Judgment

Lord Justice Longmore:

In 1994 Bim Kemi AB (“Bim”) and Blackburn Chemicals Ltd (“Blackburn”) made an agreement in relation to products which they respectively produced and marketed. It was agreed, inter alia, that Blackburn would “source” lint control products only from Bim and that Bim would “source” antifoams only from Blackburn. It was further agreed that Blackburn would have an exclusive right of sale in Great Britain and Eire while Bim would have first an exclusive right of sale in Sweden and secondly an exclusive right of sale in Denmark, Norway and Finland for a 3 year period which could be continued if Bim attained 20% of the available market in any agreed product range. Other provisions were agreed in relation to markets outside the exclusive regions.

“(10) Nothing in the form of this order shall prevent [Bim] from arguing [that] the 1994 Agreement is void for illegality and/or that [Blackburn] is precluded from recovering damages by reason of [Blackburn’s] pleaded case that the 1994 Agreement was void for illegality, but nothing in this paragraph shall prevent [Blackburn] from arguing that the Claimant is no longer entitled to raise such an argument.”

I can take this virtually verbatim from the detailed account given by Cooke J. The question of illegality surfaced about three months before the date fixed for the trial, when Blackburn sought to make amendments to its defence to plead, inter alia, that, if Bim had obtained 20% of the available market, so that it retained its right of exclusive sales in Finland after three years, there was a breach of Article 81 of the EC Treaty and the whole of the 1994 Agreement was thereby rendered invalid. Bim objected to that amendment because of the lateness of it, because it raised difficult and substantial issues and because those issues could not be fairly determined at the scheduled trial. Blackburn maintained that, as the plea was one of illegality, the Court had to consider it, whether pleaded or not, and that it was better that it should be pleaded out. Moreover, Blackburn stressed in its skeleton argument the connection to the existing proceedings in relation to investigation of market share because the Court had in any event to determine whether or not Bim had achieved 20% of the available market in the context of the existing dispute. Despite Bim’s objection, Langley J gave permission to Blackburn to amend its Defence and Counterclaim and to plead and serve a Rejoinder and Reply to Defence to Counterclaim which included this plea, but he excluded the issues from the imminent trial. He gave Bim permission to make consequential amendments in the light of Blackburn’s amendment, subject to the paragraph of the order in which he ordered a stay in the following terms:

“All further proceedings in respect of the pleas that the Agreement alleged by the claimant to have been made between the parties in 1994 was, if made, void under Article 85 of the Treaty of Rome or under the Restrictive Trade Practices Act 1976 shall be stayed until after the Trial of all other issues or further Order.” (Nothing now turns on the reference to the Restrictive Trade Practices Act 1976 and it can be disregarded.)

“Further or in the further alternative if (which is denied) the claimant or its subsidiary Cellkem achieved a 20% share of the market for Antifoaming agents in Finland or in Scandinavia, the exclusive supply and sourcing obligations and restrictions on re-sale outside allotted territories of the alleged Agreement (if made) were void under Article 85(2) of the Treaty of Rome, in that it was an agreement between competing undertakings …. which was liable to affect trade between member states of the EC (namely the UK, Sweden and Finland) to a not insignificant extent and which had as its object or effects the prevention, restriction or distortion of competition within the common market by restricting competition between the said undertakings in the supply of antifoaming agents, alternatively silicone based antifoaming agents in Finland or Scandinavia; and the remainder of the alleged Agreement, if made, was thereby invalidated …….”

“The claimant does not plead to paragraph …. 6E of the Defence. All proceedings arising from the allegations made in this paragraph have been stayed by the Order of Langley J dated 5th October 2001. If the …. [1994] Agreement was invalid for the reasons given by the defendant, the claimant reserves the right:

(i) to contend that the 1984 Agreement was also invalid:

(ii) to claim damages from the defendant for breach of Article 85(81) of the Treaty of Rome.”

“The Court tried all issues in the action other than (i) the competition laws issue raised by paragraph 6D – E of the Re-Re-Re-Re-Amended Defence and Counterclaim and (ii) issues of loss and damage and made the following Declarations Orders and directions ……….

The above declarations are made without prejudice to [Blackburn’s] case presently stated in paragraphs 6D – E of the Re-Re-Re-Re-Amended Defence and Counterclaim that the 1994 Agreement or part thereof was void ……..”

