Godfrey Morgan Solicitors Ltd v Cobalt Systems Ltd

A wasted costs order may be made where a representative’s improper, unreasonable or negligent conduct causes another party to incur unnecessary costs, and it is just to require compensation. A claim continued after the claimant has made clear that he no longer wishes to pursue it may constitute an abuse of process and a breach of the representative’s duty to the tribunal. The procedure is flexible. The representative must have a reasonable opportunity to make representations, but submissions by the applicant and cross-examination may be permitted where fairness requires it. The tribunal may refuse late-produced documents where disclosure was ordered, production would prejudice an unrepresented party, and an adjournment would be disproportionate.

Godfrey Morgan Solicitors Ltd represented an employee in an unfair-dismissal claim under a contingency-fee agreement. The agreement made the claimant responsible for disbursements, including counsel’s fees if the claim proceeded to a hearing.

When the claimant learned that he could not fund counsel, he said that he could not continue. The solicitors did not promptly withdraw the claim and did not communicate the withdrawal until shortly before the hearing. The Employment Tribunal made a wasted costs order against the solicitors under rule 48 of the Employment Tribunal Rules of Procedure.

The appeal concerned the exclusion of the solicitors’ file, the procedure adopted by the tribunal, and whether the tribunal had applied the correct wasted-costs principles.

1. Appeal dismissed. The Employment Tribunal was entitled to refuse the solicitors’ file when it was produced for the first time at the hearing. Disclosure had been ordered three months earlier. Late admission risked prejudice, particularly because the claimant was unrepresented, and a further adjournment would have been disproportionate.
2. The tribunal was not precluded from hearing submissions from the party seeking wasted costs. Nor was cross-examination absolutely prohibited. Although cross-examination will usually be inappropriate, it may be fair and proportionate where the representative is no longer acting, privilege has been waived, an oral hearing has been fixed, and the parties give materially conflicting accounts.
3. The tribunal’s reasoning was imperfectly expressed, but its dispositive reasoning could be identified. It had preferred the claimant’s evidence that, once settlement was plainly unavailable, the solicitors failed to advise him promptly that he could not sensibly proceed without funding counsel. It also found that they failed to implement his later instructions to withdraw.
4. Continuing a claim which the claimant no longer wished to pursue was capable of amounting to an abuse of process and a breach of the solicitors’ duty to the tribunal. The tribunal was entitled to conclude that this conduct caused the respondent to incur substantial unnecessary costs.
5. It was not itself improper or unreasonable for solicitors to pursue a weak claim in the hope of settlement. The order was justified by the failure to advise and withdraw, not merely by the pursuit of settlement.
6. The guidance in Ridehalgh v Horsefield remains relevant. Tribunals should ordinarily consider whether the representative acted improperly, unreasonably or negligently, whether that conduct caused unnecessary costs, and whether it is just to order compensation. The procedural application of that guidance must remain proportionate and fair.

• Employment Appeal Tribunal: dismissed the appeal against the wasted costs order of £7,313.
• Employment Tribunal: made a wasted costs order against Godfrey Morgan Solicitors Ltd under rule 48 of the Employment Tribunal Rules of Procedure.