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07 Mar 2014

David Corker published in the Association of Costs Lawyers e-bulletin – ‘Wasted costs – are litigation lawyers under fire?’

Costs Lawyers will be familiar with the antagonistic nature of court proceedings, where complaints can arise between lawyers alleging professional impropriety – including those who have acted in such an unreasonable way as to cause unnecessary expense.

The wasted costs jurisdiction allows an opposing party to apply for an order against the other party’s lawyer and is designed especially to penalise a lawyer who breaches his or her duty to the court.

The courts, however, have, in a line of authorities, emphasised the exceptional and sparing use of such a sanction so that it is reserved only for cases of the clearest malpractice.

But in the past few months there have been instances of opposing parties initiating litigation against lawyers for the other side, or related third parties, for the purpose of obtaining a penal order against them.

Two cases concerned wasted costs applications, and the third was over a costs order made on the basis that the solicitors (not the client) were the applicants to an unsuccessful application. All three occurred in criminal proceedings.

The first two wasted costs applications both arose as fallout from the Serious Fraud Office’s failed prosecution of a defendant, Victor Dahdaleh. The SFO is claiming that Mr Dahdaleh’s former solicitors, Allen and Overy, should pay a substantial sum to it in relation to the alleged misconduct in their dealings with a prosecution witness.

Mr Dahdaleh in turn has made an application against a US law firm, Akin Gump, for alleged misconduct during its investigation of him which led to his prosecution. Both instances have been reported in the financial press, including the Financial Times.

Southwark Crown Court has become the forum for two applications in which major law firms are targeted. The judiciary now has to preside over satellite litigation, which will not only be as complex as the original trial, but will probably be more heated. Finality seems a distant goal.

The final case is the judgment of the Administrative Court in DLA Piper v BDO (2013) EWHC 3970.

This case relates to whether a solicitor, acting for an applicant, can be found personally liable to pay the costs of the respondent following the court’s refusal to grant an application to issue a witness summons against the respondent, who was the employer of a defendant tried for fraud in the Crown Court.

There was no allegation of misconduct levelled at DLA by BDO; BDO sought a costs order based on a contention that DLA Piper (and not DLA’s client) was the applicant and so was liable.

The Crown Court judge had ordered DLA, as the defendant’s solicitors, to pay BDO’s costs of resisting the summons. DLA Piper resisted the application by BDO, saying it was not liable to do so.

The possibility that a firm of litigation solicitors, despite acting properly for a client in advancing their interests, could nonetheless end up being held liable to pay such a costs order is something that should be of great concern.

Fortunately the court quashed the order, holding that there was no power to make an order against DLA Piper, in the absence of a finding of misconduct.

It held the case was amenable to judicial review, since it was not a decision relating to trial on indictment. There was no statutory basis to order a wasted costs order in such circumstances, and the court could not rely on its inherent jurisdiction to do so.

Moses LJ held: “It did not affect the conduct of a trial, it was not an integral part of the trial process and it did not arise in an issue between the Crown and the defendant.”

It is unclear whether these instances are isolated ‘straws in the wind’ and just coincidental or whether they are harbingers of an era where lawyers will be more likely to be drawn into the firing line, given sufficient cause.

This article can also be viewed here.