Indemnity costs and public funding

Brawley v Marczynski and another ([2002] All ER(D) 288 (Oct) TLR 7 November)

Costs may be awarded on the indemnity basis to a publicly funded party in order to penalise the losing party’s unreasonable conduct in a case. The court also rejected the argument that there is a potential conflict between a lawyer and a publicly funded client on an application for costs on the indemnity basis, because such an order would benefit only the lawyer. The introduction of Regulation 107B into the Civil Legal Aid (General) Regulations 1989 permitted the indemnity principle to be infringed in legal aid cases. In the words of Lord Justice Longmore: ‘To make some special provision with regard to the award of indemnity costs when the receiving party is legally aided would be straining at the gnat at a time when both the profession and the court have to swallow the camel of CFAs.’ Indemnity costs had been described as both compensatory and penal; but the concepts are not antithesis. An order for indemnity costs was often intended to operate as a penalty on the losing party in the sense that the court disapproved of that party’s conduct in relation to the litigation. That was what the judge intended in the present case. It was impossible to say that the rationale of an award of indemnity costs was that the successful party should not be out of pocket. It might be the desired consequence but it was not the rationale in the present case, the rationale was that the unsuccessful party had misconducted himself in the course of the litigation for the purposes of Part 44 of the CPR. Other reasons for the indemnity costs might be that he had, for example, failed to meet a claimant’s offer to settle pursuant to Part 36, or had conducted a test case for the benefit of other litigants as well as himself.