“11.1 Quantum issues are to be tried after the competition issues. As to the competition issues:

11.2 [Blackburn] will serve a particularised statement of case by 4.30 pm 30th April 2002.

11.3[Bim] will serve a particularised statement of case in response by 4.30 pm 31st May 2002……….”

In his judgment Cooke J set out the well-known passage in Wigram V-C’s judgment in Henderson v Henderson(1843) 3 Hare 100, 114-5 in the following terms:-

“…. where a given matter becomes the subject of litigation in and of adjudication by a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have from negligence, inadvertence or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a Judgment, but to every point which properly belongs to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

(I will call this “the Henderson principle” and define it as the principle according to which parties are normally required to bring forward all the matters, which have to be decided, at one and the same time) The judge noted that there was an exception to the Henderson principle “in special cases”, recorded Blackburn’s submission that cause of action estoppel could only be avoided where fraud or collusion led to the judgment relied on and said, citing Johnson v Gore Wood & Co[2002] 2 AC 59 that the notion of special circumstances had been subsumed into the need to find an abuse of process before the Henderson principle applied. He then proceeded to hold that it was not an abuse of process to permit Bim to take the Article 81 point which Blackburn had, at a late stage of the proceedings, themselves sought to take, even though Blackburn had now decided that they were no longer going to rely on it themselves. He further held that there was a strong prima facie case that the agreement was void pursuant to Article 81 and that, if a party sought to put the illegality before the court, it was the court’s duty to permit that party to do so even if an estoppel would otherwise operate. This was because Article 81 was for the protection of the public at large whose interest lay in anti-competitive practices being exposed; it followed that the policy considerations underlying the incorporation of the EC Treaty into English law required the decision of the court. For these two separate reasons he declined to strike out Bim’s defence to Blackburn’s statement of case in relation to the assessment of damages on its counterclaim.

Mr Alistair Wilson QC for Blackburn attacked this reasoning and submitted:-

(1) the judge had failed to draw any distinction between cases of cause of action estoppel and the Henderson principle; the principle had no application in cases of cause of action estoppel;

(2) the present case was a case of cause of action estoppel because once the Court of Appeal had found that Blackburn could rely on Bim’s repudiation of the contract as a defence to Bim’s claim, their other defences and in particular the defence of illegality fell away; there was thus a conclusive determination that Bim had no cause of action against Blackburn, while Blackburn had a cause of action against Bim on their counterclaim to which no relevant defence had been pleaded; this entitled Blackburn to final judgment on its counterclaim;

(3) even if the judge was correct to hold that the only question was whether it was an abuse for Bim to rely on illegality, it was an abuse of process for Bim now to raise for the first time a defence which would have the effect of impugning Blackburn’s judgment on the counterclaim;

(4) the illegality relied on could not be allowed to impugn the judgment on the counterclaim, once cause of action estoppel was established; if that were wrong, the illegality had to be manifest which the illegality relied on was not, depending as it did on findings of fact which would have to be made after a trial.

In the light of the argument addressed to us, it is necessary to remind oneself of the difference between cause of action estoppel, issue estoppel and the Henderson principle. The classic definitions of the first two are to be found in the judgment of Diplock LJ in Thoday v Thoday [1964] P 181, 197-8:-

“The particular type of estoppel relied upon . . . . . is estoppel per rem judicatam. This is a generic term which in modern law includes two species. The first species, which I will call "cause of action estoppel," is that which prevents a party to an action from asserting or denying, as against the other party, the existence of a particular cause of action, the non-existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist, i.e., judgment was given upon it, it is said to be merged in the judgment, or, for those who prefer Latin, transit in rem judicatam. If it was determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is estopped per rem judicatam. This is simply an application of the rule of public policy expressed in the Latin maxim "Nemo debet bis vexari pro una et eadem causa." In this application of the maxim "causa" bears its literal Latin meaning. The second species, which I will call "issue estoppel," is an extension of the same rule of public policy. There are many causes of action which can only be established by proving that two or more different conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was.”

The Henderson principle then extends the res judicata principle to cover not merely matters which have actually been the subject of judgment between the parties but to

“every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence might have brought forward at the time”

as per the citation in para. 19 above.

