Wasted costs revisited

An interesting corollary, of the rise of QUOCS can reasonably be anticipated to be an upsurge in wasted costs Orders, sought against solicitors firms as victorious but impoverished litigants seek to recover costs they must otherwise write off.

This post will consider some of the basic principles which apply when such applications are contemplated.

The jurisdiction to make a wasted costs order arises from section 51 of the Senior Courts Act 1981 as supplemented by rule 46.8 of the Civil Procedure Rules 1998.

An applicant for a wasted costs Order must demonstrate

(i) Improper, unreasonable or negligent conduct on the part of a solicitor’s firm, which constitutes a breach of that firms duty to the court: no duty is owed to the applicant in this context.

(ii) That the conduct caused the incurrence of costs, which would not otherwise have been incurred.

(iii) That all the circumstances of the case render it just to impose a costs liability on the solicitor, by making a wasted costs Order in respect of all or part of the costs sought.

Impropriety, unreasonableness and negligent conduct

The leading authority remains that of Ridehalgh.v.Horsfield [1994] CH 205 the guideline case of the Court of Appeal. See in particular the commentary on what constitutes improper, unreasonable and negligent conduct at pages 232 to 233

“Improper” means what it has been understood to mean in this context ^ for at least half a century. The adjective covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalty. It covers any significant breach of a substantial duty imposed by a relevant code of professional conduct. But it is not in our judgment limited to that. Conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion can be fairly stigmatised as E such whether or not it violates the letter of a professional code.

“Unreasonable” also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But F conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner’s judgment, but it is not unreasonable.

The term “negligent” was the most controversial of the three. It was G argued that the Act of 1990, in this context as in others, used “negligent” as a term of art involving the well known ingredients of duty, breach, causation and damage. Therefore, it was said, conduct cannot be regarded as negligent unless it involves an actionable breach of the legal representative’s duty to his own client, to whom alone a duty is owed. We reject this approach. (1) As already noted, the predecessor of the present Ord. 62, r. 11 made reference to “reasonable competence.” That expression ” does not invoke technical concepts of the law of negligence. It seems to us inconceivable that by changing the language Parliament intended to make it harder, rather than easier, for courts to make orders. (2) Since the applicant’s right to a wasted costs order against a legal representative depends on showing that the latter is in breach of his duty to the court it makes no sense to superimpose a requirement under this head (but not in the case of impropriety or unreasonableness) that he is also in breach of his duty to his client.

On pursuing a hopeless case the Court of Appeal noted this at 233-234:

A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail. As Lord Pearce observed in Rondel v. Worsley [1969] 1 A.C. 191, 275:

“It is easier, pleasanter and more advantageous professionally for barristers to advise, represent or defend those who are decent and  reasonable and likely to succeed in their action or their defence than those who are unpleasant, unreasonable, disreputable, and have an apparently hopeless case. Yet it would be tragic if our legal system came to provide no reputable defenders, representatives or advisers for the latter.”

As is well known, barristers in independent practice are not permitted to pick and choose their clients. Paragraph 209 of their Code of Conduct provides:

“A barrister in independent practice must comply with the ‘Cab-rank rule’ and accordingly except only as otherwise provided in paragraphs 501 502 and 503 he must in any field in which he professes to practise A in relation to work appropriate to his experience and seniority and irrespective of whether his client is paying privately or is legally aided or otherwise publicly funded: (a) accept any brief to appear before a court in which he professes to practise; (b) accept any instructions; (c) act for any person on whose behalf he is briefed or instructed; and do so irrespective of (i) the party on whose behalf he is briefed or instructed (ii) the nature of the case and (iii) any belief or opinion which he may have formed as to the character reputation cause conduct guilt or innocence of that person.”

As is also well known, solicitors are not subject to an equivalent cab-rank rule, but many solicitors would and do respect the public policy underlying it by affording representation to the unpopular and the unmeritorious. Legal representatives will, of course, whether barristers or solicitors, advise clients of the perceived weakness of their case and of the risk of failure. But clients are free to reject advice and insist that cases be litigated. It is rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved. They are there to present the case; it is (as Samuel Johnson unforgettably pointed out) for the judge and not the lawyers to judge it.

It is, however, one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are an abuse of the process of the court. Whether instructed or not, a legal representative is not entitled to use litigious procedures for purposes for which they were not intended, as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest, nor is he entitled to evade rules intended to safeguard the interests of justice, as by knowingly failing to make full disclosure on ex parte application or knowingly conniving at incomplete disclosure of documents. It is not entirely easy to distinguish by definition between the hopeless case and the case which amounts to an abuse of the process, but in practice it is not hard to say which is which and if there is doubt the legal representative is entitled to the benefit of it.

And on the significance of Legal Aid at 234-235:

Section 31(1) of the Legal Aid Act 1988 provides that receipt of legal -aid shall not, save as expressly provided, affect the relationship between or rights of a legal representative and client or any privilege arising out of G the relationship nor the rights or liabilities of other parties to the proceedings or the principles on which any discretion is exercised. (The protection given to a legally-assisted party in relation to payment of costs is, of course, an obvious express exception.) This important principle has been recognised in the authorities. It is incumbent on courts to which applications for wasted costs orders are made to bear prominently in mind the peculiar vulnerability of legal representatives acting for assisted persons, to which Balcombe L.J. adverted in Symphony Group Pic. v. Hodgson [1994] Q.B. 179 and which recent experience abundantly confirms. It would subvert the benevolent purposes of this legislation if such representatives were subject to any unusual personal risk. They for their part must bear prominently in mind that their advice and their conduct should not be tempered by the knowledge that their client is not their paymaster and so not, in all probability, liable for the costs of the other side.

