QOCS AND MIXED CLAIMS: HIGH COURT GUIDANCE

This piece first appeared in my twice weekly Newsletter – Kerry On Costs… And So Much More…

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In

ABC & Ors v Derbyshire County Council & Ors, Re Costs [2023] EWHC 1337 (KB)

the King’s Bench Division of the High Court considered the costs liability of losing claimants in a mixed claim which was primarily a personal injury claim and allowed enforcement of 5% of the costs ordered.

The claimants brought actions under the Human Rights Act and for negligence and false imprisonment and lost at trial.

It was accepted that there should be an order that the losing claimants pay the winning defendants’ costs, and the issue was as to enforcement and the degree of Qualified One-Way Costs Shifting protection.

The costs of both defendants totalled £765,371.15 and they sought enforcement of 85% of those costs.

The claimants argued that, following the decision of the Court of Appeal in

Brown v Commissioner of Police of the Metropolis & Anor [2019] EWCA Civ 1724 (18 October 2019)

the defendants should not be allowed to enforce any element of the costs as these matters were “in the round – a personal injury case”.

CPR 44.16(2)(b) makes provision for mixed claims, that is where a claim is made for the benefit of the claimant other than a claim to which this Section applies.

In

Brown v Commissioner of Police of the Metropolis & Anor [2019] EWCA Civ 1724 (18 October 2019)

the Court of Appeal held that “this Section” within CPR 44.16(2)(b) is the section of the Civil Procedure Rules setting out the QOCS regime.

CPR 44.13(1) identifies the three types of claims covered by QOCS and all of these are species of personal injury claims.

The Court of Appeal held that “…if the proceedings also involve claims made by the claimant which are not claims for damages for personal injury… then the exception at r.44.16(2)(b) will apply.”

The Court of Appeal then considered the meaning of claims for personal injuries.

“54. The starting point is that QOCS protection only applies to claims for damages in respect of personal injuries. What is encompassed by such claims? It seems to me that such claims will include, not only the damages due as a result of pain and suffering, but also things like the cost of medical treatment and, in a more serious case, the costs of adapting accommodation and everything that goes with long term medical care. In addition, contrary to the submissions advanced by Ms Darwin and Mr Jaffey, I consider that a claim for damages for personal injury will also encompass all other claims consequential upon that personal injury. They will include, for example, a claim for lost earnings as a result of the injury and the consequential time off work.

55. In other words, a claim for damages in respect of personal injury is not limited to damages for pain and suffering. For these reasons, as Whipple J noted at [60] of her judgment, claimants in a large swathe of ‘ordinary’ personal injury claims will have the protection and certainty of QOCS.”

The Court then went on to consider claims for property, giving an example of a Road Traffic Accident where there is a claim for the cost of repairs to the vehicle and the cost of alternative vehicle hire, often Credit Hire, until those repairs are effected.

The Court of Appeal noted that such claims are not consequential or dependent on the incurring of a physical injury.

Rather they are consequent upon damage to property, namely the vehicle that suffered the accident, and therefore, they fall within the mixed claim exception in CPR 44.16(2)(b).

However, the Court of Appeal went on to say that the fact that there is a claim for damages in respect of personal injury, and a claim, for example, for damage to property “does not mean that the QOCS regime suddenly becomes irrelevant”.

“On the contrary, I consider that, when dealing with costs at the conclusion of such a case, the fact that QOCS protection would have been available for the personal injury claim will be the starting point, and possibly the finishing point too, of any exercise of the judge’s discretion on costs. If…the proceedings can fairly be described in the round as a personal injury case then, unless there are exceptional features of the non-personal injury claims (such as gross exaggeration of the alternative car hire claim, or something similar), I would expect the judge deciding costs to endeavour to achieve a ‘cost neutral’ result through the exercise of the discretion. In this way, whilst it will obviously be a matter for the judge on the facts of the individual case, I consider it likely that, in most mixed claims of the type that I have described, QOCS protection will – in one way or another – continue to apply” [Paragraph 57 of the judgment].

At paragraph 58 the Court said:

“58. It is however important that flexibility is preserved. It would be wrong in principle to conclude that all mixed claims require discretion to be exercised in favour of the claimant, because that would lead to abuse, and the regular ‘tacking on’ of a claim for personal injury damages (regardless of the strength or weakness of the claim itself) in all sorts of other kinds of litigation, just to hide behind the QOCS protection (as Foskett J warned in Siddiqui).”

The Court also considered the case of

Siddiqui v University of Oxford [2018] 4 WLR 62

where the High Court held that when considering mixed claims, there is a need “to ensure that the QOCS provisions are not abused by simply “dressing up” a non-personal injury claim “in the clothes of a personal injury claim to avoid the normal consequences of failure in litigation”.

35. In Achille v Lawn Tennis Association Services Ltd [2023] 1 WLR 1371 at [37] Males LJ (with whom Edis and Baker LJJ agreed) cited Brown at [57]-[58] as describing “how the CPR r 44.16 discretion should be exercised in a mixed claim case”, noting that Coulson LJ’s judgment had “explained that the QOCS protection which would have been available for the personal injury claim if it had stood alone will be a relevant and often important factor to take into account”.

36. Achille at [26] also made clear that the term “proceedings” in CPR r 44.13 refers to all of the claims made by a claimant against a single defendant, when one such claim is a claim for personal injury.

Here, it was agreed that these were mixed claims within the meaning of CPR 44.16(2)(b).

Therefore the Court’s task here was to address whether it is just in the exercise of its discretion to grant permission for the defendants to enforce their costs orders against the claimants, and if so, to what extent.

The Court held that these cases were “in the round” personal injury cases.

The Court here gives its reasons for that finding at paragraphs 40 – 50 of the judgment.

It therefore followed that the starting point is that the costs orders should not be enforced as there should be a “cost neutral” result unless there are “exceptional features of the non-personal injury claims”.

There was no suggestion here of any gross exaggeration in relation to the non-personal injury claims.

There was no adverse conduct by the claimants for costs purposes.

The Court did find an exceptional feature in relation to the evidence of one witness in relation to the non-personal injury claims, and which caused the defendants additional costs over and above the costs that they would have incurred in relation to the personal injury claims.

“65. Doing the best I can, in the exercise of my discretion under CPR r 44.16(2)(b), I consider an appropriate level of enforcement to be 5%. In my judgment that figure properly respects the spirit of the QOCS regime and the starting point of the need for a costs neutral result in relation to the personal injury claims but makes an appropriate allowance for the exceptional nature of the Mr Barratt issues insofar as they impacted on the non-personal injury claims.”

COMMENT

This is detailed and helpful decision on how the courts should approach mixed claims.

“Exceptions to qualified one-way costs shifting where permission required

44.16

(1) Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim is found on the balance of probabilities to be fundamentally dishonest.

(2) Orders for costs made against the claimant may be enforced up to the full extent of such orders with the permission of the court, and to the extent that it considers just, where –

(a) the proceedings include a claim which is made for the financial benefit of a person other than the claimant or a dependant within the meaning of section 1(3) of the Fatal Accidents Act 1976 (other than a claim in respect of the gratuitous provision of care, earnings paid by an employer or medical expenses); or

(b) a claim is made for the benefit of the claimant other than a claim to which this Section applies.

(3) Where paragraph (2)(a) applies, the court may, subject to rule 46.2, make an order for costs against a person, other than the claimant, for whose financial benefit the whole or part of the claim was made.”

PART 36 AND LIABILITY: JUST HOW WRONG CAN THE HIGH COURT BE?

This piece first appeared in my twice weekly Newsletter – Kerry On Costs… And So Much More…

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In

Mundy -v- TUI UK Ltd [2023] EWHC 385 (CH)

the Chancery Division of the High Court, on appeal from Swindon County Court, got the law on Part 36 offers and liability just about as wrong as is possible.

The decision is so hopelessly flawed and in conflict with numerous Court of Appeal decisions, that it is per incuriam – that is wrongly decided – and can be ignored, and indeed is being ignored, by other courts.

However, successful claimants will now have this decision thrown in their faces by losing defendants, so it is necessary to deal with it.

The County Court and the High Court arrived at the right conclusion, that is on the facts here that the claimant should not get the CPR 36.17 enhancements, but for the wrong reasons, and it is those wrong reasons which are likely to cause problems in other liability offer cases under Part 36.

It was said that there was no previous High Court authority on the point, which is nonsense.

The claimant brought a holiday sickness claim against the defendant holiday company and made two Part 36 offers on the same day:

1. £20,000 inclusive of interest and special damages;
2. liability on a 90% / 10% basis in his favour.

The defendant made a Part 36 offer of £4,000.

None of the offers was accepted and the matter went to trial, and the claimant won on a 100% liability basis, but only recovered £3,805.60.

Thus, the claimant had beaten its own liability offer, but had recovered less than 20% of its own quantum offer and had failed to beat the defendant’s quantum offer.

The claimant submitted that as it had beaten its liability offer, it should get the Part 36 enhancements.

Here, the defendant had pleaded contributory negligence, and therefore, whatever the position in matters generally, it was obviously entirely reasonable and sensible for the claimant to make a liability offer, accepting a degree of clinical negligence.

The Court, bizarrely, said that the defendant’s plea of contributory negligence was “a hopeless idea”

and that

“… no competent legal adviser could have regarded the contributory negligence plea as having the slightest chance of success.”

It, therefore, held that the Claimant’s offer was not a genuine offer to settle, but “a plainly tactical device, to take advantage of a foolish piece of pleading”.

That is one of the most bizarre statements by a court in English legal history.

A claimant sues. The defendant argues contributory negligence. The claimant accepts a degree of contributory negligence.

However, the court, talk about descending into the arena, rejects the whole concept of contributory negligence.

Furthermore, having stated that the defendant’s pleading of contributory negligence was foolish, it then punishes the claimant for making a Part 36 offer on liability, and beating it.

The whole judgment makes Alice in Wonderful look rational.

Thus, the Court treated the offer as for 90% of the quantum claim, and the claimant had failed to recover 90% of the £20,000 that he had offered by way of a quantum settlement.

Thus, the claimant had not beaten his own offer.

In fact, the claimant had achieved at Court, more than 90% of the amount offered by the defendant.

The matter becomes somewhat complicated in that if the claimant was held to have beaten his own 90% offer, and was entitled to the enhancements, including a 10% uplift on damages, then he would have beaten the defendant’s quantum offer as well.

So there are two separate issues.

Many of the cases involve a claimant making a quantum offer which equates to 95%, 99%, or whatever, of the total claim and these are not liability offers.

In these cases, the issue has been whether such an offer, giving very little discount, is a genuine offer to settle.

I have dealt with this extensively in

PART 36: 2023 SPECIALS – PART 12 – GENUINE OFFER TO SETTLE

However, there are very many cases on the issue of liability alone.

A claimant used to have to beat its own offer to succeed, but following a change in the law by Parliament, now only has to match its own offer.

Before that change, courts had held that where an offer of 100% liability had been made, and the claimant had won, that that counted as a win for Part 36 purposes, as the claimant could not have done any better.

In other cases, a claimant who had made a liability offer and won the first part of a split trial was refused any extras by the court at that point, because it was unaware whether the defendant had made a quantum offer, which the claimant may then fail to beat at the quantum hearing.

That is, of course, what happened here, albeit not after a split trial.

Clearly there is a tension between offers where both parties win, that is a claimant beats its own Part 36 liability offer, but fails to beat a defendant’s quantum offer, which is the position in this case.

In those circumstances, it is a matter of judgment for the court, and for it to exercise its discretion under CPR 36 .17(4) to decide whether it is unjust to award the enhancements.

This will happen in other scenarios.

A claimant may make a Part 36 offer in relation to special damages, and beat it, but fail to beat a defendant’s overall quantum offer.

It is strongly arguable that the claimant should get enhancements in relation to special damages, as all of that work would have been saved had the special damages offer been accepted.

Any other outcome is absurd.

A claimant could make a very reasonable offer on special damages, which would have saved, say 50 hours work but fails to beat the defendant’s overall quantum offer.

Not only does the claimant risk not getting the enhancements but has to pay the defendant’s costs from the date of the expiry of the defendant’s offer, including for those 50 hours work on special damages, which was entirely unnecessary.

Of course, it can work the other way round; a defendant makes a perfectly good offer on special damages which the claimant fails to accept, then the claimant beats its overall offer on damages, and gets indemnity costs for all the unnecessary work in relation to special damages.

If Parliament, and the Civil Procedure Rules Committee, had intended that, then the rule can be simple:

“An offer can only be for quantum, and only for the whole of the case, and any issues within the case cannot be dealt with by way of a Part 36 offer”.

In fact, all the rules, and the whole tenor of Part 36, is exactly the opposite.

Consequently, it is most definitely not all or nothing, and there can indeed be different winners of different stages of the litigation.

This should not come as any surprise to anyone, as throughout protracted litigation, it is common for the eventual winner to nevertheless lose, and have costs orders made against it, in relation to certain interlocutory matters.

A claimant who has failed to beat a defendant’s quantum offer, but has beaten its own liability offer, should certainly not be the sole winner.

One option is to award the claimant the enhancements of indemnity costs and enhanced interest thereon, between expiry of its liability offer, and the defendant’s unbeaten quantum offer if made later.

If the defendant’s unbeaten quantum offer comes first, then there is no reason why the claimant should get any enhancement as it could have resolved the whole matter by acceptance of that offer and without the need to carry on and make a liability offer.

For a court to hold that a liability offer cannot be made, is plain wrong.

The law is clear, both in Part 36 itself, and in previous decisions.

CPR 36.2(3) states that a Part 36 offer may be made in respect of the whole, or part of, or any issue that arises in a claim, counterclaim or other additional claim or an appeal or cross-appeal from a decision made at a trial.

That is all encompassing.

CPR 36.3(c) defines a trial as meaning:

“any trial in a case whether it is a trial of all issues or a trial of liability, quantum or some other issue in the case” (my bold).

Thus, liability is specifically stated in CPR 36 to be an issue, which very obviously it is, and as we have seen, CPR 36.2(3) provides that a Part 36 offer may be made in respect of any issue.

Furthermore, what is the point of defining a trial as including a liability trial if an offer on liability cannot be made?

A claimant offer a 50 – 50 liability settlement.

That is not accepted by the defendant and the matter goes to a liability trial and the court finds in favour of the claimant on a 75% / 25% basis.

If the Part 36 offer cannot be made, does the defendant then get the costs of that liability trial for having established 25% contributory negligence, even though the claimant had offered 50%?

On the reasoning in this case, the answer is yes, and that is mad.

CPR 36.5(4) states:

“(4) A Part 36 offer which offers to pay or offers to accept a sum of money …”

That clearly envisage non-monetary offers, e.g. on liability.

CPR 36.12 reads:

“Acceptance of a Part 36 offer in a split-trial case

36.12

(1) This rule applies in any case where there has been a trial but the case has not been decided within the meaning of rule 36.3.

(2) Any Part 36 offer which relates only to parts of the claim or issues that have already been decided can no longer be accepted.

(3) Subject to paragraph (2) and unless the parties agree, any other Part 36 offer cannot be accepted earlier than 7 clear days after judgment is given or handed down in such trial.”

What else can this possibly refer to except a liability offer, with the issue of liability having been decided?

Maybe I have missed something. Are courts now routinely hearing quantum trials before liability trials in split-trial cases?

I do not think so.

Suppose a claimant makes a 50% liability offer at the outset and the defendant makes no offer, and the claimant wins at trial.

Why should that claimant not get the enhancements when it was prepared to jettison half of the claim in order to settle it?

Had the claimant offered a quantum settlement of 99%, it would get the extras, but offering a 50% liability concession does not get the claimant those extras.

Again, it is irrational and very clearly not what Parliament intended, nor what the Civil Procedure Rules say.

How does it operate in a claim where there is no monetary offer?

Part 36 specifically recognizes that there can be Part 36 offers in such cases, as CPR 36.17 (4)(d)(ii) specifically provides that the 10% uplift in such cases shall be on costs, there being no damages to uplift.

I completely recognize that this is a difficult rule, but it is also the most important rule, by a million miles of the Civil Procedure Rules.

The legal profession and the population of England and Wales deserve better than this.

FIXED COSTS EXTENSION CONFIRMED FOR 1 OCTOBER 2023: KERRY IS BACK! TOUR SCHEDULE, BOOKING FORM AND EARLY BIRD DISCOUNT – DEADLINE TODAY!

Fixed Recoverable Costs apply to all civil cases valued at £100,000 or less covered by the new regime and issued from 1 October 2023 onwards, so cases in the cabinet now are caught and civil litigation clients will need to be given completely fresh costs information.

All personal injury cases are excepted; the relevant date there is the cause of action, and it will only be accidents occurring from 1 October 2023 onwards that are subject to the new regime and so nothing at all needs to be done now in relation to existing personal injury cases.

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There are two separate all-day courses, one dealing exclusively with Personal Injury Cases and the various fixed costs regimes, and one dealing with Civil Litigation only, excluding Personal Injury.

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In

Peterson & Anor v Howard De Walden Estates Ltd [2023] EWHC 929 (KB)

the King’s Bench Division of the High Court upheld the decision of the lower court that failure to pay the correct court fee was not an error of procedure, and therefore, the court did not have jurisdiction to remedy the matter under CPR 3.10.

The decision has been severely and widely criticized and is ranking with Mitchell as one of the century’s worst, involving an inadvertent underpayment of just £24, with the solicitor paying the correct, old fee which had in fact been increased.

The severe criticism has been levelled at both the original decision in the High Court and the appeal decision because both stated that even if they had had power to remedy the matter under CPR 3.10, they would have chosen not to do so.

The solicitors issued a claim form with a covering letter authorising deduction of the £308 fee, which was the correct old fee, but it had been increased to £332 in September 2021.

The claimants had sought to make an application in a landlord and tenant dispute and had four months to do so and two days before the deadline the solicitor attended Central London County Court, but the counter had been moved due to renovation works and court staff explained the payments could not be made at the new location, but that if the papers were lodged in the post box, then this would be treated as having been received that day.

The claim form was returned to the solicitors with a letter explaining that the matter could not be proceeded with on the basis of the old fee and therefore, the deadline was missed.

The solicitors asked the Court for relief under CPR 3.10 which gives the court a general power to rectify errors of procedure.

The Recorder at first instance held that this rule was not engaged as there had been no “failure to comply with the rule or practice direction”.

The Court was quite entitled to do as it did, given the failure to tend to the correct fee… it is the issue of the claim form that marks the commencement of proceedings, and it is only then that the court’s case management powers under CPR 3.10 are engaged.

“General power of the court to rectify matters where there has been an error of procedure

3.10 Where there has been an error of procedure such as a failure to comply with a rule or practice direction –

(a) the error does not invalidate any step taken in the proceedings unless the court so orders; and

(b) the court may make an order to remedy the error.”

The Recorder then appeared to criticize the law and said that it was “ripe for review” by the Court of Appeal and questioned whether the current state of the law in this area was “entirely satisfactory” observing that the mistake in this case was “inadvertent and understandable”.

However, the Recorder forfeited any sympathy by saying that had he had discretion, he would not have exercised it.

“24. Even if I am wrong, and I do have the power to remedy the error in this case under CPR 3.10, it is a discretion which must be exercised in accordance with the overriding objective of dealing with cases justly and in exercising that discretion, I must be careful to ensure that remedying one party’s error will not cause injustice to the other party. As Dyson LJ observed in Steele v. Mooney, that is the necessary control to ensure that the apparently wide scope of rule 3.10 does not cause unfairness. However, I am satisfied that there would be unfairness or injustice to the Defendant here, were I to exercise such power as I may have to validate the steps taken and treat the Claim Form as issued in time, because the effect of such an order would, in effect, be to extend time and/or dispense with a statutory imitation period in an area of the law where certainty is important and the statutory time limit is absolute”.

In fairness to the Recorder, he then did go on at paragraph 34 to suggest he was unhappy with having to make this decision, stating that if he was unconstrained by authority, his starting point would be that the innocent miscalculation of a court fee should not, absent any possible suggestion of abuse, invariably lead to an otherwise meritorious claim being lost.

The whole of paragraph 34 reads:

“34. In the light of those (albeit obiter) observations and the conflict of first instance authority to which Peter Jackson LJ referred, I have seriously considered granting this application and validating the Claim Form as if it had been issues on 23 March 2022. However, having carefully analyzed the relevant authorities, I do not consider that it is open to me to do so on the existing state of the law whether by reference to CPR 3.10 or otherwise. Each case is highly fact-sensitive but even on the most favourable view of the law (perhaps exemplified by Althea & Co Solicitors v Liddle [2018] EWHC 1751 (QB)), I cannot (in my judgment) treat this claim as having been made on any earlier date than the recorded date of issue, given that there is no question here of any fault being attributed to the Court. The incorrect fee was tendered, and that was a fatal error unless I regard the difference between the fee tendered and the fee payable as de minimis (which I do not). I make no secret of the fact that I reach this conclusion with no enthusiasm whatever. It seems something of a nuclear option, in these circumstances, to deprive the Claimants of what may otherwise be a meritorious claim. To penalize the Claimants for that error by refusing relief with the result that their notice under the 1993 Act will be deemed to be withdrawn seems to me to be a very harsh result. If I was unconstrained by authority, my starting point would be that the innocent miscalculation of a court fee should not, absent any possible suggestion of abuse, invariably lead to an otherwise meritorious claim being lost”.

This does not sit easily with his previous statement that had he had discretion, he would not have exercised it in favour of the claimant.

The Recorder himself gave permission to appeal.

On appeal, the claimants argued that the Recorder’s approach was fundamentally flawed by his failure to characterize the fee error as one of procedure, and that errors of procedure were not limited to steps taken after proceedings were issued.

In rejecting that argument, the High Court said:

“The error was not a failure to comply with some requirement laid down in the CPR. Instead it was a failure to take a step which the Lord Chancellor had required to be taken before the court staff would issue a claim form.”

The Government had legislated to implement the four month period for tenants to bring claims and it was not for the courts to say that the result of this was unsatisfactory.

The severe criticism of this decision has been in relation to the failure of the Recorder and the High Court to exercise a discretion, and more particularly both Courts said that if they had had a discretion to allow the claim, they would not have exercised it, although, as we have seen the Recorder appears to have had very mixed feelings on this point.

Because this decision is so important, and in my view, will be overturned by the Court of Appeal or by Parliament, and certainly should be, I set out the whole of the High Court’s reasoning, if it warrants that word, in relation to the exercise of discretion.

“The Exercise of Discretion.

60. In light of the conclusion I have reached as to the jurisdiction under rule 3.10 the question of the exercise of discretion does not arise. However, it is to be noted that the recorder explained why even if he had concluded that he had jurisdiction he would as a matter of discretion not have made an order under rule 3.10. Mr Green submitted that the recorder did not in reality exercise his discretion or that he exercised it on a basis which was wrong in principle. He said that the error of principle consisted of the recorder proceeding on the footing that he had no power to grant relief. However, those contentions misunderstand the recorder’s approach. The recorder was expressly proceeding by way of setting out as an alternative basis for the dismissal of the application his conclusion that even if there had been a power to do so it would not have been appropriate to grant relief as a matter of discretion. In doing that he was expressly contemplating the circumstances which would exist if his conclusion as to jurisdiction was wrong and expressly proceeding for the purpose of the alternative conclusion on the basis that he had jurisdiction. Mr Green also said that the conclusion expressed by the recorder as to discretion at [28] of his judgment is inconsistent with the regret expressed later in the judgment and the conclusion which he had reached. However, that does not advance matters and it was open to the recorder to conclude that it would not be appropriate to exercise a discretion in the Claimants’ favour while still expressing regret at the lack of jurisdiction.

61. In light of his conclusion as to jurisdiction it is not surprising that the recorder expressed his alternative conclusion on the exercise of discretion in short terms. He did not spell out in detail the injustice which he found would be caused to the Defendant by an order in favour of the Claimants but he clearly had regard to the need for the discretion, if it existed, to be exercised in such a way as to do justice as between the parties. It cannot be said that his approach was wrong in principle nor that he arrived at a conclusion which was not open to him. In that regard it is relevant that the Claimants had left it until right at the end of the two month window for making applications before seeking to apply. They were entitled to do that and to use the full period allowed by the 1993 Act and there is some force in the point that it was sensible to give a full opportunity for voluntary implementation of the agreement made in November 2021 before coming to court (though there was no evidence provided as to the reason for the delay in making the application). Nonetheless, the difficulties which arose are precisely the kind of matters which will only cause insuperable problems when a party is seeking to make an application at the end of a time period. If the claim form and covering letter had been submitted even only a few days earlier there would have been time before the end of the necessary period to remedy the deficiency in the fee proffered. Moreover, the correct court fees are a matter of public record. One can well understand how the error arose but the position remains that the error was made because the Claimants’ solicitors were working on the basis of a fee scale which had been superseded some six months previously.

62. Thus even if contrary to the conclusion I have reached above the recorder was wrong as to his interpretation of the scope of rule 3.10 he was entitled to dismiss the application on the basis of his alternative conclusion in relation to the exercise of discretion.

The Effect of the Conclusion as to Jurisdiction.

63. Having found that rule 3.10 did not give the court power to grant relief in circumstances such as those here Recorder Hansen questioned whether the state of the law was satisfactory. In that context he noted the comments made by Peter Jackson LJ in Hayes v Butters and in particular the provisional view which that judge had expressed at [24].

64. If I am right in my conclusion that rule 3.10 does not give a power to grant relief in these circumstances then it is immaterial whether the state of the law is or is not satisfactory. However, a number of points fall to be made and the position does not appear to me to be as clear as the recorder appears to have felt it to be. I will express these points in the briefest of terms and only to ensure that my dismissal of the appeal is not misinterpreted as being an acceptance of the recorder’s assessment as to whether the state of the law is or is not satisfactory.

65. The recorder was right to note that the effect of the correct interpretation of rule 3.10 is that there can be severe consequences in circumstances where there has been an inadvertent mistake as to the correct amount of the fee payable. In the present case the mistake was made by solicitors who were seeking to pay the correct fee and whose efforts to make immediate payment had been hampered by the dislocation resulting from the movement of the court counter in the course of renovation works. There are, however, a number of factors which are to be set in the other side of the balance when assessing the consequences of the proper interpretation of rule 3.10 in addition to those I have noted above deriving from the fact of the solicitors having left it till the end of the period before making the application. The effect of section 53 is significant. Parliament has chosen to say that if an application is not made within a particular period then the tenant’s notice under section 42 is deemed to have been withdrawn. In addition parliament chose to make no provision for an extension of the time period provided in section 48. The consequence is that at the end of the four month period the landlord is entitled to proceed on the footing that there is no prospect of it being required to implement the agreement. In reaching that position parliament is to be taken to have balanced a number of considerations including the interests of tenants; the interests of landlords; and the benefits of certainty. That balance having been placed at a particular point it is not for the courts to say that the result is unsatisfactory.

Conclusion.

66. In those circumstances ground 1 fails and ground 2 also fails as being dependent on ground 1. The appeal is, therefore, dismissed.”

COMMENT

The irony will not be lost on any practitioners that this arose from the shambles which is Central London County Court, surely the most dysfunctional Court in the country.

This is a Court that regularly takes months to send out court orders, resulting in solicitors being ordered to do things weeks or even months previously.

Judges and Courts exist to hear cases, not to find reasons to avoid hearing them.

An utter disgrace.

CONDITIONAL FEE AGREEMENTS IN COMMERCIAL CASES

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here, and there is an early bird discount if booked and paid for by midnight  Friday, 26 May 2023.

Book and pay by then and get a Zoominar, at no extra cost, at 4pm on Tuesday, 6 June 2023.

As the changes are retrospective in civil litigation, applying to all cases issued after 30 September 2023, so to cases coming into the office now, this Zoominar gives guidance on action to be taken sooner rather than later.

With Fixed Recoverable Costs being extended to virtually all civil litigation claims worth £100,000 or less, in relation to any cases issued on or after 1 October 2023, it is almost certain that commercial clients, with their recoverable costs capped, will seek to instruct solicitors under a Conditional Fee Agreement, rather than on the traditional hourly rate, win or lose.

A study recently showed that just 8% of small and medium enterprises instructed solicitors, and therefore, using Conditional Fee Agreements in commercial work gives solicitors an opportunity to make inroads into the 92% of small and medium enterprises who do not instruct solicitors.

The certainty of exposure, in that a losing party’s liability is also capped, should make After-The-Event Insurance both cheaper and easier to obtain, a point which is sometimes missed as to date fixed recoverable costs have covered only personal injury work, which is generally covered by Qualified One Way Costs Shifting, and so, generally costs exposure is not relevant.

That did change to a certain extent on 6 April 2023, when much of that protection was removed.

Here, I look at the following:

Part 1: General Principles and No Win No Fee Agreements

Part 2: No Win Lower Fee Agreements

Part 3: List of Conditional Fee Agreements Suitable For General Civil/Commercial Litigation

Part 4: Charging Options in Civil Litigation

Part 1: General Principles and No Win No Fee Agreements

In this first part I look at the general principles of Conditional Fee Agreements and specifically No Win No Fee Conditional Agreements, and in the second part I look at No Win Lower Fee Conditional Fee Agreements, which are a useful and popular method of funding for commercial disputes.

Conditional Fee Agreements are allowed in all work except family work and criminal work and are a form of contingency fee, but much more heavily regulated than contingency fee agreements, which are governed by  Section 57 of the Solicitors Act 1974.

