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A stark reminder of the importance of the Re Eastwood principles – did a local authority breach the indemnity principle?

In Kuznetsov, R (On the Application Of) v London Borough of Camden [2019] EWHC 3910 (Admin), Mr Justice Mostyn considered whether the indemnity principle had been breached in respect of in-house lawyers recovery of costs.

The Claimant was appealing against an order that he pay the costs of a local authority (the Defendant). The Defendant used in-house lawyers and claimed an hourly rate of £317.00 in their Schedule of Costs. It was contended that as a result of the local authority using in-house lawyers, the actual costs incurred were significantly lower and the indemnity principle had been breached. Mr Justyn Mostyn rejected this argument and allowed £317.00 (as claimed).

The Claimant made a Freedom of Information request of the Defendant and discovered that the maximum hourly rate paid to an in-house lawyer of the London Borough of Camden was £41.75 – the Claimant submitted that this is significantly less than the £317.00 which was claimed by the Defendant. The Claimant argued that irrespective of where the figure had derived from, it is a breach of the indemnity principle because the hourly rate claimed inter-partes exceeds the internal hourly rate claimed between the Defendant and the in-house representative.

The Defendant contested the claim and relied on Re Eastwood (deceased) [1975] Ch, 112, where the Court of Appeal held that;

the appropriate method of taxation of a bill of costs where party was represented by a salaried solicitor was to treat it as though it were the bill of an independent solicitor assessing the reasonable and fair amount of a discretionary item, having regard to all the circumstances of the case and the principle that the tax costs should not be more than an indemnity to the party against the expense he had incurred in litigation.”

Mr Justice Mostyn determined that;

Although the argument has been very persuasively put, I do not agree with it. The £317 encompasses a great deal more than just the costs, the payroll costs, of the people sitting in the offices of the London Borough of Camden. It extends to a contribution to the infrastructural costs of the borough itself. Certainly, it extends to the costs of maintaining not only all the equipment, utilities and all other office costs, but the capital costs of the building in which the legal department is itself housed. So, one would be reasonably expected to apply figures for notional rent for example. I cannot see that this case is, by virtue of the evidence that is before me, a special case allowing an exception to the general rule. I concur with Russell J that to investigate this matter would be unworkable in practice and to push abstract principle to the point where it ceases to give results consistent with justice”.

With that Mr Justice Mostyn rejected the hourly rate challenge and allowed the hourly rate claimed.

This case is simply another example of the importance of Re Eastwood and how the principles, despite the judgment being 45 years old, are still relied upon today.

In-house legal costs are an often misunderstood and technical area. At A&M Bacon Ltd, we have the expertise and knowledge to advise and assist you in this complex area. Contact us today on 01733 350880.

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