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.

from the draft transcript of May 5, 2000, with significant passages emboldered and suggested corrections in red

While Miss Rogers statements are transcribed almost intact, much of Mr Davies is "inaudible."

Gray J ("Yes, well that is the point") would not adjourn for a few days as requested by Davies because "I am up in Liverpool and there are other things to be dealt with."

Gray J appreciates the importance of who paid the bills:

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

MISS ROGERS: Yes.

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.

MR JUSTICE GRAY: Yes.

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

MR JUSTICE GRAY: Yes.

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. [Perhaps we ought to try to get the inaudible words filled in here.]

[and a little later:]

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).

MR JUSTICE GRAY: Yes.

[Then it is Mr Davies' turn. Soon he says:]

MR DAVIES:. […] 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).

[a page later Gray J interrupts:]

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).

[three pages later Adrian makes the evidence point:]

… 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.

[4 or 5 pages later]

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 then asks for an adjournment for Penguin to produce the evidence:].

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)[evidence of who actually paid the bills is produced?]

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). [order the defendant to produce the evidence on the question of who actually paid the bills?] 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.

[Davies]: … 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.

Later Davies reads out from an authority.

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.

[…]

Gray J touches on the insurance matter:

MR JUSTICE GRAY: 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 DAVIES: Yes.

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

MR DAVIES: Yes my Lord.

A page later Gray J asks:

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--

Davies thus again asks to see the evidence, after which Gray again refers to the inconvenience of an adjournment as he is away for a month, and Mr Irving going to the USA. Davies does not accept this, and says that the other side (he specifies Davenport Lyons) should produce an affidavit, which Mr Irving would not question.

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 veracity 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) [for example stating, "] 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 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--

Miss Rogers then gets to speak her bit in reply, and we approach the foothills of assurance which she gives on instructions:

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). [Perhaps: "I am not at this moment able to carry the point any further forward, but I will happily take instructions from my clients? This is perhaps an important inaudible passage to retranscribe.]

Ten pages later, Heather Rogers then answers the challenge:

MISS ROGERS: 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.

MR JUSTICE GRAY: Yes.

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 [Perhaps we ought to try to get the inaudible words filled in here.]) 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

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) [litigation] 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.

[Miss Rogers is being disingenuous. The insurers were Commercial Union, and they would have had to give the go ahead for the libel defence to proceed, as their dkiscoverable correspondence will show. Without such an authorization, Penguin would have chosen the other, £500, route.]