The High Court has rejected an argument that it would be a breach of the indemnity principle to make a payment on account of costs to claimants funded by a conditional fee agreement (CFA).
It was argued that because of the CFA, the claimants had no current liability to costs because they had not yet ‘won’.
However, the argument was given short shrift by Mrs Justice Thirlwall, ruling in XYZ v Various  EWHC 1151 (QB).
The case is a group action in which nearly 1,000 women are seeking damages from companies running private hospitals for supplying defective breast implants manufactured by the French company, PIP.
Last September the judge granted an application to adjourn the trial listed for October pending resolution of litigation between one of the defendants, Transform Medical Group, and its insurer, Travelers.
She also ordered Transform and Travelers to make a payment on account of costs. The claimants served a costs schedule totaling £706,000 (including VAT) for counsel’s fees, expert fees and solicitors’ fees.
At a hearing to determine the payment, the defendants made their argument about the indemnity principle.
In response, the claimants’ solicitor, Hugh James partner Mark Harvey, explained that the CFA included a clause that said: “Where a summary assessment of costs or payment on account is made in your favour, you are immediately liable to pay your share of Hugh James’s charges to the extent of the relevant summary assessment or payment on account.”
Thirlwall J said: “As he points out, this clause is commonly found in CFAs as detailed in the Law Society model conditional fee agreement, ‘if on the way to winning or losing you win an interim hearing, then we are entitled to payment of our basic charges and disbursements related to that hearing together with a success fee on those charges if you win overall’.
“It is clear that the interim award of costs prior to the final completion of the case may be charged and recovered irrespective of the requirement to win the case at trial or later final determination.
“In my judgment a payment on account of costs here would not involve a breach of the indemnity principle.”
Thirlwall J went on to reject a submission that she should make no order and leave the matter to the costs judge, before going on to consider what was a reasonable sum, with a particular focus on counsel’s fees.
She said she had “no difficulty in principle” with the claimants having two leaders and two juniors given the fact that there were “several hundred claimants and numerous defendants and third parties who participate at different levels”.
The brief fees (which do not include success fees) were £150,000 and £125,000 for leading counsel, and £150,000 and £110,000 for junior counsel, more than four times the total brief fees agreed by Transform, which were £80,000 for leading counsel and £40,000 for junior counsel, payable in stages.
Transform argued that absent any detailed breakdown by way of justification, the judge should not grant anything above the sums agreed on their side.
She said: “This was to be a 20-day trial. I know the issues. Counsel must have cleared their diaries for (as a minimum) the month of September, as well as for the trial itself. Work would have been done by some in August.
“Given the case management decisions made in the run up to September the claimants’ representatives could not have been completely confident (after the failure of the mediation on 29 August) that the trial would be adjourned although they must have thought it very likely.
“What is not clear to me, however, is the division of labour as between silks and juniors. At first blush the payment of a higher brief fee to a junior than to his leader is unusual and whilst it may well be to reflect a greater number of hours work done, albeit at a lower rate, it is not for me to speculate, even on an informed basis at this stage.
“I take Mr Harvey’s point that the general rule is that sums of in the region of 70% are paid on account of costs in this sort of situation. I am not persuaded that I should take so high a percentage given the disparity between the individual fees for the barristers on the two sides (irrespective of the difference in the size of the teams). I have decided therefore that in respect of counsels’ fees the sums payable on account shall be one half of the brief fees as agreed. That is a total of £267,500.”
With a small amount of solicitors’ costs claimed, Thirlwall J ordered a total payment on account of costs of £283,500.