“Personal liability of legal representative for costs – wasted costs orders 46.8 (1) This rule applies where the Court is considering whether to make an order undersection 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. (3) When the Court makes a wasted costs order, it will – (a) specify the amount to be disallowed or paid; or (b) direct a costs judge or a district judge to decide the amount of costs to be disallowed or paid. (4) The Court may direct that notice must be given to the legal representative’s client, in such manner as the Court may direct – (a) of any proceedings under this rule; or (b) of any order made under it against his legal representative.” (a) specify the amount to be disallowed or paid; or (b) direct a costs judge or a district judge to decide the amount of costs to be disallowed or paid. (a) of any proceedings under this rule; or (b) of any order made under it against his legal representative.”
"The underlying principle is that the Court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which he is engaged professionally . . . The jurisdiction is not merely punitive but compensatory. The order is for payment of costs thrown away or lost because of the conduct complained of. It is frequently, as in this case, exercised in order to compensate the opposite party in the action."
‘It is easier, pleasanter and more advantageous professionally for barristers to advise, represent or defend those who are decent and reasonable and likely to succeed in their action or defence than those who are unpleasant, unreasonable, disreputable, and have an apparently hopeless case. Yet it would be tragic if our legal system came to provide no reputable defenders, representatives or advisers for the latter.’
“Our legal system, developed over many centuries, rests on the principle that the interests of justice are on the whole best served if parties in dispute, each represented by solicitors and counsel, take cases incapable of compromise to Court for decision by an independent and neutral judge, before whom their relationship is essentially antagonistic: each is determined to win, and prepares and presents his case so as to defeat his opponent and achieve a favourable result. By the clash of competing evidence and argument, it is believed, the judge is best enabled to decide what happened, to formulate the relevant principles of law and to apply those principles to the facts of the case before him as he has found them. Experience has shown that certain safeguards are needed if this system is to function fairly and effectively in the interests of parties to litigation and of the public at large. None of these safeguards is entirely straightforward, and only some of them need to be mentioned here. (1) Parties must be free to unburden themselves to their legal advisers without fearing that what they say may provide ammunition for their opponent. To this end a cloak of confidence is thrown over communications between client and lawyer, usually removable only with the consent of the client. (2) The party who substantially loses the case is ordinarily obliged to pay the legal costs necessarily incurred by the winner. Thus hopeless claims and defences are discouraged, a willingness to compromise is induced and the winner keeps most of the fruits of victory.”
“"Improper, unreasonable or negligent" … "Improper" means what it has been understood to mean in this context for at least half a century. The adjective covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalty. It covers any significant breach of a substantial duty imposed by a relevant code of professional conduct. But it is not in our judgment limited to that. Conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion can be fairly stigmatised as such whether or not it violates the letter of a professional code. "Unreasonable" also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, 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 and not improper motive. But conduct cannot be described as 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 optimistic and as reflecting on a practitioner's judgment, but it is not unreasonable. The term "negligent" was the most controversial of the three. It was argued that the Act of 1990, in this context as in others, used "negligent" as a term of art involving the well known ingredients of duty, breach, causation and damage. Therefore, it was said, conduct cannot be regarded as negligent unless it involves an actionable breach of the legal representative's duty to his own client, to whom alone a duty is owed. We reject this approach. (1) As already noted, the predecessor of the present Ord. 62, r. 11 made reference to "reasonable competence." That expression "does not invoke technical concepts of the law of negligence. It seems to us inconceivable that by changing the language Parliament intended to make it harder, rather than easier, for courts to make orders. (2) Since the Applicant's right to a wasted costs order against a legal representative depends on showing that the latter is in breach of his duty to the Court it makes no sense to superimpose a requirement under this head (but not in the case of impropriety or unreasonableness) that he is also in breach of his duty to his client.”
