Peter Willers v Elena Joyce
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Andrews |
| Judgment Date | 12 April 2019 |
| Neutral Citation | [2019] EWHC 937 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2014-001272 |
| Date | 12 April 2019 |
[2019] EWHC 937 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
BUSINESS LIST (Ch D)
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HONOURABLE Mrs Justice Andrews DBE
Case No: HC-2014-001272
and
Paul Mitchell QC and Tom Shepherd (instructed by Laytons LLP) for the Applicants
Jamie Carpenter (instructed by RPC) for the First and Second Respondents
Patrick Lawrence QC (instructed by Kennedys) for the Third and Fourth Respondents
Hearing dates: 26 and 27 March 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
INTRODUCTION
This is an application to determine the admissibility of evidence (“the Contested Material”) on which the applicants, the executors of the late Albert Gubay (“the Executors”), wish to rely in an application for costs against the respondents under s.51 of the Senior Courts Act 1981. The Contested Material comprises references made in the course of inter-solicitor correspondence in September 2018 marked “Without Prejudice Save As to Costs” (“WPSAC”) to what was said and done in the course of settlement discussions at and shortly after a mediation in February 2017, which were agreed at the time to be “Without Prejudice”.
The issues that I have to consider are (i) whether the “Without Prejudice” rule applies on the facts of the present case; (ii) if it does, whether the circumstances fall within a recognised exception to the rule or give rise to a principled and incremental extension of such an exception; and (iii) whether there has been a waiver which precludes an objection from being taken to the Contested Material being used in evidence in the costs application.
I have had the advantage of receiving cogent skeleton arguments that were developed in oral submissions by counsel. I have taken all their submissions, for which I am grateful, into account in reaching my decision. However, I did not find it necessary to rehearse all the arguments in this judgment.
BACKGROUND
The respondents (collectively, “the Lawyers”) are the solicitors (“De Cruz”) and leading and junior counsel (“the Barristers”) who represented the claimant, Mr Willers, in these proceedings against Mr Gubay, and subsequently his estate, for malicious prosecution and abuse of process (“the Malicious Prosecution action”). This was the first action of its kind to go to trial in this jurisdiction. Indeed, the existence of a cause of action for malicious prosecution of civil proceedings was only established when the case went to the Supreme Court on appeal from an order striking out Mr Willers' claim: see Willers v Joyce and another [2016] UKSC 43 [2018] AC 779.
The underlying action which was alleged to have been brought maliciously was a claim against Mr Willers by a company called Langstone Leisure Ltd (“the Langstone action”), which was a member of the Anglo Group of companies through which Mr Gubay's businesses were operated (as more particularly described in the judgment of Rose J in these proceedings [2018] EWHC 3424 (Ch)).
The Lawyers had also represented Mr Willers in the Langstone action. They did so under conditional fee agreements (CFAs). Langstone Leisure Ltd discontinued that claim and was ordered to pay Mr Willers' costs. However, at the detailed assessment in November 2014 the costs judge ruled that the total costs expended by Mr Willers (just over £3.4 million, including the agreed uplift under the CFAs) were disproportionate, and that various elements of the costs he was claiming should be disallowed or reduced. Following that ruling, the claim for costs was settled for £1,450,000, which (subject to possible arguments about the terms of the CFA) left Mr Willers liable for a shortfall of at least £2 million net of any interest in respect of the Lawyers' fees and disbursements.
In the Malicious Prosecution action, Mr Willers was seeking to recover the shortfall as damages from Mr Gubay's estate, though he also claimed damages under other heads.
The Lawyers who represented Mr Willers in the Malicious Prosecution action had a substantial financial interest in its outcome. That interest went beyond the realistic prospect faced by any lawyers acting for an impecunious client that they would not be paid their fees incurred in that action unless their client succeeded and recovered them pursuant to an order for costs against the Executors, or else reached a settlement that was large enough to enable him to pay them. They had a direct interest in the damages, to the extent that they comprised the indebtedness which their client had already incurred in respect of their fees in the Langstone action, and which he was clearly unable to pay from his own existing limited resources.
