Regulation of Litigation Lawyers by the Court

Courts have an inherent jurisdiction to secure the proper administration of justice.⁴³ This includes controlling the lawyers that prepare the case and appear before the courts.

At common law, the nature of the jurisdiction may be different for solicitors and barristers. Solicitors’ historic role as officers of the court meant they could be disciplined directly.⁴⁵ Barristers were not officers of the court, but owed a duty as advocates. When the roles of advocates and litigators were more distinct, judges may have referred barristers to their Inn for discipline and exercised direct control over solicitors.

³⁹ ibid, gC13.

⁴⁰ ibid, rC9.1.

⁴¹ ibid, rC11.

⁴² ibid, rC9.2.

⁴³ Per Lord Wright in Myers v Elman [1940] AC 282, at 319.

⁴⁴ Harley v McDonald [2001] 2 WLR 1749.

⁴⁵ Abraham v Jutsun [1963] 2 All ER 402.

One of the forms of control over solicitors in litigation included an award of costs against them. This jurisdiction was codified, replacing the inherent jurisdiction, at least insofar as it relates to costs.^{[2745] [2746] This leaves the question of whether there is anything left of the inherent jurisdiction. In a key case before codification, Myers v Elman,41 the House of Lords laid down some important principles regarding the jurisdiction over solicitors as it then stood.}

The Court of Appeal considered the solicitor could not be personally liable in costs because the work had been done by his managing clerk. The House of Lords reversed this decision, holding him liable for a third of the costs of the case. Lord Atkin said that a solicitor had a ‘duty owed to the court to conduct litigation before it with due propriety’. Lord Maugham said that the duty of solicitors covered all those against whom they were opposed. Lord Wright said that before a solicitor can be condemned there must be a failure to fulfil a duty to aid in promoting the cause of justice.

The House of Lords also laid down five important principles regarding the inherent jurisdiction over solicitors. Their Lordships said, first, that the disciplinary jurisdic­tion over solicitors was separate from that required to make an order for wasted costs. Secondly, a disciplinary finding requires serious professional misconduct but a wasted costs order does not. Thirdly, the wasted costs jurisdiction derives from the duty to the court to promote justice. Fourthly, it is not necessary to find conduct justifying striking a solicitor from the roll to make a wasted costs order. Fifthly, the jurisdiction is compensatory and not merely punitive. The separation of the duty to the court and the right to make wasted costs orders is important, but they are linked by a common concern over the conduct of lawyers.

Twenty years later, the Court of Appeal considered solicitors’ duties in litigation in Wilkinson v Wilkinson.^[2747] The wife in divorce proceedings was granted a decree by the court in the absence of her husband. The husband appealed on the grounds that he had not received notice of the hearing. The solicitors acting for the wife refused to answer his solicitors’ letters and contested the application, even though they knew they could not prove that notice had been given.

Lord Justice Ormrod thought that failing to reply to letters was discourteous, but that more was needed to justify sanctioning the solicitors. The additional ele­ment was provided by the solicitors’ post book, in which all letters sent out by the firm were recorded. The entry allegedly recording the letter giving due notice to the husband’s solicitors had been altered. This fact was concealed from the wife’s solici­tors. Discovery of the post book was given shortly before the hearing to set aside the decree. The husband’s solicitors knew that they could not trace the postage clerk who was alleged to have made the entry and so could provide no explanation of the change.

Without concluding that the altered entry was the result of impropriety, the trial judge found that the wife’s solicitors had been ‘oppressive’. The Court of Appeal found no reason to disagree. Ormrod LJ noted the House of Lords confused ratio­nale for summary awards of costs against solicitors in Myers v Elman. He pointed out that Lord Maugham considered such awards to be compensatory. Lord Atkin thought they were punitive. Lord Wright, however, considered that both elements were present’.^[2748]

Under the CPR, wasted costs orders can only be made where a representative has acted ‘improperly, unreasonably or negligently’^[2749] and caused the other party to incur unnecessary costs.^[2750] Such orders are considered below. This presumably leaves an inherent jurisdiction to sanction litigators, for serious professional misconduct, as outlined in Myers v Elman. Therefore,, in appropriate cases, litigators could have an award of costs made against them and be disciplined if they were guilty of serious misconduct. This might apply, for example, if a solicitor in Wilkinson v Wilkinson had been found to have changed the entry in the post book.

A. Statutory Duty to Act with Independence in the

Interests of Justice

A statutory duty to act with independence in the interests of justice applies to litiga­tors under the Courts and Legal Services Act 1990, section 28, as amended by the Administration of Justice Act 1999.

