Neutral Citation Number: [2013] EWHC 1233 (QB)
Case No: 8LS90344
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Manchester Civil Justice Centre
1 Bridge Street West
Manchester
M60 9DJ

Date: 23/05/2013

Before :
THE HONOURABLE MRS JUSTICE SWIFT DBE
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Between :

	WAJID ALI	Claimant	
	
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	RAJID ALI	First Defendan
	
	CO-OPERATIVE Insurance society limited	Second Defendant	
	CRAIG lODGE	Third Defendant	
	Allianz insurance plc	Fourth Defendant	
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Mr Benjamin Williams (instructed by Weightmans LLP) for the Second Defendant 
Mr William Norris QC (instructed by DAC Beachcroft Claims Limited) for the Third and Fourth Defendants 
Hearing date: 25 April 2013
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Judgment

The Honourable Mrs Justice Swift DBE : 

The application 
1.	On 10 November 2010, at the conclusion of the trial in this road traffic claim, I made the following order for costs:
“The Second Defendant to pay the Third and Fourth Defendants’ costs of the action, it being recorded that it was reasonable for the Third Defendant and Fourth Defendant to be represented separately in the action.”
That part of the order which I have underlined constituted in effect a direction to the costs judge (“the costs direction”) to approach the detailed assessment of costs on the basis that, in principle, it had been reasonable for the Third and Fourth Defendants to be separately represented in the action.  It was, however, accepted by all parties that, despite the costs direction, it would be open to the costs judge to examine each step in the claim and to decide whether, in relation to that individual step, separate representation had been necessary, reasonable and/or proportionate.
2.	The Second Defendant now applies for an order revoking the costs direction on the ground that the information which gave rise to the making of the direction was inaccurate and did not properly reflect the true funding arrangements as between the Third and Fourth Defendants.
3.	On 25 April 2013 I heard oral submissions from Mr Benjamin Williams, counsel for the Second Defendant, and from Mr William Norris QC, representing the Third and Fourth Defendants. There were witness statements from Mr Emerson Wallwork, a partner in Weightmans LLP, solicitors for the Second Defendant, and from Mr Jonathan Bingham, associate solicitor at DAC Beachcroft Claims Limited, solicitors representing the Third and Fourth Defendants.   
The claim
4.	On 4 April 2008, the Claimant suffered catastrophic spinal injuries in a collision which occurred whilst he was travelling as a passenger in a car driven by his brother.  He commenced proceedings against his brother (the First Defendant) and against the Third Defendant who was the driver of the other car involved in the collision.  The First and Third Defendants blamed each other for the collision.
5.	At the time of the accident, the First and Third Defendants had policies of insurance with, respectively, the Second Defendant (Co-operative Insurance Society) and the Fourth Defendant (Allianz Insurance Plc).  However, the Second and Fourth Defendants both obtained declarations from the court entitling them to avoid the policies.  They were joined in the action as Article 75 insurers and agents for the Motor Insurers’ Bureau.
6.	At the conclusion of the trial, I found that the First Defendant had been wholly to blame for the accident.  I therefore entered judgment for the Claimant against the Second Defendant (it being agreed between the Claimant and the Second Defendant that this was the appropriate order in the light of my finding).  I also made various consequential orders, including the costs order set out at paragraph 1 of this judgment.
The background to the making of the costs direction
7.	The Third and Fourth Defendants were represented by different counsel and solicitors and, during the preparations for trial, it became clear that they intended to have separate representation at the trial.  Before the trial started, the solicitors for the Second Defendant raised in correspondence the issue of the Third and Fourth Defendants’ separate representation.  In a letter dated 5 November 2010, written to the Fourth Defendants’ solicitors, they observed that, in view of the common interests between the Third and Fourth Defendants, they regarded separate representation as “wholly inappropriate”.  They indicated their intention to raise objections to the trial judge if separate representation was maintained.  They went on to give notice that, if the court were to allow the separate representation to continue, they would raise objection to the disproportionate costs caused thereby.  By letter dated 8 November 2010, the Fourth Defendants’ solicitors responded by saying that the Third and Fourth Defendants were entitled to separate representation and that the Second Defendant was not entitled to an order preventing them from having such representation.  