“Pursuing a hopeless case A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail. … As is well known, barristers in independent practice are not permitted to pick and choose their clients. Paragraph 209 of their Code of Conduct provides: "A barrister in independent practice must comply with the 'Cab-rank rule' and accordingly except only as otherwise provided in paragraphs 501 502 and 503 he must in any field in which he professes to practise in relation to work appropriate to his experience and seniority and irrespective of whether his client is paying privately or is legally aided or otherwise publicly funded: (a) accept any brief to appear before a Court in which he professes to practise; (b) accept any instructions; (c) act for any person on whose behalf he is briefed or instructed; and do so irrespective of (i) the party on whose behalf he is briefed or instructed (ii) the nature of the case and (iii) any belief or opinion which he may have formed as to the character reputation cause conduct guilt or innocence of that person." As is also well known, solicitors are not subject to an equivalent cab-rank rule, but many solicitors would and do respect the public policy underlying it by affording representation to the unpopular and the unmeritorious. Legal representatives will, of course, whether barristers or solicitors, advise clients of the perceived weakness of their case and of the risk of failure. But clients are free to reject advice and insist that cases be litigated. It is rarely if ever safe for a Court to assume that a hopeless case is being litigated on the advice of the lawyers involved. They are there to present the case; it is (as Samuel Johnson unforgettably pointed out) for the judge and not the lawyers to judge it. It is, however, one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are an abuse of the process of the Court. Whether instructed or not, a legal representative is not entitled to use litigious procedures for purposes for which they were not intended, as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest, nor is he entitled to evade rules intended to safeguard the interests of justice, as by knowingly failing to make full disclosure on ex parte application or knowingly conniving at incomplete disclosure of documents. It is not entirely easy to distinguish by definition between the hopeless case and the case which amounts to an abuse of the process, but in practice it is not hard to say which is which and if there is doubt the legal representative is entitled to the benefit of it.” "A barrister in independent practice must comply with the 'Cab-rank rule' and accordingly except only as otherwise provided in paragraphs 501 502 and 503 he must in any field in which he professes to practise in relation to work appropriate to his experience and seniority and irrespective of whether his client is paying privately or is legally aided or otherwise publicly funded: (a) accept any brief to appear before a Court in which he professes to practise; (b) accept any instructions; (c) act for any person on whose behalf he is briefed or instructed; and do so irrespective of (i) the party on whose behalf he is briefed or instructed (ii) the nature of the case and (iii) any belief or opinion which he may have formed as to the character reputation cause conduct guilt or innocence of that person." At p236 he ruled on the effects of privilege in WCO applications: “Privilege Where an Applicant seeks a wasted costs order against the lawyers on the other side, legal professional privilege may be relevant both as between the Applicant and his lawyers and as between the Respondent lawyers and their client. In either case it is the client's privilege, which he alone can waive. The first of these situations can cause little difficulty. If the Applicant's privileged communications are germane to an issue in the application, to show what he would or would not have done had the other side not acted in the manner complained of, he can waive his privilege; if he declines to do so adverse inferences can be drawn. The Respondent lawyers are in a different position. The privilege is not theirs to waive. In the usual case where a waiver would not benefit their client they will be slow to advise the client to waive his privilege, and they may well feel bound to advise that the client should take independent advice before doing so. The client may be unwilling to do that, and may be unwilling to waive if he does. So the Respondent lawyers may find themselves at a grave disadvantage in defending their conduct of proceedings, unable to reveal what advice and warnings they gave, what instructions they received. In some cases this potential source of injustice may be mitigated by reference to the taxing master, where different rules apply, but only in a small minority of cases can this procedure be appropriate. Judges who are invited to make or contemplate making a wasted costs order must make full allowance for the inability of Respondent lawyers to tell the whole story. Where there is room for doubt, the Respondent lawyers are entitled to the benefit of it. It is again 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.”
“Causation … Demonstration of a causal link is essential. Where the conduct is proved but no waste of costs is shown to have resulted, the case may be one to be referred to the appropriate disciplinary body or the legal aid authorities, but it is not one for exercise of the wasted costs jurisdiction.”
“Procedure The procedure to be followed in determining applications for wasted costs must be laid down by courts so as to meet the requirements of the individual case before them. The overriding requirements are that any procedure must be fair and that it must be as simple and summary as fairness permits. Fairness requires that any Respondent lawyer should be very clearly told what he is said to have done wrong and what is claimed. But the requirement of simplicity and summariness means that elaborate pleadings should in general be avoided. No formal process of discovery will be appropriate. We cannot imagine circumstances in which the Applicant should be permitted to interrogate the Respondent lawyer, or vice versa. Hearings should be measured in hours, and not in days or weeks. Judges must not reject a weapon which Parliament has intended to be used for the protection of those injured by the unjustifiable conduct of the other side's lawyers, but they must be astute to control what threatens to become a new and costly form of satellite litigation.”
“As a general rule allegations of breach of duty relating to the conduct of the case by a barrister or solicitor with a view to the making of a costs order should be confined strictly to questions which are apt for summary disposal by the Court. Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples.”
“The essential point is that it is not errors of judgment that attract the exercise of the jurisdiction, but errors of a duty owed to the Court.”
