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Breach of Indemnity Principal?

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  • Breach of Indemnity Principal?

    Can anyone explain what a breach of indemnity principal is? or what it means in my situation. I made a claim as an LIP against a company of which I am a member, and lost. Before the hearing I asked by a vary request for the defendant name to be changed from 'the company' to 'the directors of the co.' but this did not happen for some reason and was dismissed. The claim ultimately failed and I was told to pay the defendants (meaning, the company's) legal fees. The defendants solicitors were very hostile and pressured me to pay them directly. At a later meeting a Director was heard saying that the Company itself had not incurred a cost, but that the Directors themselves 'loaned' the money in principal and would be repaid by repayment of the loan, but that in practice no money would enter or leave the company itself. I thought this was odd as i' been ordered to pay the company. I mentioned this in a vary application to the court and they said it may be a breach of the indemnity principal. And that the Directors have been ordered to produce a witness statement explaining how this loan arrangement was not a breach of the indemnity principal. I do not know what all that means. ca anyone explain it in ways I can understand? Do i owe the debt to the company, even though it has not paid any costs itself? or by some miracle is the debt unenforceable as the company has not actually paid anything itself?

    If so, thank you. i'm very confused
    Last edited by Amand_Heart; 18th January 2024, 16:45:PM.
    Tags: None

  • #2
    Originally posted by Amand_Heart View Post
    Can anyone explain what a breach of indemnity principal is? or what it means in my situation. I made a claim as an LIP against a company of which I am a member, and lost. Before the hearing I asked by a vary request for the defendant name to be changed from 'the company' to 'the directors of the co.' but this did not happen for some reason and was dismissed. The claim ultimately failed and I was told to pay the defendants (meaning, the company's) legal fees. The defendants solicitors were very hostile and pressured me to pay them directly. At a later meeting a Director was heard saying that the Company itself had not incurred a cost, but that the Directors themselves 'loaned' the money in principal and would be repaid by repayment of the loan, but that in practice no money would enter or leave the company itself. I thought this was odd as i' been ordered to pay the company. I mentioned this in a vary application to the court and they said it may be a breach of the indemnity principal. And that the Directors have been ordered to produce a witness statement explaining how this loan arrangement was not a breach of the indemnity principal. I do not know what all that means. ca anyone explain it in ways I can understand? Do i owe the debt to the company, even though it has not paid any costs itself? or by some miracle is the debt unenforceable as the company has not actually paid anything itself?

    If so, thank you. i'm very confused
    What is the indemnity principle

    What is the indemnity principle?
    The indemnity principle is that the losing party will never be obliged to pay more costs than the successful client would have been liable to pay to their solicitor under the terms of the agreement . The clearest way for your solicitor to show what you had agreed to pay is by putting this essential information in writing . The details will be contained in your retainer letter and/or your Conditional Fee Agreement (CFA) . It is quite usual for CFA’s to have words to the effect that: “if you win your claim, you pay our basic charges, our expenses and disbursements… you are entitled to seek recovery from your opponent of part or all of our basic charges and our expenses and disbursements” . It is also why the CFA stipulates the hourly rate to be charged to the client . Where a solicitor succeeds in winning their client’s case, they will look to receive payment for the work done from the losing party .

    The losing party will be expected to pay your solicitor’s reasonable costs (see above) . Under the indemnity principle, your solicitor must give you credit for the costs they receive from the losing party . For example, if you have agreed with your lawyer that their hourly rate is £350 and a “reasonable” rate is £300, your lawyer must give you credit (under the indemnity principle) for the £300 . You remain responsible for paying the shortfall which in this example is £50 per hour (£350 - £300 =£50) . This will be deducted from your award of damages . You should note that the indemnity principle is not the same as indemnity costs
    I work for Roach Pittis Solicitors. I give my free time available to helping other on the forum and would be happy to try and assist informally where needed. Any posts I make on LegalBeagles are for information and discussion purposes only and shouldn't be seen as legal advice. Any advice I provide is without liability.

    If you need to contact me please email me on Pt@roachpittis.co.uk .

    I have been involved in leading consumer credit and data protection cases including Harrison v Link Financial Limited (High Court), Grace v Blackhorse (Court of Appeal) and also Kotecha v Phoenix Recoveries (Court of Appeal) along with a number of other reported cases and often blog about all things consumer law orientated.

    You can also follow my blog on consumer credit here.

    Comment


    • #3
      Originally posted by pt2537 View Post

      What is the indemnity principle
      Thank you for the detailed reply. So, if the Judge asks the defendant to provide a statement in relation to the costs they have claimed, "in particular with the alleged breach of the indemnity principle". does that mean they, the directors need to explain what they have actually paid alongside the CFA (if they have one)? So far all they have provided in the witness statement is a repeat that the directors have paid the legal bills through loans. no mention of how much the bills have been or of how much has been paid. apart from the fact that they have said the loans would be recorded in the next annual returns (which is also odd as that would be for the previous year.)

      So have they provided the request by the judge or not?

      Comment


      • #4
        At a later meeting a Director was heard saying that the Company itself had not incurred a cost, but that the Directors themselves 'loaned' the money in principal and would be repaid by repayment of the loan, but that in practice no money would enter or leave the company itself.
        This suggests to me that the company had paid its lawyers, albeit using money loaned by the directors. In that event, there would only be a breach of the indemnity principle if you had been asked to pay more in costs than the company would have been charged by its lawyers.
        Lawyer (solicitor) - retired from practice, now in academia. I do not advise by private message.

        Litigants in Person should download and read this: https://www.judiciary.uk/wp-content/..._in_Person.pdf

        Comment


        • #5
          Originally posted by atticus View Post

          This suggests to me that the company had paid its lawyers, albeit using money loaned by the directors. In that event, there would only be a breach of the indemnity principle if you had been asked to pay more in costs than the company would have been charged by its lawyers.
          agree, but if the judge has asked the directors for a witness statement in this regard dealing with matters, 'in particular with the alleged breach of the indemnity principle'. is it enough for them to provide a statement that 'loans' were 'made' from directors to lawyers on the company's behalf, without any mention of how much for what cost. do we just take there word, or is the judge asking them to explain it further (with proof, or a statement that they have paid the amount stated in the costs order..?)

          Comment


          • #6
            The judge has requested an explanation. See what it says. I expect that there will be an explanation of the company's legal bills and how they were paid.

            Take care - you risk having a further costs order against you. I am puzzled that you made an application alleging breach of the indemnity principle when you did not know what that principle is.
            Lawyer (solicitor) - retired from practice, now in academia. I do not advise by private message.

            Litigants in Person should download and read this: https://www.judiciary.uk/wp-content/..._in_Person.pdf

            Comment


            • #7
              Originally posted by atticus View Post
              The judge has requested an explanation. See what it says. I expect that there will be an explanation of the company's legal bills and how they were paid.

              Take care - you risk having a further costs order against you. I am puzzled that you made an application alleging breach of the indemnity principle when you did not know what that principle is.
              I had no idea what an Indemnity Principle is and dont really understand it now. My request was only to see (freely) the company's accounts subject to 423, 424 and 431 as I apparently have that right. and they did not provide any. The judge, for whatever reason at a directions hearing converted that request into 'an alleged breach of the indemnity principle'. i dont know why and i dont know why he couldn't have just requested that they provide the accounts as is the statutory right.
              I have seen the responding witness statements now and they contain nothing other than that the directors loaned money to solicitors on behalf of the company. nothing of how much the bill was or how much they have paid, which was i assumed the clearest answer to the question.

              Comment

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