8.	In his Skeleton Argument for the trial dated 5 November 2010, Mr Norris, who was then representing the Third Defendant only, addressed the issue of separate representation:
“… D4 sought and obtained a declaration pursuant to section 152(2) of the Road Traffic Act 1988 that it was entitled to avoid the policy on the grounds of material non-disclosure.  D4 therefore stands as Article 75 insurer and D3 is potentially at personal risk.
Hence the decision that D3/D4 should have separate representation both as regards solicitors and counsel … However, there is no conflict as regards the analysis of the issues of primary liability and/or contributory negligence and we shall take care to keep to a minimum any duplication of effort as regards advocacy at the trial.”
9.	In his Skeleton Argument dated 8 November 2010, Mr Stephen Grime QC for the Fourth Defendant adopted Mr Norris’ submissions on separate representation.  In the event, no application about the Third and Fourth Defendants’ representation was made to me at the beginning of the trial on 9 November 2010 or at any stage up to the time when I gave my judgment. 
10.	In oral submissions following my judgment on 10 November 2010, Mr Norris returned to the question of separate representation.  He said (transcript at page 14, line 31 et seq.):
“The only possibly controversial issue is whether there may be two sets of costs both for the third and fourth defendants, who are both successful.  It is that that I will address, if I may, very shortly, recognising as a reality that, when it comes to assessment and looking at the costs of the third and fourth defendants, there will obviously be debate about, is there any overlap?  That is the right time for that to take place.  As a matter of fact, most of the costs, most of the solicitors’ costs, will be those of the fourth defendant.  There is, in fact, no overlap of witnesses, as you can see, between the third and fourth defendants or indeed of experts.  But those are matters, really, for assessment when the time comes.
The question of principle that you must decide, we respectfully submit, is whether, as a matter of principle, two sets of costs are justified, both the third and fourth defendants’.  I do not know if it is still controversial – it evidently was in the opening – but let me just explain whey we submit it is perfectly clear that each side is entitled to its costs, each successful side, the third and fourth defendants, first, because, the third and fourth defendants are separate parties.  There is a potential conflict between D3 and D4 arising out of the fact that D4, like D2, turns out not to have valid insurance.  As such, both D3 and D4, if I may use that shorthand, are entitled to be represented, and that is why both D3 and D4 are parties in the action. ”
Mr Norris went on to argue that the Third and Fourth Defendants had acted proportionately and had sought to avoid duplication of costs in a variety of ways.  
11.	Mr Grime effectively adopted Mr Norris’ oral submissions on the need for separate representation (transcript at page 16, line 3-4).  He submitted that, had my findings on negligence been different, liability to meet the claim might have been shared between two potential Article 75 insurers, the Second and Fourth Defendants.  He said that this possibility (which was unprecedented in his experience) had provided a further justification for separate representation.
12.	Counsel then representing the Second Defendant, Mr Timothy Horlock QC initially sought to persuade to me not to express any view about the separate representation of the Third and Fourth Defendant.  He gave the following reasons for this position (transcript at page 17, line 21 et seq.):
“… First, the assertion of a conflict of interest between the third and fourth defendant does not make it so.  For my part, I cannot identify at this stage that there is such a conflict of interest as would entitle there to be separate representation.  It is correct, as Mr Grime suggests, that there may be issues before the MIB’s technical committee hereafter, but those issues arise only after the event and have not arisen yet, and indeed, if your Ladyship’s judgment stands, they remain irrelevant because this will never get [to] the technical committee.
The next point is that whatever the third defendant’s liability was going to be, pursuant to Article 75, in our understanding, the fourth defendant was obliged to meet it and, that being so, I fail to understand how there can have been a conflict that entitled that separate representation.