“22 … in order to succeed in an application for wasted costs against a legal representative, an Applicant must show that he has incurred wasted costs "as a result of any improper unreasonable or negligent act or omission" on the part of the legal representative, that it is unreasonable that he should pay those costs, and that the Court should order the legal representative to meet those costs. Procedurally speaking paragraph 53.6 indicates that there will normally be two hearings before a wasted costs order is made. At the first hearing, the Court must, on the basis of the evidence and arguments put before it, decide whether it is "likely" that the Court will make a wasted costs order in favour of an Applicant against a legal representative, and additionally whether proceeding to the second stage is justified. If it is not satisfied as to both requirements, then the application should be dismissed; if it is so satisfied, then the application proceeds to the second stage, namely an examination as to whether a wasted costs order should be made in favour of an Applicant against the legal representative, and, if so, in what amount.”
“54. However, I consider that that is not the appropriate approach to take in wasted costs applications, and that the Court should ask itself whether, on the balance of probabilities, the Applicant would have incurred the costs which he claims from the legal representatives if they had not acted or advised as they did.”
“ … I do not for my part consider this passage to be inaccurate or misleading, and counsel did not criticise it. Read literally and applied with extreme care, it ought to offer appropriate protection to a practitioner against whom a wasted costs order is sought in these circumstances. But with the benefit of experience over the intervening years it seems clear that the passage should be strengthened by emphasising two matters in particular. First, in a situation in which the practitioner is of necessity precluded (in the absence of a waiver by the client) from giving his account of the instructions he received and the material before him at the time of settling the impugned document, the Court must be very slow to conclude that a practitioner could have had no sufficient material. Speculation is one thing, the drawing of inferences sufficiently strong to support orders potentially very damaging to the practitioner concerned is another. The point was well put by Mr George Laurence QC sitting as a deputy High Court judge in Drums and Packaging Ltd v Freeman (unreported)6 August 1999 when he said, at para 43: "As it happens, privilege having been waived, the whole story has been told. I cannot help wondering whether I would have arrived at the same conclusion had privilege not been waived. It would not have been particularly easy, in that event, to make the necessary full allowance for the firm's inability to tell the whole story. On the facts known to D3 at the time it launched this application, D3 might very well have concluded that the firm would not be able to avoid a wasted costs order, even on the 'every allowance' basis recommended by Sir Thomas Bingham MR." Only rarely will the Court be able to make "full allowance" for the inability of the practitioner to tell the whole story or to conclude that there is no room for doubt in a situation in which, of necessity, the Court is deprived of access to the full facts on which, in the ordinary way, any sound judicial decision must be based. The second qualification is no less important. The Court should not make an order against a practitioner precluded by legal professional privilege from advancing his full answer to the complaint made against him without satisfying itself that it is in all the circumstances fair to do so. This reflects the old rule, applicable in civil and criminal proceedings alike, that a party should not be condemned without an adequate opportunity to be heard. Even if the Court were able properly to be sure that the practitioner could have no answer to the substantive complaint, it could not fairly make an order unless satisfied that nothing could be said to influence the exercise of its discretion. Only exceptionally could these exacting conditions be satisfied. Where a wasted costs order is sought against a practitioner precluded by legal professional privilege from giving his full answer to the application, the Court should not make an order unless, proceeding with extreme care, it is (a) satisfied that there is nothing the practitioner could say, if unconstrained, to resist the order and (b) that it is in all the circumstances fair to make the order.”
“ …The question is whether, at that stage, the barristers had material of any kind before them which justified the making of the allegations. This is something which the Court does not know and cannot be told. Hunch and suspicion are not enough. Like Wilson J, and for the reasons given in his persuasive judgment, I remain in doubt, and the barristers must have the benefit of that doubt. In a case of this complexity, I would moreover think it unfair and contrary to the appearance of justice to condemn them unheard. …”
“Pursuing a hopeless case A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail. … As is also well-known solicitors are not subject to an equivalent cab-rank rule, but many solicitors would and do respect the public policy underlying it by affording representation to the unpopular and the unmeritorious. Legal representatives will, of course, whether barristers or solicitors advise clients of the perceived weakness of their case and the risk of failure. Clients are free to reject the advice and insist that cases be litigated. It is rarely if ever safe for a Court to assume a hopeless case has been litigated on the advice of the lawyers who are involved. They are there to present the case; it is (as Samuel Johnson unforgettably pointed out) for the judge and not the lawyers to judge it. It is, however, one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are an abuse of the process of the Court. Whether instructed or not, a legal representative is not entitled to use litigious procedures for purposes for which they are not intended, as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest, nor is he entitled to evade rules intended to safeguard the interests of justice, as by knowingly failing to make full disclosure on ex parte application or knowingly conniving at incomplete disclosure of documents. It is not entirely easy to distinguish by definition between the hopeless case and the case which amounts to an abuse of the process, but in practice it is not hard to say which is which and if there is doubt the legal representative is entitled to the benefit of it.”
