The judge was wrong to make a wasted costs order because in the absence of waiver of privilege he could not conclude that no reasonably competent legal adviser would have evaluated the claimant's chance of success as being such as to justify continuing with the proceedings.Appeal against a wasted costs order made by HH Judge George in favour of the defendant ('J') against the appellant solicitors who acted for the claimant ('D'). The claim arose out of the business relationship between D and J which was intended to exploit a closed circuit television system as a home security system. The system was manufactured and marketed in the first instance through the second defendant company. D was employed by the company but was subsequently dismissed. He claimed damages and injunctive relief on the basis of an alleged joint venture agreement entitling him to ten per cent of the profits of the exploitation of the system and on the basis that he was the inventor and developer of the system and that his dismissal was a repudiation of any agreement entitling J or his companies to exploit D's intellectual property rights in the system. The writ was issued in 1997. D was adjudicated bankrupt and the trustee assigned the claim to him which he pursued with the benefit of legal aid. The trial was fixed for March 2002. In February 2002 the intellectual property claim was withdrawn on counsel's advice that there were insufficient prospects of success to justify the continuation of legal aid for that claim. At the hearing the judge decided that the joint venture claim had no arguable prospect of success and dismissed it. J applied for a wasted costs order. The judge made a wasted costs order against D's solicitors in relation to J's costs after the intellectual property claim was withdrawn on the basis that thereafter a competent solicitor would have appreciated that the case could not be continued with any chance of success because the joint venture claim was doomed to fail. The solicitors appealed.HELD: (1) In cases where the allegation was that the legal representative pursued a hopeless case, the question was correctly identified by the judge as whether no reasonably competent legal representative would have continued with the action. It was difficult to see how that question could be answered affirmatively unless it could also be said that the legal representative acted unreasonably, which was akin to establishing an abuse of process (Ridehalgh v Horsefield (1994) Ch 205, Medcalf v Mardell (2003) 1 AC 120 and Persaud v Persaud (2003) EWCA 394 considered). (2) Negligence could be the appropriate word to describe a situation in which it was abundantly plain that the legal representative had failed to appreciate that there was a binding authority fatal to the client's case but in practice it was difficult to envisage a case in which that situation would have persisted to trial. (3) The judge applied the right test but came to the wrong conclusion because he took the view that the facts pleaded could not support the claim made as a matter of law. The statement of claim settled by leading counsel was capable of supporting the assertion that there was a joint venture agreement. Its existence was a matter for evidence. (4) The question the judge should have asked was whether no reasonably competent legal adviser would have evaluated the chance of success as being such as to justify continuing with the proceedings. In determining that question, the judge could only come to a conclusion adverse to the appellants if he had the opportunity of seeing counsel's advice which was privileged. In the absence of waiver of privilege it could not be inferred that the evaluation of the claim was negligent in the relevant sense within s.51 Supreme Court Act 1981.Appeal allowed.

[2003] EWCA Civ 1134

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