Wasted costs orders are scary things. There is the censure by the Court, of course, but worst of all, the solicitors then have to pay and, no matter how much or how little, that rips shreds out of the very essence of their being.

Threats to pursue wasted costs tend to be waved around rather too often by some solicitors, perhaps overly convinced of their own rightness. Usually what is at issue is actually a valid point of dispute. Personally, I think these threats tend to backfire, at least if the recipient is reasonably sure that an application would fail. Nothing shrieks of a lack of strength in a position so much as a big blustery threat.

However, there are times when a wasted costs order is certainly merited and where the solicitors have been really very naughty indeed. One such case has landed on the NL virtual desk and, although not strictly housing related – being a business lease – it is an opportunity to remind ourselves of the criteria for wasted costs orders.

Odihambo v Gooch Birmingham County Court, 24 October 2011 [Not available on Baili. We’ve got a transcript]

Mrs O had a commercial lease of a property, trading as a restaurant. The lease was excluded from protection (and renewal rights) under the Landlord and Tenant Act 1954 and Mrs O had signed a statutory declaration stating that she was not entitled to claim compensation for loss of the premises – this was agreed to be the case by Ms O’s previous solicitors in discussions about remaining in the property. It was a 3 year lease and expired in October 2009.

Mrs O stayed on, paying rent as before. She was a tenant at will, as accepted by her previous solicitors. Discussions on new terms took place but failed. In November 2010 a notice to quit was served, taking effect in March 2011. By March 2011, IEI Solicitors were acting for Mrs O. Come the date in March, Mrs O did not leave. After further letters, the landlord, Mrs G, made a peaceable re-entry to the property on 5 April 2011.

On 6 April, Mrs O, through IEI Solicitors, issued a Part 8 Claim and an application for an injunction for re-entry. The claim simply said that the landlord “without complying with the Landlord and Tenant Act 1954” and without rent being owed, had entered the property and changed the locks. An accompanying claim for costs had an affidavit from Mrs O saying that she was ‘amazed to discover’ that the landlord had entered without a court order, repeating that the landlord had ‘failed to follow the due process of law under the Landlord and Tenant Act 1954’.

When the application and claim came before a CJ on 8 April 2011, Counsel for Mrs O only advanced one argument, that the acceptance of rent between the service of NTQ and the date it expired constituted acceptance of a new tenancy at will by the landlord. This was, as noted in this judgment, a ‘hopeless’ argument, with no chance of success. The hearing was adjourned, by consent, to 9 May 2011 in front of HHJ David Cooke, supposedly on this point alone. Mrs O re-entered under the terms of this agreement.

The claim and application was abandoned on 6 May (a Friday) and the hearing proceeded on costs alone. At the hearing Counsel for Mrs O indicated that he had informed IEI after the previous hearing that the argument was hopeless. Costs of £8882.40 were ordered against the Claimant. HHJ Cooke made an order that IEI should show cause why a wasted costs order should not be made.

The relevant part of the CPR is Rule 48.7. Para 53.4 of the Practice Direction to Rule 48 states:

It is appropriate for the court to make a wasted costs order against a legal representative, only if –
(1)the legal representative has acted improperly, unreasonably or negligently;
(2)his conduct has caused a party to incur unnecessary costs, and
(3)it is just in all the circumstances to order him to compensate that party for the whole or part of those costs.

The notes to the PD in the White Book raise Saif Ali v Sydney Mitchell & Co [1980] AC 198 to the effect that “improper” covers conduct which would result in debarment, striking off, suspension or other serious professional penalty. “Unreasonable” describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case and it makes no difference that the conduct was the result of excessive zeal and not improper motive. “Negligence” is to be taken in the non-technical sense of a failure to act with the competence reasonably expected of ordinary members of the profession.

It is also necessary that there should have been a breach of the lawyer’s duty to the court. There must be more than mere negligence.

Following Persaud v Persaud [2003] EWCA Civ 394, the question of hopelessness is to be considered on the basis of whether no reasonably competent legal representative would have continued with the action. A case which is not hopeless but is quite proper to argue will not be an appropriate basis for a wasted costs order if the case is discontinued.

The Court set about applying these principles to the present case.

