The classic formulation of the doctrine of indemnity is that of Bramwell b in Barons of the Exchequer in Harold V Smith: 2




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COSTS AND THE PUBLIC INTEREST

by P A Keane
My topic is costs and the public interest.
I am concerned, only in an indirect way, with the burden to a litigant of paying his or her own lawyers to go to court to have a dispute resolved. It would be difficult to argue that this burden is not excessive: I know of only two judges who could afford to hire lawyers to litigate in their own courts. Sadly, neither of them is in this room.
Rather, my concern is with costs as the indemnity provided by the law to one party to a piece of litigation against the other in respect of the expense of that litigation.
My concern is particularly with litigation in those courts which are vested with a judicial discretion to impose that burden on one party or the other; usually losing party.
There is a view, which has some currency, that the very existence of a judicial power to make an award of costs against a losing party in litigation is a bad thing. That is said to be so for two reasons. First, it is thought that it has something to do with the high level of legal costs generally. Secondly, the prospect of being required to bear the burden of the other side’s costs may have a chilling effect on the willingness of people to litigate.
As to the first of these points, the belief that the existence of the costs indemnity is causally related to the level of legal costs generally is not borne out by experience in this country. And in the US, where legal costs are at least as horrendous as they are here, there is generally no costs indemnity.
As to the second point, it is not immediately obvious that disincentives to litigation are a bad thing. One of the time-honoured maxims of the law has been: “Interest rei publicae ut sit finis litium”: It is in the public interest that there be an end to suits.
More colourfully, Judge Learned Hand, the greatest American judge not to sit on the Supreme Court of the United States, said: “After some dozen years of experience, I must say that as a litigant I should dread a lawsuit beyond almost anything short of sickness and death.”1
Litigation has traditionally been regarded as a necessary evil, to be preferred to trial by ordeal or by combat, but nevertheless stressful, uncertain, beset by delays and wasteful of the community’s resources. On that traditional view, the provision of an indemnity to the successful party is part of the minimum of justice owed to a party wrongly put through such an ordeal to enforce his or her legal rights.

The classic formulation of the doctrine of indemnity is that of Bramwell B in Barons of the Exchequer in Harold v Smith:2



“Costs are an indemnity. They are given to the person who receives them to indemnify him in respect of the costs of some proceedings which the other party has compelled him to take. They are not a punishment on the party who has to pay them, nor a bonus to the person who is to receive them; therefore on the question of costs, if you can find out the extent of that damnification, you can find out the extent to which costs ought to be allowed. Of course, I do not mean to say there are not exceptions, cases in which certain arbitrary rules for taxation have been laid down; but as a rule costs are an indemnity. Find out the damnification and then you can find out the amount of the costs you ought to allow.” (emphasis added).
That traditional view is under challenge. There is a particular concern about the chilling effect upon the willingness of individuals to pursue litigation brought by them in the public interest, eg, to protect the environment against development thought to be harmful or to ensure the humane treatment of persons in detention or to enforce laws designed to maintain minimum standards of probity in business.
It is necessary to understand, of course, that where such a claim succeeds, the successful claimant can be expected to be as enthusiastic as anyone else about the idea that the costs of the proceeding should follow the event. There is undeniable force in the argument that a plaintiff who is put to expense to enforce his or her rights can only have complete justice if the party who wrongly resisted the claim should be required to reimburse that expense.
So we are talking about a chilling effect which can’t be understood otherwise than in the context of the prospect of losing the case. It cannot be harmful to the public interest that people be discouraged from bringing losing cases: No one would urge that hopeless cases should clog up the courts.
The real problem is that prospects of success may be difficult to assess. The assessment of the prospects of a case is often not an easy task, even for the most clear-eyed lawyer. And non-lawyers who are enthusiastic about a cause are unlikely to be the best people to make a balanced assessment of the strength of the case they wish to bring.
And defendants are members of the public too. Is it really fair to expect them to be consoled that they have been sued, wrongly as it turns out, in the public interest? When I was at school, when we received “six of the best”, it was expected of us that we would thank the cleric who administered the beating on the basis that his loving correction had made “better men of us”. Even as young men, befuddled by testosterone, we were sceptical of this proposition. Is it fair to expect successful defendants to subscribe to the theory that litigation is an improving discipline?
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