Ilangaratne v British Medical Association [2005] EWHC 2096 (Ch)

Case No CC/2004/PTA/0749SCCO Ref : 5R/2005[2005] EWHC 2096 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE SUPREME COURT COSTS OFFICE
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 04/10/2005
Before
THE HONOURABLE MR JUSTICE WARRENSitting withCOSTS JUDGE CAMPBELL&MR PETER TODDAs Assessors
Between
DR JAYANTHA BANDARA ILANGARATNEAppellantBRITISH MEDICAL ASSOCIATIONRespondent
Dr Ilangaratne (Appellant) in Person for in personMr M Farber (instructed by  Messrs Le Boeuf, Lamb Greene & MacRae  ) for British Medical Association (Respondent)Hearing Hearing date: 23 rd June 2005
Judgment

Introduction

[1]This appeal concerns the detailed assessment of costs payable by the Claimant, Dr Ilangaratne, which he was ordered to pay to the Defendant, the British Medical Association (“the BMA”), having lost an action he had commenced and fought against it. That action (which related to allegedly negligent advice and conduct by the BMA of claims which Dr Ilangaratne had against his employers) was heard in the Central London County Court by HH Judge Hornby, who gave judgment against Dr Ilangaratne on 18 December 2002. The order now appealed against is one made by Master Seager-Berry dated 29 October 2004. He ordered the issue of an interim costs certificate in the sum of £120,000 in relation to a claim for costs of over £200,000 and ordered further Points of Dispute to be filed in relation to one item in the bill of costs.[2]Dr Ilangaratne sought from the Master permission to appeal his order. The proposed appeal related to a number of aspects on which the order had been based. Five grounds were raised:a. That the indemnity principle was breached.b. That the BMA failed to comply with its obligation to provide a costs estimate.c. That the bill was disproportionate.d. That the application by the BMA for an interim costs certificate was made without notice to Dr Ilangaratne.e. That the BMA had instructed solicitors in the City of London rather than local solicitors in Kingston-upon-Hull (where Dr Ilangaratne’s action had been commenced). The Master refused permission to appeal.[3]Dr Ilangaratne then applied to the High Court for permission to appeal. Permission was granted by Gray J on 16 February 2005 on each of the first four grounds which I have just listed. Dr Ilangaratne abandoned the fourth of those grounds shortly before the hearing of his appeal. In relation to the third ground, Gray J included permission to rely on an argument under the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRA”). I will deal with the argument under the proportionality heading, although I think it is really a free-standing point.[4]The appeal before me is made pursuant to CPR 52. The appeal is not a rehearing. In order to succeed, Dr Ilangaratne must show that the Master was “wrong” in his decision, or that his decision was “unjust” because of a serious procedural or other irregularity being alleged: see CPR 52.11(3).[5]Although there is no written judgment of the Master, the Appeal Bundle contains a transcript of the proceedings before him which ran over three days – 27 to 29 October 2004. The Master’s reasons for his decision and his approach can be clearly seen. Each of the three issues on which Dr Ilangaratne now appeals was raised before, and dealt with by, the Master.

Proportionality

[6]In the course of argument before the Master, Dr Ilangaratne accepted that his claim against the BMA would have been in the order of £1 million although the Schedule of Loss which he had submitted gave a total of over £2 million. After hearing argument from both sides, the Master said this:
“I have reached a very, very clear view on this. I have pre-read very quickly the pleadings, the witness statements, the Judgment, the witness statement on the application to set aside the default costs certificate. I have looked at the contents of various ring binders. I have taken into account the size of the claim. I have taken into account the different factors which are referred to in [CPR] 44.5 some of which have been highlighted and supplemented in the helpful skeleton. I have identified the amount of costs previously – about £216,000. I do not consider that the costs are disproportionate to the issues involved in this particular case. It was a staggeringly high claim. It was a claim which was very firmly resisted. I have noted, but I cannot take into account for the purposes of this decision, that the Judge made adverse comments about your evidence, and made complimentary comments (with, I think, only one exception) on the defendant’s witnesses. It is clear to me that very considerable effort was made to keep the defence progressing, in spite of what was I think the perceived weakness of the claimant’s claim. In my judgment the costs do not appear to be disproportionate to the sum claimed and the basis on which it was advanced.”
