CLAIMANT FAILS IN AN APPLICATION FOR WASTED COSTS AGAINST HIS OWN LAWYERS: HOWEVER THERE IS AN IMPORTANT LESSON HERE
In Costa v Dissociadid Ltd & Anor [2023] EWHC 49 (IPEC) the claimant was unsuccessful in an application for wasted costs against his own lawyers. However the judgment tells us more than that. It is an object lesson in the dangers of raising technical issues at the last minute, and without notice. Here a technical point was taken at a hearing as to jurisdiction. The point was taken at very short notice and no authority had been produced. When submissions were filed the point was not taken at all. This was unreasonable conduct, however it did not lead to a wasted costs order.
“… I was (and remain) of the view that the conduct on behalf of Mr Costa in relation to the argument on jurisdiction was unreasonable within the meaning of CPR 63.26(2). This was because (i) it was raised too late for the defendants’ legal team to deal with the point and was without even supporting authority, thus necessitating the spending of costs and time in further preparation and submissions, and (ii) on fuller consideration it was not pursued on behalf of Mr Costa, implying that proper research into the law in good time would have led to the argument never being advanced.”
THE CASE
The claimant had been unsuccessful in an action relating to the ownership of a copyright work. After the judgment was handed down the defendants informed the claimant that they would be seeking a mandatory injunction compelling the defendant to withdraw takedown requests.
At the hearing where the injunction was being considered one of the arguments raised by counsel, on the claimant’s behalf, was that the court had no jurisdiction to grant an injunction, alternatively that it should exercise its discretion no to do so.
The claimant had not prepared a skeleton in support of the argument that the court had no jurisdiction, nor were any supporting authorities lodged. The defendants were only informed of the hearing shortly before the hearing.
The hearing was adjourned, with the claimant being ordered to pay the costs. The written argument subsequently filed by claimant’s counsel did not maintain the argument that the court had no discretion, it concentrated upon the argument that the court should not exercise its discretion.
The judge granted the injunction. He made no order to the costs of the action upon to the hearing on the 18th October 2022 which had been adjourned. The reasons were.
“(1) The Claimant’s objection to the relief sought by the Defendants and now granted under paragraph 1 of this Order was not raised until the evening before the hearing on 18 October 2022 dealing with the matters consequential upon the judgment of 22 July 2022. It was asserted at that hearing that the Court did not have jurisdiction to grant such relief but no authority was proffered in support of the objection. Because the objection went to the jurisdiction of the Court, the parties were given the opportunity to provide written submissions on the point and did so. The Claimant has now withdrawn the submission that the Court has no jurisdiction and asserts instead that the Court should not exercise its discretion to grant such relief. For the reasons given by the Defendants in their submissions I am satisfied that such relief constitutes an appropriate exercise of the Court’s discretion.
…
(5) No significant costs would have been incurred by the Defendants after the hearing on 18 October 2022 had the Claimant not raised its late objection to the Court’s jurisdiction. Save to an insignificant degree, those costs were caused by and related to the Claimant’s argument regarding the Court’s lack of jurisdiction. The Defendants are entitled to their costs since that date in accordance with CPR 63.26(2).”
THE CLAIMANT’S APPLICATION FOR WASTED COSTS AGAINST HIS OWN BARRISTER
The claimant sought an order for wasted costs against his own counsel and solicitors.
THE LEGAL PRINCIPLES CONSIDERED
The judge considered the legal principles.
The law
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- Section 51(1) of the Senior Courts Act 1981 states the basic rule on costs in any proceedings in the High Court, namely that they are in the discretion of the court subject to the provisions of any enactment or rule of the court. Subsections 51(6) and (7) provide:
(6) In any proceedings mentioned in subsection (1), the court may disallow or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with rules of court.
(7) In subsection (6) ‘wasted costs’ means any costs incurred by a party –
(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or
(b) which, in the light of any such act or omission occurring after they were incurred, the court considers it unreasonable to expect that party to pay.
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- In Fletamentos Maritimos SA v Effjohn International BV [2003] Lloyd’s Rep. P.N. 26, Simon Brown LJ referred to s.51(1), (6) and (7) of the Senior Courts Act 1981 and continued:
“The principles upon which these provisions are to be applied have been established by a trilogy of recent cases in this court: Ridehalgh v Horsefield [1994] Ch 205, Tolstoy-Miloslavsky v Aldington [1996] 1 WLR 736, and Wall v Lefever (unreported, transcript dated 14th July 1997). Amongst them are these (and here I quote only the essence of principles elaborated in these authorities with very great care):
1. Improper conduct is that which would be so regarded ‘according to the consensus of professional (including judicial) opinion.’ Unreasonable conduct ‘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 … The acid test is whether the conduct permits of a reasonable explanation.’ Negligent conduct is to be understood ‘in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession.’ (all from Ridehalgh).
2. ‘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 their 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 … 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 o lend his assistance to proceedings which are an abuse of the process of the court … 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.’ (all from Ridehalgh).
3. ‘A solicitor does not abdicate his professional responsibility when he seeks the advice of counsel.’ (Ridehalgh) The role which leading and junior counsel played in Tolstoy in putting their signatures to the statement of claim ‘did not exonerate the solicitors from their obligation to exercise their own independent judgment to consider whether the claim could properly be pursued; they were not entitled to follow counsel blindly.’
4. ‘The jurisdiction to make a wasted costs order must be exercised with care and only in a clear case.’ (Tolstoy). ‘It should not be used to create subordinate or satellite litigation, which is as expensive and as complicated as the original litigation. It must be used as a remedy in cases where the need for a wasted costs order is reasonably obvious. It is a summary remedy which is to be used in circumstances where there is a clear picture which indicates that a professional adviser has been negligent etc.’ (Wall v Lefever).”
