NATURAL JUSTICE — Bias — Apparent bias — Judge finding claimants’ expert witness failing to understand duty to court as expert witness and potential vulnerability to wasted costs order — Outspoken criticism by judge of claimants’ solicitors’ handling of case prior to order for stay of proceedings — Judge refusing claimants’ solicitors’ application to recuse himself from hearing application for wasted costs and finding prima facie case of breach of professional duty — Whether appearance of bias — Whether finding of prima facie breach to be set aside Mengiste and another v Endowment Fund for the Rehabilitation of Tigray and others [2013] EWCA Civ 1003; [2013] WLR (D) 337 CA: Arden, Patten, McFarlane LJJ: 14 August 2013 The judge who had heard a substantive application would almost always be the right judge to deal with consequential issues as to costs, even if he had made findings adverse to a party in the course of reaching his conclusion. However, exceptional circumstances might arise where there was apparent bias stemming from the facts of the case which meant that the judge should have recused himself from dealing with the issue of costs. There was no conflict between the principles applying on a recusal application and an application for a wasted costs order based on criticisms made in a judgment. The Court of Appeal so held allowing the appeal of Rylatt Chubb, solicitors to the claimants, Mulugeta Guadie Mengiste and Addis Trading Share Co, against the judgments of Peter Smith J (1) dated 26 March 2013 [2013] EWHC 857 (Ch) when he had refused the solicitors’ application to recuse himself from the hearing of a wasted costs order brought by application of the defendants, Endowment Fund for the Rehabilitation of Tigray, Addis Pharmaceutical Factory Place and Mesfin Industrial Engineering plc, and (2) dated 1 May 2013 [2013] EWHC 1087 (Ch) when he had found that the defendants had established a prima facie case that the solicitors pay some or all the costs of the claim (stage 1 of a wasted costs order). The court set aside the judge’s ruling on the wasted costs application, but dismissed the solicitors’ appeal on the basis that no wasted costs application should be made in the future. The claimants, who held a substantial equity investment in an undertaking in Ethiopia, alleged that the defendants in proceedings in Ethiopia had fraudulently deprived them of that investment in those proceedings. Execution was levied on their investment which was sold to the defendants who were their partners in the undertaking. On the basis of new material the claimants brought a claim for compensation in England, and the defendants sought to stay the proceedings. It was common ground that Ethiopia was the natural forum for the action to proceed, but the claimants feared an unfair trial. Peter Smith J stayed the action on 22 March 2013 [2013] EWHC 599 (Ch) on jurisdictional grounds. In his judgment he rejected almost all of the evidence of the claimants’ expert witness on Ethiopian law and found that the expert, although honest and inexperienced, had failed to comply with the rules of court relating to expert witnesses; nor had he realised he might be vulnerable to a wasted costs order. In particular, the judge made clear and outspoken criticisms of the claimants’ solicitors for the poor quality of the expert’s evidence, and that the solicitors failed to explain to him his duties and potential liabilities. ARDEN LJ said that the doctrine of judicial recusal was a subject of wide importance: see Hammond, Judicial Recusal: Principles, Process and Problems (2009). From Porter v Magill [2002] 2 AC 357, para 102 the established test for apparent bias was, if a fair-minded and informed observer, having considered all the facts, would conclude that there was a real possibility that the judge was biased, the judge had to recuse himself. By section 51(6) and (7) of the Senior Courts Act 1981 (as substituted by section 4(1) of the Courts and Legal Services Act 1990) a court might make a wasted costs order, upon application, against a party’s legal representative for payment of the applicant’s costs incurred as a result of the representative’s improper, unreasonable or negligent act or omission. The applicant had to satisfy the court that there was a strong prima facie case that the representative was guilty of a significant breach of professional duty, and that costs were incurred as a result of the breach (stage 1). The judge had considered that there was an inevitable collision between the principle of a wasted costs order and an application for recusal, because the former could not be applied for unless there was some criticism of the party or his representative. It was submitted on behalf of the solicitors that apparent bias was shown by the circumstances: the judge made findings against them without hearing evidence as to what they had done and without prior warning; the criticisms made were wholly unnecessary; reliance was placed on Oni v NHS Leicester City [2013] ICR 91 and In re Freudiana Holdings Ltd [1995] CA Transcript No 1778; The Times, 4 December 1995 where the Court of Appeal had held that the case was exceptional enough to justify the trial judge recusing himself from hearing a wasted costs application. Her Ladyship’s conclusion was that the instant case was exceptional and that there was apparent bias stemming from the facts of the case: by applying the test in Porter v Magill the judge should have recused himself from hearing the wasted costs application. His criticisms were not necessary to enable his evaluation of the expert’s evidence when the only issue that needed to be decided was whether that evidence should be accepted. Nor did he leave the door open for the possibility of some explanation when he had not heard submissions from the solicitors, which gave rise to an impression of bias. Furthermore, the criticisms were repeated on several occasions in the stay judgment and the recusal judgment. On the basis of the conclusion reached, the judge’s ruling on the wasted costs application had to be set aside. Her Ladyship also gave reasons why the claimants’ solicitors were unable to show that no judge could have concluded that an application for a wasted costs order should have been made, and dismissed the appeal in that respect. PATTEN LJ and MCFARLANE LJ agreed. Appearances: Graeme McPherson QC and Richard Liddell (instructed by Reynolds Porter Chamberlain LLP) for the former solicitors for the claimants; Andrew Spink QC and Oliver Assersohn (instructed by MS-Legal Solicitors) for the defendants; the claimants were not represented. Reported by: Robert Rajaratnam, Barrister.
Posted on: Fri, 23 Aug 2013 16:09:21 +0000
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