Conditional Fee Agreements have been allowed since 1995 and in certain areas of work, such as personal injury claims, this system of funding totally dominates the market.

There has been a very much lower take up in general civil litigation, but for law firms who know what they are doing, both in terms of the type of work and funding, Conditional Fee Agreements offer an opportunity to get much more work in, to have happy clients and to earn more money. It is a virtuous circle.

The basic concept of a Conditional Fee Agreement is that in return for the client paying nothing, or a lower fee, in the event of defeat, the solicitor charges the client an extra fee, known as a success fee, in the event of success.

Unlike the position with a Contingency Fee Agreement or a Damages-Based Agreement, the solicitor and client are not free simply to agree a charge of a percentage of damages on success, although this can be achieved by appropriate drafting.

Rather, the solicitor’s bill has to be calculated in the usual way, that is with an hourly rate and the numbers of hours worked and emails sent etc., and the success fee, which is on top of these ordinary charges, is a percentage uplift on those charges.

The success fee can never exceed 100% of the basic charges calculated in the usual way, but the success fee is based on the total of solicitor and own client costs, not the shortfall between solicitor and own client costs and recovered costs.

In personal injury work alone, there is also a cap on the success fee by reference to damages, and that is that the success fee, including VAT, must not exceed 25% of damages, and even that damages pool is restricted so that future loss cannot form part of the damages fund for the purposes of that maximum 25% success fee.

Thus, the success fee in personal injury Conditional Fee Agreements is capped at the lower of 100% of base costs or 25% of the Allowed Damages Pool.

In all other areas of work there is no damages-based cap on the success fee.

A Conditional Fee Agreement where the client is paying no costs for work done in the event of defeat, can still properly be described as a No Win No Fee Agreement, even if the solicitor is charging for disbursements, and those disbursements can include counsel’s fees, provided that the proper wording is used in the Conditional Fee Agreement.

Success is whatever the solicitor and client decide upon. For example, if acting for a defendant, success may be defined as keeping any damages award or settlement below, say, £250,000, or whatever.

As in all agreements, the key is that the solicitor and client are clear in advance as to what has been agreed and the consequences of any particular result, and as far as the client is concerned, the issue is whether they gave informed consent.

Although there is no damages-based cap outside the field of personal injury, the solicitor and client can agree a damages-based cap without offending the indemnity principle.

Let us look at an example.

In a commercial case, the solicitor and client have a no win no fee agreement whereby the solicitor charges no legal costs in the event of defeat, with a 100% success fee in the event of success, but with the total charges to the client limited to 50% of damages.

The matter settles for £500,000.

Costs are as follows:

Thus, in this example the solicitor will earn £450,000 as follows:

Had the matter been on an ordinary basis, rather than a conditional fee basis, the solicitor would have earned £300,000 as follows:

The success fee is not recoverable from the other side; it is always paid by the client.

What has happened in this example is that the client has ended up paying an additional £150,000 in return for paying nothing if the case is lost.

Thus, as far as her or his own legal costs are concerned, there is no risk.

If the matter is lost, nothing is paid and if it is won then there is a fund of money out of which the client can pay the solicitor.

There is a problem in general civil litigation, and that is, to adapt the old phrase, the defendant may be a person of straw. The parties are free to agree that success is defined as recovering money, rather than simply winning the case, and that is obviously attractive to clients.

With Damages-Based Agreements, which I strongly advise you not to use, the fee can only be based on money recovered -a victory and judgment without recovery entitles the solicitor to nothing.

That still leaves the client exposed to an adverse costs order if the case is lost, and that can be covered by After the Event Insurance.

Many such policies are so-called silver bullet schemes, whereby if the case is lost, the insurance premium is not payable, and so the losing client is at no risk.

However, if the case is won, the client must pay the After the Event Insurance Premium out of damages, as well as the success fee to the solicitor.

That means the litigation is genuinely risk-free for the client, save of course that they may lose the case and fail to get, or have to pay, damages but they will end up paying a significant sum out of damages in the event of success. For commercial clients this is often attractive as it means they can plan and budget accordingly.

In Part 2, I look at No Win Lower Fee Agreements, and as the name suggests that means that the solicitor gets a fee in any event, win, or lose, but that the fee is lower in the event of defeat.

In general civil litigation, this is in many ways a much more attractive option for the solicitor, and whilst not eliminating risk for the client, it does limit that risk.

A word of warning if you have never dealt with Conditional Fee Agreements. There are considerable regulatory hurdles to overcome, but these can all be dealt with by having proper procedures in place and properly worded agreements.

In Part 3, I list all the types of general civil litigation Conditional Fee Agreements that I have written and in Part 4 I set out a list of all types of potential funding for civil litigation.

Part 2: No Win Lower Fee Agreements

The general principles in relation to Conditional Fee Agreements were set out in Part 1 above, where I considered no Win No Fee Agreements in detail; the same principles apply to No Win Lower Fee Agreements.

It is important to note that in a No Win Lower Fee Agreement, as in a No Win Fee Agreement, you must have a full hourly rate as the main, standard rate in the Conditional Fee Agreement, just as you would if you were acting on an old-fashioned hourly rate basis, win or lose.

It is that full rate, which is then discounted, in the event of defeat, to nothing in the case of a No Win No Fee Agreement, and to a lower fee in relation to a No Win Lower Fee Agreement.

So if, for example, the main full rate is £400 an hour, with a 100% success fee, but discounted to £200 an hour in the event of defeat, then that is fine.

Very obviously you are getting four times the fee for winning as compared with losing – £800 an hour and not £200 an hour – but because the success fee is based on the standard full rate of £400 an hour, you are not falling foul of the rule that the success fee cannot exceed 100% of ordinary solicitor and own client costs.

However, if the agreement was expressed as £200 an hour, but increased to £400 an hour in the event of a win, then that is the 100% already used up and there could be no further success fee.

There is no problem at all, provided that the Conditional Fee Agreement is drafted properly, and in Part 3 I list the different types of Conditional Fee Agreements I have prepared for general civil/commercial litigation.

The full standard rate is the rate that the client will never pay; in the event of defeat they pay the discounted hourly rate, and in the event of success there is a success fee added to that full hourly rate.

The benefit to the solicitor of a discounted Conditional Fee Agreement is that the solicitor is guaranteed a fee win or lose. In the event of defeat the fee will be lower than normal, but in the event of victory it will be higher than normal, and therefore it is not all or nothing.

Above I have set out a scenario where the discounted fee is simply a lower hourly rate, but solicitor and client are free to agree anything by way of discounted rate, if the winning rate is the full hourly rate, so as to justify recovery from the other side under the indemnity principle.

An option that can be attractive to solicitor and client is to have the discounted fee being a fixed fee, for example ‘’£400 an hour discounted to a fixed sum of £50,000 in the event of there being no success.’’

The parties are free to define what success is, but for claimants a common definition is that there is a settlement or court award for damages or costs in favour of the claimant.

The benefit of a fixed sum as the discounted fee is that the client has certainty, which is not achieved by a lower hourly rate, as the fee will still depend upon the number of hours worked and how long the case goes on.

From the solicitor’s point of view, as it is a fixed fee payable in any event, the full discounted sum can be charged immediately and thus there are cashflow benefits.

If charging by the hour, the discounted fee can be charged each month in the usual way, as that fee will be payable in any event. Care should be taken not to deliver a statute bill for the work done to date, as that potentially prevents a further charge to the client for that work if the case is won; there are conflicting authorities on this point, and it is not worth taking the risk.

Let us look at the example in Part 1, but on the basis that if the case is lost, the client pays 50% of the normal charges, rather than nothing.

In return, the solicitor charges a success fee of 50%, rather than 100%.

It then looks like this:

Thus, in this example, the solicitor will earn £450,000 as follows:

It will be seen that in fact the solicitor is earning exactly the same on this No Win Lower Fee agreement, as on the No Win No Fee Agreement, due to us choosing to cap the charge to the client on the No Win No Fee Agreement at 50% of damages.

I have made the example work like this, but it will in fact often be the case in practice and, in the market, it is attractive to cap the total charge to the client at a percentage of damages; otherwise the client can end up with nothing even in the event of a win.

Thus, in both examples the solicitor paid £450,000 for winning, with the big difference that with the No Win Lower Fee Agreement the solicitor would receive £150,000 in the event of failure.

Thought through, and discussed in detail with the client, discounted Conditional Fee Agreements can be a very attractive option for both the solicitor and the client.

There is now no need to inform the other side that you are acting under a Conditional Free Agreement, as no element of the success fee is recoverable, except in the very limited case of  mesothelioma claims.

Tactically, it is a good idea to notify the other side as it shows that the solicitor is sharing the risk, and believes in the strength of the case.

There is no need to inform the other side that it is a No Win Lower Fee Agreement, as opposed to a No Win No Fee Agreement, and as many people in civil litigation and commercial work have little knowledge of Conditional Fee Agreements, it is often assumed that the solicitor is acting on a no win no fee basis.

Indeed, in a claim where a solicitor feels the prospects of success are not great, you can enter into a Conditional Fee Agreement for say £400 per hour in the event of a win and £350 an hour in the event of a defeat.

The solicitor is risking just 12.5% of the fees, but tactically it puts pressure on the other side.

There are almost endless alternatives to the old-fashioned hourly rate win or lose and in Part 4, I provide a checklist of alternative funding methods.

Part 3: List of Conditional Fee Agreements Suitable For General Civil/Commercial Litigation

1. No Win No Fee  – Without Success Fee
2. No Win No Fee – Without Success Fee; no charge to client beyond recovered costs
3. No Win No Fee – Without Success Fee; charge to client capped at [   ]% of damages including After The Event Insurance Premium
4. No Win No Fee – Without Success Fee; Charge To Client Capped At [   ]% Of Damages Excluding After The Event Insurance Premium
5. No Win No Fee – With Success Fee
6. No Win No Fee – With Success Fee; All Charges To Client Capped At [   ]% Of Damages Including After The Event Insurance Premium
7. No Win No Fee – With Success Fee; All Charges To Client Capped At [   ]% Of Damages Excluding After The Event Insurance Premium
8. No Win Lower Fee – Without Success Fee – No Charge to Winning Client Beyond Recovered Costs
9. No Win Lower Fee – Without Success Fee – Charge To Winning Client Capped At [   ]% Of Damages Including After The Event Insurance Premium
10. No Win Lower Fee – Without Success Fee – Charge To Winning Client Capped At [   ]% Of Damages Excluding After The Event Insurance Premium
11. No Win Lower Fee – With Success Fee
12. No Win Lower Fee- With Success Fee; All Charges to Winning Client Capped At [   ] Of Damages Including After the Event Insurance Premium
13. No Win Lower Fee- With Success Fee; All Charges to Winning Client Capped At [   ] Of Damages Excluding After the Event Insurance premium

Part 4: Charging Options in Civil Litigation

1. Hourly Rate – Uncapped
2. Hourly Rate – Total Capped at Fixed Sum
3. Hourly Rate – Total Capped by Reference to Damages
4. Conditional Fee Agreement – No Win No Fee – With Success Fee Not Capped by Reference to Damages (cannot be used in personal injury work)
5. Conditional Fee Agreement – No Win No Fee – Success Fee Capped by Reference to Damages
6. Conditional Fee Agreement – No Win No Fee – Success Fee Capped at Fixed Sum
7. Conditional Fee Agreement – No Win No Fee – No Success Fee – costs not capped
8. Conditional Fee Agreement – No Win No Fee – No Success Fee – costs capped at fixed sum
9. Conditional Fee Agreement – No Win No Fee – No Success Fee – costs capped by reference to damages
10. Conditional Fee Agreement – No Win No Fee – Recovered Costs Plus Percentage of Damages
11. CFA Lite: Costs Limited to Those Recovered from The Other Side
12. Fixed Fee
13. Fixed Initial Fee – then Hourly Rate with All Above Combinations
14. Fixed Initial Fee – then Conditional Fee Agreement with All Above Combinations
15. Conditional Fee Agreement – No Win Lower Fee – with all above combinations
16.  Conditional Fee Agreement – No Win Lower Fee – Lower Fee Capped at Fixed Sum
17. Credit – Or Not – For Fixed Initial Fee in The Event of Success
18. Contingency Fee Agreement Under Section 57 Solicitors Act 1974 (pre-issue work only)
19. Damages-Based Agreement (not recommended)
20. Underwoods Method: Contingency Fee Agreement/Bridging Agreement/Conditional Fee Agreement

Other Factors

21. Who Is Paying Disbursements?

22. After the Event Insurance

23. Are Counsel’s Fees Including in the Deal, Or Payable on Top?

24. Who Gets Interest?

25. Higher Hourly Rate to Reflect Solicitor Funding Case

26. Part 36: Who Is Taking the Risk?

27. The Retainer

28. Right to Interim Bill

29. Solicitors Act 1974 Explanation -informed consent

30. Getting the Solicitors Act 1974 Bill Right  

ISSUING WITHOUT PROBATE: WASTED COSTS AGAINST SOLICITOR

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here, and there is an early bird discount if booked and paid for by midnight  Friday, 26 May 2023.

Book and pay by then and get a Zoominar, at no extra cost, at 4pm on Tuesday, 6 June 2023.

As the changes are retrospective in civil litigation, applying to all cases issued after 30 September 2023, so to cases coming into the office now, this Zoominar gives guidance on action to be taken sooner rather than later.

I have written on many occasions about the fact that proceedings cannot be issued or continued on behalf of a person who has died intestate, that is without making a will, until probate has been granted and administrators appointed.

Executors have power from the moment of death, but where there is no will, then there is a vacuum until the court grants Letters of Administration, and then, but only then, the administrators have powers.

This is becoming an increasing problem due to the increasing delays in the courts generally, and in relation to the court granting probate.

That is why I advise always checking that a potential litigation client has a will, and in appropriate cases, where unfortunately, the claimant may well die before the proceedings are concluded, declining to act unless they make a will.

In

Rafferty v Royal Wolverhampton NHS Trust, Case Number: F56YM460 (County Court at Wolverhampton 31 May 2022)

the solicitor for the claimant in relation to a claim on behalf of the deceased party failed to check whether that living claimant had power to act, that is whether she was either an executrix or an administratrix of the deceased’s estate.

The Particulars of Claim pleaded that she was the executor (sic), and then, after amendment that she was the administrator (sic).

In fact, she was neither and the proceedings were discontinued, and the defendant successfully applied for a wasted costs order against the solicitor for the claimant.

Where there is no will, any proceedings issued before Letters of Administration are granted are a nullity and cannot be revived by a subsequent granting of Letters of Administration.

In the words of the Court here, it is “an irredeemable flaw”.

In making the wasted costs order against the solicitors, the Court considered the approach in such cases but said that the solicitor should have been able to establish conclusively the true position, which is that there was no Grant of Probate and that there was no Letters of Administration, and this could have been done by carrying out an online search at the Probate Office, or making other enquiries at the local Probate Office, or indeed by asking the claimant herself.

That failure was negligent and thus, justified a wasted costs order.

There is no new law here, but it is a reminder of the duty of a solicitor to check the position concerning probate, when either continuing to act in relation to a person who has died, or where a fresh claim is being brought by a living person on behalf of the estate.

The judgment needs to be treated with some caution as it suggests that it is possible for a claimant to issue proceedings and subsequently obtain Letters of Administration, and then serve the action, and thus, avoid any limitation problems.

That is not correct.

Any proceedings issued before Letters of Administration have been obtained where a person has died intestate are invalid from the outset and incapable of being revived.

Where there is a will, then the executors have power from the point of death and can continue, or issue, proceedings without further ado.

That point is also not clear from this judgment.

Here is my writeup which appeared in Issue 95, which was my analysis of the Court of Appeal’s decision in

Jennison v Jennison & Anor [2022] EWCA Civ 1682

in relation to the situation where proceedings were issued before Letters of Administration were granted.

Proceedings Issued Before Letters Of Administration Granted

In

Jennison v Jennison & Anor [2022] EWCA Civ 1682

the Court of Appeal considered, once again, the law relating to the conduct of the proceedings on behalf of the estate of someone who has died.

This is something that I am asked to advise on time and time again by solicitors, and often litigation solicitors are unaware of the law in this area.

Put simply, an Executor’s authority is derived from the Will and can be exercised immediately upon death.

If a person dies intestate, then there is no authority until Letters of Administration have been granted.

If proceedings are issued before Letters of Administration are obtained, then those proceedings are a nullity, and cannot be revived by the subsequent obtaining of Letters of Administration.

This case was unusual in that the Claimant was the Executrix of the Will of her husband who died in New South Wales, and Probate was granted in New South Wales in 2008.

In February 2019, she issued proceedings on behalf of the estate, and the Defendants did not admit that she had the right to bring proceedings in England and Wales.

In November 2019, the Grant of Probate was resealed under the Colonial Probates Act 1892.

The District Judge, the Circuit Judge on Appeal, and here, the Court of Appeal, all held that the Claimant had acquired the right to bring the action from the Will and had acquired title to the cause of action immediately upon the death of her husband.

The Court of Appeal then went on to consider, obiter, what the position would have been had the Claimant not had power in her capacity as an Executrix.

The Court of Appeal held that a Claimant who has no standing to issue the claim, because the necessary Letters of Administration have not been granted, cannot be allowed to continue the claim, and that CPR 3.10 does not help.

CPR 3.10 reads:

“3.10 Where there has been an error of procedure such as a failure to comply with a rule or practice direction –

(a) the error does not invalidate any step taken in the proceedings unless the court so orders; and

(b) the court may make an order to remedy the error.”

The Court of Appeal here considered the extensive case law on the subject, which showed that proceedings issued without authority are “an incurable nullity” which cannot be rescued by CPR 3.10.

CPR 19.8(1) was also considered, and that provides:

“(1) Where a person who had an interest in a claim has died and that person has no personal representative the court may order –

(a) the claim to proceed in the absence of a person representing the estate of the deceased; or

(b) a person to be appointed to represent the estate of the deceased.”

However, case law showed that that provision cannot correct a deficiency in the manner in which proceedings have been instituted, but rather deals exclusively with giving Directions in a case where proceedings were validly instituted, and death has then occurred.

The legal title to the estate of a person who dies intestate vests in the Public Trustee under Section 9 of the Administration of Estates Act 1925, until Letters of Administration are granted.

There is no new case law here, and the Court of Appeal confirmed its own decision in

Millburn-Snell v Evans [2011] EWCA Civ 577

and referred to the very recent decision of the Privy Council in

Jogie v Sealy [2022] UKPC 32

which also held that a claim brought on behalf of an estate prior to the Grant of Letters of Administration is a nullity.

Death Of Client: Right To Bring Or Continue Proceedings

In

Kimathi & Others v The Foreign Commonwealth Office [2016] EWHC 3005 (QB)

the High Court reviewed the principles relating to bringing an action on behalf of someone who has died.

Such an action is brought by the deceased’s estate and not in the name of the deceased.

The right to bring an action does not vest in administrators until they obtain Letters of Administration.

Foreign administrators have no right to bring an action until the claim is registered in England and Wales.

The issue of proceedings in the name of a deceased person is a nullity.

The court has no discretion to correct a nullity.

A claim brought on behalf of a deceased person must be struck out.

This was a group action against the Foreign and Commonwealth Office and in relation to one claimant, who was deceased, the defendant succeeded in applying to strike out that claim.

Where a person has made a will, any chose in action vests automatically in the executors at the moment of death: see for example paragraph 164 of the Court of Appeal decision in Ingall v Moran [1944] 1 KB 160.

If a person has not made a will and dies intestate, then any chose in action vests in the Public Trustee and remains in her or him until Letters of Administration are issued -Section 9 Administration of Estates Act 1925 as inserted by Section 14 Law of Property (Miscellaneous Provisions) Act 1994 – see Ingall v Moran [1944] 1 KB 160.

Ingall v Moran has been more recently considered, approved and followed, by the Court of Appeal on identical material facts in Millburn-Snell v Evans [2011] EWCA CIV 577, although Ingall has been disagreed with in the context of bankrupts.

In Millburn-Snell, the Court of Appeal said;

“…their claim was a nullity that must be struck out and could not be retrospectively validated by a grant of letters of administration. That is because whereas an executor derives his title to sue from the will and not from the grant of probate – and so can validly sue before obtaining a grant (although he will have to obtain it later in order to prove his title) — an administrator derives his title to sue solely from the grant of administration (see Chetty v. Chetty [1916] 1 AC 603, at 608, 609, per Lord Parker of Waddington).”

Upon, and not before, the Grant of Letters of Administration, the chose in action passes automatically from the President to the administrator.

There is judicial and academic debate as to whether the issuing of proceedings by an “administrator” prior to Letters of Administration renders the proceedings a nullity, incurably bad or constitutes an abuse of process giving the court a discretion to allow the matter to continue – see for example:

Eaton v Mitchells & Butler Plc [2015] EW Misc B26 (CC) (30 April 2015), Wrexham County Court.

In that case the court, in the context of a claimant’s bankruptcy, considered whether Millburn-Snell v Evans was wrongly decided, that is per incuriam, in that it followed Ingall v Moran without considering whether the law had been changed by CPR 17.4, which reads, so far as material:

“(1) This rule applies where (a) a party applies to amend his statement of a case in one of the ways mentioned in this rule, and

(b) a period of limitation has expired.”

“(4) The court may allow an amendment to alter the capacity in which a party claims if the new capacity is one which that party had when the proceedings started or has since acquired.”

In Haq v Singh [2001] EWCA Civ 957,

a bankruptcy case, two members of the Court of Appeal stated, obiter, that CPR 17.4(4) had removed the effect of Ingall v Moran, the point being that in that case the claimant was actually suing in a personal capacity, however much he claimed to the contrary, and was not permitted to amend the proceedings to sue in a representative capacity that he had not formerly possessed, whereas CPR 17.4(4) now gave that power.

It is accepted that whatever the position is it applies “not only to issue proceedings knowing that the cause of action is not vested in you, but to continue them” – Munday v Hilburn [2014] EWHC 4496(Ch).

Also in Munday:

“Of course, if the Court rules, despite the claimant’s advisers’ best endeavours, that the cause of action is not vested in him, then it would constitute an abuse for the claimant to continue with the action thereafter at any rate if the position could not be cured.”

Any which way it is bad news for a claimant, the estate and the solicitor.

Consequently, it is vital that any client you act for in any potential litigation has a will.

As power passes on death to the executors it makes sense to have the solicitors conducting the litigation appointed as the executors as they can then seamlessly proceed with the matter.

This is an excellent, and entirely justifiable, ground for cross-selling and insisting that any private litigation client makes a will, and that it would be best to appoint the solicitors as executors.

This is even more the case where the matter is being conducted under a Conditional Fee Agreement; if your client dies intestate, or with a will where you are not the executor, you risk getting no fees.

It is perfectly proper to say to a client who is not prepared to make a will with the solicitor as the executor, at least in relation to the subject matter of the litigation or potential litigation, that you will not act under a Conditional Fee Agreement.

A solicitor acting under an old-fashioned hourly rate agreement is entitled to be paid for all work done up to the date of death, whatever the circumstances. This is under the quantum merit rule, which has no application in Conditional Fee Agreement cases – see Forde v Birmingham City Council [2008] EWHC 90105.

Remember that, despite the bleating of the consumer lobby and some judges, agreeing to act for a client under a Conditional Fee Agreement is a concession by the solicitor and a privilege for the client and the client must be expected to cooperate in relation to making a will.

Those judges and self-appointed consumer champions need to get out and ask real clients in real towns and cities whether they prefer to:

(1) pay by the hour, win or lose; or

(2) have a No Win No Fee Agreement.

The response generally is: –

(1) 0%;

(2) 100%.

MENTAL CAPACITY AND RETAINERS AND CONDITIONAL FEE AGREEMENTS: PROBLEM SOLVED

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This is a difficult area, and I receive a lot of enquiries about it, but in fact, the solution is reasonably straightforward.

Although much of the article deals with matters specific to Conditional Fee Agreements, the general principles apply in relation to all retainers.

A contract between a patient lacking capacity and his solicitor is generally a voidable, not void contract, and while it is sensible to ensure that both the claimant/patient and the litigation friend sign any conditional fee agreement, making them jointly and severally liable under the agreement, it is not fatal to the agreement if only the claimant/patient has signed.

Any challenge by a paying party that the conditional fee agreement is void as between solicitor and client should fail.  Of course, if the contact is void then due to the indemnity principle there is no liability on the paying party for costs.

In the case of contracts other than for necessaries, the general rule is that a person who is lacking mental capacity is bound by his contract unless he can show both that the lack of capacity meant that he did not understand what he was doing and that the other party was aware of the lack of capacity.

If the patient can satisfy these two conditions, then the contract is voidable at his option.

This rule was laid down in

Imperial Loan Co Ltd v Stone (1892) 1 QB 599

where the court said:

“When a person enters into a contract and afterwards alleges that he was so insane at the time that he did not know what he was doing, and proves the allegation, the contract is as binding on him in every respect, whether it is executry or executed, as if he had been sane when he made it, unless he can prove further that the person with whom contacted knew him to be so insane as not to be capable of understanding what he was about”.

“The validity of a contract entered into by a lunatic who is ostensibly same is to be judged by the same standards as a contract by a person of a sound mind, and is not voidable by the lunatic or his representatives by reason of unfairness unless such unfairness amounts to equitable fraud which would have enabled the complaining party to void the contract even if he had been sane.”

This view was confirmed more recently in

Special Trustees for Great Ormond street v Ruskin and Others, High Court, 19 April 2000.

Assuming that the solicitor entering into the conditional fee agreement was aware of the client’s lack of capacity, then the contract is potentially voidable, but not void.

However, even assuming that the paying party can establish that the claimant lacked capacity to enter into a conditional fee agreement, the contract is still binding upon the claimant/patient but potentially voidable at his or her election.

This paying party has no standing to interfere with that legal position and has no power to argue that the claimant/patient should be required to void the contract.

In

Forde v Birmingham City Council [2009] 1 WLR 2732

the court was considering the status of a potentially voidable conditional fee agreement retainer where undue influence was alleged.

There, the court said:

“But an agreement obtained by the exercise of undue influence is voidable, not void.  It remains in effect unless the person influenced seeks to set aside the contract and the court allows her to do so; such relief may be given on terms, eg as to payment of a reasonable sum for services actually rendered:

Johnson v EBS Pensioner Trustees Ltd [2002] Lloyds Rep PN 309, paragraphs 76-80 and O’Sullivan v Management Agency and Music Ltd [1985] QB 429.  There is no evidence that Miss Forde had done anything to avoid CFA2.  On the contrary she has consented to these proceedings being brought by McGrath on her behalf.  What the council cannot do is to purport to avoid CFA2, to which it is not a party, on her behalf and in defiance of her wishes; nor is the court required to proceed on the basis that she has avoided it when she has not”.

Thus a conditional fee agreement made with a patient, and which has not been voided by the patient, remains enforceable and thus the paying party is bound to meet any costs order within the indemnity principle and has no standing to challenge the validity of the conditional fee agreement.

Contract for necessaries

There is a strong argument that a conditional fee agreement to pursue a lawsuit is a contract for necessaries; such contracts have always been treated differently.

Section 7 of the Mental Capacity Act 2005 provides that if necessary goods or services are supplied to a person who lacks capacity to contract for them that person must nevertheless pay a reasonable price for them.

“Necessary” means suitable to a person’s condition in life and actual requirements at the time when the goods or services are supplied.  The Mental Capacity Act 2005 provides an explanation of lack of capacity which is very much the same as that previously applied by the courts.

Ratification

A person who lacks mental capacity at the time of entering into a contract, thus rendering it potentially voidable, may nevertheless be bound by it if he ratifies it after recovery, or during an interval where he has the capacity to ratify the contract.

Ratification can be express or implied by conduct, including by acquiescence or inactivity, and there is an overlap with the doctrine of estoppel.  Clearly a client who continues to give a solicitor instructions is impliedly, if not expressly, ratifying the contract, which in personal injury wok will almost invariably be a conditional fee agreement.

Ratification is different from novation.

Thus the action of acting for a patient under a conditional fee agreement should not of itself cause any difficulties over and above those involved anyway in such cases.

I am grateful to Andrew Hogan, Costs Barrister, for much of the material relating to capacity.

In

Dunhill v Burgin [2012] EWCH 3163 (QB)

the issue was whether CPR 21.10 applies where it was not known that the claimant lacked capacity and a case was settled at the door of the court.

CPR 21.10 provides in uncompromising terms that no settlement of any kind involving a protected party is valid without the approval of the court.

Here the claimant’s personal injury claim was settled on the day of trial and the settlement was mentioned to the judge and a consent order approved, but sometime later it emerged that the claimant had been a patient within the meaning of the Mental Health Act 1983 and, now acting with a Litigation Friend, she issued negligence proceedings against her former solicitors and counsel.

She also issued an application for a declaration that she had not had capacity to enter into the original purported settlement. Thus the court had to consider whether CPR 21.10 applied where the claimant had brought a claim in breach of CPR 21.2 and thus had asserted to the court and to the defendant that she was not under a disability.

It held that it did.  Thus, a party who lacks capacity to conduct litigation is protected even though he or she has not been officially declared as lacking capacity and the rule applies whether or not the party is legally represented.

In Practice

There is no problem in signing up a client when they have capacity, and even if that is in issue, it potentially makes the contract voidable, and not void, and that means that the paying party cannot take the point, and therefore, in that sense, the indemnity principle does not apply.

