In hotly contested litigation, costs are a constant, contentious issue. But sometimes they go beyond the arena of party-and-party issues, when one side seeks a costs order against the legal representatives involved in a case.
When legal representatives are accused of improper conduct resulting in wasted costs, the courts can impose a Wasted Costs Order (WCO), holding lawyers responsible for the financial consequences of their actions. The WCO jurisdiction is longstanding, dates from long before the passing of the Senior Courts Act 1981 and reflects the court’s need to balance the rights of the parties with the integrity of the legal process, ensuring that misconduct by legal professionals does not unjustly burden others.
This newsletter delves into the wasted costs jurisdiction in detail, focusing on the principles the courts apply when considering whether to make a WCO, with a particular emphasis on the recent High Court decision in Kirsty Williams-Henry v Associated British Ports and Hugh James [2024] EWHC 2415 (KB) (“the Kirsty Williams-Henry case”). A decision of Ritchie J, the case is a very useful illustration of the issues courts face when deciding whether solicitors should bear the financial costs of litigation particularly in the context of failed personal injury litigation, where a claimant has QOCS protection, or more prosaically is simply unable to pay what might be very large sums in wasted costs. It also exemplifies how the courts interpret “improper, unreasonable, or negligent conduct” under the relevant legal framework, the crucial importance of the text of causation, and the policy themes which lie in the background to all such applications.
Kirsty Williams-Henry v Associated British Ports and Hugh James [2024] EWHC 2415 (KB): The facts
The Kirsty Williams-Henry case arises from a tragic incident on 21 July 2018 when the Claimant, Kirsty Williams-Henry, suffered a brain injury following a fall from Aberavon Pier. She sued the Defendant, Associated British Ports, as the owner or occupier of the pier. The Defendant admitted partial liability, but the quantum of damages remained fiercely contested. Moreover, the Defendant accused the Claimant of fundamental dishonesty in respect of the degree of ongoing disability caused by her undoubted injuries—a claim that had severe consequences as the litigation unfolded.
The crux of the dishonesty claim lay in the discrepancy between the Claimant’s portrayal of her condition and evidence uncovered through surveillance and other investigative methods. The Defendant alleged that the Claimant had exaggerated her injuries, overstating their impact on her life. A finding of fundamental dishonesty, under Section 57 of the Criminal Justice and Courts Act 2015, can result in the complete dismissal of a personal injury claim and the imposition of adverse costs orders, as was the case here.
The matter proceeded to trial, and in March 2024, the court dismissed the claim, finding that the Claimant had indeed been fundamentally dishonest. The court, in its judgment, stated that the Claimant’s dishonesty was material to the claim, and the claim was dismissed with costs awarded to the Defendant. However, given the Claimant’s financial circumstances, the Defendant sought to recover its wasted costs not from the Claimant but from her solicitors, Hugh James, via a WCO application.
The Defendant’s Application for a Wasted Costs Order
The Defendant’s application for a WCO was based on two main contentions.
First, a failure to properly investigate and appreciate the nature of the disclosure documents. The Defendant argued that Hugh James had failed to properly collect and analyse documents in the Claimant’s possession, particularly evidence that contradicted her claims. This failure, it was argued, amounted to negligence, as it prolonged the litigation unnecessarily and led to the accrual of costs that could have been avoided had the firm acted diligently.
Secondly, a failure to advise and settle: The second prong of the Defendant’s case was that Hugh James failed to provide appropriate advice to the Claimant regarding the viability of her case, especially in light of the fundamental dishonesty allegation. The Defendant claimed that the solicitors maintained the case to trial, knowing or should have known it was untenable. It was argued that the solicitors should have advised the Claimant to settle or withdraw from the case earlier, which would have mitigated the Defendant’s costs.
The Defendant’s argument was made against the backdrop of the Conditional Fee Agreement (CFA) under which Hugh James was representing the Claimant. The Defendant suggested that the CFA had led the solicitors to maintain the case longer than was reasonable, in hopes of recovering their own fees, an approach they argued was improper and unreasonable. This was a bold submission: it has long been settled law since at least the failed tobacco litigation of the 1990s, that the presence or absence of a CFA, without more, has no bearing on a lawyers potential liability for wasted costs.
The Legal Framework for WCO Applications
In deciding whether to make a WCO, the court applied the established legal framework, which is drawn from Section 51 of the Senior Courts Act 1981, CPR Rule 46.8, and leading case law, particularly Ridehalgh v Horsefield [1994] Ch 205, Medcalf v Mardell [2002] UKHL 27, and Brown v Bennett [2002] 1 WLR 713.
Section 51 of the Senior Courts Act 1981 grants the court a broad discretion to make costs orders against any party, including solicitors. Under subsection (6), the court can order a legal representative to pay costs that have been wasted due to their improper, unreasonable, or negligent conduct.