The amount claimed in the Malicious Prosecution action as damages in respect of Mr Willers' pre-existing indebtedness to the Lawyers was approximately £3.5 million. In the course of the hearing before me, counsel for De Cruz, Mr Carpenter, on instructions, volunteered a breakdown of that figure in order to correct what he said was a mistaken inference drawn by the Executors' legal representatives that the difference between that figure and the shortfall figure comprised interest. The information given to the court by Mr Carpenter on instructions was set out in a witness statement from Mr De Cruz which was served on 27 March 2019. I had directed the service of that witness statement in order to ensure that there was an accurate contemporaneous record of that information.
Unfortunately, that set a hare running. Evidence in response was served by the Executors' solicitor, Mr Thomas of Laytons, which challenged the accuracy of Mr De Cruz's evidence by reference to what was said in statements of case, correspondence and fee notes at earlier stages of the history of this complex litigation. This in turn gave rise to a flurry of post-hearing evidence, arguments and counter-arguments, none of which I had invited, and to which I eventually had to put a stop. Whilst the accuracy of Mr De Cruz's evidence may be the proper subject of argument on some future occasion, the exact composition of the £3.5 million has no bearing on the admissibility of the Contested Material. I will therefore say nothing further about it.
The parties to the Malicious Prosecution action engaged in mediation in February 2017 and again in 2018 shortly before the trial, which began in October that year, but they were unable to reach agreement on settlement.
In a long and comprehensive judgment handed down on 13 December 2018, [2018] EWHC 3424 (Ch), Mrs Justice Rose dismissed Mr Willers' claims in the Malicious Prosecution action. She ordered Mr Willers to pay the Executors' costs, to be the subject of detailed assessment on the standard basis unless agreed. She directed him to make a payment on account of those costs in the sum of £1 million by 31 January 2019.
Mr Willers was subsequently refused permission to appeal and a stay of execution by the Court of Appeal. He has not complied with the order for an interim payment. He does not have the means to do so, and never had. At the time when he commenced the Malicious Prosecution action, his only asset of any value (apart from claims for damages against Mr Gubay/Mr Gubay's estate in this jurisdiction and in the Isle of Man) was his share of the equity in his home, which was heavily mortgaged. It now appears that at some juncture that was charged in favour of De Cruz.
There was a hearing before Rose J on 20 December 2018 to consider an application made by the Executors to join the Lawyers as parties under CPR 46.2 for the purposes of making a claim for costs against them. The application was supported by a witness statement of Mr Thomas dated 14 December 2018. It was the 11 th witness statement that he had made in the Malicious Prosecution action. In paragraph 41 of that statement Mr Thomas explained that his clients were seeking an order for their costs to be paid on the indemnity basis by the Lawyers because they had a direct personal interest in the outcome of the proceedings and were in a position to influence that outcome, despite ostensibly being cloaked in the neutral garb of officers of the court.
The Executors' case, as summarised by Mr Mitchell QC and Mr Shepherd, is that the Lawyers each:
1. had a direct personal financial interest in the outcome of the malicious prosecution action;
2. provided substantial financial support to Mr Willers in the conduct of the Malicious Prosecution action by (i) failing to enforce payment of the sums allegedly due to them under the CFAs in connection with the Langstone action, and (ii) continuing to provide legal services to Mr Willers in connection with the Malicious Prosecution action without requiring [staged] payment or entering into any agreements regarding the late payments of their fees, or into any further CFAs; and
3. had a very significant influence over the strategy for the conduct of the litigation and, significantly, had a large amount of control over their client's ability to settle the Malicious Prosecution action and the terms on which he could do so.
The facts relied on in respect of each of these limbs of the argument were addressed in earlier passages in Mr Thomas's 11 th witness statement. Some days after that statement was served, the legal representatives of the Lawyers expressed the view that some parts of the material on which he sought to rely was subject to the “Without Prejudice” rule, and...
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