Brawley v Marczynski and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ALDOUS,Lord Justice Longmore,LORD JUSTICE LONGMORE,LORD JUSTICE MANCE,Lord Justice Aldous,Lord Justice Tuckey |
| Judgment Date | 21 October 2002 |
| Neutral Citation | [2002] EWCA Civ 1453,[2002] EWCA Civ 756 |
| Docket Number | Case No: 2001 2106 A3,A3/2001/2106 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 October 2002 |
[2002] EWCA Civ 1453
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION, PATENTS COURT)
(Mr Justice Laddie)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Aldous
Lord Justice Tuckey and
Lord Justice Longmore
Case No: 2001 2106 A3
GRAHAM SHIPLEY Esq (instructed byMessrs Gorna & Co) for the Appellant
JAMES MELLOR Esq (instructed by Messrs DLA) for the Respondents
JEREMY MORGAN Esq (instructed by the Policy and Legal Department,
Legal Services Commission) for the Legal Services Commission
We gave judgment on 8th May 2002 on the question whether Laddie J had erred in deciding that the defendants should pay the costs of the action brought by Mr Brawley in respect of money owed to him by the defendants in relation to his invention of the "Checkpoint" device; we upheld that judgment [2002] EWCA Civ. 756. Mr Brawley was a legally aided claimant.
We left over the question whether the judge was also correct to have decided that the costs which the defendants had to pay should be assessed on an indemnity basis. When that part of the appeal was opened, the court referred counsel to Willis v Redbridge Health Authority [1996] 1 WLR 1228 which had decided, on the wording of the relevant legal aid regulations then in force, that it was not appropriate that a legally aided litigant should be awarded indemnity costs. This was because the costs of a legally-aided litigant's solicitor were always taxed on a standard basis, the litigant himself could not be liable to the Legal Aid Fund for any sum recovered by way of costs other than costs assessed on a standard basis and he could not, therefore, recover costs on a basis which awarded him any greater sum by way of costs. As Lord Justice Aldous said, at page 1238E:—
"… an award to an assisted person of costs upon an indemnity basis would mean that he could recover more than his maximum liability. That is not lawful."
A party's inability to recover more by way of costs than the amount for which he is himself liable by way of costs is known in the profession as the indemnity principle, see Gundry v Sainsbury [1910] 1 KB 99 and Civil Procedure 2002 note at 47.14.15.
Mr Shipley for the appellant defendants intimated that he would wish to rely on Willis but the wording of the regulations had changed and we accordingly adjourned the part of the appeal which related to the order for indemnity costs so as to enable the parties to consider their positions and to enable the Legal Services Commission to make any submissions they might wish to make about the regulations presently in force.
We have now had the benefit of a detailed skeleton argument from Mr Jeremy Morgan of counsel for the Legal Services Commission. He has explained that the Civil Legal Aid (General) (Amendment) Regulations 1994 introduced Regulation 107B into the Civil Legal Aid (General) Regulations 1989, which were the regulations the subject of consideration in Willis v Redbridge. The effect of this new Regulation 107B is to disapply both the indemnity principle and also the rule that a lawyer for a legally-aided party can only be paid out of the Legal Aid Fund. The reason for this was that the 1994 Regulations for the first time introduced the concept of a prescribed fee (lower than the fees recoverable previously, which were normally those that were allowable on an inter partes standard basis taxation). The new regulations also permitted, however, an uplift provided that costs were actually recoverable from the legally-aided litigant's opponent. This was thus an early example of a success fee, a concept with which, since the Access to Justice Act 1999, both the profession and the courts are now becoming familiar. Mr Morgan further confirmed our initial impression that the effect of the new regulations was that it was not the claimant but his solicitor who was entitled and, indeed, could sue for the uplift in costs over and above the prescribed basis.