CPR Rule 46.8 governs the procedural aspects of making a WCO. It outlines the process by which the court must give the legal representative an opportunity to explain or justify their actions before an order is made. The rule ensures procedural fairness and transparency, allowing the respondent solicitors to defend their conduct before any decision is made.
The leading case of Ridehalgh v Horsefield sets out a three-stage test for determining whether a WCO is appropriate:
Is there improper, unreasonable, or negligent conduct? The court must first determine whether the conduct of the legal representatives fell below the standard expected of reasonably competent legal professionals. Improper conduct refers to actions taken in bad faith or with an ulterior motive. Unreasonable conduct involves actions that are indefensible or without merit, even if not malicious. Negligence refers to failures in competence, such as missing deadlines or failing to prepare adequately. The breach of duty must be in the context of a duty owed to the court.
Is causation established, in that the breach of duty caused the incurrence of identifiable costs? The applicant must show that the legal representatives’ misconduct caused the applicant to incur unnecessary costs. There must be a clear causal link between the misconduct and the costs being claimed. This requirement prevents WCOs from being made unless there is direct evidence that the solicitor’s conduct resulted in wasted costs. The test of causation is “but for” causation, in this context.
Is it just to make an order ? Finally, the court must consider whether it is just to make a WCO. This involves balancing the interests of the parties and ensuring that the solicitor is not unfairly penalised, particularly in cases where the legal representative is constrained by the client’s instructions or legal professional privilege.
The Court’s analysis in Kirsty Williams-Henry
The court in a full and careful judgment applied these principles to the facts of the Kirsty Williams-Henry case. In its analysis, the court acknowledged the difficult position that legal representatives often find themselves in when their clients insist on proceeding with litigation, despite professional advice to the contrary. This is particularly relevant in cases involving Conditional Fee Agreements (CFAs), where solicitors may be motivated to recover their own costs through success fees.
In considering whether Hugh James had acted improperly, unreasonably, or negligently, the court focused on two main issues: the firm’s handling of disclosure and its advice to the Claimant. First, the Defendant argued that the solicitors had failed to adequately review and disclose documents that undermined the Claimant’s case, particularly those that would have revealed her exaggeration of her injuries. The court accepted that there were deficiencies in the solicitors’ conduct in relation to document collection and disclosure. For example, surveillance evidence and other documents, which suggested that the Claimant had been more active than her evidence suggested, were not disclosed promptly. However, the court stopped short of finding that these failures amounted to improper or negligent conduct, noting that such errors, while unfortunate, did not meet the high threshold required for a WCO.
Secondly, on the question of whether the solicitors should have advised the Claimant to settle earlier, the court noted the inherent difficulty in advising clients who are adamant about proceeding with litigation. Solicitors are bound to act on their client’s instructions, and the court was reluctant to penalise Hugh James for adhering to their client’s wishes, even though it led to an unsuccessful outcome.
The court reiterated the principle that it is the role of the judge, not the lawyers, to determine the merits of a case, and that solicitors cannot be held liable simply for representing a client with a weak or hopeless claim. Medcalf v Mardell [2002] UKHL 27 and Ridehalgh v Horsefield [1994] Ch 205 both underscore that pursuing a hopeless case is not improper unless the conduct crosses the line into an abuse of the process or dishonesty.
The court found that the Defendant had failed to establish a clear causal link between the alleged misconduct and the costs incurred. While the Defendant argued that the case could have been settled earlier, the court found that the Claimant was unlikely to have accepted any settlement offer, given her determination to proceed with the claim. As such, even if Hugh James had provided more forceful advice, it was unclear that this would have prevented the matter from going to trial.
The court also noted that much of the delay and additional costs were caused by the Claimant’s own actions, such as her failure to accept reasonable settlement offers, rather than the solicitors’ conduct. Therefore, the court concluded that the Defendant had not sufficiently demonstrated that the solicitors’ actions directly led to the wasted costs.
The importance of proving a direct link between conduct and costs is a central principle as causation must be clearly demonstrated for a WCO to be made. Finally, the court considered whether it would be just to make a WCO in the circumstances. The court took into account the constraints of legal professional privilege, which limited Hugh James’s ability to fully defend their actions, particularly regarding their advice to the Claimant. Privilege protects the confidentiality of communications between solicitors and their clients, and the court recognised that without a waiver of privilege, it could not assume that the advice given by Hugh James was negligent or improper.
Furthermore, the court emphasised the importance of fairness in making WCOs. Legal representatives should not be punished for simply doing their job, particularly when they are acting on their client’s instructions. The court noted that solicitors are often in a difficult position when clients refuse to settle, and the existence of a CFA did not automatically imply that the solicitors acted improperly.
