Thornley v Lang

The indemnity principle permits a successful litigant to recover only legal costs which the litigant has paid or become liable to pay, subject to statutory exceptions. Where a trade union instructs solicitors on a member’s behalf, the member’s knowledge and acceptance of their services ordinarily creates liability for their fees unless an agreement excludes that liability.

An authorised or ratified agreement between the union and the solicitors may itself be the contract binding the member. Where that agreement is a valid collective conditional fee agreement, it is governed by the collective regime and need not satisfy the separate formal requirements for an individual conditional fee agreement.

A trade union instructed solicitors to pursue its member’s personal injury claim under a collective conditional fee agreement providing for a 20% success fee. After the claim was compromised, the defendant disputed whether the success fee formed part of the recoverable costs. The district judge allowed it, and Field J dismissed the defendant’s appeal.

The defendant appealed to the Court of Appeal, arguing that the member could acquire an enforceable liability only through an individual conditional fee agreement satisfying section 58 of the Courts and Legal Services Act 1990 and the Conditional Fee Agreements Regulations 2000. The central issue was whether the authorised or ratified collective agreement itself imposed the liability required by the indemnity principle.

1. Appeal dismissed unanimously. The joint judgment of Lord Phillips MR, Mummery LJ and Tuckey LJ held that the claimant had an enforceable liability for the solicitors’ charges, including the 20% success fee. The costs were therefore recoverable without infringing the indemnity principle.

2. The indemnity principle generally restricts an award to costs which the litigant has paid or become liable to pay. Where a trade union instructs solicitors for a member, the member’s knowledge and assent ordinarily impose an independent obligation to remunerate the solicitors unless an agreement provides that the member will never be liable. Adams v London Improved Motor Coach Builders, Ltd. [1921] 1 KB 495 was applied.

3. The claimant acquiesced in the union’s instruction of the solicitors after receiving a client-care letter stating that he remained liable for legal costs, subject to the union’s indemnity. His position was therefore stronger than that in Adams. His liability was on the conditional terms, including the uplift, which the union had agreed with the solicitors.

4. The agreement by which the union authorised the solicitors to represent the claimant was a collective conditional fee agreement. The union acted with the claimant’s authority; alternatively, he ratified its agreement by accepting the solicitors’ services. The contract creating his liability was consequently the collective agreement itself, not a separate individual conditional fee agreement.

5. The Conditional Fee Agreements Regulations 2000 and the Collective Conditional Fee Agreements Regulations 2000 establish mutually exclusive regimes. A valid collective conditional fee agreement is excluded from the individual regulations. It was therefore unnecessary for the claimant to enter a separate agreement satisfying those regulations.

6. The court did not uphold Field J’s alternative reasoning. Although section 58A(6) of the Courts and Legal Services Act 1990 and section 30(2) of the Access to Justice Act 1999 derogate from the indemnity principle, they do not permit recovery of fees under a conditional fee agreement which is materially unenforceable.

1. Court of Appeal (Civil Division): The defendant’s appeal was dismissed. The court upheld recovery of the 20% success fee, although for reasons different from Field J’s reasoning.
2. Newcastle upon Tyne County Court (Field J): Field J dismissed the appeal from District Judge Bullock’s costs decision and upheld inclusion of the success fee.
3. Newcastle upon Tyne County Court (District Judge Bullock): In costs-only proceedings following compromise of the personal injury claim, the district judge held that the recoverable costs included a 20% success fee.