Costs Litigation Blog

In this article Rebecca Henshaw-Keene looks at wasted costs orders following the judgment in Rainer Hughes Solicitors v Liverpool Victoria Insurance Company Ltd & Ors (Rev1) [2024] EWHC 585 (KB).The judgment contains significant guidance on preparing for wasted costs hearings and is an important addition to the line of cases on the requirements in respect of witness statements for non-English speakers. With thanks to Andrew Roy KC for his comments on the article.

Background

This matter arose from an RTA in May 2019 following which the Claimant brought a claim for injury and hire charges totalling almost £50,000. Her daughter-in-law was her passenger at the time. The Defendant had successfully applied to resile from an admission of liability, to plead fraud and to bring a counterclaim in the tort of deceit against the Claimant and her daughter-in-law.

The Claimant’s first language was Turkish. She had previously been represented by a different firm who had prepared a witness statement in Turkish with a certified translation.

The following steps had been taken by the Claimant’s solicitors, Rainer Hughes (“RH”), in preparation for trial:

• A Part 20 Defence for the Claimant was drafted in English and a Statement of Truth was signed by her in English.
• The Claimant’s witness statement had been prepared in English. In that statement, the Claimant said that her daughter-in-law spoke to the third-party driver after the collision. She had further taken delivery of a credit hire vehicle and signed their documentation “not realising that what I was actually signing was an expensive hire agreement”. Further, that she had never heard of the term impecuniosity and did now not want to advance a case on this basis. There was no Turkish version of this statement.
• The Claimant’s pre-trial checklist indicated she needed an interpreter at trial.

At a pre-trial review, RH was ordered to clarify in writing that the Claimant’s witness statements were compliant with CPR Part 32 and that the Statements of Truth complied with CPR Part 22.

RH’s position was that, whilst the Claimant’s English was “proficient”, an interpreter was needed to assist with the stresses of the trial: the Claimant was elderly and suffering from medical issues.  The Claimant’s daughter-in-law had “confirmed in numerous telephone calls that [the Claimant] fully understood the contents of her witness evidence.”

The trial came before HHJ Monty KC in December 2022.

At the outset, Claimant’s Counsel told the Judge that the Claimant was: “unable to read properly her witness statement or the pleadings, which were in English, as she was only proficient in Turkish.”

The Claimant had also not paid the trial fee. Relief from sanction was refused and the claim was struck out. Judgment was entered for the Part 20 claim at £25,000, with costs to be assessed pursuant to CPR r.44.15(c) on the basis that the Claimant and/or her solicitor’s conduct was deemed likely to obstruct the just disposal of the proceedings.

Wasted costs

RH was ordered to “show cause why they should not be jointly and severally liable” for some or all of these costs. They filed a statement saying:

• At an in person meeting it was clear that the Claimant had a “good grasp of English” despite her daughter-in-law assisting her;
• The file handler had said the statement would be translated into Turkish but that was “as further assistance”;
• The Claimant did not request for her statement of pleadings to be translated.

The Defendant took issue with a number of matters:

• It had raised the translation issue in December 2020, noting that the reply to defence of the Claimant was in English despite the assertion she was Turkish and her statement required translation. RH had responded at the time saying that, due to: “time constraints, we were unable to source our client’s statement in Turkish in the first instance. We are aiming to obtain such and will have better opportunity to do this if a stay is agreed”.
• The Claimant’s statement was then served in November 2021 (approximately 11 months post the correspondence above, 12 months prior to the pre-trial review hearing and 13 months prior to the trial).

The wasted costs hearing came before HHJ Monty KC on 25 July 2023. The Judge allowed the application for a Wasted Costs Order and ordered that RH pay:

• Wasted costs arising from the failures relating to the Claimant’s first language being Turkish which he summarily assessed in the sum of £3,000;
• The Defendant’s costs of the wasted costs application which he summarily assessed on the indemnity basis in the sum of £9,500;
• The costs of the Claimant and her daughter-in-law on the wasted costs application summarily assessed in the sum of £4,000.

RH’s statement filed for the application hearing was found to be unsatisfactory, not containing all relevant correspondence and having been written by someone not seemingly involved with the case. There had been four fee-earners on the file at various times, none of whom had given evidence.

