal had not borne in mind the guidance as to the difficulties of making a wasted costs order in those circumstances.

ii. The Tribunal had not found that Mr Scott had failed in his duty to the court or lent himself to an abuse of process.

iii. The Tribunal had not considered or made findings as to Mr Scott's assessment of the merits of Mrs Wright's case at the time when, as they held, he had failed to advise her as to those merits.

iv. The Tribunal had not made findings as to causation; had Mrs Wright been given advice as to the merits before the resumed hearings in November it was highly likely that she would have insisted on continuing, either with or without her solicitors.

v. The Tribunal had not exercised a discretion at either of the two stages set out in Ridehalgh; the first stage was omitted altogether; at the second stage the Tribunal directed themselves at paragraph 12 of their Judgment that they had no alternative but to make a wasted costs order.

vi. The Tribunal failed to consider that there had been no or no sustained attempt to strike out the claims or seek payment of a preliminary deposit on the basis of an absence of merit.

15. Miss Twine on behalf of the Respondent did not seek to challenge the content or force of the guidance provided by Ridehalgh and Medcalf, nor indeed could she have done so. Her submissions, similarly summarised, were:

(1) There had been a full waiver of privilege; the guidance as to the correct approach where there had been no such waiver was of no relevance.

(2) Where there was more than the pursuing of a hopeless case, for example – as on the Tribunal's findings in the present case - where there had also been a failure to assess and advise as to that hopelessness, it was not necessary for the Tribunal to go further and find an abuse of the process; alternatively on the findings of fact there was such an abuse and the Tribunal should have be taken so to have found.

(3) The Tribunal's judgments demonstrated that they had found Mr Scott to have appreciated that the merits were, after the first three days of the hearing, greatly reduced, to the extent that the hearing should not have continued.

(4) It was implied from the Tribunal's findings, in particular at paragraph 6, that they had concluded that, had Mrs Wright been given appropriate advice, she would not have persisted; she or Mr Scott had been given costs warnings by the Respondent four times; she would not have risked continuing.

(5) As to the first of the two stages at which a discretion could have been exercised, there had been case management discussion, to which we have referred, at which the Tribunal considered whether the application for a wasted costs order was out of time and, having decided that it was not, gave directions for the hearing of the application. No point that the Tribunal should have specifically considered whether the application was merited was raised by Mr Scott on that occasion; that hearing was conducted on the basis that, subject to the time point, there would be a full hearing of the application.

(6) There had been an application to strike out or for a deposit to be paid at the outset before Mrs Wright's claims were properly particularised. Thereafter it was not appropriate to make such an application. The wasted costs order in any event applied only to the last two days of the five day hearing.

Discussion and Conclusions

Mrs Wright

16. We should make it clear at the outset of our conclusions that the results of this appeal have no effect, one way or the other, on Mrs Wright's position. Although the Respondent sought a costs order against her and against her solicitors, they failed to obtain an order against her; and they have not sought to challenge the Tribunal's decision as to costs in her favour. If the wasted costs order were now to be set aside, the Respondent cannot revive its application for costs against Mrs Wright. That is why there has been no reason to involve her in this appeal.