(1) that in Arnold v National Westminster Bank[1991] 2 AC 93 the House of Lords carefully distinguished cause of action estoppel and issue estoppel with no exceptions being allowed to cause of action estoppel other than fraud or collusion;

(2) that the House of Lords in Johnson v Gore Booth were fully alive to all that was said in Arnold’s case and cast no doubt on what was there said on cause of action estoppel or on the limited further exception that existed in the case of issue estoppel;

(3) that, therefore, the abuse of process approach laid down in Johnson’s case was applicable only to cases invoking the Henderson principle and not to cases of cause of action estoppel or, indeed, issue estoppel.

Thus the first question, in a case, such as the present, where a cause of action estoppel is alleged to be operative, must be to see whether there is indeed such an estoppel. If there is, it can only be negated by fraud or collusion; only if there is not such an estoppel, will it be appropriate to consider, pursuant to the Henderson principle, whether it would be an abuse of process to allow the allegedly “new point” to be taken. This is identical to the approach recently taken by this court, in a case of issue estoppel, viz. first to consider whether the alleged issue estoppel existed and, only when it was determined that it did not, to consider whether it was an abuse of process for the “new point” to be taken, see Kennecott Utah Copper Corp v Minet Ltd [2004] 1 All ER (Comm) 60, especially paras. 30 and 63.

Mr Wilson is, of course, correct to assert that on 13th February 2003 the Court of Appeal determined that Blackburn had a good cause of action for the damages claimed in their counterclaim for Bim’s breach of contract. At the time when the Court of Appeal so determined, however, that counterclaim was still subject to the plea of illegality set out at para. 6E of the Re-re-re-re-Amended Defence (“the Defence”) and incorporated in the Counterclaim. The determination so made was thus only a conditional determination depending on the outcome of that plea. After the House of Lords dismissed Bim’s petition for leave to appeal on 21st May, Blackburn on 28th May by solicitors’ letter unilaterally withdrew their particularised Statement of Case regarding the competition issues which had been served on 30th April 2002 and which had, in any event, been alleged by Bim to go considerably wider than the case pleaded in paragraph 6E of the Defence for which Langley J had granted leave. The letter continued:-

“Our client further considers that the Court is now functus officio regarding the competition issues generally . . . . we confirm that our client considers that it cannot rely, and does not intend to rely, on the matters raised in paragraphs 6D and 6E of [the Defence] and Counterclaim in any further part of these proceedings.”

It is in the light of this letter that Mr Wilson now submits there is a cause of action estoppel preventing Bim from raising the same illegality on which Blackburn originally wished to rely.

This was the primary question decided by the judge who held that it could not be an abuse or otherwise an infringement of the Henderson principle for Bim now to take the illegality point. Neither Blackburn’s Notice of Appeal nor their Skeleton Argument pointed to any misdirection by the judge on this aspect of the case, save to argue that the judge erred in disregarding Blackburn’s irrecoverable costs incurred in successfully defending a claim based on a contract which Bim now wants to say is illegal. (We were not told precisely how much these irrecoverable costs were but we were told that Blackburn’s recoverable costs have now been paid by Bim.) Since any litigant has to accept the risk that there will be irrecoverable costs, there cannot be any substantial prejudice merely because that risk is realised. Moreover, such prejudice as there is has arisen because the point was taken so late; if it had been raised at a time when it could have been dealt with at the trial, all issues would have been resolved together; if it had been taken in Blackburn’s original Defence, the judge at the Case Management Conference taking place on close of pleadings could have considered whether the illegality point should have been taken first before any other expenditure was incurred. Unfortunately that never proved possible.

“43. When these matters are taken into account, in my judgment, there can be nothing unfair to Blackburn in allowing Bim to pursue the very points which Blackburn itself would have wished to pursue had the boot been on the other foot. These were issues which Blackburn was prepared to run and it cannot be harassment of Blackburn for it to be met with the same points which it thought sufficiently arguable to pursue itself and of which it insisted that the Court must take account, after determining other issues.

. . . . . . . . . . . . . . . . . .

45. Nor in my judgment would any right thinking member of society, having been told of the course of events which I have recited, consider that the process of justice was brought into disrepute by Bim’s reliance upon the illegality defence. Observing the parties’ tactical manoeuvrings and their successes and failures, such a person would be likely to give a wry smile and consider, in all the circumstances, this was a fair course of action for Bim to adopt and what was sauce for the goose was also sauce for the gander.”

I need only say that I entirely agree.

The judge went on to consider whether the illegality question was a point which he should allow Bim to take in any event because of the nature of the illegality. This was not a necessary part of his decision and anything I say would likewise not be essential to my decision.