In these circumstances Mr Shipley for the appellants accepted that there was no legal impediment to an award of indemnity costs based on Willis v Redbridge on the wording of the legal aid regulations. He did, however, repeat the submissions made in his original skeleton that the judge wrongly exercised his discretion to award indemnity costs at all and submitted further:—
(1) that the rationale for awarding indemnity costs was that the actual litigant should not be out of pocket or should be less out of pocket than he would be if an order was made on a standard basis; this had no application in legal aid cases because the litigant does not have himself to pay anything by way of costs or at least only has to make a contribution based on his means;
(2) that since an order of indemnity costs in a legally aided case only benefits the lawyers, it should only be made after examination of the question whether the claimant's lawyers actually deserved to receive more than they would receive on a standard basis;
(3) that the potential conflicts of interest that could arise between a lawyer and his client if a lawyer were to make applications for indemnity costs (which would, ex hypothesi, be only in his own interest) made it undesirable to make orders for indemnity costs at all. Was it, for example, the duty of the lawyer to pass on any offer of settlement, however derisory it might be and thus forfeit the personal benefit of an award of indemnity costs?
It is appropriate to deal first with the submission that an award of indemnity costs should not have been made even if the claimant had not been legally aided.
Indemnity costs apart from legal aid considerations
Mr Shipley's criticism of the judge's award of indemnity costs focussed on (1) the fact that the new Civil Procedure Rules did not come into effect until 26th April 1999, well after proceedings had been instituted in September 1997, and (2) the possible influence on the judge of the defendants' attempts to have the claimant's legal aid withdrawn. In fact, the reason why the judge decided to award indemnity costs was that he thought the defendants' conduct of the litigation had been unreasonable in general; a judge who so concludes, was entitled to award indemnity costs before the Civil Procedure Rules came into force and remains, of course, entitled to do so after they have come into force. There is nothing, therefore, in Mr Shipley's first point.
The judge, in fact, relied primarily on two factors: (1) the defendants' persistent refusal to supply the documents needed by the claimant to establish and quantify his claims; (2) the fact that the defendants made "woefully" inadequate offers to settle the proceedings but the inadequacy was not apparent to the claimant because the relevant documents had not been disclosed.
He did add to this that the defendants had apparently intervened to seek withdrawal of the claimant's legal aid certificate. He then said this:—
"In my view, in the circumstances of this case, and in particular in circumstances where there is no dispute that Mr Brawley was entitled to 50% of the profits, it was wholly contrary to the proper way of conducting litigation for the defendants to refuse to hand over the necessary documents to enable him to assess his claim, or, more importantly, to allow him to assess the offers which were made from time to time by the defendants. The result was that Mr Brawley was forced to engage Mr Green to help him come to an estimate of what he had lost as a result of failure to hand over 50% of the profits.
In my view, in the peculiar circumstances of this case, the making of offers by the defendants, which were woefully below what appears to be now accepted as Mr Brawley's entitlement, helped in large part by the failure to hand over documents for which no excuse or defence has been proffered, amount to a wrongful manner of conducting this litigation. It is quite clear, in my view, that Mr Brawley was anxious to settle this case as soon as possible. It has been kept going far too long as a result of the way in which the defendants have conducted this litigation. I shall order costs on an indemnity basis"
In my view it was plainly within the discretion of the judge in the circumstances of this case to award indemnity costs, if the fact that the claimant was legally aided is disregarded. Once it is accepted (as the defendants had to accept) that they did indeed have an obligation to pay over 50% of the profits made from the Checkpoint device, their conduct in seeking to obstruct the claimant's attempt to have that percentage properly assessed was quite rightly categorised as a wrongful manner of conducting litigation. The judge's reference to the defendants' attempts to have legal aid withdrawn was not, in my view, essential to his decision. Even if it was, it was a matter he was entitled to have in mind in the light of the fact that the continued legal assistance to the claimant was entirely justifiable.
If, therefore, the claimant had been financing the litigation himself, an award of indemnity costs could not be criticised.
Impact of legal aid
For his proposition that the rationale for awarding indemnity costs was that the actual litigant should, in an appropriate case, not be out of pocket or, at least, less out of pocket than if costs were awarded on a standard basis, Mr Shipley relied on Petrotrade v Texaco [2002] 1 WLR 947 paras. 63–4 (where Lord Woolf MR observed that the power to award indemnity costs is a means of achieving a fairer result for a claimant) and ...
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