Wasted costs order – Solicitor – Disclosure of documents ordered as to source of funding for purchase of property in dispute over beneficial ownership – Party making extensive redactions to documents prior to disclosure without supervision of solicitor – That party later debarred from defending applicant’s claim against him– Applicant seeking wasted costs order against other party’s solicitor – Whether proceedings protracted by solicitor’s failure to discharge duty to supervise disclosure – Application refused
In February 2008, the applicant separated from her husband, who left the matrimonial home. The company, in whose name the property was held, brought possession proceedings against the applicant. In her defence, she argued that the beneficial ownership of the property lay with her and her husband, or with the husband alone. In ancillary relief proceedings relating to her divorce, she sought to have the property transferred to her by way of a property adjustment order. In response, the company claimed that the beneficial owner was a third person, J, who had purchased the property with his own funds. J, a Swiss national who offered asset management services, was joined as a respondent to the ancillary relief proceedings.
The two sets of proceedings were heard together. The company and J were ordered to disclose documents evidencing the source of the money used to purchase the property. J, unsupervised by his solicitor, made extensive redactions to the disclosed documents; the solicitor did not retain unedited copies. One of the redacted documents, a bank statement, omitted the names of persons who had made three payments that were used to fund the purchase. J asserted that he had a duty to withhold an inspection of the names pursuant to his client confidentiality duties under Swiss law.
After failing to comply with an unless order made in September 2010 regarding production of documents, the company and J were barred from defending the applicant’s claim or adducing evidence in the proceedings. The court found that the applicant’s husband had funded the purchase of the property and was the sole beneficial owner and ordered an indemnity costs order against the company and J in favour of the applicant.
The applicant applied for a wasted costs order against the solicitor that had acted for the company and J. She contended that if the solicitor had discharged its duty to supervise the production of documents by J, then his refusal to give proper production of unredacted documents would have caused the solicitor to come off the record, leading the company and J to abandon their case sooner. The company and J declined to waive privilege in respect of that application.
Held: The application was refused.
A solicitor’s duty to the court in respect of the disclosure of documents required it to investigate the position carefully and to ensure, so far as was possible, that all relevant documents were fully and properly disclosed. That duty obliged it to inform the client of the existence and scope of the disclosure obligation and the need to preserve documents. The solicitor was responsible for the disclosure process and could not simply leave that task to its client: Myers v Elman [1940] AC 282 and Hedrich v Standard Bank London Ltd [2008] EWCA Civ 905; [2009] PNLR 3 applied. Its duty also applied to the redaction of any disclosable documents before they were offered for inspection. The court relied on the solicitor to carry out or at least to supervise both tasks, and the opposing party was entitled to assume that the solicitor had done so. In the instant case, the client had censored partially, without his solicitor’s supervision, the relevant parts of a relevant document. The redactions to the bank statement had made it impossible to know whether the statement might have included names that, directly or indirectly, identified the applicant’s husband as the source of the purchase moneys.
Where a client had not waived privilege, it was incumbent on the court to consider what, but for privilege, might have been said on behalf of the solicitor, both to defend and, if necessary, to mitigate any alleged misconduct: Medcalf v Mardell (wasted costs order) [2002] UKHL 27; [2003] 1 AC 120 and Brown v Bennett (wasted costs) (No 1) [2002] 1 WLR 713 applied. In the instant case, the correspondence showed that J was asserting a right under CPR 31.3(1)(b) to withhold the names on the bank statement on the ground that he was under a duty to do so by reason of his obligations of client confidentiality under Swiss law. The court was unable to conclude that his solicitor had not been presented with a plausible excuse, relating to such obligations, for its client’s refusal to provide it with a clean copy of the bank statement. A solicitor did not have to stop acting for a client whenever that client instructed it not to perform some part of its ordinary duty to the court. The solicitor had been entitled to continue acting for J provided that it made full disclosure to the applicant or the court, with J’s consent, of the extent to which, on his instructions, it had not complied with its ordinary duty to supervise the redaction process. However, the solicitor in the instant case had not adequately disclosed that matter. Therefore, the circumstances surrounding the redacted bank statement involved a breach of its duty to the court in that it had failed to supervise the redaction without making a full disclosure of those circumstances.
However, the applicant’s application for a wasted costs order failed on the issue of causation. On the evidence, the court was not persuaded that the solicitor’s breach of duty, constituted by an ongoing failure to make full disclosure of the circumstances in which the bank statement was redacted, had caused the applicant to incur any wasted costs or other loss.
Nigel Hood (instructed by Speechly Bircham LLP) appeared for the defendant; Charles Phipps (instructed by Mills & Reeve LLP) appeared for the claimant’s solicitor, DWF LLP.
Sally Dobson, barrister
