The case of Ireland v University College London [2024] EAT 68 involved Mr. Ireland’s appeal against the Employment Tribunal’s decision to reject his application for wasted costs against University College London (UCL).

The Employment Tribunal dismissed Mr. Ireland’s claim, ruling that UCL’s conduct did not meet the threshold for awarding wasted costs.

What are wasted costs?

Wasted costs refer to legal costs that are incurred unnecessarily as the result of any improper, unreasonable, or negligent act or omission by a party or their legal representatives during litigation. The party responsible for the misconduct will be ordered to pay costs incurred by the other party to the case under Section 51(7) of the Senior Courts Act 1981.

The Court may decide to make a wasted costs order, or parties to the proceedings may make a wasted costs application.

Under Practice Direction 46.8:

5.1 A wasted costs order is an order –

(a) that the legal representative pay a sum (either specified or to be assessed) in respect of costs to a party; or

(b) for costs relating to a specified sum or items of work to be disallowed.

5.2 Rule 46.8 deals with wasted costs orders against legal representatives. Such orders can be made at any stage in the proceedings up to and including the detailed assessment proceedings. In general, applications for wasted costs are best left until after the end of the trial.

5.3 The court may make a wasted costs order against a legal representative on its own initiative.

5.4 A party may apply for a wasted costs order –

(a) by filing an application notice in accordance with Part 23; or

(b) by making an application orally in the course of any hearing.

5.5 It is appropriate for the court to make a wasted costs order against a legal representative, only if –

(a) the legal representative has acted improperly, unreasonably or negligently;

(b) the legal representative’s conduct has caused a party to incur unnecessary costs, or has meant that costs incurred by a party prior to the improper, unreasonable or negligent act or omission have been wasted;

(c) it is just in all the circumstances to order the legal representative to compensate that party for the whole or part of those costs.

Threshold for making a wasted costs order

This concept was thoroughly examined in the landmark case of Ridehalgh v Horsefield [1994]. In this case, the Court of Appeal clarified that wasted costs orders should be made sparingly and only in cases where the conduct of the legal representatives was seriously improper, unreasonable, or negligent.

The case of Ridehalgh v Horsefield established that the threshold for circumstances in which the court will award these types of costs is high. The misconduct must involve a significant departure from proper conduct. This may include gross negligence or deliberate misconduct.

“The expression ‘improper, unreasonable or negligent’… covers not merely cases where the conduct of the lawyer is shown to have been improper, unreasonable, or negligent, but also cases where the conduct of the lawyer is merely incompetent.”

Wasted costs cover situations where a lawyer’s actions (or failures) have led to an unnecessary amount of costs for their client or the opposing party. The court emphasised that these orders are not to be used to punish mistakes or poor judgment, but to address actions that are fundamentally improper.

“Wasted costs orders are not to be used as a form of punishment, but rather to compensate a party for costs unnecessarily incurred by the wrongful conduct of the other party’s lawyer.”

The court recognised the need to protect legal representatives from undue pressure and the potential chilling effect that could arise if  these types of costs orders were made too readily. Thus, the legal profession is shielded from routine claims, except in clear cases of misconduct.

The court outlined a two-stage test:

• Causation: Did the conduct in question cause costs to be wasted?
• Misconduct: Was the conduct improper, unreasonable, or negligent?

Ireland v University College London [2024] EAT 68

Mr. Ireland claimed that UCL’s legal team had acted improperly, causing unnecessary costs. He argued that UCL’s approach to the litigation was unreasonable and vexatious, leading to unnecessary legal expenses.

The Employment Tribunal rejected this argument, finding that while UCL’s conduct may have been frustrating, it did not rise to the level required to justify an award of wasted costs.

The tribunal emphasised that such an award is only appropriate in cases where a party’s conduct is so unreasonable as to amount to an abuse of process.

“The test for awarding wasted costs is a high one and rightly so. It is not enough that a party’s conduct has been unreasonable; it must be egregious, amounting to an abuse of the tribunal process.”

Mr. Ireland appealed on the grounds that the tribunal had misapplied the legal test for wasted costs and had failed to consider the full extent of UCL’s conduct.

The Employment Appeal Tribunal (EAT), led by Mrs. Justice Eady, upheld the tribunal’s decision. The EAT confirmed that the threshold for wasted costs is intentionally high, as such awards should only be made in cases of clear and serious misconduct. The EAT found no error in the tribunal’s application of the law or its assessment of the facts.

The case reaffirmed the principle that wasted costs orders should only be made in exceptional circumstances. The EAT highlighted that the purpose of such orders is not to punish a party for poor litigation strategy but to address genuinely abusive conduct that wastes the tribunal’s and the other party’s time and resources.

Mrs. Justice Eady remarked, “The tribunal was entitled to conclude that, while UCL’s conduct was far from exemplary, it did not cross the threshold into the territory of abuse justifying a wasted costs order.”

This case is significant in clarifying the circumstances under which wasted costs may be awarded in employment disputes, reinforcing that such orders are reserved for truly exceptional cases where one party’s conduct seriously undermines the justice process.

How can ARC Costs Assist?

The ARC Costs team of Costs Draftsmen and Costs Lawyers are always happy to help with costs challenges, including those involving wasted costs.

Whether you have been ordered to pay costs or wish to recover your costs, we can assist as independent costs experts.

We can be contacted via email at info@arccosts.co.uk, or by telephone on 01204 397302. For more information on legal costs, please find out more about our speciality areas of expertise and our services on our legal costs page.

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