“ …The question he should have asked was whether or not no reasonably competent legal advisor would have evaluated the chance of success in such an argument as being such as to justify continuing with the proceedings. 31. In determining that question, it seems to me that the judge could only come to a conclusion adverse to the appellants if he had the opportunity of seeing the privileged material. It is suggested on behalf of the Respondent that it is an inevitable inference from the fact that counsel’s advice of19 February 2002 resulted in the extension of legal aid for the purpose of the trial that counsel, and also inferentially the appellants, were asserting that there were good prospects of success, and that that was a judgment no reasonably competent legal advisor could have made. I do not consider that that is a permissible inference to draw on the facts of this case. Medcalf v Mardell makes it plain that the Court should only come to such a conclusion if it is satisfied that there was nothing that the legal advisors could have said by reference to the privileged material which could counter that inference. That cannot be the position here. All that the Court could properly infer is that Legal Aid was extended as a result of the advice. We cannot know in what terms the advice was couched, because we do not know what motivated the Legal Services Commission to extend the certificate on the facts of this case.”
“We did not have much argument addressed to us with regard to a solicitor’s duty on disclosure.CPR 31.6 requires a party to disclose only the documents on which he relies and documents which adversely affect his own case. Adverse affect is normally assessed by reference to the pleadings but there may be no reason to restrict the concept that narrowly. A party is required byCPR 31.7 to make a reasonable search for those documents adversely affecting his case. It seemed to be common ground between the parties that the duties of solicitors was correctly stated in Ch.14 of the third edition of Matthews and Malek on Disclosure. ‘‘14.02 A solicitor’s duty is to investigate the position carefully and to ensure so far as is possible that full and proper disclosure of all relevant documents is made. [Myers v Elman [1940] A.C. 282.] This duty owed to the Court is ‘‘one on which the administration of justice very greatly [depends], and there [is] no question on which solicitors, in the exercise of their duty to assist the Court, ought to search their consciences more’’ [citing Practice Note [1944] W.N. 49 and theSolicitors’ Practice Rules 1990 R.1 (F)]. 14.03 The solicitor’s duty extends to explaining to his client the existence and precise scope of the disclosure obligation and the need to preserve documents. . . . 14.07 The solicitor has an overall responsibility of careful investigation and supervision in the disclosure process and he cannot simply leave this task to his client [Myers v Elman [1940] A.C. 282, at 322, 325, 338.] The best way for the solicitor to fulfil his own duty and to ensure that his client’s duty is fulfilled too is to take possession of all the original documents as early as possible. The client should not be allowed to decide relevance — or even potential relevance — for himself, so either the client must send all the files to the solicitor or the solicitor must visit the client to review the files or take the relevant documents into his possession. It is then for the solicitor to decide which documents are relevant and disclosable. . . . Again where the solicitor knows that his client has concealed relevant documents with a view to their not being disclosed, the solicitor must not act so as to suggest that full disclosure has been or will be given, and this may lead to his ceasing to act. . . . 14.09 Once the documents have been produced by the client, the solicitor should carefully go through the documents disclosed to make sure, so far as is possible, that no documents subject to the disclosure obligation are omitted from the list. . . . A solicitor must not necessarily be satisfied by the statement of his client that he has no documents or no more documents than he chooses to disclose. If he has reasonable grounds for suspecting that there are others, then he must investigate the matter further, but he need not go beyond taking reasonable steps to ascertain the truth. He is not the ultimate judge and if he has decided on reasonable grounds to believe his client, criticism cannot be directed at him. . . 14.10 If a solicitor is or becomes aware that the list of documents or any verifying affidavit or statement of truth is inadequate and omits relevant documents or is wrong or misleading, he is under a duty to put the matter right at the earliest opportunity and should not wait till a further order of the Court. His duty is to notify his client that he must inform the other side of the omitted documents, and if this course is not assented to he must cease to act for the client. If the client is not prepared give full disclosure, then the solicitor’s duty to the Court is to withdraw from the case.” ‘‘14.02 A solicitor’s duty is to investigate the position carefully and to ensure so far as is possible that full and proper disclosure of all relevant documents is made. [Myers v Elman [1940] A.C. 282.] This duty owed to the Court is ‘‘one on which the administration of justice very greatly [depends], and there [is] no question on which solicitors, in the exercise of their duty to assist the Court, ought to search their consciences more’’ [citing Practice Note [1944] W.N. 49 and theSolicitors’ Practice Rules 1990 R.1 (F)]. 