PLR AND WRITING: LETTER EXAMPLE 1
Your Ref:
Our Ref: JS/636123
Mr Mark Jones
Managing Director
Compu-Fit Ltd
Hydra House
Wellington Place
Horsham
Sussex
GU32 1SR
19 December 2018
Dear Mr Jones
Gideons LLP – Wasted Costs Order
I write further to our recent correspondence in which you asked for advice on bringing a wasted costs order
against Gideons LLP (‘G’).
To summarise the position to date, in 2017 G issued proceedings against Compu-Fit Ltd (‘C’) in the name of
Software Solutions Limited (‘S’) in connection with a disputed invoice. It transpired G was not authorised to act
for S as S’s board had not resolved to instruct G. I notified G they were not authorised to act but they continued
to do so. C successfully obtained an order for the proceedings to be struck out. C is now seeking advice on
whether G can be liable for C’s wasted costs.
I have set out my detailed advice below, including, as requested, the relevant law. In summary, the court can
order G to pay C’s costs under a wasted costs order and is likely to do so on the basis G acted negligently and
caused C to incur unnecessary costs. C will also be able to apply for a costs order against G as a ‘non-party’.
The Wasted Costs Order
The court can make an order against G to pay the whole or part of any wasted costs under s.51 Senior Courts
Act 1981 (‘SCA’), which applies both to a party’s own representatives and to their opponent’s representatives
(Brown v Bennett). The court is likely to make an order where the three stage test under CPR 46 PD 5.5 is
satisfied, as follows.
Firstly, it must be shown G acted improperly, unreasonably or negligently. ‘Negligence’ includes falling below
the standard of competence expected of solicitors (Ridehalgh v Horsefield). The court has found evidence of
negligence where a solicitor was unaware they lacked authority to act but ought to have known as part of being
a prudent solicitor (Padhiar v Patel). Given G not only acted without authority but continued to do so even after
I made them aware of this, it is highly likely the court will hold this first stage of the test is met.
Secondly, the conduct must have caused unnecessary costs to be incurred. The court will look for evidence C
would not have incurred costs ‘but for’ G acting without authority (Brown v Bennett). Similar cases have shown
that where a case is struck out on the grounds the solicitors did not have authority to act (Padhiar v Patel), this
will be seen as evidence of causation. As the case has now been successfully struck out based on G’s lack of
authority, it is likely the court will find causation in this matter.
Lastly, it must be just in all the circumstances for the court to make an order. Whilst the court will generally
make an order where an error has resulted in a significant waste of time and costs (West African Gas Pipeline v
Willbros Global Holdings), it will also consider C’s conduct. For instance, where a party notices their opponent’s
solicitors’ mistake in correspondence but fails to raise this with them, it is likely that party will be denied wasted
costs (R(C) v Salford City Council). Given I notified G they lacked authority, thereby mitigating the harm caused,
this last ground should not present a problem.
, For these reasons, it is likely the court will make an order for wasted costs. However, they have discretion not
to. I would therefore advise also making a non-party costs order as outlined below.
The Non-Party Costs Order
A non-party costs order can be made against a solicitor under s.51 SCA on the grounds the solicitor is in breach
of his duty to the court. This order can be made in conjunction with a wasted costs order. Further, if the wasted
costs order is refused this does not mean the non-party costs order will be refused as the two are subject to
different tests (Excalibur Ventures v Psari Holdings).
In this matter G has breached its duty to the court by acting for S without authority. I believe the court is likely
to make a non-party costs order based on the similarity of the facts of this matter to the case Skylight Maritime
SA v Ascot Underwriting. In that case the court made a non-party costs order against the opposing solicitors on
the basis they breached their warrant of authority.
Advice
In acting without authority, even after being notified, G has acted negligently and caused C to incur unnecessary
costs. Given the case has now been struck out and C has mitigated the harm caused by notifying G, it is likely the
court will make an order for wasted costs.
If the court makes this order it will look to put C in the position it would have been in had the warranty of
authority been true. This will usually involve the solicitors being ordered to pay all costs incurred from the point
the claim was initiated to when it was struck out (Skylight Maritime SA v Ascot Underwriting). However, please
be aware the court has the discretion to make any order it wishes so C may not recover all costs.
Further, the court could choose not to make a wasted costs order at all. I therefore advise we also make an
application for a non-party costs order on the basis G breached their warrant of authority.
I hope this answers your questions. If there is anything you would like to discuss do not hesitate to contact me.
