Last Wednesday Mr. Justice Tomlinson handed down a costs judgment in the BCCI v Bank of England case which immediately reached the mainstream print and broadcast media. It can be found at Three Rivers District Council v. The Governor and Company of the Bank of England [2006] EWHC 816 (Comm). It is a long judgment (over 80 pages) albeit, with respect, very readable. The present overview seeks to bring out the issues particularly relevant to the legal profession. It is the case brought by the Liquidators of BCCI and others (below referred to as the Claimants), accusing the Bank of England (referred to as the Defendant) of misfeasance in pubic office, for (in effect) failing to close down BCCI. (The costs judgment here discussed outlines the way the case was put, which is beyond the scope of the present article.)

On the technical level the judgment summarises and applies the criteria for an award of indemnity costs; the range of functions which indemnity costs can legitimately serve; and the role of the trial judge in giving guidance to the costs judge in assessing the reasonableness of costs incurred. In this sense the judgment will certainly be important, although an obstacle to using the judgment as a precedent is that the Claimants were not represented at the hearing (a point I discuss below).

However, the judgment is primarily significant for the way it puts in issue the 'culture' of English commercial litigation. On the cultural level it raises questions about what kinds of behaviour are and are not legitimate in seeking to pressurise the adversary into settlement, and where to 'draw the line'. It implicitly raises questions about the effectiveness for controlling impermissible behaviour of the combination of costs sanctions, judicial control of the trial, and the constraints of professional ethics.

It is unfortunately impossible to deal with the issues without to some extent retailing the criticisms which the judge makes of the Claimant and their legal advisors. Inevitably leading Counsel are in the spotlight (though Lord Neill QC escapes any specific criticism). Newspaper reports have highlighted most severe criticisms. For the lawyer, the cumulative effect of reading the whole judgment creates an impression of, if anything, still harsher criticism than is conveyed by the newspapers' 'soundbytes.' In paragraph 131 Tomlinson J says, 'Any suggestion that the Defendants incurred costs on an unreasonable scale will need to be tested against the background of litigation apparently conducted by the liquidators and their legal advisers by reference to standards which I did not recognise.'

The circumstances of the judgment were unusual. The Claimants had discontinued their Claim, and, minor matters aside, had agreed to pay costs on the indemnity basis. The Defendant asked the judge to nevertheless to hear an application for indemnity costs. In it, the Bank sought a declaration that they were entitled to indemnity costs. They also wanted the judge to exonerate the bank officials who had been accused of dishonesty. They also wanted the judge to give guidance to the costs judge. The Claimants said that the judge had no jurisdiction to hear the application, because they had already agreed to pay indemnity costs. It is an ancient principle of the Common Law that where there is no real legal dispute between the parties – no lis in the Latin jargon – a court will not hear the case. Over the centuries various exceptions to the rule have been recognized, principally under the courts' equitable jurisdiction. In this case Tomlinson J held, briefly that he had jurisdiction to hear the application on the three grounds, (1) that the Claimants, although agreeing to pay indemnity costs, denied the Defendant was entitled to them; (2) the judge has a duty to assist the costs judge; (3) 'there is a public interest in knowing what was revealed by the trial about the allegations of dishonesty made therein which were so widely publicised by the liquidators.'

It is submitted that none of these points is without difficulty. However, the judge did not discuss them at length, and it seems inconceivable that they will be appealed, because, as noted, the Claimants were not represented. This is one extraordinary feature of the case. The Claimants had written to the judge to submit that he lacked jurisdiction or at any rate should not hear the Bank's application, but did not appear to argue that point. The judge said, 'The liquidators did not suggest that they had in fact sought sanction from either the English Liquidation Committee or The Chancellor to appear before me on the hearing of the Bank's application. I infer that the liquidators did not seek such sanction and that their absence was tactical, calculated to make it the more difficult for me to express views critical of their conduct of the action.'

I turn to a very brief summary of the criticisms which the judge made of the conduct of the action. In doing so I will point out that the judge's criticisms are of conduct which is in some sense either unethical, or undesirable, but which the judge lacked adequate tools to control.

First, the judge seems to have strongly suspected that the action was possibly brought and certainly conducted with a view to pressurising the Defendant, the Bank of England, into a settlement. In retrospect it may be difficult to say at what stage the weakness of the Claim became apparent. However, the judge considered the weakness of the case had become apparent long before it was abandoned. Now, bringing, and perhaps continuing, a hopeless case in the hope of getting a settlement is contrary to the codes of ethics of both solicitors and of the Bar, but it is difficult to prove, and as far as I know practitioners are never disciplined for breaking this rule. In any event, there is nothing the judge can do to control such a course of action (except in costs).

Is there really nothing the judge can do to stop a hopeless case? What, after all, is strike out for? Well, strike out is there to deal with a Claim where the facts alleged, if proved, do not amount to a cause of action. There is summary judgement, but the original pleadings had survived an application for summary judgment, which had reached the House of Lords. The judge in the event concluded there was nothing he could do about this concern.

Second, the question of when the weakness of the case became apparent is linked with another where the judge considered the conduct of the Claimants unfortunate, though he does not expressly criticise it. The parties, famously, spent a great deal of time opening their cases, and during opening speeches took the Court through documentary evidence. The weakness of the Claim became apparent to the judge during the Defence opening speech. The judge said, 'The liquidators were represented by a legal team of the greatest eminence. What was apparent to me as a result of Mr Stadlen's exposition must have been as apparent to them, although unfortunately Lord Neill and Mr Pollock absented themselves from large parts of Mr Stadlen's address so that the immediate impact thereof may have been lost on them.' Now, the costs of Leading Counsel being absent, including the cost of continuing with a case which should be discontinued, may exceed the cost of having Leading Counsel in court. But if the lead advocate, of whatever status, is absent to the possible detriment of the administration of justice, this is presumably not unethical, and in any event there is nothing the Court can do about it.