14.03 The solicitor’s duty extends to explaining to his client the existence and precise scope of the disclosure obligation and the need to preserve documents. . . . 14.07 The solicitor has an overall responsibility of careful investigation and supervision in the disclosure process and he cannot simply leave this task to his client [Myers v Elman [1940] A.C. 282, at 322, 325, 338.] The best way for the solicitor to fulfil his own duty and to ensure that his client’s duty is fulfilled too is to take possession of all the original documents as early as possible. The client should not be allowed to decide relevance — or even potential relevance — for himself, so either the client must send all the files to the solicitor or the solicitor must visit the client to review the files or take the relevant documents into his possession. It is then for the solicitor to decide which documents are relevant and disclosable. . . . Again where the solicitor knows that his client has concealed relevant documents with a view to their not being disclosed, the solicitor must not act so as to suggest that full disclosure has been or will be given, and this may lead to his ceasing to act. . . . 14.09 Once the documents have been produced by the client, the solicitor should carefully go through the documents disclosed to make sure, so far as is possible, that no documents subject to the disclosure obligation are omitted from the list. . . . A solicitor must not necessarily be satisfied by the statement of his client that he has no documents or no more documents than he chooses to disclose. If he has reasonable grounds for suspecting that there are others, then he must investigate the matter further, but he need not go beyond taking reasonable steps to ascertain the truth. He is not the ultimate judge and if he has decided on reasonable grounds to believe his client, criticism cannot be directed at him. . . 14.10 If a solicitor is or becomes aware that the list of documents or any verifying affidavit or statement of truth is inadequate and omits relevant documents or is wrong or misleading, he is under a duty to put the matter right at the earliest opportunity and should not wait till a further order of the Court. His duty is to notify his client that he must inform the other side of the omitted documents, and if this course is not assented to he must cease to act for the client. If the client is not prepared give full disclosure, then the solicitor’s duty to the Court is to withdraw from the case.”
“General Principles 69. The leading decisions in this area of the law are Ridehalgh v Horsefield[1994] Ch 205 and Medcalf v Mardell[2002] UKHL 27 . In Lady Archer v Williams[2003] EWHC 3048 , para [45] Jackson J helpfully summarised a number of matters which emerged from Ridehalgh, in which he had acted as counsel. They are as follows: i. The word "improper" connotes conduct which would be regarded as improper according to the consensus of professional opinion. ii. "Unreasonable" connotes conduct which is vexatious or designed to harass the other side, rather than advance the resolution of the case. iii. "Negligent" does not connote conduct in which all the ingredients of the tort of negligence are present. On the contrary, the word "negligent" 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. iv. The mere fact that lawyers have pursued a hopeless case or hopeless defence does not mean that their conduct was improper, unreasonable or negligent. It is often the duty of lawyers to put forward a hopeless claim or hopeless defence, if the client has rejected wise advice and insists upon that course of action. v. Lawyers responding to a claim for wasted costs are put in a difficult position, if their client declines to waive privilege. Accordingly the judge must make full allowance for the inability of those lawyers to tell the whole story. vi. It is essential for the claiming party to demonstrate a causal link between the improper, unreasonable or negligent conduct complained of and the wasted costs which are claimed. vii. Wasted costs claims should not be permitted to develop into a costly form of satellite litigation. A wasted costs claim should not be allowed to go forward, if it cannot properly be dealt with by means of a simple and summary procedure and at a cost which is proportionate to the sum claimed. 70. There was no significant dispute as to these principles, except (vii). The import of Ms Addy's submissions was that whilst this might be the general approach, there may be cases which should be approached differently. She submitted that it was not necessary for every wasted costs claim to be capable of being addressed in a simple and summary procedure. Some cases, such as the present, call out for a remedy, even if there is a degree of complexity to the application, particularly bearing in mind the very significant amount of costs which her clients had incurred and in respect of which they have no real prospect of recovery from the Kings. 71. I do not accept this argument. There is a long line of consistent authority, summarised in more detail in Section F below, which fully accords with what Jackson J said as to simple and summary procedure and proportionate cost. Cases in the Commercial Court are no exception, even though the amounts spent by parties are often very high. Recently, Bryan J applied this line of authority in dismissing a wasted costs application at Stage 1 where a payment on account of costs in the sum of£1.44 million had been ordered: Lakatamia Shipping Co and Others v Baker McKenzie LLP[2021] EWHC 2072 (Comm) . 72. In Medcalf, the House of Lords strengthened the guidance, previously given in Ridehalgh, in respect of cases where the client has refused to waive privilege…”