Indemnity Costs After Solicitor Misconduct: HD & Ors v North Devon Healthcare Trust

A recent decision from the Senior Courts Costs Office provides a striking example of the financial consequences that can follow where a solicitor’s conduct seriously disrupts litigation.

In HD & Ors v North Devon Healthcare Trust & Ors [2026] EWHC (SCCO) 2009, Costs Judge Joseph ordered a former solicitor to repay £92,000 in payments on account and personally pay costs on the indemnity basis.

The decision is particularly interesting from a costs perspective because it brings together several issues that can arise during complex litigation, including the enforceability of retainers, payments on account, responsibility for failed hearings and the circumstances in which conduct can justify an indemnity costs order.

For costs practitioners, it is also a reminder that detailed assessment proceedings can extend beyond simply deciding whether particular entries within a Bill of Costs are reasonable.

What happened in HD & Ors v North Devon Healthcare Trust?

The underlying proceedings concerned vaginal mesh claims brought against NHS defendants.

Six women represented by the solicitor were part of a much larger cohort involving hundreds of claimants.

Problems arose when the solicitor failed to lodge the necessary documents before a hearing in 2022. As a consequence, the hearing could not proceed as intended and had to be relisted.

The solicitor’s firm was subsequently intervened into by the Solicitors Regulation Authority, and the solicitor was later struck off following separate disciplinary proceedings.

The SCCO was required to deal with the resulting costs position.

The defendants sought repayment of £92,000 that had previously been paid on account. They also sought the costs associated with the unsuccessful 2022 hearing and the subsequent detailed assessment proceedings.

Why did the £92,000 have to be repaid?

One of the most important aspects of the judgment concerned the solicitor’s retainers with the six claimants.

A retainer forms the contractual basis upon which a solicitor is instructed and entitled to charge for their services.

The Costs Judge concluded that the solicitor had effectively abandoned the clients without proper justification and was in breach of the retainers.

The retainers were ultimately found to be unenforceable.

That finding had significant consequences for the money that had already been paid.

The court ordered repayment of the £92,000 received on account of costs.

This demonstrates why retainer issues can become extremely important during costs proceedings. Before debating hourly rates, time spent or proportionality, there may be a more fundamental question, i.e. was there an enforceable entitlement to the costs in the first place?

Why were indemnity costs ordered?

The second major issue was the basis upon which costs should be awarded against the former solicitor.

Ordinarily, where costs are assessed between parties, the standard basis is the starting point.

An indemnity costs order is different and generally more favourable to the receiving party. The usual proportionality restriction applicable on the standard basis does not operate in the same way, and doubts as to whether costs were reasonably incurred or reasonable in amount are resolved in favour of the receiving party.

Indemnity costs are therefore potentially significant.

In this case, the Costs Judge found serious failures in the solicitor’s conduct.

The solicitor had responsibility for lodging documents required for the 2022 hearing but failed to do so. The court found that this amounted to a serious breach of his duties to the court and that there was no reasonable explanation for the failure.

His conduct in relation to the subsequent detailed assessment proceedings was also considered unreasonable.

The court ultimately found there had been a serious abuse of its process.

Against that background, indemnity costs were ordered.

What costs did the indemnity order cover?

The consequences extended beyond the original failed hearing. The former solicitor was ordered to pay costs on the indemnity basis relating to:

• the aborted hearing in 2022;
• the detailed assessment proceedings concerning the six claims; and
• the later applications required to resolve the costs position.

Procedural failures can create additional layers of costs litigation. A mistake or unreasonable decision at one stage can result in further applications, hearings and assessment proceedings, each generating additional costs.

Where the conduct is sufficiently serious, the party or solicitor responsible may ultimately face liability for those additional costs.

Detailed assessment is not always about reducing a Bill

When people think about detailed assessment, they often think primarily about arguments over hourly rates, excessive time, counsel’s fees and disbursements.

Those are important issues, but this case demonstrates that costs disputes can be much broader.

ARC Costs regularly encounters preliminary issues that can fundamentally change the assessment before individual entries are considered.

These may include questions surrounding:

• the validity and enforceability of retainers;
• entitlement to costs;
• payments made on account;
• compliance with costs orders;
• conduct during proceedings;
• the basis of assessment; and
• responsibility for costs generated by procedural failures.

In a substantial costs dispute, identifying these issues at the outset can be just as important as analysing the Bill itself.

The importance of the retainer

The decision is also a useful reminder for law firms about the importance of retainers and funding documentation.

A technically strong Bill of Costs cannot necessarily overcome a fundamental problem with the underlying entitlement to charge.

Where the enforceability of a retainer is challenged, the financial consequences can be substantial, particularly where significant payments have already been received.

Costs practitioners therefore need to understand the underlying funding arrangements and not simply the figures appearing within the Bill.

Robert Collington’s commentary

Robert Collington, Costs Lawyer at ARC Costs, comments:

“This is a useful example of why detailed assessment can involve much more than arguing over individual items in a Bill. Issues concerning retainers, entitlement and payments on account can potentially determine substantial parts of a costs dispute before the court even reaches arguments about hourly rates or time spent.”

He adds:

“The indemnity costs aspect is also significant. The court was dealing with conduct that it considered went well beyond an ordinary procedural failure. Where conduct generates unnecessary hearings and further costs proceedings, the financial consequences can continue to accumulate.”

What can law firms take from the decision?

There are several practical lessons. First, firms should ensure that retainers and funding arrangements accurately reflect the work being undertaken and remain enforceable throughout the matter.

Secondly, procedural responsibilities should never be treated as administrative formalities. Failure to comply can lead not only to disruption of the substantive litigation but also significant costs consequences.

Finally, where detailed assessment proceedings involve unusual conduct or questions over entitlement, specialist costs advice should be obtained as early as possible.

How ARC Costs can assist

ARC Costs acts in complex costs disputes for both receiving and paying parties.

Our Costs Lawyers regularly advise on Bills of Costs, Points of Dispute, Replies, detailed assessment proceedings, indemnity costs, retainer disputes and payments on account, including high-value matters where preliminary costs issues can substantially affect the eventual recovery.

HD & Ors v North Devon Healthcare Trust & Ors is an unusually serious example, but the underlying lesson has much wider application.

Legal costs disputes are not always simply about how much work was done. Sometimes the most important questions concern whether those costs are recoverable at all, who should ultimately pay them and whether the conduct of the litigation justifies a departure from the ordinary costs rules.

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