APPLICATION FOR WASTED COSTS AGAINST CLAIMANT’S SOLICITORS DISMISSED: NO DUTY TO “DUMP” A CLIENT WHEN FUNDAMENTAL DISHONESTY IS ALLEGED

In  Williams-Henry v Associated British Ports & Anor (Re Wasted Costs Order) [2024] EWHC 2415 (KB)  Mr Justice Ritchie dismissed an application for wasted costs against the claimant’s solicitors.  This dismissal took place at “stage one” – with the allegations not going forward.  The judgment is an object lesson in the careful steps that have to be taken if a party wants to make allegations of wasted costs.  They have to be short, specific and the losses said to be incurred by the lawyer’s conduct fully particularised.  In the current case the defendant did not meet any of these criteria.  There are wider lessons to be considered as well – the lawyer’s duty to consider their client’s social media activity and the duties when drafting a witness statement in particular.  However the key point is that this was eventually an unsuccessful, and presumably extremely expensive, exercise by the defendant.

“… exposing Claimants’ solicitors and barristers to expensive WCO proceedings for failing to terminate retainers after FD has been pleaded (and to an extent substantiated by video surveillance or disclosure or other evidence) may potentially fetter access to justice for Claimants who, whilst not wholly honest, have a good core claim and have at least some prospect of defeating the assertion of FD”

“The fact that the Respondent was brave enough not to “dump” the Claimant speaks of the firm’s humanity and bravery, not of their negligence or unreasonableness.”

WEBINAR ON SOCIAL MEDIA AND THE PERSONAL INJURY LAWYER: 1ST OCTOBER 2024

This points made in the judgment about the lawyer’s duty to look at social media accounts are important. They will be considered in the webinar on the 1st October. The webinar looks at the ways in  social media is used in the courts and in personal injury cases in particular. It then looks at the ways in which PI lawyers can use social media as a resource to keep up to date in both law and procedure.  Booking details are available here.

• The use of social media in the courts and how it is being deployed as evidence
• Examining the case law relating to how social media impacts upon both liability, damages and credibility
• How LinkedIn destroyed a witness (and could destroy yours)
• Your client’s social media profile
• Twitter could leave your client bitter
• Facebook in the courts
• Social media and credibility
• What can you tell your client about social media?
• A social media strategy for a personal injury lawyer

THE APPLICATION FOR WASTED COSTS AGAINST THE CLAIMANT’S SOLICITORS

At the trial of a personal injury action the claimant had been found to be fundamentally dishonest.  The defendant subsequently applied for wasted costs against the claimant’s solicitors. The judge was considering the “first stage” of the wasted costs process.  The judgment at trial was considered in detail here. 

THE JUDGMENT

The judgment contains a detailed exposition of the law and principles relating to wasted costs.  The defendant alleged that the claimant’s solicitors had been negligent and failed in their duties in relation to the preparation of the case. Allegations of impropriety were made initially but then dropped during the hearing.

SUMMARY OF THE LAW IN RELATION TO WASTED COSTS ORDERS

Summary of the law in relation to WCOs.

1. 1. Having summarised the statute, the CP rules relating to WCOs and the case law on how those are interpreted, I will now summarise the approach I consider that I am required to take into 10 factors.

Summary process

(1) The WCO jurisdiction is a summary jurisdiction, generally but not always dealt with at the end of a case. It may arise of the Court’s own motion or by application. It is not intended or allowed to become satellite litigation prolonging or overshadowing the pre-action conduct, trial or hearings to which it relates. It must be used and managed in a proportionate manner in relation to time and costs. It must be fair and simple.

Two stages – accusation then defence

(2) The jurisdiction usually has two stages: the initial accusatory stage in which the Applicant seeks to raise a prima facie case (show cause), which if unanswered would on the balance of probabilities lead to a WCO; then a secondary stage at which, after the Respondent has been given a fair opportunity to explain, defend and make submissions, the Court determines whether the relevant substantive and procedural thresholds have been satisfied by the Applicant such that the Court can go on to consider whether it is just to impose the WCO on the Respondent. The stages may, in appropriate cases, be rolled up together.

