BAILII is celebrating 24 years of free online access to the law! Would you consider making a contribution?
No donation is too small. If every visitor before 31 December gives just £1, it will have a significant impact on BAILII's ability to continue providing free access to the law.
Thank you very much for your support!

IN THE SUPREME COURT OF JUDICATURE CCRTI 97/1545 CMS2

(HIS HONOUR JUDGE COOK )

Royal Courts of Justice

Strand

London WC2

Friday, 27 March 1998

B e f o r e:

LADY JUSTICE BUTLER-SLOSS

LORD JUSTICE HENRY

LORD JUSTICE JUDGE

- - - - - -

TREVOR RAYMOND BAILEY

Plaintiff/Respondent

- v -

IBC VEHICLES LIMITED

Defendant/Appellant

- - - - - -

(Computer Aided Transcript of the Palantype Notes of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

- - - - - -

MR RICHARD BARRACLOUGH (Instructed by Messrs Hextall Erskine, London, E1 8ER) appeared on behalf of the Appellant

MISS CHERIE BOOTH QC & MR JEREMY MORGAN (Instructed by Messrs Rowley Ashworth, London, SW19 1SE) appeared on behalf of the Respondent

- - - - - -

J U D G M E N T

(As approved by the Court )

- - - - - -

©Crown Copyright

LORD JUSTICE JUDGE:

This is an appeal from His Honour Judge Cooke dated 17th October l997, allowing an appeal against the Order of District Judge Richardson dated 22nd September l997 at Luton County Court made on the application by the defendants in the course of taxation proceedings that the plaintiff’s solicitors should file and serve an affidavit of documents and produce an identified document.

The plaintiff was employed by the defendants as a production operator at their factory in Luton. In July l993, in the course of his employment, he suffered personal injuries. He consulted his union, the Amalgamated Engineering and Electrical Union. It was decided that his claim should be supported from union funds. Accordingly proceedings were begun against the defendants by the union solicitors, Rowley Ashworth. Eventually, before trial, in January l997, the claim was settled. The defendants agreed to pay damages to the plaintiff, with costs on Scale 2 in the County Court to be taxed. Rowley Ashworth prepared their bill of costs which was signed on 27th March l997 by a partner. The total exceeded £30,000, and included an hourly charge of £80 per hour during l994/5 and £90 per hour during l996/7 with a mark-up of 66.67%. The defendants objected to this claim requesting

“The plaintiff provide evidence to show that it is not in breach of the indemnity principle as regards the expense rate plus mark up that is being charged in this bill.”

After a reference to the figures the objection continued:

“If these are not the rates that are being charged to the plaintiff, they cannot be recovered on standard basis taxation. The situation remains the same even if the plaintiff is being funded by his union.”

The plaintiff’s solicitors responded that:

“The expense rates are in line with those promulgated and regularly allowed by the District Judges in the Wandsworth County Court as the defendant’s solicitors well know.”

This response did not deal directly with the defendants’ objection, but subsequently, after the date for taxation had been fixed, the council member of the union responsible for the plaintiff’s claim provided the further information by letter dated 19th September which ended:

“The A.E.E.U.’s relationship with Rowley Ashworth is on the basis that Rowley Ashworth is entitled to make a full solicitor/client charge”.

The defendants were not satisfied with this response. Indeed it is clear that they had already been pursuing the issue of ‘indemnity’ in the context of claims by union supported plaintiffs. As their written objection showed, they required proof that the plaintiff’s solicitors were not acting in breach of this principle. District Judge Richardson in effect supported the defendants’ contention that they were entitled to discovery of the relevant material. After an examination of the authorities, Judge Cooke disagreed, in essence on the basis that there was nothing in the available information which could lead to an inference that the indemnity principle had not been observed by the plaintiff’s solicitors. This conclusion is challenged on the appeal by Mr Barraclough for the defendants.