Privilege

17. It emerged at an early stage of the hearing of this appeal that there was a dispute between Mr Chapman, who was not present at the Costs hearing, and Miss Twine, who was present but candidly accepted that her memory of it was limited, as to what happened before the Tribunal in relation to privilege. Mr Chapman told us, on information from Mr Scott, that Mrs Wright gave evidence to the Tribunal; he said that, when she was asked by the Tribunal about the advice Mr Scott had given to her, Mr Scott objected on the grounds of privilege. The Tribunal made comments which had the effect of causing Mr Scott to go outside, talk to Mrs Wright and then return to the Tribunal, feeling under compulsion to advise Mrs Wright that questions about the advice she had received should be answered. Miss Twine's account was that Mrs Wright did not give evidence, but Mr Scott on her behalf, without giving evidence, told the Tribunal, as Mrs Wright's advocate, what had happened; when the issue of advice arose, Mr Scott asked for an adjournment and then returned to the Tribunal and indicated that Mrs Wright had waived her privilege. The waiver was entirely voluntary.
18. We can understand, on the one hand, that Mr Scott might well have felt under pressure to advise Mrs Wright to waive privilege, not necessarily at the hands of the Tribunal but from the situation that he and Mrs Wright were in. If she did not waive privilege she might have been at greater risk of a costs order against herself. On the other hand, the waiver of privilege, in the light of what is said by Lord Bingham in Ridehalgh at page 866 (c) to (e) and in Medcalf at paragraphs 23/4, involved risks to Mr Scott which would have been substantially smaller if privilege had been maintained. Where a costs order is sought against a litigant and a wasted costs order is sought against that litigant's legal representative – especially if both applications are heard together – there is inevitably a very real tension and a substantial difficulty for both targets as to how the litigant's entitlement to privilege should be appropriately handled. It is at least possible that Mr Scott's sense that he was under compulsion arose from that tension rather than from anything said or done by the Tribunal. It might well, with hindsight, have been wiser if, as Ridehalgh suggests should be considered in such a situation, Mrs Wright had been steered in the direction of independent advice and representation.
19. However, there are, on what we have been told by the parties, issues of fact between the recollections of Mr Scott, as given to Mr Chapman, and of Miss Twine; the Tribunal have not been asked for their recollection of what happened in relation to privilege or for their comments on the suggestion that, somehow, they obliged Mr Scott to allow questions to be asked the answer to which would otherwise be subject to privilege. These issues could only be resolved by seeking from the Tribunal answers to a series of carefully drafted questions; yet the delay and expense which that course would cause could hardly be proportionate.
20. In these circumstances we invited both parties, who – and we shall return to this later – were anxious that we should decide without any further delay or cost whether the wasted costs order made by the Tribunal should survive or fall, to put the issues as to privilege on one side and to proceed to reach decisions upon the other grounds of the appeal, reserving to ourselves and to the parties the right to return to the privilege issues if it became necessary to do so. For reasons which will appear, it will not be necessary to return to those issues.

The Authorities

21. The principal authorities in the wasted costs jurisdiction are Ridehalgh and Medcalf. In the former the Court of Appeal gave important general guidance as to the way in which that jurisdiction should be exercised and dealt with six appeals in actions of various types in which wasted costs orders had been made. It is common ground that the resolution of those six specific appeals is not of assistance for present purposes; as to the general guidance, we have already summarised above the propositions on which Mr Chapman based his argument; they were not disputed; and we will, therefore, not refer to the judgment of the Court of Appeal given by Lord Bingham in full detail. We will refer to some specific aspects of that guidance below. In Medcalf that guidance was adopted and, in some particular respects, particularly in relation to privilege and to wasted costs applications where what is alleged against a legal representative is that he has pursued a hopeless case, enlarged.
22. This was, of course, as both parties accepted before us, a case in which the fall-back allegation against Mr Scott, which succeeded, was that he had failed to advise Mrs Wright of the true merits of her case during the break between the third and fourth days of the hearing and had continued to pursue her case when it was hopeless. We ought, therefore, to set out the guidance for such cases given in Ridehalgh at page 863:

"Pursuing a hopeless case

A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail. As Lord Pearce observed in Rondel v Worsely [1967] 3 All ER 993 at 1029, [1969] 1 AC 191 at 275:

'It is easier, pleasanter and more advantageous professionally for barristers to advise, represent or defend those who are decent and reasonable and likely to succeed in their action or their defence than those who are unpleasant, unreasonable, disreputable, and have an apparently hopeless case. Yet it would be tragic if our legal system came to provide no reputable defenders, or representatives or advisers for the latter.'

As is well known, barristers in independent practice are not permitted to pick and choose their clients. Paragraph 209 of the Code of Conduct of the Bar of England and Wales provides:

'A barrister in independent practice must comply with the "Cab-rank rule" and accordingly except only as otherwise provided in paragraphs 501, 502 and 503 he must in any field in which he professes to practise in relation to work appropriate to his experience and seniority and irrespective of whether his client is paying privately or is legally aided or otherwise publicly funded: (a) accept any brief to appear before a court in which he professes to practise; (b) accept any instructions; (c) act for any person on whose behalf he is briefed or instructed; and do so irrespective of (i) the party on whose behalf he is briefed or instructed (ii) the nature of the case and (iii) any belief or opinion which he may have formed as to the character reputation cause conduct guilt or innocence of that person.'

