Costs privilege
Date: 14 September 2007
Authors: M Friston, P Hughes, A McGee and M Smith
Issue: Vol 157, Issue 7288
Categories: Features, Costs
Costs litigation is litigation without disclosure of the type familiar in other civil litigation. This is because the subject matter of the assessment is, by its nature, often privileged.
With certain narrow exceptions, the court has no power to order a party to disclose privileged material. There are, however, two (linked) mechanisms by which privileged material may come before the court; these are by way of filing the relevant material at court (“filing”) and by way of “election”.
FILING
The costs practice direction (CPD), supplementing Pts 43 to 48 of the Civil Procedure Rules (CPR), states at s 40.11 that, unless the court directs otherwise, the receiving party must file with the court the papers in support of the bill not less than seven days before the date for the detailed assessment and not more than 14 days before that date.
The papers to be filed and the order in which they are to be set out are listed in CPD s 40.12. As for retainers, CPD s 40.2 states where there is a dispute about the receiving party’s liability to pay costs to the solicitors who acted for the receiving party, the request for a detailed assessment must be accompanied by any agreement, letter or other written information provided by the solicitor to his client explaining how the solicitor’s charges are to be calculated.
Duty to file adverse material
Despite the CPR’s emphasis on openness and transparency, it is not clear whether the duty to file adverse material in the Rules of the Supreme Court Ord 62, r 29(7)(d)(8) (see Bourns Inc v Raychem Corpn [1999] EWCA Civ 1128, [1999] 3 All ER 154) survived the introduction of the CPR. Save in cases of fraud, a receiving party cannot be compelled to produce privileged material, even if the material is to be produced only to the court. CPD ss 40.11 and 40.12 relate to papers “in support” of a bill of costs, rather than papers which might undermine it.
It would appear that there is no express duty under the CPR to file adverse material with the court; however, there is the ever-present duty not to mislead the court, and there would be a fine line between not filing the entirety of a file, and filing a file which has been filleted to give a misleading impression.
So far as retainers are concerned, CPDs 40.2(i) is clear: a receiving party is expected to file “any agreement, letter or other written information”, regardless of whether it is supportive of his claim for costs. They probably can refuse to do so, but the practical effect would be that they would arouse suspicion, usually with adverse consequences.
The effect of filing adverse material
Where the court finds something in a receiving party’s file that causes concern —including omissions—the court has a duty to ensure fairness. In the context of privilege in relation to retainers in Bailey v IBC Vehicles Ltd [1998] EWCA Civ 566, [1998] 3 All ER 570, Lord Justice Judge said:
“If…some feature of the case alerts [the taxing officer] to the need to make further investigation or causes him to wonder if the information with which he is being provided is full and accurate, he may seek further information…However, if the stage has been reached where interrogatories might reasonably be ordered, the conclusion that the receiving party had not been able to satisfy the taxing officer about the bill, or some particular aspect of it, would seem inevitable.”
Material mistakenly filed
Where a costs judge finds a document in a receiving party’s file that is embarrassing, it is open to him to ensure that the receiving party is not prejudiced by that finding. Mr Justice Hobhouse said in Pamplin v Express Newspapers Ltd [1985] 2 All ER 185, [1985] 1 WLR 689:
“The trained legal mind normally has no difficulty in preventing irrelevant or improper material from influencing its decision. Occasionally a master may feel embarrassed by what he has seen, and knows that the respondent has not seen, and cannot be told about. In such a case, the master can [order] that the taxation of one or more items be dealt with by another taxing master.”
ELECTION: THE PRINCIPLES
The process of election is outlined in
s 40.14 of the CPD. The court may direct the receiving party to produce any document which in the opinion of the court is necessary to enable it to reach its decision. These documents will in the first instance be produced to the court, but the court may ask the receiving party to elect whether to disclose the particular document to the paying party to rely on the contents of the document, or whether to decline disclosure and instead rely on other evidence.
This process has been formulated in an attempt to take account of two competing legal principles:
- The fundamental point of natural justice, dealt with in many domestic and European authorities, that one party must have the opportunity to see, comment on and rebut material put by the other before the court.
- The right of a party to keep confidential documents or transactions covered by legal professional privilege.