The legislation did not specify how the duty related to either the inherent jurisdic­tion of the court to control its officers, or those appearing before it, or to the juris­diction to impose wasted costs orders. The section was replaced by the LSA 2007, section 188, which specified that both advocates and litigators had ‘a duty to the court in question to act with independence in the interests of justice’ and to observe the conduct rules of their authorising body. The duty to act with independence and observe conduct rules arguably has a narrower scope than that covered by the court’s inherent jurisdiction. It is therefore assumed that section 188 has not superseded or replaced that jurisdiction.

B. Wasted Costs Orders

i. Origin

That part of the court’s inherent jurisdiction to sanction solicitors by awards of costs was formalised in the Courts and Legal Services Act 1990. The Act extended the courts’ general discretion to award costs in civil^[2753] and criminal matters^[2754] by making wasted costs orders. Thereafter, judges in the main civil courts could disallow, or order a legal or other representative to meet the whole of any wasted costs under what is now known as the Senior Courts Act, 1981 section 51(6).^[2755]

ii. Scope

In civil cases the yardstick for making such orders was the rules of court.

A collection of applications for wasted costs orders under the name of the first case, Ridehalgh v Horsefield and another, provided the Court of Appeal with an opportu­nity to consider the wasted costs jurisdiction.^[2758] Two important points emerged from the case. The first was that advocates, as well as litigators, could, in principle, be sub­ject to a wasted costs order. The second was a three-stage test, which subsequently became the basis of a practice direction in the CPR. Following this test, the court had discretion to make a wasted costs order (i) where the legal representative has acted improperly, unreasonably or negligently; (ii) the conduct has caused a party to incur unnecessary costs; and (iii) it is just in all the circumstances to order compensation to the party for the whole or part of those costs.^[2759]

The CPR provide for the personal liability of a legal representative for costs in Part 46.8. This provides that 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’.^[2760] The court can direct that the client receive notice of any proceedings under this rule, or of any order made under it against his legal representative.^[2761]

Another complication in the issue of causation arises because potential liability for wasted costs is not limited to parties or their lawyers.

The father was awarded costs against the local authority for the various hearings that could not proceed without adequate reports. This was justified by the court on the basis that the local authority’s failings were sufficiently ‘closely connected’ with the litigation to justify the order. The decision is only consistent with the CPR if the local authority is treated as a potential party in the proceedings. Despite the deci­sion, the possibility of an order to pay wasted costs against a non-party is likely to be exceptional.

iii. The Three-stage Test

a. Improper, Unreasonable or Negligent Acts

The Court of Appeal in Ridehalgh v Horsefield and another concluded that three ele­ments of the statutory definition of the litigator’s duty were intended to have their ordinary meanings. ‘Improper’, therefore, applied to conduct amounting to a signifi­cant breach of a substantial duty imposed by a relevant code of professional conduct. It included conduct regarded as improper by the consensus of professional opinion. ‘Unreasonable’ described conduct not permitting of a reasonable explanation; it was likely to be vexatious or harassing rather than intended to advance resolution of the case. ‘Negligent’ was to be understood to denote a failure to act with the competence reasonably to be expected of ordinary members of the profession. In practice, the distinctions seldom seem to be a significant factor in the courts’ decisions.

One of the cases considered in Ridehalgh v Horsefield and another involved complex landlord and tenant law. Both sides’ solicitors had misconstrued the legislation, as had the judge at first instance. It was held that the solicitors had not been negligent or careless in coming to their mistaken conclusions on the meaning of the legislation. Another case raised what became a recurring theme in wasted costs applications; the lawyer acting in a ‘hopeless case’.

There are different kinds of hopeless case. For example, there are cases that must fail in law and those that may be very difficult to establish, either in law or fact. Lawyers presenting hopeless cases could, in theory, be sanctioned for abuse of pro­cess. For example, before the Gambling Act 2005, section 335, gambling debts were irrecoverable for reasons of public policy. Claims for gambling debts, intended to embarrass a debtor, were therefore classic hopeless cases.^[2763]

Beyond a few exceptional cases, the courts have been reluctant to sanction lawyers for bringing claims that turn out to be unmeritorious. The rationale for this is, simply, because presenting even weak cases is central to their role, as defined by the rule of law. In Rondel v Worsley^[2764] it was said to be deplorable, and injurious to the cab rank rule, if lawyers were to be sanctioned for pursuing hopeless cases. This dicta was cited with approval by Sir Thomas Bingham MR in Ridehalgh v Horsfield and another.

