A legal adviser whose conduct is improper, unreasonable or negligent can be ordered to pay the costs incurred by their own client or another party as a result of such conduct.
The term “legal adviser” has been broadly interpreted and could include counsel, solicitors or another representative. Counsel’s responsibility may include drafting and settling proceedings and is not limited to advocacy (Brown v Bennett  2 All ER 273).
A wasted costs order can even be made against expert witnesses who cause significant expense as a result of failing in their duty to the court (Phillips and Other v Symes and Others 2  EWHC 2330 (Ch),  4 All ER 519).
Making a wasted costs order
The power of the court to make a wasted costs order is found in s 51(6) of the Senior Courts Act 1981 and now s 4 of the Courts and Legal Services Act 1990. There is also a significant body of case law. The power extends to:
- Disallowing one party’s costs and ordering that a party's legal adviser indemnify the other party.
- Ordering one party’s legal adviser to pay another party’s legal costs.
In the case of Ridehalgh v Horsefield and Other  Ch 205,  3 All ER 848 the meaning of “improper”, “unreasonable” or “negligent” conduct was established as follows:
- “Improper” involves a significant breach of duty by reference to the code of professional conduct which, in turn, might justify suspension, striking off, fines or suspension from the legal profession.
- “Unreasonable” means vexatious; designed to harass the other side rather than resolving the case.
- “Negligent” denotes incompetent behaviour but not in a technical sense.
A three stage test was established in Re A Barrister (wasted costs order No 1 of 1991)  QB 293,  3 All ER 429 namely:
- Did the legal adviser act improperly, unreasonably or negligently.
- If so did such conduct cause the applicant to incur unnecessary costs.
- Is it in all the circumstances just to order the legal adviser to compensate the applicant in whole or in part.
Pursuing a claim which is doomed to fail will not necessarily mean that the three stage test is met, a point which was made in the Ridehalgh case. Orders for wasted costs on these grounds are in fact relatively rare.
Family proceedings & wasted costs
While much of the case authority relates to civil and criminal cases, the issue of wasted costs orders has regularly been raised in family proceedings.
In C v C (Wasted Costs)  2 FCR 1012, there was found to have been a “massive waste of costs” in the wife’s application for financial relief incurred as a result of the unreasonableness of the wife’s solicitor and counsel. Both failed to reconsider the wife’s position when new information was disclosed by the husband about the capital assets. Orders were made to compensate the wife and husband for the wasted costs that they incurred.
In Re A (A Minor)  Fam Law 339, solicitors were criticised for their failure to recognise that counsel was incompetent and incapable of carrying out the task in hand. The Court of Appeal held the solicitors personally liable for costs incurred in a number of abortive appeal hearings which were adjourned as a result of the solicitors and counsel not being ready to proceed.
Mr Justice Munby provided a stark warning to family practitioners in Re X and Y (bundles) (failure to comply with Practice Direction)  EWHC 2058
(Fam),  1 FCR 468 about the potential costs consequences of failing to comply with the Practice Directions. A further consequence of such a failure can also be public identification of defaulting practitioners in judgments delivered in open court.
Harrison v Harris  EWHC 428 (QB),  All ER (D) 61 (Feb) involved an application for a wasted costs order against counsel for her conduct of an ex-parte application for a freezing order in financial remedy proceedings. In fact, the order was subsequently set aside and the wife paid the husband’s costs. The court commented that wasted costs orders were a last resort and a strong prima facie case had to be shown against the legal representative with very clear causation adduced.
In the case of Ezair v Ezair  EWCA Civ 893 the Court of Appeal held that it was inappropriate to inflate a lump sum award in financial remedy proceedings in order to compensate for wasted costs. This is a case in which the wife had argued that her legal costs had been inflated by her husband’s conduct as a litigant in person. That, of course, is a familiar scenario as to some extent legal representatives for the wife would have been responsible for ensuring that the litigant in person was aware of his rights and possibly responsible for preparing trial bundles on his behalf.
However, the appeal court held that the approach of the court below had been incorrect. This may have been one of those unusual ancillary relief (financial remedy) cases which justified an order for costs against the litigant in person. That was the right way to proceed and to assess those costs appropriately.
Hot off the press is the case of Fisher Meredith v JH and PH  EWHC 408 (Fam),  All ER (D) 157 (Mar). On the first day of a five day hearing the wife’s solicitors (Fisher Meredith) applied to adjourn to allow third parties to be joined to the proceedings where the husband alleged that the beneficial owners of shares in a company held in his name were, in fact, family members.
There had been a number of interlocutory applications at which third parties could have been joined but were not.
The district judge allowed the adjournment but ordered the wife to pay wasted costs and her solicitors to show cause why they should not be personally
liable for these.
At the wasted costs hearing the wife contended that the husband was, in fact, the legal and beneficial owner of the shares. However, the district judge ordered the wife’s solicitors to pay the costs, stating that insufficient thought had been given as to the enforceability of any orders against third parties.
On appeal, the case came before Mostyn J who reminded himself of the guidance set out in the Court of Appeal case of Ridehalgh. Here, Fisher Meredith did not face allegations of improper or unreasonable conduct. The allegation was limited to negligence and the assertion that a competent solicitor would not have thought that the case could have been resolved without joining third parties to establish the beneficial ownership of shares.
Mostyn J distinguished between a case where a claimant states that property or shares in the name of the third party belong to the husband or where (as here) it was alleged that shares in which the husband clearly had legal title, belonged to a third party.
In the former case, Mostyn J made it clear that the obligation to join the third party would be on the claimant. In the latter case, the duty to clarify the position for the court, by joining a third party, was not clear cut at all. Indeed, there might be good reasons why the husband would join the third parties in order to reinforce his position. For those reasons the wasted costs order was set aside.
Order of last resort
Despite the professional embarrassment of defending a wasted costs hearing (especially as there is the likelihood that such cases will be published) all the recent cases seem to indicate that it is an order of last resort. It is likely to involve another full and extensive hearing where independent legal advice will be necessary for the legal advisers defending the application.
It is likely to be inappropriate for the case to be heard until conclusion of the trial in order that the conduct can be fully assessed and usually by the same trial judge.
Legal advisers may breathe a sigh of relief in the sense that recent cases have tended to be protective of them but all should be aware that such applications raise difficult questions when a balance is between the duty to a client and to the court. The inevitable consequence of defending a wasted costs application is a dissatisfied client.
This article was first published in New Law Journal, “Waste Not...”, NLJ 14 September 2012, p.1142