Broader considerations
The Kirsty Williams-Henry case underscores several important principles that govern the court’s approach to WCOs. These principles are drawn from a long line of cases, including Ridehalgh v Horsefield, Medcalf v Mardell, and others, which have shaped the modern understanding of wasted costs.
1. The Threshold for Wasted Costs Orders is High
One of the most important takeaways from this case is that the threshold for making a WCO is extremely high. The courts are cautious in making these orders, recognising the significant professional and financial consequences they can have for legal representatives. As Lord Bingham noted in Medcalf v Mardell [2002] UKHL 27, WCOs are not intended to punish errors of judgment or even incompetence unless those errors meet the standard of improper, unreasonable, or negligent conduct. In practice, this means that solicitors who make mistakes or pursue weak cases on behalf of their clients will not necessarily face a WCO unless their conduct is deemed unjustifiable. The courts must balance the need to hold solicitors accountable for their actions with the recognition that lawyers often work under difficult conditions, with clients who may not always accept their advice. As discussed in Ridehalgh v Horsefield [1994] Ch 205, the court recognises that the profession involves judgment calls, and WCOs are reserved for serious breaches.
2. Legal Professional Privilege Protects Solicitors from Unfair Sanctions
Another key principle illustrated by the Kirsty Williams-Henry case is the role of legal professional privilege in WCO applications. Privilege is a cornerstone of the legal profession, protecting the confidentiality of communications between lawyers and their clients. In WCO cases, this can create a significant hurdle for applicants, as the solicitors may be unable to fully defend their conduct without disclosing privileged communications.
In Ridehalgh, the court emphasised that where privilege restricts the solicitor’s ability to explain their actions, the court must give the solicitor the benefit of the doubt. This principle was reaffirmed in Medcalf, where the House of Lords held that courts should be extremely cautious in making WCOs where privileged material is involved. The court must be satisfied that, even with the protection of privilege, there is clear evidence of misconduct before making an order.
3. Causation is Critical in WCO Applications
The requirement to prove causation is another critical element in WCO applications. As the court in Kirsty Williams-Henry made clear, it is not enough for the applicant to show that the legal representatives made errors or that the case was weak. There must be a direct link between the conduct of the solicitors and the wasted costs incurred by the applicant.
This was a key reason for the failure of the Defendant’s WCO application in this case. The court found that much of the additional costs were caused by the Claimant’s actions, rather than the solicitors’ conduct. Furthermore, the court noted that even if the solicitors had advised the Claimant more strongly to settle, it was unlikely that she would have accepted such advice, given her determination to proceed with the claim.
4. The Role of Conditional Fee Agreements (CFAs)
The Kirsty Williams-Henry case also touches on the role of Conditional Fee Agreements (CFAs) in WCO applications. CFAs, or “no win, no fee” agreements, have become a common feature of litigation, particularly in personal injury cases. While CFAs provide access to justice for clients who might not otherwise be able to afford legal representation, they also create potential conflicts of interest, as solicitors have a financial stake in the outcome of the case.
In this case, the Defendant argued that the CFA incentivised Hugh James to continue the litigation despite the weakness of the Claimant’s case. However, the court rejected this argument, noting that CFAs do not automatically lead to improper conduct. Solicitors are still bound by their professional obligations to act in the best interests of their clients, and the mere existence of a CFA does not imply that the solicitors acted improperly or negligently.
5. The Court’s Discretion in Making WCOs
Finally, the Kirsty Williams-Henry case highlights the broad discretion that courts have in deciding whether to make a WCO. The decision to make a WCO is not automatic, even where the applicant has established improper conduct and causation. The court must always consider whether it is just to make an order in all the circumstances, taking into account the professional and financial consequences for the solicitors.
In this case, the court ultimately decided that it would not be just to make WCO, given the constraints of privilege, the Claimant’s instructions, and the absence of clear causation. This reflects the court’s cautious approach to WCOs, ensuring that they are only made in cases where there is compelling evidence of misconduct and where the order would be a fair and proportionate response.
Conclusions
The Kirsty Williams-Henry case is an instructive example of how the courts approach WCO applications, balancing the need to hold solicitors accountable for their conduct with the protection of privilege and the recognition of the solicitor’s role in representing their client’s interests. The case reaffirms the high threshold for making a WCO, the importance of proving causation, and the court’s discretion in ensuring that WCOs are only made where it is just to do so.
WCO applications were considered by us in a Zoom seminar which we gave in the summer of 2024: the recording of that Zoom seminar can be found at https://www.youtube.com/watch?v=_CPkEqldaqA if you would like to take a deeper dive into these issues.
Or, try the Podcast below.