As is well known, solicitors are not subject to an equivalent cab-rank rule, but many solicitors would and do respect the public policy underlying it by affording representation to the unpopular and the unmeritorious. Legal representatives will, of course, whether barristers or solicitors, advise clients of the perceived weakness of their case and of the risk of failure. But clients are free to reject advice and insist that cases be litigated. It is rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved. They are there to present the case; it is (as Samuel Johnson unforgettably pointed out) for the judge and not for the lawyers to judge it.

It is, however, one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are an abuse of the process of the court. Whether instructed or not, a legal representative is not entitled to use litigious procedures for purposes for which they were not intended, as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest, nor is he entitled to evade rules intended to safeguard the interests of justice, as by knowingly failing to make full disclosure on ex parte application or knowingly conniving at incomplete disclosure of documents. It is not entirely easy to distinguish by definition between the hopeless case and the case which amounts to an abuse of the process, but in practice it is not hard to say which is which and if there is doubt the legal representative is entitled to the benefit of it."

23. In Medcalf Lord Steyn said at paragraph 42:

"I cannot accept the view of the majority. The law reports are replete with cases which were thought to be hopeless before investigation but were decided the other way after the court allowed the matter to be tried."

24. Hobhouse LJ said at paragraphs 51 to 53:

"51. The starting point must be a recognition of the role of the advocate in our system of justice. It is fundamental to a just and fair judicial system that there be available to a litigant (criminal or civil), in substantial cases, competent and independent legal representation. The duty of the advocate is with proper competence to represent his lay client and promote and protect fearlessly and by all proper and lawful means his lay client's best interests. This is a duty which the advocate owes to his client but it is also in the public interest that the duty should be performed. The judicial system exists to administer justice and it is integral to such a system that it provide within a society a means by which rights, obligations and liabilities can be recognised and given effect in accordance with the law and disputes be justly (and efficiently) resolved. The role of the independent professional advocate is central to achieving this outcome, particularly where the judicial system uses adversarial procedures.

52. It follows that the willingness of professional advocates to represent litigants should not be undermined either by creating conflicts of interest or by exposing the advocates to pressures which will tend to deter them from representing certain clients or from doing so effectively. In England the professional rule that a barrister must be prepared to represent any client within his field of practice and competence and the principles of professional independence underwrite in a manner too often taken for granted this constitutional safeguard. Unpopular and seemingly unmeritorious litigants must be capable of being represented without the advocate being penalised or harassed whether by the Executive, the Judiciary or by anyone else. Similarly, situations must be avoided where the advocate's conduct of a case is influenced not by his duty to his client but by concerns about his own self-interest.

53. Thus the advocate owes no duty to his client's opponent; inevitably, the proper discharge by the advocate of his duty to his own client will more often than not be disadvantageous to the interests of his client's opponent. (Orchard v S E Electricity Bd [1987] QB 565, 571). At times, the proper discharge by the advocate of his duties to his client will be liable to bring him into conflict with the court. This does not alter the duty of the advocate. It may require more courage to represent a client in the face of a hostile court but the advocate must still be prepared to act fearlessly. It is part of the duty of an advocate, where necessary, appropriately to protect his client from the court as well as from the opposing party. Similarly, the advocate acting in good faith is entitled to protection from outside pressures for what he does as an advocate. Thus, what the advocate says in the course of the legal proceedings is privileged and he cannot be sued for defamation. For similar reasons the others involved in the proceedings (e.g. the judge, the witness) have a similar immunity."

And then he continued at paragraph 56:

"56. In my judgment, the jurisdiction must be approached with considerable caution and the relevant provisions of s.51 construed and applied so as not to impinge upon the constitutional position of the advocate and the contribution he is required to make on behalf of his client in the administration of civil justice. The judgment in Ridehalgh referred to most of the relevant points.

First, from the point of view of the advocate the jurisdiction is penal. It involves making a finding of fault against the advocate and visiting upon him a financial sanction. Unlike the position between the advocate and his own client where the potential for liability will encourage the performance of the advocate's duty to his client (see Arthur Hall v Simons, sup) and the order would be truly compensatory, the jurisdiction to make orders at the instance of and in favour of the opposing party gives rise to wholly different considerations for the advocate. The risk of such an application can, at best, only provide a distraction in the proper representation of his own client and, at worst, may cause him to put his own interests above those of his client. The construction of the section and the application of the jurisdiction should accordingly be no wider than is clearly required by the statute.