However, if the patient voids the contract, then potentially, it does.

In the case of contracts other than for necessaries, the general rule is that a person who is lacking mental capacity is bound by her/his contract unless she/he can show both that the lack of capacity meant that they did not understand what they were doing, and that the other party, that is the solicitor, was aware of the lack of capacity.

If the contract is for necessary goods or services, then even a person who lacks capacity to contract for them must nevertheless pay a reasonable price for them.

If it were otherwise, a person lacking capacity could not buy food etc.

A person who lacks mental capacity at the time of entering into a contract, thus rendering it potentially voidable, may nevertheless be bound by it if she/he ratifies it after recovery, or during an interval where she/he has the capacity to ratify the contract.

If you have any doubt at all, then it is sensible to get another person to enter into the contract, essentially on a joint and several basis.

If a person has capacity to enter into a contract, but then loses capacity, the contract survives, but you will of course need to appoint a Litigation Friend to conduct the litigation.

It clearly makes sense to have the potential Litigation Friend join in the retainer at the outset.

The key is to ensure that your client and/or the Litigation Friend is always as fully informed as possible, with regular costs updates etc.

To that end, I strongly advise, where there is any doubt, getting the client to consent to the potential Litigation Friend being copied in all correspondence.

I will give an example. Your client/patient has capacity when the contract is entered into, and no one doubts that, and therefore the contract is valid, and not voidable.

The client/patient loses capacity, but the contract remains.

Matters then arise which mean that there will be significant, previously unanticipated costs, and that these may not be recoverable from the other side, for whatever reason.

The solicitor communicates with the client who no longer has capacity.

The solicitors will be in difficulty in those circumstances in recovering those costs from the client on a Solicitor and Own Client basis.

Furthermore, the solicitor will not always know that the client has lost capacity.

BILLS IMAGINARY AND JUST FICTION – BUT COURT STILL ALLOWS 40%

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In

Ikin -v- Shawbrook Bank Limited [2023] EWHC 1075 (SCCO)

the Senior Courts Costs Office described the claimants’ bills as “just fiction” and “imaginary” and consisting entirely of estimates, a fact that had not been made clear.

The bills were reduced by 60% (wrongly described as 40% in paragraph 1(ii) of the judgment) and the claimants’ solicitors were ordered to pay 75% of the costs of the assessment and on the indemnity basis.

Ironically, the claims concerned misrepresentation.

The Court said that the “bills are intentionally misleading” and that the solicitors had acted unreasonably and improperly.

This was an application made by the losing, and therefore, paying, defendants under CPR 44.11 which reads:

“Court’s powers in relation to misconduct

44.11

(1) The court may make an order under this rule where –

(a) a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or

(b) it appears to the court that the conduct of a party or that party’s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper.

(2) Where paragraph (1) applies, the court may –

(a) disallow all or part of the costs which are being assessed; or

(b) order the party at fault or that party’s legal representative to pay costs which that party or legal representative has caused any other party to incur.

(3) Where –

(a) the court makes an order under paragraph (2) against a legally represented party; and

(b) the party is not present when the order is made,

the party’s legal representative must notify that party in writing of the order no later than 7 days after the legal representative receives notice of the order.”

Three reasons for the application were given:

i) “Concerns about counsel’s fees.

There were apparent discrepancies in the claims for counsel’s fees. In the Kinder claim, counsel’s fee for an interlocutory hearing had been increased in a subsequent fee note and a fee note which purported to have been issued by counsel’s chambers appeared not to have been issued by them. The day before the detailed assessment hearing the Claimant’s solicitors indicated that they would seek to have the bill assessed at nil and would pay the costs of the detailed assessment. The same counsel was instructed in the other claims.

ii) Concerns about the expert’s fees

The expert instructed on behalf of the Claimants had issued a VAT invoice in the Kinder case, despite not being registered for VAT. No receipted invoices had been served and the Defendants had concerns that the expert’s fees may be contingent.

iii) Concerns about profit costs

In the 2 bills that had been served, Ikin and Walsh, there were 18 identical entries, not only in the wording, but also in the time recorded. For example:

“Considering all relevant information and evidence received to date and undertaking review of quantum, considering case law and judicial guidelines and preparing quantum value of case.”

It is difficult to understand what “judicial guidelines” could have been considered.

The other concern about the profit costs was the hourly rate. Although lower rates were claimed in the bills, Parkerwall had confirmed that the rate agreed with the claimants was £400 for all grades of fee earner.”

The Court here quoted from

Bailey v IBC Vehicles Ltd [1998] 3 All ER 570

and every partner/director of every law firm should make themselves very familiar with this quotation:

“Order 62 Rule 29(7)c (iii) requires the solicitor who brings proceedings for taxation to sign the bill of costs. In so signing he certifies that the contents of the bill are correct. That signature is no empty formality. … The signature of the bill of costs under the Rules is effectively the certificate by an officer of the Court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client under a contentious business agreement. The Court can (and should unless there is evidence to the contrary) assume that his signature to the bill of costs shows that the indemnity principle has not been offended. …. For the avoidance of doubt, I also agree that the taxing officer may and should seek further information where some feature of the case raises suspicions that the whole truth may not have been told. And the other side of a presumption of trust afforded to the signature of an officer of the Court must be that breach of that trust should be treated as a most serious disciplinary offence. (per Henry LJ)”.

The Court also set out the propositions contained in

Gempride Ltd v Bamrah [2018] EWCA Civ 1367

concerning the exercise of the Court’s discretion under CPR 44.11:

i) “A solicitor as a legal representative owes a duty to the court and remains responsible for the conduct of anyone to whom he subcontracts work that he (the solicitor) is retained to do. That is particularly so where the subcontractor is not a legal representative and so does not himself owe an independent duty to the court.

ii) Whilst “unreasonable” and “improper” conduct are not self-contained concepts, “unreasonable” is essentially conduct which permits of no reasonable explanation, whilst “improper” has the hallmark of conduct which the consensus of professional opinion would regard as improper.

iii) Mistake or error of judgment or negligence, without more, will be insufficient to amount to “unreasonable or improper” conduct.

iv) Although the conduct of the relevant legal representative must amount to a breach of duty owed by the representative to the court to perform his duty to the court, the conduct does not have be in breach of any formal professional rule nor dishonest.

v) Where an application under CPR rule 44.11 is made, the burden of proof lies on the applicant in the sense that the court cannot make an order unless it is satisfied that the conduct was “unreasonable or improper”.

vi) Even where the threshold criteria are satisfied, the court still has a discretion as to whether to make an order.

vii) If the court determines to make an order, any order made (or “sanction”) must be proportionate to the misconduct as found, in all the circumstances.”

COMMENT

Why did the Court allow the claimants’ solicitors a penny piece?

CPR 44.11(2)(a) allows the court to “disallow all or part of the costs being assessed”.

It is hard to see what case would qualify for disallowing all the costs if this one does not do so.

Incidentally, CPR 44.11 appears not to allow the court both to disallow part or all of the costs and order the party at fault, or that party’s legal representative to pay costs, as happened here.

The word between CPR 44.11(2)(a) and (b) is OR and not AND.

CREDIT HIRE: £123,000 CLAIMED: £946 AWARDED – AND 50% DEDUCTION FOR CONTRIBUTORY NEGLIGENCE

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There is no new law in

Mehmood v AIG Europe Ltd & Anor [2023] EW Misc 1 (CC) (29 March 2023)

but it demonstrates once again, if demonstration was needed, what a cesspit the whole issue of credit hire is.

The Judge said:

“… I  need spend only a moment or two on whether, overall, the Claimant acted reasonably in incurring £107,340 in hire charges where the cost of repair (at the highest) was some £1,800. It is clear to me, for the reasons given, that the Claimant has not so acted.”

The claimant was a taxi driver.

Claims by taxi drivers, run by a taxi driver, started the whole Claims Direct fiasco.

The Claims Direct fiasco, which huge numbers of solicitors signed up to, directly led to the attacks on personal injury lawyers and their fees, which in turn have led to the current dire position.

The irony is that credit hire cases, which have done more damage to those lawyers practicing personal injury than anything else, remains almost entirely unregulated.

Nothing like this exists in any other field of the law, and I am at a loss to understand why it has not been scrapped.

To be put it in context, the claim for a hire vehicle here was £107,340 whereas the car damaged in the accident had a value of £2,190.

The taxi driver’s annual net income from driving was £9,021.

Where does one go from a world of insanity? Somewhere on the other side of despair.

• TS Eliot

SOME CLINICAL NEGLIGENCE TO COME WITHIN FIXED COSTS

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As the changes are retrospective in civil litigation, applying to all cases issued after 30 September 2023, so to cases coming into the office now, this Zoominar gives guidance on action to be taken sooner rather than later.

Unexpectedly, clinical negligence claims will not be wholly excluded from the new Fixed Recoverable Costs scheme coming in on 1 October 2023.

Clinical negligence cases covered will include those in the Intermediate Track, which is for claims valued at between £25,000 and £100,000, and where breach of duty and causation are admitted.

For claims valued at £25,000 or less, the Ministry of Justice and Department of Health have long been considering a Fixed Recoverable Costs scheme tailored to clinical negligence cases.

This has the odd effect that from 1 October 2023 claimant solicitors acting for those bringing clinical negligence claims are likely to be better off having the matter allocated to the Fast Track, where they will be get open, standard costs, rather than being allocated to the apparently higher Intermediate Track, where they will attract Fixed Recoverable Costs if breach of duty and causation are admitted.

There has been talk amongst clinical negligence lawyers of bringing Judicial Review proceedings.

In my view, they are bound to fail as the extension of Fixed Recoverable Costs will be by Statutory Instrument approved, or at least not voted down, by Parliament.

Parliament cannot be Judicially Reviewed.

TRANSLATION AND WITNESS STATEMENTS: THE CASE FOR A MINISTRY OF JUSTICE APPROVED ARTIFICIAL INTELLIGENCE SCHEME

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As the changes are retrospective in civil litigation, applying to all cases issued after 30 September 2023, so to cases coming into the office now, this Zoominar  gives guidance on action to be taken sooner rather than later.

It is widely recognized that the existing Civil Procedure Rules in relation to the translation of Witness Statements are causing very serious problems in relation to access to justice for people for whom English is not their first language.

I published a whole special issue of the Newsletter on this matter – Issue 116 – Kerry On Costs…And So Much More…

I now propose a solution whereby the Ministry of Justice work with Artificial Intelligence providers to establish a Ministry of Justice approved system, along the lines of the MedCo system for medical reports in personal injury proceedings.

There is no doubt now that the quality of translation by Artificial Intelligence is extremely high, and indeed is much higher than that of all but expert, and expensive, translators and interpreters.

It is well known that the quality of many of the translators and interpreters used at court and in Witness Statements is not high.

In terms of the Civil Procedure Rules, this is a simple change, and in any event, the Rules on interpretation and translation of Witness Statements should be unified, and the various High Court Division Guides should also be unified within the Civil Procedure Rules.

As my special issue shows, there are currently different Rules for different divisions and different types of work, and so as well as saving money, and ensuring the quality of translation, this is a good opportunity to clean up the Rules.

The key issue will be to find a suitable provider and monitor them.

That will be for people much more expert than me in both the field of translation and information technology.

I set out below an article on the subject, and I am grateful to Abraham Khan of Abraham Baron Solicitors Limited for his ideas and information in relation to this topic.

I have mixed views about Artificial Intelligence, and like most new developments, it is a question of considering what is appropriate and suitable, and what is not, rather than embracing it without question, or rejecting it without question.

This seems to me a perfect area for AI. Just as a dictionary is a better source of a definition of words than any individual, an AI translation program has the potential to be far more accurate than any individual.

The article itself recognizes some of the issues, such as the potential of hacking, and the necessary security measures to prevent.

That problem is part of all of our lives now.

QUALIFIED ONE-WAY COSTS SHIFTING, SET OFF UNDER CPR 44.12 AND INSURERS’ ATTEMPTS TO AVOID HO V ADELEKUN

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In

Ho v Adelekun [2021] UKSC 43

the Supreme Court held that in a case covered by Qualified One-Way Costs Shifting, a defendant can never set off costs orders in its favour against costs orders made against it, even if the matters goes to trial.

That decision has been statutorily overturned by the amendments to the Civil Procedure Rules, but only in relation to proceedings issued on or after 6 April 2023.

The amendment is not retrospective, and therefore, claims issued by 5 April 2023 are not affected, and there has been extensive publicity about that.

However, certain insurance companies are now seeking to avoid the decision of the Supreme Court in Ho v Adelekun by seeking to utilize CPR 44.12.

This is a curious rule and reads:

Set Off

44.12

(1) Where a party entitled to costs is also liable to pay costs, the court may assess the costs which that party is liable to pay and either –

(a) set off the amount assessed against the amount the party is entitled to be paid and direct that party to pay any balance; or

(b) delay the issue of a certificate for the costs to which the party is entitled until the party has paid the amount which that party is liable to pay.

When this first came in 10 years ago, I said that there was a tension between CPR 44.12 and CPR 44.13.

However, the Supreme Court in Ho v Adelekun made it clear that there can be no set off of costs against costs in a Qualified One-Way Costs Shifting case.

That is further reinforced by the fact that Parliament has recently statutorily overturned the decision in Ho v Adelekun, so that costs can now be set off against costs, but the statutory instrument makes it clear that that only applies to proceedings issued on or after 6 April 2023, and there has of course been extensive publicity and debate about that change.

This is potentially of very significant importance in the personal injury sector as it would affect all cases issued before 6 April 2023, where there is a costs order in favour of a defendant.

It would not affect the decision in

Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654

where the Court of Appeal held that there had to be an order for damages in favour of the claimant before a defendant could set off a costs order against damages, and the courts have held that deemed costs orders on settlement under Part 36, and Tomlin Orders were not such orders.

That too has been overturned in relation to proceedings issued on or after 6 April 2023, but the wording in CPR 44.12 does not envisage a costs against damages set off, but only a costs against costs set off.

One of the insurance companies running this line is  Haven Insurance Company Limited, so heavily criticized in the solicitors’ liens cases.

The application is specifically that the defendant be permitted to offset the defendant’s costs … against the claimant’s costs of the action in accordance with Civil Procedure Rule 44.12.

In my book – Qualified One-Way Costs Shifting, Section 57 and Set Off, I wrote the following:

“The Practice Direction is silent as to the effect of this rule.

Significantly this rule appears immediately above the rule dealing with Qualified One Way Costs Shifting – CPR 44.13 to CPR 44.17 – also notable for its brevity.

This raises the question as to whether, in a QOCS case, even the claimant’s pre Part 36 costs are at risk of being eaten in to to satisfy the unsatisfied element of a costs order in favour of a defendant when a defendant’s Part 36 offer has not been beaten.

Thus the claimant is awarded £30,000 at court and an order is made in the defendant’s favour for £40,000, leaving an unsatisfied balance of £10,000.

May the defendant set this off against the claimant’s pre Part 36 costs?

Yes, seems to be the clear answer. That situation appears to fall fairly and squarely with CPR 44.12(1)(a).”

Thus, the issue now is whether the decision of the Supreme Court of Ho v Adelekun rules out such an interpretation by the court, or whether the decision of the Supreme Court of Ho v Adelekun can be distinguished on the basis that that was dealing with Qualified One-Way Costs Shifting as dealt with in CPR 44.13 – CPR 44.17, and not CPR 44.12.

Thus, a further detailed analysis of

Ho v Adelekun [2021] UKSC 43

is necessary.

Although it does not form part of the judgment, the Supreme Court itself issued a press summary, as it often does now, and I now set out the reasons for the judgment as given by the Supreme Court in that press summary:

“It was agreed by both parties that the question was one of construction of the language of the QOCS provisions in CPR rule 44.14 [32].

Lord Briggs and Lady Rose’s judgment explains that the effect of rule 44.14(1) is to create a monetary cap on the amount that a defendant can recover in costs from the claimant, set at the level of the aggregate amount in money terms of all court orders for damages and interest in a claimant’s favour. The defendant must keep a running account of all costs recoveries which it makes against the claimant, and cease enforcement once that monetary cap is reached [38].

Ms Ho nonetheless argued that she could set off the opposing costs orders against each other because the monetary cap created by rule 44.14(1) only applied to the net costs liability of a claimant after all opposing costs orders had been netted off [36]. Therefore, despite the aggregate amount of court orders for damages and interest in Ms Adelekun’s favour being zero, Ms Ho argued that the £16,700 owed by her for the pre-settlement costs could still be netted off against £16,700 of the Court of Appeal costs order.

Lord Briggs and Lady Rose reject this argument. The setting off of costs against costs is a form of enforcement covered by the QOCS provisions just as the setting off of costs against damages is [39-40]. A calculation of a claimant’s net costs liability was therefore an incorrect approach, as the bar to enforcement in the QOCS provisions applied to the gross amount of a defendant’s costs orders against a claimant rather than the net amount [41].

The effect of this is that Ms Ho must pay Ms Adelekun the full pre-settlement costs of £16,700 on top of the £30,000 agreed to in the settlement agreement, but cannot enforce the Court of Appeal costs order against Ms Adelekun at all.

Lord Briggs and Lady Rose recognise that this conclusion may lead to results which at first look counterintuitive and unfair. But the conclusion follows from the wording of the QOCS provisions in CPR Part 44, and any apparent unfairness in an individual case is part and parcel of the overall balance struck by the QOCS regime [44].

References in square brackets are to paragraphs in the judgment”.

Those reasons are clear and state that costs cannot be set off against costs, but only against “the aggregate amount in money terms of all court orders for damages and interest in a claimant’s favour. The defendant must keep a running account of all costs recoveries which it makes against the claimant, and cease enforcement once that monetary cap is reached.”

That would appear to be that.

However, the Supreme Court specifically held that set off was a species of enforcement. (Paragraph 7).

It helpfully set out that there are at least three types of cases where the aggregate of the orders for damages and interest may not be enough to cover the defendants costs.

“7.

The first is where the claimant fails at trial and is ordered to pay the defendant’s costs, but is successful (with an order for costs in its favour) at an earlier interim stage, such as in fending off an application for summary judgment by the defendant, or later in winning on a costs assessment.

The second is where the claimant succeeds, but by way of settlement rather than at trial. In such a case there is no court order for damages or interest, even if the settlement agreement is annexed to a Tomlin order, and therefore no headroom below the cap available under QOCS for the defendant’s costs enforcement: see Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654; [2018] 1 WLR 6137 (“Cartwright”).

The third type is where the aggregate of the costs that the claimant is ordered to pay the defendant substantially exceeds the aggregate of the orders for damages and interest which the defendant is ordered to pay the claimant.

This is by no means a rarity; a disproportionality between the damages and the costs is all too frequent in modest to medium-sized PI claims which do not settle within the Pre-action Protocols.”

At paragraph 9 the Court accepted that there were ambiguities in CPR 44.12 and CPR 44.13 – 17:

“The very fact that two eminently constituted Courts of Appeal have differed profoundly over the interpretation of a provision of the CPR suggests that there must be an ambiguity which practitioners need to have sorted out.”

“Nonetheless, permission having been given, this court must decide the question of construction, leaving it to the CPRC to consider whether our interpretation best reflects the purposes of QOCS and the Overriding Objective, and to amend the relevant rule if, in their view, it does not.”

Of course, the Civil Procedure Rules Committee has amended the rule, and again one would think that if CPR 44.12 nevertheless applies in QOCS cases, the Supreme Court would not have made this decision, and would not have made those comments, and the Civil Procedure Rules Committee would not have needed to amend the rules, as they did with effect from 6 April 2023.

Again, that would appear to be that.

Here, the substantive matter had been resolved by acceptance by the claimant of a defendant’s Part 36 offer and so there was no “order for damages” within the meaning of QOCS regime, as per the decision in

Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654 (17 July 2018).

The costs order against the claimant in this case had arisen from a dispute, and an appeal, in relation to whether the costs should be fixed costs or standard costs, and the claimant lost on that point and was ordered to pay costs of £48,600.

The costs order in favour of the claimant that is fixed costs, amounted to £16,700.

Ms. Ho, who won the costs appeal was the beneficiary of the costs order of £48,600, accepted that due to the decision in Cartwright, the damages agreed of £30,000 had to be paid to the claimant and that she could not set off the costs awarded to her against those damages payable by her.

However, she argued that she should not be required to pay over the Fixed Recoverable Costs of £16,700 as they should be set off and absorbed by the £48,600 costs order in favour of Ms. Ho.

She accepted that she could not enforce the balance of £31,900 against the original claimant Ms. Adelekun.

“16. This case is therefore an example of the second kind of situation we described earlier. It is one of a number of situations where a defendant might be required to put their hand in their pocket to pay out money to the claimant even though they have been awarded costs against the claimant in an amount which, if they could set it off, would cancel out that liability.”

The Supreme Court also pointed out that what QOCS does is not to operate as a total ban on the setting off of opposing costs orders, but rather to limit the enforcement of a defendant’s costs order at the level of a monetary cap which is the order in the claimant’s favour for damages and interest.

“That will amount to a ban only if there are no orders for damages or interest (as in the present case) or if the aggregate amount of damages and interest has already been used up by other means of enforcement.” (Paragraph 34).

In legal aid cases, set off had been allowed of costs against costs, even though the general rule in legal aid matters was that a losing claimant would not have to pay costs, and in that sense, it was a forerunner of Qualified One-Way Costs Shifting.

What the defendant argued here was that the cap only applied once a notional set off of costs against costs have been applied.

Thus, in this case, the claimant would get no costs and that sum of £16,700 due to her would be set off against the sum of £48,600 owed by the claimant to the defendant in costs.

That would leave a balance of £31,900 costs due to the defendant.

The defendant submitted that it was that sum which was then subject to the monetary cap of the award for damages and interest.

It was also pointed out that a trial judge had the discretion to award costs on a percentage basis, or an issue-based basis and thus, could achieve this effect, for example, in this case by simply ordering the claimant to pay the defendant £31,900.

As the Supreme Court asked here … “why should QOCS be any more restrictive, merely because opposing costs orders were made at different times during the litigation?”

Paragraph 37 is at the heart of the decision and states that QOCS does not exclude set off of costs against costs under CPR 44.12 but does prevent a defendant recovering any sum which exceeds the monetary amount of the claimant’s orders for damages and interest.

“37. We would not accept Mr Mallalieu’s submission that QOCS is a complete costs code, or that it wholly excludes set-off of costs against costs under rule 44.12. But we would accept that QOCS is intended to be a complete code about what a defendant in a PI case can do with costs orders obtained against the claimant, ie about the use which the defendant can make of them. The defendant can recover the costs ordered, by any means available, including set-off against an opposing costs order, but only up to the monetary amount of the claimant’s orders for damages and interest. This is what the Explanatory Memorandum states in terms.”

The Supreme Court then said this at paragraph 43:

“43. Returning to the respondent’s submissions, we do not consider that the well-established jurisdiction to direct set-off of costs against costs under rule 44.12 is displaced by the QOCS scheme, provided that there is an order for damages or interest and that the headroom provided by that order has not been exhausted by other means of enforcement. But for the reasons already given we do not accept the submission that it is only the net costs entitlement that has to be brought into account under rule 44.12(1).”

What the Supreme Court appears to be saying is that CPR 44.12 is the jurisdiction that allows set off of costs against costs, that not being specifically allowed under the QOCS rules at CPR 44.13 – 17, but that CPR 44.13 – 17 then place a monetary cap, being the total of damages and interest, but not costs, awarded to the claimant on the enforcement of the defendant’s costs orders.

This is not an easy decision to follow, but in fairness to the Supreme Court, who politely referred to ambiguities, CPR 44.12 – CPR 44.17 are among the worst drafted Civil Procedure Rules in history.

Nevertheless, having reread the judgment several times, and having considered the changes made by Parliament in relation to QOCS protected cases issued on or after 6 April 2023, I am satisfied that the approach of Haven Insurance Company Limited and their solicitors is entirely without merit.

In my view, claimant solicitors are justified in putting the solicitors on notice that they will be applying for a wasted costs order under Section 51 of the Senior Courts Act 1981.

Enforcement Against Interim Damages Already Paid

It should be noted that a defendant who is owed costs can enforce those costs orders against the whole amount of the damages and interest paid, including any interim payment of damages made to the claimant.

Thus, the claimant is awarded £30,000 damages and interest, of which £20,000 has already paid by way of interim payments, and the defendant has a costs order in exactly the same sum, that £30,000.

Clearly, only £10,000 is available for set off and the defendant does not have to pay any further damages.

However, the defendant can then enforce in any of the ways set out by the Civil Procedure Rules, primarily in CPR 70, against those interim damages already paid to the claimant.

FIXED COSTS EXTENSION CONFIRMED FOR 1 OCTOBER 2023: KERRY IS BACK! TOUR SCHEDULE, BOOKING FORM AND EARLY BIRD DISCOUNT.

Fixed Recoverable Costs apply to all civil cases valued at £100,000 or less covered by the new regime and issued from 1 October 2023 onwards, so cases in the cabinet now are caught and civil litigation clients will need to be given completely fresh costs information.

All personal injury cases are excepted; the relevant date there is the cause of action, and it will only be accidents occurring from 1 October 2023 onwards that are subject to the new regime and so nothing at all needs to be done now in relation to existing personal injury cases.

In  industrial disease claims, the trigger date is when the letter of claim is sent. If it is sent on or before Saturday, 30 September 2023, the existing regime applies, but after the new scheme applies.

FIXED RECOVERABLE COSTS EXTENSION: THE AUTUMN 2023 TOUR SCHEDULE

This lecture tour deals with the extension of Fixed Recoverable Costs on 1 October 2023 to virtually all Civil Litigation claims valued at £100,000 or less, with all non-personal injury claims issued on or after Sunday, 1 October 2023 caught, so cases in the cabinet now will be caught if not issued by then.

There are two separate all-day courses, one dealing exclusively with Personal Injury Cases and the various fixed costs regimes, and one dealing with Civil Litigation only, excluding Personal Injury.

From 6.00pm – 7.30pm, is a session about the relationship between solicitors and barristers – free to anyone attending either of the all-day courses. Barristers find this helpful as a free-standing course.

After that, there is a Curry with Kerry event price £30 including the curry, but not drinks, which is a chance to socialize and chat about these matters in a more relaxed way.

Book here.

Headline price is £300 plus VAT per course (includes lunch and electronic course material). 10% further discount for a second delegate, and 20% discount for further delegates.

EARLY BIRD DISCOUNT

If you book and pay before midnight on Friday 26 May 2023, the price is £250 plus VAT per course. 10% discount for a second delegate, and 20% discount for further delegates, all automatically applied on the Booking Form.

FEEDBACK FROM PREVIOUS DELEGATES

Professor Dominic Regan said “Kerry Underwood is without equal when it comes to the tactical and practical issues of litigation funding. I heard Lord Neuberger MR say as much at an event which I attended about the impact of the Jackson reforms.”

“Most of the big decisions in my firm follow a Kerry Underwood course.”

“Utterly brilliant!”

“You give us the courage to keep going.”

“Superb, inspirational course.”

“What an original presentation. Loved your energy, passion and dynamism. Most unconventional but refreshing and original.”

“Truly amazing content and presentation”

“Great day with Kerry who spoke brilliantly. A wealth of knowledge and a great teacher.”

“Very authoritative on issues that are of great significance at the moment.”

“I love Kerry’s courses – I may already know the subject, but he makes me look at it in a different – and hopefully more profitable – way.”

“Extremely informative, the best and most useful course from a business point of view I have ever attended.”

Contact Colin Palmer

Email: Colin@kbgchambers.co.uk

Telephone: 01752 221551

Website: https://www.kbgchambers.co.uk/team/colin-palmer

Contact Gordon Exall

Email: clerks@kingschambers.com

Telephone: Paul Clarke 0161 819 8804 I Aaron Smith 0161 819 8272

Website: kingschambers.com

Contact Chris Lucarelli

Email: chris.lucarelli@trinitychambers.co.uk

Telephone: 0191 2459 586

Website: www.trinitychambers.co.uk

Contact Alistair Worth

Email: alistair.worth@mooneerams.com

Telephone: 02920 483615

Website: www.mooneerams.com

Contact Claire Long

Email: Claire.Long@lawabroad.co.uk

Telephone: 01442 430900

Website: www.underwoods-solicitors.co.uk

FIXED COSTS EXTENSION: IN ON 1 OCTOBER 2023 AND RETROSPECTIVE!

It has today been announced that the Fixed Costs extension will be implemented on Sunday, 1 October 2023, meaning that in practice, the last day of the ancien regime is Friday, 29 September 2023.

In a dramatic move, forecast by some of us, this scheme is effectively retrospective in that it applies to all cases issued on or after Sunday, 1 October 2023, and therefore, civil cases in your filling cabinet, or in your e-filling system, now will be caught with the new regime.

It is important to note that the new regime provides for Fixed Costs, even if the matter ends pre-issue, and therefore, if, as a claimant, you have written a letter of claim now, but your client does not then go ahead with the matter, you will have a liability in costs to the defendant.

There is a different regime for personal injury cases where the relevant date will be the cause of action not the date of issue.

Consequently, personal injury lawyers, very well used to Fixed Recoverable Costs, can relax a little bit as the new regime will only apply to accidents which have not yet occurred.

Civil litigators are in a very different position, and if you wish to avoid the new regime, then you must get everything issued by Saturday, 30 September 2023.

Details of my 42 courses on the Fixed Recoverable Costs Extension will be posted shortly.

