Wraith v Wraith

Where a legally assisted party’s means substantially improve after a costs order has been suspended, the court has a broad discretion under regulation 130 to permit enforcement in whole or in part. The court should apply ordinary inter partes costs principles, subject to the statutory assessment of what is reasonable for the assisted party to pay.

A settlement, including one of a negligence claim against former solicitors, may constitute a relevant change of circumstances. Its source may exceptionally matter, but the court should not speculate about the merits or likely outcome of the discontinued underlying action. Enforcement is not a windfall where the successful party was originally entitled to costs. An indemnity against the very costs order will ordinarily make enforcement especially compelling.

The respondent, who had legal aid, brought a partnership claim against his brothers. The claim was struck out for want of prosecution in 1991. Costs were awarded to the appellants but were not to be enforced without the court’s leave.

After settling a negligence claim against his solicitors for about £60,000, the respondent received an indemnity from the Solicitors Indemnity Fund for any liability if leave to enforce the costs order were granted. The District Judge granted leave under regulation 130 of the Civil Legal Aid (General) Regulations 1989. Judge Cooke, sitting as a High Court judge, allowed the respondent’s appeal and dismissed the enforcement application.

The central issue was whether the settlement and indemnity were a relevant change in circumstances justifying enforcement, notwithstanding arguments about a supposed windfall and the source of the funds.

1. Appeal allowed. In a joint judgment of the Court of Appeal, the court set aside Judge Cooke’s order and granted the appellants leave to enforce the costs order, with interest, against the respondent.

2. Under section 31(1) of the Legal Aid Act 1988, costs are decided on ordinary inter partes principles. If a costs order is made against an assisted party, section 17(1) then requires the court to decide what amount it is reasonable for that party to pay in all the circumstances. An order not to enforce without leave was to be treated, following Parr v Smith [1995] 2 All E R 1031, as a regulation 129(b) order suspending payment indefinitely.

3. Regulation 130 gives a wide discretion to vary that suspension following a change in the assisted party’s circumstances. A substantial acquisition of assets, highly paid employment, an inheritance, or settlement proceeds may justify enforcement. There is no principled distinction between a litigant who wins a football pool and one who receives a substantial settlement. An indemnity against payment of the very costs in question made the case for variation especially strong.

4. The source of available funds is not invariably irrelevant. Funds donated to relieve hardship or meet personal-injury expenses may properly be left out of account. But it was wrong to treat the settlement as an occasion to reconstruct the merits or probable outcome of the struck-out partnership action. The striking-out order ended that action, and the respondent or his advisers could not gain from the default which caused it.

5. The court rejected the supposed windfall argument. The appellants had already been found entitled to costs on ordinary principles. The respondent would suffer no personal financial loss because of the indemnity, and there was no reason why the insurers, often solicitors at fault, should benefit at the successful non-assisted parties’ expense. Judge Stephenson in McAleer and Judge Cooke had therefore adopted a wrong approach in principle.

The respondent was ordered to pay the appellants’ costs of the appeal and the earlier enforcement proceedings. Permission to present a petition of appeal to the House of Lords was refused.

• Court of Appeal: Allowed the appellants’ appeal, set aside Judge Cooke’s order, and granted leave to enforce the suspended costs order.
• High Court (Chancery Division): On 15 April 1996, Judge Cooke allowed the legally assisted respondent’s appeal from the District Judge and dismissed the appellants’ enforcement application.
• District Judge: On 2 January 1996, granted the appellants leave under regulation 130 of the Civil Legal Aid (General) Regulations 1989 to enforce the costs order.