King v Stiefel: a useful guide to making and responding to wasted costs applications
The Commercial Court (Jacobs J) recently handed down judgment in the wasted costs hearings in King v Stiefel  EWHC 453 (Comm). A copy of the judgement can be found here.
The wasted costs applications were the latest instalment in litigation which, in an earlier judgment, Cockerill J said bore resemblance to the Jarndyce v Jarndyce litigation in Dickens’ Bleak House.
In these applications, the defendants to the underlying claim brought applications for wasted costs against the claimants’ solicitors and counsel, the claims having previously been struck out and certified as “totally without merit”.
The principal basis of the defendants’ application for wasted costs was the judge’s finding that claims against them lacked all substance, and should never have been brought. The defendants argued that, in the circumstances, the lawyers who advanced the claim should be liable for the costs.
The wasted costs applications were dismissed in their entirety.
The Court emphasised that the wasted costs regime was intended to be a summary process for determination of straight-forward cases. It was not suitable for cases such as this, where the allegations against the solicitors and counsel amounted, in effect, to a substantial professional negligence action. The allegations would require extensive findings of fact, and would require careful determination at a trial. The court looked at whether such matters could be dealt with in hours, not days, which was the yardstick applied in several cases. The judge determined that it could not. Furthermore, even if the procedure was suitable, it was unlikely that a wasted costs order would be made, and so the wasted costs applications would not be allowed to proceed further.
Paragraphs 68 to 108 of the judgment contain a valuable summary of the law relating to wasted costs applications. They consider: (1) the general principles applicable to wasted costs hearings; (2) the summary nature of the procedure; (3) the effect of the lay client’s decision not to waive privilege; (4) the test to be applied when the allegation is that solicitors and counsel have pursued a hopeless case; (5) whether a respondent to a wasted costs application is able to challenge the decision which led to the wasted costs application being made; and (6) the extent to which solicitors’ reliance upon counsel may be a defence to a wasted costs application.
In relation to hopeless cases, the Court emphasised that the mere pursuit of a hopeless case was not normally a sufficient basis to make a wasted costs order against a solicitor. Something akin to an abuse of process would normally be required. Although the underlying claims themselves had been struck out as an abuse of process, it did not automatically follow that it had been improper, unreasonable or negligent for the lawyers to have brought the claim.
The judge also held that, on a wasted costs application following the strike out or summary disposal of a claim, it was open to the solicitors and counsel who were the respondent to that application to argue that the judge had been wrong to strike out or dispose of the claim (paragraphs 81 to 90). That judgment was not res judicata in the wasted costs proceedings, and it would not be an abuse of process to challenge aspects of the decision which led to the wasted costs application.
The judge also held that, if he had allowed the wasted costs applications to proceed against the Respondent Counsel, he would not have done so against the Respondent Solicitors, on the basis that the prime responsibility for drafting the Particulars of Claim was that of counsel.
Richard Sage acted for the Respondent Solicitors, led by William Flenley KC, instructed by Beale & co.