The High Court has upheld a decision not to order wasted costs against a law firm that failed to pass on a ‘drop hands’ settlement offer to a client who was ultimately found to be fundamentally dishonest.
Though saying the firm’s conduct was negligent, His Honour Judge Hellman at first instance was not persuaded Mohammed Saqib Razaq would have accepted the offer and so avoided the litigation costs that followed.
Mrs Justice Lambert ruled that, on the evidence, she too would have found it impossible to be satisfied that the offer would have been accepted.
Mr Razaq brought his claim following a road traffic accident in March 2014. At trial, the claim was dismissed, found to be fundamentally dishonest and the claimant was ordered to pay insurer Esure’s costs on the indemnity basis.
However, during the course of submissions on costs, it emerged that Esure had made a ‘drop hands’ offer five months before trial as it had doubts about the bona fides of the claim.
It was accepted that Mr Razaq’s then solicitor, Oliver Brumby of Altrincham firm Dunne & Co, misplaced the letter and it was not communicated to the claimant. Esure applied for a wasted costs order against Dunne & Co, which had come off the record before the trial.
The application came before HHJ Hellman on in February 2019. A statement from Mr Brumby was only produced on the day of the hearing but the judge granted Dunne & Co’s application for relief from sanctions and permitted it to be adduced.
Applying the three-limb Ridehalgh test on making wasted costs orders, he refused the application on the grounds that, although Dunne & Co was negligent, he was not satisfied that the conduct constituted a breach of any duty owed by Mr Brumby to the court.
Alternatively, and further, he found as a fact that the conduct did not cause any wasted costs given that he was not persuaded on balance that the claimant would have accepted the offer.
HHJ Hellman went on to find that, had the application not failed on limbs one and two, he would have granted it under the third limb because it would have been just for Dunne & Co to compensate Esure.
The judge had allowed Mr Brumby’s statement to be adduced because the prejudice to Dunne & Co if the statement was not in evidence would outweigh any prejudice to the claimant.
Lambert J refused permission to appeal the judge’s decision to grant relief from sanctions, finding the HHJ Hellman had applied the Denton framework “meticulously”.
She added: “It is fair to observe that other judges may have reached a different conclusion on the application, but that is no basis for my granting permission.”
The “real question”, she went on, was whether HHJ Hellman had been wrong not to adjourn the hearing in order to permit the claimant to put in evidence in response to Mr Brumby’s.
“I recognise that, at first blush, the judge’s decision to proceed may seem generous. But this is to overlook that the judge had clearly formed a preliminary view that he should be ‘extremely cautious’ before drawing any conclusions from the statement adverse to Mr Razak.” The judge also heard from Esure’s counsel and the unrepresented Mr Razaq.
HHJ Hellman had granted permission to appeal his decision on the wasted costs order because “the issue of whether a solicitor owed a duty to the court (under the overriding objective) to pass on an offer of settlement to a client” was novel and would benefit from fuller argument and consideration by a higher court.
However, Lambert J said she was not prepared to deal with it because, “regrettably”, Esure’s skeleton argument dealt with the issue “in a few short sentences running to no more than five lines”.
She explained: “The appellant’s argument was simply that it would be ‘absurd’ if a solicitor’s failure to advise his client was not also a breach of the solicitor’s duty to the court. The argument was not developed in any way in spite of the issue being centre stage of the appeal.
“Mr Higgins [for Esure] may be correct in submitting that the issue was ‘barn door obvious’ as he put it, but it also raises issues of much wider significance which I would need to consider with some care.”
Lambert J adjourned that point and turned instead to whether the claimant would have accepted the offer.
She noted that HHJ Hellman took into account the unchallenged finding of the trial judge that the claim was fundamentally dishonest and that notwithstanding advice from his later solicitors – who had advised the claimant that the claim was weak – he had pressed his case to trial.
“The fact that the claimant had pursued a dishonest case to trial and done so in spite of being advised that his claim was weak were matters which the judge was entitled to take into account. In the same position, I too would have found it impossible to be satisfied on balance that the offer would have been accepted by the claimant.”
That made considering the duty the solicitor owed to the court here academic.