Website note: this transcript is still in draft; it is not official until it has been fully checked against the tape recording and approved by the Court. It is expected that many of the inaudible passages will be perfected, and this transcript will be continually updated. An improved transcript will shortly be posted [See also selected extracts]


Case No: 1996 I no 1113


The Royal Courts of Justice
The Strand



Friday, 5th May 2000






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Computerised transcript of

Smith Bernal Reporting Ltd

190 Fleet Street, LONDON EC4A 2AG

Tel: 020 7404 1400.

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MR A DAVIES appeared on behalf of the Claimant

MISS H ROGERS appeared on behalf of the First Defendant

MR A JULIUS appeared on behalf of the Second Defendant

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(Due to the poor quality of the tapes provided there are a number of 'inaudibles' within the transcript)


Friday, 5th May 2000



MISS ROGERS: My Lord I appear here for the first defendant, Mr Julius for the second, and Mr Davies for the claimant. I hope that your Lordship has outline submissions from me and from Mr Davies.

MR JUSTICE GRAY: Yes, unfortunately, and through no fault of yours, because I was (inaudible) until quite late last night, I did not see your file. That is not right, I saw the predecessor of your file, which did not include your very helpful skeleton argument until quite late on this morning as it happened, but I have read it.

MISS ROGERS: I am grateful for that, if your Lordship has read Mr Davies's also--

MR JUSTICE GRAY: Well only in the last five minutes.

MISS ROGERS: Well similarly it is pretty plain, and we have got a witness statement from Mr Irving as well to support what (inaudible) Mr Davies's submissions.


MISS ROGERS: And your Lordship should have that too. It appears to us in a sense that the parties are at cross-purposes about this. Many of the points, which Mr Irving makes are points can be made, if they are to be made, on detailed assessment.

MR JUSTICE GRAY: Well some are and some are not I would have said.

MISS ROGERS: Well I think almost all of them are with the one exception of whether or not Penguin have a liability for costs. And in a sense it appears to us that Mr Irving does not get off the ground in suggesting that Penguin is not liable for the costs. What your Lordship has a bundle of invoices and a schedule, which sets out what Penguin has paid that they are liable to pay for the costs of the first defendant anyway.

MR JUSTICE GRAY: Partly, and this may be my fault, I took the view, rightly or wrongly and Mr Davies may want to comment on this in due course, but we are now just dealing with the costs of the action and in the ordinary way that would have been dealt with at the end of the judgment. And it was because of the rather unusual circumstances that we put over the various questions that arise.

I have taken the view and conveyed I think to your instructing solicitors, and I think to Mr Irving and/or his instructing solicitors, that the more we can dispose of today, and ideally if one can dispose of all the costs issues the better it will be for everybody, including obviously your clients for financial reasons. So my hope is that we will be able to deal with some of the issues and arguments that arose on behalf of Mr Irving.

MISS ROGERS: Well my Lord our submission is that we are afraid that really we cannot do that. What we are trying to do is to avoid completely unnecessary arguments.


MISS ROGERS: My solicitors on behalf of the first defendants have not produced their own bill of costs, but if we are going to dispose of all arguments for that cost it may be that (several inaudible words) disposal and so on, and the very preparation of that document entailed further time and costs, which are going to be very considerable. And what your Lordship orders we say rightly, is that there should be a detailed assessment. And Mr Julius and I in fact were just discussing what the position was once a detailed assessment has been ordered, as in fact your Lordship did on the 11th, that especially the costs officer is the person who then deals with arguments about too much, about unreasonable disproportions and so on.

We accept, and there may be some (several inaudible words) that could have that could be proceeded and be dealt with, but that is not this case. There may be a case insofar as my reading of the submissions are (inaudible), that the experts be paid too much (several inaudible words), so the fact that the cost officer's point. But the way we approach it is this that there should be no further time or costs taken out with arguments about costs.

If it turns out to be the case that there is no money available to pay the costs, then all of this becomes futile and a waste of your Lordship's time and [my] client's money. Because on any view on the costs already paid as disbursements to experts and so on were over a million, taking very rough generous estimates generous of the claimants, in our submission your Lordship has the power to make an order for payment on account of costs. And really it is a waste of everybody's time and a waste of money in a case, which has already been, as your Lordship well knows, a long and expensive process.

So unless and until we feel that the question, it appears to us that on any view Mr Irving is liable for at least the half a million that we are asking your Lordship to order. And it is one thing we say to have an argument about whether or not that was a proper order to make as a payment on account, but to go beyond that and to take up court time, even though I accept we are all here dealing with bits and pieces of argument about what happened with what expert at what point in the trial. And to say that the court has the disadvantage of not having been there, but it is an argument, but if your Lordship wants to go through I fear it could take very considerable time and--

MR JUSTICE GRAY: Well it might or might not, I mean the whole point really is, and I think this is really what I said and certainly intended when I gave judgment, was that yes, there was going to be detailed assessment, but yes also I was prepared to listen to argument about certain discreet items of costs.

And what I am really anxious to avoid is that, I mean I take your point that if there is a failure to pay any interim order that I make or payment on account that I may order today, it may be academic whether you are entitled to all the costs of your experts and so on. But there is surely an argument, since we are all here and a lot of us, apart from Mr Davies, are pretty familiar with the issues in dealing with these various applications. Not all of the applications that Mr Irving is making, because I think some of them cannot be dealt with today, but to get rid of as much as possible, otherwise memories are going to grow dim. So I would have thought there as an argument, even from your point of view in getting rid as it were, as such issues as can fairly be got rid of today.

MISS ROGERS: Then could I invite your Lordship to say, and I suppose really it will not find favour and it is this, is to consider the question in a sense on the question of principle should there be a payment on account. Because of course if the answer to that is no, then the whole thing, the detailed assessment point becomes a live one, that should there be a payment on account and if so at what level. And in a sense that can be dealt with without going into the argument of this item or (several inaudible words).

MR JUSTICE GRAY: Yes, I do not disagree with any of that.

MISS ROGERS: And I would invite your Lordship to stop at that point, hopefully having made an order in my client's favour, and defer any other matters until that payment has been made?

MR JUSTICE GRAY: Well that is the bit that I have difficulty with.

MISS ROGERS: Well I see that your Lordship does, otherwise it appears to us that unless there are arguments, which say that there should not be a payment on account, or that it should not be at least the sum the first defendant is asking for, then in a sense we say it is a waste of us having this argument today. If your Lordship is going to (several inaudible words).

MR JUSTICE GRAY: Well it may be and it may not be, I mean that is a crystal ball game is it not. It may be that a cheque will arrive if I make an order for a payment in account in tomorrow's post.

MISS ROGERS: Well my Lord then we would all happily come back and at that point Mr Davies (several inaudible words).

MR JUSTICE GRAY: Yes, well that is the point is it not we would all happily come back, but you know I cannot come back for some time, because I am up in Liverpool and there are other things to be dealt with. And as I say memories do grow dim as to you know, how much Professor (inaudible) contributed to matters of that kind. But I am entirely sympathetic to the idea that we should have the argument, this is subject to Mr Davies obviously, about whether there should be any payment on account, and if there should how much it should be first. But I do feel that there would be benefit in carrying on after that to deal with such other matters as can be dealt with today.


MR JUSTICE GRAY: Shall I see whether Mr Davies is happy with that?

MISS ROGERS: Yes, clearly I think the slight hesitation I have about that course is this, and I was given the skeleton argument and the witness statements after ten o'clock this morning.


MISS ROGERS: And it is to that extent in dealing with substantive points if there are substantive points of detail, it may be that I will be (several inaudible words), but we can take them as it comes.

MR JUSTICE GRAY: We can take that as it comes, and I can see there will be difficulties on some aspects but I think not on others. Yes, shall I ask Mr Davies, Mr Davies does that sound a practical way of proceeding.

MR DAVIES: My Lord yes, I am very content to continue in the way in which your Lordship says.

MR JUSTICE GRAY: Yes, there is nothing that you or your client would wish to raise as it were, before we get into the argument of payment on account?

MR DAVIES: No my Lord.

MR JUSTICE GRAY: Right. Can I - whilst it is in my mind - just convey this through you to Mr Irving that he wrote a letter, because he was concerned about what he regards as the misuse of disclosed documents? And I think it was written on Good Friday, and unfortunately I did not, because I was not here until the next week, see that until the beginning of this week. I hope he has already had this explained to him, but no discourtesy was intended, and I am sorry if it caused him any bother.

MR DAVIES: Thank you my Lord.


MISS ROGERS: Well my Lord on that payment I hope your Lordship has read my outline submissions, I do not know how much of the background material your Lordship wants to go to in terms of the rules, perhaps it would be helpful to look at the position on the last case, I am in your Lordship's hands?

MR JUSTICE GRAY: Well I have read through the relevant rules, and I see [while] that there is plainly power to order a payment on account the amount of it is really entirely in the court's discretion.

MISS ROGERS: Could I ask your Lordship which version of the CPR you are reading?

MR JUSTICE GRAY: Well annoyingly, because I did not have the White book - which I much prefer - I use this.


MR JUSTICE GRAY: You have probably not come across this.

MISS ROGERS: No, I have this one, which I have not been working from before.

MR JUSTICE GRAY: Well I mean the wording is the same so I do not think it matters very much, I just happen to have marked up (inaudible) there.

MISS ROGERS: My Lord the rules on costs are summarized in the outline submissions.


MISS ROGERS: The power is undoubtedly there in 44.3a that there is a power. And indeed the court is invited to, should always consider whether or not it is appropriate to make such an order. And Mr Justice Jacob took that a little further in the case of Marsden Technology.

MR JUSTICE GRAY: Have you got a copy of that for me, because--

MISS ROGERS: If I can just hand up a copy. My Lord Mr Davies has a copy of a different sort from me.

MR DAVIES: My Lord if I could hand up to your clerk my authority, which (several inaudible words) in that case (several inaudible words).

MR JUSTICE GRAY: What have you got it in?

MR DAVIES: I am at the Costs Law reports my Lord.

MR JUSTICE GRAY: Costs Law reports?

MR DAVIES: Indeed my Lord special (several inaudible words) questions of costs (several inaudible words).

MR JUSTICE GRAY: I am sorry I do not subscribe them; well I do not mind which.

MISS ROGERS: I shall take out a subscription at once.

MR JUSTICE GRAY: (inaudible) reports might be better.

MISS ROGERS: Well it would be if we had got copies but we do not.

MR JUSTICE GRAY: Oh you do not, oh all right could I take up your offer then, I am very grateful, thank you very much.

MISS ROGERS: Your Lordship (inaudible) judgment on the costs aspect of the case in a case in which the claimant, which were where the very large company Mars were pursued in breach of copyright and in breach of confidence. And the breach of confidence claim was (inaudible), and the defendants were entitled or thought to have the claimant not recover the costs of that part of the case, although they won overall. And my Lord after running through the rules, which he starts on page 45, which your Lordship will be rather familiar with, at the foot of page 46 in the paragraph "I now turn to the second issue."


MISS ROGERS: "(inaudible)," shall I read it my Lord or will you read it to yourself?

MR JUSTICE GRAY: Just so that I follow it, the judge had previously found that the claim in confidence really was unreasonable, and therefore--

MISS ROGERS: Fairly reasonable was the wording he used for it. It could not have succeeded--

MR JUSTICE GRAY: Unless their allegation should not have been run?

MISS ROGERS: Yes, if the copyright claim succeeded the confidence was unnecessary, if the copyright failed the confidence would have inevitably have failed as well.


MISS ROGERS: Therefore it was fairly reasonable was what he said rather than unreasonable. So picking up at "The first thing to do was consider what the general rule should be, interim payment or not, no guidance in the rules other than the court may order payment on account if there is no guidance in the practice directions.