Sufficient particularity

(3) At stage 1 and stage 2 the Applicant is required to set out the allegations of IUN with sufficient particularity and to identify the alleged wasted costs which were allegedly caused by the IUN and the sums involved, at least in general terms.

Improper conduct

(4) Improper conduct: covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice for the Respondent or other serious professional penalty. It covers any significant breach of a substantial duty imposed by a relevant code of professional conduct and conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion whether or not it violates the letter of a professional code.

Unreasonable conduct

(5) “Unreasonable conduct” covers conduct which is vexatious or 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 or gross naivety. It probably does make a difference if it is the product of malice or improper motivation. Conduct is not 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 reflecting poorly on a practitioner’s judgment, but it is not unreasonable.

Negligent conduct

(6) “Negligent conduct” may involve duty, breach, causation and damage, so an actionable breach of the legal representative’s duty to his own client, but goes wider than that. 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 so negligent conduct is not limited to professional negligence in relation to the lawyer’s client. Negligent conduct 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, or put the other way around: acting in a way in which no reasonable body of the profession would act.

Proof and privilege

(7) “Privilege” when considering IUN, the Court will take into account that fact that lawyers will have their hands tied behind their backs when defending themselves against accusations if their clients do not waive privilege in the response to the Applicant’s allegation of IUN. Therefore, the Court must take into account that disadvantage and give the lawyer the benefit of any doubt. If the client is dissatisfied with the advice given, having lost the case then, when the WCO application is made, the client may waive privilege and the allegedly bad advice given will be disclosed. If the client does not waive privilege, the Applicant’s task in seeking to prove IUN in relation to the Respondent’s handling of the action is likely to be far more difficult. WCO applications are not professional negligence actions and are not intended to be. The solicitors’ file is not examined. It is not possible for the Applicant to prove on detailed analysis of the file that the Claimant’s lawyers advised or represented him/her negligently. So, WCOs have often be characterised as applying to obvious errors: failing to turn up to a hearing; losing the papers; failing to know of the leading case which was against the client’s pleaded case; missing Court deadlines; causing the case to be stuck out or missing limitation and so on. If privilege is not waived then the Court generally assumes that the lawyer acted on instructions and the advice given was not improperly, unreasonably or negligently so given. In any event it is not unreasonable or negligent to pursue a hopeless claim or hopeless defence for a client who wishes to do so.

The hopeless case principle

(8) The principle applied in WCO applications is that a lawyer is not to be held to have acted IUN simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail. In the past, before CFAs, this was the rule how so ever the action was funded, whether privately or on legal aid. The identified historical reasons for this principle were threefold: (1) it is the judge not the lawyer who decides whether the defence or claim is valid; (2) parties need legal representation so their cases can be fully pleaded, advised upon and properly run before the Courts by someone who understand the law and the procedure; (3) it is the choice and the liability of the party, not the lawyer, whether the claim or defence continues. (However, in the application before me the Applicant asserts that the combination of CFA funding, which amounted to “maintenance” of the claim, and the hopelessness of the Claimant’s position should displace this principle and lead to a WCO. I shall rule on this below.)

Causation of wasted costs

(9) The Applicant must identify the costs which it has incurred and prove on balance that the Respondent’s IUN caused those costs such that they were “wasted” and so should never have been incurred.

Is it just?

(10) After all the other thresholds are satisfied the Court should stand back at both stages and determine in all the circumstances whether it is just to make a WCO against the lawyer. This is a matter upon which the Court is permitted a wide ranging judicial discretion, so long as all relevant matters are taken into account and all irrelevant matters are excluded.

APPLYING THOSE PRINCIPLES TO THE FACTS OF THIS CASE

1. 1. I shall now analyse the facts of the case by reference to the 10 factors identified above from the law and the authorities relating to WCOs.

Summary process

1. 1. The Applicant’s WCO application rests on a wide range of allegations of negligence and unreasonable behaviour (but not impropriety) encompassing: failure to produce proper standard disclosure; failure to read documents; failure to draft proper witness statements; failure to cross check what the Claimant told them against source documents; failure properly to advise the Claimant on the risk that she would be found FD; failure to engage in ADR properly; failure to terminate their own retainer and failure to act on instructions. Just stating that range is a firm indicator to this Court that the allegations are probably not within the summary jurisdiction covered by WCOs. Then, when descending into the detail of each allegation, they all each fall apart, save for one.

