Ilangaratne v British Medical Association

Where litigation is conducted for an insured party by solicitors instructed by the insurer, the court will ordinarily infer a retainer between the insured and the solicitors. A standing agreement on charging rates may be incorporated into a later retainer, even though the document recording it is not itself a contract of retainer. Evidence of negotiations is inadmissible to construe an concluded contract, but may be relevant to whether a contract was made and to its express terms. A breach of the Solicitors’ Costs Information and Client Care Code 1999 does not, without more, invalidate the retainer. In costs disputes, the costs judge has broad discretion over the evidence and procedure required, subject to doing broad justice and avoiding disproportionate satellite litigation.

Dr Ilangaratne appealed against orders made by Deputy Master Seager-Berry, sitting as a costs judge, concerning an interim costs certificate issued in favour of the British Medical Association after Dr Ilangaratne’s unsuccessful negligence claim.

An earlier appeal before Warren J had been allowed only to the limited extent of remitting the matter to the Deputy Master to determine whether the indemnity principle was satisfied. The Deputy Master held that a December 2000 letter recorded binding charging arrangements, while reserving two specific issues for further determination. The appeal concerned the legal effect of that letter, the existence of the retainer, the alleged breach of the client-care rules, and alleged procedural unfairness and apparent bias.

1. The appeal was dismissed. The issue remitted by Warren J was limited to whether the indemnity principle was satisfied. The existence of a retainer between the BMA and LLGM had already been decided against Dr Ilangaratne and was not open for reconsideration.

2. The December 2000 letter was not itself a written retainer or a self-contained contract. It evidenced a standing arrangement under which instructions from RSA to LLGM for an insured customer would ordinarily create a retainer between that customer and LLGM incorporating the agreed charging rates. Previously agreed rates operated as a master agreement for subsequent retainers. Rates merely proposed or discussed could operate as standing offers accepted by the giving and receipt of later instructions.

3. The Deputy Master was entitled to conclude that, subject to the trainee-rate issue and the January 2003 invoice issue, the costs claimed did not breach the indemnity principle. His observations on the invoice issue were provisional because he had directed further information and reserved final determination.

4. The submission based on the ICS case was rejected. The principle excluding negotiations from evidence concerning the construction of a concluded contract does not prevent negotiations being considered on whether a contract was made or what its express terms were.

5. The argument that the retainer was unlawful because of an alleged breach of the Solicitors’ Costs Information and Client Care Code 1999 failed in light of Garbutt & anr v Edwards & anr [2006] 1 Costs LR 143. Whether the Code had been breached therefore did not arise.

6. The Deputy Master had a broad discretion concerning the evidential preparation required in a costs dispute. Consistently with Bailey v IBC Vehicles Ltd [1998] 3 All ER 570, disproportionate satellite litigation should be avoided while ensuring that broad justice is done. There was no procedural error or apparent bias.

• Central London County Court: judgment was entered against Dr Ilangaratne in the negligence action on 18 December 2002, with an order for payment of the BMA’s costs.
• High Court, costs appeal before Warren J: the appeal was allowed to the limited extent that the indemnity-principle issue was remitted to the costs judge for further consideration.
• High Court (Chancery Division): the appeal against the Deputy Master’s July and August 2006 orders was dismissed.