My approach to the matter is the question of principle, where a party has won and got an order for costs the only reason if it does not get the money straightaway is because of the need for a detailed assessment, nobody knows how much it should be. If the detailed assessment the assessment were carried out instantly he would get the order instantly, so a successful party is entitled to the money, in principle he ought to get it as soon as possible. It does not seem to me to be a good reason for keeping the matter (inaudible) to costs, but you need time to work out the total amount of payment of some lesser amount, which he will almost certainly collect, is a closer approximation to (inaudible). So I thought that where a party is successful the court should, on a rough and ready basis, also normally order an amount to be paid on account, the amount being a lesser sum than the likely full amount."

And then he deals with practical advantages, which follow from that. "The (inaudible) are trying to prolong a detailed assessment, namely putting off the evil day when the payment has to be made will be considerably reduced when he who will have to pay can only put off the evil day in respect of a considerably reduced sum. Moreover the whole point of a detailed assessment is the commercial matter may become as important, with a result there will be less detailed assessments than there used to be of taxations of costs.

So if I start with the proposition that there should be an interim payment in general, however the court has the discretion. In exercising that discretion the court must take into account all the circumstances of the particular case, one of those is that the defendant may wish to appeal. Another is dealing with the case (inaudible) whether it is proportionate with the financial condition of each party, one of the matters, which one must consider in allowing for the overriding objective enabling the court to deal with things justly.

The overriding objective applied as much to the exercise of the costs discretion as to any other discretion within the rules. This is a case for example where whoever is (inaudible) successful party with financial weak unsuccessful party that is one thing, which should be taken into account. Other things that might be taken into account are the likelihood of an appeal or possibly successful appeal. For example there may be a case in which a claimant is financial weak, even it succeeds there might be an appeal by the defendant, and the claimant needs the money to respond to the appeal that would be a particular good reason for ordering payment on account."

And then he deals with the specifics of the case, which I was not going to--

MR JUSTICE GRAY: Well the likelihood of an appeal, well you have said that already, he repeats it as another consideration.

MISS ROGERS: Yes, and he deals with there were certain aspects of the conduct of the case pre, in the pre proceedings correspondence, which were deemed to be slightly oppressive on Mars's behalf. And then the defendants had put them to proof of the copyright, which had led to unnecessary (inaudible), all of those factors came into play.

But at the end of the day on page 51 we see the way in which the judge dealt with the matter. What I should say about this is that the part of the degree that the judge should direct that the claimant only paid a proportion, sorry the defendant only paid a proportion of the claimant's costs, it was agreed between the parties that there should be an apportionment. The only argument was what the apportionment should be, and your Lordship will see that on page 48 in the middle paragraph. "It was agreed there should be a detailed assessment, the parties agreed that it should be done on the basis of apportioning the costs. The claimants say they should get between 80 and 90 percent, the defendants said they should get 2 to 25 percent.

MR JUSTICE GRAY: Two percent?

MISS ROGERS: Yes, rather ambitious submission I think on the defendant's part in the circumstances.

MR JUSTICE GRAY: To what extent - what I could not quite understand is to what extent do those percentages reflect the fact that there was a claim, which should not have been brought?

MISS ROGERS: Well that--

MR JUSTICE GRAY: Or is this just allowing for what one would have called a reduction on tax, you know as a result of taxation?

MISS ROGERS: As I understand it this is not the taxation reduction, this is a proportionate reduction in what percentage of costs they should recover.

MR JUSTICE GRAY: Because of the confidence issue having arose?



MISS ROGERS: So that is why I--

MR JUSTICE GRAY: So it does not apply in this case in other words?


MR JUSTICE GRAY: Well you say it does not.

MISS ROGERS: I simply cannot understand why the figure is as low as 3 to 25 percent; it (inaudible) now appears to me to be the position. So the judge having considered that apportionment question came down to the provision that they would get I think, I think he said 1.66 percent, two thirds of their costs because he reduced it to 60 percent when he was making his rough estimate. That is intended to help with - in the final paragraph of judgment on page 51.

Then he says, "In the assessment of Mars's costs, they will not recover the 60 percent they have in mind, but this 60 percent is the tax down figure as opposed to the proportionment figure. I believe the sort of figure they will be more likely to be getting is something of the order of 40 percent, in other words the costs officer, in the detailed assessment would look at the items and tax them down to 40 percent.

It follows that of the 550,000 they are likely to be given only 40 percent of the said costs. Against that background I now come to work out what the interim payment should be. 40 percent is about 200,000; I have ordered 60 percent of that figure, which brings it down still further. I think the appropriate figure that I should be ordering by way of interim payment, having regard to what I am going to do next by way of how it is paid. In the special circumstances of this case it is 80,000, namely two thirds of the costs, which on a rough estimate Mars will be awarded. I am quite (inaudible) it is a somewhat arbitrary figure." And then he goes on to deal with the question of instalments.

So essentially what the rough settlement, what we would invite your Lordship to do is to take that general approach of Justice Jacobs as a very useful tool. It has been followed in a number of first instance Chancery cases on interim payments, none of which in a sense matters, because they all become they are all questions of the facts of the case.

MR JUSTICE GRAY: I am sorry I am being a bit slow about it, what he did effectively was to work out what on the facts of the case ought to be the proportion payable.


MR JUSTICE GRAY: And then to reduce that by one third to make an order for two thirds of what he thought the costs representing the appropriate proportion would be?

MISS ROGERS: In that case it is a three stage test, because he first of all said you are only entitled, imagine it was £100,000, you are only going to get 60 percent of that because the defendant does not have to pay you at all for a third of your costs.


MISS ROGERS: Then he says, well of that remaining £60,000 that will be subject to taxation, and on the taxation the costs officer taxes that down.


MISS ROGERS: Because of the conduct instead of being roughly whatever it is now 70 to 75 percent you are only going to recover 40 percent of that. So he reduces it twice and then says I will give you two thirds of that amount.


MISS ROGERS: Now in this case we can miss out the proportion argument, because the defendants won and there is not in that sense a severable issue.

MR JUSTICE GRAY: Well Mr Davies does not consent to that.

MISS ROGERS: Well my Lord I will come back to that, because what you have to bear in mind on that is that the (inaudible) Mr Irving relies on is one in Stockholm, which is essentially a meaning on determining there is factual costs in respect of (inaudible). Hit the (inaudible) again, meaning only no costs on that, and (inaudible). And your Lordship sees that the defendant has said in correspondence they are not seeking to recover the (inaudible).

MR JUSTICE GRAY: What I am going to have to do, and there may be other issues there may be points to be made about experts, some which you concede and some which you may not. I have got to - at any rate - form some sort of a view about some of those questions, to know what the base figure is from which one is then going to be working out any payment that ought to be made on account.

MISS ROGERS: Well my Lord (several inaudible words) detailed assessment, which is why the defence have taken the course it has. We have taken the disbursements for counsel and experts, in a sense there by way of example of the amount of fees at stake. So what the judge in Mars had was an estimate of the total defendant's costs, so he was working from essentially half a million as being an indication of the global figure. Now in this we are saying, here is a million pounds essentially, which has been spent, and there are further costs and it will not take your Lordship any leap of faith to assume that the other costs are also going to be very considerable, this is not a case where there is going to be another £50,000 outstanding.

MR JUSTICE GRAY: No, I am just puzzled by why one is only looking at the disbursements, and one does not see the full picture.

MISS ROGERS: Well my Lord essentially in an attempt to avoid the expense of costs in the preparation of the costs for the costs argument.

MR JUSTICE GRAY: But I mean your instructing solicitors are going to have to bill their client?

MISS ROGERS: Oh my Lord yes.

MR JUSTICE GRAY: So the exercise has got to be carried out?

MISS ROGERS: Oh yes it has, that is certainly the case, but in terms of taking up the court's time about it, and having arguments with the claims side of it in front of your Lordship or a conference or whomever, we are trying to avoid that by saying leave those costs on one side there is a matter of costs. We are looking at what can the court say at this stage in accordance with Jacobs is going to be a kind of bare minimum figure. In a sense one could have done it the court pre CPR, but now one has the rules, which are intended to be saving costs and saving unnecessary argument.


MISS ROGERS: And if I could persuade your Lordship as I said I think in my skeleton argument that there will be a claim for at least three quarters of a million, which I do not think your Lordship has any difficulty in finding, by reducing that down to say two thirds, then one sees the sort of figures the defendants are going to recover.

MR JUSTICE GRAY: Well the view could be taken that whatever Mr Justice Jacob decided in the context of the Mars case, that it is not contemplated that the power to make a payment order a payment on account, is intended to be a guess as to what the tax figure for costs is likely to be, because that is effectively what you were suggesting I should do.

MISS ROGERS: Well my Lord it was what Mr Justice Jacob did.

MR JUSTICE GRAY: Well I know, but I am suggesting there may be, it is possible to take the view that whilst that is no doubt the right course to take in the case he had, it will not always be right that a payment on account should be the best guess as to what the taxing officer - if I can call him that - the costs judge will come up with when he does the detailed assessment.

MISS ROGERS: No, but if your Lordship is, inevitably this argument could have taken place on the day of judgment itself, and it did not for good reason.

MR JUSTICE GRAY: For good reason I think.

MISS ROGERS: But here we are, and normally to avoid this sort of settlement (inaudible) might have been avoided anyway, but it has not we are all here. But in terms of what figures can the court use as a guide, and all I am asking your Lordship to do is to consider what are the conference figures and the copy figures that we have put forward in an attempt to be sensible and pragmatic about it, are the figures in the schedule at tab 1 of the file and your Lordship has that.


MISS ROGERS: And in a sense we are not saying there can be no argument about those figures in the sense that Mr Irving cannot say that any detailed assessment that Mr (inaudible) or me or any of our experts should not have been paid as much as they were. But at tab 1 we have done the sums and there is a figure of £1m, which has been spent by the defendants in conducting its defence of the case.

MR JUSTICE GRAY: Well we will come to the details of the figures in a moment.

MISS ROGERS: Yes, but in terms of why the first defendant plucked the figure or asked for the figure of half a million by way of interim payment, it is not a figure plucked out of the air in a sense.

MR JUSTICE GRAY: No, I accept that.

MISS ROGERS: And in trying to justify it to your Lordship what I have done in the outline submissions is to look at the kind of rough calculation your Lordship has made, I hope it is helpful in that way. So what would it mean, your Lordship has my submission I do not know whether they have been put into the front of the file or not unfortunately.

MR JUSTICE GRAY: Front of the file, yes.

MISS ROGERS: At paragraph 14 of that page 6, in a sense there is the encapsulation of the way we put the argument in an attempt to deal with it in a swift, effective, fair and just way.


MISS ROGERS: And I do not think it can be disputed, and perhaps Mr Davies will concede this, on any view the claimant will be liable to pay a very large sum to Penguin, your Lordship said as much when giving judgment.

MR JUSTICE GRAY: Yes, of course.

MISS ROGERS: There will be a sum, whether it is £2m, £1.75m, £1.5m, £1.25, in a sense it is irrelevant, on any view it is going to be very large.


MISS ROGERS: That is in terms of his liability, and so we are trying to avoid having a detailed assessment of all the costs, simply because it would be wasteful of time and money.


MISS ROGERS: If your Lordship has--

MR JUSTICE GRAY: Can I just ask you this, Penguin as it were are treating themselves as being responsible for virtually all the disbursements?


MR JUSTICE GRAY: And that is because that is the arrangement?

MISS ROGERS: Yes, I mean your Lordship says virtually all I do not know whether that is in fact the case, but they are certainly responsible for these (inaudible).

MR JUSTICE GRAY: Well I cannot think of many others.