It was contended before Judge Cooke that the district judge lacked jurisdiction to make the order for discovery. This submission was rejected, and was not renewed before us by Miss Cherie Booth Q.C. on behalf of the plaintiff. She accepted that a district judge sitting as a taxing officer was entitled, if he saw fit, to be provided with the information which he needed. In my judgment she was right to do so. The taxing officer is exercising a judicial function, with substantial financial consequences for the parties. To perform it, he is trusted properly to consider material which would normally be protected from disclosure under the rules of legal professional privilege. If, after reflecting on the material available to him, some feature of the case alerts him to the need to make further investigation or causes him to wonder if the information with which he is being provided is full and accurate, he may seek further information. No doubt he would begin by asking for a letter or some form of written confirmation or reassurance as appropriate. If this were to prove inadequate he might then make orders for discovery or require affidavit evidence. It is difficult to envisage circumstances in which the party benefiting from the order for costs will not have been anxious to provide the required information, but if all else fails, it would theoretically be open to him to order interrogatories. However, if the stage has been reached where interrogatories might reasonably be ordered, the conclusion that the receiving party had not been able to satisfy the taxing officer about the bill, or some particular aspect of it, would seem inevitable. This jurisdiction having been acknowledged, an emphatic warning must be added against the over enthusiastic deployment of these powers, particularly at the behest of the party against whom the order for costs has been made. As Judge Cooke recognised, the danger of ‘satellite litigation’ is acute. As far as possible consistent with the need to arrive at a decision which does broad justice between the parties, it must be prevented or avoided, and the additional effort required of the parties kept to the absolute minimum necessary for the taxing officer properly to perform his function. My conclusion in this appeal, to which I can now turn, is intended to reflect these principles.

A careful argument into the relevant principles and authorities was developed by Mr Barraclough and Miss Booth. Speaking for myself, the analysis was helpful, but for the purposes of this judgment they need little elaboration.

The indemnity principle is well understood. It was most recently considered by the Court of Appeal in The General of Berne Insurance Company v Jardine Reinsurance Management Limited, unreported, dated 12th February l998. May L.J. said:

“The principle is simply that costs are normally to be paid in

compensation for what the receiving party has or is obliged

himself to pay. They are not punitive and should not enable

the receiving party to make a profit.”

Sir Brian Neill summarised the principle:

“That as between party and party, an order for costs is not intended to provide more than an indemnity. The receiving party is not entitled to a bonus”.

He referred to Gundry v Sainsbury [l910] 1 KB 645, which May L.J. considered to state ‘a general principle’. Miss Booth did not argue to the contrary. Therefore for present purposes it is unnecessary to revisit the consistent line of authorities beginning with Gundry v Sainsbury and culminating, for the moment, in General of Berne Insurance Company , nor to consider the effect on the indemnity principle of the recent decision of the Court of Appeal in Thai Trading Co. (a Firm) v Taylor , The Times, 6th March l998, where it was held that a solicitor who had agreed to forego all or part of his fee if the action failed, was not acting unlawfully if he sought to recover his reasonable profit costs when the plaintiff’s action was successful, provided he did not seek to recover more than his ordinary profit costs and disbursements.

It is also clearly established that the indemnity principle is not undermined merely because the successful litigant is a member of a trade union whose claim is being pursued with financial support from his union: for example, see Adams v London Improved Motor Coach Builders Ltd [l921] 1 KB 499, followed in R v Miller [l983] 1 WLR 1057 where at p.1061 Lloyd J. considered the authorities and encapsulated the relevant principle in this observation:

“Once it was shown, as is now conceded, that Mr Glennie was indeed the client, then a presumption arose that he was to be personally liable for the costs. That presumption could, however, be rebutted if it were established that there was an express or implied agreement, binding on the solicitor, that Mr Glennie would not have to pay those costs in any circumstances. In practice, of course, the taxing officer will have before him on the taxation the whole of the solicitor’s file. If it appears to the taxing officer that there is doubt whether there was an express or implied agreement, binding on the solicitors, not to seek to recover the cost from the client, the taxing officer should ask for further evidence. It must then be for the taxing officer to come to a conclusion on the whole of the facts presented to him. Unless those facts establish a clear agreement, express or implied, that in no circumstances will the solicitor seek to obtain payment from their client, then the basic presumption stands....”

Further citation of authority is unnecessary.

Although the plaintiff would not in practice have been called on to pay Rowley Ashworth’s fees if the action had failed, and a deliberate decision was made not to inform him of the rate of fees lest this cause him undue alarm, the present appeal was not argued by the defendants on the basis that Rowley Ashworth had agreed that the plaintiff’s primary liability for their charges should be extinguished. Instead they directed their enquiry towards the figures actually agreed between the solicitors and the union.

Mr Barraclough maintained that as his clients were not liable to pay any items of costs which were inconsistent with the indemnity principle they were entitled to call for and be provided with information about any agreement or understanding about the costs arrangements between the plaintiff and his union and the solicitors instructed by his union to act for the plaintiff in the action. Before the defendants could be ordered to pay any costs at all, it had to be made clear not only that the sums claimed were ‘reasonably incurred’ (as required by Order 62 rule 12 Rules of the Supreme Court, applied by Order 38 rule 19A of the County Court Rules), but also that such sums were not in excess of any agreed rate. He suggested that the position could be cleared up without difficulty if the plaintiffs provided a copy of the solicitor’s ‘client care letter’ which has become an increasing feature of professional practice.

