Thomas Watts & Co (A Firm) v Smith [1998] EWCA Civ 468 (16 March 1998)

The litigation takes the form of an action by Thomas Watts & Co. against Dr Smith for remuneration for fees which they say are due to them for services which they rendered Dr Smith as his solicitors mainly in contentious proceedings, which I will identify more particularly in a moment, but partly in other matters as well. The contentious proceedings consisted in the main part of a slander action. Dr Smith is, as I have said, a doctor. He was in practice in Northampton. He had a partner, a lady named Dr Houston. Dr Houston made slanderous remarks about Dr Smith, her partner, in front of patients at the practice and, as I understand it, other people as well, such as staff of the practice. The slanderous allegations had a sexual aspect to them. They were plainly hurtful and potentially professionally very damaging to Dr Smith. It is not surprising that Dr Smith did not feel himself able simply to shrug them off. He felt compelled to commence an action for slander against his partner in order to clear his name. This understandable reaction was made the more necessary by a considerable degree of publicity that seems to have attended the falling out of the two doctors. In particular, the excitement of the press was raised by the nature of the slanderous remarks that Dr Houston was making about Dr Smith. So a slander action was commenced.

Dr Smith was represented by Thomas Watts & Co. In the main, or perhaps entirely, his dealings seem to have been with Mr Thomas Watts. The action was a difficult and messy one with various developments from time to time occurring which took it outside the ordinary course of what I suppose is usually a rather messy type of litigation, namely slander actions. There were questions raised about the relationship between Dr Houston and a certain police officer. There were worries occasioned to Dr Smith by the mysterious disappearance from his surgery premises of patient notes. Dr Smith believed that a hate campaign was being organised against him and was evidenced by the receipt of abusive anonymous messages, both in the form of letters and on the telephone.

From time to time, in the progress of the slander action, Mr Watts informed Dr Smith of the costs that had been so far incurred and were owing to his firm. Substantial payments on account were from time to time made by Dr Smith. It is plain from some of the correspondence that Dr Smith was worried by the costs implications of the litigation. He sought some reassurance from his solicitor, from Mr Watts, about these costs implications. Mr Watts informed him of the current costs that had been incurred but at no stage attempted an estimate of what the total costs of the litigation might be. Mr Watts' failure in that regard has been the basis of a complaint of negligence by Dr Smith. Mr Watts has explained his omission to provide an estimate of costs by referring to the complexity and unpredictability of the proceedings themselves. It was simply not possible, Mr Watts has submitted, to know what developments there might be, what costs might be necessary in preparation of the case, how long the case might be and what the eventual bill of costs would turn out to be.

The case came to court before a judge and jury and judgment was given on 25th October 1991. The case was an unreserved success. The jury found for Dr Smith in damages amounting to £150,000. That was a record award for a slander action. The judge, Otton J, entered judgment for Dr Smith in that amount with costs. There were immediate difficulties regarding collecting the damages, let alone any costs, which would first have had to be taxed, from Dr Houston. It was believed that she was endeavouring to divest herself of assets in order to make herself less amenable to satisfaction of the judgment than she would otherwise have been. So the classic solution, the obtaining of a Mareva injunction was put in hand. A Mareva injunction was obtained against Dr Houston. This was a post-judgment Mareva injunction. But Dr Houston gave Notice of Appeal. An application for security for costs of appeal was made against her. She was ordered to pay by way of security for costs £7,000, insofar as the appeal was an appeal against quantum only and £22,000 if the appeal was to be against liability as well. In the event she provided £7,000 as security for costs and so the appeal on quantum proceeded. The appeal on liability fell away for want of the sum ordered as security, the £22,000, to be paid.

In December 1991, however, the expectations of the successful plaintiff, Dr Smith, of recovering, after the process of appeal had been exhausted, the rewards for his determination to clear his name by means of the slander action were placed at risk by a tactic adopted by Dr Houston, namely, the presentation of her own petition for bankruptcy. She presented her petition in December 1991. At some point not long thereafter, a bankruptcy order was made on her own petition. In the statement of affairs, which she lodged for the purposes of the petition, she estimated her liabilities to Dr Smith at £300,000. That figure was based upon the £150,000 damages award, which was of course under appeal, and, no doubt, some ball park figure for the amount of Dr Smith's costs which in due course she might be held liable to pay. She had certain other liabilities as well but her liabilities to Dr Smith represented about 95 per cent of the total of the liabilities disclosed in the statement of affairs. Her assets, as disclosed, were in the region of £200,000.