[7]I have not seen all the material to which the Master refers and which he had the advantage of reading, if only quickly. The Master’s conclusion was, subject to two matters raised by Dr Ilangaratne, to which I turn in a moment, one which he was entitled to reach on the material before him. Indeed, from the material which I have seen, I would have reached exactly the same decision as the Master on the issue of proportionality.[8]The two matters raised by Dr Ilangaratne are these:a. First, he says that there was a failure by the BMA properly to engage in mediation or other settlement proposals which might have resolved the dispute without the need to incur these huge costs.b. Secondly, he says that he was, and is, an impecunious litigant and that it is disproportionate now to throw these costs onto him with the result, he says, that he will lose his home in order to meet the bill. The Master was aware of both of these points. As I understand Dr Ilangaratne’s submissions, they come to this: that the Master failed to take them into account or, if he did take them into account, he failed to give them proper weight.[9]I reject those submissions. As to mediation, a full mediation did actually take place. But agreement was not reached. Further, the BMA made a payment into court of £20,000 well before trial which Dr Ilangaratne failed to accept. The Judge himself commented on this which he regarded as a most unwise decision. There is nothing in the BMA’s approach to mediation and settlement which is open to criticism.[10]As to impecuniosity, Dr Ilangaratne relies on the overriding objective and, in particular, CPR 1.1(2)(c)(iv): he says, correctly, that dealing with a case justly includes, so far as practicable, dealing with the case in ways which are proportionate to the financial position of each party. CPR 1.1(2) applies, I consider, to the process of assessment just as it applies to any other aspect of the litigation. But that is not to say that, just because a paying party is impecunious, the amount which he has to pay should be cut down. CPR 1.1(2)(c), including paragraph (iv), will have its primary application in relation to case management. However, questions of proportionality so far as assessment of costs is concerned are dealt with under CPR 44.4 and 44.5. Under CPR 44.5(1), all circumstances are to be taken into account in deciding whether the costs have been reasonably and proportionately incurred. CPR 1.1(2) (including paragraph (iv)) really adds nothing to CPR 44 in the context of assessment of costs. I do not consider that any criticism of the Master’s decision can be levelled against him on the grounds that he had failed to take into account, or to give adequate weight to, Dr Ilangaratne’s impecuniosity.[11]There is one further point relating to Dr Ilangaratne’s impecuniosity. The reality is that, when it comes to enforcement of any substantial costs order, his family home may be at risk. I understand that both Dr Ilangaratne himself and his wife have interests in the family home but I do not know what the interests of each of them are. Dr Ilangaratne argues that the threat of enforcement against the family home is a factor which should be taken into account in deciding the amount of costs pursuant to CPR 44.5; it appears to be a threat which Gray J took into account in granting permission to appeal. I disagree that it is a point which tells against the BMA so as to disentitle it from recovery of some part of its otherwise recoverable costs. I do not consider that the methods by which an award of costs might be enforced can be relevant to whether the costs have been proportionately incurred in the first place. I also reject Dr Ilangaratne’s suggestion that the family home is “property” for the purposes of CPR 44.5(3)(b): the property there referred to is, in my judgment, quite clearly a reference to any property which is the subject matter of (or otherwise involved in) the underlying action. Dr Ilangaratne must look elsewhere if he is to resist enforcement of any order against his interest in the family home. He may or may not have grounds on which to resist enforcement when the time comes.[12]Accordingly, I do not consider that the Master’s conclusions can be challenged on the grounds that the costs of the BMA which they now seek to recover were disproportionate.[13]I turn next to the argument under TULRA. Dr Ilangaratne relies on section 23 which, so far as relevant, provides as follows: “23(1) Where in any proceedings an amount is awarded by way of damages, costs or expenses – …………… (c) against members or officials of a trade union on behalf of themselves and all of the members of the union, no part of that amount is recoverable by enforcement against any protected property.” …………… (c) against members or officials of a trade union on behalf of themselves and all of the members of the union,[14]Dr Ilangaratne says that the protection is afforded by the section whenever a member becomes involved in proceedings against his union. The purpose of the legislation, he says, is “to protect the property/home of trade union members involved in any proceedings including disputes between member/s and trade unions”. I do not agree. The section is quite clearly, in my judgment, dealing with cases where a member is acting in a representative capacity on behalf of himself and the members of the union, whether in litigation against the union or against a third party, but on behalf of the members generally. It is not concerned with litigation in which a member of a union is involved which is personal to the member, whether that litigation is against the union or a third party. This is made clear, as Counsel for the BMA submits, by section 23(1)(c), referring to awards against “members or officials of a trade union on behalf of themselves and all members of the union….”. [my emphasis][15]Dr Ilangaratne also relies on section 64 and 65 TULRA in support of his argument under section 23. He says that section 64 and 65 (which deal with unjustifiable disciplinary matters) “suggest that Parliament had not thought of condoning such extreme acts against a trade union’s own members”. In my judgment, however, those sections are wholly irrelevant to the construction of sections 64 and 65.