AFTER THE EVENT INSURANCE AND THE NEW QUALIFIED ONE WAY COSTS SHIFTING REGIME FROM 6th APRIL 2023

This piece first appeared in my twice weekly Newsletter – Kerry On Costs… And So Much More…

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All firms doing personal injury claimant work must now re-visit the issue of After the Event Insurance given the very significant changes in the law in relation to Qualified One-Way Costs Shifting in relation to cases issued on or after 6 April 2023.

Following the decisions of the Supreme Court in

Ho v Adelekun [2021] UKSC 43

and the Court of Appeal in

Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654

many solicitors took the view that After the Event Insurance was unnecessary as personal injury claimants would never have any liability for costs, absent fundamental dishonesty or effectively other serious misconduct.

The effect of those two decisions was that a defendant could not set off its own costs order against costs awarded to the claimant, and nor could it enforce the deemed costs order under Part 36 on late acceptance by a claimant of a defendant’s Part 36 offer.

The law is that on late acceptance, the claimant is deprived of its costs from the date of expiry of the period for accepting the Part 36 offer, and the defendant gets its costs from the same date.

That was always the position under Qualified One-Way Costs Shifting, in that the regime of Qualified One-Way Costs Shifting does not affect the making of costs orders but rather their enforcement, and the effect of the Supreme Court and Court of Appeal decisions above was to limit heavily the ability to enforce costs.

What the change in the law does is to allow defendants in personal injury actions to set off costs against costs, and to enforce the deemed costs order in their favour on late acceptance by the claimant of the defendant’s Part 36 offer, against damages.

Thus the decisions above are overturned.

That is where the issue of After the Event Insurance comes in, as in the past, most policies protected the claimant against the adverse costs order arising from late acceptance of the defendant’s Part 36 offer by the claimant, or failing to beat it at trial.

In the regime which ended on 5^th April, but continues to apply to cases issued by that date, the personal injury client who goes to trial and fails to beat a defendant’s Part 36 offer does indeed have a costs order in favour of the defendant’s set off against its damages, as the law require there to be a court order.

Consequently,  After the Event Insurance should at least have been discussed with clients throughout that regime, given the enforceable liability of adverse costs order where a claimant fails at trial to beat a defendant’s Part 36 offer.

All of my funding agreements are neutral on the point, in that I did not feel the need to advise in specific terms within the Conditional Fee Agreement, or Contingency Fee Agreement, on the extremely complicated law on Part 36.

Thus, the Documents as drafted are fine for both the existing regime and the new regime.

After the Event Insurance Premiums entered into on or after 1 April 2013 are not recoverable from the other party, with the exception of Mesothelioma claims, where the success fee and After the Event Insurance Premium remains recoverable.

In clinical negligence claims, that part of the After the Event Insurance Premium dealing with a report on causation and liability is also recoverable, but there is no change in the law on that issue.

Thus, this is entirely a Solicitor and Own client matter, and again, all my standard Conditional Fee Agreements have variants, one where there is capped Conditional Fee Agreement, capping all charges to the client including the After the Event Insurance Premium, and one where all charges to the client are capped but excluding the After the Event Insurance Premium.

That is a policy matter for the firm, that is whether to absorb the cost of the After the Event Insurance Premium within your charge to the client, or not.

For example, you may consider it attractive to have a higher percentage charged to the client, but to include the premium within that higher percentage.

It is important to advise clients, as was the case before the decisions in Ho and Cartwright, that if they accept a defendant’s Part 36 offer late, then they will have the defendant’s post-expiry costs deducted from their damages.

It is relatively rare that there are any other costs orders against personal injury claimants, deemed or otherwise.

You can purchase the Documents, Videos, Agreements and Advices Menu here for £2,000 plus VAT for one year.

BELSNER: SOME FURTHER THOUGHTS

This piece first appeared, in a slightly different form, on the Practical Law Dispute Resolution Blog.

The decision of the Court of Appeal in

Belsner v Cam Legal Services [2022] EWCA Civ 1387

is now five months old, but is still the source of much debate, so here is a summary of what it did, and did not, decide and as I set out below, much of the Judgment was obiter, that is not necessary for the decision on the facts of this case, and therefore not binding.

Ironically, precisely because the Court of Appeal was dealing with a non-contentious matter, that is unissued litigation, its findings, some of them very significant, are binding in unexpected areas of work, such as commercial work, conveyancing, Wills and Probate etc.

Thus, the decision is being wrongly interpreted as applying to things that it does not apply to at all, and largely being ignored by those lawyers dealing with non-contentious work, where it most certainly does apply.

Firstly, in this case the substantive matter had never been issued, as it was settled at Stage 2 of the Road Traffic Accident Portal process and therefore was classed as non-contentious.

The Court of Appeal was highly critical of the continuing existence of the concepts of contentious and non-contentious business under the Solicitors Act 1974 and the very different costs regimes applying stating:

“…the distinction between contentious and non-contentious costs is outdated and illogical. It is in urgent need of legislative attention.”

I dealt with the issue of contentious and non-contentious business in my recent piece on this blog –

CONTENTIOUS AND NON-CONTENTIOUS BUSINESS

The Court of Appeal’s comment caused the Civil Justice Council to reopen its consultation on this point.

An Act of Parliament will be needed to deal with the issue as the concept itself stems from the Solicitors Act 1974, and earlier legislation, whereas most costs matters are dealt with in Rules of Court, currently the Civil Procedure Rules.

Thus, the Court of Appeal stressed that the contentious/non-contentious split remains in full force and then it considered some of its effects.

Thus, as mentioned above, this decision is not binding in relation to issued cases, unless the relevant part applies to all cases for all clients, and some of it does, for example the ruling that solicitors do not owe any fiduciary duty to clients in relation to the terms of the retainer.

This is an important point and ends forever the ridiculous suggestion that solicitors are under some sort of mad duty to refer clients to competitors who may be cheaper, or that clients need to be separately advised by other solicitors before entering into a retainer.

Thus, part of the decision deals with non-contentious work, part of it deals on an obiter base with contentious work, and part of it deals with all work, both contentious and non-contentious, and that will include Wills, Probate, conveyancing etc.

Secondly, and consequent upon the finding that this was non-contentious business, the Court of Appeal held that Section 74(3) of the Solicitors Act 1974, and the associated CPR 46.9(2) do not apply to cases pursued through the Pre-Action Protocols, but only to cases actually issued, but added:

“Secondly, there is no logical reason why Section 74(3) and Part 46.9(2) should now apply to cases where proceedings are issued in the County Court and not to cases pursued through the Pre-Action Protocols.”

Section 74(3) of the Solicitors Act 1974 provides:

“The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.”

In Fixed Recoverable Costs cases, that is Fixed Recoverable Costs only.

However, CPR 46.9(2) disapplies Section 74(3) if the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.

Thirdly, in an important finding that applies to all solicitors’ retainers of all kinds, whether litigation, or Wills, conveyancing, or whatever, the Court of Appeal held that solicitors do not owe potential clients fiduciary duties in the negotiation of the retainer.

Fiduciary is generally interpreted as meaning duty of trust.

Fourthly, although the solicitors were not obliged to obtain the client’s informed consent in the way set out by the High Court, whose decision was overturned, all solicitors and all retainers of any kind must ensure that every client receives the best possible information about the likely overall cost of the case so that the client is in a position to make an informed decision.

This comes close to requiring all solicitors to obtain informed consent from all clients in all types of work, a finding not being picked up by the legal profession as a whole.

This ruling stems from the duty in the Solicitors Regulation Authority’s Code of Conduct and is not confined to litigation matters, contentious or otherwise.

So, no fiduciary duty pre-retainer, but maximum transparency. “We are expensive- but you get what you pay for-here is the cost.” This is a very important- and very sensible and practical ruling, which is not getting the attention which it deserves.

Fifthly, the Court of Appeal held that a term in a solicitor /client retainer allowing the solicitor to charge the client more than the costs recoverable from the other side was not unfair within the meaning of The Consumer Rights Act 2015, but as we have seen above, will be illegal in a contentious matter unless the client’s written agreement is obtained.

Again, this is an important finding that applies to all litigation cases, and is a recognition that solicitors, as well as consumers, have rights too.

Sixthly, assessment on a non-contentious matter, including as here unissued litigation cases, is under Paragraph 3 of the Solicitors’ (Non-Contentious Business) Remuneration Order 2009.

The test under that order is whether the solicitor’s costs are fair and reasonable having regard to all the circumstances of the case.

Belsner is an important and very well-reasoned decision. Here I will not go into its savage attack on Checkmylegalfees  and others, but what the senior judiciary are recognising is that if lawyers are attacked in this way, as legal aid lawyers have been, then we will simply do other work.

WITNESS STATEMENTS AND NATIVE TONGUE: SOME MORE THOUGHTS

This piece first appeared in my twice weekly Newsletter – Kerry On Costs… And So Much More…

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In Issue 113, I published a brief summary of the decision concerning the admissibility of a statement other than in the witness’s first language, and that was the decision of the King’s Bench Division of the High Court in

Correia v Williams (2022) EWHC 2824 (KB)

and that followed my piece in Issue 111 –

TRANSLATORS’ AND INTERPRETERS’ FEES AND LANGUAGE TO BE USED

I have now read and considered the full Judgment in Correia in more detail and on the facts, there can be little doubt that the decision of Central London County Court to exclude the evidence, a decision upheld by the High Court, was correct.

I now set out the High Court’s finding on that point, but then go on to consider the High Court’s analysis of the law in this area which is, to put it mildly, confused, that is the law, not the High Court’s analysis.

In this case, in considering whether the trial Judge was entitled to exercise his discretion to refuse to admit the statement, the High Court said:

“47. In my judgment, he was. In all the respects identified by the judge, this witness statement failed to meet the requirements of the rules. The rules about the provision of witness statements by those who are not fluent in English provides an important discipline for litigants and their advisers and are not lightly to be ignored. The judge correctly identified the reasons why to have allowed this witness statement to be admitted would have been grossly unfair. In particular, the Respondent had provided a witness statement which complied with the rules, and, as a result, the Appellant knew the evidence to which he has to respond. By contrast, the Respondent had only the account of events drafted by the Appellant’s solicitor, in a language in which the Appellant was not fluent. The difficulties that would have faced the Respondent’s counsel in cross examination on such a witness statement are obvious. As the judge observed, one of the purposes of requiring the service in advance of trial of witness statements are to tie the witness down to one account of events; to have allowed in this statement would have enabled the Appellant to escape that constraint.

48. Furthermore, this application was being made on the first day of a two day hearing; to have permitted it would have been to limit severely the Respondent’s opportunity to respond and it would have put the hearing of the case on this date substantially at risk. Had an adjournment proven necessary, it would likely have put the parties to additional cost and it would have resulted in significant wastage of court time with consequent disadvantage to other litigants.

49. In addition, in my view, the judge was entitled to reject as unsatisfactory or unfair the various alternatives advanced by the Appellant. He gave good reasons for rejecting those alternatives. To have allowed the Appellant to give oral evidence in chief, either in English, to the best of his ability, or in Portuguese, with evidence being translated into English, would have been to create precisely the difficulties for the court and the respondent which the rules are intended to avoid. To have permitted the interpreter to translate the statement into Portuguese and a fresh statement of truth to be signed by the Claimant at Court would have created the difficulties and unfairness the judge identified. To have granted an adjournment so the statement could be drafted in Portuguese would have created the unfairness referred to in the preceding paragraph of this judgment.”

The case involved Practice Direction 32, Paragraphs 18.1, 19.1 and 20.1 and Practice Direction 22, Paragraph 2.4.

CPR 22 and Practice Direction 22 deal with Statements of Truth.

“Rule 22.1(1). The following documents must be verified by a statement of truth –

(c) a witness statement.

Rule 22.3. If the maker of a witness statement fails to verify the witness statement by a statement of truth the court may direct that it shall not be admissible as evidence.

Practice Direction 22

2.4. The statement of truth verifying a witness statement must be in the witness’s own language.”

CPR 32 and Practice Direction 32 deal with Witness Statements.

“Rule 32.4(1). A witness statement is a written statement signed by a person which contains the evidence which that person would be allowed to give orally.

Rule 32.8. A witness statement must comply with the requirements set out in Practice Direction 32.”

The claimant whose evidence was excluded was a Portuguese national who had given evidence in the matter in the Magistrates Court through an interpreter.

In the civil proceedings the 36 page, 126 Paragraph statement contained the following:

“Whilst I can understand and speak English, I am not wholly fluent and rely on the assistance of a translator during court proceedings. I am able to make this statement in English because the principal solicitor of Harris da Silva Solicitors speaks fluent Portuguese.”

The Witness Statement ended with a Statement of Truth in English and a “Certificate of Translation” which read:

“I, Charles da Silva, hereby certify that I am proficient in Portuguese and English. I translated the forgoing statement and read it back to Jose Carlos Marquez Correia in its entirety in Portuguese (European) on 15 September 2021”.

The reference to European Portuguese is as compared with Brazilian Portuguese.

The High Court here pointed out that the position is very different both in the King’s Bench Division of the High Court itself, and the Chancery Division of the High Court.

“22. The King’s Bench Guide [2016] provides at paragraph 10.61:

If a witness is not sufficiently fluent in English to give their evidence in English, the witness statement should be in the witness’s own language and the translation provided.

23. The Chancery Guide says at 19.13:

If a witness is not sufficiently fluent in English to give his or her evidence in English, the witness statement should be in the witness’s own language and a translation provided. If the witness is not fluent in English but can make himself or herself understood in broken English and can understand written English, the statement need not be in his or her own words provided that these matters are indicated in the statement itself it must however be written so as to express as accurately as possible the substance of his or her evidence.”

Indeed, as I pointed out in my piece –

TRANSLATORS’ AND INTERPRETERS’ FEES AND LANGUAGE TO BE USED

Practice Direction 57 itself, dealing with work in the Business and Property Courts, has a very different provision, which, on the face of it, and whilst purporting to reinforce Practice Direction 32 seems fundamentally to disagree with it, and certainly to disagree with the decision of Manchester County Court in

Muhammad v Liverpool Victoria Insurance Company Limited (unreported, Manchester County Court, HHJ Evans, 1st April 2022)

Practice Direction 57 specifically states that the witness’s own language includes any language in which the witness is sufficiently fluent to give oral evidence (including under cross-examination) if required and is not limited to the witness’s first or native language (my bold).

The issue had arisen in at least five previous High Court cases:

• Force India Formula One team v Malaysia Racing Team [2012] EWHC 616;
• NN v ZZ [2013] EWHC 2261;
• Frankel v Lyampert [2017] EWHC 2223;
• Diamond v SSHD [2020] EWHC 313;
• Bahia v Sidhu [2022] EWHC 875.

However, the court here held that the cases were of marginal value as in none of them was the point taken that those errors rendered the statements inadmissible, so none of them was authority for the proposition that a Witness Statement which does not comply with the rules is admissible.

The High Court here said that it had to go back to first principles and to the rules of court and that Practice Direction 32 required any statement, including where language is not an issue, to be in the witness’s own words, if practical, but must be in the witness’s own language “in any event”, which words are without qualification, as compared with the qualification concerning the statement being in the witness’s own words.

The court here said that Practice Direction 32, Paragraph 25, gives the court a discretion to admit the statement in any event.

In errors of form, the default position is that the statement is admissible, unless the court orders otherwise, whereas in the case of defects or substance, the default position is that statement is not admissible, unless the court agrees.

“There remains a power in the Court to admit defective witness statements even when the deficiencies are profound, but it is a power that will be exercised in the light of the nature, seriousness and consequences of the deficiencies.”

COMMENT

The Civil Procedure Rules and Practice Directions and Court Guides are all over the place, and unfortunately, that is true of much of the Civil Procedure Rules generally, and it is clear that no one has ever read the rules from beginning to end, and re-read them, and re-read them to check the internal inconsistencies.

As reported by me recently the House of Lords and House of Commons Joint Committee on Statutory Instruments has found seven drafting errors in the recent Civil Procedure (Amendment) Rules 2023 alone.

This is not some hangover from the old days when far fewer people’s main language was not English, but rather represents a toughening up of Practice Direction 32 as recently as April 2020.

It gets worse.

The Minutes of the Civil Procedure Rules Committee of 4 November 2022 show that the Association of Consumer Support Organisations had raised these very points.

Instead of considering them, the Civil Procedure Rules Committee, with stunning arrogance, simply said that their rules were right, and the courts were wrong and Paragraph 71 of the minutes reads:

“71. The purpose of those amendments (together with amendments to PD 22 Statements of Truth) were intended to allow a witness to use a language in which they are fluent, even if that is not their mother tongue.

74. It was RESOLVED:

• to NOTE the correspondence with thanks
• no further action is required at this stage, because the PD rules mean what was Intended.”
  

This is not a fine, academic point along the lines of how many angels can dance on a pinhead.

This issue, and the inability to recover the costs of interpreters’ and translators’ fees in Fixed Recoverable Costs cases is causing real anger and distress amongst ethnic minority communities in England and Wales and their lawyers.

Literally to add insult to injury, the 80% reduction in damages in most personal injury cases, that is all of those involving Whiplash injuries and with a starting point of just £240 for a Whiplash injury, means that anyone for whom English is not their own language will have the award wiped out by translation and interpretation fees.

For all intents and purposes, if your first language is not English, then you are not entitled to compensation for personal injury, unless you are sufficiently severely injured that your damages are not used up in translation and interpretation fees.

That cannot under any circumstances be right.

Indeed, as I have written elsewhere, it would appear to infringe Article 6(1) of the European Convention on Human Rights, that is the right to a fair trial, and that is enshrined in the law of England and Wales by the Human Rights Act 1998.

Very obviously, the many people for whom English is not their first language will not be able to get a lawyer to act for them, either because it will be uneconomic for the lawyer to act, or because the lawyer has to advise the client that it is not worthwhile as they will end up out of pocket as the translators’ and interpreters’ fees will exceed the damages.

The Official Injury Claims Portal, often known as the Small Claims Portal, has been a resounding failure in any event, but the idea was that litigants in person could use it for Road Traffic Accident claims where the General Damages would be less than £5,000.

In fact, it is unbelievably complex, even for the most experienced lawyers, and just 9% of those using it are litigants in person.

There is no provision for someone for whom English is not their first language, and so they are forced to use lawyers, but the lawyer is effectively forced to decline to take the case on.

I have said above, as confirmed by the Houses of Parliament, that the Civil Procedure Rules are all over the place.

In April 2020, the hard-liners toughened up the rules to make it harder for non-English people to use the courts.

However, just one year later, in April 2021, Practice Direction 1A was introduced and that is concerned with the courts ensuring that vulnerable parties “are on an equal footing and can participate fully in proceedings… and can give their best evidence”.

A vulnerable party can be vulnerable precisely because of communication or language difficulty.

These provisions are wholly inconsistent with one another, not only in the technical rules, but in the message that they are sending out.

I wrote the initial piece following an enquiry from one of my Consultees who referred to Chris Middleton’s piece, and I am grateful to Chris, of Oriel Chambers, for his excellent piece in this issue.

I have had a lot of responses.

As will be apparent from this piece the attitude of the King’s Bench Division of the High Court, the Chancery Division of the High Court, and the Business and Property Courts of the High Court, specifically reinforced by their guides and by Practice Direction 57 is tolerant and practical, and for what it is worth, an approach I agree with.

However, if you are an ethnic minority member bringing a low-value personal injury claim then you are hammered with the full force of the law.

To many, that looks like a nasty mix of racism and discrimination against people of limited means, given that the cost of compulsory translation and interpretation cannot be recovered.

No law is an island. As the debate about small boats and deportation to Rwanda rages, and hats off to Gary Lineker, the Civil Procedure Rules Committee needs to be very, very careful.

Cathy Wrigglesworth, in an excellent piece in the Law Society Gazette recently – Translation rules impede access to justice – said:

“Own language

We are fortunate to live in a very diverse country. There are many different languages spoken by the millions living in the UK.

The CPR does not define ‘own language’. The use of ‘own language’ can be interpreted in many ways and in practice can mean many different things.

There are those of dual nationality, those who are bilingual, those who were raised in a country (such as some African countries) where the formal education is delivered in English, and those who settled in this country at a young age and have spoken English far longer than their ‘own language’. Arguably, a person can have two or more ‘own languages’.

The amendment to PD32 puts a huge hurdle in front of litigants in accessing justice in that they must, for example, locate a solicitor who speaks Chittagonian (a Bengali dialect of which there are almost 200,000 speakers who are UK residents), happens to practise in a specific area of law relevant to their case, so that their statement can be drafted in Chittagonian.

An alternative involves the large investment in time and expense of the solicitor sitting with the client and an interpreter, to ensure the relevant and pertinent questions are asked and answered sufficiently, to allow the interpreter (who is not legally qualified) to draft the client’s statement. Once the client has signed their own language statement, that statement then has to be translated into English.

How about the overriding objective having an additional section:

The courts of England and Wales are open to all and this overriding objective specifically requires every court and every tribunal and every Judge and every member of staff at every court and every tribunal in this jurisdiction to do their utmost to accommodate the needs of every person in our richly diverse community to accommodate those for whom English is not their first language.

It shall be the duty of all the above people to accommodate to the very best of their ability the needs of those whose first language is not English, and that duty shall be as high as the duty to accommodate and treat equally people irrespective of their gender, age, race, ethnic origin, marital status or sexuality.

If there is any issue arising out of the admissibility of a statement on the basis that the witness is not fluent in the language in which the statement is given, then the court shall adjourn the matter, with costs consequences if appropriate, but shall not dismiss the matter on the basis of the exclusion of evidence.

The ironies here are considerable.

I make a point of always referring to the jurisdiction of England and Wales and referring to English/Welsh decisions, and that is the correct legal position and Welsh speakers have the right to have proceedings conducted in Welsh, and quite right too.

If we are in a position where more people in England and Wales have, as their first language, Urdu, than Welsh, and that may well be the position already, then should we consider having proceedings conducted in Urdu, as well as English, and if not, why not?

I have written this piece whilst in my firm’s office in Wellington in the Western Cape of the Republic of South Africa.

South Africa has 11 official languages, and court proceedings are conducted in a number of languages, although Parliament sits in Cape Town and proceedings are conducted in English.

Here in Wellington, Afrikaans is overwhelmingly the first language.

We are an hour from Cape Town. In Cape Town, not only is the overwhelming first language English, but it is also English with an English accent and even my London/Cockney/Hemel Hempstead accent seems to some a little common .

In that one hour between Wellington and Cape Town, you will move from Afrikaans to a mix to South African English to English to English with an English accent.

I was at an event in Somerset West last weekend in support of Cape Town Opera and it happened to have a large German contingent, the presenter, having outlined the evening’s event in English, then said that he was aware that not everyone could understand that, and I expected him then to speak in Afrikaans, but he spoke in German!

German is not one of the official languages of the Republic of South Africa.

The point I am making, and I believe that it is an important one, is that to be highly prescriptive about the language in which court proceedings must be conducted, and to be highly inflexible, as the courts in England and Wales are, and then to dismiss actions completely, rather than adjourn them, is, to put it bluntly a form of racism by another name which would be entirely and utterly unacceptable in the Republic of South Africa, and rightly so.

South Africa is not perfect by any manner or means, but it does have, unsurprisingly, a highly developed set of laws and principles in relation to diversity and human rights and prides itself on being the Rainbow Nation.

The United Kingdom recognizes this, and it is one of the few jurisdictions where in relation to human rights matters, the courts of the United Kingdom are obliged to take into account decisions of the Constitutional Court of the Republic of South Africa.

The Civil Procedure Rules Committee would be very well-advised to take advice from the Republic of South Africa on this issue.

As ever, I offer my services in this regard free of charge.

SAMARITANS: PLEASE PUBLICIZE

MCKENZIE FRIENDS: AN ABSURD DECISION

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Here’s one I wrote in 2016.

In Ravenscroft v Canal and River Trust [2016] EWHC 2282 (Ch)

Chief Master Marsh gave guidance in relation to McKenzie Friends.

He stated that the starting point was to consider whether the applicant reasonably needed such assistance. If so the scope of that assistance should be determined and that required consideration of the applicant’s personal position, the context in which the application was made, the principles in the overriding objective and the guidance in Practice Notes: McKenzie Friends: Civil and Family Courts [2010] 1 WRL 1881.

Here the Master held that it was appropriate to appoint a McKenzie Friend and for him to have rights of advocacy, but that is “an exceptional course of action… only justified by exceptional circumstances”.

The Master said that the permission was not open-ended and could be withdrawn at any time if it was abused or if the McKenzie Friend sought to delay the conduct of the trial.

Here the claimant had difficulty in understanding written material, as well as the technical nature of the case and thus it was reasonable for him to call on assistance. The McKenzie Friend proposed to act free of charge and had already won a similar case when representing himself.

However the McKenzie Friend also had a number of unmet costs orders against him, including ones in favour of the defendant here.

Comment

An absurd decision that comes very close to saying that anyone who needs representation can choose anyone and does not need to have a lawyer.

This representative has ignored costs orders against him and thus can represent people in court but treat court orders that he does not like with impunity.

Such conduct by a solicitor would result in automatic suspension and subsequent striking off.

Here the Master was influenced by the fact that the McKenzie Friend had helped draft the proceedings etc. and that the claim “is in a reasonable shape” and that “my impression of Mr Moore from the three hearings when he has appeared in front of me is that he is capable of acting in a measured and helpful way.”

The logic of this is that if I illegally prescribe medication but it works, then having acted illegally, but reasonably successfully, as a non-qualified doctor, I should be allowed to conduct major surgery. If anyone may now appear as an advocate in a full High Court trial, which this case will be, where the Master accepted that it involved an issue of “real public importance” then what is the point of being a barrister or a solicitor?

Why train? Why qualify? Why insure? Why obey court orders? Why obey the law?

So anyone can now appear in court and ignore court orders as they want.

There will be hearingless Briggs courts. I suppose that stops the problem of McKenzie Friends.

This attitude will lead to the decline of the courts, the rule of law and everyone involved in it.

It is likely to lead to a shortage of lawyers seeking judicial appointments at the sharp end – that is as Deputy District Judges.

Why not just let the courts fall down as well? Saves a few bob.

FIXED COSTS: TWO TRIAL ATTEMPTS, AN ADJOURNMENT, COVID AND VERY LATE ACCEPTANCE OF PART 36 OFFER: STILL NO EXCEPTIONAL CIRCUMSTANCES!

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In

Osuzauwa v Madeira, Coventry County Court, F27YY758 (5 September 2022)

a District Judge held that there were no special circumstances within the meaning of CPR 45.29J enabling the claimant to obtain costs outside of the Fixed Costs regime, which applied to this case.

CPR 45.29J states:

“Claims for an amount of costs exceeding fixed recoverable costs

45.29J

(1) If it considers that there are exceptional circumstances making it appropriate to do so, the court will consider a claim for an amount of costs (excluding disbursements) which is greater than the fixed recoverable costs referred to in rules 45.29B to 45.29H.

(2) If the court considers such a claim to be appropriate, it may—

(a) summarily assess the costs; or

(b) make an order for the costs to be subject to detailed assessment

(3) If the court does not consider the claim to be appropriate, it will make an order—

(a) if the claim is made by the claimant, for the fixed recoverable costs; or

(b) if the claim is made by the defendant, for a sum which has regard to, but which does not exceed the fixed recoverable costs,

and any permitted disbursements only.”

This was a claim which was settled on 13 January 2021 by the Defendant accepting the claimant’s Part 36 offer made on 13 December 2019.

There was a dispute between the parties as to various costs issues:

(i) Counsel’s fees for the cancelled trials on 26 October 2020 and 14 January 2021;

(ii) Interest thereon; and

(iii) Solicitors’ profit costs.

The Judge here correctly held that late acceptance, even very late acceptance, of a Part 36 offer by a defendant in a Fixed Cost case does not lead to the claimant getting the benefits under CPR 36.13, but rather that CPR 36.20 applies.

That is the effect of the controversial Court of Appeal decision in

Hislop v Perde [2018] EWCA Civ 1726.

The Supreme Court, and the Court of Appeal, effectively levelled the playing field by holding in

Ho v Adelekun [2021] UKSC 43

and in

Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654

that in a Fixed Costs case, a late accepting claimant would not suffer any penalty either, as the deemed costs order under CPR 36 did not amount to an order of the court for the purposes of losing Qualified One-Way Costs Shifting up to the level of damages.

The effect of these decisions was also that the defendant’s costs could not be set off against the claimants’ costs in QOCS protected cases.

That all changes on 6 April 2023, when personal injury claimants lose those protections.

However, the changes to the Civil Procedure Rules do not overturn the decision in Hislop v Perde, which leads to a very unfair situation in personal injury Fixed Cost cases, where a defendant escapes scot-free for late acceptance, but a claimant gets hammered.

Here, the court correctly said that it had no power under CPR 45.29I to award counsel’s brief fees, as they are simply not listed as a recoverable disbursement under that rule, and rightly so, as that is part of the legal spend, that is part of the fixed costs.

Any other policy would lead to solicitors effectively escaping fixed costs by instructing counsel for everything, and claiming counsel’s fees, and thus keeping the fixed costs for doing nothing.

However, there is a catch-all provision in CPR 45.29I referring to

 “any other disbursement reasonably incurred due to a particular feature of the dispute”,

and that is what the claimant, in the words of the Judge, asked to be allowed to hang his “hat on in allowing the brief fees to be recoverable as a disbursement”.