Lord Justice May:

Lord Justice Kennedy:

ORDER: Appeal dismissed. With the costs of appeal subject to detailed assessment on a standard basis if not agreed.

(order does not form part of approved judgment)

PROCEEDINGS AFTER JUDGMENT

1. LORD JUSTICE KENNEDY: For the reasons set out in the judgment handed down, this appeal is dismissed. We further order that the appellant pay the costs of appeal to be subject to detailed assessment on standard basis if not agreed.

2. MR ONSLOW: I do not think I need to add anything. Mr Wilson has a more exotic application to make to your Lordships.

3. MR WILSON: I hope I do not misrepresent your Lordships' judgment when I say that the underlying logic is that my point - the cause of action estoppel which would have succeeded if I was right - failed because your Lordships were saying that there was available to my learned friend an ability to amend his main defence to counterclaim, so to speak, which has been, again so to speak, subsumed within his defence to the claim for damages under the counterclaim. Therefore underlying everything there is what might be seen as an implicit amendment by my learned friend of his defence to counterclaim to introduce the European point which he had not previously pleaded. It is a very late amendment to his defence to counterclaim for the reasons with which we are all familiar. In principle, where there is a very late amendment to pleadings, the victim of such a late amendment will frequently be compensated in costs for the consequences of such a late amendment. I do not know whether your Lordships need some authority for that, but I have brought some authorities. They are familiar principles in what may be .....

4. LORD JUSTICE KENNEDY: I rather doubt it at this stage. Apart from anything else, it seems to me to be a well known

principle.

5. MR WILSON: I am obliged.

6. LORD JUSTICE LONGMORE: This is a preface to your application to appeal to the House of Lords, or where are we going?

7. MR WILSON: Do your Lordships have a copy of the amended minute of order?

8. LORD JUSTICE KENNEDY: Yes, I do. That is what I was looking at.

9. MR WILSON: We are dealing with paragraph 4 which, in a sense, is a preface to my application for leave to appeal because the contents of paragraph 4 are, or could be, quite an important ingredient.

10. In my submission, had an application been made in good time before Mr Justice Langley or notionally before your Lordships to amend the defence to counterclaim the appropriate order for the court to make would be along these lines: if the defendants now accept this amendment, it follows that both parties are at one that this action should never have been brought. That is the burden of my learned friend's amended defence to counterclaim. If the defendants were to opt to fight on, it may turn out that the agreement was valid after all and the defendants take their chances with the magnitude of damages under the counterclaim. But if the claimants did not make that amendment and it is, so to speak, accepted by the defendants, then it follows, as night follows day, that this action must be treated as if it should never have been brought. In accordance with normal principles I would submit that a consequence of such an amendment being sought is that we should be given the option, to be exercised within a reasonable time, of accepting that, after all, our counterclaim is defective on the grounds we originally pleaded.

11. The further consequences should be that, if we accept that, we should have what I might compendiously refer to as the irrecoverable costs of the action. There are three heads of irrecoverable costs which, I am told, amount to something in the order of £600,000. The three heads are these: (1) the costs incurred so far on the quantification of the counterclaim which were expressly excluded from the Court of Appeal order as to costs of the appeal and trial; (2) the 25 per cent of the ordinary costs of the action at appeal which were excluded from the Court of Appeal's order because we argued the point about existence of contract on different grounds; (3) the difference between standard basis costs and indemnity basis costs.

12. In my submission, in the very extraordinary circumstances of this case it would be right .....

13. LORD JUSTICE MAY: There is no difference between the standard basis costs and indemnity costs, in principle. It is only a question of who has to prove what.

14. MR WILSON: Indeed, yes. It does have considerable consequences when it comes to assessment. There has been a basis agreed between the parties as to the standard basis costs, which is about £620,000, which was used as the basis for agreement between the parties and, pursuant to that, BIM paid us three-quarters of £620,000, leaving something of the order of £150,000 as the 25 per cent. On top of that we say there are further costs which could have been recovered had the matter been assessed on the so-called indemnity basis.

15. LORD JUSTICE MAY: There may be irrecoverable costs, but that is a different matter.

16. MR WILSON: There may be further irrecoverable costs beyond that but I do not think one can realistically seek to recover costs which the court would never order.