Costs estimate

[16]Dr Ilangaratne sought to raise a point about the provision of inadequate costs estimates to him, relying on Leigh v Michelin Tyres [2004] 2 All ER 175. The point had been raised very late in the day. The point was not raised in any Points of Dispute but was raised expressly for the first time only in Dr Ilangaratne’s skeleton argument served on 25 October 2004, 2 days before the start of the hearing before the Master. It has been hinted at, perhaps, in a Notice to Admit facts dated 6 October 2005 containing a notice to admit that “no specific costs estimates were served upon the [BMA] upon initiating proceedings or via an Allocation Questionnaire”. The response of the BMA to that Notice was that there was no obligation on it to provide such an estimate. In his oral decision the Master said this:
“I am going to rule this point out. This is a point which should have been included in Points of Dispute or, if you wished to raise it, you should have done so within the fourteen days directed for the service of any skeleton arguments. It is now too late to raise it. The parties coming to a hearing must know the case they have got to meet. Therefore, I do not give permission to raise that now.”
[17]The Master, in early December 2004, gave written reasons for refusing permission to appeal: I am not clear whether this was as a result of renewed application to him for permission to appeal or simply to enlarge on the reasons given orally at the hearing in October. His written reasons include this:
“CPD 6 – Costs estimate Leigh v Michelin Tryres [Dr Ilangaratne] raised this through his Notice to Admit Facts dated 16 October 2004, within the time directed for skeleton arguments. He considered that a competent solicitor would grasp the point about allocation questionnaire. Mr Kendall reminded me that the Leigh issue was only raised 48 hours before the hearing and I ruled that it was too late to introduce this point. It was not dealt with in the Points of Dispute. In any event, the allocation questionnaire was dealt with at a very early stage and it did not envisage the manner in which the litigation unfolded. My view remains unchanged. I refused permission to bring this issue before me. I remain of that view. Permission to appeal is refused.”
[18]In my judgment, it was well within the discretion afforded to the Master pursuant to his case-management powers in relation to the conduct of the hearing before him, to have made the decision which he did. I doubt very much that the BMA should have expected a Leigh v Michelin Tyres point to arise following the Notice to Admit Facts and the response. Whether or not I would have reached the same decision as the Master is not relevant since I can detect no error of law in, and no wrong approach to, the exercise of those powers.[19]Gray J gave permission to appeal on the basis that Dr Ilangaratne wished to argue that there was a continuing obligation on a party to correct an estimate which it can be seen is, as the case progresses, an underestimate of the potential costs liability of the other party. He considered that there was sufficient in that point to warrant granting permission. I think that Gray J was very likely under the impression that the Master had decided the merits of the issue and that Dr Ilangaratne was seeking permission to appeal on that basis. In fact, the true position is that the Master did not make a decision on the merits (save for the indication which I have quoted from his written reasons for refusing permission) but decided that he would not entertain the point.[20]Nonetheless, in relation to the merits I would, given the basis on which permission to appeal was granted, like to say something. My own provisional view (without having heard anything like full argument on the point) is that Dr Ilangaratne’s case is very weak. I can see nothing in the Practice Direction (43PD.6) which requires an updated costs assessment to be given, although the Court can, at any stage, order such an update to be given. When a case develops (and grows in scale) in a way which clearly was not foreseen when the original costs estimate was given by one party, the other party must realise, or be taken to realise, that the estimate is not to be relied upon. He can take steps to obtain an updated estimate. What, in my judgment, he cannot do is to say, when a costs order is eventually made against him, that the early estimate should result in a large reduction in the amount which he has to pay.

