Bailey v IBC Vehicles Ltd

The indemnity principle limits party-and-party costs to compensation for what the receiving party has incurred or is obliged to pay. It does not permit a bonus or profit. A taxing officer may seek further information, including discovery or affidavit evidence, where the material raises a genuine concern about the accuracy or completeness of a bill. Those powers should be used sparingly to avoid satellite litigation. A solicitor’s signed bill may ordinarily be trusted unless evidence suggests otherwise. Where a client care letter or contentious business agreement exists, the agreed rate ordinarily measures and caps recoverable costs. Union funding does not itself displace the indemnity principle. Reasonable solicitor-client charges may be recovered where no cap or discount applies.

The respondent’s personal injury claim against the appellant settled before trial. The appellant agreed to pay damages and costs on County Court Scale 2, subject to taxation. The respondent’s union-funded solicitors claimed more than £30,000, including specified hourly rates and a 66.67% mark-up.

The appellant objected that the bill might breach the indemnity principle and sought information, including an affidavit of documents and production of an identified document. District Judge Richardson ordered disclosure. His Honour Judge Cooke allowed an appeal against that order on 17 October 1997, concluding that the available information disclosed no basis for inferring a breach. The issue before the Court of Appeal was whether further information was required to verify the rates agreed between the union and the solicitors.

Appeal dismissed unanimously.

1. Jurisdiction and restraint. A taxing officer exercises a judicial function and may seek information needed to tax a bill properly. If some feature of the material raises a concern that the information is incomplete or inaccurate, the officer may begin with written confirmation and, if necessary, order discovery or affidavit evidence. Interrogatories are theoretically available in an appropriate case. These powers must be used sparingly and only to the minimum extent necessary to achieve broad justice, because satellite litigation should be avoided.
2. Indemnity principle. Party-and-party costs are compensatory. They are not punitive and must not enable the receiving party to make a profit or receive a bonus. The principle is not displaced merely because a successful litigant’s claim is financially supported by a trade union. The authorities included Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 499 and R v Miller [1983] 1 WLR 1057.
3. Application. The available information showed that the union and the solicitors had agreed a full solicitor-client charge, without a special reduction, discount or cap. The only material limitation was that the charges had to be reasonable. Solicitors, as officers of the court, were trusted not to mislead or permit the court to be misled. The information was therefore sufficient for taxation to proceed without further proof. The appellant’s demand for information proving compliance with the indemnity principle would have created pointless satellite litigation.
4. Further guidance. In the ordinary case, any client care letter or contentious business agreement should accompany the bill, or a short written explanation should be provided. Where applicable, figures in a contentious business agreement under section 60(3) of the Solicitors Act 1974 provide both a measure and a ceiling for recoverable costs. Lord Justice Henry additionally regarded the solicitor’s signed bill as an effective certification that its contents were correct and that the indemnity principle had been observed, subject to contrary evidence.

The appeal was dismissed with costs. The relevant costs were directed to be taxed in the Supreme Court Taxing Office.

• Court of Appeal (Civil Division): On 27 March 1998, unanimously dismissed the defendants’ appeal with costs. Relevant costs were directed to be taxed in the Supreme Court Taxing Office.
• Luton County Court: On 17 October 1997, His Honour Judge Cooke allowed an appeal against District Judge Richardson’s order.
• Luton County Court: On 22 September 1997, District Judge Richardson ordered the respondent’s solicitors to file and serve an affidavit of documents and produce an identified document during taxation proceedings.