Heron v TNT (UK) Ltd & Ors

A non-party costs order against a solicitor is exceptional and turns on whether, in all the circumstances, it is just to make the order. A solicitor acting under a conditional fee agreement for an impecunious client does not become the real party to the litigation merely because the solicitor expects fees if the claim succeeds.

A negligent failure to obtain after-the-event insurance, and a consequent conflict of interest, do not alone justify such an order. The successful opponent must show that the solicitor went beyond the ordinary role of legal representative and that the costs claimed would not otherwise have been incurred. Professional-negligence issues requiring tested evidence should ordinarily be resolved in negligence proceedings, not by the summary costs jurisdiction.

The employee brought a personal-injury claim against his employer through solicitors acting under a conditional fee agreement. The solicitors did not obtain after-the-event insurance. Following an unsuccessful trial outcome and adverse costs consequences, the employer’s insurers sought a non-party costs order against the solicitors under section 51 of the Senior Courts Act 1981.

His Honour Judge Reid QC, sitting in Guildford County Court, dismissed the application. The insurers appealed, alleging that the solicitors’ failure to obtain insurance and to disclose the resulting conflict of interest made them a real party to the litigation and justified personal liability for the employer’s costs.

1. Appeal dismissed. Leveson LJ, with whom Beatson LJ and Gloster LJ agreed, upheld the refusal of a non-party costs order against the solicitors.

2. The jurisdiction under section 51 of the Senior Courts Act 1981 is exceptional, in the sense explained in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39. The ultimate question is whether the order is just in all the circumstances. A non-party who substantially controls or benefits from proceedings may be a real party, but that requires more than the ordinary financial interest of a solicitor acting under a conditional fee agreement.

3. The solicitors’ failure to obtain after-the-event insurance could give the employee a professional-negligence claim and could create a conflict requiring advice to obtain independent legal advice. It did not, without more, establish that the solicitors had acted primarily for themselves, exercised the requisite substantial control, or caused the insurers to incur costs that they would otherwise have avoided.

4. The judge’s finding that there was no conscious impropriety was open to him on the evidence. The Court rejected any absolute rule that such impropriety could never be found without evidence from the relevant solicitor, but that point did not undermine the judge’s factual conclusion.

5. Adris v The Royal Bank of Scotland plc [2010] EWHC 941 was distinguishable. Unlike that case, it was not shown that the absence of insurance meant that this claim would not have been issued or pursued. Questions of breach, causation and loss were more appropriately determined in any professional-negligence proceedings brought by the employee.

1. Court of Appeal (Civil Division): dismissed the insurers’ appeal and upheld the refusal of a non-party costs order: [2013] EWCA Civ 469.

2. Guildford County Court: His Honour Judge Reid QC dismissed the application for a wasted costs order or non-party costs order against the solicitors, and refused permission to appeal.