It is common knowledge that a winning party can (ordinarily) recover their costs from the losing party of litigation. It is less well known that wasted costs can also be sought against lawyers who have acted for that losing party.
We have seen an increased number of claims in respect of wasted costs awarded against lawyers in recent years. This trend in utilising this strategy to recover costs is also reflected in the number of reported cases for wasted costs this year alone.
The Framework
The Court's jurisdiction to make an order for costs to be paid by a party's legal representative is found in S.51(6-7) of the Senior Courts Act 1981 ("the Act"). The making of a wasted costs order is a serious matter (confirmed by S.51(7A) of the Act which requires the Court to inform the SRA if a wasted costs order is made). Such an order can be made against the firm as well as the individual lawyer who acted and, as a result, it is a potential stain on the professional character of the lawyer.
This statutory framework is enshrined in the CPR at r46.8 and its Practice Direction.
Case Updates
There are a number of (recent) cases in which the Court has considered the application of the wasted costs jurisdiction but the leading case remains the Court of Appeal's judgment in Ridehalgh v Horsefield [1994]CH 205.
Ridehalgh provides procedural guidance as well as addressing the substantive test to be met on the application and that wasted costs applications should be dealt with summarily.
Recent cases are Shadi Al Tarboush v. Yusuf Cassam [2024] EWHC 639 (KB), where the Court considered the Claimant's application for wasted costs against her former solicitors when her claim was struck out following a string of procedural errors. The Court dismissed the application, determining that while the conduct was reprehensible it did not cause the claimant to incur wasted costs, rather exposed the claimant to liability to pay the Defendant's costs. The proper recourse was for the claimant to bring a professional negligence claim.
However, in Rainer Hughes Solicitors v (1) Liverpool Victoria (2) Emine Karadag (3) Dzheylyan Velkova Ilieva [2024] EWHC 585 (KB) the Court upheld a wasted costs order in respect of the claimant's solicitor's failure to ensure witness statements and pleadings were translated for a client with limited English proficiency.
There has also been SRA guidance which is relevant to wasted costs. For example on 4 May 2024 the SRA issued a warning notice to lawyers who undertake claims management activities in respect of claims relating to financial products. One of the Regulator's concerns was that some clients complained that they had not authorised their claims. This lack of authority has presented in a number of recent wasted costs cases.
Summary
Wasted costs applications are notoriously difficult to bring and those doing so should ensure the proper framework is followed and that they are not threatened as a tactic only. They should only really be made in relatively extreme cases and ought to be dealt with summarily.
Those faced with defending a wasted costs application should heed the difficulties in properly defending an application because of their duty to protect their client's privilege and seek their client's permission to waive such privilege in the circumstances.
While we predict that wasted costs applications will continue to rise, the Court is generally cautious on making orders that are unwarranted and the Court will ensure that only clear and substantial evidence of improper conduct will lead to a wasted costs order.
