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K14.5. Wasted costs orders
| 463. | An order for the summary assessment of costs generally penalises the party against whom it is made. However, the fault may lie entirely with the party's legal advisers rather than with any instructions given by the party himself. With the advisers being required (Note 412) to inform their client in writing of an adverse costs order, the financial penalty on the client may result in his demanding an indemnity from his lawyers or in his having them replaced. Such possible indirect penalties on the lawyers may be effective in some cases, but where the client lacks sophistication, he is likely to find himself not only paying for shoddy legal services but also paying the other side's costs. There is accordingly clearly a case for making the lawyers, rather than the client, personally liable for wasted costs. |
| 464. | In Hong Kong power exists to make a solicitor personally liable for such wasted costs. Order 62 r 8(1) of the HCR provides :- |
| "...... where in any proceedings costs are incurred improperly or without reasonable cause or are wasted by undue delay or by any other misconduct or default, the Court may make against any solicitor whom it considers to be responsible whether personally or through a servant or agent an order- |
| (a) | disallowing the costs as between the solicitor and his client; and | ||
| (b) | directing the solicitor to repay to his client costs which the client has been ordered to pay to other parties to the proceedings; or | ||
| (c) | directing the solicitor personally to indemnify such other parties against costs payable by them." |
| The solicitor generally must be given a reasonable opportunity to appear before the Court to show cause why the order should not be made. The Court may direct that notice of such proceedings or such order be given to the client. (Note 413) | |
| 465. | A similar jurisdiction is preserved in the CPR 48.7, pursuant to s 51(6) of the Supreme Court Act 1981 as amended by s 4 of the Courts and Legal Services Act 1996 (Note 414) in England and Wales. It is however of wider application in two respects:- |
| 465.1 | First, it bears what appears to be a wider definition of the circumstances in which a wasted costs order may be made, namely, where costs are 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 unreasonable to expect that party to pay." |
| 465.2 | Secondly, unlike the Hong Kong rule, it is not confined to orders against solicitors. It applies to the party's "legal or other representative" and includes barristers. In Hong Kong, the liability of barristers for wasted costs arises only in the limited circumstances covered by the Costs in Criminal Cases Ordinance Cap 492. (Note 415) |
| 466. | Case-law has developed in England and Wales exploring the standards to be applied and circumstances in which wasted costs orders should be made against legal representatives. The White Book (Note 416) summarises the test for making such orders as a three stage test :- |
| * | Had the legal representative of whom complaint was made acted improperly, unreasonably or negligently | |
| * | If so, did such conduct cause the applicant to incur unnecessary costs | |
| * | If so, was it, in all the circumstances, just to order the legal representative to compensate the applicant for the whole or part of the relevant costs (Note 417) |
| 467. | It is appropriate that the existing wasted costs jurisdiction should be preserved and regarded as one of the sanctions against misuse of interlocutory applications. It is arguable that the Hong Kong definition turns on conduct approaching misconduct (as opposed to the English test which stresses unreasonableness or negligence), making it too high a threshold for wasted costs orders. Readers are consulted as to whether the English test should be adopted in preference to the existing O 62 r 8(1) test: Proposal 33. |
| 468 | The question also arises as to whether the power to make wasted costs orders should apply to barristers. There is undeniable force in the argument that where the costs wasted are due to the default of the barrister, no justification exists for penalising only the solicitor. On the other hand, arguments of policy against extending the penalty to barristers exist. They are (i) that the public interest in barristers fearlessly conducting the case as they see best requires their immunity from any form of liability arising out of the manner in which they conduct the case; and (ii) that wasted costs proceedings in general (whether against solicitors or barristers) tend to be hotly contested and constitute unproductive and costly satellite litigation. Readers are consulted as to whether the power to make wasted costs orders should apply to barristers: Proposal 34. |
Notes
| 412 | By CPR 44.2. <back> |
| 413 | The principles developed by the courts in the exercise of this jurisdiction are discussed at HKCP 2001, 62/8/1-8. <back> |
| 414 | "In [the specified proceedings] 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." <back> |
| 415 | Sections 2 and 18. A "legal representative" is defined to include "any person who has a right of audience or a right to conduct litigation on behalf of any party to the proceedings or who is exercising any such right". <back> |
| 416 | White Book 48.7.3 - 48.7.17. <back> |
| 417 | White Book 48.7.3. <back> |
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