Butt v Nizami

Where a claim falls within the fixed-cost scheme for specified low-value road-traffic cases, fixed recoverable costs and the prescribed success fee are payable without proof that the claimant’s conditional fee agreement is valid or that the indemnity principle is satisfied. A paying party cannot require a compliance certificate or investigate the agreement as a precondition to payment. Disbursements remain different because they are not fixed and remain subject to ordinary assessment and the indemnity principle.

Two claimants suffered whiplash injuries when a vehicle driven by the defendant struck their stationary car. Their claims settled before proceedings, but the parties could not agree the costs. The claimants therefore issued costs-only Part 8 proceedings under Civil Procedure Rules 1998 rule 44.12A.

The defendant challenged recovery of fixed costs and a success fee because the conditional fee agreements might be invalid, including through inadequate enquiries about before-the-event insurance. Master O’Hare held that fixed costs and success fees were recoverable without court intervention, while disbursements remained subject to the indemnity principle. The appeals concerned whether that distinction was correct.

1. Appeals dismissed. The order of Master O’Hare was upheld in both cases.
2. The amendment to section 51(2) of the Supreme Court Act 1981 authorised rules permitting recovery between the parties of costs exceeding the amount payable by the receiving party to its legal representative. Part 45, Section II of the Civil Procedure Rules 1998 was intended to provide a certain and easily calculated scheme of fixed recovery for a confined class of cases.
3. The indemnity principle did not apply to the fixed recoverable costs under rules 45.9 and 45.11. In a case within Section II, the receiving party need not demonstrate a valid solicitor-client retainer or prove that the conditional fee agreement complies with every regulatory requirement. It is sufficient to comply with the conditions laid down by the Rules.
4. The court rejected an overriding requirement for the paying party to investigate compliance with the conditional fee agreement or to obtain a certificate. Such enquiries would encourage wasteful satellite or parasitic litigation and would conflict with the overriding objective. The approach was consistent with the guidance on substantial compliance in Hollins v Russell [2003] EWCA Civ 718 and the criticism of indemnity-principle enquiries in Bailey v IBC Vehicles Ltd [1998] 3 All ER 570.
5. Disbursements under rule 45.10 remained subject to the ordinary costs rules, including the indemnity principle, because their amounts were not fixed by Part 45.

High Court (Queen’s Bench Division): Appeals from the order of Master O’Hare dated 30 June 2005 were dismissed.