Top City Firm Ordered to Pay Wasted Costs over Instruction Error

Why It Matters

The ruling highlights the severe financial and reputational risks law firms face when they breach the warranty of authority, reinforcing the need for rigorous verification in cross‑border insurance litigation.

Key Takeaways

• Clyde & Co ordered to pay $162k wasted costs to defendants
• Error stemmed from falsely claiming instruction by insurer PetroVietnam
• Judge deemed firm's explanation “manifestly inadequate” and negligent
• Claim originated from alleged 2024 South China Sea collision
• Court reduced original £142k assessment by 10% due to uncertainty

Pulse Analysis

The High Court’s Admiralty Registry recently ordered London‑based firm Clyde & Co to reimburse defendants for wasted costs after the firm misrepresented its authority in a maritime claim. The case stemmed from an alleged 2024 collision in the South China Sea between a fishing vessel and an oil tanker. Clyde & Co told the defendants’ insurer that it had been instructed by both the claimant’s insurer, PetroVietnam Insurance, and the insured, a claim later proven false. Judge Davison labeled the explanation “manifestly inadequate” and imposed a wasted‑costs order of £127,577 (approximately $162,000).

The ruling underscores the strict duty of solicitors to verify and disclose proper authority before proceeding. In admiralty and insurance litigation, a breach of the warranty of authority can trigger costly sanctions, as the court seeks to compensate parties for expenses incurred due to misleading representations. Law firms now face heightened scrutiny over their instruction chains, especially when claims involve cross‑border insurers and claims agencies. Robust internal checks and clear documentation are becoming essential to avoid negligent missteps that can erode client trust and profitability.

Beyond the immediate financial hit, the decision may reverberate through the broader legal services market. Insurers may become more cautious in authorizing counsel, demanding explicit proof of instruction before committing to jurisdiction or funding. Litigation funders could tighten due‑diligence protocols, increasing costs for claimants. For firms like Clyde & Co, the episode serves as a cautionary tale that procedural lapses not only invite monetary penalties but also threaten reputational standing in a competitive global market.