The District Judge, entirely correctly in my view dismissed this argument stating:

“13. I take the view that if the disbursement was intended to cover counsels’ brief fee it would have been included and the inclusion of a different fixed fee dependent on whether the trial has started or as to whether it has not, in Table 6B, substantively and comprehensively determines the point. If there had been an intention that an advocacy fee would be payable even though the trial had not started, then I would say that Table 6B would provide for that and it does not.”

That is the same conclusion reached by Master Haworth in

Coleman v Townsend [2020)

where the Judge correctly stated that the only route by which counsel’s fee can be recoverable is through CPR 45.29J, and not 45.29I.

In relation to Fixed Costs generally, the Judge said this:

“16. That it is important to parties that they know that costs will be limited to the fixed costs regime at the outset so there is that certainty about what is recoverable and what is not and that applies to both sides. The point was made that those who act for Claimants will do better on some cases and not so on others. This is the swings and roundabouts that was referred to in the judgment”.

Here, whilst accepting that each case depended upon its own facts, the court took the view that late acceptance by the defendant was not, of itself, exceptional circumstances.

In relation to the Covid related adjournment of trials, the court said that Covid was an exceptional time, but that did not mean that it was an exceptional reason, because not being able to come to court through illness, and not being able to participate remotely is “something that we hear about all of the time. It is something that comes up regularly, in my experience.”

“22. The Part 36 offer that obviated the need for the second trial was accepted very late in the day, the day prior to the final hearing and whilst that is entirely regrettable circumstances, it is also, in my experience, a regular occurrence with both fast track and multitrack trials. It is the final hearing that focuses party’s minds that the matter is going to come to a conclusion and that they need to be ready to get on with matters. It may well be that the Defendant was not able to do that and therefore chose the Part 36 offer as an alternative to an application for a further adjournment being refused; I am sure he would have been advised would need to be a compelling one to adjourn a trial twice.

23. So this is a case that there has been two aborted trials and whilst that presents a difficult set of circumstances and unfortunate in my judgment but looking at the case as a whole it is not one that is exceptional, and so I am not able to apply the exception to the fixed costs regime in terms of counsel’s fees or, indeed, solicitor’s costs, which is alluded to in the witness statement.”

COMMENT

In spite of my headline, I think that this is a correct decision.

The whole issue comes into sharp focus in October 2023, when the Fixed Recoverable Costs scheme is extended to virtually all civil claims valued at £100,000 or less.

One of the lessons to be learnt is for solicitors to discuss with counsel, or more likely counsel’s clerk, what type of retainer they will have with counsel.

The figures will be much higher in claims of up to £100,000.

It seems to me that if the client and solicitor cannot ever recover counsel’s fees of an aborted trial, and that is the case, then, provided that the aborted trial is not caused by the lay client or the solicitor, counsel should not expect to receive a fee.

What is swings and roundabouts, in the words of the court, for clients and solicitors, must also be the same for counsel.

LEGAL OMBUDSMAN SERVICE: A COMPLAINT ABOUT A COMPLAINT

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Here is an email from one of my firm’s solicitor clients which they have asked me to publicize for the wider benefit of the legal profession and our clients.

The client’s complaint related to charges that we had rendered to our client in connection with a claim for pension mis-selling.

The client received an interim award which was subject to our contingency charge of 25% plus VAT and later received a final award in respect of which we also raised a bill. The client objected to the second bill for reasons which are not entirely clear.

I did my best to answer the client’s complaint in an extremely lengthy email dated 21 October 2020. However, it became obvious that the client was not satisfied and indicated in his email of 22 October 2020 that he proposed to complain to the Legal Ombudsman Service.

I attempted to deal with any outstanding issues by sending the client a further email on 30 October 2020, but this did not assuage the client’s complaint.

We then received an email from the Legal Ombudsman Service on 19 January 2021 which confirmed that a complaint had been made by our client. They advised us that they were investigating the matter.

We did not hear from the Legal Ombudsman Service again until 20 October 2021 stating that they were currently waiting for an assessment to be carried out.

This was followed by an email on 17 January 2022 stating that they were still waiting for an assessment to be carried out.

There was a further email from the Legal Ombudsman Service on 26 April 2022 which confirmed that they were waiting for an assessment and a further email of 19 July 2022 in identical terms.

It was not until 23 September 2022 that we received full details of the complaint and requesting a response from ourselves by no later than 30 September 2022.

Our reply to the Legal Ombudsman Service (9 pages) and which contained no less than 29 documents was sent by email on 29 September 2022.

Our email of 29 September 2022 was acknowledged by an email from the Legal Ombudsman Service dated 21 October 2022, wherein they referred to our former client by another name.

Our reference was not referred to in the email. However, we were able to identify the file simply because it was the only matter that we had ongoing with the Legal Ombudsman Service, and indeed this is the first complaint that we have received this century.

On 29 November 2022 we received an email from the Legal Ombudsman Service requesting further information which we replied to on 1 December 2022.

We then received a telephone call from a case handler at the Legal Ombudsman Service in December 2022 who confirmed to us that she was dismissing the complaint by our former client, that she had telephoned our former client and advised him that she would be dismissing his complaint (she mentioned that the client was abusive towards her when she spoke to him) and that she would let me have a written decision in due course.

We have been writing to the Legal Ombudsman Service since that phone call by email asking for a copy of the written decision.

On 13 February 2023 we heard from the Team Leader for the case handler at the Legal Ombudsman Service that the case handler was out of the office unexpectedly due to unforeseen circumstances and that the case would be allocated to another Investigator.

The last we heard from the Legal Ombudsman Service was when we received an email from the Team Leader which states as follows:

“…… I can see [redacted] was in the process of compiling her case decision to send this out. It will now be for the new Investigator to see if they agree with [redacted]  findings before sending their own case decision out…….”.

You cannot imagine how frustrated I was to receive a completely unjustified complaint in the first instance. I handled the matter from beginning to end.

The matter was dealt with in an impeccable manner from beginning to end. All correspondence received from the client, including sometimes five or six emails in one day, were replied to within minutes.

I was therefore relieved when in December 2022 the case handler advised me that she had contacted the former client to advise him that his complaint had been dismissed.

However, my relief was short-lived as it appears that I will now be subject to a further investigation for the same matter by a different claims handler.

I am now totally convinced that the lunatics have taken over the asylum.

This case has occupied many hours of what I consider to be completely unnecessary work without any reward in dealing with a complaint that was wholly unmeritorious.

Are we the only profession in the world that has to put up with this complete and utter nonsense?

CALDERBANK OFFERS AND CLAIMANT PERSONAL INJURY LAWYERS

This is dealt with in my series of four Part 36 Zoominars each Tuesday for one hour at 4pm Tuesday, 21 February until Tuesday, 14 March.

Although the first one has taken place, recordings of all four will be sent to anyone booking. For more information and to book, click here. The cost is £120 plus VAT for all four, including the recordings, with as many people as you want from your organization attending.

It is crystal clear why defendants in personal injury claims will often prefer to make a Calderbank offer, as compared with a Part 36 offer.

Faced with an exaggerated claim, as compared with a meritless claim, a defendant has little option.

Let us say that the claim is for £100,000, and the defendant admits liability but values the claim at £15,000.

An accepted Part 36 offer of £15,000 creates a deemed costs order, with no percentage reduction for exaggeration or failing to succeed on most issues, whereas a Calderbank offer does not have that effect and leaves the paying party free to argue about the principle of costs, as well as the details.

On the face of it, one might think that it is never worth a claimant in a personal injury case making a Calderbank offer, as compared with a Part 36 offer.

However, my ever resourceful viewers have come up with examples.

The personal injury claim was struck out, and the solicitor issued fresh proceedings out of time, accompanied by an application pursuant to Section 33 of the Limitation Act, to disapply the primary limitation period.

Counsel advised making a Calderbank offer, along the lines that if the defendants allowed the application the claimant would agree to forego costs.

That was not accepted, but at the hearing, the Judge made an order in the terms requested, and due to the Calderbank offer, the Judge awarded the claimant the costs of the application, which he had been prepared to forego.

In addition, I can envisage merit in a personal injury claimant Calderbank offer where there may be arguments about costs.

For example, supposing that you argue that the claim is above the Small Claims Limit, but that you are prepared to accept less in order to resolve the matter, a Calderbank offer may be useful, so as to impose a condition in relation to costs, which is of course a complete no-go area in Part 36 offers.

Has anyone any other ideas, or personal experience of situations where it is worth personal injury claimant making a Calderbank offer rather than a Part 36 offer?

Outside the field of personal injury, there are many situations when it would suit a claimant to make a Calderbank offer, as well as, or instead of, a Part 36 offer, especially when a non-monetary remedy is being sought, either on its own, or in addition to damages.

The key in any type of case, whether acting for a claimant or a defendant, is always to have an open mind about the possibility of making an offer, whether under Part 36, or a Calderbank offer and regularly to review the file and consider any offers made already, and whether they should remain on the table, and whether any fresh offers should be made.

SERVICE OF PART 36 OFFERS

This is dealt with in my series of four Part 36 Zoominars each Tuesday for one hour at 4pm Tuesday, 21 February until Tuesday, 14 March.

Although the first one has taken place, recordings of all four will be sent to anyone booking. For more information and to book, click here. The cost is £120 plus VAT for all four, including the recordings, with as many people as you want from your organization attending.

CPR 36.7 is short and sweet and reads: –

“36.7

(1) A Part 36 offer may be made at any time, including before the commencement of proceedings.

(2) A Part 36 offer is made when it is served on the offeree.

(Part 6 provides detailed rules about service of documents.)”

Part III of CPR 6 deals with service of documents other than the Claim Form in the United Kingdom and CPR 6.20 is the governing provision and reads:

“6.20

(1) A document may be served by any of the following methods –

(a) personal service, in accordance with rule 6.22;

(b) first class post, document exchange or other service which provides for delivery on the next  business day, in accordance with Practice Direction 6A;

(c) leaving it at a place specified in rule 6.23;

(d) fax or other means of electronic communication in accordance with Practice Direction 6A; or

(e) any method authorised by the court under rule 6.27.

(2) A company may be served –

(a) by any method permitted under this Part; or

(b) by any of the methods of service permitted under the Companies Act 2006.

(3) A limited liability partnership may be served –

(a) by any method permitted under this Part; or

(b) by any of the methods of service permitted under the Companies Act 2006 as applied with modification by regulations made under the Limited Liability Partnerships Act 2000.”

It will be noted that CPR 6.20(1)(d) provides for service by fax – but I presume no one now has fax – or other means of electronic communication, in accordance with Practice Direction 6A.

Paragraph 1.1(2) of that Practice Direction specifically state that it supplements Section III, that is Service of Documents other than a Claim Form in the United Kingdom, of Part 6.

Paragraph 4.1 is headed:

Service by fax or other electronic means.

Paragraph 4.1 reads:

“4.1 

Subject to the provisions of rule 6.23(5) and (6), where a document is to be served by fax or other electronic means –

(1) the party who is to be served or the solicitor acting for that party must previously have indicated in writing to the party serving –

(a) that the party to be served or the solicitor is willing to accept service by fax or other electronic means; and

(b) the fax number, e-mail address or other electronic identification to which it must be sent; and

(2) the following are to be taken as sufficient written indications for the purposes of paragraph 4.1(1) –

(a) a fax number set out on the writing paper of the solicitor acting for the party to be served;

(b) an e-mail address set out on the writing paper of the solicitor acting for the party to be served but only where it is stated that the e-mail address may be used for service; or

(c) a fax number, e-mail address or electronic identification set out on a statement of case or a response to a claim filed with the court.

4.2 

Where a party intends to serve a document by electronic means (other than by fax) that party must first ask the party who is to be served whether there are any limitations to the recipient’s agreement to accept service by such means (for example, the format in which documents are to be sent and the maximum size of attachments that may be received).”

It will be seen that the party who is to be served or the solicitor acting for that party must previously have indicated in writing to the party serving that they are willing to accept service by electronic means and provide the email address or other electronic identification to which it must be sent.

That written indication will be given if the receiving party has set out an email address on “the writing paper of the solicitor acting for the party to be served, but only where it is stated that the email address may be used for service.”

That only applies to solicitors, and does not apply to a litigant in person, and therefore, you cannot serve a Part 36 offer by email only on a litigant in person unless they have previously indicated in writing that they are willing to accept service by such means.

Furthermore, by Practice Direction 4.2 where a party intends to serve a document by electronic means, including a Part 36 offer, that party must first ask the party who is to be served whether there are any limitations to the recipient’s agreement to accept service by such means, for example, the format in which the documents are to be sent and the maximum size of attachments that may be received.

Where a document is capable of being served by electronic means, because all the above provisions have been satisfied, then the serving party need not deliver a hard copy in addition.

The exceptions in CPR 6.23(5) and 23(6) do not apply.

You cannot serve a Part 36 offer electronically without the prior permission of the receiving party.

INTEREST ON PART 36 OFFERS

This is dealt with in my series of four Part 36 Zoominars each Tuesday for one hour at 4pm Tuesday, 21 February until Tuesday, 14 March.

Although the first one has taken place, recordings of all four will be sent to anyone booking. For more information and to book, click here. The cost is £120 plus VAT for all four, including the recordings, with as many people as you want from your organization attending.

This issue is now dealt with by CPR 36.5(4) and (5) which read:

“(4) A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until—

(a) the date on which the period specified under rule 36.5(1)(c) expires; or

(b) if rule 36.5(2) applies, a date 21 days after the date the offer was made.

(5) A Part 36 offer to accept a sum of money may make provision for accrual of interest on such sum after the date specified in paragraph (4). If such an offer does not make any such provision, it shall be treated as inclusive of all interest up to the date of acceptance if it is later accepted.”

The rate of interest is a matter for the offeror, and there are no legal restrictions on the amount to be included.

However, if the rate is very high, and is significantly higher than the court awards at trial, then clearly the claimant is much less likely to have matched or beaten its own offer.

It will be noted that if such an offer does not make any such provision, it shall be treated as inclusive of all interest up to the date of acceptance if it is later accepted.

This was arguably the law before the change, and there were conflicting decisions and the provision within the Civil Procedure Rules specifically allowing an offeror to specify in the Part 36 offer that interest is accruing, within the offer, after expiry of the time for acceptance is relatively new and was brought about by the Civil Procedure (Amendment) Rules 2021.

There had been conflicting decisions on the point, with some decisions holding that any attempt to add to the interest provisions rendered the offer invalid as a Part 36 offer, and the new rule effectively codifies the decision of the Court of Appeal in

Calonne Construction Ltd v Dawnus Southern Ltd [2019] EWCA Civ 754.

In that case the Court of Appeal considered the position where an offer included a provision to accept a certain sum and a provision that:

“The Settlement Sum is inclusive of interest until the relevant period has expired. Thereafter, interest at a rate of 8% per annum will be added.”

THE JUDGMENT ON INTEREST

The court held that the provision of this term in relation to interest after late acceptance did not render the offer invalid.

 However, it was important that the interest imposed was realistic.

“43. Did the inclusion of a term as to interest after the end of the Relevant Period render the Offer invalid for the purposes of CPR r 36? In my judgment, it did not. First, there is nothing in Part 36 and in CPR 36.5 in particular, which precludes the inclusion of terms as to interest in a Part 36 offer which are intended to apply after the Relevant Period has expired. The only express provision in relation to interest is CPR Rule 36.5(4) which provides that offers to pay or accept a sum of money will be treated as inclusive of interest essentially until the Relevant Period expires. It seems to me that that takes the matter no further.

44. Secondly, there is nothing which expressly precludes the inclusion of terms in addition to the requirements in CPR 36.5(2) and CPR 36.2(2) expressly preserves the ability to make an offer to settle in whatever way the party chooses, albeit that it provides that if r 36.5 is not complied with the offer will not have the costs consequences set out in that section.

45. Thirdly, as Mr Stokell points out, if a party could not provide for interest to run after the end of the Relevant Period, it would not be compensated with interest for any delay between the end of that period and a subsequent acceptance of the offer.

46. Fourthly, it seems to me that there is nothing in Mr Cook’s submission that if this is correct, an offeror could state, for example, that the settlement sum was subject to 25% or even 200% interest after the expiry of the Relevant Period, something which he says would inhibit settlement and be contrary to the policy of CPR Part 36. Mr Stokell suggests in his skeleton argument that there are two alternative answers to this. First, the assessment of whether an offeror has obtained a judgment, at least as advantageous as the proposal in its offer is made at the date of the judgment. An offeror who had provided for the application of such interest rates after the expiry of the Relevant Period might find that the judgment was not more advantageous than the offer and accordingly, the costs consequences of Part 36 would not apply. Secondly, and in the alternative, as interest after the end of the Relevant Period is ignored for the purposes of the CPR 36.17 assessment (see Purrunsing v A’Court [2016] EWHC 1528 (Ch), [2016] CILL 2861 (ChD) per HHJ Pelling QC at [15] – [16]), it should also be ignored for the purposes of determining whether the Part 36 offer is valid. Although Mr Cook’s objection is undermined in either case, it seems to me that the latter reflects the correct approach.

47. Fifthly, if the offeree found the particular clause unpalatable, it would be possible for it to make its own Part 36 offer in the same terms but without the offending provision. It seems to me therefore, that there is no reason whether of policy or otherwise which renders an offer invalid for the purposes of Part 36 if it includes provisions as to interest after the expiration of the Relevant Period. After all, as Flaux LJ pointed out in the course of argument, there is nothing wrong with a party making a Part 36 offer expressed as a specified sum which includes interest during the Relevant Period calculated on the basis of a particularly high rate. He just has to take the consequences when it comes to be determined whether the offer has been “beaten”.

48. For all the reasons set out above, I would dismiss the appeal. Accordingly, it is unnecessary to decide the points which arise on the Respondent’s Notice or to determine whether this court should exercise the discretion under CPR part 44 in relation to Calonne’s costs below or decide to remit the matter to the Judge for reconsideration.”

Example

A Part 36 offer is made for £100,000, and that is deemed by CPR 36.5(4) to be inclusive of all interest up to the date of expiry.

No provision is made for the accrual of interest and it is accepted two years later.

The paying party must pay £100,000.

The same scenario but there is a provision for the accrual of interest.

The paying party accepts the offer. The paying party must pay £100,000 plus interest for two years.

This is an important provision that is often overlooked, as mere silence on the issue in the Part 36 offer means that it shall be treated as inclusive of all interest up to the date of acceptance, however late that is.

I can see no reason ever not to include the accrual of interest provisions.

Clearly, this becomes much more important as interest rates rise, and failure to include such a provision must be negligence.

PART 36: ZOOMINARS

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Tuesday 21 February 2023

• Overview and Principles
• Form N242A
• Day One Offers
• Pre-issue Offers
• Liability and Quantum
• Interest
• Interplay with Calderbank Offers

Tuesday 28 February 2023

• Effect of winning re Part 36
• Defendant Benefits
• Claimant Benefits
• Genuine Offer to Settle
• Interplay with Qualified One-way Costs Shifting
  • Existing Law
  • New Law from 6 April 2023
• Late Acceptance

Tuesday 7 March 2023

• Multiple Parties
• Protected Parties
• Part of Claim
• Conditions
• Varying Part 36 Offers
• When Court Permission is needed

Tuesday 14 March 2023

• Costs Assessments Proceedings
• Appeals
• Part 36 in Fixed Recoverable Costs Cases
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DIVERSITY

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Here is one I wrote in 2016, with the statistics updated for my firm.

Diversity, or rather the lack of it, is again in the news with the new Lord Chancellor singling out the Supreme Court:-

“Can it be right that out of 12 judges in the Supreme Court only one is a woman and not a single one is from an ethic minority?” (Speech 4 October 2016).

Would more black people and more women make any difference? Does having people who look different but think the same achieve true diversity?

In my piece in Solicitors Journal on 1 July 2005 – Needed: Class Act – I wrote:-

“Replacing white public school men with white public school women or black public school men and women may be an improvement, but it achieves nothing in terms of true diversity in the legal profession.”

I was born and brought up in a council house and all of my education was paid for by the State and I did not attend University. When I qualified as a solicitor I had nothing, but I owed nothing either.

From my background I doubt very much that I would have incurred the massive debts now needed to qualify.

Student loans undoubtedly deter people from ordinary backgrounds and are a greater brake on diversity than anything else.

Those who do get through will, understandably, seek a highly paid training contract, that is in the City, to try and pay off debt. City firms do not encourage their lawyers to become judges.

Like many of my generation I chose to do my articles – five years – in a legal aid firm. Faced with £75,000.00 debt would I have made the same decision?

The Legal Services Board July 2016 report – Changes in the legal services market 2006/07/2014-2014/15 – states that the government’s own research shows that the professions, including law, are becoming more, not less, socially exclusive (page 105).

It is the judiciary – appointed by the government – where the real problem is. Women and ethnic minority representation is increasing but the truly shocking statistic is that in 2015 the proportion of the High Court and Court of Appeal judges who were privately educated was 74%, almost unchanged in 26 years from 76% in 1989.

By comparison 34% of the Chief Executives of FTSE 100 companies were privately educated.

Judicial Office involves public service and often a pay cut. Governments of all persuasions have, for a generation, attacked the public sector, be it teachers, doctors, police, local authority works or legal aid lawyers. They have valued money, not service, profit not professionalism, consumerism and not society.

The part-time judiciary is discouraged. The pressure is to become full-time or get out. I know. I did. It hardly attracts women or men with childcare responsibilities.

As with so much else in relation to the legal profession and the judiciary, this an attack by politicians who are responsible for the problem in the first place. Specifically the new Lord Chancellor is the only person who has any real power to change the composition of the judiciary.

AND MY FIRM IN 2023?

PART 36 CONSEQUENCES WHEN CLAIM CHANGED AFTER OFFER

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In

Von Westenholz & Ors v Gregson & Anor [2022] EWHC 3374 (Ch)

the Chancery Division of the High Court held that it was not unjust for the defendants to face the normal consequences of failing to beat a Part 36 offer in circumstances where the pleadings had been amended to put the claim a different way after the offer have been made.

The claimants had succeeded on one of the original aspects of their pleaded cases.

At trial, the claimants had been awarded £400,000 equitable compensation having made two Part 36 offers, one by one of the claimants for £150,000 before proceedings were issued and one on behalf of all the claimants shortly after proceedings were issued, for £120,000.

The court held that the first offer was only made on behalf of one of the claimants and was in relation to a claim that was differently constituted and was made on behalf of different parties to a potentially different claim and thus was not a relevant offer for the purposes of this litigation.

In relation to the second offer, the court held that this was clearly a valid offer which the claimants had bettered and therefore, the starting point was that the consequences in CPR 36.17 flowed unless the court considered it unjust for them to do so.

The defendants argued that it would indeed be unjust as when the offer was made a particular type of claim known as a Guardian Trust claim had not been pleaded and the focus of the claim was on the economic torts, and those claims had failed.

The court held that although that was the case, the claimants had succeeded on the basis of a breach of fiduciary duty by the defendants, and that was part of the original claim.

Nevertheless, the court would take into account the fact that the Guardian Trust claim had not been pleaded when dealing with the extent of the CPR 36.17 consequences.

In fact, the only consequences were that the court ordered a relatively low interest rate of 4% above base rate on both damages and costs.

The full 10% uplift on damages was awarded and indemnity costs were awarded from the date of expiry of the time for accepting the second Part 36 offer.

FARCICAL JUSTICE COMMITTEE INQUIRY INTO WHIPLASH SHAMBLES

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The House of Commons Justice Committee has announced an inquiry into the effect and operation of the Civil Liability Act 2018 and the consequent Whiplash Tariff and Office Injury Claims Portal.

It is widely misreported that these reforms applied only to whiplash claims; that is entirely incorrect.

The Small Claims limit was put up from £1,000 to £5,000 for virtually all Road Traffic Accident claims, and the new Small Claims Portal covers all such claims, and not just whiplash claims, and so the effect of the reforms is far wider than is generally realized.

What was presented as a restriction on dodgy whiplash claims in fact applies across the board in less serious Road Traffic Accidents.

A combination of the 500% increase in the Small Claims Limit, and the introduction of the Whiplash Tariff, reducing Damages awards by up to 80%, meant that overnight the percentage of Road Traffic Accident Personal Injury claims which were Small Claims went from virtually nil to around 90%, and thus became non-costs bearing.

The disastrous Official Injury Claims Portal handles all of those, and not just Whiplash claims.

The idea was that litigants in person could run their own cases. 9% have done so. Around 91% are represented.

The portal itself, and the rules surrounding it, is incomprehensible and amongst the worst written ever, and the Court of Appeal has already had to rule on the interpretation of how hybrid claims should be treated, and that was by a 2-1 vote with the Master of the Rolls dissenting.

How on earth litigants in person are meant to deal with these matters is beyond me, and the Court of Appeal. Most lawyers are struggling.

The House of Commons Committee will look at what has happened to the number of low value Personal Injury claims. That should take about five minutes – the value of the claims has slumped, and costs are no longer recoverable, and so injured people are voting with their broken feet.

In a most ironic statement Sir Bob Neill, Chair of the Justice Committee said:

“Whiplash injury claims have been costing motorists a disproportionately large amount of money and taking up a lot of precious court time. That’s not to minimise the pain and suffering such injuries can cause.” (My bold)

Yes, that is exactly what you did by voting for the Civil Liability Act and the Whiplash Regulations – you minimized the pain and suffering by reducing compensation by up to 80%.

The House of Commons Committee Enquiry is inviting comments on the new fixed tariffs for Whiplash compensation, and asking whether the portal is successful for claimants and their representatives.

The figures speak for themselves.

People who are put off bringing claims are unlikely to engage with the House of Commons Justice Committee.

For what it is worth, submissions are being accepted until 17 March 2023.

The answers and the evidence are so obvious that no inquiry is needed.

QUALIFIED ONE-WAY COSTS SHIFTING PROTECTION SLASHED FROM 6 APRIL 2023

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The Civil Procedure Rules relating to Qualified One-Way Costs Shifting have been heavily amended by The Civil Procedure (Amendment) Rules 2023 and will apply to all claims issued on or after 6 April 2023 and solicitors should look urgently now to see if there are any claims that can properly be issued by then so as to be sure that clients in those cases enjoy the current level of QOCS protection.

Put simply, the new Civil Procedure Rule, which I set out below, reverses the decisions of the Supreme Court in

Ho v Adelekun [2021] UKSC 43

and of the Court of Appeal in

Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654

Consequently, in relation to any claims issued on or after 6 April 2023 a defendant in a Personal Injury claim can set off costs orders in its favour not only against actual orders for damages made by the Court but also against deemed orders, for example on acceptance of a Part 36 offer, and agreements to pay damages.

Defendants will also be able to set off costs orders against Claimants’ costs.

Amendment of Part 44

24. In rule 44.14—

(a) in paragraph (1), for “damages” substitute “, or agreements to pay or settle a claim for, damages, costs”;

(b) after paragraph (1), insert—

“(2) For the purposes of this Section, orders for costs includes orders for costs deemed to have been made (either against the claimant or in favour of the claimant) as set out in rule 44.9.”;

(c) renumber what was paragraph (2) as paragraph (3);

(d) after what will now be paragraph (3), insert— “(4) Where enforcement is permitted against any order for costs made in favour of the claimant, rule 44.12 applies.”; and

(e) renumber what was paragraph (3) as paragraph (5).

Please note carefully that the new rules apply to any claims issued on or after 6 April 2023, as this has been widely mis-reported as only applying to claims issued after 6 April 2023.

I know what you are all like because I am one of you 😊.  You will rush around to get everything issued on 6 April 2023 ! That will not work 5 April 2023 is the last day and this is made clear by the statutory instrument which reads: –

“(3) The amendments made by Rule 24 of these Rules apply only to claims where proceedings are issued on or after 6 April 2023.”

The key date is issue, and so if you issue by 5 April 2023, you have the usual four months in which to serve, and the claim will still enjoy the greater protection of the existing QOCS Rules, as interpreted by the courts.

The amendment is achieved by a Civil Procedure (Amendment) Rules 2023 and the Explanatory Notes read:

“(g) amending rule 44.14 (effect of qualified one-way costs shifting)—

(i)to allow the court in cases falling within the scope of the qualified one-way costs regime to order that the parties’ costs liabilities be set-off against each other, Ho v Adelekun[2021] UKSC 43 having previously found that this rule, properly construed, did not allow the court to do so; and

(ii)to include within this rule, as well as deemed orders, agreements to pay damages or costs, so to allow the off-setting of costs orders made in favour of a defendant and ensure that offers made under Part 36, and, for example, settlements concluded by way of a Tomlin Order, come within the rule;”

I set out below the revised CPR 44.14, the key provision in relation to the changes, with those changes shown in italics.

44.14

1.Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for, or agreements to pay or settle a claim for, damages, costs and interest made in favour of the claimant.

2.For the purposes of this Section, orders for costs includes orders for costs deemed to have been made (either against the claimant or in favour of the claimant) as set out in rule 44.9

3.Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.

4.Where enforcement is permitted against any order for costs made in favour of the claimant, rule 44.12 applies.

5.An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.

It is strongly arguable that these amendments merely achieve what was intended in the first place, and it is well known that the Civil Procedure Rules on Qualified One-Way Costs Shifting are amongst the worst ever drafted.

There are different things going on, and it seems hard for anyone properly to object to a claimant who has had a costs order against her/him due to failures on their part, for example to attend a hearing or to comply with court orders on time, should not have that costs award deducted from any damages or costs awarded in its favour.