MISS ROGERS: Well I think there probably are others, but--

MR JUSTICE GRAY: Well I do not doubt that there are some others.

MISS ROGERS: There are some, but unfortunately they are not possible, but your Lordship's comment was right virtually all the disbursements that is the position.


MISS ROGERS: And they have paid these, there are further disbursements which they have not yet paid, but which they are liable to pay.


MISS ROGERS: So in those circumstances, of course if that was not the case then (inaudible) essential foundation for the application (inaudible) but we say it did. So your Lordship then has a figure of £1m, which has been paid representing (several inaudible words) represent, there are the transcriber's costs and so on, and the solicitor's own costs. And in order to (several inaudible words) there were disbursements incurred in respect of other experts for whom there is no claim.

MR JUSTICE GRAY: Yes you have left out, I mean I do not know and now may not be the right time to look at it, but I have no idea who at (inaudible) Robinson, and Mr Waxman and Mr (inaudible).

MISS ROGERS: They are three researchers who were assisting the (inaudible) [chief expert] historian a Phd at Cambridge (inaudible) who were assisting on historical matters in part the experts and in part the solicitors on various points of detail, so they are directed to the historical issues of the case.



MR JUSTICE GRAY: Is a fairly staggering figure for somebody who is neither part of the legal team nor one of the experts.

MISS ROGERS: Yes, it represents a vast amount of time in (several inaudible words) Mr Scott Robinson he has also been on the-- Your Lordship may well remember the RWE file it was one of two, which I hope your Lordship found helpful, on the nature and extent of Mr Irving's political connections with certain figures.


MISS ROGERS: Specifically in Germany, your Lordship found in the judgment that Mr Irving had significantly long-standing connections with certain people.


MISS ROGERS: But of course a lot of that material was in German, and all the Mr (inaudible) and Mr (inaudible) are both German and Mr Scott Robinson (inaudible) English/German, so to that extent there was a lot of--


MISS ROGERS: So again I quite accept that Mr Irving may on a detailed assessment, wish to take points about either the length of time spent by the individuals or the amount they were paid, and of course one accepts that. But in terms of what they have been paid for good or ill this is what Penguin's liability was (inaudible).


MISS ROGERS: So this is just a guide figure just to justify to your Lordship that this is (inaudible) order for the sums of money, which have been paid.


MISS ROGERS: And there are further sums to be paid.

MR JUSTICE GRAY: Yes, I think in relation to quantum it seems to me perhaps sensible that I should hear Mr Davies on the as it were, the principles of the thing, and then we can perhaps go in your, when you come to apply to the figures, if we get to that stage.

MISS ROGERS: Unless your Lordship wants to hear me any further on the--?

MR JUSTICE GRAY: No, I think you have made the position very clear, Mr Davies does that sound sensible that you make submissions (inaudible) as to whether in principle (several inaudible words)?

MR DAVIES: (several inaudible words) your Lordship on particular items on the bill, but (several inaudible words).


MR DAVIES: My Lord I approach this matter in a rather different fashion from my learned [friend] who has the advantage over me (inaudible) of [having heard?] the case as has your Lordship. And that being so I will begin to approach it on broad principles in relation to the basis upon which English courts make (inaudible) costs in favour of the successful litigants.

The (several inaudible words) is that Mr (several inaudible words), which your Lordship has at the first paragraph of my skeleton argument of the costs between party and party (inaudible) by my Lord, and (several inaudible words). They are not imposed as a punishment on the party which (several inaudible words) nor (several inaudible words) succeeds.

Therefore if we assess the (several inaudible words) to the extent to which costs ought to be allowed is also (inaudible). That passage was (inaudible) Master of the Rolls (several inaudible words), and remains (several inaudible words), it was to some extent (several inaudible words) question by what was said by Lord Justice (inaudible). The Court of Appeal did not (inaudible) that case (inaudible) which has gone off to the House of Lords.

So the first consideration on (several inaudible words) will no doubt be (several inaudible words) yet been heard, and (several inaudible words) concluded until next year as seems to be the pattern on (several inaudible words). But at the moment that statement of Mr Granville Adams approved by the Master of the Rolls is what is classically called (several inaudible words) on costs. So the first question, which I think your Lordship should ask himself is whether Penguin have in fact incurred any damnification at all.

MR JUSTICE GRAY: Sorry, can you explain to me what damnification actually means?

MR DAVIES: It means loss or damage by reason of having pay out costs (several inaudible words) counsel and others instructed in the case.

MR JUSTICE GRAY: Well they say they have written out huge cheques for all these experts.

MR DAVIES: Well my Lord, and in an ordinary case one would begin on the basis that substantial sums have been disbursed. The question in this case is whether they have in fact been disbursed by the parties in the action, or by parties who (several inaudible words) further costs indemnity have been given (several inaudible words). What is apparent my Lord from the judgment given in the Chancery Division in Bailey (several inaudible words) fifth paragraph of my skeleton argument is that if in fact a litigant is found to have been retained by another party who is not normally made a party to the action. And if his costs and disbursements have been taken as he goes along by (several inaudible words), then he cannot recover costs for the benefit of that third party. And the position--

MR JUSTICE GRAY: Well I am - I am so sorry to interrupt you again - I just wonder whether Bailey and Merrill, which I am sure you have correctly summarized, really is any longer a true statement of the legal position?

MR DAVIES: My Lord as claimant the only (inaudible) whoever casts upon this line of authority were cast by what was Justice (inaudible) then was said in (inaudible) Trading, the whole position is one of great (inaudible), because it did not go into(several inaudible words) and certainly not properly reported in any of the (several inaudible words) law reports, we did not even get a copy of the report. The Court of Appeal requires to follow that (several inaudible words) persuade a court society, and the (several inaudible words).

And to the best of my knowledge what (inaudible) did (several inaudible words) advantage of whether a defendant (several inaudible words) great disadvantage of whether (several inaudible words) as against your Lordship of being (several inaudible words) Chancery practitioner with little knowledge of the (several inaudible words) common law in relation to (several inaudible words). What (several inaudible words) how practically, in relation to costs, which I suspected would be a bit before your Lordship's era.


MR DAVIES: And what (inaudible) your Lordship from my experience in this matter of costs, (several inaudible words) long time (several inaudible words) are, I would very (inaudible) suggested that this authority has been disproved. All (several inaudible words) subject to (several inaudible words) hearing (several inaudible words).

MR JUSTICE GRAY: Well (inaudible) I do have a little bit of experience in this particular area, Gunbry and Stainsbury(?) I think is simply authority for the proposition that if a party was never actually under any liability to pay any of the costs incurred in conducting his or her case then you cannot recover.


MR JUSTICE GRAY: Because you simply were never, as you would put it, going to be damnified.


MR JUSTICE GRAY: But that is not this case is it, at the highest you might put it there may be some arrangement between Penguin Books and Pearson or somebody in America, whereby they may contribute. But you cannot say that Penguin Books were never in the firing line as far as the financial implications of the case is concerned.

MR DAVIES: Well my Lord that question instructing solicitors, retaining (inaudible) party to the action that is what Bailey and (inaudible) is about (several inaudible words). I do not put it that I (several inaudible words) that Bailey and (inaudible) authoritative proposition that where one party has been indemnified by another, the party that has been indemnified can never recover costs as between party and party. It would be a serious breach (inaudible) duty to the court if I were to suggest to your Lordship that (inaudible) expert (several inaudible words).

MR JUSTICE GRAY: No trade union claimant could ever recover it if that were right.

MR DAVIES: Indeed, the question is whether there was ever any arrangement such that the costs and disbursements would (several inaudible words) ultimately be met by the indemnifying party, and it plainly is inevitable, in fact pointedly decided against the same party. It was decided that although the succeeding party (several inaudible words) claimant in that case had in fact been indemnified by the Daily Express in relation to proceedings brought fought against Mr Neville. Nevertheless on (inaudible) instruction were taken in that case, which was how the (inaudible) in evidence, that there was indeed a residual liability upon the (inaudible) plaintiff pay the costs in the rather unlikely event that the Daily Express did not (inaudible) the money. And on the construction of that application Mr Justice Ruddle(?) decided that the claimant in that case would be entitled to recover costs against the defendant.

So my Lord I (several inaudible words) suggest to your Lordship that in any case where there is an arrangement for indemnity between the parties in action, and a party who is retaining them, the retained party will be, as a matter of law, disqualified from recovering his costs.

MR JUSTICE GRAY: Well I think on the contrary, if it is an indemnity, which means that the primary liability on the party to the action that that party can then turn to the indemnifier for an indemnity. I think in those circumstance the party to the action is always entitled to pick up his costs, because it is an indemnity it is not an absence of primary liability.

MR DAVIES: Your Lordship uses the word in technical terms, and if there is a relationship strictly of that kind then one way or the other there is evidence (inaudible) that plainly refers to representatives (several inaudible words) sat in on all meetings, (inaudible) things like that, litigation on behalf the claimant (several inaudible words). (several inaudible words) plainly expressed to be their half (inaudible) costs incurred by Pearson, which seems rather (several inaudible words) your Lordship to (inaudible) entertain about that.

(inaudible) your Lordship on this point as an approach to be (inaudible), it may well be that ultimately this question will be decided against my client, and your Lordship will say on the (inaudible) construction of the retaining fee (inaudible) therefore lies with Penguin. Penguin were primarily liable or ultimately liable for the costs of indemnity as between themselves, Pearson and (several inaudible words). (several inaudible words) retained them, but what I would say about that my Lord is this, that is something, which your Lordship can only decide once your Lordship has had an opportunity to consider the retainer, which as I say is not present in evidence.

But if your Lordship looks at paragraph 28 in Mr Irving's affidavit your Lordship will see a citation from the Bookseller, (inaudible) Mr Irving (several inaudible words). If I can take your Lordship to the second paragraph of that, (several inaudible words) Penguin (several inaudible words) Penguin personnel involved (several inaudible words). There is no point in (several inaudible words) sometimes obvious (several inaudible words).

MR JUSTICE GRAY: But are you, I am sorry to interrupt you can read on in a minute, but are you seriously suggesting that where a subsidiary, I have not I am bound to say entirely appreciated that Penguin was a subsidiary of Pearson. But are you seriously suggesting that if the litigating party is a subsidiary and the bill is ultimately going to be picked up by the parent that the subsidiary cannot recover the costs of the case?

MR DAVIES: My Lord let me address your Lordship in this way, in this case, no doubt (inaudible) subsidiary (several inaudible words) actual company. I would ask your Lordship to consider this example, if it (several inaudible words) company £200m, and the subsidiary (inaudible) of £2, and the subsidiary mounted a lengthy action (several inaudible words) against (several inaudible words) intellectual property, which is (several inaudible words) can there never have been any complication that the subsidiary would beat them.

And there could never have been any complication that if the action failed the subsidiary could not (inaudible). Then in that case my Lord it would be (several inaudible words) from this sort of (several inaudible words) he could most certainly not recover his costs in (several inaudible words). And in my submission that follows inevitably from what was said in (several inaudible words), necessary implication to what was said in Bailey and Neville.

MR JUSTICE GRAY: Well I am not so bothered about, well anyway complete your reading if you would like to (inaudible).

MR DAVIES: My submission is simply (inaudible) that is no case where the claimant can a retaining party ever recover the costs. But I wish to make this clear to your Lordship, because I would not wish to misrepresent (several inaudible words) as I say I put it to your Lordship (several inaudible words) what (several inaudible words) question of construction is obtained (several inaudible words). If it were a case my Lord that (several inaudible words) not by (several inaudible words) but by (several inaudible words) what my submission would have been by (several inaudible words) who had a role initially (several inaudible words) 40 years, is that (several inaudible words) is (several inaudible words) to take them all the way down to (several inaudible words).

