(1) Mohammad Reza Ghadami (2) Jayne Ghadami –v- Lyon Cole Insurance Group Ltd [2010] EWCA Civ 767

Posted on Tuesday, July 13th, 2010

C’s claim against D was dismissed with an order that C pay D’s costs on the indemnity basis. C contended that D had professional indemnity insurance which covered the costs of proceedings save for an excess of £1,000.00. C argued that D’s costs were limited by operation of the indemnity principle to the £1,000.00 which it had actually paid out.

C was successful at first instance. D’s solicitors had sent no client care letter and had failed to comply with the Law Society’s client care code. On the evidence available he found there was an agreement that D was liable for only £1,000.00 and capped their costs accordingly. The Judge on appeal looked at the same evidence and concluded there was no such agreement, reversing the District Judge’s decision. He noted that D was in the insurance business and would understand the true position on costs.

C appealed, arguing that the District Judge had been right in that if the insurers had refused to pay D could have successfully argued that its liability to its solicitors would be limited to £1,000.00 and that the Judge on appeal was wrong to have regard to what the subjective understanding of D would have been, absent which, he would have found for C.

D argued that there was a contract between itself and the solicitors with no expressed terms as to remuneration. The solicitors would be entitled to be paid at reasonable rates for work properly done in pursuance of the retainer.

Held: There was no agreement that D’s liability to its solicitors would be limited to £1,000.00. Adams –v- London Improved Motor Coaches Limited [1921] 1 KB 495; Lewis –v- Avery (No. 2) [1973] 1 WLR 510; Davies –v- Taylor (No. 2) [1974] AC 225; British Waterways Board –v- Norman QBD, 26 November 1993 (unreported) considered. Furthermore, failure to comply with the client care code did not prevent the solicitors from recovering costs. Garbutt –v- Edwards [2006] 1 WLR 2907 considered. There was an implicit agreement that D’s solicitors would act but without express terms as to charging rate etc. The solicitors would be entitled to charge reasonable fees and disbursements for work reasonably done. Appeal dismissed with costs.


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