The ‘hopeless case’ in Ridehalgh v Horsefield and another concerned a barrister who had accepted a case at short notice and had caused costs to be wasted by not proceed­ing expeditiously. The Court of Appeal held that, because a barrister had to obey the cab rank rule, pursuing a hopeless case with inadequate instructions was not, of itself, conduct falling within the section.

Sir Thomas Bingham said that

[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 defence which is plainly doomed to fail.^[2765]

He recognised that it is not always easy to distinguish the case which is hopeless from the case which is an abuse of the process of the court, but stated that any doubt should be resolved to the benefit of the legal representative.

A contemporaneous case in which a wasted costs order was made is C v C.^{[2766] [2767]} A divorcing husband and wife, in dispute over financial provision, both applied for a wasted costs order against the wife’s solicitor. During the case, it became clear that the husband’s assets were much less than originally thought. Expensive further investiga­tions were made and information required of the husband. An offer to settle the case for £50,000 was rejected by the wife, who was eventually awarded £20,000. By that time her costs amounted to £60,000 and the husband’s £70,000. A wasted costs order was made in respect of some of these costs on the grounds of unreasonableness and negligent conduct on the part of the solicitor.

Another case where a wasted costs application was successful, Tolstoy v Aldington⁶ followed shortly after Ridehalgh v Horsefield and another. A lengthy and successful libel action was brought by Lord Aldington against Count Tolstoy, who then sought to have the judgment set aside on the ground of fraud. Tolstoy had been declared bankrupt and so could not pay any costs.

Tolstoy’s solicitors acted for him without fee and without applying for legal aid. This was significant because it would have provided a screening process on the merits of the case. Nor did the solicitors send a letter before action. At first instance, the court found that the case was hopeless and struck it out as an abuse of process. Aldington succeeded in an application for a wasted costs order against the solicitors. The grounds of the judgment are that the proceedings were ‘at least potentially vexatious’^[2768] and a collateral attack on the judgment of the court.

In the Court of Appeal, Lord Justice Rose stressed that acting without a fee, even in a hopeless case, was not sufficient to justify an order on its own. He concluded, however, that no solicitor could ‘reasonably have instituted these proceedings’. Lord Justice Ward likewise thought that the ‘solicitors allowed themselves to be dragged outside that broad province where their actions could reasonably be said to further the ends of justice.’^[2769] Although counsel had signed the statement of claim, no case against counsel was before the court. Rose LJ stressed that counsel’s involvement did not exonerate the solicitors from their duty to exercise their own independent judge­ment in relation to the case.^{[2770] [2771] [2772]}

In Dempsey v Johnstone,^[2773] a test for deciding whether proceeding with a hopeless case invited a costs sanction was proposed. The court asked whether no reasonably competent legal adviser would have evaluated the chance of success as being such as to justify continuing with the proceedings. This of course, ignored the fact that it is often the client who wishes to proceed, sometimes against advice. This was apparently the case in Mitchells Solicitors^[2774] where the respondents contended that the applicant’s solicitors should bear their costs. They suggested that it was clear halfway through an employment case that the applicant could not succeed. They had even offered not to seek costs if she withdrew. She continued, having consulted her solicitors.

The Employment Appeal Tribunal observed that lawyers could

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.^[2775]

It therefore held that, for a wasted costs order to be made, the legal representative had to lend assistance to proceedings amounting to an abuse of process or the duty to the court. Where a claim is ‘doomed to fail’ parties should apply to strike out the claim rather than waiting to pursue wasted costs. Moreover, the fact that a claim had been abandoned on appeal should not be taken to mean that it had been pursued negligently.^{[2776] [2777]}

The possibility that wasted costs orders may have a ‘chilling effect’ on lawyers’ willingness to pursue hopeless cases is a consideration that the courts have probably borne in mind. In Southcombe & Anor v One Step Beyond^[2778] for example, the Court of Appeal considered a case where solicitors (S), acting in a company liquidation, had obtained several adjournments on behalf of their client. They were invited to not to apply for their costs, of around £1000, under threat of an application for a wasted costs order against them. The court stated that S was entitled to take steps to protect their reputation and not be held to ransom by wasted cost applications. They should not be criticised for not abandoning their proper claim for their own costs, even where the sums in issue were modest.

While the courts have been reluctant to penalise pursuit of hopeless cases, the threat of a wasted costs application is still a concern. It would have been helpful therefore if the Court of Appeal in Ridehalgh v Horsefield and another had made a general state­ment that bona fide actions aimed at bringing about a change in the law would not fall foul of the wasted costs jurisdiction.

b. Causation

In Ridehalgh v Horsefield and another it was held that orders should only be made under the Senior Courts Act, section 51(6) when the defined conduct directly caused wasted costs.⁷⁷ In the recent case of A (A child),¹⁸ the Court of Appeal affirmed the approach and commended the statement of the law in Harrison v Harrison.¹⁹ The case of A (A child) concerned an application by parents to reopen an investigation into their child’s bone damage for which they were initially held to blame. An expert report commissioned by the court did not support their case, but the parents’ solici­tors continued with a hopeless appeal anyway, because of an over-optimistic assess­ment by counsel.