One of a number of the complaints made by Dr Smith against his solicitor Mr Watts is that Mr Watts did not take steps to have the bankruptcy annulled. There is no doubt that Mr Watts gave consideration to the possibility and desirability of making such an application. On 19th December 1991 he had a meeting with a Mr David Evans, described as an insolvency practitioner, who was a member of a firm of accountants, Pannell Kerr & Forster. I believe Mr Evans was not himself a qualified accountant. He was described as an insolvency practitioner. Pannell Kerr & Forster were Dr Smith's own accountants.

It is plain from the minutes of the meeting of 19th December 1991 that serious consideration was given to the question whether an annulment of the bankruptcy should be applied for. The pros and cons were discussed. The prospects of Dr Smith obtaining something by way of a dividend from the bankruptcy were plainly discussed as well. Mr Watts has told me that the advice given by Mr Evans was that, on balance, it would be in Dr Smith's interests to allow the bankruptcy to continue rather than to make a speculative application for its annulment. The application which would put the applicant under the burden of showing that Dr Houston was solvent, with assets that exceeded her liabilities.

It is somewhat astonishing to notice that in the minutes of the meeting Mr Evans is recorded as expressing the guess that the costs of the trustee in bankruptcy would probably be in the region of £2,000 - £3,000, in addition to what were described as "very small scale fees" due to be paid to the Official Receiver. The decision was taken not to attempt to annul the bankruptcy but to hope for the recovery of some substantial dividend from it. In the meantime preparations for the hearing of the appeal were continuing.

By this time, into 1992, the relationship between Mr Watts and Dr Smith had already deteriorated. It is plain from the correspondence that Mr Watts was extremely unhappy at the lack of funds being provided to his firm by Dr Smith on account of costs already incurred. He had received some substantial sums, if looked at alone, but the bills he had submitted showed very substantial sums still unpaid. He sought assurances from Dr Smith that the outstanding balance would be dealt with by payments on account of £2,000 per month. An agreement to that effect was reached and for some time Dr Smith did pay £2,000 a month. But then those payments failed. For a while it seems a sum of £1,000 a month was paid and then those payments too came to an end. By the spring of 1993 Mr Watts had reached the position in which he was not prepared for his firm to continue acting in the appeal unless he were paid the amount outstanding as shown on the bills he had delivered to Dr Smith. He therefore served on Dr Smith a formal notice under section 65(2) of the Solicitors Act 1974, as a result of which he then applied to and did come off the record in the proceedings. Dr Smith was then a litigant in person.

There was some form of legal representation that Dr Smith from time to time seems have to had. A firm called Stanleys advised him at one time following the departure, as his solicitors, of Thomas Watts & Co. I am not sure exactly at what time Stanleys were advising but they appear to have been advising him in connection, amongst other things, with the costs dispute between Thomas Watts & Co. and Dr Smith. The importance of that is that, rather like the dog that did not bark in the night, there was no application made on behalf of Dr Smith for the bills that Thomas Watts & Co had submitted to be taxed.

The appeal eventually came on for hearing on 30th November 1993. I am told that Dr Houston was represented by counsel acting pro bono . Be that as it may, Dr Smith was not. He was in person at the hearing. The Court of Appeal at the hearing reduced the £150,000 down to £50,000 but made no order as to costs. The hearing before the Court of Appeal drew a line beneath the slander action between Dr Smith and Dr Houston. It ended with a judgment debt owing by Dr Houston to Dr Smith of £50,000 and an order for Dr Smith's costs of the trial, taxed on a standard basis, to be paid by Dr Houston.

