Wasted costs: a judicial masterclass

Wasted costs orders: some statute law, some case law and much more…

Once in a while a judgment comes along which you know is intended to be a masterclass on law, procedure or some other aspect of practice; and which justifies the title. Williams-Henry v Associated British Ports & Anor (Re Wasted Costs Order) [2024] EWHC 2415 (KB) (24 September 2024), Ritchie J
(http://www.bailii.org/ew/cases/EWHC/KB/2024/2415.html) is a judicial masterclass on wasted costs orders (WCO). In twenty pages of luxuriantly cited judgment Ritchie J sets out statute, rules and case law on the subject; and then – for revision purposes (or perhaps for the lazy reader) – the judge helpfully provides a two-and-a-half-page summary of what has been tilled over by him in the previous 16 or so pages. This judgment, the law on which it is based, and the commentary here, applies as much to civil proceedings as to family cases.

The facts are almost incidental, but they were that at the trial of a personal injury action the claimant (K) had been found to be fundamentally dishonest.  The defendant (ABP) subsequently applied for wasted costs; but ABP’s claim was against Hugh James (HJ), that is against K’s solicitors. The judge was considering the ‘accusatory’ or ‘show cause’ stage – stage (2) below, and the initial stage of the WCO procedure where the lawyers (it can be solicitors or barristers, or even both) must answer the claims by the applicant (in this case by ABP) for a WCO (as explained later). ABP said that HJ had been negligent and failed in their duties in relation to the preparation of the case.

What I aim to do here is to highlight the importance of the subject, and Ritchie J’s judgment within it; and then in a further substack post to back up Ritchie J’s ‘ten factors’ (see below) with their source in common law and suggest a procedural overlay mostly based on family law experience.

Wasted costs: a definition

The term ‘wasted costs’ is defined by Senior Courts Act 1981 s 51 (which deals with costs in civil proceedings generally). Sections 51(6) and (7) say:

(6) In any proceedings mentioned in subsection (1), the court may… 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 rules of court.

(7) In subsection (6), ‘wasted costs’ means any costs incurred by a party—

(a) 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

(b) 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.

The courts concerned and referred to in s 51(6) include the family court, the High Court and the Court of Appeal. The meat of s 51(7)(a) is in the words ‘improper, unreasonable or negligent’ (what Ritchie J calls IUN: see later). But what do these terms – IUN – mean in context. How does a WCO claimant go about getting his or her costs (to be picked up in a second post)?

In family proceedings this aspect of costs proceedings is defined by Civil Procedure Rules 1998 (CPR 1998). WCO applications are covered by CPR 1998 r 46.8, a rule which is probably as lean as it can be. For present purposes it says:

46.8 Personal liability of legal representative for costs – wasted costs orders

(1) This rule applies where the court is considering whether to make an order under section 51(6) of the Senior Courts Act 1981 (court’s power to disallow or (as the case may be) order a legal representative to meet, ‘wasted costs’).

(2) The court will give the legal representative a reasonable opportunity to make written submissions or, if the legal representative prefers, to attend a hearing before it makes such an order.

Readers of Civil Procedure (the ‘white book’) will find extensive coverage of the subject and which is applicable equally – mostly – to all civil jurisdictions including family. Family lawyers will be disappointed if they refer to the family law white book equivalent: Family Court Practice 2024, (the ‘red book’). As far as I can see, the red book contains the text I provided to the publishers in 2022, and no more for the intervening two years.

Mr Justice Ritchie’s ten factors of wasted costs orders

The law and rules have been fleshed out by the common law (judge-made law). I make no apology for adopting Ritchie J’s ten factors set out in para [22] of his judgment, summary: ‘the approach I consider that I am required to take into’ account. I have adopted the judge’s headings and only slightly amended his text:

(1) Summary process

(1) The WCO jurisdiction is a summary jurisdiction, generally but not always dealt with at the end of a case. It may arise because the so court directs (ie ‘of the Court’s own motion’) or by application. It must not ‘become satellite litigation’. It must be used and case-managed in a proportionate manner in relation to time and costs. It must be fair and simple.

