In Rainer Hughes Solicitors v Liverpool Victoria Insurance Company Ltd & Ors (Rev1) [2024] EWHC 585 (KB), Mr Justice Martin Spencer considered the Court’s power to order legal representatives to pay costs which have been ‘wasted’ by their conduct.
That power derives from section 51(6) of the Senior Courts Act 1981 and the procedures governing applications for wasted costs are at CPR46.8 and CPR46PD.5.
The familiar general rule (found in CPR44.2(2)) is that the unsuccessful party will be ordered to pay the costs of the successful party but that the Court may make a different order. Exceptional circumstances must clearly arise for a non-party to pay costs that have arisen in litigation, and particularly for a party’s legal representative to be required to do so.
The commentary provided by the editors of the White Book is lengthy and at time confusing. In line with the leading case Ridehalgh v Horsefield [1994] EWCA Civ 40, it recalls that:
A personal representative was not to be held to have acted improperly and unreasonably or negligently simply because they acted for a party who pursued a claim or defence which was plainly doomed to fail.
Although on the one hand the White Book notes…
A wasted costs application was a punitive remedy to enable a litigant to recover costs not otherwise recoverable, but caused by a solicitor’s improper conduct. (46.8.4, see D&D v SMH [2008] EWHC 559 (Fam))
It also concludes…
The wasted cost regime is neither a punitive nor a regulatory jurisdiction but rather a compensatory one. A person seeking orders for wasted costs has to show that the conduct complained of has caused them loss. Even where ‘improper, unreasonable and negligent’ conduct has been shown, the court retains the discretion as to whether any order should be made (46.8.16, see Harrison v Harrison [2009] EWHC 428 (QB)).
In Rainer Hughes, the Claimant’s former solicitors had been ordered to pay a contribution towards the first Defendant’s costs but had been granted permission to appeal that Order.
Rainer Hughes Solicitors had acted for Mrs Karadag, the Claimant in a personal injury case, who had become the Defendant to a Part 20 claim by the other driver’s insurer LV alleging that the claim had been fraudulent. At length, the claim was struck out for non-payment of the trial fee, and Mrs Karadag was not granted relief from sanction. Mrs Karadag had signed her statements of case and given a witness statement in English, however at Court it became apparent that she could not understand it or give evidence without the assistance of a translator despite the fact that the Court had been reassured that this was not the case at a PTR.
In addition to awarding damages against the Claimant, His Honour Judge Monty KC ordered Rainer Hughes to show cause why they should not be jointly and severally liable for some or all of the costs ordered against the Claimant (in line with the procedure at CPR46PD.5.7). Considering the evidence, he ordered Rainer Hughes to contribute to the costs to the extent that they had been generated by their not dealing properly with the effect of Mrs Karadag’s first language not being English.
In their appeal against this Order, Martin Spencer J noted that Judge Monty had carefully considered the rules relating to wasted costs and those relating to witnesses whose first language was not English and the relevant rules under CPR32 and CPR22 and in the Kings Bench and Chancery Guides. He had been wholly unsatisfied with the evidence advanced on Rainer Hughes behalf, the explanations it contained and the notion that they had been reasonably satisfied that Mrs Karadag in fact had a good grasp of English.
The appeal was advanced first on the procedural basis that the Court had failed to consider the proportionality of making any such award. However, Martin Spencer J stressed:
…there is merit, whenever an application for a wasted costs order is sought, for the Judge to consider proportionality and whether, on the information available, he or she should exercise their discretion to decline allowing the application to proceed. However…this is very much in the Judge’s discretion…
…The ambit of the discretion is wide and will not be lightly interfered with by an Appeal Court. This is just such a case: on the basis of the facts as they appeared to Judge Monty in December 2022 when he refused relief from sanction, it appeared to be a clear case of a solicitor having failed to comply with the rules and practice direction and have the witness statement and pleadings drafted in the Claimant’s “own language” which was Turkish (para.35).
The appeal was also on the substantive basis that the exercise had itself been wasteful and disproportionate, given a relatively small award of £3000 had been made. However, the Judge concluded that this merely showed the appellant successfully to have argued it down to that level.
Importantly, the Judge made this overarching observation:
…there is, as it seems to me, a public interest in costs which have been wasted as a result of a solicitor’s negligence or misconduct in the proceedings being visited on the solicitor in the form of a wasted costs order. Firstly, this encourages lawyers to comply with the rules of the court. Secondly, it immediately relieves the costs burden from the solicitor’s client who would otherwise potentially need to take negligence proceedings against the solicitors with all the additional costs that would incur.
Finally, it was noted that there is a difference between oral applications for wasted costs orders made immediately at the end of trial and those made later and on notice using the CPR23/N244 procedure. The latter required particularisation of what the legal representative is alleged to have done or failed to do and the former should be approached in the same spirit.
Graeme Kirk
March 2024