So that if (several inaudible words) which (several inaudible words) no beneficial interest whatsoever in the (several inaudible words), and that would be quite (several inaudible words). It might well be proper (several inaudible words)-

MR JUSTICE GRAY: What it is the relationship between Pearson and Macmillan?

MR DAVIES: Macmillan as I said my Lord originally purchased (several inaudible words) my Lord the American company.


MR DAVIES: Original (several inaudible words) detailed (several inaudible words) case that my learned friend had (several inaudible words) had. And (several inaudible words) relationship between Macmillan and Pearson, subsequently (several inaudible words) effect that there is further indemnity, (several inaudible words) page 54, which is (several inaudible words) but one takes indemnity down to the chain. Your Lordship will see as to (inaudible) generally it was (several inaudible words) up to 1957.

MR JUSTICE GRAY: And now it is (inaudible).

MR DAVIES: But what the defendants will not (several inaudible words) authority, is that in proper (several inaudible words) lots of (inaudible) categories were made (several inaudible words) admitted between (inaudible) probably would be, it is still contrary to public policy. And the effect there will be that any arrangement under which Macmillan were ultimately funding this (inaudible) retainer contrary to public policy (several inaudible words) authority in the House of Lords on that (several inaudible words), such that ultimately no such (inaudible) recoverable from Mr Irving (several inaudible words) position.

(several inaudible words) United States of America, rather than the defendant (inaudible), I do not say that in the case of Pearson (inaudible) with the ultimate funding party, because they (inaudible) the meeting, (several inaudible words)--

MR JUSTICE GRAY: I am sorry I thought a moment ago when I asked you that question you said that if the parent was paying the costs then the subsidiary could not recover?

MR DAVIES: That it might not be able to recover my Lord.


MR DAVIES: There are two (several inaudible words), well the general (inaudible) of maintenance, maintenance and (inaudible) is still not as bad as (several inaudible words) at all. Contrary to public policy all contracts (several inaudible words).

MR JUSTICE GRAY: It is not contrary to public policy?

MR DAVIES: It is my Lord in (several inaudible words)--

MR JUSTICE GRAY: If it is improper maintenance it may be--

MR DAVIES: (several inaudible words) authority (several inaudible words) as to the effect of maintenance without a contract. What (several inaudible words) 1957 swept away, (several inaudible words) liability (several inaudible words) criminal liability it did not purport to abolish, but on the contrary it preserved all rules of law that stated maintenance (inaudible) contract (several inaudible words) and contrary to public policy and indeed that is the view (several inaudible words). And it remains the view so that in my submission must be adopted (several inaudible words) House of Lords (several inaudible words) 1981.


MR DAVIES: (several inaudible words) maintenance (several inaudible words) the principle of illegality (inaudible) public policy etc, do not apply (several inaudible words) exception.

In my submission it might well be argued (several inaudible words) my learned friend might well argue (several inaudible words) do so simply to (inaudible) it. The maintenance (inaudible) by the holding company would fall (several inaudible words), and in those circumstances it might be the case, if on a true construction of the (inaudible) between the maintained party and the litigant (several inaudible words) parties, if on a true construction of that (inaudible), the maintained party nevertheless has a liability to that he would be entitled to recover costs (several inaudible words).

What in my submission would not be permissible would be that if he (several inaudible words) and for many years then one might be (several inaudible words) substantial interim payment could be made (several inaudible words) solicitors (inaudible) for an expert report. If as the case (several inaudible words) then this must be provided by (several inaudible words) far worse by Macmillan, or by their insurers to the effect that it has not been paid in the case of (several inaudible words), but has been ripped apart by other (several inaudible words) persons, then in my submission--

MR JUSTICE GRAY: Yes, I think you are, if I may say so, and I think all your submissions, perhaps glossing over what I believe to be the fundamental distinction between the case where, if you like, the bills are going direct to some third party. In other words the litigant is not even receiving the bill, and cases where the party being billed by the expert or whoever it may be is the litigating party, and the litigating then pays, but then may be is indemnified by an insurer or by a parent, or by some other corporate entity. And I think that the authorities show that that is the crucial distinction.

MR DAVIES: My Lord, (inaudible) distinct is a very important English, (several inaudible words) your Lordship then your Lordship might well conclude. As I say this is a case where what happened was, Penguin paid, they were being retained by, and their liability primarily (several inaudible words) recover their costs. Well as your Lordship says it would not be true undoubtedly if that was what the arrangement between the various parties and the other side ultimately would be.

But (inaudible) your Lordship (inaudible) I make this submission not to try and persuade your Lordship (several inaudible words) but (several inaudible words) made by Mr Irving will be given serious consideration by the court to make the court (several inaudible words) process of assessment of costs now, and (several inaudible words) to be put in. My Lord if (several inaudible words) consists of the affidavit for the (inaudible) firm of solicitors of the highest standing such as (several inaudible words), in which (several inaudible words) said that at all times Penguin (inaudible) primarily liable for costs. Penguin (several inaudible words) and I do not think (inaudible) like this, I do not think (several inaudible words)--

MR JUSTICE GRAY: Well putting in front I think we ought to be very clear what we mean?

MR DAVIES: (several inaudible words).

MR JUSTICE GRAY: Well the question that you are effectively inviting an answer to is whether the solicitors to Penguin Books have been rendering their bills, and of that matter the disbursements and invoices for the disbursements, to Penguin Books as opposed to some other third party. That is the point is it not?

MR DAVIES: Yes my Lord, but what I do furthering that my Lord is in my submission the position were that (several inaudible words) from America for an agent that appears (several inaudible words) acting for those Americans to that (several inaudible words) to meet their interim bill, then whoever those (several inaudible words) to, if the position is that the solicitors that received those (inaudible) acknowledged that they have been provided by maintaining, and that (several inaudible words) the solicitors should pay themselves out of funds remitted to them (inaudible) by the (inaudible).

MR JUSTICE GRAY: So the sending of the bill was really a sort of, a bit of a nonsense on that factual scenario?

MR DAVIES: Well (inaudible) I know (inaudible) suggest any impropriety--

MR JUSTICE GRAY: No, no I appreciate that.

MR DAVIES: But the question, which in my submission is (inaudible) is the underlying (inaudible) reality situation.

MR JUSTICE GRAY: Yes, I follow that I think you may well be right about that.

MR DAVIES: Yes, and what I would say to your Lordship about that is this, if the (inaudible) seeking to, by paragraphs in Mr Irving (inaudible) as I put to your Lordship, I (inaudible) in your Lordship's mind the question, which your Lordship thinks ought the matter (inaudible) negligence be answered as between the parties, whether there (inaudible) of such a kind that it was true Penguin would not pay the interim bills out of their own money, but out of monies that had been submitted to their solicitors by Pearson, or by (inaudible). Then what your Lordship ought to do is to stay all further proceedings in respect of the costs until the (inaudible) is (inaudible).

MR JUSTICE GRAY: Well just let us look at the evidence, supposing you are right on your submission as it were, of law. You rely on the Bookseller?

MR DAVIES: Yes my Lord, and indeed on what is said in the affidavit.

MR JUSTICE GRAY: Well just wait a moment--

MR DAVIES: By the representatives of Penguin.

MR JUSTICE GRAY: What do you mean, quoted in the Bookseller?

MR DAVIES: Well yes my Lord.

MR JUSTICE GRAY: Yes, well I would have thought that is a bit equivocal myself, I mean in a sense the parent is always going to be (inaudible) with subsidiaries incurring £2m worth of costs in a libel action.

MR DAVIES: Well (several inaudible words) my Lord is this, it is a not a question, which I ask your Lordship to answer on this evidence, in my submission all I seek to persuade your Lordship to do is (several inaudible words) question of (inaudible). Namely, the plaintiff did not (several inaudible words) financial (several inaudible words) in advance. And (several inaudible words) court to establish whether there was any maintenance.

MR JUSTICE GRAY: Well you have got to get to first base, you cannot simply raise this is a speculative consideration, because otherwise it could be done in every single application for a payment on account.

MR DAVIES: Yes my Lord that is very true, but to what extent that (inaudible) is that the article in the Bookseller, which supports irrespective of (several inaudible words) verbatim what has been said by persons on the other side, not what was said by Mr Irving. In my submission, but to raise the question in your Lordship's mind, and in my submission in order for your Lordship to answer that question by saying, oh it is equivocal on the evidence of (several inaudible words) I am not persuaded so I might forget that (several inaudible words). What in my submission your Lordship ought to ask yourself is whether there ought to be further enquiry of this question.

MR JUSTICE GRAY: Yes, I follow the way you put it.

MR DAVIES: (several inaudible words) it could be disposed of by adjourning for a few days, and having persons on the other side make an affidavit dealing with this question, the affidavit (several inaudible words) retainers (several inaudible words) we therefore (several inaudible words) payment (several inaudible words).

And whatever arrangement existed between Penguin and Pearson are matters to which we are not privy, (several inaudible words) cheques by payment (inaudible) in England that is an end of the matter. The point has gone and your Lordship will decide it upon the evidence, but at the moment your Lordship (inaudible) against me, what your Lordship is doing would be dismissing this application effectively for full disclosure of this point.

And deciding against the claimant without having direct benefit of even (several inaudible words) evidence of it, then there really is my Lord, authority in my submission for me on this question in (several inaudible words) of the divisional court of this division. And that authority does make it quite plain that there is a presumption in the normal case, there is a regular retainer (several inaudible words) sufficient doubt in your Lordship's mind.

MR JUSTICE GRAY: Well that is rather what I think I was saying; you have got to get to first base.

MR DAVIES: (several inaudible words) authorities (several inaudible words) your Lordship's (inaudible).

MR JUSTICE GRAY: Have you very kindly, oh yes here I am afraid I have not had a chance to look at any of your authorities, but that is those what you have just told Mr Davies and it sounds sensible to I am (several inaudible words).

MR DAVIES: Yes, what could I read a very small part of what (inaudible) in terms of (inaudible). He says, "When (inaudible) genuinely--

MR JUSTICE GRAY: Hang on where are you?

MR DAVIES: In the last paragraph of the second column my Lord.

MR JUSTICE GRAY: Yes got it.

MR DAVIES: Where (inaudible) genuine issue raised by the defendant as to whether the complainant (inaudible) properly (inaudible) in proceedings--

MISS ROGERS: Sorry, can you start with the first paragraph?

MR DAVIES: Yes, my Lord my learned friend asks me to start and she is entitled to do that.


MR DAVIES: "In cases where it is usual to assume that where the claimants are actively (inaudible) pursuing a claim, it is out of the payment (inaudible) costs of doing so. In other words there is an (inaudible) presumption the complainant will be perfectly liable to (inaudible) costs. And this should not normally be (several inaudible words) evidence to that effect. Such an approach would mean (several inaudible words) Regina v Miller, (several inaudible words) avoiding (several inaudible words) relative statutory provisions (several inaudible words). The same can therefore be relied upon (inaudible) liable for costs where there is no effective challenge to it." I would my Lord emphasise the last word of what Mr Justice Harris(?) says, "Where there is no effective challenge to it."

And he goes on to say at paragraph (several inaudible words) it is not (several inaudible words) for the paying party to say, oh well I put you to proof, (several inaudible words). That in my submission is (several inaudible words), which your Lordship given in an ordinary case, and which Mr Justice Harris (several inaudible words) agreeing, they ought to be given in ordinary cases. But what Mr Justice Harris was solely (several inaudible words) genuinely issue (several inaudible words) as to whether the complainant could properly receive (several inaudible words). (several inaudible words) costs, (several inaudible words) unlawful and unenforceable conditional (inaudible).

