Gillian McGivern v MBR Acres Limited & Ors

The indemnity principle is a fundamental common law rule in costs recovery repeatedly referred to in the case law. In Harold v Smith [1860] 5 H&N 381 the principle was summarised as follows:

“Costs as between party and party are given by the law as an indemnity to the person entitled to them: they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them”.

This means that a party cannot recover more in costs from an opponent than they are liable to pay their own legal representatives.

In civil legal aid cases, long-standing provisions have been in place to circumvent the indemnity principle. The present Regulation 21 of the Civil Legal Aid (Costs) Regulations 2013 explicitly provides for this, stating that:

“the amount of costs to be paid under a legally aided party’s costs order or costs agreement must be determined as if that party were not legally aided”.

This regulation, in conjunction with section 28(2) of LASPO, allows for the routine recovery and retention of costs in excess of what the LAA would pay, despite the client having no direct liability for those additional costs. No equivalent provision exists for criminal legal aid to disapply the indemnity principle.

The LAA’s position is that a successful legally aided party can recover the costs the LAA has met, a concept sometimes referred to as a “legal fiction,” given that the assisted party does not have a liability to pay fees as such. This is predicated on the legally aided party’s obligation to account to the LAA for recovered costs whether by virtue of the statutory charge or otherwise. The fact that this liability is contingent on recovery does not prevent it from satisfying the indemnity principle. However, this extends only to the sums properly payable by the LAA. The principle that there could be a recovery under this “legal fiction” was not in issue before the Judge.

LASPO is divided into distinct parts, with Part 1 dedicated to legal aid provisions. Section 14 defines “criminal proceedings” for the purposes of Part 1, encompassing various types of proceedings including those prescribed by regulations. Section 14(h) extends this definition to “such other proceedings, before any court, tribunal or other person, as may be prescribed”. Section 16 provides that representation for criminal proceedings is available to an individual if they are “specified” and the “relevant authority” has determined they qualify.

Contempt proceedings have been specifically classified as “criminal proceedings” for legal aid purposes under LASPO, by virtue of section 14(h) and Regulation 9(v) of the Criminal Legal Aid (General) Regulations 2013.

Section 28(2) of LASPO is of central importance. It stipulates that a person providing services under legal aid arrangements:

“must not take any payment in respect of the services apart from— (a) payment made in accordance with the arrangements, and (b) payment authorised by the Lord Chancellor to be taken”.

This provision underpins the “prohibition against topping up,” preventing legal aid providers from charging clients privately for publicly funded services.

Regulation 3 delineates the scope of the Regulations. It provides that Regulations 8 and Schedule 4 apply to proceedings in the High Court. Notably, Schedule 2, which allows for enhancement in certain circumstances, applies only to proceedings in the Crown Court.

Regulation 8 governs claims for fees in cases to which the Standard Crime Contract applies, including representation in proceedings prescribed as criminal under section 14(h) of LASPO.

Regulation 8(2) mandates that such claims:

“must— (a) be made and determined in accordance with the 2010 Standard Crime Contract; and (b) be paid in accordance with the rates set out in Schedule 4”.

Schedule 4 of the Regulations sets out the specific rates payable for claims falling under Regulation 8, including those for representation in proceedings prescribed as criminal under section 14(h) of LASPO.

Regulation 9 addresses “Payments from other sources.” It states that a representative:

“must not receive or be a party to the making of any payment for work done in connection with those proceedings, except such payments as may be made— (a) by the Lord Chancellor; or (b) in respect of any expenses or fees incurred in— (i) preparing, obtaining or considering any report, opinion or further evidence...; or (ii) obtaining any transcripts or recordings,”

where LAA authority was refused. Significantly, Regulation 3(5A) clarifies that Regulation 9 applies only to proceedings in magistrates’ courts, the Crown Court, and the Court of Appeal; it does not apply to proceedings in the High Court.

Paragraph 8.10 of the Criminal Specification states that:

“where an agreement or order provides for costs to be paid by any other party...then you may retain the element of any costs recovered under that agreement or order which exceeds the amount paid or payable to you by us...under the terms of this Contract”.

