Frade & Ors v Radford & Anor

On an inter partes costs assessment, the indemnity principle limits recovery to the receiving party’s actual legal liability to their own solicitor. The paying party may raise any issue about that liability which affects reimbursement. There is no general requirement that the point be one the receiving party could reasonably have taken. The assessment procedure is sufficiently flexible to deal with such issues fairly.

For a second appeal, permission requires an important point of principle or practice, or another compelling reason. A proposed challenge concerning a retrospective deed said to rectify a conditional fee agreement from inception, rather than vary it after a costs order, was arguable and warranted permission. The court did not decide the merits.

The appellants were defendants in detailed assessment proceedings arising from English litigation concerning the film La Mula. They had entered into conditional fee agreements with their solicitors and counsel. Issues arose concerning the scope of those agreements, liability for work outside them, and a later deed of rectification extending counsel’s agreement to corporate defendants.

Warby J dismissed two appeals from the Costs Judge’s orders: [2016] EWHC 1600 (QB). Permission had previously been granted on some grounds. The appellants renewed permission applications concerning the remaining construction, indemnity-principle and rectification grounds. The central questions were whether the paying party could challenge the receiving party’s liability to its own lawyers and whether the rectification issue raised an important point warranting a further appeal.

Lord Justice Hickinbottom dealt with a renewed application for permission to appeal. Permission had already been granted on Grounds 3, 4 and 7. The present application concerned Grounds 1, 2, 5 and 6.

1. Ground 2. The ground was not arguable. The indemnity principle means that a receiving party may recover only the costs for which it is actually legally liable to its own solicitor. The paying party is entitled to raise any point concerning that liability which affects the reimbursement obligation. That entitlement is not confined to points which the receiving party would have taken against its solicitor. The reference to section 194 of the Legal Services Act 2007 reinforced that departure from the ordinary principle requires statutory intervention.
2. There was no general reasonableness restriction on points available to a paying party. Hollins v Russell [2003] EWCA Civ 718 supported the flexible approach to assessment, including disclosure where appropriate. Observations in Forde v Birmingham City Council [2009] EWHC 12 (QB) arose in a materially different context and did not assist the appellants. A collateral agreement or estoppel argument not advanced before Warby J could not be raised for the first time on this appeal.
3. Grounds 1 and 5. The construction challenges did not satisfy the second-appeal criteria in rule 52.7(2) of the Civil Procedure Rules 1998. They raised no important point of principle or practice, and, once Ground 2 failed, there was no other compelling reason for the Court of Appeal to hear them.
4. Ground 6. It was arguable that the present case could be distinguished from Kellar v Williams [2004] UKPC 30. That case concerned a later variation of the charging basis after an inter partes costs order. The present case concerned rectification intended to give effect to the agreement from the outset. The distinction raised a point of general importance. Permission was therefore granted, without determining the merits.

Permission was granted on Ground 6 and refused on Grounds 1, 2 and 5.

• Court of Appeal (Civil Division): On the renewed application, permission was granted on Ground 6 and refused on Grounds 1, 2 and 5. Permission had previously been granted on Grounds 3, 4 and 7. Judgment reported at [2017] EWCA Civ 1010.
• High Court (Queen’s Bench Division): Warby J dismissed two appeals against orders made by the Costs Judge in detailed assessment proceedings. Judgment reported at [2016] EWHC 1600 (QB).