In this article, Melody Hadfield analyses the test for wasted costs orders and provides an overview of the key procedural rules governing wasted costs applications.
Introduction
The wasted costs jurisdiction is a powerful tool which enables the court to award costs against lawyers who have acted improperly, unreasonably or negligently. Some of the definitions in this context are, at first glance, circular. For example, “improper conduct” is said to be conduct which would be “regarded as improper” according to the consensus of professional opinion. This article (i) unpacks these definitions, (ii) provides an overview of the test for wasted costs orders, (iii) sets out the procedure for making and defending a wasted costs order, and (iv) considers recent cases in which such orders have been sought against legal representatives.
The power to make a wasted costs order
The court’s power to make a wasted costs order is derived from section 51(6) of the Senior Courts Act 1981 (“the Act”) which provides that the court “may disallow,…or 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.”
Section 51(7) of the Act provides that the term “wasted costs” encompasses:
- costs incurred by a party as a result of any improper, unreasonable or negligent act or omission by a legal (or other) representative.
- costs incurred by a party, which, in light of an improper, unreasonable or negligent act or omission by a legal (or other) representative occurring after the costs were incurred, the court considers it unreasonable to expect that party to pay.
Criteria for making a wasted costs order
Before making a wasted costs order against a legal representative, the court must be satisfied that:
- The representative has engaged in conduct which is improper, unreasonable or negligent.
- That conduct has caused the applicant to incur wasted costs.
- It is proportionate and just to order the representative to pay the wasted costs (Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), [9]).
Improper conduct
In Ridehalgh v Horsefield [1994] Ch. 205, p232 (the leading case in this field), the term “improper” was said to encompass (i) conduct which (although it may not be a breach of a professional code) would be regarded as improper according to the consensus of professional opinion, as well as (ii) any significant breach of a substantial duty imposed by a code of professional conduct.
Courts have found a wide range of conduct, of varying degrees of seriousness, to be improper. For example:
- In Serra v Harvey [2024] EWHC 2250 (KB), the claimant’s solicitors failed to prepare the trial bundle on time. This ultimately led to the adjournment of the trial. The court found that the solicitors’ conduct was improper because it would be regarded as improper according to the consensus of professionals, including judicial opinion. The court observed: “It would not be difficult to imagine conduct of a legal representative that fell even further short of the high standards expected. However, that does not mean that the failures in this case were not sufficiently serious to be properly described as improper” ([21]).
- In Paul Singh v Eui Ltd [2023] EWHC 2134 (SCCO), the court found that a firm of solicitors had engaged in improper conduct of a very serious nature. The firm had produced a solicitor/client bill in support of costs claimed by their client (the claimant) in detailed assessment proceedings. The court found that the bill had been “manufactured by [the firm] long after its purported dates of production and service, in an attempt to mislead the third defendant and [the] court into concluding that [the firm’s] costs …were not claimed in breach of indemnity principle, when in fact they were” ([211]).
In ordinary parlance, the term “improper” often connotes dishonesty or wilful misconduct. However, in the wasted costs context, conduct may be deemed improper notwithstanding the absence of bad faith or deliberate misconduct on the part of the representative.
In Rushbrooke UK Ltd v 4 Designs Concept Ltd [2022] EWHC 1687 (Ch), solicitors had made an application to the court on behalf of a company, to prevent a winding-up petition being presented against it. Prior to the issue of the application, relations between the two directors of the company had broken down. Instructions to the solicitors (to make the application) were given by just one of the directors (S).
In pre-action correspondence, the respondent had expressly raised the issue of S’s authority to instruct solicitors on behalf of the applicant company ([22]). Nonetheless, the solicitors failed to satisfy themselves of S’s authority to authorise proceedings.
The application was subsequently dismissed owing to the solicitors’ lack of authority. The respondent sought a wasted costs order against the solicitors.
The court found that there was prima facie evidence that the solicitors had committed a significant breach of a substantial duty imposed by a relevant code of professional conduct (i.e., the duty, under the Code of Conduct for Solicitors, to act for clients on instructions from the client or from someone properly authorised to provide instructions on their behalf) ([13] – [14]).