Yours sincerely
NAME
Partner
Word Count: 912
Your Ref:
Our Ref: JS/636123
Mr Mark Jones
Managing Director
Compu-Fit Ltd
Hydra House
Wellington Place
Horsham
Sussex
GU32 1SR
19 December 2018
Dear Mr Jones
Gideons LLP – Wasted Costs Order
I write further to our recent correspondence in which you asked for advice on bringing a wasted costs order
against Gideons LLP (‘G’).
To summarise the position to date, in 2017 G issued proceedings against Compu-Fit Ltd (‘C’) in the name of
Software Solutions Limited (‘S’) in connection with a disputed invoice. It transpired G was not authorised to act
for S as S’s board had not resolved to instruct G. I notified G they were not authorised to act but they continued
to do so. C successfully obtained an order for the proceedings to be struck out. C is now seeking advice on
whether G can be liable for C’s wasted costs.
I have set out my detailed advice below, including, as requested, the relevant law. In summary, the court can
order G to pay C’s costs under a wasted costs order and is likely to do so on the basis G acted negligently and
caused C to incur unnecessary costs. C will also be able to apply for a costs order against G as a ‘non-party’.
The Wasted Costs Order
The court can make an order against G to pay the whole or part of any wasted costs under s.51 Senior Courts
Act 1981 (‘SCA’), which applies both to a party’s own representatives and to their opponent’s representatives
(Brown v Bennett). The court is likely to make an order where the three stage test under CPR 46 PD 5.5 is
satisfied, as follows.
Firstly, it must be shown G acted improperly, unreasonably or negligently. ‘Negligence’ includes falling below
the standard of competence expected of solicitors (Ridehalgh v Horsefield). The court has found evidence of
negligence where a solicitor was unaware they lacked authority to act but ought to have known as part of being
a prudent solicitor (Padhiar v Patel). Given G not only acted without authority but continued to do so even after
I made them aware of this, it is highly likely the court will hold this first stage of the test is met.
Secondly, the conduct must have caused unnecessary costs to be incurred. The court will look for evidence C
would not have incurred costs ‘but for’ G acting without authority (Brown v Bennett). Similar cases have shown
that where a case is struck out on the grounds the solicitors did not have authority to act (Padhiar v Patel), this
will be seen as evidence of causation. As the case has now been successfully struck out based on G’s lack of
authority, it is likely the court will find causation in this matter.
Lastly, it must be just in all the circumstances for the court to make an order. Whilst the court will generally
make an order where an error has resulted in a significant waste of time and costs (West African Gas Pipeline v
Willbros Global Holdings), it will also consider C’s conduct. For instance, where a party notices their opponent’s
solicitors’ mistake in correspondence but fails to raise this with them, it is likely that party will be denied wasted
costs (R(C) v Salford City Council). Given I notified G they lacked authority, thereby mitigating the harm caused,
this last ground should not present a problem.
, For these reasons, it is likely the court will make an order for wasted costs. However, they have discretion not
to. I would therefore advise also making a non-party costs order as outlined below.
The Non-Party Costs Order
A non-party costs order can be made against a solicitor under s.51 SCA on the grounds the solicitor is in breach
of his duty to the court. This order can be made in conjunction with a wasted costs order. Further, if the wasted
costs order is refused this does not mean the non-party costs order will be refused as the two are subject to
different tests (Excalibur Ventures v Psari Holdings).
In this matter G has breached its duty to the court by acting for S without authority. I believe the court is likely
to make a non-party costs order based on the similarity of the facts of this matter to the case Skylight Maritime
SA v Ascot Underwriting. In that case the court made a non-party costs order against the opposing solicitors on
the basis they breached their warrant of authority.
Advice
In acting without authority, even after being notified, G has acted negligently and caused C to incur unnecessary
costs. Given the case has now been struck out and C has mitigated the harm caused by notifying G, it is likely the
court will make an order for wasted costs.
If the court makes this order it will look to put C in the position it would have been in had the warranty of
authority been true. This will usually involve the solicitors being ordered to pay all costs incurred from the point
the claim was initiated to when it was struck out (Skylight Maritime SA v Ascot Underwriting). However, please
be aware the court has the discretion to make any order it wishes so C may not recover all costs.
Further, the court could choose not to make a wasted costs order at all. I therefore advise we also make an
application for a non-party costs order on the basis G breached their warrant of authority.
I hope this answers your questions. If there is anything you would like to discuss do not hesitate to contact me.
Yours sincerely
NAME
Partner
Word Count: 912
