Wasted costs orders
Wasted costs orders

The following Dispute Resolution practice note provides comprehensive and up to date legal information covering:

  • Wasted costs orders
  • What is a wasted costs order?
  • Alternative to a wasted costs order—breach of solicitor's warranty
  • Power of the court to make an order
  • Test and principles the court will apply
  • Test to be applied
  • Principles
  • What will the court look for?
  • Principles the court will apply—what is meant by improper, unreasonable, negligent
  • Who can a wasted costs orders be made against?
  • More...

What is a wasted costs order?

A wasted costs order is defined in CPR PD 46, para 5.1 as an order:

  1. that a legal representative pay a sum in respect of the costs of a party; such sum to be specified or to be assessed, or

  2. for costs relating to a specified sum or items of work that are disallowed

Wasted costs orders are not available to satisfy a disgruntled party who has been unable to obtain an effective costs order, ie they cannot be used as a back door to recover costs not otherwise recoverable. This was clearly set out by the Court of Appeal in Ridehalgh v Horsefield.

Alternative to a wasted costs order—breach of solicitor's warranty

It is possible that where it is considered that an application for wasted costs against a solicitor would not succeed, an application for breach of an implied warranty of authority on the part of the solicitors could be brought where that breach resulted in damages by way of costs unnecessarily incurred. This potential route was put forward as an alternative to a wasted costs order in Zoya Ltd v Ahmed. Both the wasted costs and the breach of solicitor’s warranty applications failed—the defendant could not demonstrate reliance on the warranty in the sense of being induced by it to act to his prejudice. However, the case illustrates the availability

of breach of warranty jurisdiction as an alternative basis on which to seek costs from solicitors where a defendant would otherwise be left without a remedy. For a detailed analysis of this decision, see News Analysis: Solicitor's warranty as a basis for wasted costs (Zoya Ltd v Ahmed).

Power of the court to make an order

The court has the power under the Senior Courts Act 1981 (SCA 1981) to award wasted costs in the following courts:

  1. the Civil Division of the Court of Appeal

  2. the High Court, and

  3. the County Court

These powers are:

  1. SCA 1981, s 51(6)—in any proceedings mentioned in SCA 1981, s 1, the court may disallow, or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with the rules of court

  2. SCA 1981, s 51(7)—sets out what is meant by wasted costs, ie costs incurred by a party:

    1. as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative, or

    2. which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay

Test and principles the court will apply

Test to be applied

The Court of Appeal in Ridehalgh v Horsefield set out a three-stage test to be applied when considering whether to make a wasted costs order:

  1. has the legal representative/litigant on person acted improperly, unreasonably or negligently?

  2. if so, did their conduct cause the applicant to incur unnecessary costs?

  3. if so, is it just in all the circumstances to order the legal representative/litigant in person to compensate the applicant for the whole or part of the relevant costs?

Principles

The principles the courts will apply were established in a trilogy of Court of Appeal cases, being Ridehalgh, Tolstoy-Miloslayskv v Aldington and Wall v Lefever. Those principles were summarised by the Court of Appeal in the later decision in Fletamentos Maritmos SA v Effjohn International BV:

‘1. Improper conduct is that which would be so regarded "according to the consensus of professional (including judicial) opinion." Unreasonable conduct "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.... The acid test is whether the conduct permits of a reasonable explanation." Negligent conduct is to be understood "in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession." (all from Ridehalgh)

2. "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 their 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.... 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 in abuse of the process of the court.... 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." (all from Ridehalgh)

3. "A solicitor does not abdicate his professional responsibility when he seeks the advice of counsel." (Ridehalgh) The role which leading and junior counsel played in Tolstoy in putting their signatures to the statement of claim "did not exonerate the solicitors from their obligation to exercise their own independent judgment to consider whether the claim could properly be pursued; they were not entitled to follow counsel blindly."

4. "The jurisdiction to make a wasted costs order must be exercised with care and only in a clear case." (Tolstoy) "It should not be used to create subordinate or satellite litigation, which is as expensive and as complicated as the original litigation. It must be used as a remedy in cases where the need for a wasted costs order is reasonably obvious. It is a summary remedy which is to be used in circumstances where there is a clear picture which indicates that a professional adviser has been negligent etc." (Wall v Lefever)"

While a wasted costs order can be an important means of protecting a party through costs, the Court of Appeal in Ridehalgh emphasised the importance of not allowing parties to use it to engage in satellite litigation:

‘Judges must not reject a weapon which Parliament has intended to be used for the protection of those injured by the unjustifiable conduct of the other side's lawyers, but they must be astute to control what threatens to become a new and costly form of satellite litigation.’

What will the court look for?

