A wasted costs order bypasses the client and reaches the legal representative personally. For a solicitor in England and Wales, an order under section 51 of the Senior Courts Act 1981 can convert a case-management failure into a five- or six-figure personal liability. This entry covers the statutory power, the Ridehalgh test, and how a solicitor firm's professional indemnity (PI) cover written on the SRA Minimum Terms and Conditions (MTC) responds.
Section 51(6) of the Senior Courts Act 1981 gives the court a discretionary power to disallow, or to order the legal representative to meet, the whole or any part of any wasted costs. Section 51(7) defines wasted costs as costs incurred by a party as a result of any improper, unreasonable or negligent act or omission of a legal representative, or which the court considers it unreasonable to expect the party to pay. The power applies to solicitors, barristers and other legal representatives.
The order sits alongside — but is distinct from — an ordinary adverse costs order. An adverse costs order shifts costs between the parties. A wasted costs order shifts costs onto the lawyer, on a discrete statutory footing that requires the court to identify particular conduct and the specific costs it caused.
The Court of Appeal in Ridehalgh v Horsefield [1994] Ch 205 set out the three-stage test that continues to govern applications:
The three limbs on which conduct can be caught have specific content:
Causation is the guard-rail. The court must identify the specific costs said to have been wasted and be satisfied that the impugned conduct caused those costs. A general complaint that a case was pursued badly will not do. The applicant has to point to particular acts or omissions and to the costs traceable to them. Immunity issues, particularly for barristers acting on instructions, were revisited in Medcalf v Weatherill [2002] UKHL 27, which reinforced that the jurisdiction must be exercised with restraint where a legal representative cannot, because of privilege, put their full answer before the court.
Clause 1 of the SRA Minimum Terms and Conditions requires the insurance to indemnify each insured against civil liability to the extent that it arises from Private Legal Practice in connection with the firm's practice. A wasted costs order under section 51 is a civil liability of the individual solicitor (and, in practice, the firm) arising directly from the conduct of Private Legal Practice. It falls within clause 1.
The order therefore engages the firm's PI cover in the ordinary way. The aggregate limit of indemnity, the retention (self-insured excess) and the policy's defence-costs mechanics apply as they would to any other claim on the policy. Notification obligations are triggered as soon as the firm becomes aware of the application or of circumstances that might give rise to one.
A solicitor firm pursues a professional-negligence claim on behalf of a client. Disclosure and expert evidence make it clear, well before trial, that the claim has no reasonable prospect of success on causation. The firm nonetheless presses on to a two-day trial. The claim fails. On the defendant's application, the court finds that continuing to trial after the causation position had crystallised was unreasonable within limb one of Ridehalgh, that the conduct caused the defendant's trial costs to be incurred, and that it is just to make an order. The court orders the solicitor firm to pay £45,000 of the defendant's costs personally. That is a wasted costs order under section 51(6)–(7) of the Senior Courts Act 1981.
The firm's SRA-MTC-compliant PI policy responds to the £45,000 as a civil liability arising from Private Legal Practice under clause 1. The policy's aggregate limit is reduced by the payment. The firm pays its retention. Defence costs incurred in resisting the application are dealt with under the policy in the usual way.
Wasted costs orders are rare, but the possibility should shape file-review discipline and decisions to continue in the face of adverse disclosure or expert evidence. Firms placing PI cover through a considered broker can review notification wording, retention level and aggregate position against the profile of the litigation book.
Related entries: Adverse costs orders and solicitor PI. For the broader picture see the solicitors' PI insurance guide.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.