1. 1. The failure to provide proper standard disclosure assertion centred on the Claimant’s social media accounts. However, no adequate evidence was put before me that social media accounts are generally considered relevant for standard disclosure in moderately severe brain injury claims. What issue would they go to? Are solicitors to spend days trawling through hundreds of thousands of TikTok posts, texts, WhatsApp messages and Twitter feeds (aka X) to harvest them, arrange them, delete personal ones, then disclose them to insurers? Which issues would each post go to? Would Masters allow the huge costs of this in every case in costs budgets? Would insurers wish to pay such costs routinely? Until dishonesty is alleged, I do not see the relevance of these. One tell tale sign is that the Defendant did not ask for these after standard disclosure was completed. The rest of the complaints about disclosure do not stand up either. Each time the Defendant sought documents the Respondent faithfully and professionally sought and obtained them. The disclosure requests came thick and fast after the videos were served. I do not see how the L&G policy could have been in the mind of the Respondent at standard disclosure stage as relevant at that time. It become relevant when the Claimant’s case began to unravel after the videos were served. I reject the assertion that the way the Respondent handled disclosure was clearly IUN.

1. 1. The Defendant asserts that the Respondent was unreasonable or negligent in the way the firm handled the ADR. True it is that the Claimant failed to beat the offers made in August 2023 and January 2024, the latter of which was repeated in February. But there is no evidence before me that the Claimant and her mother, who was her litigation friend from January 2024, were negligently advised or that the rejections were made without instructions. No WCO is applied for against Mr Grant the Claimant’s counsel. Is the Respondent to be assumed to have ignored his advice? True it is that the Claimant’s part 36 offer of £1.85 million and her lower offer of £1.5 million were both far too high, but if that amounted to negligence or unreasonable conduct, then a large percentage of lawyers in personal injury work would be at risk of WCOs for their offers. Privilege could have been waived but has not been. The Claimant and the Respondent stand side by side. Taking into account the Respondent’s inability to disclose what actually went on I assume that they acted on instructions and give them the benefit of any doubt. I have no doubt that in principle a lawyer is not liable to suffer WCOs for running a difficult case. The principle goes further and provides that a lawyer is not liable for a WCO for running a hopeless case on instruction. I do not consider that the evidence before me comes close to proving, on the balance of probabilities, that the Respondent negligently advised the Claimant on the risks. True it is that the Claimant faced stark challenges to her evidence arising inter alia from the videos, the employment performance reviews, her PIP applications, what she told the medical experts and the L&G insurance proposal she completed, however I accept that her case on the value of her honest damages in quantum was stronger than the Defendant’s case. The Defendant argued for lower damages and lost that issue. The Claimant had a slim chance on FD but she had a real argument to run over substantial injustice. This was not a “hopeless case” as Mr Williams described it, and even if it was, in principle, that is not enough to justify a WCO. More is required.

1. 1. As for the Claimant’s October 2022 witness statement, it is not suggested that the words used were not the Claimant’s. The criticism is that the Respondent should not have let the Claimant put, what I found in my judgment to have been lies, in the statement because the firm had information in their possession which undermined what the Claimant was writing. I find this a difficult issue on which to give judgment. I take into account the guidance in Hedrich. The solicitor had a duty to check and a duty not to mislead the Court. For instance, the Respondent should have known and remembered that the Claimant had been to Benidorm in the summer of 2022. The Claimant asserted in the witness statement that she never went abroad. If the solicitor who drafted that statement knew that the sentence was a lie, that would have been a breach the solicitor’s duty to the Court. I consider that would have been both improper and unreasonable. There is no evidence that when the statement was signed and served the solicitor who drafted it in the Respondent firm was aware of or alive to the conflict between that statement and the objective facts. Against that must be set the fact that the Claimant had asserted to many experts by that point that she had a wide range of disabilities preventing her from socialising, travelling, walking far, driving and drinking. To resolve this point on the balance of probabilities, privilege would need to be waived and the file would need to be considered in detail. It has not been. I take into account the assumption that the solicitor was acting on instructions when the statement was drafted, signed and served. I note that Miss Sowden-Taylor has not denied that the firm knew the Claimant had been to Benidorm before the statement was signed by the Claimant. I find that the Applicant has proven on balance, at stage 1, that it has a prima facie case on this assertion. However, I do not see how this potential IUN could have caused any wasted costs. Instead, it gave the Applicant a large stick with which to beat the Claimant and that stick was used professionally and effectively by Mr Blakesley KC. In addition, by the time the videos were disclosed this was all in the past. The FD issue was raised. When the DWP records were disclosed the issue was further highlighted. The Applicant has failed to establish on balance what costs the witness statement IUN caused. In any event, I consider that such matters are generally better dealt with in a professional negligence claim or in a regulatory disciplinary hearing than in an WCO application.

