The indemnity principle – a crushing blow for the successful Defendant

The case of Liverpool Victoria Insurance Co Ltd v Khan & Ors [2022] EWHC B8 (Costs) relates to a matter whereby a Solicitor and Doctor had been found in contempt of court.  The Fourth Defendant was found not guilty and obtained a costs order against the Claimant’s insurer.

Following preparation of a Bill of Costs, totalling the sum of £438,388.95, the Fourth Defendant lodged the Bill and sought to recover their costs.  A point was raised whereby it was argued that the Fourth Defendant’s costs should be limited to those that had been allowed under the Defendant’s legal aid certificate. If successful, the maximum sum recoverable was £1,368.75 as per the criminal legal aid certificate.

The Claimant filed an Application seeking permission to argue that the Fourth Defendant’s entitlement to costs is limited by virtue of the indemnity principle to the amount prescribed by the Paragraph 7(2) of Schedule 4 to the Criminal Legal Aid (Remuneration) Regulations 2013, imposing a limit of £1,368.75.

The Judge found in favour of the Claimant and held that the Fourth Defendant’s costs were limited to £1,368.75, the sum allowed under the Regulations.

In an interesting twist, the Claimant’s retainer was also subject to review.  The Claimant in this case, acting under a Collective Conditional Fee Agreement, with a success fee.  It was the Defendant’s case that the proceedings were criminal proceedings and as such there was a statutory bar on conditional fee agreements in criminal cases.

The Judge ruled that contempt of court proceedings were in fact civil proceedings ruling that contempt proceedings were not “criminal proceedings” for the purposes of Section 58A of the Courts and Legal Services Act 1990, and as such the statutory bar did not apply and the Collective Conditional Fee Agreement is not unenforceable.

The decision in this case highlights the vast inequality when looking at the costs borne on behalf of each party.  It appears somewhat unjust that a successful Defendant could not recover costs in full simply because of their choice of funding, yet the Claimant is able to recover costs on a CFA because the same are classified as civil proceedings rather than criminal.

If you have any questions regarding this summary, please do not hesitate to contact Emma Robson here