Secondly, the fault must, in the present context, relate clearly to a fault in relation to the advocate's duty to the court not in relation to the opposing party, to whom he owes no duty.

Thirdly, the terms used in subsection (7) should receive an appropriately restrictive interpretation in relation to advocates. The judgment in Ridehalgh spelled this out at p.232 of the report. The use of the first two terms, improper and unreasonable, call for no further explanation. The word negligent raises additional problems of interpretation which are not material to the present appeal since the respondents' allegation against the appellants is impropriety not negligence. But it would appear that the inclusion of the word negligent in substitution for "reasonable competence", is directed primarily to the jurisdiction as between a legal representative and his own client. It is possible to visualise situations where the negligence of an advocate might justify the making of a wasted costs order which included both parties, such as where an advocate fails to turn up on an adjourned hearing so that a hearing date is lost. The breach of the advocate's duty to the court will be clear and if the breach was not deliberate, the term negligent would best describe it. For a person exercising a right o conduct litigation (ie a litigation agent) it is less difficult to think of apt examples affecting the other side as was the situation in Myers v Elman [1940] AC 282. The use of the same language in subsection (7) in relation to both categories of legal representative does not mean that it will have the same breadth application for both categories.

Fourthly, it is the duty of the advocate to present his client's case even though he may think that it is hopeless and even though he may have advised his client that it is. (Ridehalgh pp 233-4). So it is not enough that the court considers that the advocate has been arguing a hopeless case. The litigant is entitled to be heard: to penalise the advocate for presenting his client's case to the court would be contrary to the constitutional principles to which I have referred. The position is different if the court concludes that there has been improper time-wasting by the advocate or the advocate has knowingly lent himself to an abuse of process. However, it is relevant to bear in mind that, if a party is raising issues or is taking steps which have no reasonable prospect of success or are scandalous or an abuse of process, both the aggrieved party and the court have powers to remedy the situation by invoking summary remedies – striking out – summary judgment – peremptory orders etc. The making of a wasted costs order should not be the primary remedy; by definition it only arises once the damage has been done. It is a last resort."

25. We should refer to two further authorities. In Persaud v Persaud [2003] EWCA Civ 394 a wasted costs application against counsel was based on alleged failure on his part to give his clients accurate advice as to the prospects of success. In his judgment, with which Mummery LJ and Blackburne J agreed, Peter Gibson LJ said:

"22. It is clear from what was said in both Ridehalgh and Medcalf that it is necessary for a duty to the court to be breached by the legal representative if he is to be made liable for wasted costs. In Ridehalgh at page 232 H to page 233 A Sir Thomas Bingham said this:

"Since the applicant's right to a wasted costs order against a legal representative depends on showing that the latter is in breach of his duty to the court, it makes no sense to superimpose a requirement under this head (but not in the case of impropriety or unreasonableness) that he is also in breach of duty to his client."

That guidance given in Ridehalgh was confirmed in Medcalf. Lord Hobhouse in that case at paragraph 26 referred approvingly to Ridehalgh and to the necessity for there to be a breach of the advocate's duty to the court. I need say no more on that first point."

"24. To my mind the two cases of Ridehalgh and Medcalf must now be taken to state what the law is in this area, and earlier cases may heave to be reconsidered in the light of the authoritative guidance which we now have. In Ridehalgh a clear distinction is drawn between presenting a hopeless case. It is plain that that cannot of itself lead to a wasted costs order – and lending assistance to proceedings which amount to an abuse of process."

26. Miss Twine referred us to Highvogue Ltd v Morris (EAT/0093/07) in which the EAT, presided over by Beatson J – in a decision made after the decision in the present case – upheld a wasted costs order against solicitors arising from their conduct of an Employment Tribunal claim. However, the order there was not based on negligent pursuance of a hopeless case; it was based not on negligence but on improper or unreasonable conduct. At paragraph 6 the EAT reminded itself of and followed the first two sentences in the passage in Ridehalgh which we have set out above.
27. It is to be noted that the judgment of the Tribunal in the present case makes no reference to Ridehalgh or to Medcalf. Whilst there is, at paragraph 13, a reference to authorities as to the need for claimants to be represented in discrimination cases, the Tribunal did not refer to any authority as to the approach which should be taken to an application for a wasted costs order. If, of course, the Tribunal had been fully aware of those principles the absence of any reference in their judgment to authority would be of no significance; but that, for reasons we shall explain, is not this case. Unhappily, in a jurisdiction which Tribunals are not regularly called upon to consider, the Tribunal in this case were not referred either by Mr Scott or by Miss Twine to Ridehalgh, Medcalf or any other authority on wasted cost orders; nor were they referred to the summary of the guidance in Ridehalgh set out in Harvey on Industrial Relations and Employment Law Vol. 5 Section T, paragraph 077. We feel bound to express both surprise and regret that the Tribunal's attention was not drawn to at least one of those sources of essential assistance. Had they been given the assistance to which they were entitled this appeal might not have been necessary.