Sufficient particularity

1. 1. At stage 1 I consider that the CPR require that the Applicant sets out the allegations of IUN with sufficient particularity and identifies the alleged wasted costs which were allegedly caused by the IUN and the sums involved, at least in general terms. The Applicant in this case has made the allegations wide ranging and has completely failed to be specific about which costs are claimed as wasted (until the hearing itself) and how much they are. That is an unsatisfactory way of making the application and I take it into account in the decision I make below on the justice of the making of a stage 1 order leading to a WCO. Those allegations which had some particularity I have dealt with above and will deal with further below.

Improper conduct

1. 1. The Applicant alleged improper conduct in the evidence and in the skeleton but abandoned this allegation at the hearing.

Unreasonable conduct

1. 1. I have dealt with the disclosure allegations above. I do not consider that the Respondent’s handling of disclosure was prima facie or arguably IUN.

1. 1. The drafting of the Claimant’s ultimately fatal October 2022 witness statement was conduct which lead in the event to an unsuccessful result for the Claimant, combined with her other lies in statements to experts and in documents. No malice is asserted. I am sure that more cautious legal representatives would have acted differently on the witness statement drafting and on whether to press on to trial and whether to accept the Defendant’s offers, but that is not the test. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as reflecting poorly on a practitioner’s judgment, but it is not unreasonable. No explanation has been given for the words in the October 2022 witness statement being left unchallenged by the Respondent. I consider that the drafting of the Claimant’s witness statement in October 2022 was poor practice and prima facie unreasonable or negligent, despite being what the Claimant wanted to say.

1. 1. Specific consideration needs to be given to one of the main submissions from the Applicant, that failing to “dump” the Claimant when it became clear that she had been dishonest, amounted to unreasonable conduct. When a personal injury case involving a moderately severe brain injury has been running for years; when liability has been admitted; when it is clear beyond argument that the Claimant suffered a very nasty injury (her skull was opened up and the top part of the bone sewn into her abdomen for weeks, to relieve the pressure in her injured brain); when the Claimant has needed rehabilitation and care and has lost earnings; how can it be said to be unreasonable or negligent to have continued to represent her to trial when she asserted she was seriously injured and she was? In addition, the Defendant was making offers to settle. The only real ground for termination was the Claimant’s asserted FD and, of course, the CFA allowed the Respondent to terminate on that ground, but it did not require termination. In my judgment the decision whether to terminate or not to do so was a human and commercial one for the firm, not a matter of professional regulation or a matter for the Court or the Applicant to comment upon or criticise. If the retainer had been terminated the Claimant would probably have recovered nothing. She could not have paid her experts fees for the trial. It is wholly speculative to suggest that another firm would have stepped in on a CFA and represented her. She would probably have had to repay her interim payment. I reject the Applicant’s submission that there is any requirement in law, in justice, in reasonableness or in professional standards that the Respondent “should” have terminated the CFA with the Claimant. What they had to do was be very careful not to mislead the Court in the face of the very clear documentary evidence that the Claimant had contradicted herself many times. Certainly, the Claimant’s counsel was very careful during the whole trial to tread a wholly professional line in representing her.

1. 1. I am unpersuaded that any of the accusations made against the Respondent (save for the witness statement dated October 2022) are proven on a prima facie basis.