In A (A child), the Court of Appeal found that counsel, not the solicitors, had caused wasted costs. As the judge said, however, counsel was not ‘in the frame’ when the case was considered. The court decided that it would not be fair to impose liability when counsel had not had a chance to be heard. The case demonstrates that, if the court accepts that a litigator’s conduct is improper, unreasonable or negligent, it is still necessary to show a causal link between the conduct complained of and the wasted costs. This involves demonstrating that, but for the conduct complained of, the appli­cant would not have incurred the costs in question.⁸⁰

The application of the causation test was demonstrated in D v H.⁸¹ A husband (H) involved in matrimonial proceedings brought a wasted costs application against his wife’s lawyers. H later agreed to pay his wife a lump sum and forego an order for costs against his wife. He then continued with the wasted costs application. It was held that the agreement to forego costs had broken the causal link. H no longer had any recoverable loss.

In Hedrich v Standard Bank, the claimant disclosed emails during the trial, follow­ing which the claim was discontinued.⁸² The defendant bank could not recover costs from the claimant. It then applied for wasted costs from the claimant’s solicitors, because the emails were disclosed late. The Court of Appeal held that the solicitor had not been negligent and that all of the costs had been incurred when the emails were disclosed. Therefore, causation of loss had not been established. ^{[2779] * * [2780] [2781] *}

In Koo Golden East Mongolia v Bank of Nova Scotia,^[2782] the High Court held that part of the claim for wasted costs was misconceived. The costs in question were to be the subject of assessment and the defendant had shown no lack of willingness to pay. At the time of the application, no bill had yet been presented and no demand had been made for payment. The defendant banks could not, therefore, show that they had suffered any loss.

c. Whether it is Just in all the Circumstances to Make an Order

The wasted costs jurisdiction is always subject to the discretion of the court. Even if the first two stages of the test are met, the court must still decline to make a wasted costs order if it is not just in all the circumstances to do so. The precise circumstances are not delineated, but there are at least three types of circumstances evident in the cases. The first is where the application for an order is used for some tactical advan­tage. The second is where it would be procedurally unfair to the lawyer against whom costs are claimed. The third is where a wasted costs order would have a disproportion­ate personal impact on the lawyer.

Threatening to make an application for wasted costs orders may be seen as a form of intimidation and would therefore be seen as an improper tactic. In Orchard v South Eastern Electricity Board, a legally aided claimant brought a case claiming that the defendant had allowed electricity leaks that heated underground water, damaging his house.^[2783] Early in the case the defendants threatened to make a wasted costs order against the solicitors if they continued with the claim. The claim was shown to be spurious and the threat was pursued.

The Court of Appeal said, per curiam, that it was not proper to threaten to make an application for wasted costs during or prior to a hearing in order to browbeat solici­tors for legally aided clients into dropping the case or procuring the revocation of the legal aid certificate. Lord Justice Dillon went so far as to say it could be a contempt of court.^[2784] This is obviously difficult territory for lawyers. The particular case involved a threat to make an application unless the case was dropped. Presumably, a more tar­geted warning, relating to specific conduct, might be more acceptable.

Another example of the tactical use of the wasted cost jurisdiction relates to the attempted recovery of costs that may not otherwise be recoverable. In Symphony Group v Hodgson,^[2785] Lord Justice Balcombe noted that wasted costs orders might be abused by successful parties trying to recover costs from impoverished litigants, legally aided parties or the legal aid administration. Such orders are only made exceptionally against lawyers for legally aided clients.^[2786] In Ridehalgh v Horsefield and another, Sir Thomas Bingham agreed, saying that it would ‘subvert the benevolent purposes of [the legal aid] legislation if such representatives were subject to any unusual personal risk’.^[2787] This continues to be a concern of the courts.^[2788]

Another concern of the judges was that arguments over costs might be used as another way of continuing an argument. In Hedrich v Standard Bank, for example, the court referred to the risk of ‘satellite litigation’ spinning off from the main case. This language may reflect concern that parties may use wasted costs applications to cause delay, put personal pressure on opposing lawyers or to create bargaining chips for later negotiations.