The next point is that one would have to consider the retainer and the extent of the retainer, the terms of it, as between the third and fourth defendant because what we do not know and what one cannot investigate at this stage – and I am not inviting the court to; I am just identifying a potential issue.  The third defendant has probably been assured by the fourth defendant that it will indemnify him against any liability for costs, and yet, of course, unless and until any judgment was made against him there would be no such liability.  We do not know what agreement has been reached between the third and fourth defendant as [to] an indemnity. I am not asking to lift that particular veil at this stage, but, of course, that is a relevant consideration in terms of liability [for] costs.  We understand that the fourth defendant will have made a voluntary choice to represent and to pay the costs of the third defendant, and the basis of that decision needs to be investigated.”
The last paragraph of that passage was a reference to the possibility that any agreement by the Fourth Defendant to pay the Third Defendant’s costs might have been in breach of the indemnity principle. Mr Horlock was not seeking to argue that point at that stage or to enquire into the existence or terms of any such agreement.  I understood him merely to be indicating that it was an argument that might be raised on detailed assessment.  
13.	Mr Horlock also advanced a fourth reason for disallowing the costs of separate representation, namely that the Third and Fourth Defendants had not been separately represented at any time before trial.  In fact, that was not the case.  They had been jointly represented at the Joint Settlement Meeting and at a Case Management Conference but, otherwise, they had employed separate solicitors and counsel. 
14.	In his response to Mr Horlock’s submissions, Mr Norris pointed out that error.  He went on (transcript at page 18, line 39 et seq):
“But, subject to that correction, the answer to [Mr Horlock] is that we do not agree that your Ladyship should leave it simply to the process of detailed assessment.  What we invite you to do at this stage, and it is only this, is to give very general guidance that will inform that detailed assessment on the question of separate representation, bearing in mind that this is an issue specifically raised in the openings [in fact Skeleton Arguments] in this case.  The general guidance I invite you to give, no more and no less than this, is to say that it is reasonable, in your judgment, that the detailed assessment should proceed on the basis that it was reasonable for the third and fourth defendants to be separately represented in this action.  That does no more than to, as it were, lay the ground for what was reasonable.  But I do invite you to address what I characterise as the point of principle, which is that it was reasonable for them to be separately represented in the action.
On the point of whether the conflict is real or imagined between D3 and D4, the potential conflict arises out of the fact that if the fourth defendant satisfies the judgment the fourth defendant might seek to recover some part of that judgment from the third defendant personally.  That is the potential conflict.  It is no more complicated than that.”
15.	At that point, Mr Horlock took instructions and indicated (transcript at page 20, line 37 et seq) that he was happy for me to make:
“… insofar as the third and fourth defendants are concerned, an order that is for detailed assessment of the costs of the action and that the detailed assessment should proceed upon the basis that it was reasonable for the third and fourth defendants to be separately represented … [i]n the action”.
16.	That was the costs direction I made. 
The pre-trial correspondence between the Third and Fourth Defendants 
17.	After the hearing, preparations for the detailed assessment of costs in the case proceeded. In June 2012, the Second Defendant raised Supplemental Points of Dispute in the assessment proceedings against the Third and Fourth Defendants, in which it suggested that there may have been a breach of the indemnity principle in that the Third Defendant may not have had a direct personal liability to pay his solicitors, Barlow Lyde and Gilbert LLP (BLG).  The Second Defendant sought disclosure of BLG’s letter of retainer.
18.	The Third and Fourth Defendants served a Reply to the Supplemental Points of Dispute in which they contended that the Third Defendant had at all times been liable for the costs claimed.  They went on to state:
“… Although it was anticipated that, provided D3 co-operated in the defence of the claim, D4 would pay BLG’s fees and disbursements, D3 remained notionally liable for them.  Furthermore, given D4’s repudiation of the insurance policy, it was as much in D3’s interests as D4’s to mount a proper defence to the claim.”