Two stages – accusation then defence

(2) The jurisdiction usually has two stages: [1] the ‘accusatory’ stage in which the Applicant (A) seeks to raise a prima facie case (show cause), which if unanswered would on the balance of probabilities lead to a WCO. That may lead to [2] a secondary stage at which, after the Respondent (R) has been given a fair opportunity to explain, defend and make submissions. The court then decides whether the relevant substantive and procedural thresholds have been satisfied by A such that the judge can go on to consider whether it is fair to impose the WCO on R. These two stages may be rolled up together. Procedurally this is the stage which must be looked at in a later post.

Sufficient particularity

(3) At stage 1 and stage 2 A is required to set out the allegations of IUN with sufficient particularity and to identify the alleged wasted costs which were allegedly caused by the IUN and the sums involved, at least in general terms.

Improper conduct

(4) The judge then reviews the IUN aspects: the epithets are derived from s 51(7). Thus ‘improper conduct’ covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice for the Respondent or other serious professional penalty. It covers any significant breach of a substantial duty imposed by a relevant code of professional conduct and conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion whether or not it violates the letter of a professional code.

Unreasonable conduct

(5) ‘Unreasonable conduct’ covers conduct which is vexatious or 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 or gross naivety. It probably does make a difference if it is the product of malice or improper motivation. Conduct is not 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 reflecting poorly on a practitioner's judgment, but it is not unreasonable.

Negligent conduct

(6) ‘Negligent conduct’ may involve duty, breach, causation and damage, so an actionable breach of the legal representative's duty to his own client, but goes wider than that. A’s right to a WCO depends on showing that the legal representative is in breach of his or her duty to the Court. Negligent conduct should be understood in an untechnical way, to denote failure to act with the competence reasonably to be expected of ordinary members of the profession, or put the other way round: acting in a way in which no reasonable body of the profession would act.

Proof and privilege

(7)(a)   ‘Privilege’ when considering IUN, the court will take into account that fact that lawyers will have their hands tied when defending themselves against accusations if their clients do not waive the client’s privilege in the response to A’s allegation of IUN. Therefore, the Court must take into account that disadvantage and give the lawyer the benefit of any doubt. If the client is dissatisfied with the advice given, having lost the case then, when the WCO application is made, the client may waive privilege and the allegedly bad advice given will be disclosed.

(b) If the client does not waive privilege, the Applicant's task in seeking to prove IUN in relation to the Respondent's handling of the action is likely to be far more difficult. WCO applications are not professional negligence actions and are not intended to be. The solicitors' file is not examined. It is not possible for A to prove on detailed analysis of the file that the Claimant's lawyers advised or represented him/her negligently.

(c) Thus, WCOs have often been characterised as applying to obvious errors: failing to turn up to a hearing; losing the papers; failing to know of the leading case which was against the client's pleaded case; missing Court deadlines; causing the case to be stuck out etc.

(d) If privilege is not waived then the Court generally assumes that the lawyer acted on instructions and the advice given was not improperly, unreasonably or negligently so given. In any event it is not unreasonable or negligent to pursue a hopeless claim or hopeless defence for a client who wishes to do so.

The ‘hopeless case’ principle

(8) The principle applied in WCO applications is that a lawyer is not to be held to have acted IUN simply because he acts for a party who pursues a case or a defence which is plainly doomed to fail. The identified historical reasons for this principle were threefold: [1] it is the judge not the lawyer who decides whether the defence or claim is valid; [2] parties need legal representation so their cases can be fully pleaded, advised upon and properly run before the Courts by someone who understand the law and the procedure; [3] it is the choice and the liability of the party, not the lawyer, whether the claim or defence continues.

Causation of wasted costs

(9) A must identify the costs which A has incurred and prove on balance that R’s IUN caused those costs such that they were ‘wasted’ and so should never have been incurred.

Is it just?

(10) After all the other thresholds are satisfied the Court should stand back at both stages and determine in all the circumstances whether it is just to make a WCO against the lawyer. This is a matter upon which the Court is permitted a wide-ranging judicial discretion, so long as all relevant matters are taken into account and all irrelevant matters are excluded.

David Burrows

25 September 2024