(several inaudible words) complainant (several inaudible words) reduction in the light of his solicitor's costs. If he has not then (inaudible) to evidence to prove that he has properly incurred costs in the proceedings, and the defendants have shown (several inaudible words) argue that he had not he would be most unlikely to succeed in recovering his costs.

What I think my Lord said (several inaudible words) I shall not labour the position your Lordship has (several inaudible words), but what is put in the Bookseller what is in Mr Irving's affidavit, and (several inaudible words) evidence whatever else your Lordship might decide against it, (several inaudible words) which is probably common here I think to all parties in the case, (several inaudible words) 40 years experience in the ways of the Bookseller, including payment (several inaudible words). And although what is the nature of the indemnity your Lordship will no doubt recollect that--

MR JUSTICE GRAY: Sorry, which indemnities are you talking about?

MR DAVIES: Indemnity given between author and publisher, between publisher (several inaudible words) published in the United States.

MR JUSTICE GRAY: You are talking of indemnities, and I think we have agreed earlier on that an indemnity is fairly unexceptionable.

MR DAVIES: Well my Lord I use the phrase indemnity loosely, of the arrangements, which may exist such that litigation will be (inaudible) by the party, which ultimately have responsibility for costs.

MR JUSTICE GRAY: But that is not indemnification that is the point.

MR DAVIES: Not true indemnity my Lord, (several inaudible words) your Lordship will no doubt recall and Mr Irving recalls is following (several inaudible words) liable (inaudible) in Kaplin Co and (inaudible) [Cassell & Co vs Broome?], where Kaplin Co were representing Mr Irving's interests in effect, as well as their authors, simply because there were no fees or arrangements between them (several inaudible words), commercially in pursuing the (several inaudible words).

And it is a completely different kind of arrangement (several inaudible words) exists. (several inaudible words) is that it is usual for (several inaudible words) distributor. (several inaudible words) United Kingdom, (several inaudible words) show that my learned friend could make her submissions on quantum, 1,800 or so copies of a book, which had a (several inaudible words) in the United States (several inaudible words).

And ultimately American rather than an English book, of which there are very few copies applicable to (inaudible), it would be usual and would make common commercial sense (inaudible) for the English distributor to ensure that there are arrangements in place to meet it, and the ultimate publisher in the United States so that he can recover any liabilities incurred by means of libel suits in England from the ultimate publishers in the United States, which (several inaudible words) eligible (several inaudible words) actions for defamation (several inaudible words) in the United States.

MR JUSTICE GRAY: Where is the evidence in Mr Irving's affidavit of that, because it may be said that it may equally not be said because of English libel laws?

MR DAVIES: (several inaudible words) paragraph (several inaudible words), my Lord if you turn to paragraph 74 it begins there (several inaudible words). He (inaudible) his experience, as my Lord (several inaudible words) 40 years.


MR DAVIES: Of the kind of arrangements that exist.

MR JUSTICE GRAY: Yes, well 24 does not really address the question does it?

MR DAVIES: 25 goes on to (several inaudible words) publication in the United States.


MR DAVIES: Between (several inaudible words) and Macmillan, and they include in (several inaudible words). And what he then said was it would be usual in those circumstances to (inaudible) responsibility directly (several inaudible words).

MR JUSTICE GRAY: Yes, I think the way Mr Irving puts in paragraph 25--

MR DAVIES: And then he goes on in paragraph 28(?) to, in my submission (several inaudible words) that general proposition (several inaudible words) evidence in relation to the circumstances of this case.

MR JUSTICE GRAY: Yes, but you see unfortunately in paragraph 27 Mr Irving, and this is obviously not a criticism of him at all, he does use the word indemnify. And oddly enough the at is the key point, I say that on the basis of a case in which I was involved, this is why I happen to know about it, where everything turned on the structure. Nobody disagreed that there was going to be ultimately payment by a non-party, and as it happened an insurer. Unfortunately for the litigating party the arrangement was structured in such a way as to have the consequence that the bill went direct to the insurer.


MR JUSTICE GRAY: So there was no question of the litigating party being billed or anything else.

MR DAVIES: Yes my Lord.

MR JUSTICE GRAY: So that is why I make the point as I do that paragraph 27 does not actually help you.

MR DAVIES: Well my Lord, what I say about that is this, I have asked your Lordship not to be over harsh of the litigant's words in relation to the way in which he uses words. The word indemnity is (several inaudible words)--

MR JUSTICE GRAY: No, I am perplexed about that.

MR DAVIES: The word guarantee, the word (several inaudible words) technical meaning and a technical (several inaudible words) guaranteed, and the principle (several inaudible words). These words (several inaudible words) litigant in person (several inaudible words) affidavit in a short space of time, (several inaudible words) litigants, which manifestly (several inaudible words) payment in costs order in my submission that bankrupted him and caused him difficulties in security for costs in the appeal, which he fully intends to bring (several inaudible words) your Lordship has told me.


MR DAVIES: (several inaudible words) in my submission as I say, to decide (several inaudible words) use of the word (several inaudible words).

MR JUSTICE GRAY: I think that is a fair point if I may say so.

MR DAVIES: I am very obliged to your Lordship.

MR JUSTICE GRAY: Let me just, when considering the question of what the evidence suggests invite you to look at tab 12.


MR JUSTICE GRAY: And this is, as I understand it, the first defendant's solicitors invoicing the first defendant, partly I think for their own professional charges, but also for disbursements. Now how can you displace what seems to me to be the clear inference from that, that the parties to whom Davenport Lyons(?) were looking for the payment was indeed the first defendants and not some other company?

MR DAVIES: My Lord that is prima facie, but the (inaudible) might be that these bills were evident to pay the parties in the action, they had always been agreed between (inaudible) parties that they have been cocky (inaudible) appears, as appears to be shown (several inaudible words). Or else that that is more likely apart from (inaudible) advance by (inaudible), to make the staged payments on account of the action (several inaudible words) quite common my Lord.

The (several inaudible words) on this (several inaudible words) will wish to have (several inaudible words) fees that they have incurred in relation to counter-suit. But given the costs of the experts in this case in relation to the expert's fees, (several inaudible words) no evidence, and with which the solicitors (several inaudible words) Davenport Lyons would be able to deal with them in the very shortest order. If it was the case that in fact the (several inaudible words) provided (several inaudible words) parties in the United States (several inaudible words) which your Lordship gave (several inaudible words) by their insurers directly, then very different questions might arise.

And I all I would invite your Lordship to do is to put to the defendant that they ought to deal with this (inaudible) evidence, and simply adjourn the matter over for a few days when your Lordship can next conveniently hear it--

MR JUSTICE GRAY: Well there are difficulties here about that, if it is sensible to do that we will have to do that, but I mean I am not available for another month or so because I am out of London, Mr Irving I know is going to the States, and I--

MR DAVIES: (several inaudible words) before your Lordship it is not a matter where (several inaudible words) with the intention of (several inaudible words) trial.

MR JUSTICE GRAY: Well that may be that may be.

MR DAVIES: (several inaudible words) your Lordship is the problem in my submission that is simply the nature of the fact that your Lordship may have to go on (several inaudible words) out of London or whatever. (several inaudible words) for your Lordship (several inaudible words) other side, which I have no formal instructions (several inaudible words) one can imagine it is most unlikely that Mr Irving would question the voracity of any affidavit put to him by Davenport Lyons, provided (several inaudible words) particulars.

And if in respect of the matter the (several inaudible words) clearly, then that would be an end of that point. But what one would wish to see in my submission my Lord is some evidence of exactly what the retainer was. And some evidence whether there had ever been payment of (several inaudible words) at no time have I ever received payment directly from Pearson or Pearson (several inaudible words). But that is an (inaudible) point that I have (several inaudible words) cross-examining (several inaudible words) professional reputation--

MR JUSTICE GRAY: Well I would not put yourself to that.

MR DAVIES: (several inaudible words) truthful affidavit (several inaudible words) rather insulting and probably may be a futile exercise, but at the moment there is simply no evidence at all that--

MR JUSTICE GRAY: When did you first raise the query, which is the basis of your opposition to your payment on account, when I say you I mean your side as it were?

MR DAVIES: The answer to that my Lord is this, I was instructed in this matter on Wednesday.


MR DAVIES: And considered the papers, and I made an appointment with my instructing solicitors either on Wednesday or Thursday.


MR DAVIES: (several inaudible words) on the weight of some evidence supplied by Mr Irving on that question, in fact it occurred to me to ask whether there were in fact (several inaudible words) parties (several inaudible words) litigation, the matter was then pursued by my instructing solicitors (inaudible) Mr Irving and Mr Irving (several inaudible words).

So my Lord the question came up in the course of this week, and I (several inaudible words) various issues arising out of (several inaudible words) your Lordship what your Lordship has to decide the question upon. So it is a point, which Mr Irving has taken before, because he has the technical knowledge of Guthrie (inaudible) [Gatley?] and such authority (several inaudible words).

MR JUSTICE GRAY: You must not underrate your client if I may say so; he took this very point in relation to the second defendant (inaudible) 18th April.

MR DAVIES: Well yes there is (several inaudible words) rather the point raise obviously, because I understand that my learned friend Mr Julius has said that he acted pro bono (several inaudible words), which reflect upon--

MR JUSTICE GRAY: Well we are not dealing with that I read it--

MR DAVIES: (several inaudible words) (inaudible) Bookseller dated 25th April (several inaudible words).

MR JUSTICE GRAY: Right, well I can totally accept that -- totally accept that.

MR DAVIES: (several inaudible words) the point of making (several inaudible words) statement (several inaudible words) your Lordship have some indulgence for the position of the defendant (several inaudible words) very (inaudible).

MR JUSTICE GRAY: If I may say so I entirely accept that and you have [had] to get your tackle in order very quickly. It was really only enquiry because it seemed to me to be material to know the position, but I now know it.

MR DAVIES: I am grateful to your Lordship for that. But I come back again to that point that your Lordship mentioned earlier, your Lordship has (several inaudible words) and it seemed to be a matter that your Lordship during the exercise of your discretion in a case such as this, where candidly (several inaudible words) if the matter goes against me, whether a very large order should be made now, whether your Lordship ought to do it now.

MR JUSTICE GRAY: Well let us postpone the question of the amount?

MR DAVIES: Yes, well until this point has been disposed of.


MR DAVIES: And I would submit that your Lordship (several inaudible words) decided to make a large order for material (several inaudible words) disposed of, or (several inaudible words) for the matter to be dealt with by the defendant with proper particularity on affidavit. And as I say I know that (several inaudible words) will expect an affidavit, which sufficiently (several inaudible words) blanket denial of any form of maintenance. But so far as--

MR JUSTICE GRAY: Supposing I am against you on that part -- and I obviously have not made up my mind about that -- but supposing I were to be against you would you be able to resist an order. Leave aside the amount for the moment, an order for payment on account given Mr Justice Jacobs decision, and the overall realities of this litigation?

MR DAVIES: In our submission (several inaudible words) put to your Lordship for that indicate as I can see from my learned friend (several inaudible words) that (several inaudible words) it is not even a proposition that generally such an order ought to be made. Before making it your Lordship would have to be satisfied in his own mind that the figure for which your Lordship is (several inaudible words) taxation--

MR JUSTICE GRAY: Well leave aside amount.

MR DAVIES: (several inaudible words) there is discretion in your Lordship; it is not a matter (several inaudible words). All that Mr Justice Jacobs when he first (several inaudible words) is that generally that discretion will be exercised in favour of (several inaudible words) party. What I think (several inaudible words) factors in this case (several inaudible words) put by the defendant is that there is no prospect of Mr Irving paying (inaudible) proportion of a certain amount of costs that are going to be (inaudible) hand.

The costs Mr Irving (inaudible) very large (several inaudible words) which the defendants chose to pursue it. And also (several inaudible words) my Lord I have the instructions on this point if (several inaudible words) your Lordship's (inaudible).