The solicitors maintained that they had honestly believed that they had been properly authorised to act for the company ([16]). The court accepted that the solicitors had acted in good faith ([22]). However, the court stressed that “Good faith on its own is not a defence” to an allegation of improper conduct ([19]).
Similar remarks were made by the Court of Appeal in Gempride Ltd v Bamrah [2018] EWCA Civ 1367. Gempride was decided under CPR rule 44.11(1)(b) (a costs provision, which states that if a party or a party’s legal representative has engaged in conduct which is unreasonable or improper, the court may disallow part of the costs being assessed or order the party at fault or that party’s legal representative to pay costs which they have caused the other party to incur). However, the Court of Appeal observed that the terms “unreasonable” and “improper” under CPR 44 have the same meanings as they have in the wasted costs provisions ([17]).
The court went on to make clear that conduct may be improper, notwithstanding that it is not dishonest ([26]).
However, something more than a mere “mistake or error of judgment or negligence” is needed to establish improper (or unreasonable) conduct ([26]).
What then is required?
Dishonest behaviour or wilful misconduct will clearly constitute improper conduct for the purposes of a wasted costs order.
Additionally, it seems that the term “improper conduct” seeks to capture serious mistakes, as distinct from errors in matters of judgment or less serious mistakes, committed recklessly or with a state of mind approaching recklessness; in Gempride, the court found that although the claimant (a solicitor) had not acted dishonestly in certifying an inaccurate bill of costs, her conduct had been at least reckless. Accordingly, the court found that she had acted improperly ([127]).
In contrast, in R. (on the application of C) v Salford City Council [2010] EWHC 2325 (Admin), where a solicitor had mistakenly relied on the wrong legislation in pre-action correspondence and in a claim form for judicial review, the court held that it was not even arguable that she had acted improperly ([18]). The judgment does not make entirely clear why the court considered it unarguable that the solicitor had acted improperly; however, the court had regard to the fact that when responding to the pre-action letters sent by the claimant, the defendant’s representatives had not pointed out the error [24] – [25]). Thus, it may be that the court considered that whilst the error showed a “poor knowledge of the law” ([19]) on the part of the solicitor, her conduct did not cross the threshold of recklessness.
Unreasonable conduct
“Unreasonable conduct” has been defined as conduct which permits of no reasonable explanation. It includes (but is not limited to) conduct which is “vexatious” or “designed to harass the other side rather than advance the resolution of the case” (Ridehalgh v Horsefield [1994] Ch. 205, p232).
Negligent conduct
Negligence, in this context, is a failure to act with the competence reasonably to be expected of ordinary members of the profession. Essentially, an applicant for a wasted costs order alleging that the respondent acted negligently must show that the respondent made such an error that “no reasonably well-informed and competent member of that profession could have made” (Ridehalgh v Horsefield [1994] Ch. 205, p233).
In Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), the court found that solicitors had, prima facie, acted negligently and unreasonably in failing to properly cross-check their clients’ witness statement against information previously provided to them by their client (the claimant). Had they carried out appropriate checks, they would have realised that an assertion in the witness statement (to the effect that the claimant had never been abroad) was inaccurate ([40] and [44]).
Judgment calls falling solely within the discretion of the representative
Courts have held that certain decisions are matters of judgment for legal representatives and are not aptly subject to regulation by the court. A wasted costs application made in relation to such matters is likely to fail.
For example, in Paul Singh v Eui Ltd [2023] EWHC 2134 (SCCO), the court held that the claimant’s solicitors’ settlement strategy and decisions on whether offers ought to be made or accepted were matters of judgment for the solicitors. The court observed that it was “difficult to envisage circumstances in which it would be appropriate to bring such matters within the scope of CPR 46.8 or CPR 44.11″([174]) and that “legal advisers owe their duties in that respect to their client, not to the court, and that it is not the role of the court under CPR 46.8 or CPR 44.11 to enquire into such matters” ([176]).
In Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), applicants for a wasted costs order maintained that the respondent solicitors ought to have terminated their retainer with their client (the claimant) once the defendant had accused her of fundamental dishonesty. The terms of the retainer allowed the respondent solicitors to terminate on grounds of fundamental dishonesty on the claimant’s part but did not require the termination of the retainer in such circumstances. The court held that whilst the solicitors had a duty not to mislead the court: “the decision whether to terminate or not to do so was a human and commercial one for the firm, not a matter of professional regulation or a matter for the Court or the Applicant to comment upon or criticise” ([45]).
Causation requirement
Wasted costs orders are primarily intended to be compensatory (Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), [14]).
As such, an applicant for a wasted costs order must establish a causal link between the improper, unreasonable or negligent conduct complained of and the wasted costs sought to be recovered (Ridehalgh v Horsefield [1994] Ch. 205, p237).
In Al Tarboush v Cassam [2024] EWHC 639 (KB), the claimant brought a wasted costs application against his own solicitors (H). He argued that his claim had been struck out because of H’s repeated non-compliance with court orders. The claimant had been ordered to pay the defendant’s costs of the claim on the indemnity basis. However, the court found that the claimant had incurred a liability to pay the defendant’s costs of the action, rather than incurring wasted costs himself ([38]). Accordingly, the claimant failed to establish that H’s conduct had caused him to incur unnecessary costs ([40]).
His proper recourse in all these circumstances was not the wasted costs jurisdiction but, rather, a professional negligence claim against H ([41]).
Proportionality
If it is established that a legal representative has been guilty of improper, unreasonable or negligent conduct and that the conduct has led to wasted costs being incurred, the court will go on to consider whether a wasted costs order is a just response in all the circumstances. “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” (Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), [22]).
Making an application
An applicant for a wasted costs order may apply by filing a CPR Part 23 application notice or by making an application orally in the course of any hearing (PD 46, paragraph 5.4).
Further, the applicant must (a) identify what the respondent is alleged to have done or failed to do and (b) set out the costs which the applicant says the respondent ought to pay (PD 46, paragraph 5.9; Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), [10]).
Whilst wasted costs orders can be made at any stage in the proceedings, such applications are best left until after the end of the trial (PD 46, paragraph 5.2).
In general, a wasted costs application is suitable only in regard to matters which can be summarily determined by the court (Harley v MacDonald [2001] 2 AC 678, [50]).
In Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), the court considered that a wasted costs application, resting on a very wide range of allegations of negligence and unreasonable behaviour, was unlikely to be suitable for summary determination ([37]).
Procedure for determining application
Stage 1
Wasted costs applications are generally determined in two stages. At the first hearing (known as a the “show cause” stage), the court must be satisfied that it has before it evidence or other material which, if unanswered by the respondent, would be likely to lead to a wasted costs order being made. In other words, there must be material which, if left unanswered, would, on the balance of probabilities, lead the court to conclude that a wasted costs order was warranted (Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB),[22]).
At the first stage, even if the above test is satisfied, the court retains a discretion as to whether or not it will proceed to the second stage. When considering whether to exercise its discretion to proceed to the second stage, one factor the court will consider is whether wasted costs proceedings are justified notwithstanding the likely costs of those proceedings (Ridehalgh v Horsefield [1994] Ch. 205, p239; PD 46, paragraph 5.7).
It has been held that wasted costs claims should not be allowed to proceed if the nature of the allegations is such that the application cannot be dealt with in a “simple and summary procedure and at a cost which is proportionate to the sum claimed” (Lady Archer v Williams [2003] EWHC 3048, [45]).
In Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), Ritchie J observed that the applicant had, until a late stage, failed to be specific about which costs were claimed as wasted and their amount. The court took this into account in determining whether to exercise its discretion to proceed to the second stage ([41]).
Stage 2
If an application for a wasted costs order successfully passes the first stage, notice will be given to the respondent to put in evidence and answer the allegations (Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), [11]).