Let me explain what the property action was about. The surgery premises at which Dr Smith and Dr Houston worked in as partners was vested in them jointly for the purposes of the partnership business. Dr Houston commenced an action ("the property action") seeking an order under section 30 of the Law of Property Act 1925 that Dr Smith concur with her in selling the property. Dr Smith did not want the property sold; he wanted to continue to practice from the premises and wanted some other solution to the dissolution of the property relationship between himself and Dr Houston. Thomas Watts & Co. acted for him in that action. There were some tactical problems relating to the time at which the property action should be bought on for trial; should it be before or after the slander action? Eventually it was decided that the slander action should be allowed to come on first. In due course the property action was the subject of a settlement between the parties with no order as to costs. The 2nd June 1993 invoice charged a total of £17,284.32 as costs in connection with the property action. The invoice refers to:

"For continuing to act for you in this case, including the defendant's attempts to have the Mareva injunction set aside, her bankruptcy, her campaign with the press, her attempts to set up a fighting fund, her malicious falsehoods, her appeal and her variety of attempts to thwart you. Your acquisition of her half-share of the surgery, of the mortgage attaching thereto and collaterally secured endowment policy. For dealing extensively with the NFSHA and other medical authorities, for dealing with this matter generally during the 18 month period including attendances."

On 28th September 1994 Thomas Watts & Co. issued a writ and a Statement of Claim for the total of the sums claimed in the three invoices, namely £186,265.21 with credit given for £2,200 representing payments made on account between October 1993 and September 1994. So the total amount claimed was £184,000 odd. In addition interest was claimed.

The service of the writ and Statement of Claim was followed by an application under Order 14 of the Rules of the Supreme Court for summary judgment. It is of interest to notice that the summary judgment summons simply claimed payment of the amount as claimed in the Statement of Claim with interest, and did not include any alternative claim for an interim payment pursuant to Order 29 Rules 10 and 12 of the Rules of the Supreme Court.

The Order 14 application came before Master Hodgson on 13th January 1995. The Master gave summary judgment for a sum of £67,000 together with £7,800 odd for interest. The £67,000 was described as being "part of the claim herein". The Master further ordered that the defendant might defend the action as to the residue and ordered that the defence and any counterclaim be served within 28 days. He also gave directions for the service of a reply.

I would, for my part, question whether an order in that form really made sense. The plaintiff solicitors' claim was not for the purposes of the order broken down into specific identifiable parts. It was not as though summary judgment were given on the property action costs claim with leave to defend for the rest, or on the slander action costs claim with leave to defend for the rest. The order was simply that judgment be entered for the plaintiff for £67,000 with leave to defend for the rest. But any defence there might be as to the rest would , save as to quantum, apply also to the £67,000. It seems to me that what the Master was in effect doing was concluding that the minimum amount that the plaintiff would succeed in recovering would be £67,000 and that, accordingly, judgment should be entered for that sum, as being a sum that in any event the plaintiff was bound to recover. If that was the basis on which the order was made, the order could have been entirely appropriately made, in my opinion, under Order 29 Rule 12.

the court may, if it thinks fit, without prejudice to any contentions of the parties as to the nature or character of the sum to be paid by the defendant, order the defendant to make an interim payment of such amount as it thinks just, after taking into account any set-off, cross-claim or counterclaim on which the defendant may be entitled to rely."

Whether my analysis of the nature of the order being made by Master Hodgson is right or not, the order he made was as stated. There was then an appeal by Dr Smith to the judge. The appeal was heard on 7th February 1985 by Sir John Wood sitting in chambers. Sir John Wood dismissed the appeal. A transcript of his judgment is before us. It is interesting to notice the description given by Sir John of the way in which Master Hodgson had reached the figure of £67,000. Sir John Wood said this:

"I now understand how it is that the learned Master reached the figure of £67,000, as to which I confess I have had some difficulty. I am now persuaded that it was reached in this way. The learned Master took the view, and with his experience it is one that I am happy to adopt, that not more than 50% could have been taxed or argued off the £184,000; £90,000 in fact had been paid previously, so the total figure was £270,000. Therefore, if one halves £184,000, one reaches £92,000, but there would have been the costs of taxation (if taxation had taken place), namely £25,000. He therefore deducted the £25,000 from £92,000 and that left £67,000. That seems to me, with respect to the learned Master, to be an admirable, logical and sensible way of dealing with the matter, and I can find no reason here to disagree with the decision of the learned Master. This is an appeal from it and a re-hearing."