When considering wasted costs the courts have identified different issues of relevance:

  1. causation—for an order to be made, the applicant must establish causation between the alleged acts or omissions complained of and their expenditure of wasted costs (Court of Appeal in Re A (a child) (2013) citing the Court of Appeal in Harrison v Harrison (2009))

  2. requirement of fault—there must be a finding of fault against the respondent (Chief Constable of British Transport Police v Soods Solicitors (2012))

  3. just in all the circumstances—the court will have regard to the effect of a wasted costs order, eg the risk of causing a representative to go bankrupt (R (on the application of Hide and other) v Staffordshire CC (2007))

  4. the case must be plain and obvious—the jurisdiction will only be exercised in cases which are plain and obvious (Court of Appeal in Re Freudiana Holdings, per Millett LJ (1995))

Whether there is a requirement to determine negligence has been the subject of conflicting Court of Appeal decisions. In Persaud it was held that the negligence of a legal representative was insufficient to justify making a wasted costs order and that a breach of duty/abuse of process was required. However, three months later, in Dempsey v Johnstone, it was held that negligence would suffice for the purposes of making a wasted costs order.

Principles the court will apply—what is meant by improper, unreasonable, negligent

When dealing with wasted cost orders it is necessary to understand the terminology used, ie ‘improper’, ‘unreasonable’ and ‘negligence’. Guidance was provided by the Court of Appeal in Ridehalgh, but although the court was invited to give the words specific self-contained meanings, so as to avoid overlap, it declined to do so. The rationale being that conduct which is unreasonable might also be improper, and conduct which is negligent will very frequently be unreasonable. It was considered that a sharp differentiation between these expressions would not be helpful or necessary. The guidance given as to the three terms was:

TermDefinition
ImproperConduct that according to the consensus of professional (including judicial) opinion would be improper.
This 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.
Unreasonable This 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.
The acid test is whether the conduct permits of a reasonable explanation.
NegligenceThis should be understood in an untechnical way to denote failure to act with the competence reasonably expected of ordinary members of the legal profession.

Who can a wasted costs orders be made against?

Legal representative

A wasted costs order can be made against a legal representative applying the rules in Part II of CPR 46, which start at CPR 46.8.

A legal representative is defined in CPR 2.3 as:

  1. a barrister

  2. a solicitor

  3. a solicitor’s employee

  4. a person who, for the purposes of the Legal Services Act 2007, is an authorised person in relation to an activity which constitutes the conduct of litigation (within the meaning of that Act)

Litigant in person

A wasted costs order can be made against a litigant in person, as held by the Court of Appeal in Ogiehor v Belinfantie (2018). The Court of Appeal found that while litigants in person will attract more assistance from the court during proceedings, the claimant litigant in person in that case had been warned, on a number of occasions, not to disclose the contents of a without prejudice settlement letter but did so anyway. It was established that his conduct met the three-stage test for making a costs order. For an insight into the Court of Appeal decision, see News Analysis: Court of Appeal: wasted costs order against litigant in person who disclosed without prejudice offer to the trial judge (Ogiehor v Belinfantie).

Cross-examination of the person against whom the order is sought

A key consideration in an application for a wasted costs order may be whether the person against which the wasted costs order is sought will attend the hearing and be available for cross-examination.

While CPR 46.6 deals with wasted costs against a legal representative, it does not address the issue of cross-examination. The point was considered in Hunt v Annolight Ltd, where the judge rejected the submission that the wasted costs regime set out in CPR 46.8 is a complete procedural code and therefore the court has no power to order attendance for the purposes of cross-examination. The judge took the view that had that been the intention of the rule drafters they would have made that clear, as they have for example with the regime under Part 36.

The issue of the court’s power to require attendance for cross-examination has not been addressed in the Court of Appeal decisions setting out the correct approach to applications for wasted costs orders. In Hunt, the judge identified two different bases on which the court does have such a power:

Basis on which the court can order attendance for cross examinationComment
CPR 32.7This rule provides the court with the power of the court to require anyone who gives evidence in writing (other than at trial) to attend for cross-examination. It was observed that this rule is often overlooked but it is ‘an important provision for those who choose to give interlocutory witness statements to bear in mind’. The judge considered that there was nothing in the case before him that would exclude the application of that power to the solicitor who had chosen to provide a witness statement, although the CPR 32.7 point had not been raised. Attendance of a solicitor under CPR 32.7 has been ordered, eg Republic of Djibouti v Boreh [2015] EWHC 769 (Comm), [2015] 2 All ER (Comm) 669.
General powerThe general power of the court was set out in Godfrey Morgan Solicitors Ltd v Cobalt Systems Ltd [2011] 6 Costs LR 1006, an Employment Tribunal case. Having analysed a number of cases, including Ridehalgh, Underhill J reached a contrary view to that previously reached in the Employment Tribunal, in Ratcliffe Duce and Gammer, and held that the court had the power to require a legal representative against whom costs are sought to attend court for the purposes of cross-examination. The judge said: ‘...no doubt in most circumstances this will be inappropriate and/or unnecessary and/or disproportionate. But in a case like the present, where the representative is no longer acting for the party, where privilege has already been waived, where an oral hearing has been fixed and where the party and the representative have given different accounts of facts which may be central to the issue before the tribunal, cross examination would seem a fair and proportionate way of helping it to get to the right result’.
The same approach has been taken in the High Court as seen in Hunt
where the judge stated that, while not bound by the decision in

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