MR DAVIES: And the (several inaudible words) wish to be represented by me, being counsel familiar with this area before. And anything (inaudible) your Lordship's judgment (several inaudible words) technical point in relation to (inaudible) how far the matter, which your Lordship (several inaudible words) in favour of Mr Irving (several inaudible words). The general question as (several inaudible words) in this case, which I have to say (several inaudible words).

MR JUSTICE GRAY: No, I do not want to ask you unfair questions I am puzzled by that latter proposition.

MR DAVIES: Well what I say to that my Lord is if Mr Irving is the (inaudible) this case, then (several inaudible words) your Lordship with what the lines of appeal would be. Because I (several inaudible words), but manifestly there are matters of general public interest raised by this appeal. It would be an appeal on which he would wish to (several inaudible words) and however much (several inaudible words) conduct the case in the first instance, and your Lordship was kind enough to make it available (several inaudible words).

(several inaudible words) Court of Appeal if I may respectfully say so (several inaudible words) their Lordships in the court (several inaudible words) Court of Appeal (several inaudible words). And in any event the technical point whether (several inaudible words) put in (several inaudible words) by the claimant and by way of justification when matters were (several inaudible words) justification, but could not properly pleaded by the defendant on appeal. These are all matter from which (several inaudible words) by legal counsel, various (several inaudible words) this case properly (several inaudible words).

MR JUSTICE GRAY: Well supposing all of that is right and it may well be, do you not have to grapple with the problem that I, having I hope considered the issue correctly, refused permission to appeal. Because I remember mainly on the grounds, but I without being, it is always difficult for a judge to have to review his own judgment he obviously thinks he has got it right. But I did form the view rightly or wrongly that the prospects were not rosy, I mean that is a conclusion I have already arrived at, I think you have got to deal with that, it is difficult for you because you do not know very much about the case, but--

MR DAVIES: The difficulty then my Lord is that I must confess (several inaudible words) your Lordship's judgment in any great detail, and I have the great disadvantage of (several inaudible words) on that issue (several inaudible words) your Lordship (several inaudible words) evidence very carefully.

MR JUSTICE GRAY: Well the problem Mr Irving has, and this is not said in a spirit of anything other than trying to see how the position stands for the purposes of today's application, is that it is pretty much a factual judgment and there is the Section 5 point I see, and you say there is an inadmissibility of evidence point, which I do not fully follow at the moment. But in the end it is very much a question of fact.

MR DAVIES: Well (several inaudible words) my Lord (several inaudible words) defendants are (several inaudible words).

MR JUSTICE GRAY: Oh I see in that sense that yes.

MR DAVIES: (several inaudible words) and the way matters (several inaudible words) the newspapers are thinking (several inaudible words).

MR JUSTICE GRAY: I see what you mean yes I follow I follow.

MR DAVIES: (several inaudible words) yes my Lord. What I would ask is that (several inaudible words) which Mr Jacobs (inaudible) in mind and the court ought to consider, is the likelihood of whether the parties wishing to pursue an appeal (several inaudible words) why your Lordship may say that your Lordship's delivery (inaudible) was probably against the claimant (several inaudible words).

Nevertheless your Lordship has (several inaudible words) recognizes (several inaudible words) I never remember having made any submissions on the question of costs (several inaudible words) five minutes (several inaudible words) what has been said. I think it is only (inaudible) the costs is such a rare privilege I shall have to put it in my diary as a red-letter day.

But this case has such overwhelming public interest that in my submission (several inaudible words) of the payment of costs (inaudible). Whether (inaudible) £100,000 or £150,000 (several inaudible words) Mr Irving by making him bankrupt (several inaudible words) is really not going to be the global (several inaudible words). (several inaudible words) come back to that my Lord in a moment, but I wish to (several inaudible words). But I would say the likelihood of appeal being disputed (inaudible) the matter (inaudible) of general public interest, the possible likelihood of appeal by (inaudible) appellant, so that any opportunity to take to appeal was viable, (several inaudible words) is a matter which in my respectful submission ought to (several inaudible words) costs order.

Your Lordship (several inaudible words) and I really say that it is a matter, which the appellant or the (several inaudible words) appellant will wish to pursue at the first (several inaudible words).


MR DAVIES: If your Lordship (several inaudible words) given a vast amount of (several inaudible words). The submission I make to your Lordship is the proportionality, in the sense that (several inaudible words) Mr Justice Jacobs very much touches upon at page 47.

MR JUSTICE GRAY: Well he does, and I do not quite understand what he means.

MR DAVIES: Well what he says my Lord is, my Lord (several inaudible words) but what it does say is that (several inaudible words) a factor to be taken into account is whether the successful party (several inaudible words) the other successful party (several inaudible words). And that would have taken into account in accepting the (inaudible) of costs as part of the overriding objective, if the court seeks the level of (inaudible) between (several inaudible words) parties who wish to (several inaudible words) general public interest. And it would in my submission be entitled--

MR JUSTICE GRAY: How do you take that into account, I follow the concept but I do not follow how you can apply it?

MR DAVIES: Well let me say my Lord, if the parties are pursuing a case, running a long (several inaudible words), with investigative (several inaudible words) etc etc, the cost of that exercise should properly sit upon the (several inaudible words) party, if perhaps only say a reasonable amount.

MR JUSTICE GRAY: But then it goes the quantum then.

MR DAVIES: It goes to quantum my Lord.

MR JUSTICE GRAY: But Mr Justice Jacob puts it as going to the discretion whether to make an order or not.

MR DAVIES: Yes he goes on to quantum, and he goes to the specialist (several inaudible words) in my respectful (several inaudible words) which is an act of discretion.

MR JUSTICE GRAY: Well that is, I do not follow that, but there we are.

MR DAVIES: (several inaudible words) your Lordship put it, but I mean I suppose the point I wish to make your Lordship (several inaudible words) is this, (several inaudible words). (several inaudible words) and with that (several inaudible words) costs (several inaudible words). It is in my submission important that those (several inaudible words) court today; he makes no application (several inaudible words) on account of (several inaudible words).

MR JUSTICE GRAY: No, well there may be considerable complexities in (several inaudible words).

MR DAVIES: That may well be why the application is not (several inaudible words).

MR JUSTICE GRAY: That may be so.

MR DAVIES: But you see if I can persuade your Lordship the (several inaudible words) Mr Irving (several inaudible words) are important questions relating to his (several inaudible words). (several inaudible words) Mr Irving as (several inaudible words) because they are quite happily published his books in the past. And no doubt made a great deal more money out of him than in fact (several inaudible words) 2,000 copies (several inaudible words), so the (several inaudible words) man, (several inaudible words).

And the position as between Penguin and Mr Irving is (several inaudible words) £500 and a few formal apologies, and in my submission what your Lordship ought to consider is whether the party (several inaudible words) untainted by Mr Irving's (several inaudible words) what happened, one ought to say (several inaudible words) litigate these matters (several inaudible words), incurred numerous amounts of costs against a person you know (several inaudible words). Because when you take £500 you take £500, (several inaudible words) oh we retract what (several inaudible words).

What I say to your Lordship is this, as a matter of general principle is it right that this huge enterprise should continue to defend proceeding, or (several inaudible words) of principle against (several inaudible words) when he has offered (inaudible) £500, no costs and a (inaudible) apology. Might I give an analogy if I dare (several inaudible words) your Lordship?

MR JUSTICE GRAY: Well (several inaudible words).

MR DAVIES: I tell your Lordship this, imagine a family in which the family hated one another, a common occurrence, (several inaudible words) £100,000, one of the children alleges that one its siblings procured the execution of the will by the exercise of duress over the (several inaudible words). (several inaudible words) decided that the (several inaudible words) position, and (several inaudible words) so receive the value of the estate they carry on fighting, because it comes back to the question of proving that they were right and their brother or sister, or half-brother or half-sister is wrong.

That what they really want to do is to have their day in court, and employ cross-examining of rival siblings on (inaudible) relationship with their parents, whether they fought (several inaudible words), when they threaten to hit granny over the head with a poker unless she (several inaudible words). If half a million pound in costs is (several inaudible words) case, disputing (several inaudible words) a small terraced house worth £80,000, would it be right and proportionate of the issues involved in the action to say the costs will be assessed, bearing in mind the half a million pounds incurred, and taking no account of the fact that it was ludicrous on any sensible commercial view to arrest that action.

And in my submission the answer which would be given is no, parties who litigate (several inaudible words) of that kind (several inaudible words), for the (several inaudible words) making (several inaudible words) or other employment ought not to have their costs (several inaudible words) by making £500, or writing them a formal letter of apology (several inaudible words) do it. But in my submission as a matter of principle and bearing in mind the overriding rule of proportionality (inaudible) to costs, the costs in this case as between Mr Irving and Penguin ought to be proportionate in the sum of £500, which is (several inaudible words). The (several inaudible words) should not be entitled to (several inaudible words).

And what it is your Lordship is it is a matter of principle that that figure, the figure, which has actually been settled, make (several inaudible words), is the fact, which has weighed very heavily on your Lordship. First in deciding on what basis to order costs (several inaudible words), make any order for costs at all. I think (several inaudible words) interim order for costs against the party (several inaudible words) £500 (several inaudible words) apology that is the case. And in my submission that is a matter of principle where your Lordship should exercise his discretion against the defendants.

My Lord I come to the last matter, and it is a matter again on the question of whether your Lordship should exercise his discretion. And that is the matter, which and I put it in no great detail, because (several inaudible words). (several inaudible words) as to breach of the (several inaudible words)--

MR JUSTICE GRAY: Well I do not for the moment see how that can possibly bear on the decision I have to make. I know nothing about it and I am not of course expressing a view one way or the other as to whether there has been any impropriety, but even if there has that is a matter for contempt proceedings is it not?

MR DAVIES: Well my Lord in my submission (several inaudible words) instruction my Lord, in relation to costs. (several inaudible words) take your Lordship to what my learned friend very clearly put.

MR JUSTICE GRAY: Yes, the conduct of the party yes I see what you mean.

MR DAVIES: Conduct of the party my Lord; here is a case that there would appear to be a serious breach of (several inaudible words). (several inaudible words) defendant, (several inaudible words) defendant party that (several inaudible words) that would be a disgraceful contempt, it would be an absolutely disgraceful (several inaudible words). And which should weigh very, very heavily in the balance in considering whether an order for costs, or (several inaudible words).

MR JUSTICE GRAY: But how can I possibly, I mean the logic of this is that we have adjourn this application until such time as contempt proceedings can be mounted?

MR DAVIES: Well, in my submission (inaudible) your Lordship (inaudible) lead as your Lordship suggested, and order an adjournment of this application until such time as Mr Irving has either (inaudible) his allegation of serious (inaudible).

MR JUSTICE GRAY: But how does he make that or fail to make good the allegation, in contempt proceedings or--

MR DAVIES: If, (inaudible) your Lordship is this, (several inaudible words) my Lord one could know who, assuming that it has been done, assuming that material provided (several inaudible words) is now appearing (several inaudible words) on a website (several inaudible words) whoever he may be, but would appear to be a political opponent. If (inaudible) Mr Irving (several inaudible words) all over the website he is going to (several inaudible words). It is apparently that someone has given all this material, (several inaudible words).

MR JUSTICE GRAY: Well someone on that scenario would be within the jurisdiction of this court.

MR DAVIES: Well quite my Lord, I hasten to say (several inaudible words) it would be quite wrong if I come before your Lordship with only the most (inaudible) instructions, having (inaudible) the matter rather late, begin to make allegations against named individuals (inaudible) gross contempt of court. And then say (several inaudible words) your Lordship the material (several inaudible words) website should not be there. It may not necessarily (several inaudible words) it may (several inaudible words), if it would however she is not (several inaudible words).