Third, the Claimants maintained a media campaign. They employed consultants. In addition their solicitors spoke to the media. Counsel of course did not – that would have a breach of the Bar Code of Conduct. It is not suggested Counsel's words in court were aimed at the media, though of course it is foreseeable in any high-profile trial that the fist day will be reported. The fact that one party maintained a vigorous media campaign was held to be a factor in awarding indemnity costs. However, although lawyers tend to frown on such conduct, it is not improper, and there is nothing courts can do to prevent it in most cases.

Fourth, serious allegations of dishonesty were made against numerous Bank of England officials. These would be reported in the media. This is harsh for those accused, and all the more harsh where such allegations get into the media (protected from a defamation suit, of course, by privilege). There is nothing the court or the persons criticised can do about this. This point is not made by the judge specifically, but he does repeatedly and in detail state that allegations of dishonesty were thrown around with little or no basis in evidence. There has been litigation testing what kind of thing can and cannot be pleaded by way of accusations of dishonesty. And to make allegations of dishonesty without sufficient material to base them on may be unethical. However where allegations are made orally in court, or where pleadings have survived strike out applications, and where the lack of material to found the allegations does not become apparent until the evidence has been heard, there is nothing the court can do to stop such allegations being made. This is an area where there are apparently robust rules to control abuse, which the judge seems to have felt simply did not work.

Fifth, the judge was unhappy about the way the formulation of the case was constantly changing, and the list of Bank of England accused of dishonesty was constantly added to as (the judge found) the exigencies of the moment required. In a situation like this, where the trial is long enough to give the Defendant sufficient opportunity to meet the allegations, the judge has no adequate way to stop this happening. He can, and did, penalise the party concerned in costs. He can, and did, ask them to redraft to pleadings to cover their changed case (though he regarded amended pleadings as failing to fulfil that request).

Sixth, the judge was unhappy that where it had become clear that there was no prospect whatsoever of proving an allegation, it had nevertheless not been withdrawn. The judge thought that the reason was that by keeping open the opportunity of attacking the witnesses in cross examination with the allegation, the Defendants would be placed under greater pressure. There seems to have been nothing the judge could do about this. He can of course invite Counsel to abandon an allegation. He did this, and on one occasion when Counsel appeared to have abandoned certain allegations, the Claimant's solicitor wrote to the judge make it clear that in reality no point had been abandoned. The judge could not force a party to abandon a hopeless allegation or point.

This leads to the seventh complaint, which was that the Claimant's Leading Counsel advanced cases inconsistent and at times even opposed to one another. Again, where costs penalties are not effective there is little the judge could do to prevent this situation, particularly where the litigation is conducted with a view not so much to winning in court as to pressurising the adversary into a settlement.

Eighth, though not among the points the judge spelled out, there is no remedy for the witness who is brought to court and unjustifiably exposed to stressful cross-examination, whether or not as a form of pressure intended to make settlement more likely. In the case of one witness the judge limited the cross-examination on the grounds, in part, that he had a heart condition. This decision was the subject of an unsuccessful appeal.

Ninth, the judge was critical of the advocacy style of certain Counsel on the Claimant's side. He said at one point 'I will be corrected if I am wrong but…' Claimant's Counsel later said in effect that he had been wrong but she had not corrected the judge, because, 'When your Lordship asks us a direct question, we of course will answer, but absent a direct question we have thought it right to stay silent, because our experience has been that as soon as we rise and say anything, it just leads to a further reiteration of Mr Stadlen's openings.' (Mr. Stadlen QC was Counsel for the Defence.) The judge commented, 'I regarded as unhelpful this unusual approach of the Claimants' Counsel.' There is also the point about rudeness which has been widely reported in the general press. The judge said, 'I propose to say no more about some of the things said in the course of the trial about the Bank, its officials and its legal advisers with the exception however of Mr Stadlen. Mr Pollock's sustained rudeness to his opponent was of an altogether different order. It was behaviour not in the usual tradition of the Bar and it was inappropriate and distracting. I should have done more to attempt to control it, although I doubt if I should have been any more successful than evidently were Mr Pollock's colleagues whom on at any rate one occasion I invited to attempt to exercise some restraining influence.' Where Counsel takes a view, rightly or wrongly, that such departures from the styles and methods of advocacy associated with the 'traditions of the Bar' are in the interests of his or her client, the administration of justice may become more difficult. However, even supposing some or all of the judge's complaints were to relate to conduct which amounts to a breach of the Code of Conduct (and I do not suggest they do), it became clear that the judge lacks adequate tools to deal with the conduct he found unhelpful.

The judge says that he consulted the Lord Chief Justice about his concerns. He says, 'The Lord Chief Justice and I discussed whether there were any measures which might be taken either by me or by both of us together in order to persuade the liquidators of the folly of their enterprise. I take full responsibility for the conclusion, which was essentially mine anyway, that there was nothing which could usefully be done.'

The points I have set out above can be drawn from the costs judgment in hand, but do not reflect the way in the which the judge set out his criticisms. I have set them out in this way to suggest that in the light of the judgment, the judiciary and the professions are likely to want to consider whether something should be done to strengthen the tools which the judge has to control the conduct of litigation. It is difficult to see quite what could be done, and suggested solutions are beyond the scope of the present article. However, it will not be surprising if the judiciary do explore changes in the rules in the light of the difficulties which this case has thrown into relief.

Dr John Birchall - Professional English, Legal English, and Common Law Training