Hedrich & Anor v Standard Bank London Ltd & Anor

A wasted costs order is a summary remedy reserved for a reasonably obvious case. At the first stage, the applicant must present strong prima facie evidence which, if unanswered, would be likely to justify an order. The proceedings must also be proportionate to the costs involved.

A solicitor’s defective disclosure process does not itself establish negligence. The court considers whether an ordinarily competent solicitor clearly breached a duty owed to the court and whether that breach caused identifiable wasted costs. A solicitor may ordinarily accept a client’s account unless there is reason for further investigation. Where privilege prevents a complete answer, the court must proceed with particular caution and resolve genuine doubt in the solicitor’s favour.

The claimants brought proceedings against Standard Bank London Ltd for remuneration under a consultancy agreement. During the trial, belated disclosure revealed evidence adverse to their case. Their solicitors, Messrs Zimmers, ceased acting, the claim was discontinued and indemnity costs were ordered against the claimants. Those costs remained unpaid.

The Bank subsequently sought a wasted costs order against Zimmers. Field J dismissed the application because causation had not been established, although he found a good prima facie case of negligence. He directed each side to bear its own costs.

The Bank appealed against dismissal of its application. Zimmers cross-appealed against the costs order. The central questions were whether there was a strong prima facie case that Zimmers had negligently breached their disclosure duties, whether any breach caused wasted costs, and whether such extensive proceedings were appropriate for summary determination.

1. Appeal dismissed; cross-appeal allowed. Ward LJ, with whom Sedley and Wall LJJ agreed, held that the Bank had not established a strong prima facie case of negligence. The wasted costs application was also unsuitable for a summary jurisdiction intended to be exercised in hours rather than days.
2. A wasted costs applicant must show a reasonably obvious case. The court considers the overall picture rather than investigating every detail of the conduct of complex litigation. Defective disclosure by a client does not itself show that the solicitor clearly breached the separate duty owed to the court.
3. The evidence strongly indicated that Zimmers did not receive the CD-ROM containing the whole contents of their client’s computer until 14 November 2005. The Bank had already destroyed the client’s credibility in the underlying trial and could not establish a strong prima facie case by preferring his evidence to the solicitor’s account. The apparent date relied upon in two emails did not corroborate an earlier electronic transfer.
4. Negligence was to be judged by the standard of an ordinarily competent, reasonably well-informed solicitor. Zimmers could reasonably accept instructions that the emails had initially been lost and that the subsequently recovered material contained the relevant emails. There was no evidence that they had failed to explain the obligation to disclose adverse documents. The demands placed upon a solicitor were not to be measured by the exceptional resources or practices of a large City firm.
5. The client’s refusal to waive privilege materially restricted Zimmers’ ability to explain their advice and instructions. That restriction reinforced the need for caution. On the available evidence, no prima facie negligence was established before or after the solicitors learned that the email archive had been recovered.
6. Zimmers produced the CD-ROM when its relevance became reasonably apparent. By then the relevant costs had already been incurred, so causation was not established in any event. The volume, delay and expense of the application were incompatible with the summary nature of the jurisdiction and the need to confine satellite litigation rigorously.
7. Because the wasted costs application should not have been brought, Zimmers were entitled to their costs. Field J’s order that each party bear its own costs was set aside, and the application stood dismissed with costs to be assessed on the standard basis if not agreed.

1. Court of Appeal (Civil Division): The Bank’s appeal was dismissed. Zimmers’ cross-appeal was allowed, and the wasted costs application was dismissed with costs on the standard basis.
2. High Court, Queen’s Bench Division: Field J dismissed the wasted costs application because causation had not been established, although he found a good prima facie case of negligence. He ordered each party to bear its own costs.
3. Underlying High Court proceedings: The claimants discontinued their contractual and quantum meruit claims during trial. Judge Overend ordered them to pay the Bank’s costs on the indemnity basis.