19.	Four letters were exhibited to the Reply.  The first letter was dated 15 April 2010 (i.e. about seven months before the date of trial) and was from Mr Brown, a solicitor at BLG, to the Third Defendant.  In it, Mr Brown pointed out that, since the Third Defendant’s policy of insurance had been declared void, any outlay which the Fourth Defendant made pursuant to a judgment in the Claimant’s favour against the Third Defendant would, as a matter of law, be recoverable from him.  Mr Brown emphasised that the Third and Fourth Defendants therefore had a mutual interest in defending the claim.  He went on:
“As indicated above, [the Fourth Defendant] have asked me to represent your interests in the proceedings.  If you are willing for me to represent you, my fees will be paid entirely by the Fourth Defendant.  I am further authorised to say that provided you instruct me to represent you and provided you co-operate fully with the Defence, [the Fourth Defendant] will agree not to attempt to recover any outlay which it is ordered to make to [the Claimant] from you.  In other words, provided you co-operate with me, you would be protected from any liability to pay damages or legal costs to [the Claimant].”
20.	The second letter was again from Mr Brown to the Third Defendant and was dated 18 May 2010. The Third Defendant had agreed to attend a Consultation with Mr Norris. The letter set out the arrangements for the Consultation which was also to be attended by a representative of the Fourth Defendant and by the Fourth Defendant’s solicitor. 
21.	The third letter (which was undated and unsigned and had plainly been drafted by BLG) was a draft of a letter to be signed by the Third Defendant and returned by him to BLG.  It was addressed to Mr Brown and signified the Third Defendant’s agreement to BLG being authorised to act as his solicitors in connection with the claim.  It stated:
“I am … aware that Allianz has agreed that if it is required to satisfy any judgment obtained against it or against me which arises as a result of the accident, it will not attempt to recover its outlay from me.  I am also aware that this course of action is dependent on me co-operating fully with the defence of this claim throughout the duration of the Court proceedings.  I also understand that your fees will be paid by Allianz.”
The fourth letter was a signed version of that draft. I was told that the Third Defendant had returned the signed letter to BLG in May or June 2010.  
22.	The effect of the correspondence was to make clear that – despite the declaration that had been obtained from the court – the Fourth Defendant had agreed to indemnity the Third Defendant in respect of any damages he might be ordered to pay, as well as in relation to his costs.
The Second Defendant’s application 
23.	For the Second Defendant, Mr Williams submitted at the hearing before me that the costs direction had been made on the basis that, at the start of the trial, a conflict of interest had existed between the Third and Fourth Defendants.  He said that, in reality, no such conflict had existed.  He referred to Mr Norris’ submissions in his Skeleton Argument for the trial (see paragraph 8 of this judgment).  He submitted that those submissions had clearly linked the fact that the Fourth Defendant had obtained a declaration from the court entitling it to avoid the policy with the fact that the Fourth Defendant was an Article 75 insurer (rather than a contractual insurer) and the fact that (before my finding of liability on the part of the First Defendant) the Third Defendant had been “potentially at personal risk”.  
24.	Mr Williams also cited Mr Norris’ oral submissions after the trial.  In particular, he relied on the submissions quoted at paragraph 14 of this judgment. Since both counsel agreed that, in order to give Mr Norris’ words their proper meaning, it was necessary to changes the tenses he used, I have amended the relevant passage (the amendments are shown in italics): 
“… the potential conflict arose out of the fact that, if the Fourth Defendant satisfied a judgment, the Fourth Defendant might have sought to recover some part of that judgment from the Third Defendant personally.  That was the potential conflict.”
25.	Mr Williams argued that Mr Norris’ written and oral submissions were wholly inconsistent with the true position at the time of the trial which was that the Third Defendant had been fully indemnified by the Fourth Defendant in respect of both damages and costs.  He said that, in reality, the Third Defendant had been at no “personal risk” at the start of the trial that the Fourth Defendant would be able to recover from him any monies payable under a judgment in the Claimant’s favour. 
26.	Mr Williams submitted that the only circumstance in which the Third Defendant could have been at personal risk would have been if he had failed to co-operate in the defence of the claim.  He argued that the existence of a conflict of interest was therefore contingent on the Third Defendant breaching his agreement with the Fourth Defendant and was in reality highly unlikely to arise.  There was no suggestion that the Third Defendant had at any stage threatened non-cooperation and it had plainly been very much in his interests to co-operate.  Mr Williams pointed out that motor insurance policies are invariably subject to express or implied terms making indemnity conditional on the co-operation of the insured.  Thus, the Third Defendant had been in precisely the same position as that of a defendant motorist with a valid policy of insurance.  
