What is a Wasted Costs Order?

Within Section 51 of the Senior Courts Act 1981, a wasted costs order is defined as “any costs incurred by a party as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative.” Practice Direction 46 Paragraph 5.1 defines a wasted costs order as 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.“

The defining difference between a wasted costs order and non-party cost orders (NCPO) is that the latter can be made against anyone. In contrast, a wasted costs order should be made against a legal or other representative.

Under the rules listed in the Senior Courts Act, a wasted costs order can only be devised when there has been an improper, unreasonable or negligent action. The Court considers it unreasonable for the other party to pay the consequences if the opposing party has committed actions that are seen to be any of the above.

This three-step action test emerged from the case of Ridehalgh v Horsefield and is now incorporated in the Practice Direction for Part 48 of the Civil Procedure Rules. The action that is considered to be to be one of these characteristics (improper, unreasonable, or negligent) must have been completed by the legal representative or their employee. Within CPR 2.3, a legal representative is defined as “a barrister, solicitor, solicitor’s employee, manager of a body recognised under Section 9 of the Administration of the Justice Act 1985 or a person for the purposes of the Legal Services Act 2007 is an authorised person in relation to an activity which constitutes the conduct of litigation.” 

Under the Senior Courts Act 1981, the Court has “full power to determine by whom and to what extent the costs are to be paid.” This means that wasted costs will be ordered if the Court deems it just to do so.

Can I Apply for a Wasted Costs Order, or does the Court Decide when they are Necessary?

Either of these situations can occur. The Court can make a decision to order wasted costs, but only when proceedings have been issued.

A party to the proceedings can also apply for a wasted costs order under PD46 para 5.4 at any stage during the proceedings, up to and including the detailed assessment proceedings. It is advisable however, that applications for wasted costs orders are prepared after the trial. When seeking an application, a party can apply under Part 23 of the procedure rules. This method usually works in two stages. Firstly, the Court will ensure that they are satisfied that an order may be suitable, and secondly, a hearing would take place to allow the parties to make submissions on the application. An oral application can also be made, and this would usually take place at the end of the Trial once all evidence in the proceedings have been heard.

Are Applications for Wasted Costs Orders Usually Successful?

The likelihood for success on a wasted costs application will vary from case to case and cannot be predicted.

In the 2015 case of Kagalovsky & Wilcox -v- Balmore Invest & Others, the Court refused a wasted costs order because “despite the relatively high level of costs alleged to be at stake, the further time and resources that would be involved in proceeding to a substantive determination of this application would be disproportionate and inconsistent with the concept of summary determination“.

This ruling highlights how the proportionality of the matter and the time that it will take to grant the wasted costs order should be considered prior to making an application as it may be rejected for these reasons. A failure to fulfil a preliminary threshold to demonstrate unreasonable behaviour may also constitute a valid reason to reject any application, and it is imperative to assess all factors and aspects of the matter prior to application.

Examples of the Use of Wasted Costs Orders: Common Law

In the case of Joyce Whitfield v Revenue and Customs Commissioners [2016] UKFTT 685 (TC) a tribunal ruled that the “inflexible” behaviour of a party should mean that they paid wasted costs. Within the matter, a party’s representative in a taxi dispute returned documents to HMRC because they were sent a few days late. Due to these actions, this party would have been given a wasted costs order if HMRC had sought one. The tribunal decided that they did not consider it to be proportionate to open an envelope, review the contents and return it to the sender unread, solely because it was a few days late. HMRC was advised to prepare a costs schedule in order to provide the “inflexible” party with an opportunity to explain why they should not be ordered to pay HMRC’s wasted costs. However, Jane Ashworth, for HMRC, stated that due to the lack of time and the small amount of costs, a schedule would not be prepared. Despite this, this matter demonstrates the type of unreasonable behaviour which could result in the provision of a wasted costs order.

In the recent case of Jovicic & Ors v Serbian Orthodox Church – Serbian Patriarchy (2020), the Claimant’s Solicitors were ordered to pay wasted costs. Master Cook stated that the Claimant submitted Claim Forms in both actions that had “expired before their purported service”. Moreover, he stated that the Claimant had shown “complete disregard of the Civil Procedure Rules” as they had tried to effect service on a party who was not the Defendant. He concluded that there had been a “wholesale failure by the claimants’ solicitors to comply with the provisions of the Civil Procedure Rules” and that they had failed to interact efficiently with the Defendant regarding issues during pre-action correspondence. Finally, Master Cook considered all of the Claimant’s Solicitors actions during the proceedings and concluded that they were to pay all costs that had been incurred by the Defendant from 27th December 2018 on the indemnity basis. This judgment highlights how careless and erroneous behaviour can lead to the production of wasted costs orders, and for significant levels of costs.

How can ARC Costs Assist in Matters Involving Wasted Costs Applications?

ARC Costs are a group of experienced and independent Costs Draftsmen and Costs Lawyers who regularly advise in costs disputes. Our team, who possess in excess of 20 years’ experience, regularly represent Paying and Receiving Parties, to prepare or contest Bills of Costs, Costs Budgets and to conduct costs negotiations (including in respect of budget variation notices) in order to recover costs, or to reduce a party’s burden to pay costs.

If your matter requires legal costs representation and advocacy services, our expert costs lawyers can assist in your case. Using their knowledge and expertise, they can give advise on novel costs situations, including in respect of any applications for wasted costs orders. Subsequent to the provision of advice, we can aid the client in preparing/contesting any application.

In respect of advice/advocacy services, we also regularly assist in prospects of proceeding to, and providing representation in relation to any CCMC and detailed assessment proceedings.

If you require any further information or have a costs query, please utilise our free chat facility.  Alternatively, speak to one of our experts directly on 01204 397302 or via email at info@arccosts.co.uk.

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