The judge found there had been “a proliferation of red flags” and that “without properly translated statements, this was a disaster waiting to happen”

Turning to the wasted costs jurisdiction, the conduct had been negligent in the Ridehalgh v Horsefield [1994] Ch 205 sense: a failure to act with the competence reasonably to be expected of ordinary members of the profession. It was a breach of the firm’s duty to the Court: Persaud v Persaud [2003] EWCA Civ 394 at [27] and Gillian Radford & Co v Charles [2003] EWHC 3180 (Ch) at [20]. Finally, these failures led to costs being wasted.

Turning to proportionality, the Judge found:

“This was a straightforward case where the costs had been increased by Rainer Hughes not accepting the inevitable, and conceding that they were wrong, and instead having argued – without justification – that there was never anything to suggest that Mrs Karadag was other than proficient in English … Rainer Hughes negligently failed to deal with the language issue, have defended this application without calling evidence from those actually involved at the truly material times such as the drafting of the statement, have failed to produce all relevant documents, and have ignored what is in my view clear from the documents. That is why the costs are greater than they should have been”.

RH made the following points on appeal:

The Judge erred procedurally in failing to consider proportionality as a preliminary issue before going on to consider the merits of the application for wasted costs

RH relied on the case of Harrison v Harrison [2009] EWHC 428 (QB), that the wasted costs jurisdiction will only be exercised in cases which are “plain and obvious” and that it is a summary remedy which should be capable of being dealt with in “hours rather than days”.

This was a matter for the Court’s discretion, and not to be lightly interfered with by an Appeal Court. On the basis of the facts as they appeared to HHJ Monty KC in December 2022 when he refused relief from sanction, it appeared to be a clear case. No application was made by RH at the directions hearing that the matter should not proceed on grounds of proportionality, neither was one made in front of Judge Monty at the final hearing. The costs had been by then, obviously, incurred.

The Judge erred substantively in failing to exercise his discretion to dismiss the application on grounds of proportionality

Again, it was said that the discretion of the Judge was a wide one. He was entitled to take into account the fact that, on his assessment, the costs were greater than they should have been because of the unreasonable approach taken by Rainer Hughes to the application. That the final sum awarded was reduced from that put forward by the Defendant was immaterial.

It was agreed between the parties, as stated in Harrison v Harrison, that the jurisdiction was confined to cases which are “plain and obvious”. RH had sought to suggest that this matter was not capable of such an assessment. The discussion on this point centred on RH’s statement written in defence of the application. It had been put forward by a senior partner in the firm. It was not clear, held the Court, whether the partner had ever personally heard the Claimant speak or had been present in any meeting with her, leading the Judge to comment that “the absence of such evidence is in the nature of a deafening silence.”

HHJ Monty KC had been right to see what support, if any, there was for the position adopted by the senior partner, and what the evidence showed about the Claimant’s fluency in the English language.

In summary, the Judge was justified in finding that there had been a clear breach of CPR Part 32 and PD 22, as well as a breach of the overriding objective imposing an obligation on the court to deal with cases justly and at proportionate cost by, among other things, enforcing compliance with rules, practice directions and orders. The identified negligence of the solicitors was a breach of the duty on a legal representative to assist the court in promoting the overriding objective.

Finally, the decision to award costs on the indemnity basis was upheld, again because of the conduct of RH.

Take away points: witness statements

Practitioners will be familiar with the relevant legal provisions. This article contains an overview of them as stated in the leading case of Correia v. Williams [2022] EWHC 2824 (KB)

• The proficiency of a witness in English is key. It matters not, in some cases, what a witness’ “own language” or “mother tongue” is. Witnesses who are bi-lingual or otherwise sufficiently fluent in English can give evidence in English. For further commentary on this, see the decision of Freedman J in Afzal -v- UK Insurance Ltd [2023] EWHC 1730.

• The ability to be cross-examined in English appears to be the obvious litmus test. HHJ Monty KC said: “any witness who required a translator at trial would in my view be deemed to be insufficiently proficient to give evidence at trial in English”

• Also in Afzal, the then current Business and Property Court Guide was considered to be instructive, which read: a witness’s own language includes any language in which the witness is sufficiently fluent to give oral evidence (including under cross-examination).