At the second stage, the court will give the legal representative a reasonable opportunity to make written submissions or, if the legal representative prefers, to attend a hearing (CPR rule 46.8 (2); PD 46, paragraph 5.7(b)).
Where the court is satisfied that the legal representative has already had a reasonable opportunity to make representations, the two stages may be “rolled up” together in a single hearing (PD 46, paragraph 5.8; Williams-Henry v Associated British Ports [2024] EWHC 2415 (KB), [22]).
Cross-examination
Where the respondent to a wasted costs application makes a witness statement, the court has the power to direct that he or she may be cross-examined (see CPR rule 32.7). However, it will rarely be appropriate for the court to do so (Hunt v Annolight Ltd and others [2021] EWCA Civ 1663, [30]). Further, any cross-examination should be limited to the subject matter of the respondent’s witness statement, and the court should be astute to prevent the applicant from using cross-examination as a fishing expedition, to create a case against the respondent rather than supporting a pre-existing one (Hunt v Annolight Ltd and others [2021] EWCA Civ 1663, [31]).
Legal professional privilege
Lawyers against whom a wasted costs application is made may find themselves in some difficulty in explaining or defending their conduct of the proceedings. This is because legal professional privilege (unless waived by the client) will prevent them from revealing the advice and warnings they provided their client and the instructions they received.
In Ridehalgh v Horsefield [1994] Ch. 205, p237, the court held that judges must make full allowance for this when considering whether a wasted costs order should be made. Further: “Where there is room for doubt, the respondent lawyers are entitled to the benefit of it. It is…only when, with all allowances made, a lawyer’s conduct of proceedings is quite plainly unjustifiable that it can be appropriate to make a wasted costs order.”
In some cases, the court will be able to readily conclude that quite irrespective of any (privileged) advice given by the lawyer to their client or any (privileged) instructions given by the client to the lawyer, the lawyer’s conduct was negligent, improper or unreasonable.
For example, in Robinson v Air Compressors & Tool Ltd [2025] EWHC 1469 (KB), in April 2021, the claimant issued proceedings (in her capacity as administratrix of her late father’s estate) against three corporate entities in regard to alleged asbestos exposure to her father on a manufacturing site in Basingstoke during his lifetime.
The second and third defendants filed defences in September 2021, setting out the names of all of the deceased’s employers according to HMRC records, together with other matters which made clear that these defendants could not have been the deceased’s employer. The second defendant put the claimant to proof on the issue of whether it had ever employed the claimant. The third defendant expressly denied that it had ever employed the claimant.
However, it was only in May 2024 (following an application, in July 2023, by the second and third defendants to strike out the claim on the basis that the claimant had sued the wrong entities), that the claimant agreed that the claims against the second and third defendants should be dismissed and a new party should be added to the proceedings.
Subsequently, the second and third defendants made a wasted costs application against the claimant’s solicitors.
The court found that it was evident, on the material pleaded in the defences, that the claims against the second and third defendants had no prospects of success rather than merely weak prospects of success ([22]).
In his response to the wasted costs application, the claimant’s solicitor emphasised that his client had not waived privilege in respect of the advice she was given ([23]).
However, the court made a wasted costs order against the claimant’s solicitors nonetheless, finding that:
- The decision to continue the claim against the second and third defendants was, at least from the date on which their respective defences were served, without justification ([51]).
- Irrespective of what advice the claimant’s solicitors may have given her or what instructions they may have received, no reasonable practitioner would have refrained from addressing the issue of the correct entities for years only to spontaneously discontinue those claims just before the hearing of the defendants’ strike out application ([59]).
- In particular, even if the firm had been acting on “inappropriately abusive instructions to still continue, then there was a conflict of interest such that they should not have remained on the record” ([59]).
- The claimant’s solicitors had therefore acted negligently in maintaining the claim against the second and third defendants ([59]).
- The maintenance of the claim against the third defendant, who had, in its defence, expressly denied that that it had employed the deceased, was improper ([60]).
As the Robinson case shows, issues of legal professional privilege will not invariably provide legal representatives a defence to a wasted costs application.