27.	Mr Williams acknowledged that Mr Horlock had clearly recognised the possibility that the Fourth Defendant had agreed to indemnify the Third Defendant in respect of his costs and had indicated that the Second Defendant might seek to argue before the costs judge that there had been a breach of the indemnity principle.  However, Mr Williams said that it was equally clear that Mr Horlock had not considered the possibility that the Fourth Defendant had agreed to re-instate the Third Defendant’s indemnity in respect of damages.  He said that, if the Second Defendant had been aware of the true position, Mr Horlock would not have conceded that the costs direction should be included in my order.  
28.	Mr Williams made clear that he was not suggesting that Mr Norris (or Mr Grime, who had adopted his submissions) had deliberately misrepresented the position.  However, the effect of what he had said was that the Second Defendant and the court had been misled. Mr Williams submitted that, in the light of the facts that were now known, there had been no reason for separate representation of the Third and Fourth Defendants.  He argued that justice demanded that the costs direction should be set aside, leaving the costs judge with a “clean slate” at the start of his assessment.
The case of the Third and Fourth Defendants
29.	Mr Norris contended that the Second Defendant’s application must fail.  He argued that nothing that he or Mr Grime had said after the trial had misrepresented the Third Defendant’s funding arrangements.  He said that Mr Horlock had plainly recognised the likelihood that the Fourth Defendant was paying the Third Defendant’s costs of defending the claim.  That being the case, it must have been obvious to him that the Fourth Defendant would also have indemnified the Third Defendant in respect of any damages he might otherwise have had to pay.  Mr Norris said that, if Mr Horlock had been uncertain of the position, he should have asked for disclosure of any documents giving rise to an indemnity and should have requested an adjournment for that purpose.  As it was, there had been no uncertainty or misunderstanding.
30.	Mr Norris emphasised that the agreement by the Fourth Defendant to indemnify the Third Defendant had been expressly conditional on the Third Defendant co-operating with the Fourth Defendant in defending the action.  He argued that it was not correct to characterise the agreement contained in the correspondence between BLG and the Third Defendant as a “re-instatement” of the Third Defendant’s indemnity and to regard it as analogous to a conventional policy of insurance containing express or implied terms requiring co-operation.  There had already been a lack of co-operation on the part of the Third Defendant (his failure to disclose his motoring convictions) which had led to his policy of insurance being avoided.  The agreement between the Third Defendant and the Fourth Defendant contained in the correspondence constituted a wholly new contract.  Under that agreement, the Third Defendant was at risk of having to pay damages and costs if he failed to co-operate with the Fourth Defendant.  That risk had existed right up until the end of the trial when it could no longer be alleged that he had failed to co-operate.
31.	Mr Norris cited other circumstances that might have arisen and would have resulted in the Third and Fourth Defendant having divergent interests in their defence of the claim.  He suggested that the Third Defendant might have insisted that he bore no liability for the accident, whereas the Fourth Defendant may have wished to compromise the action for commercial reasons.  Alternatively, the Third Defendant might have decided to admit all or some liability for the accident, contrary to the wishes of the Fourth Defendant.  Given the possibility that their interests might diverge in that way, the Third and Fourth Defendants were entitled to have their separate costs paid by the Second Defendant, subject to any argument about unnecessary duplication.
32.	Mr Norris submitted that the Second Defendant’s application to set aside the costs direction was misconceived and that its action in pursuing the application to a hearing was vexatious.  He referred to Mr Bingham’s witness statement in which Mr Bingham had made clear that he accepted that it was open to the Second Defendant to raise an argument about breach of the indemnity principle at the detailed assessment hearing.  Mr Bingham had said that he was:
“… happy to clarify that the position of the 3rd and 4th Defendants is that the meaning of the existing order/direction is that, subject to the argument that the funding arrangement between the 3rd and 4th Defendants contravenes the indemnity principle, the 2nd Defendant cannot now argue it was unreasonable for the 3rd and 4th defendants to be separately represented from the date when the action was commenced until judgment was given.  What (apart from the indemnity principle point) they can argue about is the nature, extent and cost of such separate representation at different times.”