The indemnity principle

[21]Dr Ilangaratne considers that the indemnity principle may have been breached. He suggests that the BMA may not have been liable to the solicitors acting for it in the action on the basis that there was no retainer between the BMA and the solicitors acting for it in the action. He says, correctly, that the BMA was insured and, again correctly, that the insurers appointed solicitors and paid them. He points out that the BMA has not disclosed its insurance contract either to him or to the court. And yet, he says, the BMA is relying on the very same contractual documents as the basis for its claim against him. He says that proceeding with a hearing on that basis “is wholly unjust and a breach of natural justice and of Article 6 of the European Convention on Human Rights and offends the principle of equality of arms”.[22]In response to that, counsel for the BMA sets out three propositions:a. Unless and until Dr Ilangaratne raises an issue which justifies going behind the signature and certificate on the bill of costs and inquiring into the retainer ie raises a “genuine issue”, no question of disclosure arises.b. Dr Ilangaratne has not raised a genuine issue.c. No retainer documents have been produced to the court whether under the CPR or at the direction of the court or voluntarily; therefore no question arises of being put to an election whether to disclose documents or to assert privilege and prove facts which need to be proved in some other way. The BMA asserts, in any case, that there is no issue to which any documentation is relevant.[23]Counsel submitted that the relevant principles are well established and should not need the citation of authority. He nonetheless cited a number of authorities in his skeleton argument doing so, he said, because(a) Dr Ilangaratne submitted that the BMA’s case was wrong in law and(b) to ensure that Dr Ilangaratne understood the basis of the BMA’s case. The position is as follows.[24]There is a presumption that a client is liable for the fees of a solicitor whom he engages. That presumption can be displaced by showing an express or implied agreement that the client is not to be liable for fees, but the onus is on the person challenging his liability to pay to show that such an agreement exists: Adams v London Improved Motor Builders Ltd [1921] 1 KB 495 at 500-5001, and 502-504 which was followed in a line of cases including R v Miller (Raymond) [1983] 3 All ER 1056 at 1059-1062 which in turn was cited with approval in Bailey v IBC Vehicles Ltd [1998] 3 All ER 570 at 574.[25]It is clearly established by a long line of authority that the indemnity principle is not undermined merely because a third party, such as a trade union or an insurer, funds the successful litigant who eventually becomes the receiving party under a costs order. For a recent review of the principles, one need look no further than Thornley v Lang [2004] 1 All ER 886 at paragraphs 5 to 8. In the present case, there is not the slightest evidence to suggest that the arrangement between the BMA and its insurers was any different from the general run of actions where a party is insured. In such a case, the insurers may take control of the litigation process, but the insured is the client of the solicitors even though(i) the solicitors have been chosen by the insurer with which the level of fees has been agreed(ii) the insured has an indemnity from the insurer for the costs which he incurs and(iii) there is also a client/solicitor relationship between the insured and the solicitors. I do not consider that Dr Ilangaratne has any prospect of establishing before the Master that the indemnity principle is breached because there was no retainer at all. At most he might be able to argue that the terms of the retainer do not permit recovery of the full amount which is claimed.[26]In Bailey’s case, a claimant in a personal injury action was funded by his trade union. The claim was settled with the defendants agreeing to pay costs to be taxed if not agreed. The solicitors’ bill of costs was signed by a partner and included a mark-up of 66.67% on the hourly rate charged. The defendants objected and requested that the plaintiff provide evidence that it was not in breach of the indemnity principle. The union responded by letter stating that the relationship between the union and the solicitors was on the basis that the solicitors were “entitled to make a full solicitor/client charge”. The defendants did not assert that, because he was funded by the union, the plaintiff could not recover any costs at all on the basis that he had not come under any personal liability; instead, the defendants wished to ascertain the basis on which the union had agreed to pay the solicitors and sought discovery in the taxation proceedings of various documents relating to that question. The district judge granted the application, but the judge allowed the plaintiff’s appeal, holding that there was nothing in the available information which could lead to an inference that the indemnity principle had not been observed. The defendants appealed, contending that as they were not liable to pay any item of costs which were inconsistent with the indemnity principle, they were entitled to call for and be provided with information about any agreement or understanding about costs arrangements in order to make clear that the sums claimed had been reasonably incurred and not in excess of the agreed rate. The appeal was dismissed because the information available indicated that a full solicitor/client charge had been agreed between the union and the solicitors and there was nothing to suggest that there would have been any capping of those charges if the claim had failed. But the Court made some general observations which are of relevance in the present case.[27]The following passages appear in the judgment of

Judge LJ:

“The taxing officer is exercising a judicial function, with substantial financial consequences for the parties. To perform it, he is trusted properly to consider material which would normally be protected from disclosure under the rules of legal professional privilege. If, after reflecting on the material available to him, some feature of the case alerts him to the need to make further investigation or causes him to wonder if the information with which he is being provided is full and accurate, he may seek further information. No doubt he would begin by asking for a letter or some form of written confirmation or reassurance as appropriate…… This jurisdiction having been acknowledged, an emphatic warning must be added against the over enthusiastic deployment of these powers, particularly at the behest of the party against whom the order for costs has been made. As Judge Cooke recognised, the danger of ‘satellite litigation’ is acute. As far as possible consistent with the need to arrive at a decision which does broad justice between the parties, it must be prevented or avoided, and the additional effort required of the parties kept to the absolute minimum necessary for the taxing officer properly to perform his function. My conclusion in this appeal, to which I can now turn, is intended to reflect these principles.”
