Sergio Mendes Costa v Dissociadid Limited & Anor.

A wasted costs order is compensatory, not punitive or regulatory. The applicant must establish that the legal representative’s improper, unreasonable or negligent conduct caused costs to be incurred, and the court retains a discretion whether to order payment. The jurisdiction must be exercised carefully and only in a clear case. Conduct may be unreasonable for the purposes of a costs rule without satisfying the narrower statutory meaning of unreasonable conduct under the Senior Courts Act 1981. A late and abandoned argument may justify additional party-and-party costs, yet still fall short of improper, unreasonable or negligent conduct sufficient for a wasted costs order.

The claimant had been ordered to pay £10,000 in costs after raising a late jurisdictional objection to a mandatory injunction granted following the substantive judgment. He applied for a wasted costs order requiring his former counsel and solicitors to pay that sum. The application alleged that the legal team had negligently advanced the jurisdiction argument and sought permission to appeal without proper instructions.

The application was determined on the papers under the procedure in Practice Direction 46. The central issues were whether the conduct was improper, unreasonable or negligent within section 51(7) of the Senior Courts Act 1981, whether it caused the costs claimed, and whether the court should exercise its discretion to make an order.

1. The application for a wasted costs order was dismissed. The claimant had authorised the jurisdiction argument, had been warned that pursuing it might affect costs, and had expressly instructed the legal team to seek permission to appeal. The evidence did not establish that the legal representatives’ conduct caused the court to require further written submissions in the manner alleged.

2. The court applied the principles governing wasted costs orders. The jurisdiction is compensatory and requires a causal link between the representative’s conduct and the costs incurred. It is a summary jurisdiction to be exercised with care and only in a clear case. It must not become satellite litigation or a back-door means of recovering costs that are otherwise unavailable.

3. The statutory categories in section 51(7) have distinct meanings. Improper conduct is judged according to the consensus of professional opinion. Unreasonable conduct means conduct which is vexatious, designed to harass rather than advance resolution, and which permits of no reasonable explanation. Negligence means, in an untechnical sense, failure to act with the competence reasonably expected of ordinary members of the profession.

4. The meaning of unreasonable conduct under section 51(7)(a) is narrower than the looser meaning of unreasonable behaviour under CPR 63.26(2), which may include conduct generating unnecessary costs when measured against the objective of minimising litigation costs. The late jurisdiction argument was unreasonable in the latter sense, but it was not improper, unreasonable or negligent within section 51(7)(a).

5. The argument should not have been raised so late and without supporting authority. Nevertheless, the claimant’s authorisation of the point, his awareness of the costs risk, and the absence of evidence showing professional incompetence meant that the statutory threshold was not met.