I am not so confident as was the judge below that the way in which the learned Master dealt with the matter was the logical way of dealing with it. I can quite follow his attempt to identify the minimum amount which would be left of the £184,000, after a process of taxation or assessment had been applied to it. He took that to be 50 per cent, which brought the figure down to £92,000. I am afraid I do not follow the logic of deducting from the £92,000 a further £25,000 on account of the estimated costs of a taxation which was not going to take place. It perhaps does not matter because there was no cross-appeal by Thomas Watts & Co. against the Master's order, and the deduction of the £25,000 produced a result favourable to Dr Smith. As I have already said, it seems to me that what the learned Master was in fact doing was going through a process of reasoning relevant to the identification of a suitable sum to stand as an interim payment, being an amount that the plaintiff was bound to recover whatever success in challenging quantum the defendant, Dr Smith, might have.

There was no stay attached to Master Hodgson's order of 30th January and, as the appeal was dismissed by Sir John Wood, there was no stay added at that stage. The plaintiff solicitors took certain garnishee proceedings in order to try and obtain payments towards the judgment debt in their favour. Sums were recovered. I am not sure of the amounts.

Master Hodgson having given Dr Smith leave to defend as to the balance of the claim after the £67,000 had been deducted from it, it might have been expected that a defence and, perhaps, counterclaim would have been forthcoming from Dr Smith. But those pleadings were not forthcoming. So an application was then made by the plaintiff firm for judgment in default of defence for the balance of the sum claimed. On 16th March 1995 Master Hodgson gave judgment in default for the balance of the claim, a sum of £117,000 or thereabouts. He ordered a stay of execution. In ordering a stay of execution Master Hodgson did not indicate how long the stay was to continue. The order was simply in these terms:

Then, on 8th November 1995, an application was made to the Registrar of Civil Appeals for security for costs of the appeal. The Registrar made an order for security for costs. It was a fairly complex order, not a simple order for payment of a specified sum by way of security. I do not think I need take time to describe the nature of the order because nothing now turns on its content and it was subsequently set aside. But I have to mention it because it plays a part in the procedural history of this matter, and explains a subsequent important Court of Appeal order.

The Registrar's order for security, as I have said, was made on 8th November 1995. An application was made by Dr Smith to set aside the security for costs order. That application came before Saville LJ on 8th May 1996 who dismissed it. There was then an application to the full court to set aside the security for costs order that the Registrar had made. That application came before the Court of Appeal on 14th October 1996. It was an occasion on which Mr Watts was not present. An explanation for his absence was subsequently given. It was not a matter of choice on his part to absent himself, there were difficulties which had conspired to prevent his presence. So Dr Smith alone was before the Court. The Court consisted of Nourse, Auld LJJ and Sir Patrick Russell. The Court agreed with Dr Smith that the security for costs order should not have been made in the form in which it was made. So the Court of Appeal gave Dr Smith leave to appeal against the security for costs order, treated the appeal as being before them and allowed it. At that point the security for costs order had been set aside. Dr Smith had already been granted leave to appeal and, indeed, already had served a Notice of Appeal. The Notice of Appeal had been served on 22nd February 1995, and is the Notice of Appeal now before us. But the Court of Appeal order of 14th October 1996 also granted a stay of Master Hodgson's order of 30th January 1995, that being the order under appeal, and in respect of which appeal the security for costs order had been sought. Having dealt with that matter, the Court of Appeal went on to grant a stay, conditionally on a defence and counterclaim being served, of Master Hodgson's order of 16th March.

In my respectful opinion, that part of the Court of Appeal's order was irregular. The order of 16th March 1995 was already the subject of a stay, the stay granted by Master Hodgson when he made the order and which stay had remained in force. But the particular point which seems to me to render the Court of Appeal's stay order irregular is the fact that the order of 16th March 1995 had not been appealed and was not before the Court of Appeal. The Court of Appeal has a statutory jurisdiction to deal with any appeal that has been made and is brought before the Court. When that happens the Court has power to make any order that the judge in the court below could have made. But the judge below was the Registrar of Civil Appeals, he being the person who had made the security for costs order. It does not seem to me to be possible to regard the order of 16th March 1995 as before the Court of Appeal on 14th October.

