Koo Golden East Mongolia (A Body Corporate) v Bank of Nova Scotia & Ors

A wasted costs order is a remedy of last resort. It requires improper, unreasonable or negligent conduct by a legal representative, causation of unnecessary costs, and a just order in all the circumstances. A possible failure by a foreign client to pay costs is insufficient. Pursuing a difficult claim is not negligent merely because it ultimately fails. An error in failing to serve a party does not justify wasted costs without proof that it caused additional costs.

The claimant brought proceedings concerning gold said to have passed through MongolBank and the Bank. After interim applications, the claim against the Bank changed to an application for Norwich Pharmacal relief. The Court of Appeal dismissed the action, upheld state-immunity and discretionary objections, and ordered the claimant to pay the Bank's costs. Permission to appeal to the House of Lords was refused.

The Bank applied for wasted costs against the claimant's solicitors. It alleged that they should have appreciated the immunity issues, accepted the Bank's first witness statement, and served MongolBank. The issues were whether the conduct crossed the wasted-costs threshold and whether it caused costs which could not be recovered.

1. The application was dismissed. Under section 51 of the Supreme Court Act 1981 and the associated procedural rules, a wasted-costs order requires improper, unreasonable or negligent conduct, unnecessary costs caused by that conduct, and a just order in all the circumstances.
2. The original claim against the Bank was not so plainly doomed that its pursuit was negligent. United States of America v Dollfus [1952] AC 582 concerned a materially different immunity issue and did not conclusively determine the position concerning mixed or unallocated gold. The immunity issues were complex and fact-sensitive. The Bank's failure to seek strike-out or otherwise end the claim supported the conclusion that reasonable lawyers could regard it as arguable.
3. The Norwich Pharmacal claim was not negligent merely because its prospects were poor or because it failed. The Court of Appeal had required a full hearing and reserved judgment. The House of Lords regarded the proposed appeal as raising important questions about immunity and agents.
4. It was reasonable to seek further evidence after conflicting information about the location of the gold. The first witness statement did not conclusively exclude gold held through another depository. Failure to serve MongolBank was an error, but the Bank did not show that it caused additional costs.
5. Independently, no recoverable loss had been established. The claimant had paid the assessed Court of Appeal costs, had not refused or indicated an inability to pay the remaining costs, and was under no obligation to provide security. Applying Medcalf v Mardell [2003] 1 AC 120, wasted costs could not be used as the Bank's primary means of obtaining security.

The judgment records prior procedural history but is a first-instance decision on the wasted-costs application.

• Court of Appeal: the action was dismissed and the claimant was ordered to pay the Bank's costs. The decision is cited as [2007] EWCA Civ 1443.
• House of Lords: permission to appeal was refused after an oral hearing.