28 April 2011

Practice: Media CAT v Adams and Others - The End

After the party comes the bill. In this final episode of the Media CAT saga (Media CAT v Adams No, 4 [2011] EPC 10) His Honour Judge Birss QC decided who was to pay for episodes 1, 2 and 3. Or, to be more accurate, whether the solicitors who brought this litigation and their principal Andrew Crossley, should pay for them under s.51 (6) of the Senior Courts Act 1981,

This sub-section provides:
"In any proceedings mentioned in subsection (1), the court may disallow, or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with rules of court."
The proceedings mentioned in s.51 (1) are proceedings in the Civil Division of the Court of Appeal, the High Court and any county court. Wasted costs are defined by s.51 (7) as "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."
The relevant rules of court are now CPR 48.7 and Section 53 of the Costs Practice Direction.

As I said in my article on the New Patents County Court Rules,
"CPR 45.42 provides that unless a party has behaved unreasonably the maximum costs that can be awarded against him are:
(a) £50,000 on the final determination of a claim in relation to liability; and
(b) £25,000 on an inquiry as to damages or an account of profits."

In a short extempore judgment which, unfortunately, has not been reported, Judge Birss QC removed those limits on 16 March 2011.

After considering the rule. practice and case law, the judge directed himself that the wasted costs jurisdiction was a "narrowly confined procedure and the court should concern itself with specific areas of costs specifically wasted by the specific improper/unreasonable or negligent conduct in the context of the litigation" [para [28]]." He therefore limited himself to the following issues:
(1) hopeless claim;
(2) champerty;
(3) failure to join the copyright issues;
(4) the Norwich Pharmacal orders;
(5) the letter of claim;
(6) negligent correspondence;
(7) £3,000 damages limit; and
(8) abuse of process by the attempt to avoid judicial scrutiny by discontinuing the proceedings.

The judge considered each of those issues individually applying the two-stage merits and proportionality test set out in the Practice Direction. He found that only champerty - that is to say the revenue sharing agreement between ACS and Media CAT - and the attempted discontinuance merited a wasted costs order.

Orders of this kind are very difficult to get and I have only once succeeded in obtaining one. That was from the Vice-Chancellor of the County Palatine of Lancaster in the days when legal aid was available for commercial litigation. My clients were the majority shareholders of a theatrical agency who had appointed the respondents as directors of their company. For one reason or another they decided to remove the directors but before they could do so the directors managed to persuade a s.9 judge in Manchester to grant them an ex parte interim injunction. The order was a nonsense on several grounds. No undertaking as to damages had been offered and there had been an obvious failure to disclose all material facts. I applied to the judge who had made the order to discharge it but he was unable to hear me because he was busy with another case. So I applied to Mr Justice Lightman in London to hear it instead. The judge discharged the order and awarded me indemnity costs but as my clients owned the shares of the company the effect of the order was that they would end up paying the Legal Aid Board. So I had to apply for wasted costs against the solicitors and the very inexperienced junior barrister who had made the ex parte application. At the hearing in Newcastle, the Vice-Chancellor ordered the solicitors and barrister to pay those wasted costs.

3 comments:

Anonymous said...

In fact, this was not the "final episode" and HHJ Birss QC did not decide that anything "merited" a wasted costs order. He decided that the application for a wasted costs order should proceed (that is, that ACS/Mr Crossley should show cause), but only in relation to the notices of discontinuance and the revenue-sharing agreement.

The judge may (unwittingly) have done Mr Crossley a favour by limiting the wasted costs application to these two points. This is because neither of the acts identified by the judge can have caused costs to be wasted:

1. Serving notices of discontinuance cannot cause costs to be incurred: the whole point of serving a notice of discontinuance is to stop the incurring of further costs. What caused costs to be incurred was not the notices of discontinuance, but the bringing of the proceedings in the first place (coupled - later - with the court's refusal to accept the notices of discontinuance).

2. Similarly, a revenue-sharing agreement does not of itself cause costs to be incurred. The judge seems to have assumed that, without the revenue-sharing agreement, there would have been no litigation. However, there is no clear evidence to support such an inference. Mr Crossley may say that he cannot address that point because (i) it is not within his knowledge whether Media CAT would have litigated if there had not been a revenue-sharing agreement and (ii) he is in any event hampered in trying to deal with this point because there has not been a full waiver of privilege by his client.

What the judge should have done is allowed the wasted costs application to continue in respect of (i) the commencement of proceedings in the name of a claimant which appears not to have had locus standi to sue and (ii) the apparent failure (prior to commencing proceedings) to seek or obtain instructions from the other party or parties which should have been joined as claimants.

On analysis, the judgment which he has handed down in relation to the first stage of the wasted costs application is a curious one, which may provide Mr Crossley with lots of good appeal points.

Anonymous said...

In addition to the wated costs, Crossley was also joined as claimant for costs purposes. So the costs are not confined just to those wasted items.

In any event, Crossley was made bankrupt on 20th May 2010, (See: http://www.insolvency.gov.uk/eiir/IIRCaseIndivDetail.asp?CaseId=700104081&IndivNo=700226199&Court=HIGH&OfficeID=600000011&CaseType=B)

Anonymous said...

It has subsequently been reported that Crossley's insurers did a deal on the costs issue with the defendants.

But whilst that is the end of it as far as ACS-Law is involved, another player (who, prima facie, is making similar claims) has emerged, as can be seen at http://www.bailii.org/ew/cases/EWPCC/2011/27.html