1. 1. Negligent conduct I have carefully considered whether the Respondent’s conduct, as alleged, was in breach of its duty to the Court or a failure to act with the competence reasonably to be expected of ordinary members of the profession, or put the other way around: acting in a way in which no reasonable body of the profession would act.

1. 1. I do not consider that the Respondent can properly be criticised for their conduct in relation to disclosure. Quite the opposite. When asked, they worked really hard to provide all that was requested. As for the ADR, I do not consider that there is anything like sufficient evidence to raise a case that the Respondent was negligent in its approach to ADR. If the Claimant did not want to accept the offers made, then that was her decision. I do not know what advice she received from Hugh James or counsel. Nor am I entitled to guess at that. Hugh James are assumed to have acted on instructions and, without more, I am not entitled to go behind the principle that lawyers are permitted to fight difficult cases, even hopeless cases, if clients want to do so. The person carrying the liability is the client not the lawyer.

1. 1. Specific consideration needs to be given to the main submission from the Applicant, that failing to “dump” the Claimant when it became clear that she was dishonest, amounted to negligence. For the reasons set out at para. 45 above I reject that submission.

Proof and privilege

1. 1. I take into account that fact that the Respondent has its hands tied behind its back because the Claimant has not waived privilege in the response to the Applicant’s allegations of IUN. I take into account the disadvantage which the Respondent carries and give the lawyers the benefit of any doubt. If the client had been dissatisfied with the advice given, having lost the case, then when the WCO application was made the Claimant could have waived privilege and the allegedly negligent advice given would have been disclosed to me. Instead, the Claimant has not waived privilege. The Applicant accepted that the task in seeking to prove IUN in relation to the Respondent’s handling of the action is far more difficult when privilege is not waived. This WCO application is not a professional negligence action and is not permitted to be. The Defendant has tried prove that the Claimant’s lawyers advised or represented her negligently but in my judgment has wholly failed to do so. This WCO cannot be characterised as relying on obvious errors. I start from the assumption that the Respondent acted on instructions and the advice given was not improperly, unreasonably or negligently so given. In my judgment the Respondent’s conduct has not been proven prima facie “negligent” in the sense used in the WCO jurisdiction. I consider that the Applicant has failed, at stage 1, to prove on balance that the Respondent’s conduct was either unreasonable or negligent on the evidence save for the October 2022 witness statement.

The hopeless case principle

1. 1. In my judgment the Respondent is not to be held to have acted IUN simply because it acted for a party who pursued a claim which failed and was probably doomed to fail. I do not consider that the funding by way of CFA makes any difference to this principle. The identified historical reasons for this principle apply equally in this case: (1) it is the judge not the lawyer who decides whether the defence or the claim is valid; (2) the Claimant needed legal representation so her case could be fully pleaded, advised upon and properly run before the Courts by someone who understood the law (as her experienced solicitors and counsel did) and the procedure; (3) it was the choice of the Claimant whether the claim continued, not the lawyer. I reject the assertion that the combination of CFA funding, which allegedly amounted to “maintenance” of the claim and the hopelessness of the Claimant’s position on FD should displace this principle and lead to a WCO. In my judgment the opposite applies. CFA funding puts more pressure on solicitors to terminate retainers in FD claims. The fact that the Respondent was brave enough not to “dump” the Claimant speaks of the firm’s humanity and bravery, not of their negligence or unreasonableness.