The ability of the witness to be cross-examined in English is paramount and should be considered at the earliest opportunity. Is the witness’ English good enough to allow them to give their best evidence, in a situation which the witness may find stressful? There is a useful passage in the first instance judgment of HHJ Evans in Afzal (included in the appeal judgment):

“One of the fundamental principles of civil litigation is that parties are entitled to know before they come to trial what it is that a witness is going to say and are entitled to assume that that which the witness says in his statement is expressed in a manner which he will choose to express himself with all the vocabulary and nuance and everything else available to him; and a witness statement that is drafted in a language which is not the witness’s own language invariably will not convey the witness’s evidence in the same manner that it would if it were drafted in his own language.”

As above, a witness who professes the ability to read and understand an English statement, but who has an interpreter to assist at trial, is vulnerable to challenge.

What should be avoided, taking guidance from this case, is an over-reliance on the witness’ family and friends to assist them in preparing for trial.

Take away points: wasted costs

Mr Justice Martin Spencer made clear that a Judge’s discretion in considering proportionality and whether, on the information available, they should exercise their discretion to decline allowing a wasted costs application to proceed, remained a wide one. “No hard and fast rule can be laid down because the circumstances in which a wasted costs application may be made are infinitely varied.”

The judgment does however make clear that respondent solicitors who unreasonably throw up obstacles to a wasted costs application (for example by seeking to defend the indefensible) might not be allowed to rely upon the extra costs thereby generated in support of an argument that the application should be dismissed on proportionality grounds, This is consistent with CPR 44.5(3) which provides that one of the metrics by which proportionality is to be judged is “any additional work generated by the conduct of the paying party”.

It also makes clear that any point that the application should be dismissed on grounds of proportionality needs to be taken at the earliest possible stage.  In practical terms, doing so at the full hearing of the application itself will almost be by definition be too late.  The costs will have already been incurred.  The toothpaste cannot be put back in the tube.  The only options would either be to consign the work generated by those costs to redundancy or to use it to determine the application.  The latter is unlikely to be an attractive option.

Mr Justice Martin Spencer provided guidance for the Court on show cause orders, which practitioners can also follow. Where a Judge decides to make a “show cause” order, they should consider giving a direction that the applicant identify matters referred to in PD 46, paragraph 5.9 being a) what the legal representative is alleged to have done or failed to do and b) the costs that the legal representative may be ordered to pay or which are sought against the legal representative, as early as possible.

This will give the court a basis upon which to make an early assessment of the issue of proportionality because there will then be information on how straightforward or complicated the “negligence” issues are likely to be. The order of HHJ Monty KC had instead read: Rainer Hughes Solicitors do show cause why they should not be jointly and severally liable for some or all of the costs referred to in paragraph 5 above pursuant to CPR 46.8.

Finally, on deadlines, the Defendant was penalised for the fact that their Statement of Costs had been served late and assessed their costs at £9,500 inclusive of VAT. Costs had been claimed in the sum of approximately £15,000.

Ready reckoner: relevant CPR provisions

CPR Part 22 and Practice Direction (PD) 22 deals with statements of truth –

• R.22.1(1): The following documents must be verified by a statement of truth … (c) a witness statement.

• R.22.3: If the maker of a witness statement fails to verify the witness statement by a statement of truth the court may direct that it shall not be admissible as evidence.

• PD 22, 2.4. The statement of truth verifying a witness statement must be in the witness’s own language.

CPR Part 32 deals with witness statements –

• R.32.4(1): A witness statement is a written statement signed by a person which contains the evidence which that person would be allowed to give orally.

• R.32.8: A witness statement must comply with the requirements set out in Practice Direction 32.

The Practice Direction to part 32 (“PD32”) sets out the requirements for the preparation of witness statements:

• PD32: 18.1. The witness statement must, if practicable, be in the intended witness’s own words and must in any event be drafted in their own language.

• PD32: 19.1. A witness statement should – (8) be drafted in the witness’s own language

• PD32: 20.1. A witness statement is the equivalent of the oral evidence which that witness would, if called, give in evidence it must include a statement by the intended witness in their own language that they believe the facts in it are true.

• PD32: 23.2. Where a witness statement is in a foreign language

(a) The party wishing to rely on it must –

(i) have it translated; and

(ii) file the foreign language witness statement with the court; […]

• PD32: 25.1. Where:

(1) an affidavit,

(2) a witness statement, or

(3) an exhibit to either an affidavit or a witness statement does not comply with Part 32 or this practice direction in relation to its form, the court may refuse to admit it as evidence and may refuse to allow the costs arising from its preparation.

There are also provisions in the King’s Bench Guide, Chancery Guide and the Business and Property Courts Guide.