Can a solicitor acting for an impecunious client offer indemnity for adverse costs when ATE insurance is unobtainable? Master Rowley rejected the Defendant’s argument that such an agreement was champertous in Edwards v Slater & Gordon UK Limited [2021] SCCO (15/09/2021), but an appeal of this decision is being heard in the High Court this week, so some clarity of this important but ambiguous area of law should follow.
Whether a solicitor’s role extends to bearing the risk of liability for adverse costs is controversial in more ways than one.
If an ATE provider declines to insure a claim or if the premium is set too high, in the absence of indemnity from a solicitor, a claim may not proceed at all. This raises questions about how far ATE providers should be keepers to the gates of justice and no doubt is a common frustration of claimant solicitors.
An obvious consideration for the solicitor and their practice should be whether they would be able to afford adverse costs liabilities in the event of an unsuccessful claim. This issue came to the fore in the Edwards case as the Defendant alleged that the Claimant solicitors did not have adequate financial backing.
Most importantly, the legality of indemnifying a client must be at the very top of the checklist when deciding whether to offer indemnity, as supporting litigation for a share of the proceeds would ordinarily be considered champertous and contrary to public policy. Prior to the Courts and Legal Services Act 1990, contingent funding arrangements offered by solicitors were completely prohibited under the rules against maintenance and champerty, and although the Act sanctioned exceptions in certain circumstances, these are limited and strict conditions must be met to ensure enforceability.
Although the recent Court of Appeal case of Farrar v Candey Limited [2022] EWCA Civ 295 attempted to widen the scope for legitimate solicitor-client agreements, the case was dismissed.
Watch this space for the outcome of the Edwards v Slater & Gordon appeal…
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