The big problem is Part 36, in that a late accepting claimant is not doing anything wrong, although of course it is true that extra costs will have been incurred by the paying party due to not accepting within time.

 However, there is no such penalty on a late accepting defendant.

The claimant who matches or beats its offer at trial gets indemnity costs and 10% uplift on damages etc, but that has to be at trial.

 The Supreme Court and the Court of Appeal effectively levelled the playing field by saying that a claimant was only punished in costs for failing to beat a defendant’s Part 36 offer if a court order was made, rather than settle by a Tomlin Order –

 Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654,

a Part 36 offer –

 University Hospitals of Derby & Burton NHS Foundation Trust -v- Harrison [2022] EWCA Civ 1660.

The answer is to accept that these changes are justified, and make further amendments to the rules to provide that a defendant who accepts a Part 36 offer late, must suffer the same consequences as if the claimant had matched or beaten its offer at trial, that is indemnity costs from the date of expiry of the Part 36 offer, a 10% uplift on damages and additional interest etc.

HOUSING CASES EXCLUDED FROM FIXED COSTS SCHEME

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The Ministry of Justice has announced that the introduction of Fixed Recoverable Costs for housing cases has been delayed until at least October 2025, but states that it remains committed to the principle.

The latest date for the next General Election is January 2025, and any incoming Labour Government is unlikely to introduce fixed costs for such cases.

A Ministry of Justice spokesperson said that it was important that fixed costs reforms in housing “are aligned with other reforms in the housing sector which is why we have taken the decision to delay introduction in these instances by two years”.

A decision had already been made in 2022 to delay by two years the inclusion of any legally -aided housing possession cases from fixed costs.

It should be noted that claimants in housing cases, unlike personal injury claimants, do not enjoy the protection of Qualified One-Way Costs Shifting and so are at risk of paying adverse costs if they lose, or having damages wiped out by failing to beat a Part 36 offer.

Reaction has been mixed, with many lawyers, and the Law Society welcoming the decision, but others point out that many non-legally aided claimants cannot afford to take the risk of losing and paying uncapped costs.

Broadly, critics of fixed costs in housing cases argue that if lawyers are not paid properly for bringing successful claims against landlords and mortgagees, then tenants and borrowers would not have access to justice.

The Ministry of Justice takes the view that ensuring that the maximum costs exposure is known upfront, and controlled, is the best way to help parties pursue and plan the litigation.

Mortgagees virtually always have in the mortgage contract a provision that the borrower is liable for its legal costs under that mortgage contract, which effectively evades the Small Claims Track rules and costs rules generally, and also means that fixed costs do not apply.

This issue exists in other types of work and was specifically addressed by Lord Justice Jackson in his Supplemental Report on extending Fixed Recoverable Costs where he said that this was a policy decision for Parliament, as to whether contracts could override the costs regime.

The Small Claims limit in Housing Disrepair cases is just £1,000, as compared with the general limit of £10,000, and so, such cases are cost-bearing at one tenth of the damages level of most other cases.

Another feature of housing cases concerns the location of the offices of lawyers.

There is now a wide-spread recognition that there is no operational need for lawyers to have offices in expensive city centre locations; this is due to modern technology, including very fast broadband, but also lessons learned during Covid concerning the use of Teams, Zoom, WhatsApp etc.

It may well be that at the same time as Fixed Recoverable Costs are introduced, the basis of guideline hourly rates will be changed so that location, as compared with the type of work and skill and experience of the lawyer, will no longer be relevant.

Housing lawyers argue that they do need offices in city centres so as to be close to their clients.

That is an interesting argument.

All these unusual factors of housing law, and that description covers a very wide range of matters, suggests to me that there should be a specialist tribunal for housing matters.

A cost-bearing Housing Tribunal, where all claims must be started on a portal, and with a streamlined procedure and with Fixed Recoverable Costs, but also Qualified One-Way Costs Shifting protection and a much greater provision of legal aid in this field would be a huge improvement.

Of course any prospect of legal aid being more widely available for any given sector is greatly enhanced if there are Fixed Recoverable Costs, as that inevitably puts a control, and introduces certainty in relation to the legal aid budget.

TIME OR KNOWLEDGE? WHAT ARE WE PAID FOR?

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It is the classic conundrum that I pose in my lectures.

A solicitor rings a barrister at 2pm with a query, and the barrister does not know the answer and says she/he will look it up. She/he takes one hour to do so, and then telephones the solicitor with the answer and charges £200.

By coincidence, as the barrister puts the phone down, another solicitor rings with the same query.

Does the barrister:

• give the answer there and then, and tell the solicitor that it is not worth preparing a fee note;

• tell the solicitor that she/he will research the matter and get back and then subsequently telephone and charge £200 for the advice; or

• tell the solicitor that she/he knows the answer and the fee will be £250, the rationale for the higher fee being that she/he is now a better lawyer than she/he was an hour ago, as she/he knows the point without the need to look it up.

In other words, are we being paid for time or knowledge?

FINANCIAL CONDUCT AUTHORITY SLAMS CLAIMS MANAGEMENT COMPANIES

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In a letter to Claims Management Companies, the Financial Conduct Authority states that while it has seen improvements in some areas, there remains a risk to consumers using such organisations.

The Authority’s Consumer Finance Director Roma Pearson said that advertising can be ‘misleading, unclear and unfair’ and clients misled by poor-quality promotions.

Examples included poor or no disclosure on company websites, search engine advertising and social media posts about the status of the Claims Management Companies, what fees it charges and complaints procedures.

Claims Management Companies were also said to be using Financial Conduct Authority authorisation to legitimise their non-regulated services and are not being clear about which products and services are regulated.

The Financial Conduct Authority is concerned about what it called the ‘inappropriate sourcing of customers’, where Claims Management Companies do not always conduct or document appropriate checks when buying customer data or leads, or do not ensure that a potential client has been sourced lawfully.

Claims Management Companies are then failing to investigate the merits of each element of a potential claim, and potentially failing to meet Financial Conduct Authority requirements to ensure that claims are not false or misleading or an exaggeration, the letter warned. It said some companies still exhibit a ‘poor attitude to regulatory obligations’ where they do not take a proactive approach and do not deal with their regulator in an open and cooperative way.

‘We will identify Claims Management Companies that appear to cause harm, work with our regulatory family and other external partners to identify issues and take action against firms that are causing harm.’

Ms Pearson added that companies will be expected to show they are protecting clients and in particular not putting ‘their own profits and income above consumers’ interests and fair treatment’.

Since the Financial Conduct Authority took on responsibility for the regulation of Claims Management Companies in 2019, 30% of businesses have left the sector because they were unable to meet the new standards.

The regulator has introduced a fee cap on Claims Management Companies charges and banned companies ‘phoenixing’ so that individuals responsible for failings cannot set up new entities.

60 firms have been banned or been issued with conditions on their authorisation.

COMMENT

Well, there is a thing!

Set up a cowboy system of non-lawyers, and then complain that it is a cowboy system.

Ban the lot.

How about having some sort of highly qualified, fully insured, heavily regulated people doing this?

Need to think of a name – maybe solicitors, lawyers, legal executives – something like that.

DYSFUNCTIONAL COSTS SYSTEM: 97 DAY ASSESSMENT – OR WAS IT 104 DAYS? COURT LOSES COUNT

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In

Deutsche Bank AG v Sebastian Holdings Inc [2023] EWHC 9 (SCCO)

there is no new law, but it is worth reading this short Judgment to see how our costs system is now beyond parody.

A longer read, or re-read is Bleak House by Charles Dickens, but after reading this Judgment you might wonder what Mr Dickens was moaning about.

Detailed assessment proceedings started in 2017 and the bill was served on 25 January 2019 and Points of Dispute in July 2019 and Replies in December 2019.

The detailed assessment hearing commenced in February 2020 and concluded with this Judgment on 23 December 2022, and there were 97 hearing days, and as the Senior Costs Judge pointed out, that was over twice as long as the actual trial.

Indeed the case took so long that the court was not sure how many days it took and in a footnote at paragraph 23 of the Judgment, the court suggested that it might have been 104 days, but no one could be sure whether this included days which have been listed but not used.

Ultimately, the costs awarded were “only” £2 million more than the payment on account made nearly nine years earlier in 2014.

The Senior Costs Judge here said: –

”Apart from the size of the bill and the length of the detailed assessment, this case was, procedurally, straightforward.”

COMMENT

This madness must stop.

No detailed assessment should last more than five days, and even that should be extremely rare.

Any detailed assessment lasting more than one day should be vigorously time tabled and, as in council chambers up and down the country, and indeed in other courts, at the end of the allotted period, that is that, and the judge decides any unaddressed matters on the papers.

COSTS REDUCED BY 98.5%

In

AB v Secretary of State for Justice [2023] EWHC 72 (KB)

the costs claimed by the partially successful Applicant were reduced by 98.5%.

The initial bill was reduced by 95%, because it was too high, and the remaining 5% was reduced by a further 70% to reflect the Applicant’s misconduct in the proceedings.

The Applicant, who was subject to an anonymity order, is a solicitor advocate acting on his own behalf, and he is based in Liverpool, but we know no more.

There is no new law here, but if you can be bothered to read the Judgment, it is another example of the entirely dysfunctional costs system in this country.

COSTS PROTECTION FOR REGULATORY BODIES

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In

A & D Computers Ltd v Nottingham County Council [2022] EWHC 2922 (Admin)

the Administrative Court, part of the Kings Bench Division of the High Court, held that a Magistrates’ Court had been wrong to refuse to make a Costs Order against a local authority.

Here, the local authority’s complaint against A & D Computers Ltd was brought under Section 97 of the Trade Marks Act 1994 and was dismissed by the District Judge as the local authority was unable to present its case at the hearing.

The District Judge, applying

Bradford MDC v Booth [2000] 5 WLUK 236

held that as the local authority had acted reasonably and properly in bringing the proceedings, the Court should not make an order against it, despite the discretion to do so provided by Section 64(1)(b) of the Magistrates’ Courts Act 1980.

The Administrative Court overturned that finding, holding that forfeiture proceedings under the Trade Marks Act 1994 should be classed as civil proceedings and not regulatory proceedings.

Accordingly, the case of Booth had no application and the District Judge had erred in law in refusing to award the company its costs of defending the action.

Although the District Judge had had regard to the decision to institute the proceedings as a factor in the exercise of his discretion to refuse an award of costs, he had failed to have regard to how the local authority had conducted the proceedings following commencement.

The failure of the prosecution was due to the local authority failing to instruct counsel and failing to ensure that its own complaint was ready to be tried.

That had nothing to do with the exercise by the local authority of any of its statutory duties.

The District Judge’s decision not to award costs involved a misdirection of law in wrongly taking Booth into account, and it exceeded the ambit of his discretion by failing to have regard to the manner in which the local authority had conducted the proceedings.

The decision was quashed and remitted to the District Judge.

COMMENT

This decision raises more questions than it answers.

If the proceedings had in fact been regulatory, and not civil, should the Court have ordered costs anyway, as the reason for the failure of the action was failure to be represented at the hearing, as set out above, and not the reasonableness or otherwise of the decision to bring the action in the first place?

If the proceedings had not been conducted unreasonably, should the Court in any event have awarded costs, because the proceedings were civil and not regulatory?

Is it necessary for the proceedings to be both non-regulatory and poorly conducted to warrant an award of costs?

In any event, why should regulatory bodies such as local authorities and the Solicitors Regulation Authority, both powerful and well-funded, enjoy this form of One-Way Costs Protection against individuals and companies?

Guidance was set out in the Booth case as follows:

“16. In City of Bradford Metropolitan District Council v Eric Wilson Booth [2000] 164 JP 485, Lord Bingham CJ summarised (at paras 24ff) the proper approach to the application of section 64 in three propositions:

“1. Section 64(1) confers a discretion upon a Magistrates’ Court to make such order as to costs as it thinks just and reasonable. That provision applies both to the quantum of the costs (if any) to be paid, but also as to the party (if any) which should pay them.

2. What the court will think just and reasonable will depend on all the relevant facts and circumstances of the case before the court. The court may think it just and reasonable that costs should follow the event, but need not think so in all cases covered by the subsection.

3. Where a complainant has successfully challenged before justices an administrative decision made by a police or regulatory authority acting honestly, reasonably, properly and on grounds that reasonably appeared to be sound, in exercise of its public duty, the court should consider, in addition to any other relevant fact or circumstances, both (i) the financial prejudice to the particular complainant in the particular circumstances if an order for costs is not made in his favour; and (ii) the need to encourage public authorities to make and stand by honest, reasonable and apparently sound administrative decisions made in the public interest without fear of exposure to undue financial prejudice if the decision is successfully challenged.”

It is time this whole area was revisited.

The policy is grossly unfair.

ILLEGAL REFERRAL FEES: A REMINDER OF THE LAW

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It is apparent that many Personal Injury solicitors are openly breaking the law in relation to referral fees, whilst others are turning a blind eye, and yet others have convinced themselves that the complexity and lack of transparency of their arrangements means it is all okay.

It is not.

Here is a reminder of the law in this area, which is likely to come under increasing scrutiny in 2023.

I start by setting out in full Section 56 of the Legal Aid, Sentencing and Punishment of Offences Act 2012. 

“56. Rules against referral fees

(1) A regulated person is in breach of this section if—

(a) the regulated person refers prescribed legal business to another person and is paid or has been paid for the referral, or

(b) prescribed legal business is referred to the regulated person, and the regulated person pays or has paid for the referral.

(2) A regulated person is also in breach of this section if in providing legal services in the course of prescribed legal business the regulated person—

(a) arranges for another person to provide services to the client, and

(b) is paid or has been paid for making the arrangement.

(3) Section 59 defines “regulated person”.

(4) “Prescribed legal business” means business that involves the provision of legal services to a client, where—

(a)  the legal services relate to a claim or potential claim for damages for personal injury or death,

(b) the legal services relate to any other claim or potential claim for damages arising out of circumstances involving personal injury or death, or

(c) the business is of a description specified in regulations made by the Lord Chancellor.

(5) There is a referral of prescribed legal business if—

(a) a person provides information to another,

(b) it is information that a provider of legal services would need to make an offer to the client to provide relevant services, and

(c) the person providing the information is not the client;

and “relevant services” means any of the legal services that the business involves.

(6) “Legal services” means services provided by a person which consist of or include legal activities (within the meaning of the Legal Services Act 2007) carried on by or on behalf of that person; and a provider of legal services is a person authorised to carry on a reserved legal activity within the meaning of that Act.

(7) “Client”—

(a) where subsection (4)(a) applies, means the person who makes or would make the claim;

(b) where subsection (4)(c) applies, has the meaning given by the regulations.

(8) Payment includes any form of consideration whether any benefit is received by the regulated person or by a third party (but does not include the provision of hospitality that is reasonable in the circumstances).”

Firstly, and most importantly, the point to note is that throughout the section the reference is to “the regulated person” or “a person”.

Any talk of the corporate veil etc. is meaningless. The individual is liable. The status of the offence under the Act is unclear, and I look at that later, but there is no doubt at all that it creates a liability on an individual, whatever the nature of the entity.

If a regulated person receives any form of consideration, or any third party receives any form of benefit – see Section 56(8) – then that is a breach, save that the provision of reasonable hospitality does not amount to a payment.

If a telephone call is simply transferred to the firm then there is not a referral of prescribed legal business within the meaning of Section 56(5), as no information is being provided, and so no offence is committed.

There are four requirements under Section 56(5), and Section 56(5)(c) provides that if the person providing the information is not the client, then clearly that condition is satisfied, and ‘’relevant services’’ means any of the legal services that the business involves, and so that is satisfied.

However, if no information is provided then there is no breach.

Consequently, if a marketing organisation simply transfers the call to a law firm, then there is no breach.

I am less happy about a system where a firm accesses a password protected portal to obtain information; my view is that a firm cannot avoid the consequences of Section 56(5) by simply having the referrer place the information on a portal, which the firm then accesses.

You do not need to be a genius to work out that if everything is above board, then you simply obtain all the information from the client, as happens in other types of work, and without recourse to any portal.

The only reason for using the portal is so that the referrer can trace that your firm has got the client through them.

Properly dealt with, there is no problem in paying a digital marketing agency a fee for marketing personal injury services.

What must be carefully noted is Section 56(2) which, for ease of reference, I repeat:

“56. Rules against referral fees

(2) A regulated person is also in breach of this section if in providing legal services in the course of prescribed legal business the regulated person—

(a) arranges for another person to provide services to the client, and

(b) is paid or has been paid for making the arrangement.”

That involves a breach of Section 56 if any non-legal service is provided to the client by another person, and the regulated person is paid, or has been paid, for making the arrangement.

The subsection is clear and involves the regulated person providing legal services in the course of prescribed legal business, but the breach occurs if another person provides any services to the client and the regulated person is paid, or has been paid, for making the arrangements.

That clearly, and deliberately, avoids the receipt by a regulated person of any money of any kind in return for arranging another person to provide any services to the client, and that very clearly and obviously includes the provision of, for example, medical reports.

It could not be clearer.

Section 56(8) defines payment as including any form of consideration whether any benefit is received by the regulated person, that is the law firm, or by a third party, for example a sister company, or indeed an unassociated company.

If this only related to legal business, then Section 56(2) would be unnecessary, as receipt of money, or payment of money, for legal business is covered by Section 56(1).

Not only is Section 56(2) freestanding, but it includes the word “also” which clearly involves a separate and discrete breach of the Act.

Note that Section 56(2) does not require the passing of any information for there to be a breach of the Act; it is only Section 56(5) where the term “information” appears.

Section 59 defines a regulated person, and includes an authorised person within the meaning of the Financial Services and Markets Act 2000, a person authorised under Section 5(1)(a) of the Compensation Act 2006 to provide regulated claims management services – that is a claims management company individual – and a person authorised by the Law Society to carry on reserved legal activity within the meaning of the Legal Services Act 2007.

It is true that Section 56 imposes no criminal sanction, and therefore it is arguable that it does not create a criminal offence.

However, we all know that there is no such thing as a civil offence, and there is a powerful argument that it does create a criminal offence, but without penalty.

In any event, a breach by a solicitor of an Act of Parliament, whether that Act imposes a criminal sanction or not, is very obviously a most serious matter, and repeated breach would warrant the solicitor being struck off.

There is a prohibition on a regulated person providing legal services through an unauthorised body, but there is no prohibition on a regulated person providing non-legal services through the medium of an SRA-recognized and regulated body.

That is made clear by Section 56(6) of the Act which states that “legal services” means services provided by a person which consist of or include legal activities (within the meaning of the Legal Services Act 2007) carried on by or on behalf of that person, and that a provider of legal services is a person authorised to carry on a reserved legal activity within the meaning of that Act.

As the cesspit that is residential conveyancing comes under increased scrutiny – a ban on bungs to estate agents is long, long overdue – expect the whole issue of referral fees – bribes – to come up.

You have been warned.

FAIR DEALINGS IN PERSONAL INJURY CLAIMS BILL

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Here are some ideas for cleaning up personal injury work and I have put them in the form of a draft Bill.

Any other ideas?

1.It shall be an offence, punishable by up to two years imprisonment, for an insurance company to seek to settle a personal injury claim with its insured’s opponent direct, save as provided for by Section 2.

2.If a potential claimant enters a matter on the portal as a Litigant in Person, then Section 1 shall not apply.

3.It shall be an offence, punishable by up to two years imprisonment for a solicitor to act for a client with Before-the-Event insurance where that solicitor knows, or should reasonably have known, that that client has been deprived of freedom of choice of solicitor by that BTE insurance company.

4.It shall be an offence, punishable by up to two years imprisonment for a BTE insurer to seek to persuade its insured to go to a solicitor of the BTE insurance company’s choice.

5.It shall be an offence, punishable by up to two years imprisonment for a solicitor to place a matter on the portal without written instructions so to do from the claimant.

6.A representative who does not meet with a client shall not be able to recover costs. “Meet with” includes meeting by way of any video application such as Teams, Zoom or Whatsapp.

7.A solicitor paying a referral fee in a personal injury case shall be struck off the Roll and be subject to imprisonment for up to two years.

8.Any person who knowingly presents false information in any Parliamentary consultation shall be guilty of an offence punishable by up to two years imprisonment.

9.No person, company or body of any kind which deals with personal injury work shall make a donation to any political party, or associated body, which exceeds £5,000.00 a year and anyone who does so shall be guilty of an offence punishable by up to five years imprisonment.

10.If a defendant in a personal injury claim alleges fundamental dishonesty or fraud and fails at trial to substantiate that allegation then the court shall increase general damages by 100% and shall award the claimant costs on the indemnity basis and shall increase those costs by 100%.

INSURERS CRUSHED AGAIN ON PART 36 AND QOCS SET OFF: HAPPY NEW YEAR!

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In

Chappell v Mrozek [2022] EWHC 3147 (KB)

the Kings Bench Division of the High Court rejected the Defendant insurer’s attempt to circumvent QOCS in yet another Part 36 late acceptance case and yet another failed attempt by insurers to subvert the decisions of the Supreme Court in

Ho v Adelekun [2021] UKSC 43

and the Court of Appeal in

Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654

As I write elsewhere in this Issue, my strong advice to Claimants’ solicitors when met by this tactic is to make an application against the Defendant’s solicitor personally for a Wasted Costs Order under Section 51 of the Senior Courts Act 1981, which if upheld, forces the Court to consider reporting that solicitor to the Solicitors Regulation Authority.

Likewise  Defence Counsel, and the Court must consider referring them to The Bar’s regulatory body.

Such conduct is entirely unacceptable, as made clear by the Court here, and in other cases.

Here, the Claimant accepted a Part 36 offer of £250,000 around 20-months after it had expired.

The insurer deliberately refused to pay the damages, in breach of the Civil Procedure Rules, forcing the Claimant to apply to Court for an Order for Payment so that it could then argue that an order had been made for damages and interest, thus triggering the loss of QOCS Protection.

The Court said: –

“It cannot be fair or right that a paying party is financially rewarded (by securing an order for damages and interest) against which it can enforce costs orders, only through the deliberate breach of an obligation imposed by the CPR to pay an agreed sum.

I consider it important to recognise the unfairness to the claimant, and those trying to advise him as well, if my finding was against him… the defendant confirmed that they accepted the claimant’s suggested costs liability so the only issue was the QOCS set-off. The defendant’s decision to challenge the position judicially has resulted in the claimant being denied any payment of his agreed damages to date. That is unfortunate and [there is] case authority for the proposition that the claimant is entitled to receive the offered sum without awaiting set-off of an unquantified costs liability.”

COMMENT

This behaviour by Defendant insurers must be stopped. It is disgraceful.

APPEAL IN INTERLOCUTORY POINT: LOSER PAYS: COSTS NOT IN THE CASE

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In

Frasers Group Plc v The Official Receiver & Ors [2022] EWHC 3184 (Ch)

the Chancery Division of the High Court held that the appropriate order, following a successful appeal in relation to an interlocutory matter was that the unsuccessful respondents to the appeal should pay costs, and that those costs should not be deferred until after the trial of the substantive action, and the Court ordered detailed assessment.

The Court was concerned about the amount of costs involved and only allowed less than one third of the sum being claimed in relation to the interim payment on account of costs.

£75,000 was ordered, compared with the sum of £324,000 which was claimed.

Thus, the Court rejected the paying party’s mission that the costs of the appeal should be reserved, on the basis that a fair decision as to the costs of the appeal could only be made at the end of the trial of the substantive issue.

“The appeal was a distinct interlocutory step in the proceedings. The appeal has had a clear outcome; Frasers has succeeded and Silver and GLAS have failed. It is usual for the court to deal with the costs of distinct interlocutory steps as it goes along rather than reserving those costs. It is not unfair to decide the question as to the costs of the appeal irrespective of knowing the outcome of Frasers’ contentions following a trial. The present case is not comparable to the case of a split trial where, following a trial on liability and before a trial on quantum, it is sometimes right to reserve the costs of the trial on liability. Nor am I assisted by being shown one example of a case where summary judgment was refused and the judge reserved the costs. Instead, I will follow the completely usual practice of dealing with the costs of interlocutory applications or interlocutory appeals by reference to success and failure on the application or the appeal.”

COMMENT

This is a similar approach to another case reported by me, under the heading: –

COSTS AND CASE MANAGEMENT CONFERENCES: COSTS WILL NOT ALWAYS BE COSTS IN THE CASE

COSTS AND CASE MANAGEMENT CONFERENCES: COSTS WILL NOT ALWAYS BE COSTS IN THE CASE

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In

University of Manchester v John McAslan & Partners Ltd & Anor [2022] EWHC 3154 (TCC)

the Technology and Construction Court of the Business and Property Courts of England and Wales, part of the Kings Bench Division of the High Court, ordered one of the Defendants in the action to pay the Claimant’s costs of a specific issue raised by that Defendant at the Costs and Case Management Conference.

This is contrast to the usual position where the costs for Costs and Case Management Conference are costs in the case, that is the ultimate winner gets the costs of that hearing.

Indeed, the Court here said that the default position in accordance with the practice of this Court is that the Order for Costs should be costs in the case.

The issue in dispute here concerned expert evidence and the Second Defendant accused the claimant of “expert shopping”, an allegation which the judge firmly rejected, and the judge also held that the disclosure made by the Claimant’s solicitors was sufficient and appropriate to satisfy the requirements set out in the authorities when a party wishes to change expert.

There had been correspondence between the parties after that disclosure, and a substantial amount of documentary evidence was placed before the judge, and the judge heard lengthy oral submissions on the matter.

The Court held:

“13. In my judgment this is a case where there should be a departure from what I have described as the default position insofar as costs which would not otherwise have been incurred in respect of the Costs and Case Management Conference were incurred after 13 September 2022 in dealing with the Second Defendant’s submission that conditions should be attached to the permission for the Claimant to adduce expert evidence.

14. The assessment of those costs cannot be made at this stage: what is necessary is to determine the costs which would have been incurred in any event in preparing for and attending the Costs and Case Management Conference and the additional costs incurred after 13 September 2022 in dealing with the Second Defendant’s submission that conditions should be attached to the permission for the Claimant to adduce expert evidence.

15. Accordingly I decline to order summary assessment or an order for payment of costs on account, but I do order that the Second Defendant should pay the Claimant’s costs incurred after 13 September 2022 in dealing with the Second Defendant’s submission that conditions should be attached to the permission for the Claimant to adduce expert evidence.”

COMMENT

This is a reminder that the discretion of the Courts in relation to costs is very wide indeed but raising duff points at a Costs and Case Management Conference can, rightly, lead to punishment in costs, whatever the odds and outcome of a case.

This is a similar approach to that adopted by the Chancery Division in relation to costs of an appeal on an interlocutory point, which I have written up under: –

APPEAL IN INTERLOCUTORY POINT: LOSER PAYS: COSTS NOT IN THE CASE

SOLICITORS ACT 1974: TIME LIMITS: PAYMENT BY DEDUCTION

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In

Menzies v Oakwood Solicitors Ltd [2022] EWHC 3199 (KB)

the Kings Bench Division of the High Court, on appeal, overturned the decision of a Costs Judge who had held that an application for detailed assessment of a solicitor’s bill by a former Client was time-barred as it had been made more than a year after the costs have been paid, and thus, fell foul of the time limits in Section 70(4) of the Solicitors Act 1974.

Here, the solicitors had deducted the costs from damages received from the other side in a personal injury claim.

The High Court held that the solicitor had not presented an appropriate settlement account to the Claimant, and therefore, time had not begin to run.

It is well established that mere acquiescence by a Client to a deduction of costs from damages does not amount to payment of the bill by the client for the purposes of the Solicitors Act 1974.

Rather, positive and specific consent to the deduction is required to start time running.

As in all such cases, the decision was fact sensitive: –

“On the facts of this case, I therefore conclude that the Respondent did not inform the Appellant with sufficient clarity that he could object to the deduction with a reasonable time, failing which it would be taken to be agreed subject to his statutory assessment rights.”

Here, the Client had accepted an offer to settle the claim for £275,000 plus reasonable costs, and an interim statutory bill was delivered for £73,700, of which £38,000 was recovered from the other side.

The solicitors retained around £58,000 to cover any shortfall in costs, and ended up deducting around £35,000, and paying the remainder to the Client.

In evidence, and it is significant that the Client here did give evidence, in contrast to most such cases, Mr Menzies said that he was confused about the basis of the payment and had trusted his solicitors to work out the figures correctly.

He said that there was no sufficient informed agreement with the solicitors for the deductions to take place, but rather there was a general agreement that payment would be made from the monies held by the firm and would not exceed 25% of the damages.

The firm responded that there was an agreement for a capped payment by deduction, and that the final bill was sufficient to effect the necessary settlement of account.

The Court found that payment of the bill by deduction from the monies received from damages had been authorized in principle in the Conditional Fee Agreement, but the firm should have obtained the Client’s agreement to payment of the actual shortfall in order to demonstrate that the account had been settled.

Settlement of account could not be held to have occurred had the Client objected to deduction of that sum.

The High Court considered the case law dating back Re Ingle (1855) 25 L.J.CH 169 where it was held that payment of costs from monies retained must occur by agreement and “on the settlement of account between [the Client] and his solicitor”.

Here, the High Court held that there was no settlement of account, as compared with a mere account which was the account stated by the solicitor in the Final Statutory Bill and covering letter.