This provision grants authorisation for the provider to retain sums exceeding LAA payments but it does not, of itself, appear to disapply the indemnity principle.

Paragraph 8.50 generally prohibits charging the client privately for services or disbursements provided under the contract.

Paragraph 8.52 (or 8.43 in some versions) provides a limited exception to this prohibition, allowing private payment for specific types of work (e.g., expert witnesses, transcripts) where prior LAA authority was refused, and the client expressly authorised the payment. However, this provision does not extend to High Court committals.

Khan was a judgment delivered by Costs Judge Leonard concerning the assessment of costs in committal proceedings. A key issue was whether a party receiving legal aid could recover costs from an opponent at conventional between the parties’ rates, or if recovery was limited to the rates payable by the LAA. He concluded that the indemnity principle is not disapplied for a party in receipt of criminal legal aid in prescribed proceedings. He found no express statutory provision within LASPO or the relevant Criminal Legal Aid (Remuneration) Regulations 2013, that abrogated this principle for criminal legal aid, unlike the specific provisions which apply to civil legal aid. Consequently, the costs recoverable by a criminally legally aided party from an opponent were limited in that case to those payable under paragraph 7(b) of Schedule 4 to the Criminal Legal Aid (Remuneration) Regulations 2013. Thus, he decided, in short, that a party cannot recover at higher between the parties’ rates where their own liability is restricted to legal aid rates.

He rejected arguments that the LAA’s Standard Criminal Contract Specification, or any other contractual provision, could authorise enhanced rates or override the mandatory provisions of the Remuneration Regulations. He observed that even if the contract purported to allow enhancement, it could not supersede statutory regulations, and that the LAA had no discretion to enhance the rates set out in Schedule 4.

The Judge in the present case expressly followed the reasoning of Costs Judge Leonard in Khan describing the judgment, whilst not binding on him, as “carefully and correctly determined”.

It is common ground, that while the underlying proceedings against Ms McGivern were civil contempt proceedings, they are, for the specific purposes of legal aid under LASPO, classified as criminal proceedings. This classification stems from section 14(h) of LASPO, as interpreted by Blake J in Bunning and the cases which have followed since.

This distinction is not a mere technicality; it has profound consequences for the application of legal aid regulations and, critically, for the operation of the indemnity principle in relation to costs recovery.

It is also common ground that the indemnity principle applies in legal aid cases, meaning that a party cannot recover more in costs from an opponent than they are liable to pay albeit on the basis of the legal fiction described in Khan.

The pivotal point of divergence between the parties is whether this principle is disapplied in the context of criminal legal aid for civil contempt proceedings.

I accept the Respondents’ submission that the key difference between civil and criminal legal aid regimes, in relation to between the parties’ costs recovery, lies in the presence or absence of a statutory provision equivalent to Regulation 21 of the Civil Legal Aid (Costs) Regulations 2013. Regulation 21, in conjunction with section 28(2) of LASPO and the Civil Specification, explicitly overrides the indemnity principle in civil legal aid cases, permitting recovery as if the party were not legally aided.

As Costs Judge Leonard concluded in Khan, and as I agree, there is no equivalent disapplication of the indemnity principle in criminal legal aid. Mr Underwood KC for the Appellant argued that since Regulation 9 of the Criminal Legal Aid (Remuneration) Regulations 2013 does not apply to the High Court, there is no prohibition on recovery from other sources in High Court committal proceedings. However, I prefer the Respondents’ submission on this point. Regulation 9 serves as an example of a situation where the statutory regime expressly allows for certain payments outside the standard LAA funding; the fact that it is limited to other courts (rather than including the High Court) reinforces the argument that such express legislative provision is required for any deviation from the general rule. Its limited scope does not create a general disapplication of the indemnity principle in the High Court.