Miss Booth countered this argument by drawing attention to the salient facts of the case and submitting that it was unreasonable to infer that the figures set out in the bill of costs had been included in breach of or contrary to the ordinary indemnity principle. There was no ‘client care letter’ nor any contentious business agreement.

In my judgment the information available to us indicates that the Union and Rowley Ashworth were agreed that the union should be charged a ‘full solicitor/client charge’. In other words no special reduction or discount applied. The only relevant limitation, plainly implied, was that these charges should themselves be reasonable. I can see no basis for doubting the accuracy of this information. In fact, while maintaining her client’s entitlement as a matter of principle to refuse to give any information additional to that set out in the letter, Miss Booth informed us on direct instructions that there was no ‘cap’ in this case. That confirmed my reading of the letter dated 19th September l997. As officers of the court, solicitors are trusted not to mislead or to allow the court to be misled. This elementary principle applies to the submission of a bill of costs. If a cap or similar arrangement had applied in this case, I should have expected Rowley Ashworth to have disclosed that fact and to have ensured that the union letter either represented a comprehensive rather than a partial explanation of the facts, or to supplement it with information of their own. They would not have produced and signed a bill of costs which included a claim for ‘reasonable costs’ which would have fallen foul of the indemnity principle.

The defendants’ request that the plaintiff be required to provide information proving that the indemnity principle had been observed represents pointless satellite litigation. As there is nothing to suggest that the relationship between the union and the solicitors would have resulted in some form of capping of the fees which the solicitors would have submitted to the union if the claim had failed, the information is sufficient to enable the taxation to proceed on the basis that the figures claimed in the bill of costs do not represent an unacceptable breach of the indemnity principle.

Accordingly, this appeal should be dismissed.

I add that in the ordinary case in which a “client care letter” has been provided (and certainly if and when the client care letter becomes obligatory), the hourly rate claimed in the bill of costs should coincide with the terms of that letter. In the General of Berne Insurance Company the same principle was applied to a contentious business agreement under Section 60(3) of the Solicitors Act l974, Sir Brian Neill observing:

“Where applicable, the figures in the contentious business agreement provide both a measure and a ceiling for each recoverable item of costs”.

Moreover in view of the increasing interest taken in this issue by unsuccessful parties to litigation, coupled with the developing practice in relation to conditional fees, the extension of the ‘client care’ letter and contentious business agreements under Section 60(3), in future, copies of the relevant documents (where they exist) or a short written explanation of the kind eventually provided in this case in September l997, should normally be attached to the bill of costs. This will avoid skirmishes which add unnecessarily to the costs of litigation.

LORD JUSTICE HENRY:

I agree with the judgment my lord has given. That the matter had to be taken to judgment shows just what a culture change is necessary before we have a sensible cost-conscious proportionate civil justice system. Here was a perfectly ordinary personal injury case, settled before trial, with experienced solicitors on both sides. Order 62 Rule 29(7) c iii requires the solicitor who brings proceedings for taxation to sign the bill of costs. In so signing he certifies that the contents of the bill are correct. That signature is no empty formality. The bill specifies the hourly rates applied, and the care and attention uplift claimed. If an agreement between the receiving solicitor and his client (here the trade union) restricted (say) the hourly rate payable by the client, that hourly rate is the most that can be claimed or recovered on taxation (see General of Berne Insurance Company v Jardine Reinsurance Management Limited above). The signature of the bill of costs under the Rules is effectively the certificate by an officer of the Court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client under a contentious business agreement.

The Court can (and should unless there is evidence to the contrary) assume that his signature to the bill of costs shows that the indemnity principle has not been offended. Here Rowley Ashworth’s letter of 19th September put (or should have put) the matter beyond all doubt. But strictly speaking, the signature of the bill required by the rules should have done that already.

Having said that, in what is hoped will be the new ethos of litigation, where by co-operation the parties ensure that costs are spent resolving the essential issues in the action rather than in satellite litigation, an ounce of open-ness is cheaper than any argument. I therefore agree that the client care letter or any contentious business agreement should be attached to the bill of costs.

For the avoidance of doubt, I also agree that the taxing officer may and should seek further information where some feature of the case raises suspicions that the whole truth may not have been told. And the other side of a presumption of trust afforded to the signature of an officer of the Court must be that breach of that trust should be treated as a most serious disciplinary offence.

LADY JUSTICE BUTLER-SLOSS:

I agree with both judgments.

Order: Appeal dismissed with costs; by consent it is directed that the costs ordered to be paid by the defendants pursuant to paragraph 2 of the order of 17 October 1997 in the Luton County Court and the costs of the appeal heard on 6 March and 27 March be taxed in the Supreme Court Taxing Office.