I have already said that Mr Watts was not present on 14th October 1996. He then applied to the Court of Appeal for a rehearing of the appeal. He asker a differently constituted Court of Appeal to reverse the decision come to by Nourse LJ's court. This application for a reopening of the appeal came before the Master of the Rolls and Waite and Henry LJJ. The Court refused Mr Watts' application for a rehearing of the appeal.

The next thing that happened was that on 7th November 1996 Dr Smith made an application to the High Court for leave to appeal out of time against the order of 16th March 1995. The application was heard by Mr Leyton-Williams QC, sitting as a deputy judge of the Queen's Bench Division. He gave Dr Smith leave to appeal out of time and granted a stay of the order of 16th March 1995, pending appeal. So there were at this point three orders for a stay of the 16th March 1995 order. The first had been granted by Master Hodgson when he made the order. The second had been granted by the Court of Appeal on 14th October 1996 and the third was granted by Mr Leyton-Williams on 7th November 1996.

I should now mention an application issued by Dr Smith on 7th November 1996. This was an application to the Court of Appeal for leave to appeal out of time against the order of 16th March 1995. This, on any footing, was an irregular application which could lead nowhere. An appeal from the 16th March 1995 order of Master Hodgson would lie to a judge of the High Court. A decision on the appeal by a judge of the High Court could, with leave, be appealed to the Court of Appeal. But it would not be possible to directly appeal Master Hodgson's order of 16th March 1995 to the Court of Appeal. That that is so is quite clear, in my judgment, from the terms of Order 58 of the Rules. Order 58 Rule 1(1) provides as follows:

The order made by Master Hodgson on 16th March 1995 does not come within either of the categories referred to in Rule 2 as enabling an appeal to be made direct to the Court of Appeal. So one is back with Order 58 Rule 1, "an appeal shall lie to a Judge in Chambers". An appeal cannot be brought, in my judgment, from Master Hodgson's order direct to the Court of Appeal. The Court of Appeal, in my opinion, has no jurisdiction to entertain such an appeal.

I have some considerable sympathy with Dr Smith in this procedural tangle in which he has become enmeshed. It would tax, in my view, many, if not most, lawyers. It taxed me and I believe it taxed my learned brother. But after one has gone through the story and analysed it step by step, it seems to me quite clear that any appeal from Master Hodgson's order of 16th March 1995 must go, first, to the High Court and only thereafter would the question of the Court of Appeal entertaining an appeal arise.

On 27th January 1998 Thomas Watts & Co. applied to the High Court to set aside the stay that had been granted by Mr Leyton-Williams on 7th November 1996. The ground for the application was that no Notice of Appeal from Master Hodgson's order of 16th March 1995 had yet been issued. Dr Smith had simply not appealed. He had obtained leave to appeal but had not appealed and, accordingly, a stay on the execution of the order ought to be set aside.

Laws J heard the application on 12th February 1998. He was plainly puzzled about the status of the stay granted by the Court of Appeal on 14th October 1996. He expressed the opinion that, when was all was said and done, that stay must have been subsumed by the stay granted by Mr Leyton-Williams. So he regarded himself as having power, if satisfied that it was a step that ought to be taken, to set aside the stay. That was the conclusion to which he came. He set aside the stay granted by Mr Leyton-Williams. He made it clear that in doing so he was regarding himself as also able to deal with the stay that the Court of Appeal had purported to order on 14th October 1996. No one seems to have noticed that Master Hodgson himself had granted a stay and nobody had actually applied to have that stay set aside.

The success of Thomas Watts & Co. in having the stay removed was followed by a number of garnishee applications made by the plaintiff, with a view to obtaining payments towards the sum ordered to be paid by the order of 16th March 1995. Various sums have been recovered by the plaintiff as a result of the garnishee proceedings. The position, as it stands at the moment, is that following the first of Master Hodgson's orders, the order of 30th January 1995, garnishee proceedings were taken and a sum of, I am told, £1,600 has been recovered. Then this year there has been a second tranche of garnishee proceedings taken to recover sums in respect of the £117,000 odd judgment given on 16th March 1995. The amounts recovered in each of these series of garnishee applications is not quite clear at the moment. The actual amounts do not matter. I will come back to the amounts in due course.