Similarly, while Paragraph 8.10 of the Standard Criminal Contract Specification does indeed authorise a provider to retain costs recovered from other parties that exceed the amount paid by the LAA, I concur with the Respondents’ submission (following the approach in Khan) that this contractual provision does not and cannot, disapply the indemnity principle. The indemnity principle is a rule of law, and its disapplication requires primary or secondary legislation, not merely a contractual term between the LAA and the provider. Paragraph 8.10 operates within the confines of the indemnity principle, allowing the provider to retain costs if they are recoverable under that principle, but not to create a liability where none exists on the part of the client.

The Appellant placed considerable reliance on the dicta in JFS and Bunning to argue that the court should pursue a “sensible outcome” that allows for the recovery of between the parties’ rates. I acknowledge the importance of these judgments, particularly the Supreme Court’s observations in JFS regarding the necessity for solicitors undertaking publicly funded work to be able to recover remuneration at between the parties’ rates in successful cases, to ensure the financial sustainability of their practices and to prevent a “gravely disadvantaged” public funding system. However, as Mr Mallalieu KC argued, the dicta in JFS and Bunning were delivered in the context of the court’s general discretion to award costs or involved assumptions about the applicability of between the parties’ rates, rather than a direct analysis of whether the statutory scheme disapplied the indemnity principle in a criminal legal aid context. While those cases illustrate a broader policy imperative, they do not, in my judgment, provide any binding legal principle that overrides the specific statutory provisions and their interpretation concerning the indemnity principle in criminal legal aid. The function of the courts is to give effect to the words Parliament has used in a statute, not to rewrite them based on perceived absurdity or policy arguments that are the province of the legislature.

The Appellant argued that the LAA has demonstrated a willingness to pay enhanced rates, referring to the LAA’s own assessment in this case and the “non-standard fee” provisions in the Criminal Contract. However, I accept the Respondents’ submission, supported by Costs Judge Leonard’s detailed reasoning in Khan, that the Regulations (specifically Schedule 4) do not provide for the enhancement of rates in High Court proceedings for cases falling under section 14(h) of LASPO. The provisions for enhancement elsewhere in the Regulations (e.g., Schedule 2, Regulation 29) are explicitly limited to Crown Court proceedings.

Costs Judge Leonard expressly found that the LAA “has no discretion to enhance the rates and fees set by paragraph 7(b) of Schedule 4,” and that any purported contractual agreement to do so would be a matter between the solicitors and the LAA, having no bearing on the amount recoverable from the paying party. I agree with this conclusion.

The Appellant’s proposition that she could “revoke her criminal legal aid” and rely on a retrospective private retainer to claim costs at a higher rate is, in my judgment, untenable.

The principle established in Radford v Frade [2018] EWCA Civ 119, following Kellar v Williams [2004] UKPC 30, is clear; a retrospective variation of a receiving party’s costs liability after a costs order has been made cannot be effective to increase the liability of the paying party. The liability crystallises when the order is made.

Furthermore, such an attempt would appear to breach the statutory prohibition on topping up and would be contrary to public policy, as it would expose legally aided clients to the risk of being pursued privately for fees that the statutory scheme intended to prevent. The argument is, as the Respondents described it, “unprecedented and remarkable”.

While Mr Underwood KC forcefully articulated the perceived “absurdity” of a successful legally aided party being unable to recover full between the parties’ costs, this is, fundamentally, a matter for the legislature, not for the courts. The courts’ role is to interpret and apply the law as enacted.

The Respondents offered a plausible policy rationale for the distinction between civil and criminal legal aid funding for between the parties’ costs: the majority of criminal prosecutions are state-funded, and a general disapplication of the indemnity principle would mean the Government would fund a defence at low rates only to then pay higher commercial rates if it lost the case. While this case involves a private party, the legal aid regulations are framed for the broader criminal justice system. Whether this leads to an “unjust outcome” in particular cases, is a policy matter that, if deemed problematic, should be addressed elsewhere.

