PI Brief Update

Throwing good money after bad? A warning on wasted costs - Michael Brooks Reid, Temple Garden Chambers

20/11/25. Michael Brooks Reid comments on the Employment Appeal Tribunal’s consideration of the wasted costs jurisdiction in the case of Gurney v Randall and Others [2025] EAT 154.

The Facts

The Claimant, R, had been, though an informal arrangement beginning in 1990, a cleaner of a residential building in Harrow. In 2020, R was informed that her engagement was terminated. Wishing to challenge her termination, R was referred by her trade union to a direct access barrister, S.

R relied on S in submitting and pursuing claims in the Employment Tribunal (“ET”). The Respondents (R’s alleged employers) consistently defended the claim on the basis that R was self-employed, repeatedly warned of costs consequences including wasted costs, and made a settlement offer.

Following a preliminary hearing, the ET found R was indeed “truly self-employed” and dismissed all claims for want of jurisdiction.

The Respondents applied for a wasted costs order against S.

S’s failings

The Tribunal made several findings of deficient conduct by S, including that S had:

• failed to advise R of the risk of a costs award against her in his retainer letter and provided little evidence of having explained the significance of subsequent costs warnings.
• included an age discrimination claim which was never properly particularised, despite requests from the other side.

• failed to explain the rationale behind a £2,500 settlement offer to his client.

The Respondents argued that this conduct was negligent and/or unreasonable and that a wasted costs order should follow.

The Law

The power to make a wasted costs order arises where a representative’s "improper, unreasonable or negligent" act or omission causes a party to incur unnecessary costs. (in the civil context, section 51(7) of the Senior Courts Act 1981).

The leading authority of Ridehalgh v Horsefield [1994] Ch provides a three-stage test:

1. Did the representative act improperly, unreasonably, or negligently?
2. If so, did that conduct cause the applicant to incur unnecessary costs?
3. If so, is it just to order the representative to compensate the applicant?

In Persaud v Persaud [2003] EWCA Civ 394, the Court of Appeal held that for the jurisdiction to be engaged, negligent conduct must be "something akin to an abuse of process" i.e. a higher standard than mere negligence. It warned of the uphill battle faced by those wishing to appeal a first instance judge’s decision on wasted costs, noting that an appeal court would only interfere “in a very rare case”.

In KL Law Ltd v Wincanton Group Ltd and Anor [2018] 5 Costs LO 639, Simler P (as she then was) held that it must be shown that a duty to the court had been breached by the legal representative. She emphasised that representatives must not be penalised for presenting their client’s case, even if it is thought to be hopeless.

The Decision

The ET refused to make a wasted costs order, finding that whilst S’s service had "deficiencies" that mightamount to negligence, they did not meet the Persaud threshold. There was no conduct akin to abuse of process.

The EAT dismissed the appeal finding that the ET had made no error of law nor any perverse factual findings. 

Comment

When considering or advising on an application for wasted costs, practitioners must bear in mind the high bar set out in Persaud. Under the civil rules procedure (CPR r.46.8), the first stage is making a “show cause” order, giving the respondent the opportunity to file a witness statement, usually followed by a further hearing. In reality, the respondent is often able to craft the statement and invoke legal professional privilege to effectively shield themselves from any real scrutiny.

The danger then is that the wasted costs application fails and the applicant has thrown good money after bad, and, as the Court of Appeal made clear in Persaud, an appeal will only succeed in the rarest of circumstances; likely only where there was an obvious error of law rather than a finding that the standard was or was not met.

Whilst in the right case, the impugned conduct might be such that the Persaud standard will clearly be met, it is important before making an application for wasted costs to step back and consider the realistic prospects of success, and whether in reality, further costs are simply going to be incurred pursuing an application unlikely to succeed.

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