One of the applications before us today is an application by Dr Smith for the committal of Mr Watts for contempt of court in seeking to execute judgments in the face of a stay granted by the Court of Appeal. The basis of that allegation is that the plaintiff solicitors have issued garnishee proceedings, following the lifting of the stay by Laws J, in order to try to recover part of the sum of £117,000 odd ordered to be paid by Master Hodgson on 16th March 1995.

For a number of reasons that application is bound, in my judgment, to fail. It is bound to fail because it could hardly be contempt for Mr Watts to make an application pursuant to the lifting of a stay by a High Court judge. Whether or not Laws J was justified in regarding himself as able to override the stay granted by the Court of Appeal, it could not be described as contempt for Mr Watts to proceed on the footing that Laws J had the powers that he was purporting to exercise. But there is a more fundamental objection to the committal proceedings. It cannot, in my judgment, ever be a contempt of court for an individual to make an application to the court. It may be an abuse of process, and if it is an abuse of process it will receive very short shrift. But it is not a contempt of court to make in due form an application to the court.

In making the applications for garnishee orders on which the committal application is founded, the plaintiff firm, and Mr Watts personally, were exercising the right of any citizen to apply to the court for relief. The court either grants it or it does not grant it, but to do so cannot be described as a contempt of court. So may I start, therefore, after this lengthy introduction, by dismissing the committal for contempt of court application.

There is also before us an application by Dr Smith for leave to place additional evidence before us. Dr Smith's application is based upon the proposition that the conditions required by Ladd v Marshall for the admission of additional evidence are all satisfied. I am not clear that they are but we have not invited argument on that application because, having read the file containing the evidence, it seems to me that there is nothing in it that makes any difference to any substantive matter that we have to decide. It is easier to admit the material rather than to have a technical argument as to whether or not it ought to be admitted.

May I now turn to the real matter of substance, namely Dr Smith's appeal against Sir John Wood's dismissal of his appeal against the order of Master Hodgson made back on 13th January 1995. Dr Smith's contention is that he has against the plaintiff solicitors a counterclaim, arising out of the same matters as have given rise to the solicitors' charges against him, and that will exceed the amount of the solicitors' claim against him. He contends, therefore, that he ought to receive unconditional leave to defend and prosecute his counterclaim. Let me consider the substance of the counterclaim, which is the important matter before considering what, if any, effect it ought to have in the withholding from the plaintiff an immediate judgment on a claimed debt.

Dr Smith has said that this is not the occasion for the merits of his counterclaim to be decided. He is right in that submission. He has said that provided he can show a triable issue, then summary judgment ought not to be allowed to proceed until the triable issue has been determined at trial. I would prefer to put the point that he must show an arguable case. If he has an arguable case for a cross-claim against the solicitors, arising out of the work that they did for him and in respect of which they have submitted the bills on which they are suing, then I would agree that it would be wrong to allow summary judgment to go until the cross-claim has been determined.

So I turn to consider the various heads of claim that have been contended for by Dr Smith. First and foremost, Dr Smith complains that the solicitors never placed before him an estimate of the costs of the litigation on which he was embarking, namely the slander action, so as to allow him to exercise an informed judgment as to whether or not he wished to proceed with the litigation. If, to the costs which the solicitors are in this action, the £184,000, is added to the £90,000 odd already paid by Dr Smith towards his solicitors' costs the total, a sum in excess of £270,000 is, Dr Smith comments, a horrendous figure for any ordinary citizen to be faced with. He pushes an open door, so far as I am concerned, in his protests at the costs of civil litigation and of the action in which he finds himself engaged in particular. But the costs of civil litigation cannot be laid at the door of any particular solicitor. It is partly the system that has led to this level of costs. It has had the effect that many without the backbone of Dr Smith are simply not prepared to chance their arm, and their family fortune, in litigation.