17. LORD JUSTICE MAY: Precisely.

18. MR WILSON: But there are those three heads of costs which, in my submission, the court could order in our favour. There may indeed be further costs which - - undoubtedly, the clients themselves have incurred very considerable personal expense and, indeed, unhappiness fighting this action bearing in mind the course of action that the case took. We understand that that is not something they can obtain. So far as those three heads of costs are concerned, which the court can revisit on an application to amend the pleadings, by way of seeking from the person who seeks to amend the pleadings, an undertaking that if he - - or rather imposing a condition on him that if he wants to make his amendment he must accept those terms. The court, in my submission, does have jurisdiction to say this is what should happen in the case of this amendment. I appreciate that in the ordinary course of events the court could not under-do (sic) an order for costs that had already been made. But that is not what I am saying should be done. I am saying that on my friend's notional application to amend his pleadings, he should be notionally put on terms that if he wants to make an amendment he has to accept the consequences.

19. LORD JUSTICE MAY: This seems to me to be immensely complicated and highly artificial. The consequences, as I understand it, which you seek to achieve are entirely contingent on what the defendants would, or might, do once the amendment is made.

20. MR WILSON: That is why I have framed the order in the way I have.

21. LORD JUSTICE MAY: I understand that, but why should this court anticipate what you might do when you might not.

22. MR WILSON: This is the only time at which it can do it.

23. LORD JUSTICE KENNEDY: This is only time when you can secure an order in advance, I agree.

24. MR WILSON: It is only at the stage of amendment that the court can say to the person seeking to amend, "Although you have orders for costs in your favour, nevertheless, as a condition of amendment, we require you to accept that you will not get those costs and they will indeed go the other way." That is the point. In my submission, the court can do that. There may be a fourth ingredient. There may be orders for costs in my friend's favour pending trial which have not been considered, but those too are ingredients of costs which might well be within the purview of what I have put to your Lordships. In my submission, the nature of the amendment here is really a quite extraordinary one.

25. LORD JUSTICE KENNEDY: We understand that. We have been down this road ad nauseam.

26. MR WILSON: For that reason I am not seeking to re-argue the appeal, but I am saying that this amendment goes even further than the normal amendment which carries costs consequences

27. LORD JUSTICE KENNEDY: A very unusual amendment, I agree.

28. MR WILSON: It is unusual, but it goes further than the normal one because normally what one seeks to do is to add a claim which reinforces what was already there. Here the defendants, BIM, are not seeking to reinforce what is already there; they are seeking to undo what was already there and say this is a claim that should never have been brought. In those circumstances the defendants BIM, in my submission, should be required to offer very unusual undertakings commensurate with the unusual nature of the amendment.

29. It is fair to say that before my paragraph 4 came into force, so to speak, my friend perhaps should be given an opportunity to say, with those terms present, "I do not want to make my amendment." That is for him to say. But if he is happy that his amendment should be notionally granted on those terms, then, in my submission, those terms are fair terms to impose on someone seeking to amend in this way. It is not contingent upon what we choose to do.

30. The term is that if we choose to accept the amendment, then we get the costs thrown away. If, on the other hand, we choose to dispute the amendment and say that after all the agreement is valid and the matter goes to the inquiry, then there are no consequences; my friend gets his amendment and the matter carries on with an ordinary inquiry, with this argument being presented as one of the defences in the course of the inquiry.

31. My clients are then faced with a choice and, in my submission, it is an entirely fair choice with which to be faced. They either accept that the defence they originally put forward is indeed a valid one and the counterclaim goes, in which case they get the costs of the action to date. Or, alternatively, they say, "We do not propose to accept this amendment, we will fight it. It was wrong to plead it in the first place and we consider it can be defended (?)" and take their chances on the inquiry. It may be that that course of action will appear deeply unattractive to them.

32. LORD JUSTICE MAY: It seems to me, speaking for myself, that the question of amendment and the question of what might subsequently happen if you choose to come along and discontinue are two separate questions.

33. MR WILSON: They are two separate questions save for this .....

34. LORD JUSTICE MAY: I do not at the moment see why one should anticipate, in relation to the amendment, what you might subsequently do.

35. MR WILSON: For this reason - that if we do admit the pleading, at that stage the court is not able to give us the relief, in my submission, to which we are entitled. The court at that stage could do no more than give us the costs to date of the counterclaim.

36. LORD JUSTICE LONGMORE: I do not follow that, for my part. You would need leave to discontinue the assessment for damages and in that application everything would be open.

