Costs law

Document disclosure - indemnity principle

The first signs of the Human Rights Act affecting costs appeared in two recent decisions of the High Court on natural justice in the context of detailed assessment.

Both concerned the extent to which a paying party is entitled to see documents relied on by the receiving party as evidence that there is no breach of the indemnity principle.

The decisions are Dickinson v Rushmer and South Coast Shipping v Havant BC, both handed down on 21 December 2001.

Although both cases were decided on the basis of a restatement of pre-CPR and pre-Human Rights Act decisions, they evidence a shift away from the 'trust me, I'm a solicitor' approach to the certificate on a bill of costs suggested by Bailey v IBC Vehicles [1998] 3 All ER 570 and favours considerations of natural justice.

That said, the Havant decision makes clear that each decision will be based very much on the facts of the case in question, so a mindless demand in points of dispute for disclosure of all documents or abandonment of the entire bill is likely to receive short shrift from costs and district judges.

In Dickinson v Rushmer the indemnity principle challenge to the claimant's bill of 88,000 odd was based on his inability to pay and the possibility that the action was being maintained by a third party, for both of which there was some evidence from the substantive proceedings.

The point was taken at the detailed assessment and the receiving party produced three classes of documents to the costs judge which he refused to produce for the paying party on the ground of privilege.

These were solicitor/client bills, a client care letter and a calculation showing that the receiving party had paid about 40% of the costs due under the bills.

Having considered this evidence, and refused to order disclosure to the paying party, the costs judge held that there was no breach of the indemnity principle.

In so holding he placed reliance on the solicitor's certificate on the bill in accordance with Bailey.

The paying party appealed to Mr Justice Rimer, sitting with assessors.

In South Coast Shipping v Havant BC, there was an indemnity principle dispute in which the costs judge had given directions for the exchange of evidence, as a result of which he had before him a number of witness statements which were, of course, available to both parties.

In addition he was shown certain material for which privilege was claimed, but which he declined to order to be disclosed to the paying party.

In reliance upon the witness statements, the signature on the bills and the privileged documents the costs judge held that there was no indemnity principle issue which required further investigation.

The paying party appealed.

The analysis of the two judges on appeal was similar, though Mr Justice Pumfrey gave greater importance to arguments based on the European Convention.

Mr Justice Rimer allowed the appeal to him while Mr Justice Pumfrey rejected his.

The relevant principles may be summarised as follows:

l Where a disputed issue of fact arises in the course of an assessment, the costs judge may direct production to him of a relevant document, or the receiving party may seek to rely upon a privileged document.

It is not open to the costs judge to override the receiving party's privilege, but he can put that party to its election whether to rely upon the document or to seek to prove the fact by other means, such as the oral evidence of the solicitor in question.

l The decision whether to put the receiving party to its election is one for the costs judge, having regard to relevance and proportionality.

However, where a document is of sufficient importance to be taken into account in determining the recoverability of costs, the receiving party must be put to this election.

l If the receiving party seeks to prove the fact by other means, the paying party is not automatically entitled to see relevant documents in the possession of the receiving party but upon which that party does not intend to rely.

In Dickinson, Mr Justice Rimer held that there had been a breach of natural justice, and that the matter would have to be redetermined.

In Havant, Mr Justice Pumfrey, before whom there was a waiver of privilege which had been declined by the receiving party below, dismissed the appeal.

He held that, once the costs judge decided to take account of the privileged material, the receiving party ought to have been put to its election, but that, ignoring the privileged material and considering only that available to both sides, no issue of breach of the indemnity principle arose.

One further point on which Mr Justice Rimer ruled concerned the classes of documents which were, in principle, privileged.

He upheld a claim to privilege for solicitor and client bills, but rejected claims in relation to a client care letter and a calculation of the sums paid by the client on account of solicitor/client bills.

In so doing, he said that a client care letter might, on the facts, be privileged but whether it was depended on the contents of the letter.

By Jeremy Morgan, barrister, 39 Essex Street, London