I would be prepared to accept that if it were possible for a solicitor to give a client an estimate of the costs of a proposed action, that is something that a solicitor ought to do. A client ought to be able to make an informed choice as to whether to commence civil litigation or to give up whatever his rights might be and stay out of court. Equally, I would wish to give as much encouragement as I possibly could to a practice of solicitors of quoting their clients a fixed price for litigation in which they are instructed to act. But there are some actions, there is some litigation, where neither of these courses is practicable. It is no doubt practicable in a case of a simple uncomplicated action. But an action of slander, with a background of personal animosity between defendant, the alleged slanderer, and the plaintiff, the victim, and with the other oddities, to some of which I have already made reference, that there were in this case, is not, in my view, a case in which any reasonable criticism can be made of a solicitor for failing to give a client an estimate in advance of legal costs. An estimate in advance of legal costs would have to be preceded by an estimate of how long the case would take. It would have to be preceded by a view being formed of what the issues were going to be in the case and the number of witnesses who would be called. Some actions lend themselves to those estimates, those forecasts and some do not. I find it impossible to read what I have read in the evidence (there is no dispute between the parties about this) about the slander action which Dr Smith brought against Dr Houston and to criticise Mr Watts for being unwilling to provide an estimate of costs of the litigation.

What Mr Watts did do, as is clear from the correspondence, was from time to time, and when asked, to inform Dr Smith of the costs position to date. The proposition that in going no further than that Mr Watts was in breach of a duty of care, whether in contract or tort, is not in my judgment an arguable one. I do not think there is any mileage at all in a cross-claim by Dr Smith based upon some failure on his solicitors' part sufficiently to warn him of the danger of the burden of costs that might fall on him at the end of this highly messy litigation.

Second, Dr Smith has argued that Mr Watts was negligent in failing to take steps to have Dr Houston's bankruptcy annulled. As to that, having read the minutes of Mr Watts' meeting with the insolvency practitioner, it is apparent that he gave careful thought to the question of whether an annulment would be in his client's best interests or not. He concluded that it would be preferable to leave matters as they were, rather than to embark on another piece of speculative litigation. Speculative it undoubtedly would have been and there would have been further costs incurred if an application for annulment of the bankruptcy had failed. It is relatively easy after the event to look back at the course of the bankruptcy has taken, with a negligible sum emerging as a dividend for Dr Smith and a high level of costs of the bankruptcy eating into the assets available for distribution to creditors, in order to argue, "Anything would have been better than this. The bankruptcy has done me no good, an application to annul should have been made." In my judgment, the facts of this case do not permit an arguable case of negligence in failing to apply to annul the bankruptcy to be mounted.

There are various other matters of complaint made also by Dr Smith to which I should make reference. It is alleged that Mr Watts was negligent in failing to apply to strike out Dr Houston's appeal and negligent in failing to serve a respondent's notice based upon the slanders that Dr Houston continued to utter, even after the jury had resoundingly found against her and in favour of Dr Smith at trial. There is, in my judgment, nothing in either of those allegations of negligence.

It is alleged that Mr Watts committed a breach of the duty he owed to Dr Smith in inciting Dr Smith to further litigation against newspapers and others who were publishing these post-trial defamatory comments being made by Dr Houston. There is, in my judgment, nothing in that either. Then it is said that Mr Watts was negligent in not having obtained an injunction to prevent Dr Houston continuing to defame Dr Smith. But Dr Smith was represented at the trial of the slander action by very experienced counsel, Mr Jonathan Crystal. Mr Crystal was advising as to the relief which should be sought. I can see nothing to suggest there is any arguable case at all against Mr Watts for any failure in regard to the fact that an injunction against Dr Houston was not sought.

I have read Dr Smith's affidavits in the voluminous files before the court. I have also, over the adjournment read a copy of the defence and counterclaim that was served on 25th October 1996. In my opinion there is nothing contained in those documents that constitutes an arguable cross-claim for the purpose of setting against whatever costs entitlement the plaintiff solicitors may have against Dr Smith. I turn now to matters more strictly of defence than of cross-claim.

Dr Smith has pointed to apparent inconsistencies in various documents leading up to the these bills; inconsistencies as to the rate per hour being charged by the plaintiff solicitors for partner time; inconsistencies as to the rate of markup, in some places a 75 per cent mark up is claimed and in other cases 100 per cent mark up is claimed. There are, no doubt, other matters as well in respect of which questions might reasonably be asked, and the answer to which is not apparent from the documents before the court.

