Solicitors must pay costs of improper claim

LAW REPORT 3 January 1996

Tolstoy-Miloslavsky v Aldington; Court of Appeal (Lord Justice Rose, Lord Justice Roch and Lord Justice Ward); 13 December 1995

There was no jurisdiction to make an order for costs against a solicitor solely on the ground that he acted without fee. His duty to the court was the same whether he was paid or not, and simply by acting without payment he did not put himself in the position of a "third party funder" of litigation.

The Court of Appeal affirmed, though for different reasons, an order made by Mr Justice Collins on 16 December 1994, requiring the appellants, Shilling & Lom, a firm of solicitors acting for the plaintiff, Count Nikolai Tolstoy-Miloslavsky, to pay 60 per cent of the costs incurred by the defendant, Toby Low, Baron Aldington, in proceedings in which Count Tolstoy claimed that Lord Aldington had used fraud and perjury to win a libel action in 1990, in which he had been awarded pounds 1.5m in damages and costs against Count Tolstoy and his co-defendant Nigel Watts.

The essence of the libel was that Lord Aldington was a major war criminal responsible for the massacre of 70,000 people in May 1945. After a two- month trial, Lord Aldington's reputation was vindicated, but in financial terms it was a Pyrrhic victory: Nigel Watts only paid pounds 10,000 and Count Tolstoy, having had himself made bankrupt, paid nothing.

The present proceedings, in which Count Tolstoy sought to set aside the libel judgment on grounds of fraud and perjury, were begun by a writ issued by Shilling & Lom, who have acted for Count Tolstoy since 1991. Legal aid was not applied for and both counsel and solicitors acted for Count Tolstoy free of charge.

Lord Aldington successfully applied to have this action struck out, on the grounds that it was frivolous, vexatious and an abuse of process. He then applied for an order that Count Tolstoy's lawyers pay his costs, on the grounds (a) that they were "wasted costs", as defined in section 51(6) and (7) of the Supreme Court Act 1981 (as amended by the Courts and Legal Services Act 1990), which the solicitors should pay, their conduct having been "improper" and "unreasonable"; and (b) that by agreeing to act without fee, the solicitors put themselves in the position of third party funders and should be made to pay the costs pursuant to the general discretion conferred by section 51(1) and (3) of the Act.

The judge rejected the first ground but made his order on the basis of the second ground.

Guy Mansfield QC and Adrienne Page (Barlow Lyde & Gilbert) for Shilling & Lom; Charles Gray QC (Allen & Overy) for Lord Aldington; Duncan Matheson QC and Gregory Chambers (Diane Burleigh, and Janice Bye) for the Law Society and the Bar Council.

Lord Justice Rose said the judge reached the right conclusion by the wrong route. Section 51(1) and (3) did not confer jurisdiction to make an order for costs against legal representatives when acting as legal representatives.

There were only three categories of conduct which could give rise to an order for costs against a solicitor: (i) if it was within the wasted costs jurisdiction of section 51(6) and (7); (ii) if it was otherwise a breach of duty to the court; or (iii) if he acted outside the role of solicitor.

There was no jurisdiction to make an order for costs against a solicitor solely on the ground that he acted without fee. It was proper and in the public interest for counsel and solicitors to act without fee. Whether a solicitor acted for remuneration or not did not alter his duty to his client and the court, or the absence of any duty to protect the opposing party from a hopeless claim.

The order in this case should have been made under the wasted costs jurisdiction of section 51(6) and (7). The action was a collateral attack on a court of competent jurisdiction and was prima facie an abuse. Against the background of the case, the solicitors' conduct was properly to be characterised as "unreasonable".

Lord Justice Roch and Lord Justice Ward concurred.

Paul Magrath, Barrister