IEI sent a letter to the Court for the wasted costs hearing, arguing that their client had instructed them to bring proceedings for re-entry because “the manner of her eviction was not palatable for her business” (I adore this line, and I propose a sustained campaign to bring in the ‘palatability’ defence alongside proportionality).

IEI then said that following the hearing of 8 April, they had been telephoned by Counsel saying that the client had been asked to re-enter and to send the rent to them to pay on to the Defendant. Counsel said that a skeleton argument had been directed and he would deal with it They did not get the Order from the Court. They were then surprised to be contacted on 18 April, presumably by the Defendant, seeking a skeleton and agreed statement of facts. They were then contacted by Counsel on 4 May to say that there were no prospects. They stated that they then immediately contacted the other side.

In short, they tried to put the blame on the client and on Counsel.

This didn’t get them very far. On the evidence it appeared likely that IEI had known that Mrs O’s lease was excluded from the 1954 Act either before issuing the injunction application, or in any event by 7 April.

It was therefore a ‘grave concern’ that the Part 8 claim and injunction application were in the form that was issued. There was a suggestion of a rent dispute and a suggestion that the 1954 Act was engaged, but no mention of the notice to quit, 3 months notice and tenancy at will. When the matter came before the court on the initial injunction hearing, there was a duty of full and frank disclosure to the Court of all relevant matters and the application and affidavit fell far short of this. Mrs O had professed herself to be ‘amazed’ to find the landlord had re-entered, when she was fully aware that she had been required to vacate on 25 March. There was a serious degree of misrepresentation by omission which amounted to an abuse of process. Either IEI knew before the claim was issued or they knew before it was heard on 8 April. The fact that Counsel had managed to obtain an adjournment on different and extremely flimsy grounds didn’t alter that.

IEI then appeared to give the matter no further consideration until they received Counsel’s note on 4 May and took no steps to inform themselves of what had taken place after Counsel’s initial call. The ground put forward by Counsel was so flimsy that no competent solicitor or barrister could have properly maintained it.

In view of the urgency of the proceedings brought, it was simply not acceptable that the Claimant’s solicitors appeared not to have taken any substantive steps to prepare for the later hearing or to chase up counsel.

And then, even after being told there was no case on 4 May, IEI did not contact the Defendant’s solicitors until 6 May, after the Defendant had had to brief Counsel for the Monday 9 May hearing. What is more, IEI had offered to discontinue on the basis of no order as to costs, which was of course going to be wholly unacceptable to the Defendant. There was no excuse for the delay or for making a proposal that they must have known would be unacceptable and would mean the hearing going ahead.

The claim was therefore initiated in circumstances that made it an abuse of process and the solicitors acted improperly and unreasonably in doing so. The solicitors then effectively abandoned the claim to Counsel and were negligent in doing so, not even giving the most basic consideration to the merits. The solicitors had caused loss to the Defendants in terms of the whole costs of defending the proceedings. Indeed, had proper consideration been given to the case in the first place by the solicitors, they would have advised Mrs O not to pursue an action, despite their instruction that it was ‘not palatable’ to her to be evicted. If they were still instructed to bring the claim, then the full facts should have been presented to the Court at first instance.

As it was extremely unlikely that Mrs O was going to pay the Defendant’s costs it was just that the solicitors should be ordered to do so on a joint and several basis with the Claimant.

In the transcript that we have seen, there follows a fragment of a thoroughly entertaining discussion between the CJ and Counsel for the Defendant. Having had £8,800 costs of the April and May hearings awarded, the Defendant sought costs of £12,528 for subsequent costs up to this hearing. Whether they got them or were assessed down, we shall probably never know, alas.

The CJ notes that Mrs O’s claim bore all the hallmarks of being brought with a view to pursuing a negotiating position, where there was no justification in law. That seems likely.

The lesson to be drawn, should it need drawing, is that one should never make a threat – let alone bring proceedings – that one cannot to some degree make good on. That applies to threatening wasted costs applications, as noted at the start, but also and with rather more force to threats to bring proceedings or within proceedings. Above all, one shouldn’t be be so catastrophically daft as to attempt to make good on an empty and groundless threat!

*Ian Dury and the Blockheads: ‘What a waste‘