33.	Mr Norris relied also on the contents of paragraphs 27-29 of his Skeleton Argument for the hearing before me which, although undated, was served at some time between 10 and 12 April 2013.  At paragraph 27, he said:
“… If it is thought helpful, we [i.e. the Third and Fourth Defendants] are content that the order should be clarified to make it clear that its effect is no more than that to enable D3 to recover his costs to the extent that it was reasonable for him to be separately represented in relation to that part of the claim and this includes the Trial.”
34.	He went on to say at paragraph 29 that, if the Second Defendant were to argue that there had been a breach of the indemnity principle and that argument were rejected by the costs judge:
“… it will still be open to D2 to challenge the reasonableness of separate representation in relation to the particular parts of the action, within the context of a concession that in general it was reasonable for D3 to be separately represented.”
35.	Mr Norris submitted that the sensible response would have been to accept the clarification contained in Mr Bingham’s letter or, failing that, the formulae of words in his own Skeleton Argument.  He argued that, quite apart from the fact that no misunderstanding had occurred, the Second Defendant’s application, even if successful, would not achieve anything.  Even if the costs direction remained in place, it would still be open to the Second Defendant to argue before the costs judge that there had been a breach of the indemnity principle and to challenge the reasonableness of the separate representation in relation to specific steps in the action.
Discussion and conclusions 
36.	I have a clear recollection of the discussions in court which took place after I had delivered judgment in this case.  My recollection has been refreshed by reading the transcript of those discussions
37.	It seems to me that the natural interpretation to be placed on Mr Norris’ written and oral submissions was that, because the Fourth Defendant had obtained a declaration from the court entitling it to avoid the Third Defendant’s policy of insurance, the Third Defendant did not have the benefit of an indemnity from the Fourth Defendant which protected him from having to pay any damages awarded against him.  I understood that it was because of that lack of protection that Mr Norris described the Third Defendant as being “potentially at personal risk”.  It was my understanding that the Third Defendant’s lack of protection also formed the basis for Mr Norris’ contention that a conflict of interests had existed between the Third and Fourth Defendants. 
38.	Like Mr Horlock, I recognised at the hearing that the likelihood was that the Fourth Defendant had agreed to indemnify the Third Defendant in respect of his legal costs. In the absence of such an arrangement, it was improbable that he would have been unable to afford representation by leading counsel and a firm of city solicitors.  However, since I had been told that the Third Defendant had been “potentially at personal risk” in relation to any damages I might have awarded against him, it did not occur to me that the Fourth Defendant might also have entered into an indemnity arrangement in respect of damages.  I cannot therefore, accept Mr Norris’ submissions that the point should have been “obvious” to Mr Horlock or that Mr Horlock should have sought disclosure of documents relating to any indemnity agreement in order to clear up any potential uncertainty.  Given what the court had been told, there was no reason to believe that any such uncertainty existed. 
39.	No reference was made at the previous hearing to the fact that the Third Defendant would only have been at personal risk of being called upon to pay any damages awarded against him if he had failed to co-operate with his defence.  I am satisfied that, if Mr Horlock had known or suspected that that was the case, he would not have agreed to the making of the costs direction.  I consider that the Second Defendant should be permitted to withdraw that agreement. 