[28]Judge LJ then went on to dismiss the appeal on the basis that “the information available to us” [ie to the Court of Appeal] indicated that the solicitors and the union were agreed that the union should be charged a “full solicitor/client charge” relying, at least in part, on a letter from the union indicating that that was the agreed basis of charge and taking comfort in Counsel’s information, on instructions, that there was no “cap” on the charges. Reliance was also placed on the obligation of officers of the court (ie the solicitors) not to mislead and not to allow the court to be misled, so that, if there had been a cap, it should have been disclosed, saying “[The solicitors] would not have produced and signed a bill of costs which included a claim for ‘reasonable costs’ which would have fallen foul of the indemnity principle”.[29]Henry LJ agreed. He said this:
“I agree with the judgment which Judge LJ has given. That the matter had to be taken to judgment shows just what a culture change is necessary before we have a sensible cost-conscious proportionate civil justice system. Here was a perfectly ordinary personal injury case, settled before trial, with experienced solicitors on both sides. RSC Ord 62, r 29(7)(c)(iii) requires the solicitor who brings proceedings for taxation to sign the bill of costs. In so signing he certifies that the contents of the bill are correct. That signature is no empty formality. The bill specifies the hourly rates applied, and the care and attention uplift claimed. If an agreement between the receiving solicitor and his client (here the trade union) restricted (say) the hourly rate payable by the client, that hourly rate is the most that can be claimed or recovered on taxation (see General of Berne Insurance Co v Jardine Reinsurance Management Ltd [1998] 2 All ER 301). The signature of the bill of costs under the rules is effectively the certificate by an officer of the court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client under a contentious business agreement. The court can (and should unless there is evidence to the contrary) assume that his signature to the bill of costs shows that the indemnity principle has not been offended. Here Rowley Ashworth’s letter of 19 September put (or should have put) the matter beyond all doubt. But strictly speaking, the signature of the bill required by the rules should have done that already. Having said that, in what is hoped will be the new ethos of litigation, where by cooperation the parties ensure that costs are spent resolving the essential issues in the action rather than in satellite litigation, an ounce of openness is cheaper than any argument. I therefore agree that the client care letter or any contentious business agreement should be attached to the bill of costs. For the avoidance of doubt, I also agree that the taxing officer may and should seek further information where some feature of the case raises suspicions that the whole truth may not have been told. And the other side of a presumption of trust afforded to the signature of an officer of the court must be that breach of that trust should be treated as a most serious disciplinary offence.”