Abuse of the Process

28. The authorities are clear; before a wasted costs order can be made against a legal representative on the grounds that he has presented a hopeless case that representative must be shown not only to have acted improperly, unreasonably or negligently – and it is negligence which is relevant here and will usually be relevant in this class of case – but also to have lent assistance to proceedings which amount to an abuse of the court.
29. Miss Twine's submission that the Tribunal did not need to consider abuse of the court is based on the words in Ridehalgh at page 863G:

"Legal representatives will, of course, whether barrister or solicitor, advise clients of the presumed weakness of their case…"

She argues that, if a legal representative does not give any advice at all or at a relevant point in the case when the merits have changed, then either there is no need to prove abuse of the court or the failure to give such advice is itself an abuse of the court.

30. While we are prepared hypothetically to accept that it may be open to a tribunal to regard a failure to give advice and "ploughing on regardless" as amounting to an abuse of the court – although we are not to be taken as deciding that that would be so – there is no suggestion in Ridehalgh or the other authorities that that must be so. The sentence on which Miss Twine relies is not, in our judgment, intended to limit the need for an abuse of the court to be established or to suggest that a failure to give advice as to the merits amounts to such an abuse but to point out the dangers of assuming that a hopeless case is being pursued on the advice of lawyers or that lawyers can be expected or should be expected, in advising or considering the giving of advice, to turn themselves into judges. There will inevitably be cases in which the giving of advice as a trial proceeds, if not sought by the client, may be unwelcome or destabilising. Some clients may express a desire not to be advised about the merits as a trial develops. How often or at what intervals should such advice be given? The multiplicity of fact-situations which could arise is such that there cannot be a principle or rule that failure to give advice as to merits on the part of a legal representative as a trial proceeds must amount to a breach of that representative's duty to the court or to an abuse of the process of the court if the trial continues.
31. Therefore, if failure to give advice or continuing with proceedings without giving such advice can amount to a breach of a legal representative's duty to the Court or on an abuse of the process, the court or tribunal before which a wasted costs order is sought must decide on the facts of each case whether such a breach of duty and abuse is demonstrated.
32. However, the Tribunal did not in this case consider that question. The need for there to be more than negligence, before they came to consider the exercise of their discretion, does not appear to have been canvassed before them at all. Certainly there is no mention of it in their judgment. There is no reason to suppose that they would not have considered the principles set out in the authorities if they had before them any of the sources to which we have referred; but they did not have them. The absence of a finding that Mr Scott was in breach of his duty to the court or that his conduct of the case amounted to an abuse of the process is, in our judgment, fatal to the survival of the wasted costs order which the Tribunal made.

Mr Scott's state of mind

33. In our judgment if any assessment was to be made of negligence on the part of Mr Scott in failing to advise Mrs Wright between the end of the third day and the start of the fourth day of the hearing, it was essential for the Tribunal to consider and determine what was Mr Scott's state of mind in relation to the merits of Mrs Wright's claim at that stage. The Tribunal found that, in February 2006, Mr Scott advised Mrs Wright that her prospects of success were 55-60 per cent and that, shortly before the hearing, he advised her that those chances were 50-55 per cent (see paragraph 7 of their judgment); but nowhere did the Tribunal make any finding as to whether Mr Scott had reconsidered the prospects during the six-week gap, as to what his judgment was of the merits at that stage if he had done so and as to what the basis of any estimate which he made was. While the Tribunal, observing the progress of the hearing, formed their own view of the merits at that stage, as is clear from paragraph 12 of their judgment, for the Tribunal to have proceeded from their view to a conclusion that Mr Scott held or ought to have held the same view was, in our judgment, not justified. Mr Scott may have had wholly different and entirely genuine reasons for any assessment he made (if he did) at that stage.
34. The Tribunal did not consider his state of mind or assessment of the merits at that stage at all; we were told that Mr Scott did not say anything and was not asked any questions about these matters. He did not give evidence, as opposed to addressing the Tribunal as a representative; and Miss Twine did not ask to be allowed to cross-examine him. Therefore the Tribunal did not investigate or make any express findings in this factual area.
35. Miss Twine's argument that the Tribunal must be taken to have found that Mr Scott did not put his mind to the merits at that stage at all is, in our judgment, not supportable. There is nothing in the Tribunal's judgment which evidences such a finding. We have some sympathy with Miss Twine's further point that the Respondent had no evidence to give on this issue; but the burden of proof lay on the Respondent; and the Respondent could have asked that Mr Scott give evidence and be cross-examined. It was, in our judgment, an error of law for the Tribunal to leap from their own view of the merits to the conclusion that Mr Scott was negligent in failing to advise Mrs Wright as to the merits again at that stage without any evidence or other material, if he did not do so, as to why he did not do so.

