| COSTS — Discretion of court — Application against non-party — Successful party applying for costs of appeal against unsuccessful party’s solicitors — Solicitors having substantial financial interest in outcome of proceedings — Whether power to make order against solicitors — Supreme Court Act 1981, s 51(1)(3) (as substituted by Courts and Legal Services Act 1990, s 4(1))
Myatt and Others v National Coal Board and Another (No 2)
CA: Dyson and Lloyd LJJ and Sir Henry Brooke: 16 March 2007
The court had jurisdiction under s 51(3) of the Supreme Court Act 1981 to order that an unsuccessful party’s solicitor should pay some or all of the successful party’s costs where the litigation was pursued by the client for the benefit, or to a substantial degree for the benefit, of the solicitor.
The Court of Appeal so held when ordering that Ollerenshaws, the solicitors acting for four claimants in proceedings against the National Coal Board (“NCB”), should pay 50% of the NCB’s costs of an appeal in the litigation.
The claimants, former coal-miners, had sued the NCB for damages for noise-induced hearing loss. Their claims were settled for about £3000 to £4000 in each case and a detailed assessment of costs was ordered. Master Wright, who conducted the detailed assessment, found on a preliminary issue that conditional fee agreements which the claimants had entered into with their solicitors were unenforceable, with the consequence that their after the event legal expenses insurance was invalid. On 18 July 2006 the Court of Appeal dismissed the claimants’ appeal against that decision: see Garrett v Halton Borough Council (Law Society intervening) [2007] 1 WLR 554. The NCB sought an order that the costs of the appeal be paid by Ollerenshaws who were joined as a party for the purposes of costs only, pursuant to CPR r 48.2.
DYSON LJ said that the four cases were test cases. About 60 other clients had entered into similar unenforceable conditional fee agreements with the solicitors. The solicitors’ for profit costs were about £4000 in each case, so that about £250,000 was at stake for them in the appeals. The four claimants also had a financial stake in the appeals in that the shortfall in their recoverable costs would have to be met out of their damages. Counsel for the NCB submitted that solicitors had a substantial interest in appealing the decision of the master, which was sufficient to found jurisdiction under s 51(1)(3) of the Supreme Court Act 1981 to make the costs order sought. The solicitors submitted that there was no jurisdiction to make the order against them since they were the claimants’ legal representatives (see Tolstoy-Miloslavsky v Aldington [1996] 1 WLR 736, 734, 745), and that an order for payment of costs by a non-party would always be exceptional: see Symphony Group plc v Hodgson [1994] 1 QB 179, 192. Having regard to Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807, para 25, his Lordship did not accept that the mere fact that a solicitor was on the record presenting proceedings for his client was fatal to an application by the successful opposing party under s 51(3) that the solicitor should pay some or all of the costs. If a claimant had no financial interest in the outcome of the appeal at all because the solicitors had assumed liability for all the disbursements, the only party with an interest in the appeal would be the solicitors. They would undoubtedly be acting outside the role of solicitor, to use the language of Rose LJ in the Tolstoy-Miloslavsky case. It would be surprising if the existence of the claimants’ modest financial interest deprived the court of the jurisdiction to make an order against the solicitors which, absent that interest, it would undoubtedly have. It was unfortunate that the NCB had not warned the claimants’ solicitors at an early stage of the appeal that they would apply for costs against them if the appeal failed. That was a factor to take into account in deciding whether to make an order: see Symphony Group plc v Hodgson, at p 192. In his Lordship’s judgment the fair and just order to make was to order the solicitors to pay 50% of the NCB’s costs of the appeal.
LLOYD LJ delivered a concurring judgment and SIR HENRY BROOKE agreed.
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