The next case is Hazlett v Sefton Metropolitan Borough Council [2000] 4 All ER 887. Although a decision about the provision for costs made by section 82(12) Environmental Protection Act 1990 in the context of statutory nuisance, the following passage is equally applicable to the assessment of costs in the present case. Harrison J, giving the decision of the divisional court, said this at p 893:
“Where, however, there is a genuine issue raised by the defendant as to whether the complainant has properly incurred costs in the proceedings, the position will be different. A defendant may, for instance, have grounds for believing that the complainant will not be liable to pay his solicitor’s costs, whether because he has entered into an unlawful and unenforceable conditional fee arrangement with his solicitor or for any other reason. In those circumstances, where the defendant has raised a genuine issue as to whether the complainant has properly incurred costs in the proceedings, the complainant will be at risk if he continues to rely on the presumption that he is liable for his solicitor’s costs. If he does not then adduce evidence to prove that he has properly incurred costs in the proceedings and the defendant can show by evidence or argument, that he has not, he would be most unlikely to succeed in recovering his costs. The need for the complainant to give evidence to prove his entitlement to costs rather than relying on the presumption in his favour will not, however, arise if the defendant simply puts the complainant to proof of his entitlement to costs. If the defendant simply puts the complainant to proof of his entitlement to costs, the complainant would be justified in relying on the presumption in his favour. It would be necessary for the defendant to raise a genuine issue as to whether the complainant is liable for his solicitor’s costs before the complainant should be called upon to adduce evidence to show that he is entitled to his costs. It will be for the trial judge to decide whether or not the defendant has raised an issue which calls for proof by the complainant of his liability to costs. Prior notice of the issue to be raised by the defendant should be given to the complainant in sufficient time before the hearing to enable the complainant to deal with it properly at the hearing and to avoid the necessity of an adjournment at the defendant’s expense.” “Where, however, there is a genuine issue raised by the defendant as to whether the complainant has properly incurred costs in the proceedings, the position will be different. A defendant may, for instance, have grounds for believing that the complainant will not be liable to pay his solicitor’s costs, whether because he has entered into an unlawful and unenforceable conditional fee arrangement with his solicitor or for any other reason. In those circumstances, where the defendant has raised a genuine issue as to whether the complainant has properly incurred costs in the proceedings, the complainant will be at risk if he continues to rely on the presumption that he is liable for his solicitor’s costs. If he does not then adduce evidence to prove that he has properly incurred costs in the proceedings and the defendant can show by evidence or argument, that he has not, he would be most unlikely to succeed in recovering his costs. The need for the complainant to give evidence to prove his entitlement to costs rather than relying on the presumption in his favour will not, however, arise if the defendant simply puts the complainant to proof of his entitlement to costs. If the defendant simply puts the complainant to proof of his entitlement to costs, the complainant would be justified in relying on the presumption in his favour. It would be necessary for the defendant to raise a genuine issue as to whether the complainant is liable for his solicitor’s costs before the complainant should be called upon to adduce evidence to show that he is entitled to his costs. It will be for the trial judge to decide whether or not the defendant has raised an issue which calls for proof by the complainant of his liability to costs. Prior notice of the issue to be raised by the defendant should be given to the complainant in sufficient time before the hearing to enable the complainant to deal with it properly at the hearing and to avoid the necessity of an adjournment at the defendant’s expense.”
[30]Dr Ilangaratne relies on the decision of Rimer J in Dickinson v Rushmer [2001] All ER (D) 369. That is a case which shows that where a receiving party voluntarily discloses to the Costs Judge documents in support of his claim for costs, the paying party is entitled to see those documents if the receiving party seeks to rely on them. The decision certainly does not say that there is any general obligation on the receiving party to disclose documents; nor does it lend any support to the suggestion that documents which are provided to the Costs Judge because rules of court require them to be lodged with the bill of costs or because the Costs Judge has ordered their production, have to be shown to the paying party. In the present case, those questions do not arise – or, at least, have not yet arisen – because no documents relevant to the solicitors’ charging rate to the BMA have been lodged with the court or requested by the Master.[31]Dr Ilangaratne also referred to South Coast Shipping Co Ltd v Havant Borough Council [2003] 3 All ER 779. That case, however, does not assist him. What it establishes is that paragraph 40.14 of the Costs Practice Direction (concerning production of documents to the court and a subsequent election whether to consent to disclosure, in the absence of consent, to rely on other evidence) is consistent with Article 6. Privilege could not be overridden by the court but had to be waived by the party entitled to assert it. However, as is the case with Dickinson v Rushmer, the decision does not contain any suggestion that documents which have not been provided to the court at all need to be disclosed.