Causation of wasted costs

1. 1. The Applicant has failed to identify the sum in wasted costs which it has incurred and has failed to prove, on balance that, the Respondent’s alleged IUN caused those costs such that they were “wasted” or should never have been incurred. Initially the Applicant sought all of its costs. At the hearing this was reduced to only the costs after late 2022 or late 2023. The causation case was that the Respondent should have advised the Claimant to settle because she was going to be found to have been FD. It was submitted that, if they had not been IUN, she would have taken the advice and settled or they would have withdrawn so the case would never have gone to trial. I do not consider any of the allegations of unreasonableness or negligence are prima facie proven on balance save for the October 2022 witness statement. I have tried to understand the Applicant’s case on what wasted costs that caused or what any of the accusations would have caused. I cannot speculate what would have happened if the disclosure had come out earlier because the Defendant did not ask for it so it is difficult to see how anything the Respondent did on disclosure caused any costs to be wasted. As for the witness statement, as I have indicated above, this provided the Defendant with a stick with which to beat the Claimant. The Applicant has not proven what costs have been wasted as a result of the lies which were uncorrected and were in it. In addition, those lies were so scattered elsewhere throughout the conversations which the Claimant had with the medical experts and on DWP forms that it is not as if the witness statement lies stood alone and singular. As for the failure to settle, I set out in the substantive judgment how I considered it likely that if the Claimant had not been FD the claim would have settled in late 2023 without videos and extra medical evidence, but that was the Claimant’s responsibility for her lies. I have rejected the accusation that there is prima facie evidence that the Respondent should have terminated the retainer and that there is any evidence that the Respondent failed to advise the Claimant properly. In all the circumstances I do not consider that the Applicant has discharged the burden of proof on causation.

Is it just?

1. 1. I now stand back and determine in all the circumstances whether it is just to make a Stage 1 order which would lead potentially to a WCO against the Respondent lawyer.

1. 1. Proportionality is relevant. The wasted costs sought are unspecified and the costs of seeking them are very substantial. Overall, I do not consider that the broad negligence allegations raised fit well within the summary WCO jurisdiction. I take into account: the lack of evidence to support the wide range of accusations; the abandonment of impropriety during the hearing; the privilege retained by the Claimant; the lack of particularity of allegations (save for the witness statement allegations); the lack of identification of the date range of wasted costs and the sums of those costs; the disproportionality of the costs of the WCO proceedings compared with the likely sums being claimed as wasted; the lack of any clear evidence of causation for any of the accusations and in particular the witness statement drafting accusation; my conclusion that the accusation that the Respondent should have terminated the retainer is not made out and does not constitute unreasonable or negligent behaviour and the fact that Hugh James have waived any right to recover their fees and disbursements from the Claimant.

1. 1. I had the benefit of hearing submissions from two costs silks. But, in summary WCO proceedings, I question the proportionality of the application being handled by leading counsel who were not trial counsel. The preparation may have involved reading the transcripts of an 11 day trial, reading 30 lever arch files of trial bundles, assimilating the witness statements and a large number of reports from medical and other experts and then drafting the application and skeletons and appearing at the hearings. The costs became substantial. The making of the negligence allegations against the Claimant’s lawyers gave rise to the risk of conflict of interest with the Claimant and the lawyers needed to withdraw. They did withdraw. This left the Claimant unrepresented at the consequentials hearing which covered large sums of costs and QOCS matters. Such an approach needs very careful thought before it is taken.

1. 1. I take into account all that is set out in my earlier judgment and what I have set out above. I take into account that the system for dealing with fundamental dishonesty in S.57 of the Criminal Justice and Courts Act 2015 deals with costs penalties and punishes dishonest Claimants by depriving them of their damages. It punishes Claimant lawyers by depriving them of all of their costs and forcing them to pay disbursements, because LEI insurers will potentially avoid liability for those. I consider that, more generally, exposing Claimants’ solicitors and barristers to expensive WCO proceedings for failing to terminate retainers after FD has been pleaded (and to an extent substantiated by video surveillance or disclosure or other evidence) may potentially fetter access to justice for Claimants who, whilst not wholly honest, have a good core claim and have at least some prospect of defeating the assertion of FD. In all of the circumstances I do not consider that a stage 1 order towards a WCO is evidentially supported, appropriate, proportionate or just.

Decision

1. Above I have ruled that the Applicant has not made out either unreasonable behaviour or negligence on a prima facie basis against the Respondent, save in relation to the October 2022 witness statement of the Claimant. In my judgment the Applicant has failed to comply with the procedural requirements for simple, clear allegations which do not require a detailed examination of the Respondent’s files, documents and evidence. I consider that the privilege to which the Claimant is entitled provides a barrier to many of the Applicant’s accusations. In my judgment the Applicant has failed to satisfy the requirement for clear identification of the allegedly wasted costs, has failed to identify the sums claimed and has not established the necessary causal link between the IUN accusations and any wasted costs. I also consider that proportionality and the justice of the case require the application to be dismissed.