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    70. The second feature is partly a consequence of the first. It is not possible to make a Ladd v Marshall application without waiving any privilege in the material which is the subject of the application. Ground 45 starts with the words - "the ... Defendants have fresh evidence that since the trial there has been interference with the official transcripts of the trial". They cannot at the same time claim any privilege against disclosing what that evidence is. The suggestion that there was material capable of justifying the allegation which Mr Mardell could rely on without waiving any privilege and disclosing the material to the opposite side and the court is patently unsustainable.

    71. The third feature is peculiar to the present case. The allegation of fraudulent interference with the transcript had been unsuccessfully relied upon by junior counsel for Mr Mardell on previous occasions using the same material. In particular, on 2nd December, she applied to Lloyd J for an order that proceedings on the account should be stayed and the police should be directed to investigate the transcript question as an attempt to pervert the course of justice. The judge dismissed the applications and refused leave to appeal. The reaction of the Court of Appeal on the hearing of the substantive appeal should have come as no surprise to the barristers. It was entirely in line with what had been said by the judge earlier. There was no evidence whatever that Mr Medcalf or anyone acting for him had anything to do with the defective transcripts. The evidence disclosed regrettably familiar deficiencies in the system whereby mechanical recordings and transcripts are made in the Royal Court of Justice in London. The primary tape is in the court-room where the trial is taking place and depends upon a court official each day keeping a log of the proceedings and switching the tape on and off at the right times. The tape recording should be of a reasonably good quality but the transcriber, who has no independent knowledge of the proceedings, is entirely dependant upon what the court officials have done. (The court officials may indeed have had to look after several courts at the same time.) What happened in the present case was that the court officials did not keep a complete log and did not always switch on or off the tape recorder at the times they should. Also, at times the voice on the tape was not clear. All this was confirmed by the investigations carried out and the statements and affidavits lodged. In the Royal Courts of Justice there is also a back-up multitrack tape which runs throughout the working day covering all courts. Inevitably its quality is not as good as the primary tape. A transcript is not made unless asked for. The transcript will normally be made by one of the Lord Chancellor's Department contractors from the daily court-room tapes if available. This was what was done initially in the present case. When the defects in the first transcript and, hence, in the tapes from the court room were discovered and the solicitors complained, the senior contractors were called in and a further complete transcript was made using both types of tape. This is the second transcript to which Ground 45 refers and which those representing Mr Mardell consider to be satisfactory.

    72. It was an unhappy incident but it was fully explored and explained in the evidence which was put before the Court of Appeal. In my judgment no competent and reasonably experienced advocate or litigator should have seen anything remotely sinister about it let alone treat it as evidence of a conspiracy to pervert the course of justice. As previously stated, there was nothing to implicate Mr Medcalf or any one acting for him in any wrong doing in this connection whatever. It disclosed no prima facie case against him. Yet the advocates put their signature to Ground 45 and to the supporting skeleton argument.

    73. In my judgment this was just the type of situation Paragraph 606 was designed to prevent. Unjustifiable allegations of fraud have been made. Like Peter Gibson LJ and Schiemann LJ, I cannot conceive of any privileged material which could possibly make any difference to the culpability of making this irresponsible allegation or justify it. The allegation is on its face implausible and suggests an abandonment of the objectivity and sense of proportion which a court is entitled to require of an advocate. Further it was the duty of the advocate to put before the court on the Ladd v Marshall application the material which was said to justify the allegation. If the material was not reasonably capable of justifying it, even on a prima facie basis, the allegation should not have been made.

    74. Therefore I would for myself only allow the appeal in part. But your Lordships consider otherwise and would allow the appeal wholly. Since matters of discretion are involved and since I do not feel confident that, if the transcript allegation had stood alone, the Court of Appeal would still have thought that a wasted costs order was appropriate, or at least felt no doubt about it, I will with reluctance concur in the order proposed. Subject to what I have said in this Opinion, I agree with what has been said by my noble and learned friends Lord Bingham of Cornhill and Lord Steyn; I also agree with what the former has said in paragraph 28 of his Opinion.