Causation

36. In Ridehalgh at page 861 (A)-(C) the Court of Appeal stated that a three-stage test is required when a wasted costs order is contemplated, namely: (1) Has the legal representative of whom complaint is made acted improperly, unreasonably or negligently? (2) If so did such conduct cause the applicant to incur unnecessary costs? (3) If so, is it in all the circumstances just to order the legal representative to compensate the applicant for the whole or any part of the relevant costs?
37. However, we suspect for the same reason as that which explained the absence of any reference to abuse of the process, there is no reference to causation in the Tribunal's judgment. They did not set causation out as an issue to be decided; nor did they expressly make any findings as to it.
38. Miss Twine submitted that the necessary finding is to be implied from paragraph 15 of the Tribunal's Judgment. The Tribunal there said that it followed from the absence of any provision of a critical analysis by Mr Scott to Mrs Wright after the first three days of the hearing, when the merits were seen by the Tribunal to be extremely low, that the Respondent had been put unnecessarily to the cost of the last two days of the Hearing. That reasoning necessarily included a finding, Miss Twine argued, that, had Mrs Wright been given appropriate advice at that stage, she would have withdrawn. Such a finding would have represented the reality; Mrs Wright had every reason to withdraw, especially in the light of the costs warnings given to Mr Scott by the Respondent (only the first of which, given well before the hearing started, is known to have been passed on by Mr Scott to Mrs Wright).
39. In contrast Mr Chapman submitted that Mrs Wright would, in all probability, not have withdrawn if advised pessimistically as to her prospects of success at that stage. Mr Scott (or his firm to be more precise) was acting on a conditional fee basis; Mrs Wright was not at risk save in the event of a costs order against her which, in the Employment Tribunal, would have been rare (we do not know whether she was insured against such an order). She had given her evidence and was likely to have wanted to see her case pursued properly and effectively to the end. There was, of course, no suggestion that Mr Scott would withdraw; but Mrs Wright might, if he had given her unwelcome advice, have terminated his retainer and continued in person, with the risk of additional difficulties for the Tribunal and the Respondent and, possibly, added expense.
40. We cannot resolve these rival arguments as to what course Mrs Wright would or might have taken had Mr Scott given the advice which the Tribunal believed should have been given. She was not asked about what would have happened if Mr Scott had given her such advice; there was no specific evidence as to that and no finding; and the a priori arguments we have summarised demonstrate that there was not only one answer which could have been given, had the causation issue been investigated. That is why it is not possible to conclude that the Tribunal implicitly determined the causation issue in the Respondent's favour. The reality is that the Tribunal were not invited to and did not consider or determine that issue; and therein is to be found a further error of law.

The exercise of discretion

41. On this issue we prefer Miss Twine's submission. As to the first stage at which the discretion arose, Mr Scott raised no objection at the CMD to the giving by the Tribunal of directions for the substantive hearing of the wasted costs application. If he had wished to persuade the Tribunal that there was no real substance in the application and that they should not permit it to go forward to such a hearing, he had on that occasion the opportunity to do so. He did not take it then or at any other time. The hearing went ahead without any demur from Mr Scott; and it is too late now for it to be said on his behalf that the Tribunal should have set about a task at the CMD stage which neither party invited them to undertake.
42. As to the second stage we do not accept that the use by the Tribunal in paragraph 12 of the words:

"leading" [sic] "this Tribunal with no alternative but to make a wasted costs order…"

should be read as an indication that the Tribunal did not exercise their discretion, having found that there was negligent conduct, in deciding to make the order which they made. The Tribunal's judgment must be read as a whole; in paragraph 13 the Tribunal referred to the importance of not discouraging legal representatives from representing claimants in discrimination cases, a policy point which could only have been relevant as part of the exercise of a discretion.. In paragraphs 14 and 15 the Tribunal balanced various considerations. In our judgment the Tribunal can be seen, when all the relevant paragraphs are considered together to have exercised their discretion in favour of making an order.