On causation at 237:

As emphasised in In re A Barrister (Wasted Costs Order) (No. 1 of 1991) [1993] Q.B. 293 the court has jurisdiction to make a wasted costs order only where the improper, unreasonable or negligent conduct complained of has caused a waste of costs and only to the extent of such wasted costs. Demonstration of a causal link is essential. Where the P conduct is proved but no waste of costs is shown to have resulted, the case may be one to be referred to the appropriate disciplinary body or the legal aid authorities, but it is not one for exercise of the wasted costs jurisdiction.

On the timing of the application at 238

In Filmlab Systems International Ltd. v. Pennington, The Times, 9 July 1993, Aldous J. expressed the opinion that wasted costs orders should not, save in exceptional circumstances, be sought until after trial. He highlighted a number of dangers if applications were made at an interlocutory stage, among them the risk that a party’s advisers might feel they could no longer act, so that the party would in effect be deprived of C the advisers of his choice. It is impossible to lay down rules of universal application, and sometimes an interlocutory battle resolves the real dispute between the parties. But speaking generally we agree that in the ordinary way applications for wasted costs are best left until after the end of the trial.

On the exercise of the discretion at 239:

It was submitted, in our view correctly, that the jurisdiction to make a wasted costs order is dependent at two stages on the discretion of the court. The first is at the stage of initial application, when the court is invited to give the legal representative an opportunity to show cause. This is not something to be done automatically or without careful appraisal of the relevant circumstances. The costs of the inquiry as compared with the costs claimed will always be one relevant consideration. This is a discretion, like any other, to be exercised judicially, but judges may not infrequently decide that further proceedings are not likely to be justified. The second discretion arises at the final stage. Even if the court is satisfied that a legal representative has acted improperly, unreasonably or negligently and that such conduct has caused the other side to incur an identifiable sum of wasted costs, it is not bound to make an order, but in that situation it would of course have to give sustainable reasons for exercising its discretion against making an order.

Negligence constituting breach of a duty owed to the court, not the tort of negligence

The significance of negligence not being enough: it must be negligence in pursuance of a duty owed to the court was emphasised in a decision of Neuberger J as he then was in the case of Radford and Co v Charles [2003] EWHC 3180 where he observed:

21. In Ridehalgh at 232 C – 233 E, the Court of Appeal discussed “the correct construction of these crucial words”, namely, “improper, unreasonable or negligent”, in section 51(7). Having described the word “negligent” as “the most controversial of the three”, and having also referred to the fact that the predecessor of section 51(7) referred to “reasonable competence,” the Court of Appeal at 232 H – 233 said:

“It seems to us inconceivable that by changing the language Parliament intended to make it harder, rather than easier, for the court to make orders … since the applicant’s right to a wasted costs order against a legal representative depends on showing that the latter is in breach of his duty to the court, it makes no sense to superimpose a requirement but not in the case of impropriety or any unreasonableness, it is also in breach of duty of this client.”

22. It appears to me that the opening part of the last sentence in that passage indicates that a finding of negligence to the client on its own is not sufficient to justify a wasted costs order against a solicitor. There must also be some sort of breach of duty to the court. That is consistent with Miles v Elman [1940] AC 282 where, when dealing with the power of the court to award costs against solicitors, at 319 reference was made to:

“conduct which involves a failure on the part of a solicitor to fulfill its duty to the court to aid in promoting in his own sphere cause of justice.”.

It should also be noted that a very real issue on such an application, is the question as to how a solicitor can defend himself, if, having parted company acrimoniously with his client, that client refuses to waive his privilege, to permit the solicitor to tell the whole story.

The client’s privilege is paramount and will be protected by the court, but this does not mean that the solicitor will necessarily be hung out to dry. In the case of Medcalf.v.Mardell [2003] 1 AC 120 the House of Lords emphasised, that in such circumstances, it is only if nothing can be said, or no allowances made, that it would be right to make a wasted costs Order. Otherwise, the solicitor is entitled to the benefit of the doubt and no Order should be made.


4 thoughts on “Wasted costs revisited

  1. In the family court, judges are now instructed to take a case out of the list and make an order for wasted costs if an advocate does not get a draft order and position statement in by strictly 4:00 pm the day before the hearing. This means for public child care law, local authorities, who are the applicant and therefore provide the draft order, and respondents who are Legally Aided. It seems to me that the costs incurred by the parties are a result not of improper conduct but of a disproportionate response by the court, which is making a punitive order. I should be interested for your thoughts because I can’t find anything helpful about the court making such an order, though it is undeniable that it can it seems to me

    1. The question is (a) whether there has been unreasonable, negligent or improper conduct amounting to a breach of duty owed to the court (ii) that has caused the incurrence of costs which would otherwise not have been incurred and (c) that it is just to make the order. However I would suggest that you track down the source of the purported power to make that order: does it arise from a specific rule? or a practice direction? Or is the local judge simply a martinet, who has devised her own procedural gimmick. If the latter, then off to the appellate court you go.

      1. thank you very much for responding. it is a PD requirement to file the documents. I just can’t accept that filing an hour later than required is unreasonable, improper or negligent, especially in the context of cases where wasted costs orders have been made.

  2. Just as an update, here is a case where wasted costs were awarded against an intermediary, which must have given them a shock. It seems a helpful guide on getting wasted costs into proportion. If the hearing is ineffective because of decision by a judge to take the case out of the list for non compliance with a PD, that response has to be demonstrably proportionate, surely? Punitive costs are one thing, imposing them as a warning to a whole profession is quite another imv. Many thanks for your response.

    It wouldn’t be me arguing that the circumstance of late filing a position statement can’t be “exceptional” because it is a frequent issue, but the thought does occur.


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