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- In Harrison v Harrison [2009] EWHC 428 (QB) Mackay J pointed to further principles that may be drawn from the Court of Appeal’s judgment in Ridehalgh:
“[21] … First, the jurisdiction must not be used as a back door means of recovering costs not otherwise recoverable (226B to D). Second, it should not become a satellite branch of litigation or be disproportionate (225G). Third, it is essential that the applicant demonstrate a causal link between the conduct and the incurring of the costs (237E). Fourth, it is generally best left until after trial (238C). Fifth, the procedure to be adopted should be fair and as simple and summary as fairness permits (238G). Sixth, the burden is on the applicant to satisfy the court that the order should be made (239B). And seventh (which is really part of 6), even if the court is satisfied, there is a discretion to decline to make the order.
[22] What is plain from the tenor of that judgment is this: this is not a punitive nor a regulatory jurisdiction but a compensatory one and as a prerequisite persons seeking its exercise must show that the conduct has caused them loss.”
THE DECISION IN THIS CASE: NO ORDER FOR WASTED COSTS
The judge did not accept that this was an appropriate case for wasted costs.
“… we could run an argument to the effect that the court has no jurisdiction to award a mandatory injunction as a remedy for the unlawful means tort, or alternatively that, if such jurisdiction exists, it should not be exercised as damages are an adequate remedy. Although the authors of Clerk & Lindsell say that an injunction can in principle be awarded in respect of any tortious wrong, this is not correct. The true position is more complex: injunctive relief is generally only awarded in respect of tortious wrongdoing which causes injury to a proprietary interest (or to something which is akin to a proprietary interest). There is an excellent review of the authorities and principles in John Murphy, ‘Rethinking Injunctions in Tort Law’ (2007) 27 Oxford Journal of Legal Studies 509.”
“… taking the point may make us seem stubborn and unreasonable, which may affect (explicitly or otherwise) the decision on costs.”
At the hearing on 18 November 2022, having heard the parties’ submissions, I indicated that I was minded to order Mr Costa to withdraw his takedown requests and associated complaints to YouTube. At that point counsel indicated that Mr Costa would seek permission to appeal such an order. In his argument on wasted costs, Mr Costa places much emphasis on that indication from counsel, which Mr Costa describes as unreasonable. He says that he had given no instructions to appeal and it was the opposite of what had asked counsel to do, i.e. to tread carefully.
In his witness statement counsel points out that Mr Costa saw his email advice of 16 October 2022, including his was warning that running the argument on jurisdiction might have an adverse effect regarding the court’s decision on costs, and that he was given instructions by Mr Costa to run the argument.
Discussion
With regard to the application on behalf of Mr Costa to seek permission to appeal at the hearing of 18 November 2022, there is an issue of causation. Mr Costa misunderstands the role of that application in my decision to require further written submissions. I did not approve of the lateness of Mr Costa’s argument on the jurisdiction of the court but came reluctantly to the conclusion that it was just possible that I was about to make an order that was unlawful for lack of jurisdiction. The indication from counsel that he would seek permission to appeal may have focussed my mind in the moment, but it was not the cause of my decision. The cause was the possibility of making an order beyond the jurisdiction of the court without having first having heard argument and without having been referred to authority which would allow me to decide whether such an order would be lawful.
As is apparent from the reasons given in my order of 25 November 2022, I was (and remain) of the view that the conduct on behalf of Mr Costa in relation to the argument on jurisdiction was unreasonable within the meaning of CPR 63.26(2). This was because (i) it was raised too late for the defendants’ legal team to deal with the point and was without even supporting authority, thus necessitating the spending of costs and time in further preparation and submissions, and (ii) on fuller consideration it was not pursued on behalf of Mr Costa, implying that proper research into the law in good time would have led to the argument never being advanced.
The argument on jurisdiction ought never to have been raised. I think that the strongest point to be made in Mr Costa’s favour is that counsel and his solicitors would, or at least should, have been more aware than Mr Costa would have been of the risk in advancing the argument in the way it was done.
I do not believe that the conduct of counsel or Mr Costa’s solicitors could properly be described as “improper” as that term is perceived according to the consensus of professional opinion. This seems to me to carry the connotation of improper conduct in dealings with the court or with the opposing party. Nor do I believe that it was “unreasonable” within the meaning of s.51(7)(a) of the Senior Courts Act 1981. The explanation of that term given by the Court of Appeal – “conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case … [permitting of no] reasonable explanation” – does not seem to me to apply to the present facts. The term “unreasonable” apparently has a meaning more narrow and specific in the context of s.51(7)(a) than in CPR 63.26(2). Unreasonable conduct in the latter sense more loosely includes behaviour generating costs which are unnecessary when measured against one of tenets of this court, namely minimising of the cost of litigation.
That leaves negligent conduct, to be understood “in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession.” Here I have some sympathy with Mr Costa. It might well be said that Mr Costa would expect his legal team to research and prepare an argument properly, particularly an argument on jurisdiction, before floating it with the court. On the other hand, Mr Costa gave his authority for the argument on jurisdiction to be raised. He was also expressly warned that there was a risk of an adverse consequence in costs. Mr Costa was apparently willing to live with that. In my judgment the conduct of counsel and Mr Costa’s former solicitors was not negligent (or improper or unreasonable) in the sense explained by the Court of Appeal. Mr Costa’s application, in both original and amended form, is dismissed.