“36. Payment by retention of money from damages had been authorised in principle by the CFA. The Respondent now needed to obtain the Appellant’s agreement to payment of the actual shortfall of £35,711.20 in order to demonstrate that the account was settled. If the Appellant had objected to that sum, settlement of account could not have been said to have occurred.

37. In that situation, I do not consider that the client could prevent payment from occurring simply by ignoring the Respondent’s bill and letter. It must in my judgment be possible for a solicitor to give a client a reasonable time in which to notify any dispute, after which agreement can be assumed if there is no reply.

38. The problem in this case is with the terms in which the solicitor expressed the position. In his letter of 11 July 2019 Mr Shemwell said:

“If you wish to challenge the deduction sought from your damages in relation to costs, you have 30 days from receipt of this letter to file your complaint. A copy of our Complaints Procedure is available upon request. You have the right to have your charges reviewed by the Court. This is called “assessment”. The procedure is set out in s.70, 71 and 72 of the Solicitors Act 1974.”

39. That paragraph did not clearly identify that the Appellant had a choice between (1) declining to agree the deduction, in which case the Respondent might apply for its own bill to be assessed, and (2) agreeing to the deduction, in which case the Appellant could still apply for assessment of the bill if he wished.

40. On the contrary, the letter introduced the separate topic of the Respondent’s complaints procedure. It stated or at least implied that the Appellant could not challenge the deduction without resorting to that procedure, which was contained in an external document not in the Appellant’s possession. The paragraph also appeared to elide that process with the option of assessment under the 1974 Act, not making clear that the two were separate.

41. On the facts of this case, I therefore conclude that the Respondent did not inform the Appellant with sufficient clarity that he could object to the deduction with a reasonable time, failing which it would be taken to be agreed subject to his statutory assessment rights.”

The Court chose not to deal with an issue that has arisen before, but never been determined, on a particular time point.

It is well established that delivery of a Final Statutory Bill after deduction cures any issue surrounding that deduction, and the court here said that it was not a concern for the purposes of the time limits with the Solicitors Accounts Rules and Solicitors Code of Conduct.

The time issue is from what date time should run where there is a deduction subsequently ratified by a Final Statutory Bill and sufficient consent from the Client for it to amount to payment.

Does time run from the date of the original deduction, or the delivery of the Final Statute Bill?

The Court said that it would make practical sense for it to run from the date of the delivery of the bill but said that that did not sit easily with the wording of Section 70.

The Court declined to decide the issue, but had this to say: –

“32. The problem is not that the retention of £35,711.20 pre-dated delivery of the Final Statute Bill. Applying Re Thompson, payment could be followed by delivery of a bill to which it could be referred. Mr Ralph suggested that in those circumstances it would be logical for the time limits to run from delivery of the bill rather than from the date on which the solicitors took payment. That would make practical sense although it sits uneasily with the wording of section 70. In my judgment the authorities do not clearly answer that question and it does not fall for decision in the present case.”

COMMENT

It is always sensible to obtain the Client’s specific written authority for the actual deduction, and I have precedent letters in my Documents, Videos, Agreements, and Advices Menu.

There is a potential problem if the Client refuses positively to consent, in that although the deduction can be made, the Client can then challenge that deduction and is not bound by the one-month rule.

However, if the positive consent is tied up with the payment of the damages to the Client, the Client will normally consent so as to receive the damages.

PART 36 AND LATE ACCEPTANCE: CLEAR GUIDANCE NEEDED FROM COURT OF APPEAL

The Court of Appeal has reserved its decision in an important case considering the curious state of the law in relation to Part 36 and late acceptance.

This was a clinical negligence case where the Claimant had sought £5.7 million, but after two years of litigation, and following a mediation, accepted a Part 36 offer of £421,362.88 made two years before.

The Defendant said that it had incurred £115,000 of costs since the time for accepting the Part 36 offer had expired.

As this was a Personal Injury claim, the Claimant enjoyed the benefit of Qualified One-Way Costs Shifting, which means that a costs order is made in the usual way, but there are heavy restrictions on the Defendant’s ability to enforce such an order.

Thus, the High Court ordered the Claimant to pay the post Part 36 expiry costs but stated that “the defendant may not set off or enforce this costs order against the claimant pursuant to rule 44.14”, that is CPR 44.14.

The effect of this is that the Claimant did not have to pay any of the Defendant’s costs, but of course, did not recover her costs for the post Part 36 expiry period.

Had the matter gone to trial, then the Defendant could have set off those costs against damages, up to the total awarded to the Claimant, thus, potentially wiping out the award, but not leaving the Claimant in debt to the Defendant.

The High Court Judge described this as “extremely regrettable” and said that it clashed with the policy aims of Part 36 to encourage early settlement but said that this was “the inevitable consequence of the authorities that bind me”.

The Court of Appeal has reserved judgment, which suggests that it might be considering overturning its own decision in

Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654 (17 July 2018)

which the High Court Judge here was obliged to follow.

The Court of Appeal is not bound by its own previous decisions, and so is free to depart from its own previous ruling.

Before it does so, it should remind itself that there are very much two sides to this coin, as a late accepting Defendant suffers no penalty either.

Neither side gets the benefit unless the matter goes to trial, which is indeed counter-intuitive to the whole purpose of Part 36, which is to encourage early settlement.

The decision in Cartwright is widely thought to have been a response to the earlier decision in

Hislop v Perde [2018] EWCA Civ 1726

where the court held that a late accepting Defendant did not have to pay indemnity costs from the date of expiry of the time for accepting the Part 36 offer.

Either both decisions should be overturned – arguably the sensible outcome – or neither should be.

The problem with overturning these decisions is that it is effectively retrospective law in that parties, both claimants and defendants in Personal Injury cases, have felt free not to accept a Part 36 offer in time in the knowledge that there will be no penalty on late acceptance.

True it is that the concept of a Court declaring the law to be otherwise than it was before is always in a sense retrospective, but the difference here is that it affects ongoing cases and will affect costs covering many years in many cases.

It is also important to note that these are not issues where parties and the legal profession generally were awaiting authoritative decisions from the higher courts, but rather where there are what we thought were definitive decisions of the Court of Appeal.

Generally, the Supreme Court will not get involved in costs matters, although it did in

Ho v Adelekun [2021] UKSC 43 (06 October 2021)

and therefore, for all intents and purposes, Cartwright and Hislop decisions were final and authoritative decisions in this area.

Indeed, the Senior Judiciary have expressed their concern at the rules which made them make these decisions, and they are currently under review, and legislation is expected to overturn these decisions, but that legislation will not be retrospective; the danger here is that the Court of Appeal’s decision will be, in effect, retrospective.

Of course, the offeror, as here, always has the power to withdraw the offer.

This issue, no doubt fed by the insurers’ bottomless pit of public relations funding, has been reported as a one-way street. It most certainly is not.

That does not mean that the insurers are wrong, but it does mean that the commentary has been skewed, and here I am unskewing it.

The High Court correctly stated the existing law:

His Honour Judge Sephton KC said the case turned on the nature of the acceptance of a Part 36 offer, the acceptance of which he said is not “an order for damages or interest made in favour of the claimant”.

The Judge stated that the costs order could not be enforced because the Civil Procedure Rules provide for enforcement only after proceedings have concluded.

On acceptance of a Part 36 offer, proceedings are stayed and are not concluded.

Some solicitors for insurance companies are openly stating in correspondence that I have seen that late acceptance of a Part 36 offer by a Claimant triggers an enforceable costs order.

Not only is that wrong, but they must know that it is wrong.

Some solicitors are going even further and saying that they will not pay up on late acceptance of a Part 36 offer by a claimant, without a court order, and that such an order then means that costs can be enforced.

That is doubly misleading.

On acceptance of a Part 36 offer the paying party must pay up within 14 days.

No ifs, no buts.

If a paying party does not want that consequence, then it should withdraw the offer.

Furthermore, as the High Court Judge said in this case, acceptance of a Part 36 offer leads to proceedings being stayed, and not concluded.

In my view, any defendant who seeks to avoid the clear requirement that payment must be made within 14 days of a Part 36 offer being accepted, and that is one of the few areas where a Part 36 is clear and seeks to require the claimant to obtain a court order, in the hope that that triggers a costs liability, is guilty of contempt of court and should be punished accordingly.

Counsel for the insurers here said that the Lower Court decision meant that the Defendant would have been able to recover it costs only if it had taken the case to trial.

He said:

“If the dividing line is between settlements and trials, what is the logic of that dividing line? Why would Parliament have intended to distinguish those two? Your disincentive for making offers or accepting offers is, “we will not get our costs back”, which is a perverse incentive. If that dividing line is here, defendants are not encouraged to settle, they are encouraged to take things to trial.”

As an anonymous commentator on the Law Society Gazette article said – and I wish I had your name to give you public credit:

“Mr Pot, may I introduce you to Mr Kettle?

This is the exact flaw that Defendants benefit from when the accept Claimant offers at the door to the court.”

Quite.

The whole stance of the Defendant here is very strange indeed.

They are clearly alleging fundamental dishonesty.

In response, the trust introduced evidence collected from social media and surveillance which it alleged showed “a gross lack of consistency such that the credibility of the claimant was undermined and the honesty of the claimant’s account was in issue”.

Now, I do not know when the incident occurred, but if it was after the implementation of the Criminal Justice and Courts Act 2015, then if fraudulent dishonesty is found, the Claimant is held to have lost the claim.

If it was before then, then the Claimant still loses costs protection under Qualified One-Way Costs Shifting, if fundamental dishonesty is found.

Why did the Defendant not withdraw his Part 36?

On the face of it, it looks as though the insurers had deliberately chosen to fight the Part 36 point on a case which, by any standards, does not reflect well on the Claimant.

Yet, on the face of it, the Defendant had its remedies elsewhere, as set out above.

In this Issue I also look at the decision in

Kerseviciene v Quadri & Anor [2022] EWHC 2951 (KB)

where the Court allowed the admission of evidence produced by a Defendant Insurer’s solicitor about the alleged pattern of conduct in cases where a particular firm of solicitors was representing the Claimant.

The Personal Injury market has been described as an open sewer.

Let us not forget that whatever the conduct of claimant solicitors and defendant solicitors, and let us be blunt, conduct of some solicitors on both the claimant and the defendant’s side is a disgrace to the legal profession, the reality is that thousands of people each year, through no fault of their own, suffer life changing injuries.

It is those people who have been under constant attack from all the main political parties, either by active legislation, or a failure to oppose repressive legislation.

We have the whiplash tariff and the Small Claims Portal, both of which disgrace a supposedly civilized country where the Rule of Law is supposed to rule supreme.

We have had Criminal Injuries Compensation, where a person is seriously injured by criminal behaviour, massively reducing cap.

Court fees are beyond the reach of ordinary people.

It is not a sin to be injured.

The atmosphere in the United Kingdom is becoming thoroughly toxic.

The Court of Appeal needs to think very carefully about this one, and to recognize the massive financial and political power enjoyed, and abused, by some insurance companies.

If I were the Court of Appeal, I would reverse both decisions, that is Cartwright and Broadhurst, but only prospectively, that is in relation to Part 36 offers made after the Court of Appeal gives its judgment.

Late Settlement Punished, Even Though It Beat Part 36 Offer: Carver Restored? Parliament Ignored?

The confusion of the courts was further demonstrated in the case of

Moradi v The Home Office (Costs) [2022] EWHC 3125 (KB) (05 December 2022)

where the High Court penalised a Claimant for late settlement, even where the settlement agreed on the last working day before trial was 50% more than the Part 36 offer made by the Defendant.

The Court was critical of the fact that the Claimant did not accept that Part 36 offer, even though it did 50% better on settlement, and made no counter-offer until nine months after that offer was made.

“The Claimant’s costs submissions do not explain why, having initially proposed settlement, she then did not pursue it for nine months. That fact is central to the costs issue in this case.”

The Claimant did then make a Part 36 offer in the sum of £40,000, which it revised downwards to £22,500, and then to £18,000, before finally accepting the Defendant’s Part 36 offer of £15,000, itself made just two working days before trial.

Here, the automatic costs consequences of Part 36 did not apply because the offer was made less than 21 days before the start of the trial, and therefore, comes within CPR 36.13(4)(a) which provides that costs must be determined by the court, unless the parties agree those costs.

The parties did not agree costs, and so here the Court was determining those costs.

What the Court did was to award the Claimant its reasonable costs in the usual way up to the 21 December 2021, which was the date of expiry of the Defendant’s Part 36 offer, which the Claimant bettered by 50% on settlement.

For the period after that the Court only awarded the Claimant 66% of its reasonable costs, or to put it another way, imposed a 34% penalty on the Claimant for settling shortly before trial.

This is not a case of late acceptance of a Part 36 offer, as the offer made by the Defendant, which was accepted, was only made two days before trial and a party always has at least 21 days to accept an offer.

The irony is that had this offer been made more than 21 days before trial, and the Claimant had accepted it, then the Court would have no discretion as the costs consequences are then automatic.

Thus, the Court only had the opportunity to punish the Claimant here because of the Defendant’s very late offer, which the Claimant accepted. This actually encourages paying parties to hold off making offers until within the 21-day period before trial, and rely on earlier, lower offers, again something which Part 36 specifically forbids if the second, higher offer is made more than 21 days before trial.

In those circumstances the Part 36 consequences run only from the second, more advantageous offer. It is only when the offer is lowered that costs consequences run from the first, higher, offer, as discussed at length by me in Issue 49, page 271

LOWERING PART 36 OFFERS

and Issue 86, pages 863-865

DEFENDANTS REDUCING PART 36 OFFERS AND CLAIMANTS INCREASING THEM

This make no sense at all and part of the reasoning, which to put it mildly is not lucid, appears to be that the Claimant has gone on for a long period after the Part 36 offer of £10,000 was made, with considerable costs incurred, and only achieved a further £5,000, albeit that that is 50% more than the original offer.

This decision seems perilously close to following a decision in

Carver v BAA Plc [2008] EWCA Civ 412 (22 April 2008)

which Parliament specifically overturned saying that there is a bright line and the fact the Claimant only just beats its offer by a pound or so, can never lead to the Claimant being punished in costs.

If it were otherwise, then there is total uncertainty on costs.

This is a wrong decision which should be overturned, and as I make clear in this whole piece, this whole issue needs very careful consideration.

Administration Assistant Required

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The key responsibilities for this role are:

• Providing administrative support to the lawyers
• Answering the telephone
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• Greeting clients
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• General administrative duties

Who are we looking for?

We are looking for a smart, well presented and hardworking individual. Our key requirements are:

• Excellent administrative and organisational skills
• Excellent telephone manner
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• Ability to work under pressure and prioritise tasks
• A keen interest in law related matters

This is a fantastic opportunity to join a prestigious, innovative and well-respected firm. This position would be ideal for a candidate looking to embark on a full-time career in law. If the candidate has a strong interest in law, there could be an opportunity through the Chartered Institute of Legal Executives to gain a qualified legal position.

Hours

Core hours 8.30am to 5.00pm Monday to Friday and due to the nature of this role, this would be a full-time office-based position.

Salary

£18,000+ according to experience

Added extras and benefits

• 20 days holiday per annum rising by one day in the holiday year following the first year of service and by each subsequent holiday year by one further day to a maximum of 25 days.
• An additional day’s holiday for your birthday
• Free onsite parking
• Free hot drinks and a variety of soft drinks plus biscuits
• Family friendly firm that supports working parents
• Healthy approach to work/life balance
• Opportunities to attend and support legal events and local, regional, and national sporting and charity events
• You will be invited to celebrate and take part in the firm’s 30^th birthday celebrations which were put on hold due to Covid.  
• Opportunity to visit South Africa

About us

We are an independent law firm with offices in Bovingdon in Hertfordshire and Wellington, just outside Cape Town, South Africa.  The staff in our Wellington office provide administrative support to the Bovingdon office, including dealing with all typing of digital dictation for the fee earners, as well as providing offshoring services to a number of renowned solicitors firms across the UK.

We have strong links with South Africa and much of our work is South African related and we have had a base there for 22 years.

Kerry Underwood is Senior Partner of Underwoods Solicitors and is the acknowledged expert on funding, costs, legal systems, client care, marketing and advertising of legal practices. His books on these subjects are considered the standard works. Kerry has written hundreds of articles on legal topics and is a regular contributor to Practical Law He appears regularly on radio and is frequently consulted by senior politicians and senior members of the Judiciary.

We act for a wide range of individuals including actors, sportsmen and sportswomen, judges and Members of Parliament as well as organisations large and small, national and international and sports clubs. We are often involved in advising governments, especially of commonwealth countries.

Sir Mike Penning MP PC, former Justice, Police and Armed Forces Minister, is a Non-Executive Director.

Leah Waller is a Consultant Solicitor that completed her training with us and now manages our employment law department as well as the HR for staff in the UK and South Africa.

Jordan Parkes, former Captain of Hemel Hempstead Town Football Club, is an ambassador of the firm.

The firm plays an important role in the community in both England and South Africa and has close links through support of the local sports teams as well as supporting local schools for special needs children. We are involved in several charities including the Lord’s Taverners and Lords Taverners South Africa which provide access to sport for disabled and disadvantaged children.

How to apply

To apply please send CV and covering email to claire.long@lawabroad.co.uk by Friday 6 January 2023.

Candidates will be invited for interview week commencing 9 January 2023.

DEFENDANTS REDUCING PART 36 OFFERS AND CLAIMANTS INCREASING THEM

It is becoming increasingly common for Defendants to reduce Part 36 offers, and this has been a trend for some time; indeed the Burrett v Mencap case on this point dates from 2014.

In Burrett v Mencap Ltd [2014] EW Misc B50 (CC) (14 May 2014)

the Court held that where a paying party had reduced its offer, and that reduced offer was accepted, the costs consequences ran from the first offer, and not the revised offer.

That case was decided under the old rules, and the old CPR 36.3 (6) provided:

‘After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the Court.’

The case is not the same where the offer is revised upwards.

Thus, if a defendant makes an offer of £2,000 on day one, and then varies the offer upwards to £100,000 years later, then there is no doubt that time runs from that higher offer.

The wording in the old CPR 36.3 (6) refers to changing the terms “to be less advantageous to the offeree”.

There is logic in that. A client had a higher offer on the table, which they declined to accept, and then accepted the lower offer.

That is an entirely different situation from one where the offer is increased.

This point is specifically dealt with by the current governing rule which his CPR 36.9.

CPR 36.9 (5) reads:

(5) Where the offeror changes the terms of a Part 36 offer to make it more advantageous to the offeree—

(a) such improved offer shall be treated, not as the withdrawal of the original offer; but as the making of a new Part 36 offer on the improved terms; and

(b) subject to rule 36.5(2), the period specified under rule 36.5(1)(c) shall be 21 days or such longer period (if any) identified in the written notice referred to in paragraph (2).

Consequently, an improved offer is treated as a new Part 36 offer on the improved terms.

The current rule is no clearer than the old one in that sense and the logic of the decision in

Burrett v Mencap Ltd [2014] EW Misc B50 (CC) (14 May 2014)

still applies.

However, it was a first instance decision, and as far as I am aware, the point has never been considered by a higher court.

The rules were changed by the Civil Procedure (Amendment No. 8) Rules 2014, SI 2014 No. 3299 (L.36), which has at Schedule 1 the entire rule, and so Part 36 is now a Statutory Instrument, not simply a Civil Procedure Rule.

The amendment makes it clear, as I have set out above, that an upward variation is a new offer with time, and costs consequences, running from the date of that new offer.

However, Parliament specifically addressed the issue and provided that an increase in the offer amounts to a new offer but chose not to make the same amendment in relation to a decreased offer.

As set out above, there is logic in that why should a claimant not suffer the costs consequences of failing to accept a higher offer?

For all intents and purposes, it is analogous to the claimant only getting, say, £20,000 at trial, when £30,000 was on offer.

What About Claimants Increasing Their Offers

The logic is the same as in the reverse position.

A claimant makes an offer of £5,000 and subsequently raises that to £8,000 and gets, say, £9,000 at trial.

The offeree, the defendant in this instance, had their remedy, and had their chance, which was to accept the lower, therefore more advantageous, offer to them, of £5,000.

I use the terms offeror and offeree deliberately, as that is the language now of most of Part 36 and reflects the fact that the rules cut both ways.

There are certain instances where the terms claimant and defendant are used, but not in this context.

Thus, had Parliament wished to make the situation only apply where a defendant reduced its offer, and not where a claimant increased its offer, then it could have done so.

An interesting point is as to what happens if in the example given, the claimant recovered, say £7,000 at trial.

The claimant has beaten its original offer, but as that was changed upwards, it was no longer capable of acceptance, and thus the claimant has not beaten its revised offer.

My view is that the automatic Part 36 consequences do not follow, but that the Court should consider the defendant’s failure to accept an offer below the sum achieved at trial when it was available for acceptance.

One option is to award the claimant indemnity costs from expiry of the time for accepting £5,000 until the date when that offer became incapable of acceptance due to it being raised to £8,000.

I dealt with this issue, on slightly different facts, in my piece

PART 36: WITHDRAWN OFFER STILL COUNTS: AN UNFORTUNATE DECISION

which appeared at Pages 267 – 270 of Issue 49 of Kerry On Costs … And So Much More …

In that write-up, I dealt with the decision in

Blackpool Borough Council v Volkerfitzpatric Ltd [2020] EWHC 2128 (TCC)

There, the Defendant’s Part 36 offer had been withdrawn, and the Claimant recovered less at trial than had been on offer in the withdrawn offer.

As set out above, that is a slightly different situation in that the offer was withdrawn rather than varied to make it less advantageous to the Offeree, but as a matter of pure logic, it seems to me to be the same.

In a sense, the offer has been varied to nil when it is withdrawn.

There, it was common ground that the automatic consequences of Part 36 did not apply.

However, it could still be considered under the general cost provisions in CPR 44, with the key issue being whether the Offeree acted reasonably in rejecting it when it was available.

That seems to me to be analogous to the position above, and the question would be whether it was reasonable for the Defendant not to accept the offer of £5,000 when it was available for acceptance.

On the face of it, if the Claimant then goes ahead and gets £7,000, then subject to the specific facts of the case, it would have been unreasonable.

The Court should put itself in the position of the party at the time, and not judge the case with hindsight.

These are far from easy matters, to put it mildly.

The extension of Fixed Recoverable Costs has now been delayed until October 2023, but the new Part 36 regime then, in all Fixed Recoverable Costs cases, will be that there will be a 35% enhancement for a successful Part 36 party.

With claimants, that means a 35% uplift on the Fixed Costs stages from expiry of the time for accepting the offer.

What we do not yet know is whether a claimant will get that uplift when a defendant accepts late.

Another unanswered question is whether a successful Defendant will receive an uplift.

Thus, the Defendant offers £50,000 very early on the case, which goes to trial and the Claimant recovers £40,000, and thus the Claimant is deprived of their costs from the date of expiry, and the Defendant gets their costs from the date of expiry, even though the Claimant has won the action.

That reflects the current position.

The penalty/reward there is that the losing claimant has lost the costs of almost the whole of the action and the defendant does not have to pay much by way of costs.

Clearly, that does not work with a claimant who matches or beats its own offer, as they would get costs in any event, and hence the need for the uplift, currently indemnity costs, but to be a straight 35% increase.

My view is that a successful Part 36 defendant should not get an uplift on costs as they already have their benefit as set out above.

BELSNER: AN INTERESTING COURT OF APPEAL ORDER

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Details here.

Book here.

I set out below the order of the Court of Appeal, following its landmark decision in

Belsner -v- Cam Legal Services [2022] EWCA Civ 1387, 27 October 2022

which I reported at length in Issue 77 under the heading –

CHALLENGES IN HIGH COURT TO SMALL BILLS MUST STOP SAYS COURT OF APPEAL.

The Order is of interest in any event, as it shows that Darya Belsner must pay to Cam Legal Services Limited the sum of £155,295.50 by 4.00pm on Monday, 28 November 2022.

The Order sets it all out, but it is a stark reminder that this case was about £295.50 and the other  £130, 000 is an interim payment in relation to one side’s costs plus the return of the £25,000  on account of Ms. Belsner’s costs, paid after she won in the High Court.

In spite of much comment to the contrary as the order makes clear, this is the liability of Darya Belsner, the original client of Cam Legal Services Limited, and not anyone else, and any reports to the contrary are plain wrong.

Whether or not Checkmylegalfees have given an indemnity to Ms. Belsner is a separate issue; Ms. Belsner is liable for the costs order which can be enforced against her directly by Cam Legal Services Limited, if not satisfied by Monday week.

This is not a personal injury case, but rather a Solicitors Act 1974 case, and although the original case was indeed a personal injury case, a claimant does not enjoy Qualified One Way Costs Shifting protection in relation to Solicitors Act 1974 proceedings, whatever the original subject matter, and so, in the event of defeat, as here, is liable for the other side’s costs.

This should act as a warning bell to those clients seduced by marketing offers of getting some legal fees back from solicitors about whom they never complained at the time.

However, the most interesting point of the Order is paragraph 9 or more particularly the fact that the Court of Appeal has included this in its Order, albeit at the prompting of Ben Williams KC for the solicitors, and agreed by Checkmylegalfees.

I do a lot of work relating to Section 51 of the Senior Courts Act 1981, often referred to as non-party costs orders, or wasted costs orders, and I can never recall seeing such a paragraph in the original order of the Court, as compared with an order made once an application for a Section 51 order has been made.

The legendary Professor Dominic Regan tweeting on the 16 November 2022, in response to one of my tweets said that:

“Nor me! We have read a fair few judgments over the years.”

Section 51 of the Senior Courts Act 1981 gives the Court unlimited discretion, to be exercised judicially, as to costs, and Section 51(3) could hardly be in wider terms:

“(3) The court shall have full power to determine by whom and to what extent the costs are to be paid.”

I have written extensively on this subject, and this piece is not the place for a full discussion of this topic.

However, a very brief summary may be useful.

Orders under Section 51(3) are generally known as non-party costs orders, and common examples of where the court makes such orders are against the individual directors, in their personal capacity, as compared with the Limited Company, so as to avoid satisfaction of the costs itself being avoided by Limited Liability status.

There is a great deal of case law on this subject, but putting it extremely briefly, a court will only generally consider such a non-party costs order if that non-party has intermeddled in the litigation, or stood to be the real beneficiary.

A very obvious, and common, example is a non-party costs order against a third party funder.

A non-party costs order does not of itself imply any wrongdoing, but simply that the successful party should have someone else against whom they can enforce any costs order.

Section 51 pointedly deals only with costs, and not damages.

Without commenting on the rights or wrongs of this case, it is very clear from the comments of the Court of Appeal, which it had no need to make for the purposes of the legal decision, that its view was that the potential beneficiary in this case was Checkmylegalfees.com, and not the lay client.

Paragraph 98 of the judgment in Belsner, the Court of Appeal said:

“98. The Client in this case has never had any real or economic interest in the pursuit of this costly litigation. Only checkmylegalfees.com have such an interest.”

In Karatysz v SGI Legal [2022] EWCA Civ 1388

the Court of Appeal said, at paragraph 45:

“45. The Client allowed checkmylegalfees.com to bring this costly case on her behalf, when she had almost nothing to gain.”

These are paradigm statements of the situation where a court would generally consider making a non-party costs order under Section 51(3).

It should be noted that such an order is designed precisely to avoid injustice to the successful party in being unable to enforce a costs order; in such a case there would be little point in making a non-party costs order against a Limited Company alone, if there was a chance that that Limited Company, due to the concept of Limited Liability, could not satisfy the order.

The Court has full powers to make the full costs order enforceable against the individual director/shareholders.

Section 51(6) of the Senior Courts Act 1981 is a very different animal, and allows the court to make an order against a legal or other representative and Section 51(13) defines “legal or other representative” as “any person exercising a right of audience or right to conduct litigation” on behalf of a party to the proceedings.

Thus, the court has power to make a wasted costs order against the solicitors and/or counsel, but it is a much higher threshold, and it does require fault on the part of the lawyer.

Section 51(7) reads:

“51(7) In subsection (6), “wasted costs” means any costs incurred by a party—

(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or

(b) which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay.”

Where the court exercises the power under Section 51(6) it must consider informing the approved regulator of the lawyer concerned, that will generally be the Solicitors Regulation Authority or the Bar Council.

It is not suggested that Section 51(6) has, or will, come into play in this case, and the Court of Appeal’s Order specifically refers to a non-party costs order, and not a wasted costs order.

Finally, a thank you to Darren Draper and all of those at Cam Legal Services Limited who had the guts to pursue this matter, at great risk in costs, and to free decent lawyers doing their best to their clients from what the leading costs lawyer Ben Williams KC described as “a shakedown” of such solicitors.

You may, or may not, be interested in what I wrote about the High Court decision, overturned here by the Court of Appeal in no uncertain times.

Very clearly this subsection only applies to “proceedings” in a County Court – that is what it says.

Here, for reasons beyond me, it was conceded that, even though proceedings have not been issued, Section 74(3) was engaged.

That must be wrong, and is out of kilter with a range of recent decisions on the meaning of proceedings.

That being the case, apart from being wrong in law, the whole decision is obiter.

On the face of it, CPR 46.9 (2) does not require anything beyond a written agreement. It is hard to see what further “informed consent” is required. Which bit of “you will have to pay some of the costs yourself” is the client expected not to be able to understand?

It is in fact CPR 46.9 (3) which deals with informed consent, although that term is not used. That subsection effectively deals with the quantum of any charge to the client, whilst subsection (2) deals with the principle.