[32]The last case I refer to and which Dr Ilangaratne relies on is Hollins v Russell [2003] 4 All ER 590. That case examined the indemnity principle in the context of conditional fee agreements. Brooke LJ, giving the judgment of the Court, reviewed the cases which I have considered above and drew attention, at paragraph [62], to the passage from the judgment of Henry LJ in Bailey’s case which I have quoted. He went on, at paragraph [63], to say that the principles established in the case law which he had discussed were seized upon by the respondents who contended in essence that, once the solicitor had certified the accuracy of the costs due to his firm, the onus switches to the paying party to show some genuine ground why that certificate may be inaccurate. Specifically, that would mean that the paying party in relation to a conditional fee agreement would have to show why it may be unenforceable. Although Brooke LJ distinguished Bailey’s case on five grounds, he did not question the correctness of the decision. Nonetheless, he clearly wished to restrict its scope saying, at paragraph [71] “In all the circumstances, we have come to the conclusion that the decision in Bailey’s case should not be extended beyond the facts with which it was dealing, namely that of a conventional bill, so as to obviate disclosure of the CFA as the norm”. The present case, however, is one of a conventional bill, so the decision does not, I think, assist Dr Ilangaratne.[33]Approaching the present case, therefore, as one where there is a conventional bill in relation to which the well-established principles apply, it might be thought that there is nothing out of the ordinary in it. However, there is one point of concern. This is a case where it is clear that the action has been funded by insurers, the inevitable inference being that the solicitors are only entitled to charge whatever rate they had agreed with the insurers. It is the experience of my Assessors, both of whom have far more experience in this area than I do, that insurers drive hard fee bargains with those solicitors whom they regularly instruct. The rates of charging by the BMA’s solicitors, and on the basis of which the BMA actually seeks to recover its costs on the assessment, strike my Assessors as significantly higher than they would expect to see in cases of this nature where insurers are funding the defence. My Assessors express surprise that, as no retainer documents had accompanied the bill when it was lodged at the Court for assessment, the Master did not, in the circumstances of the present case, ask for production to him under the Costs Practice Direction section 40.14 of any document which dealt with the rate of charging which the solicitors acting for the BMA and the insurers were to pay. By that route, the Master could have satisfied himself that there were no concerns that the costs which it is now sought to recover might not be in accordance with the charges previously agreed between the solicitors and the insurers.[34]The concerns to which that gives rise is increased in the light of the way matters developed during the course of this appeal. As I have said, it has been known all along that the BMA were insured; indeed, an email dated 19 December 2003 from Mr Waters, director, BMA Legal Services, to Dr Ilangaratne states that the BMA’s solicitors “control all aspects of litigation including issues relating to costs”. At first, I was told by counsel that there was nothing in writing about the level of fees between the solicitors and the BMA, it being implicit, I think, in that that the solicitors were entitled to charge a reasonable fee and that the costs it is sought to recover are reasonable. However, towards the end of the hearing, and after questioning from myself and my Assessors, it became clear that the position is as follows:a. These solicitors work regularly for these insurers. They have, as I understand it, a standing arrangement agreed some time ago relating to the terms and conditions on which the insurers are to be taken as instructing the solicitors on behalf of the insured.b. If the BMA, notifies the insurers of a problem which warrants the involvement of solicitors, the insurers will instruct solicitors on behalf of the insured. This can be done quite informally, even by way of a phone call. Quite what is said about the level of costs which the solicitors can charge is not clear, although Counsel said that “costs information is sent to the insurers by the solicitors the whole time” and that “there is a letter relating to all cases”.c. It is the terms of the standing arrangement just mentioned which will have applied in the present case to the terms of the retainer between the solicitors and the BMA.d. Accordingly, this may well not be a case where insurers have simply instructed solicitors and agreed a fee level with them in relation to the particular case. It appears that the fee level is dictated by an earlier standing arrangement.[35]This last factor makes it particularly important to be sure that the charges actually being levied are in accordance with the standing arrangement, assuming that such arrangement does, in fact, apply.[36]In this context, I draw attention to section 40.2(i) of the Costs Practice Direction (see 47PD.13). Under that provision, certain documents must accompany the request for a detailed assessment if there is a dispute as to the paying party’s liability to pay costs to his solicitor (which would I consider include a dispute that some, but not all, of the costs incurred by the receiving party are irrecoverable because of breach of the indemnity principle). Those documents are “any agreement, letter or other written information provided by the solicitor to his client explaining how the solicitor’s charges are to be calculated”. It might be said those documents include the standing arrangement between the insurers and the solicitors. However, the obligation to provide documents to the court under paragraph (i) only arises(a) where there is “a dispute as to the receiving party’s liability to pay costs to the solicitors who acted for the receiving party” and(b) where the documents have been “provided by the solicitor to his client”.