Ilangaratne v British Medical Association

On an appeal from a detailed assessment of costs, proportionality is assessed by the costs rules, principally Civil Procedure Rules 1998 rules 44.4 and 44.5. A paying party’s impecuniosity, or the risk that enforcement may affect the family home, does not ordinarily reduce costs that were proportionately incurred. The indemnity principle is presumed to be satisfied where a solicitor has signed the bill of costs. Further investigation is justified where the paying party raises a genuine issue or circumstances create a sufficient concern about the solicitor’s charging arrangements. An appeal court may remit the assessment for that limited investigation without determining that the indemnity principle has been breached.

The appellant had lost proceedings against the British Medical Association and was ordered to pay its costs. The Supreme Court Costs Office made an interim costs certificate for £120,000 on a bill exceeding £200,000. The Master refused permission to appeal. Gray J granted permission on grounds concerning proportionality, costs estimates, the indemnity principle and notice, although the notice ground was abandoned.

The High Court considered whether the Master had been wrong or had acted unjustly through serious procedural irregularity, and whether the assessment should be reconsidered because the respondent’s solicitors were funded through insurers and appeared to charge unusually high hourly rates.

1. Appeal partly allowed. The matter was remitted to the Master to take further steps to satisfy himself whether the indemnity principle was satisfied. The other challenges failed.
2. The appeal under Civil Procedure Rules 1998 rule 52.11(3) was not a rehearing. The appellant had to show that the Master was wrong or that the decision was unjust because of a serious procedural or other irregularity.
3. The Master was entitled to conclude that the costs were proportionate. The claim was exceptionally large, firmly resisted and required substantial work. Mediation had occurred and a payment into court had been rejected. Impecuniosity was relevant principally to case management under rule 1.1(2), while assessment proportionality was governed by rules 44.4 and 44.5. The risk of enforcement against the family home was not relevant to whether costs had been proportionately incurred, and the property referred to in rule 44.5(3)(b) was property involved in the underlying action.
4. The argument under section 23(1)(c) of the Trade Union and Labour Relations (Consolidation) Act 1992 failed. The provision protects property where members or officials act representatively on behalf of themselves and all union members. It does not apply to litigation personal to an individual member, whether against the union or a third party. Sections 64 and 65 were irrelevant to that construction.
5. The Master acted within his case-management discretion in refusing to entertain the late costs-estimate argument. The judge’s provisional view was that an early estimate does not ordinarily cap later recoverable costs where the litigation has developed in an unforeseen way, although the court may order an updated estimate.
6. There was a presumption that a client is liable for the fees of solicitors engaged by it. Third-party funding by an insurer does not, without more, breach the indemnity principle. However, the unusually high hourly rates, the apparent standing arrangement between the insurers and solicitors, and the absence of supporting information justified further inquiry. The Master could require documents under the Costs Practice Direction or accept a clear letter confirming the applicable rates and absence of a cap.

• High Court (Chancery Division): appeal from the Supreme Court Costs Office allowed to the limited extent that the issue of compliance with the indemnity principle was remitted to the Master for further investigation; the remaining grounds failed.