A procedural issue, considered by the Court of Appeal to be relevant to the issue of justice, was the summary nature of proceedings in wasted costs applications. When the House of Lords first considered the area in Medcalf v Mardellf' their Lordships expressed similar concern. The case concerned two barristers alleged to have amended a notice of appeal to allege fraud. It was claimed that the allegations had no basis in the evidence, as required by the Bar Code of Conduct. The other side to the litigation then claimed wasted costs from the barristers to cover the costs of investigating and rebutting the fraud allegations. The barristers claimed that their client was unwilling to waive professional privilege. They could not therefore demonstrate that they had credible evidence of fraud before them when drafting the appeal.

The House of Lords decided that a court should not make a wasted costs order

unless, proceeding with extreme care, the court could say that it was satisfied that there was nothing that counsel could, if unconstrained, have said to resist the order, and that it was in all the circumstances fair to make the order.

The majority held that, since the barristers were under the disadvantage of being bound by privilege, they had to have the benefit of the doubt. Accordingly, the House of Lords reversed the Court of Appeal and quashed the wasted costs order.

The approach in Medcalf v Mardell suggests that courts will seek to be fair to the lawyers contesting a wasted costs application. Only exceptionally and in the clear­est cases are applications apt for summary determination. Hearings to investigate the conduct of a complex action are likely to be expensive and time consuming. Lord Bingham thought that, while dealing with lawyers’ unjustified conduct is ‘an important public interest, it is... only one of the public interests which have to be considered’.^{[2789] [2790] Lord Hobhouse said that the dominant interest for protection was not that of opposing parties, to whom barristers owe ‘no duty’, but the duty to the court.[2791]}

The disproportionate effect of a wasted costs order made against legal representa­tives was taken into account in R (on the application of Hide) v Staffordshire County Council.^[2792] The defendant local authority applied for a wasted costs order against a solicitor advocate who represented the claimant (H) in an unsuccessful action for judicial review.

The local authority submitted that the solicitor had instigated, managed and main­tained the action as part of a campaign, stepping outside the role of legal representa­tive. The court accepted that the solicitor’s behaviour was unreasonable and negligent and that the action was unnecessary and doomed to failure. Nevertheless, it refused to make an order for wasted costs against the solicitor because of the significant risk of her bankruptcy. The court considered this a disproportionate consequence, despite the solicitor’s conduct.

iv. Importance of the Wasted Costs Jurisdiction in

Controlling Lawyer Conduct

Although the courts remain willing to make wasted costs orders, the numerous court decisions have often favoured lawyers facing such applications. Taken together, the cases suggest that judges exercise their jurisdiction to grant wasted costs orders with extreme caution. While wasted costs awards are not made lightly, first instance deci­sions are frequently overturned because the three-part test is incorrectly applied. This may seem unduly lenient to lawyers. As noted in Harley v McDonald,^[2793] issues of neg­ligence or professional conduct can, and possibly should in ordinary circumstances, be dealt with by court proceedings for negligence or by disciplinary proceedings rather than under the wasted costs jurisdiction.

Despite the relative lack of success of wasted costs applications, the mere existence of the jurisdiction in civil cases means that lawyers cannot simply act as hired guns. This creates an environment of some uncertainty. In considering acting in a weak case, for example, lawyers must weigh competing considerations. They must exercise their own discretion in bringing a case but are accountable to the court. They need not filter out hopeless cases, so need not only take cases with a better than even chance of success. They must advance their client’s cause within reason, but are potentially liable if they get it wrong.

v. Relationship of Wasted Costs Jurisdiction to other

Control Mechanisms

It is important to recognise that the wasted costs jurisdiction is only part of the courts’ armoury for controlling lawyer behaviour in litigation. As the cases show, there may be a finding against a lawyer, but the court may refuse to make an order because there is no causal link to wasted costs or because an order would not be just in the circum­stances. In such cases, the court may resort to other sanctions. In Re A barrister,^[2794] for example, it was observed that, where a court finds improper conduct but no wasted costs, it may refer the lawyer to the relevant disciplinary body, or the legal aid authori­ties if appropriate.

The issue of whether a reference to a professional body could be made after a wasted costs award is not clear-cut. If the jurisdiction is punitive, it would seem that to add a further sanction is unfair. If, as seems to be the case, it is primarily compen­satory, the fact of an award does not necessarily wipe the disciplinary slate clean.^[2795] Presumably then, a reference for professional discipline could still be made, even after a wasted costs order, if the misconduct is so serious that the costs sanction is inad­equate. Such an approach would appear to integrate the disciplinary and compensa­tory aspects of the court’s inherent jurisdiction over lawyers.

V.