The procedure set out in CPD s 40.14 takes into account that in the last resort, the first principle must prevail; if a party wishes to rely on material which is put before the court, his opponent must be able to see it. CPD s 40.14 also protects the second principle: if the receiving party does not want the paying party to see the document, it is open to him to elect not to rely on it—unless he has already waived privilege.
The court’s discretion
Fortunately, most—if not nearly all—detailed assessments are dealt with on an informal basis and the need formally to consider the issue of election does not arise. This informal approach is beneficial because it allows the court to complete the assessment expeditiously.
The need for a sensible approach on the part of paying parties was emphasised by Hobhouse J in Pamplin:
“[It will be] very rare for the full formality of these steps [relating to election] to be gone through. Most [paying parties] appreciate that once they have drawn to the master’s attention the possibility that an item of charge may be unnecessary or may be being overvalued, their interests are best served by allowing the master to look at the relevant documents and form his own judgment.”
The Court of Appeal said in the pre-CPR case Goldman v Hesper [1988] 3 All ER 97, [1988] 1 WLR 1238 that a costs judge should “use all his expertise and tact” to avoid a party being put to his election. The Court of Appeal has suggested that the costs judge should consider alternatives, such as partial disclosure, or disclosure given only to an opponent’s lawyers.
Costs judge’s duty
Cases will arise where an informal approach is not appropriate, however. Then the question is to identify the stage at which the receiving party has to be put to his election—or must be taken to have waived privilege.
That stage is not reached when documents are lodged at court pursuant to the CPD. The fact that the costs judge goes through the lodged documents does not at that stage raise any problems of natural justice (see Pamplin at 695, which, although a pre-CPR authority, remains authoritative on this point).
That stage may be reached during the course of the assessment. Once it has been reached, the costs judge has a duty to put the receiving party to his election. Hobhouse J said in Pamplin:
“An issue of fact may emerge which necessitates…making formally or informally a finding of fact. In such a situation, the master may have to ask the [receiving party] what evidence he wishes to rely upon in support of the contested allegation of fact. The [paying party] may then take the stand that if the claimant wishes to adduce evidence, he [the paying party] wishes to see it and comment on or contradict it. This will mean that the [receiving party] will then have to elect whether he wants to use the evidence and waive his privilege or seek to prove what he needs in some other way.”
In South Coast Shipping Co Ltd v Havant Borough Council [2001] EWHC 9017 (Costs), [2002] 3 All ER 779, Mr Justice Pumfrey suggested election is not limited to contentious issues of fact, but will arise when any document that is relevant to “recoverability” is being considered:
“Once the document is of sufficient importance to be taken into account in arriving at a conclusion as to recoverability, then, unless otherwise agreed, it must be shown to the paying party or the receiving party must content itself with other evidence.”
The stage at which a party should be put to election will be reached only if there is contentious issue which needs to be decided. No such issue will arise if the receiving party is able to rely on a presumption in his favour and that presumption has not been rebutted. It is for this reason that receiving parties are not routinely put to their election in relation to private retainers.
The stage at which a party should be put to his election will not be reached if the purpose of putting the receiving party to his election is merely to test that party’s evidence. Mr Justice Rimer said in Dickinson v Rushmer [2001] EWHC 9018 (Costs), [2001] All ER (D) 369 (Dec):
“It does not seem to me that the principles…require privileged material available to the receiving party to be disclosed for the purpose of testing the evidence given…The solution is imperfect, but is dictated by the existence of the privilege…either both or neither can deploy the privileged material. The familiar rule that the other party is entitled to see the disclosable material even if the party which possesses it does not deploy it can have no application when the material is privileged.”
Thus the process of election cannot be used to force disclosure of documents upon which the receiving party does not intend to rely.
The fact that a receiving party can waive privilege in an assessment, but can (usually) re-assert privilege in subsequent contexts is relevant to the exercise of a discretion to put the receiving party to his election (see South Coast Shipping).
Dr M Friston, P Hughes, Professor A McGee and M Smith are barristers in the costs team at Kings Chambers. E-mail: costs@kingschambers.com
The second article will be published in next week’s NLJ, and will address proportionality and election, waiver of privilege, the consequences of election and disclosure of non-
privileged material
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