SUPREME COURTS COST OFFICE
B e f o r e :
| Alan Robert Miskin
|- and -
|St John Vaughan
Mr Lawrence (Kennedys) for the Respondent
Hearing dates : 29 August 2002
Crown Copyright ©
Master Campbell :
"It is adjudged that the Defendant do pay the Plaintiffs £41,096.24 and their costs of the action up to 6th day of June 1991 and that the Plaintiffs do pay the Defendants costs from the said date. The costs recoverable by the Defendant to be set off against the sum of £41,096.24 and the Defendant do pay the Plaintiffs the balance of the costs, such costs to be taxed if not agreed."
"It is said here that the plaintiff is not in a position to claim an indemnity, for two reasons, as I understand: one is that the firm who purported to act as his solicitors were not his solicitors at all; all they were were the solicitors for the union, and their only instructions were to act as solicitors for the union. The other is that, assuming the union instructed the solicitors to act as solicitors for the plaintiff, yet it was upon the terms that the solicitors should look solely to the union and not to the plaintiff for payment of their costs. Sankey J [the Judge below] held that neither contention was well founded upon facts. He came to the conclusion that the solicitors were engaged to act as solicitors for the plaintiff by the union and that in so engaging the solicitors, the union were acting as agents of the plaintiff. In my opinion that view is correct. The learned Judge also found that there had been no arrangement either by the union or by the solicitors or by the plaintiff, that the solicitors should not under any circumstances, look to the plaintiff for payment of their costs. With that conclusion upon the facts I also agree."
"When once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs and that liability would not be excluded merely because the union undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the union and the solicitors or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs."
"In these circumstances I think that it is highly probable, though the matter has not been discussed, that the solicitors have a personal right against the trade union to receive a proper remuneration for their services. It has not been discussed, and we do not know the precise terms of the relationship between the trade union and the solicitors, but I assume there exists such an obligation. Nevertheless there is nothing inconsistent in that obligation co-existing with an obligation on the part of the plaintiff to remunerate the solicitors."
"In this case the solicitors, no doubt first instructed by the insurance company, were the solicitors on record as solicitors for the respondent. They acted for him, and in the absence of proof of an agreement between him and them, or between them and the insurance company that he would not pay their costs, they could look to him for payment of the work done and his liability would not be excluded by the fact that the insurance company had itself agreed to pay their costs."
"I would hold, following Adams and the other cases I have mentioned, that costs are incurred by a party if he is responsible or liable for those costs, even though they are in fact paid by a third party, whether an employer, insurance company, motoring organisation or trade union and even though the third party is also liable for those costs. It is only if he has agreed that the client shall in no circumstances be liable for the costs that they cease to be costs incurred by him, as happened in Gundry v Sainsbury. In practice, of course, the taxing officer will have before him on the taxation the whole of the solicitors file. If it appears to the taxing officer that there is doubt whether there is an express or an implied agreement, binding on the solicitors, not to seek to recover the costs from the client the taxing officer should ask for further evidence. It must then be for the taxing officer to come to a conclusion on the whole of the facts presented to him. Unless those facts establish a clear agreement express or implied that in no circumstances will the solicitor seek to obtain payment from their client then the basic presumption stands ..."
"The liability of the insurers shall not exceed for any one claim under this policy the sum specified in item 4 of the schedule except as provided for under insuring clause 4 but the insurers shall in addition indemnify the assured in respect of all costs and expenses incurred with their written consent in the defence or settlement of any claim which falls to be dealt with under this policy ..."
"The assured shall not admit liability for, or settle any claim, or incur any costs or expenses in connection therewith, without the written consent of the insurers who shall be entitled at their own expense at any time to take over and conduct in the name of the assured or the said firm as the case may be, the defence or settlement of any such claim ..."
i. The Defendant has ceased business some time before 1989 (see Kennedys letter to Customs & Excise dated 19 December 2000).
ii. Bills rendered by Kennedys could not have been submitted to the partners in the Defendant firm because they disappeared (see letter 3.10.01 Kennedys to Customs & Excise).
iii. The solicitor and own client bills were rendered on 28 April 1993, 5 March 1999 and 21 January 2000. Two were addressed to "underwriters at risk c/o Aon Group" and one to "Halifax Property Services formerly St John Vaughan – St John Smith". (See Customs & Excise letter 14.08.01.)
iv. As the Defendants ceased business some time before 1989 instructions could subsequently have come only from insurers not from the former partners themselves.
"A letter from the Respondents solicitors in which it was stated that the terms of the Respondents policy of insurance was such that the insurance company concerned would not in any circumstances have looked to the Respondent for payment of costs." (per Viscount Dilhorne page 230 at A)
"... there is nothing inconsistent in there being a co-existing obligation on the part of the insured and its insurers to remunerate the solicitors."
In my view that is exactly the situation here.
"But Lord Cross in Davies v Taylor (No.2)  1 AER 959 at 965 to 966 ... refers only to an agreement with the client and it was Lord Cross' speech which was adopted by Lord Diplock in O'Brien v Robinson (No.2)  1 AER 969."
It follows that where, as here, the Defendant did not agree expressly that Kennedys should look only to insurers for their costs, it remained jointly liable to meet them.
"Counsel suggest that in this case the costs were not incurred by Mr Avery but were incurred by the Automobile Association because the Automobile Association undertook the appeal and instructed their solicitors and paid them. I cannot accept this suggestion. It is clear that Mr Avery was in law the party to the appeal. He was the person responsible for the costs. If the appeal had failed, he would be the person ordered to pay the costs. If the costs had not been paid, execution would be levied against him and not against the Automobile Association. The truth is that the costs were incurred by Mr Avery, but the Automobile Association indemnify him against the costs ... that is sufficient to satisfy the requirement that the costs were "incurred by him"."
"(5) Subject to paragraph (6) below if a person who has been but is no longer a taxable person makes a claim in such manner and supported by such evidence as the Commissioners may require, they may pay to him the amount of any VAT on the supply of services to him after the date with effect from which he ceased to be, or to be required to be, registered and which was attributable to any taxable supply made by him in the course or furtherance of any business carried on by him when he was, or was required to be, registered.
(6) Subject to paragraph (7) below, no claim under paragraph (5) above may be made more than 3 years after the date on which the supply of services was made.
(7) Paragraph (6) does not apply where:
(a) The person ceased to be, or ceased to be required to be registered before 1 May 1997; and
(b) the supply was made before that date."
"As regards the Defendant it will be able to recover the VAT as input tax so the Claimant should not be expected to meet costs that can be recovered elsewhere. To allow otherwise would be to enable the VAT on legal services to be recovered twice: once from the Claimants and then again from Customs & Excise.
Should the position be any different where the insurer has paid the whole of the Defendants legal costs (ie, the VAT and inclusive costs)? In my submission it should not be because for the purpose of claiming an input tax credit, the focus of the legislation is on the recipient of the supply and it is irrelevant who actually pays for the service ... The fact that the Defendant is not now registered for VAT does not affect the position. Regulation 111(5) of the 1995 Regulations makes it plain that a person who ceases to be registered can still make a claim for input tax."