Costs privilege (2)
Date: 21 September 2007
Authors: M Friston, P Hughes, A McGee, M Smith
Issue: Vol 157, Issue 7298
Categories: Features, Costs
The subject matter of detailed assessments in costs litigation is often privileged. However, privileged material may come before the court by way of filing at court or by way of election.
PROPORTIONALITY AND ELECTION
In South Coast Shipping Co Ltd v Havant Borough Council [2001] EWHC 9017 (Costs), [2002] 3 All ER 779, concerning a disputed retainer, Mr Justice Pumfrey made the following observations, which at first blush seem to suggest that a costs judge can decline to put a party to his election on the grounds of proportionality:
“I would expect that in the great majority of cases the paying party would be content to agree that the costs judge alone should see privileged documents. Only where it is necessary and proportionate should the receiving party be put to his election.”
In Dickinson (t/a Dickinson Equipment Finance) v Rushmer (t/a FJ Associates) [2002] 1 Costs LR 128, [2001] All ER (D) 369 (Dec), concerning another disputed retainer, Mr Justice Rimer came to a seemingly different conclusion:
“I interpret the substance of this submission to be that a detailed assessment of costs is essentially ancillary to the main litigation and so justifies the court in adopting something of a broad-brush approach to the performance of the exercise. I do not subscribe to that view. A claim by one party to recover costs from another may well in practice prove to be just as important, perhaps ever more so, to one or other or both sides as the resolution of the substantive issues in the action.”
These seemingly antagonistic observations are reconcilable: proportionality will play a role where the costs judge is using “all his expertise and tact” (see Goldman v Hesper [1988] 3 All ER 97, [1988] 1 WLR 1238) to avoid the need to put a party to his election, but once that need is made out, the process of election will not be cut back on the grounds of proportionality.
WAIVER OF PRIVILEGE
Waiver may be express or implied. As with election, the essence of the question is to identify the stage at which the receiving party must be taken to have waived his privilege. Mr Justice Hobhouse said in Pamplin v Express Newspapers Ltd [1985] 2 All ER 185, [1985] 1 WLR 689:
“In taxation, it will normally be a matter of express waiver only. It should always be possible to avoid having to get involved with implied waiver…A [receiving party] should not have imposed on him an unintended waiver unless fairness to both parties really does necessitate that result.”
The way in which a receiving party would avoid having an unintended waiver imposed upon him is by withdrawing a document before that stage is reached. Mr Justice Gray said in Adams v MacInnes [2001] EWHC 9014 (Costs):
“When a party lodges a privileged document for detailed assessment in order to claim the costs of it, if the other party wishes to see it to dispute that claim for costs the [receiving party] must be given the right to elect to withdraw it and not claim costs or he must disclose it.”
Handing document to judge
What is less clear is whether or not the mere fact of handing a document to the costs judge during a detailed assessment will amount to waiver. Rimer J held in Dickinson that if a receiving party voluntarily chooses to hand documents to the judge “in support of his case”, then this would pre-empt the decision about whether or not the receiving party should be put to his election. Referring to the fact that certain documents had been voluntarily handed up to the costs judge, he said:
“The costs judge did not direct the production to him of the relevant documents, and so the procedure contemplated by that rule [ie costs practice direction (CPD) s 40.14] was strictly not engaged at all. The judge saw the documents because the [receiving party] voluntarily chose to hand them to him in support of his case...[This] was a simple situation in which the [receiving party] chose to prove his version of a disputed issue of fact by reference to certain documents. In my view, the basic principle is that, if he wanted to do so, fairness required him also to disclose the documents to the [paying party].”
While we are aware of no authority on the point, where a document has been informally produced to the court in circumstances where the issue of election has not been canvassed, it would usually be appropriate to afford the receiving party the opportunity to withdraw it. Moreover, where a document has been produced at the request of the court, CPD
s 40.14 expressly provides that the costs judge may ask the receiving party to elect whether or not to decline disclosure.
Production of documents
It is commonly the case that documents relating to the retainer are handed up to the costs judge in the expectation that those documents will not to be shown to the paying party unless and until the court finds that a genuine issue has been made out. Such a practice is dangerous and mistaken: production of documents in those circumstances would at least amount to a waiver of privilege, and could also amount to a tacit admission that a genuine issue had been made out. This was explained by Rimer J in Dickinson:
“A paying party raises an issue about [the indemnity principle] by advancing factual assertions which serve to put it in question…Faced with those assertions, the [receiving party] had a choice as to what course to follow. He could have asked the costs judge to direct whether he regarded the [paying party] as having raised an issue on which he, the [receiving party] needed to provide further evidence...Alternatively, he could, as he did, pre-empt any decision by the judge on that point…The fact that the [receiving party] thought it appropriate to adopt the latter course is perhaps the best indication that the issue the [paying party] had raised was a genuine one—or at least the [receiving party] so regarded it.”