One of the Appellant’s grounds related to the delay in the handing down of the initial judgment. Mr Underwood KC did not press his arguments under this ground. While delay in producing a judgment may warrant particular scrutiny, it is not, in itself, a reason for allowing an appeal or concluding that a judge has erred if the reasoning is sound. In this instance, the core issues were purely legal arguments, and I am satisfied that the Judge, a specialist in such matters, had full access to the detailed written submissions and was capable of reaching a decision unimpeded by the elapse of time.

For the reasons set out above, it is my conclusion that the Judge’s determination was correct in law. The statutory framework, as it currently stands, does not provide for the disapplication of the indemnity principle in criminal legal aid, where it funds civil contempt proceedings.

The Appellant’s application for a Costs Capping Order (“CCO”) is brought pursuant to CPR 3.19 and CPR 3.20. CPR 3.20(2) sets out the criteria that must be satisfied for such an order to be made. I may only make a CCO if:

I was invited to deal with this application on the basis of the written submissions. I have carefully considered all the submissions and the material provided. The power to make a CCO under CPR 3.20 is an important discretionary power designed to ensure that the costs of litigation do not become a barrier to justice where specific criteria are met. The three conditions set out in CPR 3.20(2) are cumulative; if any one of them is not satisfied, the application must fail.

In relation to the interests of justice I accept that the appeal raises an issue concerning the intersection of criminal legal aid and civil contempt proceedings and may have wider implications for access to justice and the pool of solicitors willing to undertake such work. The Appellant’s personal financial predicament, being left with a net liability despite her exoneration in the underlying proceedings, is also a relevant factor. However, the Respondents have been defending a costs order obtained in their favour at first instance. To impose a cap on their recoverable costs would require them to argue a complex legal appeal, driven in part by public interest concerns, whilst potentially bearing a proportion of their own reasonable and proportionate costs. This would, in my judgment, be unjust to the Respondents. While there may be a public interest in the point of law raised, the financial burden of resolving it should not be disproportionately shifted onto one party simply by capping their costs below what is reasonable for them to incur in defending the appeal. The Respondents also suggest that the appeal is primarily for the benefit of the Appellant’s solicitor, or the LAA.

In relation to a substantial risk of disproportionate costs, the Appellant points to the Respondents’ significant costs in the SCCO assessment, which were higher than her own awarded costs, as evidence of a propensity for aggressive cost building. While the Respondents’ costs at first instance were substantial, they were assessed by the Judge, after a conventional summary assessment reduction, as being reasonable and proportionate in the context of the detailed assessment hearing. The Respondents’ estimated costs were not inherently disproportionate for an appeal of this nature.

In relation to adequacy of control by case management or detailed assessment, the most significant safeguard in relation to costs in litigation is the assessment process itself. In this appeal, the costs incurred by the Respondents will be subject to a summary assessment by the Court. This process ensures that only reasonable and proportionate costs are allowed. While it is true that appeals do not typically benefit from costs budgeting, the mechanism of summary assessment remains robust. The Appellant’s argument that the detailed assessment at first instance “failed to prevent a disproportionate result” is not a critique of the assessment process itself but rather a reflection of the outcome of that assessment given the parties’ conduct and the legal principles applied in relation to costs recovery. It does not provide sufficient ground to conclude that summary assessment of the appeal costs would be an inadequate safeguard against disproportionate costs. The argument that post-event assessment offers no practical protection against future adverse cost risks is a general concern of litigation and does not demonstrate a specific inadequacy of the assessment mechanism in this case, particularly when weighed against the potential injustice to the Respondents of capping their costs.

For these reasons, I am not satisfied that the Appellant has met all three limbs of CPR 3.20(2). While the issues raised by the Appellant in relation to the broader legal aid system and access to justice are undoubtedly significant and merit careful consideration on appeal, the criteria for imposing a costs capping order, which restricts a party’s ability to recover reasonable costs, have not been met. The standard mechanisms of costs control, primarily summary assessment, are available and remain appropriate for managing the costs of this appeal.

Accordingly, the application for a Costs Capping Order is refused.

I am grateful for the quality of the oral and written arguments presented by counsel on both sides and for the guidance and assistance on costs matters provided by Senior Costs Judge Rowley in this appeal.