Waste not, want not

Litigants have a newfound impetus for pushing the boundaries of law, particularly when it comes to costs. A recent DLA Piper case suggests lawyers could be in the firing line.

Should the High Court be able to hold an instructed solicitor liable for costs?

Less than a year into the Jackson era and the ramifications are already being felt far and wide. Litigants have a newfound impetus for pushing the boundaries of law, particularly when it comes to costs.

One such case was heard last November, with DLA Piper appealing a decision by HHJ Mowat to order the firm to hand over costs to accountancy firm BDO in an application that had been made on behalf by a DLA Piper client.

The suggestion that the firm could be held liable for such an application will strike fear into the hearts of some litigators.

First the facts: DLA Piper was instructed to defend Mark Woodbridge who, the SFO alleged, committed false accounting and conspiracy to defraud his employer Torex Retail. Ahead of the trial the firm requested that BDO, Torex’s auditors, disclose a number of documents it said were related to the case. BDO refused; DLA Piper issued a summons to the Crown Court with the aim of forcing BDO to comply; the accountancy firm instructed lawyers to defend the case and, in January last year, BDO won.

What happened next was described by Lord Justice Moses, who heard DLA Piper’s appeal, as “erroneous”. HHJ Mowat, who oversaw the satellite litigation, decided she had inherent power to issue a costs order against DLA Piper and did so.

As the original case had been brought by the SFO, the firm was unable to head to the Court of Appeal in a bid to reverse HHJ Mowat’s order. Instead, the firm instructed 3 Raymond Buildings’ Hugo Keith QC on a ‘case stated’ basis, meaning that the appeal could be heard by Moses LJ and Mr Justice Foskett sitting in the Administrative Court.

The court quashed the order, issuing a ruling that repeatedly labels HHJ Mowat’s decision as a mistake.

The key discussion centred on whether the Crown Court had the power to make a decision on costs.

“There seems to be a fatal flaw in the attempt to invoke the inherent jurisdiction of the court,” Moses LJ stated in the ruling. He went on to say, “the mistake seems to have arisen because of the form of the application for a witness summons”.

The Crown Court mistakenly took the decision that it was DLA Piper that had made the application, the High Court said, adding, “there was no warrant for treating DLA Piper as the applicant”.

The Crown Court did not rule that DLA Piper was guilty of any serious misconduct against BDO, neither was the firm a party to the application.

“The judge plainly had the power to make an order for costs against the defendant but misdirected herself as to the identity of the applicant of the summons,” the ruling read.

It added that the judge had made the order because BDO had founded its original case on an “erroneous statutory basis”.

DLA Piper could have brought a judicial review of the decision through the Administrative Court under the Senior Courts Act 1981,but there was no need to in this case because the order was quashed.

This is exactly the kind of costly satellite litigation that Lord Justice Jackson was seeking to avoid when he put forward a raft of proposals to reform the covil litigation system.

Moses LJ cited an earlier ruling in which Mr Justice Openshaw set out the “undesirability” of taking up time with such unnecessary matters.

The 2013 ruling stated: “There is an ever-pressing need to ensure efficiency in the courts; the judges, the parties and most particularly the practitioners all have a duty to reduce unnecessary delays. We do not doubt that the power to make a wasted costs’ order can be valuable but this case, and others recently before this court, demonstrate that it should be reserved only for the clearest cases otherwise more time, effort and cost goes into making and challenging the order than was alleged to have been wasted in the first place.”

This emphatic ruling will come as a welcome relief to all litigators.

For the claimant DLA Piper

3 Raymond Buildings’ Hugo Keith QC instructed by DLA Piper

For the defendant BDO

2 Hare Court’s Andrew Radcliffe QC instructed by Irwin Mitchell