37. MR WILSON: It is a little difficult to see how the court, on an application to discontinue an inquiry as to damages, could undo orders for costs made, for example, in the Court of Appeal in the trial and on appeal from the trial.

38. LORD JUSTICE LONGMORE: You are not asking for that, are you?

39. MR WILSON: Yes, I am.

40. LORD JUSTICE LONGMORE: But asking for the irrecoverable costs.

41. MR WILSON: Those are part of the costs which, in my submission, my friend should be ordered to pay us. Those are one of the three heads of costs which, as a consequence of this amendment, we say has been wholly thrown away. It is only at this stage that the court is in a position to reverse those costs orders. It does so not by directly reversing it but by putting terms on the person seeking to amend, those terms being that you can only amend if you agree to a reversal of those costs orders, or rather sacrifice what would otherwise have been your rights under those costs orders. That is a perfectly permissible exercise at the stage of someone seeking to amend his pleadings. It is not a permissible exercise at the subsequent stage of us admitting the merits of the offence.

42. Dealing with my friend's point that it is far too late for us to take this point, which incidentally is the exact opposite of what is being put to me at the moment that it is far too early for us to take this point, it is not too late because, as we saw it, we came before the court with an attack on pleading in the inquiry as to damages at which stage it would have been too late to seek to undo costs orders in the Court of Appeal that related to the trial. It is because of your Lordships' analysis that, in truth, we are here on a notional application to amend the trial pleadings that the window of opportunity arises for me to seek to get those orders which put matters into what my clients see as an appropriate state, in other words, a state where my clients are not out of pocket on an action which should never ever have been brought by claimants who now say that, after all, this was an unenforceable agreement from the very start: a very different situation from a case where one has fought through and succeeded. This is a case where the claimant himself was saying "I should never have brought this case." That is why I say the court should make this rather unusual order. I hope that your Lordships have understood the underlying point that they put their pleading in on the inquiry. Your Lordships are saying they have notionally made the amendment, but essentially you are saying that my friend has been notionally seeking to amend the pleadings in the counterclaim, the trial pleadings. It is because of that that this point arises.

43. That brings me to the question of leave to appeal. It is fair to say it is a somewhat narrow and special point that on the facts of this case we are outside the realms of cause of action estoppel and into the realms of extended Henderson v Henderson estoppel, abuse of process. Nevertheless it does raise a rather important point of principle, both about the nature of pleadings, the nature of stays and the nature of cause of action estoppel. Where is this boundary to be defined between the one and the other? That is, in my submission, quite an important point. And the point I have put before your Lordships this morning about the consequences of amendment, if that is how it is to be dealt with, is itself a very important point for my client and perhaps its implications in similar situations were they to arise.

44. I would submit that we should have leave to appeal against your order.

45. MR ONSLOW: Dealing with the first of those points, the first submission is that there is no precedent for the kind of double contingent order that Mr Wilson is seeking. He is asking for an opportunity to have all his irrecoverable costs paid if, first, he fails in his application for permission to appeal to the House of Lords or the House of Lords decides against him, and then, at some stage after that, he unilaterally decides he does not want to proceed with the inquiry after all. Your Lordships may think that is a rather odd position for him to be taking up at all given that both before Mr Justice Cooke and in submissions to the Court of Appeal he was still saying a few weeks ago that our Euro point - whatever he or his side may have said in the past - was a bad one. He is now giving - it is encouraging to us, I suppose - the firm indication that they want to give up or may give up in the future. The answer to that is that they need to make their application to discontinue in due course. At the time that they choose to make it they can apply for me to discontinue on special terms. The usual terms are that they would pay the costs outstanding. They can apply for leave to discontinue on special terms. It does sometimes happen, as your Lordships will be aware, that parties apply for leave to discontinue on the basis not only that they should not pay the other side's costs, but that the other side should pay their costs because, for example, things have happened .....

46. LORD JUSTICE LONGMORE: Mr Wilson says that you cannot reverse an order that is already made which I think applies to his second category of irrecoverable costs in particular, does it not?

