Sued partners can recover own firms' costs

Partners facing legal action can reclaim the costs their firms incur in successfully defending them, the Court of Appeal recently held.

It also suggested that partnership deeds which provide that partners will not be charged for such services except when costs are recovered do not amount to illegal contingency fee agreements.

Malkinson v Trim concerned solicitor Christopher Trim, who was a partner with Lincolnshire-based Tinn Thimbleby & Co (now Thimbleby Fisher) which was sued over fellow partner Eric Christie's handling of an estate.

By the time the action started, Mr Trim had joined Spalding-based Crusts, which acted for him.

The court said there seemed to be a settlement with the other partners.

The claimant served notice of discontinuance against Mr Trim, making himself liable for Mr Trim's costs of more than 15,000.

The costs officer and costs judge rejected the claimant's charge that he was not liable.

The case in the Court of Appeal turned on London Scottish Benefit Society v Chorley Crawford and Chester (1884) 12 QBD 872 (CA), which entitles a partner to reclaim costs that he has incurred in an action against him.

The claimant said this did not apply as Mr Trim had not acted personally.

The Court of Appeal rejected this, saying there should be no distinction.

Lord Justice Chadwick said: 'A partner who is represented in legal proceedings by his firm incurs no liability to the firm; but he suffers loss for which under the indemnity principle he ought to be compensated, because the firm of which he is a member expends time and resources which would otherwise be devoted to other clients.'

The issue of whether the partnership deed created a contingency fee agreement was not directly considered, but the judge noted in obiter that it probably did not.

'It does not, in terms, commit the partnership or any of the partners to provide any litigation or other legal services to anyone.

It merely provides for the consequences, as between the partners, in the event that such services are provided.'

Nottingham firm Ashton Bond Gigg acted for the claimant.

By Jeremy Fleming