It seems to have been a week dominated by the subject of solicitors and costs. And the mud-slinging has had one particular target: my profession. After weighing up the pros and cons about commenting on the issue, I decided it is a topic I couldn’t really ignore any longer and duly wrote a post on it.
Then yesterday I saw a report on a high court case in which an order for payment of wasted costs of £100,000 had been made against a firm of solicitors, who then successfully appealed that order.
Wasted costs orders do happen, although I can think of only one involving me. Several years ago an order was made against my firm when I was on holiday in Switzerland. The solicitor on the other side took full advantage of my absence and completely misrepresented my actions in a defended divorce case to the judge. As I was on holiday I did not know what was going to be said, nor did I have the opportunity to address the court. My secretary, who was very concerned by the outcome, contacted me in Switzerland. Standing literally at the top of a mountain, where I was having lunch in a restaurant that afforded spectacular views of the Alps (Piz Gloria – pictured above), I dictated a letter to the judge requesting an opportunity to be heard immediately on my return, notwithstanding the wasted costs order that had already been made.
The judge agreed and the following week I appeared before him in open court with my opponent sitting alongside. This time things were conducted very differently! I knew the file inside out and gave him no opportunity whatsoever to repeat his allegations. The judge very decently apologised to me, he commented that he had been misled. He set aside the order he had made and the wasted costs order against my firm. He also ordered the other side to pay my costs. I still bristle whenever I think of this incident, so how a £100,000 wasted costs order would have impacted, leaves me (for once) speechless!
The firm in the current case enjoys an excellent reputation in family law. It had applied for an adjournment on behalf of its client after being served with hundreds of pages of heavily redacted material during the first day of a trial, along with counsel’s skeleton arguments.
Upon their application, opposing Counsel Mr Geraint Jones QC, who you might reasonably have thought would have been extremely apologetic and embarrassed for his late service, instead made a deadly case against the solicitors. Then, at first instance, he received the full backing of District Judge Bassett-Cross.
It is all a little odd you might think, particularly when you read the case and note how many family members appear to have become involved on the husband’s side to demonstrate his apparently impecunious state. He alleged that these family members owned the assets in question, some of which had been in his own name until he transferred them to his aunt shortly before the parties separated.
On appeal in the high court the case came before Mr Justice Mostyn who immediately set aside the wasted costs order and ordered the other side to pay the costs. He did not agree with the submissions on the law of Mr Geraint Jones QC, nor of the District Judge whom he observed “had followed the QC’s submissions in almost all its aspects”.
The law in question involved the particularities of when, how and by whom third parties to an action should be joined into a case. John Bolch at Family Lore wrote a succinct post about that subject earlier this week. There’s little point repeating it, save for the fact that in relation to the procedure for joining third parties, a previously acknowledged gap has been closed. In April 2012, The Family Procedure Rules (FPR) will be amended to include the new Rule 9.26B (1) (viewable here under section 18).
Perhaps most interesting for readers is a consideration of when and how wasted costs orders can be made against lawyers, solicitors and barristers – as opposed to their clients.
The general rule is that in family law, each side pays their own costs and so orders for costs aren’t prevalent. If the family court is going to make a costs order at all, it is usually because the judge believes a client deserves to pay the costs because of their conduct. But if the practitioner has caused wasted costs to arise, the law is set out in section 51 of the Senior Courts Act 1981:
“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 is unreasonable to expect that party to pay.”
The procedure was considered thoroughly in Ridehalgh v Horsefield 1994 3 All ER 848, where the Court of Appeal through Lord Bingham MR, gave “definitive guidance”. Mostyn J summarised it as follows:
1. Defining the meaning of those three highlighted words;-
(i) “Improper” covers “a significant breach of a substantial duty of a professional code of conduct as well as conduct which would be improper according to the consensus of professional opinion.”
(ii) Unreasonable conduct is “not permitting of a reasonable explanation.”
(iii) Negligent is “failure to act with the competence reasonably expected of ordinary members of the profession.”
2. It is essential that there must be a direct causal link to the wasted costs. Any costs not directly caused by the actions complained of, are not to be included into the order.
3. There must always be an opportunity for the practitioner to be heard. A Judge may believe the complaint is made out, but must give the practitioner the opportunity to be present. Imagine the case where a stuttering trainee present in court to note the judgement, is hauled up before a Judge, and an explanation is demanded. Clearly this would be unfair. Similarly in my own case, the Judge gave me the opportunity to be heard.
4. The court must also exercise its discretion in two ways;-
(i) to consider whether to have a hearing to pursue the matter further is necessary at all, e.g. if the potential costs of the inquiry are likely to be very much higher compared to the costs claimed.
(ii) whether at the costs hearing, even if the court is satisfied the case has been made out, it still may exercise its discretion to make no wasted costs order at all. (Although, if the court does declines to hold an inquiry or make the wasted costs order, “it would have to give sustainable reasons.” )
5. A practitioner may have a problem answering the claim for wasted costs because of legal professional privilege. In those circumstances, the court should only make a wasted costs order exceptionally and where it is satisfied there is nothing the lawyers could say if they were permitted to do so that would resist the order and it is fair in all the circumstances to make the order. An example in the present case might have been that the client herself wanted the adjournment although she was advised by her solicitors to proceed. It would be unfair to make the solicitors pay the costs if they had been acting on their client’s instructions.
So not for the first time, Mr Justice Mostyn has added yet another triumphant judgment to his CV. He has given a clear interpretation of the law in relation to wasted costs and the joinder of third parties, and sent those off who held different views to him with fleas in their ears. I am sure the partners of the firm in question are sleeping an awful lot easier in their beds too.
Respect has been restored to the reputation of an excellent firm of family lawyers.