Likewise, while obiter, Gray J indicated in Adams that when a client care letter was affirmatively relied upon, it ought to be “standard practice” that it is made available to the paying party. A receiving party who wishes to avoid disclosing a retainer to his opponent would usually best achieve this aim not by affirmatively relying upon the retainer, but by passively making the retainer available to the court in compliance with CPD s 40.2(i). Where the documents are in the hands of the judge solely as a result of the procedure envisaged by CPD s 40.2(i), there will have been no waiver of privilege (see Giambrone v JMC Holidays Ltd [2002] 2 Costs LR 294).
It is possible to withdraw a waiver of privilege. If privilege is waived, a withdrawal of a waiver of privilege may be effective if it is made before the waiver has resulted in documents being inspected by the paying party (see Goldman).
CONSEQUENCES OF ELECTING TO DISCLOSE
Any disclosure of privileged documents for the purpose of the assessment is, with limited exceptions, for that purpose only. Voluntary waiver or disclosure by a costs judge on an assessment would not prevent the owner of the document from reasserting his privilege in any subsequent context. This principle was illustrated by Lord Justice Aldous in Bourns Inc v Raychem Corp [1999] EWCA Civ 1128, [1999] 3 All ER 154:
“As to Mr Bloch’s ‘cat’ [Mr Bloch being one of the advocates], in all cases where there is disclosure upon terms the ‘cat is out of the bag’. There is no need to put it back. Documents disclosed for a limited purpose can only be used for that purpose. Of course difficulties arise, but that is not the fault of the person making the disclosure nor the law which protects the confidences of the person disclosing the documents.”
CONSEQUENCES OF ELECTING NOT TO DISCLOSE
Election not to disclose documents will place the receiving party at the disadvantage of relying on what will inevitably be limited evidence. If a receiving party elects not to disclose documents, the court ought to take into account that the receiving party may have a legitimate interest in not adducing the most obvious or complete evidence, and may prefer to rely on oral evidence rather than producing privileged legal documents (see Pamplin).
It is a general principle that if a party refuses to waive privilege it would be wrong to regard that refusal as giving rise to an adverse inference (see Reed Executive plc v Reed Business Information Ltd [2004] EWCA Civ 887, [2004] 4 All ER 942, para 36); as far as we are aware, there is no authority to suggest that this general rule does not apply to costs litigation.
DISCLOSURE IN CASES OF FRAUD
A party may be ordered to disclose privileged material to defeat fraud. Where fraud is alleged, however, the party seeking disclosure must provide strong evidence before the court will order disclosure (see Skuse v Granada Television [1994] 1 WLR 1156, relying on the principle set out in Derby & Co Ltd v Weldon (No 7) [1990] 3 All ER 161, [1990] 1 WLR 1156).
NON-PRIVILEGED MATERIAL
CPD s 40.14 is not mandatory in that it merely provides that the court may put a receiving party to his election. Where the material for which disclosure is sought is not privileged, it is (theoretically) open to the court to order disclosure pursuant to Pt 34 of the Civil Procedure Rules.
In practice, however, most documents that are relevant to an assessment are privileged. In particular, solicitors’ bills are privileged. Vice Chancellor Turner held in Chant v Brown (1862) 9 Hare 790 that this is on the ground that “an attorney’s bill of costs is, in truth, his history of the transaction in which he has been concerned”. Mr Justice Aldous (as he then was) appeared to have accepted a concession made by leading counsel that bills were privileged; in International Business Machines Corp v Phoenix International (Computers) Ltd [1995] 1 All 412 he commented: “the reasonable solicitor would have been in no doubt that the legal bills were privileged documents.” Rimer J also seems to have accepted this as being the correct position in Dickinson; he went on to say, however, that calculations made in relation to bills are not privileged.
A client care letter may be privileged depending on the nature of its contents and the context in which it is written—for general guidance see Balabel v Air India [1988] 2 All ER 246, [1988] 2 WLR 1036. While obiter, Rimer J commented in Dickinson that a letter merely setting out the terms on which the solicitor will act is not privileged.
While his comments were made in the context of costs-capping, Gray J indicated (obiter) in Henry v British Broadcasting Corporation [2005] EWHC 2503 (QB), [2006] 1 All ER 154 that after the event policies are not privileged, and that they ought to be disclosed “as a matter of course”.
Finally, it is worth emphasising that issues concerning privilege, disclosure and election ought rarely to arise in detailed assessment hearings. Nearly all such hearings proceed on the “informal” basis described in the first of these articles (see NLJ, 14 September 2007, pp 1256–57).
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
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