40.	Had I been aware that the Third Defendant would have been at personal risk only if he had failed to co-operate with the Fourth Defendant in his defence, I would have considered that he had been for all practical purposes in the same position as a motorist with a valid policy of insurance who was a defendant in a road traffic claim. In the absence of some special feature, such a motorist would not be entitled to the costs of representation separate from his insurer. It is true that a divergence of interest between the Third and Fourth Defendants of the kind referred to by Mr Norris (see paragraph 31 of this judgment) might have arisen.  However there is no reason to believe that such a disagreement was more likely in this case than in any other claim involving a defendant motorist and his/her insurer.  Nor would I have found that the possibility raised by Mr Grime (see paragraph 11 of this judgment) entitled the Third and Fourth Defendants to the costs of separate representation at the trial.  If that possibility had materialised, the resolution of any consequent dispute would have been for another occasion when separate representation might have been appropriate.  Had I been aware of the true position, therefore, I would not have made the costs direction but would instead have left the whole issue of separate representation to the costs judge.  
41.	The question then arises whether I should exercise my power under CPR 3.1(7) to revoke the costs direction.  Mr Norris argued that such revocation would not achieve anything since, even if the costs direction remained in place, the Second Defendant would still be able to argue before the costs judge that there had been a breach of the indemnity principle and to challenge the reasonableness of separate representation in relation to specific steps in the action.
42.	I cannot accept that submission.  At the previous hearing, the Third Defendant and Fourth Defendant argued strenuously for the costs direction.  They would not have done so if they had not considered that the costs direction would have a significant effect on the decisions to be made by the costs judge.  Their view was plainly correct.  The costs direction would require the costs judge to approach his/her task on the basis that it had in principle been reasonable for the Third and Fourth Defendants to be separately represented throughout the proceedings, including at trial.  The outcome of an assessment of the costs on that basis might well be very different from an assessment conducted by a costs judge who approached the issue of separate representation unfettered by any such direction.
43.	I do not accept either that it was unreasonable – let alone “vexatious” – for the Second Defendant not to accept the clarifications/assurances contained in Mr Bingham’s letter and Mr Norris’ Skeleton Argument. Those clarifications/assurances made clear that it was open to the Second Defendant to raise arguments as to the indemnity principle and the reasonableness of separate representation for specific steps in the action. In the light of what had been said at the previous hearing, that was clearly the case.  
44.	However, both the letter and the Skeleton Argument made clear that the costs assessment would take place in the context of the costs direction.  In his letter, Mr Bingham said:
“… the 2nd Defendant cannot now argue it was unreasonable for the 3rd and 4th Defendants to be separately represented from the date when the accident was commenced until judgment was given.”
and Mr Norris stated:
“… it will still be open to D2 to challenge the reasonableness of separate representation in relation to the particular parts of the action, within the context of a concession that in general it was reasonable for D3 to be separately represented.”
45.	Plainly, the insistence that the costs assessment should proceed on the basis that separate representation had been reasonable in principle was entirely inconsistent with the Second Defendant’s contention that the costs direction should never have been made and should be revoked.  The clarifications/assurances did not address that contention and it is not surprising therefore that the Second Defendant chose to proceed with its application.
46.	The costs direction that formed part of my order of 10 November 2010 was made as a result of a misunderstanding as to the funding position as between the Third and Fourth Defendants.  I make quite clear that there is no question of the court having been deliberately misled.  Nevertheless, the fact is that, as a result of that misunderstanding (albeit caused inadvertently), I made a direction that I would not have made if I had been aware of the true position.  In those circumstances, I consider that the interests of justice demand that the costs direction should be revoked.
The costs of the application 
47.	Mr Norris argued that, even if the Second Defendant’s application were to succeed, costs should not follow the event.  He contended that the Second Defendant should have followed up what he termed the ‘olive branch’ contained in Mr Bingham’s letter and his own Skeleton Argument and should have reached a compromise without pursuing the application to a hearing.
48.	Since, as I have already said, the clarifications/assurances offered by Mr Norris and his instructing solicitor would have left the costs direction unaffected, it was in my view entirely reasonable for the Second Defendant to pursue its application and I am satisfied that the appropriate order is that the Third and Fourth Defendants should pay the Second Defendant’s costs of and incidental to this application.
49.	The Third and Fourth Defendants raised no objection to any of the items set out in the Second Defendant’s Schedule of Costs prepared for the hearing on 25 April 2013.  Those costs appear to me to be reasonable and proportionate and I summarily assess them as in the Schedule in the total sum of £11,736.50.