Brawley v Marczynski

A legally aided litigant may receive indemnity costs where the applicable legal aid regulations disapply the indemnity principle. Legal aid does not otherwise alter the court’s discretion or require an inquiry into whether the litigant’s lawyers deserve the additional remuneration.

Indemnity costs are not confined to compensating a successful party for the shortfall between solicitor-and-client costs and standard costs. They may mark the court’s disapproval of litigation conduct. They may also be justified without stigma where some conduct or circumstance takes the case out of the norm. In ordinary non-assisted litigation, recovery remains limited to the receiving party’s liability to its lawyers.

The claimant, who was legally aided, successfully claimed money owed by the defendants in connection with his invention of the “Checkpoint” device. Laddie J ordered the defendants to pay his costs on the indemnity basis because their persistent failure to disclose documents had obstructed the assessment of his entitlement and concealed the inadequacy of their settlement offers.

The Court of Appeal had previously upheld the costs order in principle in [2002] EWCA Civ 756, but adjourned the question whether indemnity costs were available to a legally aided claimant. The remaining appeal concerned whether changed legal aid regulations removed the impediment identified in Willis v Redbridge Health Authority and whether the judge had properly exercised his discretion.

1. Appeal dismissed unanimously. Longmore LJ delivered the judgment, with which Tuckey and Aldous LJJ agreed. The defendants’ persistent refusal to provide documents necessary to establish and quantify an admitted entitlement, together with their woefully inadequate offers made while that information remained undisclosed, constituted a wrongful and unreasonable manner of conducting litigation. Laddie J’s award of indemnity costs was within his discretion.

2. The rationale of indemnity costs is not simply to prevent a successful party being left out of pocket. All costs orders are compensatory in the sense that they compensate for liability incurred to lawyers. An indemnity order may also operate penally by expressing the court’s disapproval of the losing party’s conduct. The compensatory and penal descriptions are compatible.

3. Misconduct is not essential in every case. Indemnity costs may be appropriate where some conduct or circumstance takes the case out of the norm, including a test case benefiting other litigants or a failure to accept an appropriate Part 36 offer. In ordinary non-assisted litigation, the indemnity principle nevertheless prevents a litigant recovering more than the costs for which the litigant is liable.

4. Willis v Redbridge Health Authority, [1996] 1 WLR 1228, established an impediment under the regulations then in force because indemnity recovery could exceed the assisted person’s maximum liability. Regulation 107B of the Civil Legal Aid (General) Regulations 1989, inserted in 1994, disapplied that impediment and permitted the assisted person’s solicitor to recover an uplift from the opponent. Willis therefore did not prevent the order in this case.

5. The fact that additional recovery would benefit the legally aided claimant’s lawyers did not require the court to investigate whether they deserved it. Such an inquiry would be expensive, counterproductive and potentially intrusive into privileged matters. Possible conflicts of interest did not justify special restrictions on indemnity costs in legally aided proceedings.

6. The respondents received their costs of the appeal on the standard basis. It would be rare, where permission to appeal had been granted, to order the unsuccessful appellant to pay the appeal costs on the indemnity basis.

1. Court of Appeal: The remaining appeal against Laddie J’s order for indemnity costs was dismissed unanimously in [2002] EWCA Civ 1453. The respondents received their appeal costs on the standard basis.

2. Court of Appeal: In the earlier judgment in the same appeal, [2002] EWCA Civ 756, the court upheld the order requiring the defendants to pay the claimant’s costs, but adjourned the indemnity-basis issue.

3. High Court, Chancery Division, Patents Court: Laddie J ordered the defendants to pay the legally aided claimant’s costs on the indemnity basis because of their unreasonable conduct of the litigation. No citation is stated.