MR JUSTICE GRAY: Well she is amenable in an indirect sense of the jurisdiction of the court.

MR DAVIES: Well my Lord in my submission the reality of the position is that apart from (several inaudible words) unless (inaudible) traveled the country, might very well regard orders (inaudible).

MR JUSTICE GRAY: No, by amenable in an indirect sense I simply meant that she is a litigant with, as I understand, applications which may still need to be made on her behalf.

MR DAVIES: (several inaudible words) the difficulty with that again, unless your Lordship directs that proper evidence should be put in by both (several inaudible words) explaining how it is that the material (several inaudible words) is appearing on (inaudible) website, it is quite impossible for Mr Irving to know who might have done that.

MR JUSTICE GRAY: Yes, but all I am questioning at the moment is how I can really accommodate that consideration in today's application, because that may take weeks or months to resolve, and I do not see how you can resolve it really in the context of an application of this kind. It seems to me that you can only really resolve it on a contempt application?

MR DAVIES: In my (inaudible) submission what your Lordship says is (several inaudible words) to save time. It is wrong in the sense that only in the court (several inaudible words), it is in my respectful submission wrong (several inaudible words). What your Lordship has to decide today I would submit is whether to exercise his discretion (several inaudible words) in favour of the party.

What your Lordship (several inaudible words) might well be to (several inaudible words), it might well be the other defendant (several inaudible words) it might be there will be extra witnesses to say (several inaudible words). And in that case if that expert is out of the jurisdiction then (several inaudible words) submission (inaudible) to the party. One simply does not know until attempts are made to (several inaudible words). (several inaudible words) that would have the effect that it is perfectly (several inaudible words).

If your Lordship makes an order for payment of £500,000 or £250,000 in 14 days, the defendant will be able to petition and very likely that petition will succeed, subject to any question of applications being made to stay (several inaudible words) before your Lordship or in another place. And before your Lordship goes so far as to make an order (several inaudible words) your Lordship ought to consider the (several inaudible words) come to the court (several inaudible words). It is a matter for the exercise of a discretion, (several inaudible words) it is I concede a discretion, which ought, prima facie to be exercised in their favour subject to submissions that I wish to make to your Lordship on quantum in due course, if your Lordship wishes to hear them.

But what prima facie your Lordship's judgment ought to be exercising in favour of the proceeding party, if your Lordship were satisfied, if (several inaudible words) if your Lordship were satisfied that a serious question is (several inaudible words) out of the conduct of the proceeding party, then in my submission your Lordship ought not to exercise his discretion in their favour until they can (several inaudible words) hang over them by means of matters of material on websites. They (several inaudible words) apply to the Webmaster by (several inaudible words) to have a complete disregard for their obligations in court.

And what I would submit to your Lordship is the fact (several inaudible words) weighs very heavily in this case. So then your Lordship has my final submission on why an order for costs should not be made at this stage.


MR DAVIES: (several inaudible words) your Lordship that I shall not weary the court with further repetitions of submissions that your Lordship (several inaudible words).

MR JUSTICE GRAY: No, well you have made your submissions very fully and very helpfully, thank you very much.

MR DAVIES: I am obliged to your Lordship.

MR JUSTICE GRAY: Miss Rogers first of all on the question, well take your own course, but I mean the first question is obviously this question of if there is any maintenance, which is improper, or if there is any question of Penguin Books not being the party incurring the liability to pay your instructing solicitors costs?

MISS ROGERS: Yes my Lord, I am (inaudible) the point any further forward, but I will happily (several inaudible words).

MR JUSTICE GRAY: No, do it in your order I really do not mind.

MISS ROGERS: If your Lordship, actually I do not think it matters which way round I--

MR JUSTICE GRAY: Well I do not mind you take your own course.

MISS ROGERS: If I may I will do it in the reverse order simply because I do not want to forget the points, although it is a slightly trivial one, I do not want to let it go.


MISS ROGERS: Which is the question of the allegation of contempt. First of all I submit your Lordship is right to say that that has got nothing to do with you on this hearing, even if it be right. Secondly, since there have been members of the press and public in court during this, I want to make it quite clear that there is no evidence at all before your Lordship in relation to the Miss Call(?) [Nizkor] website allegation which has been made. If it is alleged that material has been put onto a website, then at the very least we are entitled to know what it is, this was raised over the telephone with me by Mr Davies yesterday and I made it quite clear I wanted to know details of what the allegations were. And on my reading of the witness statement there is nothing at all there.

MR JUSTICE GRAY: Well Mr Irving did make reasonably plain what he was alleging a long while ago, as I say on Good Friday.

MISS ROGERS: Oh my Lord he has made some allegations, but I do not know what it is that is actually being made now. And if an allegation is being made and the witness statement has been put in then it should have been put in properly.

MR JUSTICE GRAY: Well I think what he is saying is that he knows, and (inaudible) take him on trust on this that there is material from his diary, which has been appearing on some website or another.

MISS ROGERS: Well my Lord there was material from his diary that was used in open court.

MR JUSTICE GRAY: Well I think it is implicit that it is not material that was used in open court.

MISS ROGERS: Well that is certainly asserted my Lord, but nothing is easier than to download and take off material that is on the website. All I making a point of is if the allegation is to be made it is a potentially serious one, could have been made, should have been made and has not been made on evidence that is all my Lord. And of course it is denied by us there has been any breach of any (several inaudible words).

MR JUSTICE GRAY: No, but it would be a serious matter if this has happened.

MISS ROGERS: Of course my Lord, and it has been made in open court by Mr Davies, he has got a witness statement, which he is relying on, and the witness statement does not contain any detail that one would want to see, which I made plain to him I thought out of fairness to the first defendant should be before the court.

MR DAVIES: (several inaudible words) your Lordship create a massive (several inaudible words) in paragraph 32 (inaudible) website. He directs me in saying that (several inaudible words) video or that he ought to complain about the website, but he does go into great detail in relation to the (several inaudible words).

MISS ROGERS: Well I accept the detail about the alleged misuse of certain videos, but that is not what--


MISS ROGERS: In a sense I do not want to get bogged down in that it is an allegation, which even if made is not a matter that your Lordship (inaudible).

MR JUSTICE GRAY: No, well I do not see really I can take much account of it until I know what the position is.

MISS ROGERS: No, and we do not know either and we have not (several inaudible words). My Lord that is that, then on discretion another point that was made, this point about essentially this is a small claim for £500.

MR JUSTICE GRAY: I need not trouble you on that.

MISS ROGERS: Well my Lord again I do just want to say in fairness about that. It has been suggested that Penguin had no interest in this action, and should have compromised it and should have apologised to Mr Irving.

I do not want to make submissions to the gallery, but your Lordship's findings were, and this is what emerged in the case, that Mr Irving for his own ideological reasons persistently and deliberately misrepresented, and that it related to historical evidence. That for those reasons he portrayed Hitler in an unwarrantedly favourable light, principally in relation to his attitude towards the responsibility for the treatment of Jews. That he is an active holocaust denier that he is anti Semitic that he is racist, and as you say (several inaudible words).

MR JUSTICE GRAY: Yes well I remember my judgment and I expect--

MISS ROGERS: My Lord I wanted to say that, because the suggestion was that Penguin should have apologised to Mr Irving, and should have made a payment to him in order to compromise this action.


MISS ROGERS: And the offer that was made was made, the second offer, which is in the bundle with the witness statements, was made after all the evidence had been produced. And whatever the position was when Penguin may have published his books in the past; we know what the position is now.

My Lord in terms of the importance of the case, Penguin interest in fighting the action as Mr - I think (inaudible) - said in his opening submission, is by exposing Mr Irving extremist views and sympathies and his falsification of the tragic episode in history, the defendants were in effect performing a (inaudible) public service. And my Lord that is what the case was about. So I invite your Lordship - that cannot affect the question of whether or not there should be an order for costs, if anything it is in my favour.

Coming backwards again, the next point I think was that on the question of the likelihood of an appeal, and the question of stifling that.


MISS ROGERS: That potentially I expect that the potential impact on any potential appeal is a factor, which can be taken into account, and should be. At present of course we do not know what the proposed grounds of any proposed appeal might be. Your Lordship has refused permission in the court of the first stage that Mr Irving persuade the Court of Appeal that he should have permission to appeal.

MR JUSTICE GRAY: I think I extended time, if that was within my jurisdiction for the detailed grounds did I not?

MISS ROGERS: I think your Lordship did, and I am not sure that there was power, and as I say at the time (several inaudible words).

MR JUSTICE GRAY: Well I wondered at the time.

MISS ROGERS: In any event Mr Irving (inaudible).

MR DAVIES: I must say I take (inaudible) [issue] with my learned friend on that point.

MR JUSTICE GRAY: Well I think in fairness to me I did say that I was doubtful, but that I could understand there were good reasons and I am sure the Court of Appeal would be sympathetic.

MISS ROGERS: Of course one is sympathetic to Mr Irving being impersonal [sic. in person], although in fact I understand it now to be suggested he was to instruct solicitors and counsel. Now what the defendants said, anticipating that there might be an argument about Mr Irving's means was this, in a letter of the 20th April. That if any points were to be made about his lack of means then it should be supported by evidence. It may be that I have not read the witness statement carefully enough, but I do not see anything in there about Mr Irving's means other than a bare allegation that we are attempting to stifle an appeal, which he has not yet got permission to make.

Mr Irving has publicly stated and proclaimed the extent of public support for him, and claimed many thousands of supporters around the world who have supported him both in moral support, but also in financial terms.

MR JUSTICE GRAY: But not to the tune of anything like the sort of figures that experts and lawyers of costing.

MISS ROGERS: Well your Lordship (several inaudible words) before your Lordship at all about the level of Mr Irving's means, or the level of his fighting fund for which he had been soliciting funds, and still does through his website, and for all I know through other means. If a party were going to suggest that he is impecunious for lacking in means in some way or another, then one would expect to see some evidence of that. We know nothing on this face of this sort of statement about Mr Irving's means.

There is the (inaudible) in paragraph 14, "There is a strong likelihood the defendant's (inaudible) oppressing a costs order, which they do not really need as they are in no financial embarrassment themselves, in order to harass and impede in preparation ... reading the words ... I do not know whether or not Mr Irving (several inaudible words) tried to instruct counsel and solicitors to assist him in the preparation of the appeal. It is certainly not suggested that he has not got enough money to instruct solicitors or counsel, perhaps he will find someone to do it pro bono be that as it may. But if it were to be suggested that he would become bankrupt, one would expect to see some evidence of that, particularly when one has a claimant who has proclaimed that they have received huge fighting funds.

We have invited him in correspondence to make the position clear. Your Lordship will see--

MR JUSTICE GRAY: Yes, I remember the correspondence.

MISS ROGERS: And he was invited in at least two letters where he is invited to make the position (inaudible) clear (several inaudible words). He has put in an affidavit on these other matters but he does not address the question of his means. So in my submission your Lordship should be very slow to presume that Mr Irving cannot pay.

In terms of, certainly on the security for the costs of appeal under the old rule, what the Court of Appeal took into account or the registrar at that point took into account, was whether or not the security could be provided from the claimant's own means, or from having raised funds from other sources. We do not know what Mr Irving's ability to borrow money is, we do not know what the value of charges of the partners in Mayfair, we do not know how much he has got left in the fighting fund he amassed for this case, or for any other litigation he might be involved in.


MISS ROGERS: So my Lord all I say about that is that you cannot conclude at this stage that it would have any impact on, certainly the preparation of the application for permission to appeal, which one would anticipate would be if not formally submitted already, I do not believe it has been formally submitted, ought to be given that now almost three weeks four weeks have elapsed since the judgment, ought to be in its final stages anyway.