It is a fact that Dr Smith never entered into any contract to pay the sums as claimed. He engaged Thomas Watts & Co. as his solicitors but was not asked to and did not agree any particular rate of remuneration. The solicitors are entitled to reasonable and fair remuneration for the work they have done. It is too late for Dr Smith to apply with any prospect of success for the bills now to be submitted for taxation. In any event, the fee payable on taxation would be a substantial addition to the costs. But the position of the plaintiff firm is not, in my judgment, one in which they can simply ask the court, without any further investigation, to underwrite the amount that they have chosen to claim in their three invoices. It may be that the amounts are reasonable. It may be that in one, or other, or several, respects the amounts are inflated. Master Hodgson thought it possible that as much as 50 per cent might, I would emphasise the word might, have been taxed off the bills had there been a taxation.

In my judgment, in a case such as this, where solicitors are applying for payment of their bill, the situation is analogous to one in which a plaintiff is applying for an unquantified sum which has to be quantified by a judicial process before judgment can be awarded for the appropriate amount. This is common in damages claims. Judgment for damages to be assessed is a very common form of order under an Order 14 application. Where a quantum merit for work done, the benefit of which has been obtained under a contract but where the contract sum has not been agreed is claimed, there may be an order for judgment to be entered for the plaintiff with the quantum to be assessed. In my judgment that is the position of the plaintiff's claim in the present case. It is no doubt too late, having regard to the terms of section 70 of the Solicitors Act 1974, for Dr Smith to make an application for taxation. But if the Court is to be asked to make an order for payment by Dr Smith, the client, of the amount claimed by the solicitors, a process of judicial assessment must, in my judgment, first take place. The judicial assessment should be carried out by a taxing master. It is the taxing masters that have the requisite expertise for that purpose.

In my opinion the order that Master Hodgson should have made would have been an order for judgment to be entered for the plaintiff firm for an amount of costs to be assessed. He could at the same time have made an order for an interim payment of the minimum that would be payable, the £67,000 as he found it, to be paid in the meantime. We have power to make any order that the court below could have made and, in my judgment, an order in that form is the order that this court should now make. I would not be prepared simply to dismiss this appeal and leave the client, Dr Smith, liable to pay the sums that the solicitors have chosen, perhaps rightly chosen but that has yet to be tested, to include in their bills.

Master Hodgson on 30th January 1995 could have dealt with the whole claim in that fashion. Sir John Wood on the hearing of the appeal could have done so as well. It follows, in my judgment, that we can do so. I would therefore be minded to allow the appeal, to allow Dr Smith leave to defend by making representations on quantum as to the amount claimed in the solicitors' bill. I would order that the amount that ought to be paid by him to the plaintiff solicitors be assessed by a taxing master and that he be entitled to enter judgment for the amount so assessed. It would be for Dr Smith to issue an appropriate summons to obtain directions for the purpose of that assessment. An order in this form requires the order of 16th March 1995 to be set aside.

As to the interim payment point, Master Hodgson as a Queen's Bench Master has great experience, second of course to the taxing masters, but nonetheless great experience, in assessing costs. He concluded that £67,000 was a sum that the plaintiff solicitors were bound to recover. Sir John Wood upheld his assessment of that sum. I would be prepared to endorse that assessment and order that an interim payment of £67,000 ought to be made by Dr Smith. But against that £67,000 must be set any recovery, or the total of all recoveries, made by the plaintiff under the garnishee proceedings that they have taken, both in 1995 and, more recently, this year. The interim payment, or part of it, may be repayable at the end of the assessment, if the figures work out that way. The sum, however, is payable forthwith after an adjustment for the recoveries under the garnishee proceedings that I have mentioned.

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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Thomas Watts & Co (A Firm) v Smith [1998] EWCA Civ 468 (16 March 1998) URL: http://www.bailii.org/ew/cases/EWCA/Civ/1998/468.html Cite as: [1998] EWCA Civ 468

England and Wales Court of Appeal (Civil Division) Decisions