47. MR ONSLOW: I think the problem there is, as I understood it, and this is one of his problems, you certainly cannot reverse an order of the court below or the Court of Appeal that has already been made. As I understood it, when he was initially addressing your Lordships he was saying that is not actually what he sees as happening here. He is saying there are parts of the costs not dealt with yet or can be set aside or treated as separate from the costs orders that have already been made, and it is those additional costs that now he wants awarded in his favour. He is treating them as if they have never been awarded or allocated at all. If that is right - and I do not want to sound encouraging to him - then there is no objection, in principle, to him applying in due course, at the time he wishes to discontinue, for the kind of order he is now seeking. As I said in my e.mail outline, I would be impressed if he succeeds, but that is another matter. There is no precedent for this kind of double contingency. It really is most unusual. Yes, in substance, it may be - although he is keen I think to distance himself from this proposition - he is seeking to unravel costs orders that have already been made. But he is not, I think, technically appearing to want to do that or to be doing that.

48. We say there are one or two other rather basic objections to taking this course. It is all based on the idea that we are somehow amending; even Mr Wilson would say we are only notionally amending.

49. There are two points there. One is that this whole application before Mr Justice Cooke and before your Lordships has not been treated as an application for leave to amend nor has it been at the forefront, or possibly anywhere, in their argument that what we put into our pleadings should be disallowed on the simple basis that we never obtained the permission of the court to put it in. The reason for that is quite simple. There was, following the Court of Appeal hearing last year, some agreed directions that were given to enable the assessment of damages to proceed with some new pleadings. They put in their statement of case. As I had indicated we were minded to do when I appeared last before the Court of Appeal, we put in our statement of case in response which took the point we foreshadowed, the Euro point. There had been a fresh direction from the court for the service of pleadings in the assessment. That is why we say we are neither notionally nor actually amending; we are simply putting in our response to the new and fully pleaded case which has been put forward by them.

50. If one wants to take the point even further, one only has to look back at the state of their pleaded counterclaim as it stood before that moment; it remained about three or four lines with no particularisation of any aspect of their counterclaim. The reality is that both parties were starting again with the counterclaim. They had got their liability judgment and on we went. There is no question of us, by our defence in the qualification proceedings, amending notionally or otherwise.

51. I suppose the only other point I would wish to make for the moment is that they are now saying that our ability to proceed with this point should be put on terms. That was something which they should have applied for to Mr Justice Cooke and should have applied for as a matter of substance to the Court of Appeal. They have not done so. They fought before Mr Justice Cooke and before the Court of Appeal fair and square on the main substantive point with no back-up position or anything of that sort. It is wrong in principle, we submit, that this point should come in somehow as a sidewind on issues of costs when they had lost both before Mr Justice Cooke and before the Court of Appeal.

52. LORD JUSTICE LONGMORE: No application of this kind was made at the time of judgment before Mr Justice Cooke?

53. MR ONSLOW: No. I think that is all I can say on that point. On permission to appeal to the House of Lords .....

54. LORD JUSTICE KENNEDY: You need not trouble us about that. Is there anything more you want to say?

55. MR WILSON: Just on the point of not having made an application of this nature to Mr Justice Cooke. At the time of the application before Mr Justice Cooke the case appeared to be dealt with on the basis of principles of estoppel. Mr Justice Cooke appeared, as we saw it, to be deciding the case on the basis that it was a cause of action estoppel case, with the principles nevertheless permitting the amendments to be made despite that fact. It is your Lordships' analysis of the case in the Court of Appeal that has essentially raised this point because of your Lordships' view that my friend's defence to the counterclaim contains buried within it the notional application to amend the pleadings. It is true that he has not applied to amend his pleadings in relation to the action, but it is only because he could, and notionally should, have done so that he succeeded in getting it into his defence to counterclaim. To put it this way, if the pleading had not existed and Mr Justice Langley had not stayed it, and thereby preserved for my friend the ability to amend to include it himself, he would never, in a month of Sundays, have been able to add it as a defence to the counterclaim. It is only because of what happened before Mr Justice Langley and his notional ability to amend the main action that he was able to get this point in to the defence to counterclaim. In my submission, this is to be regarded as, in substance, an amendment case. That being so, your Lordships should make what are, in substance, orders appropriate to amendment. Unusual as that may be, this is an unusual, perhaps even a unique, case and in my submission an unusual, perhaps a unique, order should be made to reflect that fact.

56. LORD JUSTICE KENNEDY: Thank you.

(The Bench retired)

57. LORD JUSTICE KENNEDY: The application for leave to appeal to the House of Lords is refused. We decline to make any order in the form sought in paragraph 4 of the draft order. It is entirely a matter for any judge who has conduct of this matter henceforth to decide what the consequences of any order that he or she may make shall be.

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