LORD RODGER OF EARLSFERRY

My Lords,

    75. I have had the advantage of considering the speeches of my noble and learned friends, Lord Bingham of Cornhill and Lord Steyn, in draft. I agree with them and, for the reasons they give, I too would allow the appeal.

    76. Like my noble and learned friend, Lord Hobhouse of Woodborough, I was much troubled by the allegation, in ground 45 of the proposed amendments to the notice of appeal, of fraudulent interference with the transcript. None the less, the appellants have not been able to tell their side of the story. A court making a wasted costs order under section 51 of the Supreme Court Act 1981 exercises a discretion. All kinds of mitigatory circumstances may be relevant to the exercise of that discretion. In my view, therefore, it was wrong for the Court of Appeal to make an order against the appellants in a situation where the full facts about the circumstances in which the appellants had been instructed and had prepared the relevant documents were not known and where the appellants were prevented from putting them before the court.

    77. The majority of the Court of Appeal held that the appellants' conduct, in drafting the amended notice of appeal on 3 February 2000 and in preparing the skeleton arguments the following day, had been "improper" in terms of section 51(7)(a). That decision was based on the view that their conduct on those dates was governed by paragraph 606 of the Code of Conduct of the Bar of England and Wales (7th ed (2000)). Paragraph 606 provides that, before making any allegation of fraud, counsel should have before him "reasonably credible material which as it stands establishes a prima facie case of fraud". The majority held that, in terms of the rule, the "material" had to be "evidence which can be put before the court to make good the allegation": [2001] Lloyd's Rep (PN) 146, 154, para 40 per Peter Gibson LJ. Since it was clear from what happened subsequently that no such evidence had been available to counsel on 3 and 4 February, the majority held that counsel had breached the rule in paragraph 606.

    78. The interpretation of the paragraph 606 that the majority adopted is, perhaps, not surprising since the rule of professional conduct was formerly understood to be to that effect. For instance, in Associated Leisure Ltd (Phonographic Equipment Co Ltd) v Associate Newspapers Ltd [1970] 2 QB 450, 456E - F Lord Denning MR indicated his understanding that the duty of counsel was not to put a charge of fraud on the record "unless he has clear and sufficient evidence to support it." The passage is cited in Bullen & Leake & Jacob's Precedents of Pleadings 13th ed (1990), p 428. The same approach is to be found in the extrajudicial remark of Lord Macmillan that, where a person's reputation is at stake, the pleader should not "trespass … a hair's breadth beyond what the facts as laid before him and duly vouched and tested, will justify": "The Ethics of Advocacy" in Law and Other Things (1937), p 192, approved in Oldfield v Keogh (1941) 41 SR (NSW) 206, 211 per Jordan CJ.

    79. But the current rule is that stated in paragraph 606. Wilson J held that the term "material" in paragraph 606 went wider than evidence in proper form: [2001] Lloyd's Rep (PN) 146, 161 para 80. The paragraph states a rule of professional conduct rather than a rule of law, but I agree with his interpretation of it. The current rule of conduct is slightly less strict than the rule as at one time understood. While, usually, the material before counsel will comprise evidence in an admissible form, something less can satisfy the requirements of the current rule, provided that it establishes a prima facie case of fraud. A report of an official inquiry, or accurate reports of evidence given in a civil or criminal trial, are examples that come to mind. A professional rule that permits counsel to draft pleadings on such a basis, before the actual evidence is to hand, achieves a sensible balance: it gives due protection to defendants, while not putting unnecessary obstacles in the way of claimants and their counsel raising proceedings promptly. So interpreting the rule, I am unable to infer from the circumstances that the appellants were necessarily in breach of it on 3 or 4 February 2000.