[37]As to (a) [ie is there a “dispute” about the BMA’s liability to pay costs to the solicitors who acted for it?] Dr Ilangaratne included in his Points of Dispute a section commencing “Indemnity Principle”. He claimed that he could not comment on whether the BMA satisfied that principle, nor have a fair determination of the costs issue, without having sight of the BMA’s indemnity insurance details including the relevant retainer. Whether this raises a “dispute” within the meaning of section 40.2(i) is a matter of some difficulty. The BMA says that there was no dispute because Dr Ilangaratne had no material on which he could base any argument at all to displace the presumption established in the authorities in the absence of material which indicates to the contrary, a presumption strongly fortified by the solicitors certificate on the bill of costs which, according to Bailey’s case, it will be very hard to go behind. I do not propose to decide that difficult issue since there was before the Master the unusual factor that the hourly expense rates claimed were higher than those which, at least in the experience of my Assessors, might be expected where insurers are funding the defence. In my judgment, if it is necessary, in order to engage section 40.2(i), to establish a dispute – in the sense that the onus is on Dr Ilangaratne to establish a genuine issue rather than simply put the receiving party to proof of his entitlement – then that onus is, in the present case, discharged in the light of surprisingly high hourly rate claimed where the receiving party is insured.[38]As to (b) [ie have documents been provided by the solicitors to the BMA?], even if it is established that there was a dispute as to liability raised by the Points of Dispute, it is not known to me whether documents (if any) recording the standing arrangement between the insurers and the solicitors were ever provided to the BMA; if they were not, it might be suggested that they are not documents “provided by the solicitor to his client”. I think that there are powerful arguments for saying that the insurers, too, were clients of the solicitors (indeed, that is how Henry LJ described the trade union in Bailey’s case) and that documents provided to them by the solicitors are as much within section 40.2(i) as would be documents provided directly to the BMA had there been any.[39]If I am right in saying that there was a “dispute” before the Master, then any documents which had been provided to the BMA and which fall within section 40.2(i) of the Costs Practice Direction should have been provided. I think that the Master ought to have satisfied himself whether or not that there were any such documents which had been provided to the BMA and, if there were, to have ordered their production to ensure compliance with section 40.2(i). Similarly, if the argument that the documents provided by solicitors to the insurers are also within section 40.2(i) is correct, those documents ought to be provided to the Master.[40]However, the position is different if either(i) I am wrong in saying that there was a “dispute” before the Master or(ii) although there was a dispute, the argument that the documents provided by solicitors to the insurers are also within section 40.2(i) is wrong. If that is the position, I consider that this is a case where the Master ought to have asked for the documents, establishing the charging rate of the solicitors, to be produced pursuant to section 40.14 of the Costs Practice Direction. It would have been better if the documents had been attached to the request for a detailed assessment, in accordance with the spirit of what Henry LJ said in Bailey’s case about any client care letter or contentious business agreement; and it is in accordance with what he said should be done where some feature of the case raises suspicions that the whole truth may not have been told. This is even more true under the CPR that it was under the old RSC with which Henry LJ was dealing and in the context of which he made his remarks.[41]Now, I appreciate that the Master himself was not told what I was told, namely that there was a pre-existing standing arrangement between the solicitors and the insurers. Had he known that, he himself might well have asked for further clarification. Although the matter does not come before me by way of a full rehearing, I do not think that I should ignore the additional material which I now have in attaching proper weight to the doubt which arises, in the views of my Assessors, about the hourly charging rates. For completeness, I should say that I would have reached the same conclusion without the additional information provided by Counsel about the standing arrangement between the solicitors and the insurers: but that material strongly supports the conclusion.[42]None of this is to accuse the solicitors of any sort of malpractice or improper failure to disclose relevant facts or to suggest that the certificate on the bill was not given in good faith. I do, however, consider that in the light of all the information before me, the matter should go back to the Master to enable him to take such steps as he thinks appropriate to satisfy himself whether or not the indemnity principle is satisfied. I do not rule that he must necessarily ask to see the documents governing the standing arrangements between the insurers and the solicitors. He may, for instance, be satisfied, if it is forthcoming, by a letter from the solicitors which states clearly that the charging rates in the bill are in accordance with the standing arrangements and that there would be no form of capping of the solicitors’ fees had Dr Ilangaratne been successful in his action against the BMA. That is the sort of course of action which was contemplated in Bailey’s case. How to proceed is a matter for the Master. I only add that the BMA, to avoid any further dispute, might think it sensible to disclose to Dr Ilangaratne whatever the Master requires to be produced to him; that will avoid further dispute about whether a question of election arises under section 40.14 of the Costs Practice Direction.[43]Accordingly, this appeal is allowed to the limited extent only that the matter should return to the Master for him to take further steps in the light of this judgment to satisfy himself whether or not the indemnity principle is satisfied.[44]I would like to express my thanks for their assistance to my Assessors whose views in relation to the indemnity principle have been central to my decision. The decisions on all issues, however, are mine and the responsibility for them lies with me alone.

Cited in 1 later judgment