On 2 March 2023, the Commercial Court handed down a judgment which will be a helpful precedent for those defending wasted costs applications which are effectively a vehicle for an application akin to complex professional negligence claims: King & Ors v Stiefel & Ors.
The judgment considers the circumstances in which the court should make a wasted costs order in favour of one party to litigation against the legal representatives of the other and affirms that wasted costs orders should be limited to straightforward cases which can be dealt with summarily. The judgment also confirms that the findings of a judge in an earlier decision from which the wasted costs application arises do not bind a legal representative defending the wasted costs application and are not immune from criticism, on the basis of collateral attack.
WBD's Simon Beckwith (who instructed John Taylor KC and Nathalie Koh of Fountain Court Chambers) acted for the successful barrister.
A recap on wasted costs
The court has a statutory power to order a legal representative to pay costs incurred by their own client or by another party as a result of any "improper, unreasonable or negligent act or omission".
The Court of Appeal decision in Ridehalgh v Horsefield is the leading authority and sets out the principle that wasted costs applications are for determining straightforward allegations in a summary process. In practical terms, this means issues that can be dealt with in hearings "measured in hours, and not in days or weeks".
Applications for wasted costs generally proceed in two stages (as prescribed by PD46.8). Stage one usually involves a hearing during which the court will consider first whether there is enough evidence before it which would likely lead to a wasted costs order being made and second, whether the proceedings are justified, despite the costs which the process would involve. It is essential, for example, for the claiming party to demonstrate a causal link between the improper, unreasonable or negligent conduct complained of and the wasted costs with which the claim is concerned.
It is only if an application passes stage one, that the court will then go on to consider the application in detail at stage two. This approach is to control costly satellite litigation.
The applicants sought wasted costs against their opponents' barrister and solicitor following a successful reverse summary judgment/strike out application in the underlying claim. The judgment in question ran to 93 pages and the judge, Cockerill J, certified that the underlying claim was "totally without merit".
The applicants were ordered to file and serve written statements of grounds, identifying what each respondent was said to have done or failed to do which justified the applications for wasted costs and the costs sought. These were subsequently filed running to 25 pages (with 44 footnotes) and 19 pages respectively. The grounds amounted, in effect, to complex allegations of professional negligence against the barrister and the solicitors with a large number of allegations and alternative cases and issues as to causation.
Can a wasted costs application proceed in a complex case?
As noted above, the general principle is that the wasted costs application process is a summary process for straightforward cases. The issue before the Commercial Court was whether there is ever scope for allowing certain wasted costs applications which "call out for a remedy" to proceed, even if there is a degree of complexity to the application.
Having reviewed the authorities, the judge concluded that the wasted costs applications against the barrister and solicitor were "wholly unsuitable for determination in the summary process described in the authorities." There were eight key reasons for this finding:
- The case advanced in the (extensive) statements of grounds would require extensive findings of fact at a trial rather than by a summary process
- Significant issues of causation made the matter inherently unsuitable for summary determination
- The factual and legal background to the applications was extremely complex thus making any stage two hearing lengthy
- A very large amount of underlying documentary material would need to be considered if the application were to proceed to a stage two hearing
- The stage two hearing could potentially last more than a week
- The applicants' incurred and prospective costs were very significant and the application could not be justified on the basis of the costs that had been and would be incurred
- The claimants had not waived privilege so that the court would be considering the substantial case advanced without sight of the relevant evidence meaning it could not come to "any safe or satisfactory conclusions, on important aspects of the case advanced by the applicants"
- The judge was "far from persuaded that this is a straightforward case for wasted costs at all" whether looking at conduct or causation and viewed overall concluded that it was in any event unlikely that a wasted costs order would be made.
Is it an abuse of process to challenge an earlier decision in this context?
The court also considered the extent to which any findings of Cockerill J were binding on the barrister and the solicitors in the context of the wasted costs application. The applicants argued that it would be an abuse of process for the barrister or solicitors to challenge any aspect of Cockerill J's judgment, on the basis that to do so would be a collateral attack on that judgment.
The judge found that there is no authority which suggests that it is an abuse of process for a barrister or solicitor, in the context of a wasted costs application, to challenge aspects of the decision from which the application arises.
It is not necessary for the barrister or solicitor to show that the underlying decision was wrong. It is sufficient to show that there was no improper, unreasonable or negligent conduct by them. Even so, the judge accepted that there was "considerable force" in the barrister's argument that notwithstanding Cockerill J's material findings, there was not only a coherent pleaded case of loss but it had not been an abuse of process for a costs conspiracy case to be pleaded in the statements of case in the underlying proceedings. It follows that any findings in Cockerill J's decision are only binding as between the parties to the proceedings and the judgment was "not immune from criticism, on the basis of collateral attack, in the context of the wasted costs application".
This case is a helpful precedent for those defending wasted costs applications that are, in effect, a vehicle for complex professional negligence actions. Wasted costs applications should be limited to straightforward matters such as, for example, a failure to attend court or conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by poor presentation or repetition. Such applications must proceed on a summary basis and applications which are akin to complex professional negligence cases will present real difficulties for the court in reaching the necessary conclusions at stage one.
This will be particularly true in cases where the barrister or solicitors' client has declined to waive privilege (as in the present case). The court will be slow to make an order against a lawyer restricted in defending the application by legal professional privilege.
The judgment also confirms that the finding of a judge in a decision in the proceedings from which the applications arise was not immune from criticism, on the basis of collateral attack, in the context of a wasted costs application.
This article is part of Womble Bond Dickinson’s Growing Global series. For more insights, click here to visit our Growing Global hub.