43. We should add that decision-makers often use expressions such as "we have no alternative but to" or "we are driven to". The use of such expressions should not be taken generally as an indication that the decision-maker has not considered both sides' cases fully and fairly or has not exercised a discretion which had to be exercised. Such expressions are usually an indication that, despite such full and fair consideration, the merits of one side's position have been overwhelmingly persuasive.

Striking out etc.

44. We need say no more about this issue than that (1) the absence of an application to the Tribunal to strike out the claim (other than an application which was dropped when Mrs Wright's claim was properly particularised) or for payment of a deposit does not, in law or in practice, preclude a successful application for costs against an unsuccessful claimant or a wasted costs order against the representative of such a claimant. It is well known that such applications rarely succeed; and the true weaknesses in a claimant's case may often not appear until after disclosure and exchange of witness statements or until the substantive hearing has started and developed; and (2) on the basis of Mr Scott's pre-trial assessments of the prospects of Mrs Wright succeeding – which the Tribunal did not find to have been unreasonable or negligent, while expressing the view that they might have been (see paragraph 14) – Mrs Wright's case was properly conducted for the first three days of the hearing on any view. Had there been a successful strike-out application she would not have been able to progress her case as far as the point at which the Tribunal adjourned part-heard. Had there been an unsuccessful application for a strike-out, the position would have been no different, between the third and fourth days of the hearing, from that which prevailed. Whether the ordering of a deposit would have made any difference to Mrs Wright's decision to proceed or not, at any stage, it is not possible to tell.
45. In these circumstances we do not regard the fact that no application to strike-out or for a deposit was persisted in as in any way undermining the Tribunal's decision on the wasted costs application.

Conclusion

46. For the reasons we have set out above under the headings (1) Abuse of the Court (2) Mr Scott's State of Mind and (3) Causation the wasted costs order cannot stand; this appeal must be allowed and the wasted costs order must be set aside.
47. At one stage we were concerned that, in the absence of crucial findings by the Tribunal, we might have no alternative but to remit the wasted costs application to the Tribunal, either in full or on a limited basis. Although Mr Chapman urged us that any remission should be to a new Tribunal, only the original Tribunal could, in practical terms, deal properly with the application; and any remission would, in our judgment, have had to have been to the same Tribunal. However, as we said earlier, both Mr Chapman and Miss Twine, on behalf of their respective clients, urged us not to remit, for good reason. The amount at stake is relatively small; further expenditure of costs would be disproportionate; and, realistically, unless the Respondent can argue that there was a waiver of privilege before the Tribunal which would bind Mrs Wright at a rehearing, it is highly likely that privilege would not be waived at such a rehearing; and, on the basis of what was said on the effect of privilege in Ridehalgh and Medcalf, the Respondent's prospects of obtaining an order would be slight.
48. In our view it is very likely indeed that, had the Tribunal properly directed their attention to the Respondent's need to prove abuse of the Court and to the need to consider Mr Scott's state of mind, for the reasons we set out above they would not have made the wasted costs order on the material before them. Mr Scott has since made it clear, Mr Chapman tells us, that he believed at the end of the third day that Mrs Wright still had a 50/50 chance of success. He did not say that in evidence to the Tribunal; he was not asked; but in any event without that evidence to the contrary we feel able to conclude with confidence that, absent error of law, the Tribunal would, on the limited material before them, despite their natural and understandable misgivings as to the merits of the claim, have felt unable to make the wasted costs order sought. There was no direct evidence as to causation; and the material to support a finding that continuing with the proceedings beyond the third day amounted to an abuse of the process was simply not present.
49. Accordingly we allow the appeal, set aside the wasted costs order and substitute a judgment that the wasted costs application be dismissed.