And of course in terms of whether or not there will be an appeal, there is no guarantee that there will be and our submission to your Lordship's judgment was on the facts there are no points of law, there are no points of fact on which your Lordship was wrong. So that is the submission on that.

I think that so far as the Mars case is concerned, what Mr Justice Jacob was envisaging was a position, and in that case where he had commercial competitors, one who was very wealthy and one who is not. If one had a small financially weak claimant that took on a financially strong defendant and succeeded at trial, the defendant immediately turns round and says, oh I will appeal. One can see in that case that if the claimant's financial resources had been almost exhausted as a result of the litigation, then there would be a very clear need for security for payment on account to be made so that the claimant could go on and pursue the appeal, so that the unsuccessful defendant (inaudible).

MR JUSTICE GRAY: Well I do not see why the converse should not apply I mean in principle, I mean you have got your point about no evidence of means, and one has to consider the likelihood of an appeal succeeding.

MISS ROGERS: I do have, I certainly would not argue that Mr Irving is more financially stronger than my client that is certainly not the case. But this is not--

MR JUSTICE GRAY: No, what I meant conversely was that you know, if you have a situation where the claimant is financially weaker, and can assert credibly that he really is going to be scuppered from pursuing his appeal if there is any payment on account ordered. I mean that must be a relevant consideration must it not?

MISS ROGERS: If it is supported by evidence yes.

MR JUSTICE GRAY: Yes, yes that is all I am putting to you.

MISS ROGERS: I mean it is true that if Mr Irving had no money, no means of raising money and would have to file for bankruptcy if your Lordship ordered £10,000, then obviously that would be a matter to take into account.


MISS ROGERS: Certainly if the judgment had been on the one hand (several inaudible words).

MR JUSTICE GRAY: Yes quite, or a question of law or something like that yes.

MISS ROGERS: If that were the case. But I think in (inaudible) it is wrong to look at the question of whether or not the defendants need the money, I do not think I would be instructed to say that Penguin needed the money.

MR JUSTICE GRAY: Well Penguin may, but Pearsons probably do not.

MISS ROGERS: Well I will come on to that point. It is not a question of need; it is not a question of need; it is a question of entitlement. Mr Irving chose to sue Penguin and Miss Lipstadt succeeded, and as Justice Jacob said, there is an entitlement to costs.

MR JUSTICE GRAY: Yes, I apologise I have got that point yes.

MISS ROGERS: The only reason it does apply is that we have not gone for (inaudible).

My Lord, that brings me to the possibly the main point, which is whether or not Penguin are liable for the costs. In our submission, the claimant dimply [sic. simply] does not get off the ground in suggesting that they are not liable for costs.

MR JUSTICE GRAY: Well I was hoping you might be able to put it a bit more positively.

MISS ROGERS: There is a presumption; it is clear from the Hazelet case.


MISS ROGERS: That there is a presumption. I am instructed, and the position has been -- this is not something that we have thought about this morning for the first time -- the liability for costs is that of Penguin. Penguin are, as your Lordship pointed out, (several inaudible words) bills sent to Penguin, and it is Penguin who are liable for the costs. That is not to say that there is not insurance, and policy agreements and so on in the background in the ordinary way.

MR JUSTICE GRAY: But the primary liability attaches to Penguin.

MISS ROGERS: Attaches to Penguin, and in our submission that is an end of the matter. And if your Lordship -- I hesitate to offer to put one of my solicitors in the box to say precisely that, but--

MR JUSTICE GRAY: Well I would be very reluctant to as well for a variety of reasons, but if Mr Davies were to say that -- I think probably irrespective of what Mr Davies says, I think it is not a fair position to put a solicitor in. But it seems to me that what you have just told me is something that I can weigh in the balance in deciding whether the presumption has been rebutted.

MISS ROGERS: I have heard what your Lordship has said, and certainly if the matter was put into more doubt by the material that was raised, then obviously I would be suggesting that one adjourned and put in witness statements and so on. That is why I put it that one does not even get off the ground. It is conceded in the outline submissions that in order for this to be a starter there has to be credible evidence in they way it is sought.


MISS ROGERS: It is in paragraph 3 of the submissions:


"It is plain ... read into the words ... properly an issue by some credible evidence ..."

That is what Haselet -- if Hazelet is right on this, the presumption is there.


MISS ROGERS: If, as it were, essentially I think it is a paragraph that Mr Davies did not read -- I do not know whether your Lordship has still got the judgment to hand, the single page from the New Law Journal:


"The need for the complainant to give evidence to prove his entitlement to costs [top of the third column] rather than relying on the presumption in his favour, it would not arise if the defendant simply put the complainant to proof of his entitlement of costs. The claimant would be justified in relying on the presumption in his favour. It is for the trial judge to decide whether or not the defendant has raised an issue, which causes ... by the claimant is liable to costs, primary as to the issue ... read into the words ...adjournment of the defendant's claim."



MISS ROGERS: It is quite right as Mr Davies indicated that he had taken this point at about five o'clock last night, and it was only when we got the material at court this morning that we got (inaudible). It is not enough, and if your Lordship looks at the actual article from the Book Sellers, from which Mr Irving quotes in his witness statement.


MISS ROGERS: In our submission, in page 10 of the little clip that goes with that ---

MR JUSTICE GRAY: Sorry, what am I supposed to look at? Page 10 of the ruling?

MISS ROGERS: It is the exhibit.

MR JUSTICE GRAY: Yes, I am afraid I have not even looked at the exhibit before.

MISS ROGERS: I do not suppose it is necessary, but page 10 of that is the whole article.

MR JUSTICE GRAY: I see, yes.

MISS ROGERS: It does not really take the matter much further, other than we say that looking at the context of this, it is absolutely clear that it is Penguin who are on the book in the libel action, not anybody else.

MR JUSTICE GRAY: Where do you get that from?

MISS ROGERS: If one sees "Libel actions are invariably against Penguin Books", is where we start in the first paragraph in the first column. In the third paragraph:

"In September 1996 a writ was served against Penguin. Three months later one was served on the author. The publisher's defence was overseen by a Penguin legal director ... read into the words ... instructed to act on Penguin's behalf. A defence was put in. Nothing happened for a year ... read into the words ... dropped."


Then we get a reference to Deborah Lipstadt and Mischon de Reya. Then of course we have the quote, which is where it picks up really in the witness statement:

"I hope this case shows that Penguin does not run with Peacock, so there is no reason for the concern on our author."


Then we get into the context of Penguin being sued, into Penguin's parent company turning up at meetings, as one would expect, and ---

MR JUSTICE GRAY: So Miss Peacock is Penguin UK?

MISS ROGERS: Yes, she is. If you look you will see she is the person who is the (inaudible) director.

MISS ROGERS: I did see that yes.

MISS ROGERS: Her title is Legal Director. As my solicitors have pointed out to me, if God forbid, Davenport Lyons had not been paid, they would and could have sued Penguin and nobody else.

In those circumstances my Lord, we invite you to conclude that there is, to use an expression I had not heard before that there is damnification on Penguin's part in terms of costs.

MR JUSTICE GRAY: One learns every day.

MISS ROGERS: Indeed. Penguin are in it for the costs; they were in it for the publishing and for the libel and there it lies. We invite your Lordship to conclude that raising this matter at this very late stage is just simply an attempt to put off what Mr Irving no doubt as an evil day.


MISS ROGERS: Unless I can help your Lordship further, unless I am told --

MR JUSTICE GRAY: Not on the question, I am just wondering what the best way of dealing; I think probably the best thing for me to do is to -- what I was going to suggest is that I give a judgment on; or ruling or whatever it is, on whether in principle there should be a payment on account, and then hear argument on quantum. And what I would prefer to do, it is not going to be what one might call a major judgment, going into all the law, because I am not sure this is an appropriate case for that to happen, but I would rather have a little opportunity to put my thoughts in order. What I think I am going to suggest is that we adjourn pretty much now, in a few minutes, and resume at quarter to two, if that is not inconvenient, and I will give my ruling then.

In the meanwhile, there are some puzzles about the case. I think it would be sensible for me to just raise this with you now. The counsel's charges are sent to Davenport Lyons, and so I think is (inaudible), but I noticed that Evans' invoices to Mischon de Reya and so was somebody else, Mr Falkirk or Doctor Falkirk, I think he (inaudible). I mean you see the point, and then there is an invoice to both, which makes life even more complicated. I mention this for the following reason that, I am not being told - and I am not making any complaint about it - what the position in relation to the second defendant is. And I can see that it may well be that the sort of application that we have heard being made this morning by Mr Davies would have greater force when it comes to her, and I think I have got to make every assumption in favour of Mr Irving on that. Am I making myself reasonably clear, or am I--

MISS ROGERS: Perfectly.

MR JUSTICE GRAY: That I am bound to say accords with my general feeling abut quantum, which is that, if I may say so, has been pitched in the context of this case, too high by a fairly large margin. And that would be one reason why one might think it was right to reduce it in any event, even if that were not my overall feeling abut the case. I mention that now just so that you can think about it. Maybe you do not really need time to think about it.

MISS ROGERS: Although I do not think I do, I think I will explain it better to your Lordship when I think about it.

MR JUSTICE GRAY: Yes, well that is really why I mentioned it now.

MISS ROGERS: I do not want to give a half-hearted explanation now and then another one at two. It may be your Lordship does not want give any indication at all, but if your Lordship was intending to perhaps make an order, it might be helpful to have an indication now, because it may well be that Mr Irving, if he knows an order is to be made, might wish to make some kind of offer.

MR JUSTICE GRAY: Yes, you want me to say now? Yes, I have decided, not least in the light of what you have told me on instructions, but also looking at all the consideration, that it would be right o make an order for payment on account, but I will not say any more than that.

MISS ROGERS: My Lord, I hope that may be helpful, because of course it may be that an offer is forthcoming n the light of that indication which will save further argument.

MR JUSTICE GRAY: If it does, all well and good, if it does not, so be it. Just looking ahead further, I have been wondering about -- because I am still keen that one should deal with everything that one can whilst everybody is here, and I just wonder whether -- I think I do have the power if not to make -- I think I do have the jurisdiction to make orders disallowing particular costs.

But I think quite apart from that I would - because I reserved that power to myself when I made the original costs order - but I think I would be entitled to make comments, which can be taken into account by the costs judge, I notice that is the way it has been done in occasionally in other cases, which seems to make sense. He does not have to follow what I say, but I do have the considerable advantage over him of knowing about what was obviously quite a complicated case. You can think about that too.

MISS ROGERS: The only hesitation I have about that is that your Lordship is making comments on the basis of incomplete material, because of course your Lordship does not have a complete costs picture at the moment.

MR JUSTICE GRAY: No that is true.

MISS ROGERS: If it is the common order, then I think the CPR invites the judge rather than divide up the costs of certain issues, to direct on a proportionate basis. In our submission, it is very -- I hope we have not inadvertently made it harder for your Lordship to do that. It is difficult to talk about proportions of costs in this context when your Lordship does not have the full picture.

MR JUSTICE GRAY: I would not dream of talking about proportions of costs. It be more a question of say, "It looks to me at first blush as if such-and-such an item may be difficult to justify."

MISS ROGERS: I think the way -- it may be it can be done -- the CPR certainly looks as though it invites the court not do that if it can be avoided.

MR JUSTICE GRAY: Does it? If it does, then perhaps I had better not do it.

MISS ROGERS: It is in 44.3 of my outline (several inaudible words).

MR JUSTICE GRAY: Do not worry, shall we deal with that at the next stage? One forty-five please.





I confirm that the preceding transcript is a true and accurate record to the best of my knowledge and belief.


Susan Landers

Saturday, 2nd July 2002