The decision of the court here that subsection (2) required informed consent is, in my opinion, an error of law, which makes the decision per incuriam, that is wrongly decided to such an extent that it does not need to be followed by other courts.

Fiduciary Duty

I wrote this:

“It is strongly arguable that the common law fiduciary duty has, in part, been overruled by that section.

In any event, where does this end? If, as a fiduciary, you cannot make a profit from the client without the client’s fully informed consent, presumably that means telling the client exactly what the profit will be. Afterall, a client may be happy with a 10% profit on the matter, but not a 40% profit.

Apart from the fact that it is impossible to tell at the outset in litigation what the percentage profit will be, does this also apply to, for example, Conveyancing, Wills and Probate?

On the basis of the decision in Belsner, a solicitor preparing a Will must, in advance of quoting a fee for the client, tell that client that they intend to make a profit in that Will and how much that profit will be.

After all, in Belsner, the issue was the level of profit, not the fact that the solicitor would make a profit.

Pandora’s Box hardly begins to describe the potential consequences of this decision.

I see the point in Belsner. I would, wouldn’t I – it is a judicial endorsement of the Underwoods Method and my Model Conditional Fee Agreement – more than an endorsement actually – it makes it mandatory.

However, the whole issue needs more thorough analysis, and if we are to have out and out contingency fees, and there is much merit in that idea, then let Parliament and the courts say so unambiguously.

Otherwise, we will be litigating forever, and let us be blunt, virtually all of these challenges are morally bankrupt.”

I normally expect the Court of Appeal to tone my remarks down; here they appeared to have done the opposite.

NATIONAL PRO OH NO! WEEK!

Yes, it is that time of year again – National Nick What You Want Week, aka National Pro Bono Week.

This year everyone is working for free! It is not just solicitors expected to work for nothing.

Best not to try these until  confirmed as they are criminal offences:-

Free petrol!

Just fill up and drive away!

Free shopping!

Get that supermarket trolley as full as you can and proceed straight to your car! Remember to pay 5p for the bags though.

Travel

Why buy a ticket? Get on that bus or train and have a free trip!

Sports

Just climb over the fence or turnstile. Steal a free programme while you are at it!

Rejected ideas

The minutes of the National Oh No! Steering Advisory Council Committee Taskforce Thinktank Board show that, unsurprisingly, the following ridiculous – can you believe them?! ideas were rejected:

• Free university education;
• Legal aid;
• Free dental care;
• Free courts;
• Free Employment Tribunals

Meanwhile I set out again an old favourite which is an actual exchange between a person we had had no previous contact with, who surprise surprise, obtained our name from an internet search, and Robert Males, my business partner, who, normally is rather milder mannered that me:-

Hello,

are you able to provide free legal representation? I am working, however I am not able to afford solicitors fees.

Thank you

Robert Males’ reply

Dear

I thank you for your enquiry.

My firm does not provide free legal representation. If my firm’s bank provides interest free loans, my governing  body, the Solicitors Regulation Authority, will authorize my firm to practise for free, my firm’s professional indemnity insurance is reduced to nil, my firm’s staff will all work for nothing, if the computer company who I deal with will provide all computers and servicing free of charge and if the stationery business who we deal with will give us all paper and consumables for free and the utilities will provide gas, electricity and water for free then I may be in a position to provide free representation. Until that time I am not.

My firm does however do a considerable amount of free work for charitable institutions including the Royal British Legion and the Lord’s Taverners charity for disadvantaged children as well as making donations to other very good causes.

The only reason that we can do this is because we charge our clients for the very high quality legal advice and work that we do on their behalf.

Yours sincerely

Robert Males

Solicitor

Managing Partner

UNDERWOODS SOLICITORS

Please see my related blog:-

A CHRISTMAS CAROL BY THE HIGH COURT

BELSNER AND KARATYSZ SPECIAL

For more information and to book, please click here.

CHALLENGES IN HIGH COURT TO SMALL BILLS MUST STOP SAYS COURT OF APPEAL

I will be presenting a Zoominar on these cases next Thursday, 3 November 2022 at 4.00 – 5.00pm. £50 plus VAT for as many people as you want. Recording available whether or not you can attend. Please book here.

In two key and very important decisions delivered consecutively by the Court of Appeal today, with the same judges in each case, the Court of Appeal said that the appropriate forum for low value challenges to solicitors bill under the Solicitors Act 1974 was the Legal Services Ombudsman, and not the High Court.

Although the solicitors won in both cases, the Court of Appeal made it clear that if checkmylegalfees.com and others continued to bring “trivial claims” in the High Court, then they would be deprived of their costs, even if they won.

“Firms such as checkmylegalfees.com and their clients should be in no doubt that the courts will have no hesitation in depriving them of their costs under section 70(10) if they continue to bring trivial claims for the assessment of small bills to the High Court, even if those bills are reduced on the facts of the specific case by more than one fifth under section 70(9). The critical issue is and always will be whether it is proportionate to bring this kind of case to the High Court. In this case, it was not.” [Paragraph 45 of Karatysz v SGI Legal [2022] EWCA Civ 1388]

The Court of Appeal took the most unusual step of issuing a press summary in relation to what are two unrelated cases, in that there are no identical parties and nor were the legal issues the same.

The common factor is the attack upon claims like this being brought in the costs-bearing jurisdiction of the High Court.

Here is the Court of Appeal’s summary of the judgments in

Belsner -v- Cam Legal Services [2022] EWCA Civ 1387, 27 October 2022

and

Karatysz v SGI Legal [2022] EWCA Civ 1388

The Court of Appeal states that it will exercise it jurisdiction under 70(10) which allows the court to make such order as respect to the costs of the assessment as it may think fit, if there are “any special circumstances”.

Indeed this opens up the likelihood that not only will the successful client in a Solicitors Act 1974 challenge be deprived of their costs if they wrongly bring the matter in the High Court, but that they may be ordered to pay costs, even though successful.

The importance of these two decisions, and the fact that they were delivered consecutively, and of the joint press summary, and the tone of the language used by the Court of Appeal, can hardly be overstated.

BELSNER

In Belsner -v- Cam Legal Services [2022] EWCA Civ 1387, 27 October 2022

the Court of Appeal allowed the appeal of the solicitors against the deduction from their bill of costs, and gave important rulings on the law governing solicitor and own client retainers, and made highly significant comments concerning the business model of firms such as checkmylegalfees.com challenging solicitors bills in this way, and specifically named that firm who were the solicitors for the Claimant in this matter.

It should be noted that the key legal elements of the decision generally apply only to claims that have not been issued, and are classed as non-contentious.

I will make it clear which parts apply to all claims, and which parts apply only to unissued claims.

This claim was settled at Stage 2 of the Portal process, and thus, substantive Part 7 proceedings were never issued.

The Defendant’s insurer paid damages and fixed costs and disbursements, and the solicitors retained the fixed costs.

The solicitors retained out of damages a success fee of £321.25, being the charges capped at 25% of the recovered damages.

The client then instructed new solicitors trading as Checkmylegalfees.com to query the original solicitors’ bill.

Here, the Court of Appeal said:

“5. The Solicitors in this case were instructed by the Client to bring her claim on the RTA portal. The claim was settled at stage 2 after the provision of medical reports, as is common, with the defendant’s insurer paying damages of £1,916.98 plus fixed costs of £500 plus disbursements (ignoring VAT). The Solicitors retained the fixed costs and paid the Client the damages less a success fee of £321.25 (capped at 25% of the recovered damages – see [28] below). The Client later instructed new solicitors trading as checkmylegalfees.com to query the Solicitors’ charging. The Solicitors point out that the Client did not appeal DJ Bellamy’s assessment that they could reasonably have charged £1,392 (11.6 hours at £120 per hour) for their work (plus a success fee of £208.80), instead of the £321.25 plus £500 fixed costs (£821.25) which they actually asked for and were paid.”

On the first appeal, the High Court allowed the client’s appeal and permitted the solicitors to charge only the fixed costs recovered from the other side and a success fee of £75, which the High Court Judge applied on the basis of a success fee of 15% of fixed costs.

I have commented extensively on the heavily flawed decision of that High Court Judge, and will not repeat that here, although I may analyse matters in more detail in a future piece.

Suffice to say that the Court of Appeal agreed with me on virtually every point I have made in relation to the High Court decision in this case.

The High Court also assumed that the solicitor owed the client a fiduciary duty when the retainer was being negotiated, and that finding was also overturned by the Court of Appeal.

The Court of Appeal also disagreed with the High Court Judge in relation to Section 74(3) of the Solicitors Act 1974 and CPR 46.9(2), or rather whether it had any application to an unissued case.

The Court of Appeal then set out the provisions  of the statute and the Civil procedure Rules, which appear in the Judgment, and which I have written about before, and which I do not repeat here.

At paragraph 13 of the Judgment, the Court of Appeal set out the key questions to be determined:

(i) whether section 74(3) and Part 46.9(2) apply at all to claims brought through the RTA portal without county court proceedings actually being issued,

(ii) whether the Solicitors are required to obtain informed consent from the Client in the negotiation and agreement of the CFA, either due to the fiduciary nature of the solicitor-client relationship or through the language of Part 46.9(2),

(iii) if informed consent was required, whether the Client gave informed consent to the terms of the CFA relating to the Solicitors’ fees,

(iv) whether, in any event, what can be regarded as the term in the Solicitors’ retainer allowing the Solicitors to charge the Client more than the costs recoverable from the defendant to the RTA claim was unfair under the Consumer Rights Act 2015, and

(v) what are the consequences of the determination of these issues on the assessment in this case.

The Court of Appeal answered these questions as follows:

(i) section 74(3) and Part 46.9(2) do not apply at all to claims brought through the RTA portal without county court proceedings actually being issued,

(ii) the judge was wrong to say that the Solicitors owed the Client fiduciary duties in the negotiation of their retainer,

(iii) although the Solicitors were not obliged to obtain the Client’s informed consent to the terms of the CFA on the grounds decided by the judge, the Solicitors did not comply with the SRA Code of Conduct for Solicitors (the Code) in that they neither ensured that the Client received the best possible information about the likely overall cost of the case, nor did they ensure that the Client was in a position to make an informed decision about the case,

(iv) the term in the Solicitors’ retainer allowing them to charge the Client more than the costs recoverable from the defendant was not unfair within the meaning of the Consumer Rights Act 2015, and

(v) the court can and should reconsider the assessment on the correct basis, which is under paragraph 3 of the Solicitors’ (Non-Contentious Business) Remuneration Order 2009 (the 2009 Order), which requires the Solicitors’ costs to be “fair and reasonable having regard to all the circumstances of the case”. The costs actually charged to the Client in this case were fair and reasonable.

The finding at (i) apply only to non-issued matters, where court proceedings have not been issued.

Where County Court proceedings have actually been issued, then Section 74(3) and CPR 46.9(2) apply in full.

Given that at the outset solicitors will never know whether or not proceedings will be issued, my practical advice is that in every case, without exception, solicitors should at the outset, comply with Section 74(3) and CPR 46.9(2).

The finding at (ii) applies to all cases of all clients, whether litigation or conveyancing or whatever.

The finding at (iii) is somewhat hybrid in that different rules apply to different situations, and the judgment must be read as a whole.

The finding at (v) applies only to non-issued proceedings, that is non-contentious business.

The Court of Appeal made a number of other comments, and the timing is significant, as well as the content, as there is a holistic review of all Civil Litigation costs and processes, and that is currently being undertaken by the Civil Justice Council.

The Court of Appeal said that:

“…the distinction between contentious and non-contentious costs is outdated and illogical. It is in urgent need of legislative attention.”

“Secondly, there is no logical reason why Section 74(3) and Part 46.9(2) should now apply to cases where proceedings are issued in the County Court and not to cases pursued through the pre-action portals”

“Thirdly, it is unsatisfactory that, in RTA claims pursued through the RTA portal (and perhaps the Whiplash portal), solicitors seem to be signing up their clients to a costs regime that allows them to charge significantly more than the claim is known in advance to be likely to be worth. The unsatisfactory nature of these arrangements is not appropriately alleviated by solicitors deciding, at their own discretion, to charge their clients whatever lesser (and more reasonable) sum they may choose with the benefit of hindsight.”

“Fourthly, it is illogical that, whilst the distinction between contentious and non-contentious business survives, the CPR should make mandatory costs and other (e.g. Part 36 and PD8B) provisions for pre-action online portals, but otherwise deal only with proceedings once issued. Section 24 of the Judicial Review and Courts Act 2022 will allow the new Online Procedure Rules Committee (OPRC), in due course, to make rules that affect claims made in the online pre-action portal space. It would obviously be more coherent for the OPRC to make all the rules for the online pre-action portals …”

The Court of Appeal then made a highly significant comment, and whilst it does not represent the law, and was not a comment on the law, it is a significant and important comment:

“Finally, it is also unsatisfactory that solicitors like checkmylegalfees.com can adopt a business model that allows them to bring expensive High Court litigation to assess modest solicitors’ bills in cases of this kind. The Legal Ombudsman scheme would be a cheaper and more effective method of querying solicitors’ bills in these circumstances, but the whole court process of assessment of solicitors’ bills in contentious and noncontentious business requires careful review and significant reform.” [Paragraph 15 of the judgment]

I still find the decision somewhat confusing in the sense that the Court of Appeal appears to have looked at the whole sum that had charged by the solicitors to the client, and then deducted the success fee, with the rest representing part of the unrecovered solicitor and own client costs.

The correct way is to apply any charge made to the client to the unrecovered solicitor and own client costs element first, and only then, if there is any further charge to be made, to incur into success fee territory.

This is not a mere academic point, as the success fee is capped at a percentage of the Allowed Damages Pool, whereas the unrecovered solicitor and own client element is not.

I have not seen the actual bills in this case, and have not seen the way that they were structured, and it may be that the solicitors erroneously delivered a success fee bill to the client, when in fact everything could have been absorbed by the unrecovered solicitor and own client element.

It makes little difference to the rationale of this decision.

I set above that the finding at (iii) was something of a hybrid finding, and I now set out the Court of Appeal’s explanation of the first appeal Judge’s consideration of this aspect, which appears at paragraphs 40-43 of the judgment.

“40. The judge proceeded on the assumed basis that section 74(3) applied to RTA portal cases, noting at [42] that it was not disputed that the section applied except insofar as Part 46.9(2) might otherwise provide. A major issue before him was whether the phrase “expressly permits” in Part 46.9(2) meant that a client’s informed consent was required in order to disapply section 74(3).”

“41. The judge said at [34] that “[t]he relationship between solicitor and client is a fiduciary one. As a fiduciary, a solicitor may not receive a profit from his client without his client’s fully informed consent”. At [68], he said this I do not consider that this appeal can be determined by a simple comparison between the wording of [Part 46.9(2) and (3)]. The requirement for informed consent which applies in cases under [Part 46.9(3)] does not arise because of the use of the word “approval” rather than the word “agreement”. The requirement for informed consent arises because of the fiduciary nature of the relationship.”

“42. He then held at [69] that when interpreting Part 46.9(2): It goes without saying that an agreement for the purposes of [Part 46.9(2)] must be a valid and enforceable agreement. It follows, for example, that an agreement procured by fraud or misrepresentation would not suffice. Nor, obviously, would an agreement whose performance would involve a breach of fiduciary duty. To that extent, therefore, [Part 46.9(2)] requires informed consent.”

“43. On the basis that Part 46.9(2) required informed consent, he found that the Client had not provided informed consent to pay fees in excess of those recoverable from her opponent. Section 74(3) applied and the Solicitors were limited to charging fixed costs of £500 plus VAT in addition to the (reduced) success fee.”

Issue 1: Do section 74(3) and Part 46.9(2) apply to claims brought through the RTA portal without county court proceedings actually being issued?

The Court of Appeal deals with this issue at length at paragraphs 45 – 61 of the judgment and I have set out the conclusion above.

However, it is worth setting out the Court of Appeal’s definition of contentious business taken from the decision in

re Simpkin Marshall Ltd [1959] Ch 229 (Simpkin Marshall)

“There is now a clear and, I should have thought, logical division between contentious and non-contentious business. All business is now to be regarded as contentious which is done before proceedings are begun provided that the business is done with a view to the proceedings being begun, and they are in fact begun, and also all business done in the course of the proceedings. All other business is non-contentious.”

The Court of Appeal said that while it is true that the RTA Portal is an official process introduced by the Ministry of Justice, that does not make claims within it into proceedings in the County Court.

The fact that rules of court make various provisions for cases brought within the RTA Portal may be illogical, but it does not convert Portal claims into County Court claims. [Paragraph 58]

Civil Procedure Rules, specifically CPR 46.9(2) cannot enlarge the meaning of Section 74(3), “however convenient that might be”. [Paragraph 59]

In the context of the forthcoming reforms, the Court of Appeal made a significant comment at paragraph 61:

“61. These conclusions do not mean that the distinction between contentious and noncontentious costs is a meaningful or logical one now that the pre-action online portals form a significant part of the litigation environment. I have no doubt that the 1974 Act is in urgent need of legislative attention. Moreover, these conclusions do not mean that it is logical for section 74(3) and Part 46.9(2) to apply to cases where proceedings are issued in the County Court and not to cases pursued through pre-action portals.”

Issue 2: Were the Solicitors required to obtain informed consent from the Client in the negotiation and agreement of the CFA, either due to the fiduciary nature of the solicitor-client relationship or through the language of CPR 46.9(2)?

This is discussed at length by the Court of Appeal at paragraphs 62 – 81 of the judgment.

As it clear from the finding on Issue 1, the Court of Appeal had found neither Section 74(3) nor CPR 46.9(2) applied here, as it was non-contentious business.

Although CPR 46.9(2) does not apply, CPR 46.9(3) does, and that applies to the assessment of costs in both contentious and non-contentious business.

The Court of Appeal held that the High Court Judge was wrong to think that the client’s informed consent was required in this case because of the wording of CPR 46.9(2) as that “is and was irrelevant to the formation of the CFA in this case”.

The Court of Appeal went on to make the entirely valid point concerning the problem of not knowing at the outset, when a CFA is entered into, as to whether the matter will be issued or not.

“70. This conclusion may seem strange because, in theory, section 74(3) and Part 46.9(2) could have applied to this CFA, had county court proceedings been issued. It might have been said that, since the parties could not have known when they entered into the CFA whether, in future, proceedings would be issued, the conclusion is illogical. That, in my view, is just one unsatisfactory consequence of the fact that the current legislation takes no proper account of the fact that many claims are pursued in online pre-action portals without proceedings being issued. It cannot mean that statutory provisions applicable only to contentious business can be applied to non-contentious business.”

The Court of Appeal also recognized that the fact that CPR 46.9(2) did not apply “does not answer the question of whether the Solicitors owed the Client a duty to seek her fully informed consent to the level of their fees”. [Paragraph 71]

Did the fiduciary nature of the solicitor/client relationship or the solicitors’ duty of care give rise to a fiduciary duty to obtain the client’s fully informed consent?

This is dealt with at paragraphs 72 – 81 of the judgment, but the short answer is no.

However, the moment that solicitors start acting for a client there is a fiduciary duty, but only in relation to the steps that the solicitors take in relation to the case, and not in relation to the retainer.

In other words, if a case starts before the Conditional Fee Agreement is entered into, that does not create a fiduciary duty in relation to that retainer.

“80. The duty to ensure that clients receive the best possible information about pricing and the likely overall cost of the case may have similarities to fiduciary duties of loyalty, but they are not such duties. They are professional duties, and the consequences of the breach of a professional duty, even one given effect by statute, are different from the consequences of breaches of fiduciary duties.”

Issue 3: Did the Client give her informed consent to the terms of the CFA relating to the Solicitors’ fees?

This dealt with at paragraphs 82 – 86 of the judgment, and the Court of Appeal had already found that it did not think, as a matter of law, that the solicitors were obliged to obtain the client’s informed consent at the terms of the Conditional Fee Agreement, on the grounds decided by the High Court Judg.

 However, the Court of Appeal said that it was appropriate to explain what the solicitors should have done in order to comply with their professional duties.

 In this case, the solicitors neither ensured that the client received the best possible information about the likely overall costs of the case, as required by paragraph 8.7 of the Solicitors Code of Conduct, and nor did they ensure that the client was in a position to make an informed decision about whether she needed the service they were offering on the terms that they were suggesting as required by paragraph 8.6.

“84. In this case, the Client was given most of the information she needed to make those decisions, with the exception of one vital matter, namely the fixed recoverable costs that the defendant’s insurers would pay within the RTA portal. It would have been straightforward for the Solicitors to inform the Client of the level of the fixed recoverable costs that could be recovered at stages 1 and 2. The Client was told that the Solicitors estimated their base costs at £2,500 (net of VAT and disbursements), and that many such claims would settle within the RTA portal after production of medical evidence and financial losses. She was also given an estimate of £2,000 for her damages. Had she also been told of the level of the fixed recoverable costs, she would have been able to compare the likely recoverable costs with the amount she was being asked to agree to pay the Solicitors. As the Client submitted to us, she would then have known that she was assuming a liability to pay the Solicitors five times the costs she would be getting back from the defendant. I do not think that the Solicitors can be said to have complied with either [8.7] or [8.6] of the Code without providing that information.”

“86. In my judgment, it is wholly unsatisfactory for solicitors generally, and these Solicitors in particular, routinely to suggest that their clients agree to a costs regime that allows them to charge significantly more than the claim is known in advance to be likely to be worth. Solicitors do not resolve this unsatisfactory state of affairs by allowing a discretionary reduction of their charges after the case is settled. It would, in theory, be possible for there to be an order made under section 56 of the 1974 Act to deal with this problem, and perhaps some of the others I have identified in relation to current practice, by the establishment of reformed general principles applicable to the determination of the proper remuneration of solicitors in respect of non-contentious business within the pre-action online portals.”

Issue 4: Was the term in the Solicitors’ retainer allowing the Solicitors to charge the Client more than the costs recoverable from the defendant to the RTA claim unfair under the Consumer Rights Act 2015?

This is dealt with at paragraphs 87 – 92 of the judgment.

Section 62(4) of the Consumer Rights Act 2015 makes a term of a consumer contract unfair, and therefore, not binding on the consumer, if “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer”.

The Court of Appeal set out the way the client put its case.

The term as to recovery of costs over and above fixed costs creates a significant imbalance to the client’s detriment, because it results in:

(a) a liability for base costs of a sum greatly in excess of the fixed maximum that would be allowed pursuant to s.74(3) Solicitors Act 1974, and

(b) consequent use of such base costs figure as the multiplicand in calculation of the success fee, in both cases without mentioning either

(i) the fact of the statutory protection provided by s.74(3) or its purported disapplication,

(ii) (how that statutory protection would have operated and how its disapplication is to the detriment of the client, or

(iii) the likely maximum in this particular case.

Thus, the client submitted that the term in her retainer as to recovery of costs over and above fixed costs created a significant imbalance to the client’s detriment, and was therefore, unfair.

The client put the case on the basis that the term was unfair because it results in the liability for base costs much in excess of “the fixed maximum that will be allowed pursuant to section 74(3)”.

As Section 74(3) did not apply in this case, a claim under the Consumer Rights Act 2015 also failed.

That does not mean, that had the client’s case been pleaded differently, such a claim would have failed.

Solicitors still need to ensure that they do not fall foul of Section 62(4).

Issue 5: The consequences of these determinations on the assessment in this case

The Court of Appeal proceeded to assess the costs on the basis of whether they were fair and reasonable under paragraph 3 of the Solicitors’ (Non-Contentious Business) Remuneration Order 2009.

It was.

The test was set out in paragraph 96:

“The ultimate question on an assessment of non-contentious costs, taking into account the factors stated in the 2009 Order, is: what overall amount would it be fair and reasonable for the client to pay? As Morgan J said in Mastercigars v. Withers [2009] 1 WLR 881 at [102]:

Even if the solicitor has spent a reasonable time on reasonable items of work and the charging rate is reasonable, the resulting figure may exceed what it is reasonable in all the circumstances to expect the client to pay and, to the extent that the figure does exceed what is reasonable to expect the client to pay, the excess is not recoverable.”

While the client ought, as a matter of good professional practice, to have been told the level of fixed costs that would be recovered from the other side if the matter settled within the Portal, that did not necessarily make the bill unfair, and here it was not unfair.

There is no legal duty on a solicitor to obtain fully informed consent to charge more by way of base costs that was recovered from the third party.

Perhaps the most important paragraph is one that does not deal with the law at all:

“98. The Client in this case has never had any real or economic interest in the pursuit of this costly litigation. Only checkmylegalfees.com have such an interest. The Solicitors capped their fees voluntarily at a fair and reasonable level after the event, even if they ought to have told the Client what she would recover by way of fixed costs in the RTA portal, and even if they ought to have agreed in advance when they entered into the CFA to the cap they later applied voluntarily.”

As to the law, the Court of Appeal restated what has been the law for a long time, namely that the issue under Section 70(9) of the Solicitors Act 1974 is as to what sum the solicitor is demanding, and not what the original contractual liability may have been.

Here the client achieved no reduction from the sum that the solicitor ended up asking for, and therefore, the starting position is that the client must pay the full costs of her application, and the two appeals to the High Court and the Court of Appeal, unless there are special circumstances under Section 70(10) of the Solicitors Act 1974.

The Court gave full reasons for that statement of the law, in the case it heard, with the same Judges, immediately after the Belsner case.

That case is Karatysz v SGI Legal [2022] EWCA Civ 1388.

KARATYSZ

In Karatysz v SGI Legal [2022] EWCA Civ 1388

the issue was the amount of the solicitors’ statute bill, the relevance being that Section 70(9) of the Solicitors Act 1974 provides that the costs of assessment are paid by the solicitors if the amount of the bill is reduced by one fifth, but otherwise by the client.

The District Judge had determined that the bill was £2,731.90 but the High Court on appeal had held it to be £1,571.50.

If the District Judge was right, then the solicitors would have to pay all of the costs of the first hearing, the appeal to the High Court, and this appeal to the Court of Appeal; if the High Court was right, then the client would have to pay all of those costs.

Here, the Court of Appeal held that the High Court Judge was right, and therefore, the client had to pay all of the costs.

However, the Court of Appeal said that it intended in the judgment to make clear how solicitors should frame their statute bills in future, so as to avoid future costly disputes of this kind.

The Court of Appeal said that in Belsner, it had already stated that:

(i) it is unsatisfactory that solicitors like checkmylegalfees.com can adopt a business model that allows them to bring expensive High Court litigation to assess modest solicitors’ bills in cases of this kind, and that

(ii) the Legal Ombudsman scheme would be a cheaper and more effective method of querying solicitors’ bills in these circumstances.

Essentially, here, the Claimant client was bringing into play all of the original bill as compared with the sum which the solicitors actually sought from the client at the end of the day.

I have written on this principle elsewhere and I will do so again, but the main purpose of this write up is the significance of the comments in relation to bringing these claims in the High Court.

In simple terms, the amount of the bill is the amount demanded, and not the amount that the solicitor claims he had the right to charge.

Part of the argument here, which I will deal with on another occasion, was that as the success fee is limited by reference to the full solicitor and own client costs, those costs must be established, and therefore, it must be those full costs which form the basis on which the court decides whether or not the client has achieved a 20% deduction.

The Court of Appeal made the following helpful comment:

“35. In reality, the proper question might be more clearly phrased, in respect of the category or categories of costs being assessed, as “what is the total sum that the bill is demanding be paid to the Solicitors, whether or not all or part of that total sum has actually been paid?”. It matters not whether the costs charged in the bill have been paid or not, so long as that fact is made clear on the face of the bill. I also do not think that it matters that the costs stated have been paid in whole or in part by a third party, whether insurer or not, again so long as that fact is clearly stated on the face of the bill.”

The Court of Appeal then had this to say about the fact that this and similar matters are being brought in the High Court:

“45. The Client allowed checkmylegalfees.com to bring this costly case on her behalf, when she had almost nothing to gain. As Lavender J demonstrated at [42], she recovered £177.50 before DJ Bellamy, which was all that was really at issue except massive sums by way of costs. The process whereby small bills of costs are taxed in the High Court is to be discouraged. It is far more economic to use the Legal Ombudsman scheme which is a cheaper and more effective method of querying solicitors’ bills in these circumstances. Moreover, whilst it has not been necessary to decide whether there were “special circumstances” in this case under section 70(10), because the Client has not succeeded on her appeal, there remains a lesson to be learned from this case. Firms such as checkmylegalfees.com and their clients should be in no doubt that the courts will have no hesitation in depriving them of their costs under section 70(10) if they continue to bring trivial claims for the assessment of small bills to the High Court, even if those bills are reduced on the facts of the specific case by more than one fifth under section 70(9). The critical issue is and always will be whether it is proportionate to bring this kind of case to the High Court. In this case, it was not.”

The Court of Appeal then went on to give guidance as to how statute bills, or what it said should from now on be referred to as statutory bills be drawn.

Properly drawn bills ought in future to state the agreed charges and/or the amounts that the solicitors are intending by the bill to charge, together with their disbursements.

They should make clear what parts of those charges are claimed by way of

(i) base costs;

(ii)  success fee (if any), and

(iii) disbursements.

The bill ought also to state clearly:

(i) what sums have been paid, by whom, when and in what way (i.e. by direct payment or by deduction),

(ii) what sum the solicitor claims to be outstanding, and

(iii) what sum the solicitor is demanding that the client (or a third party) is required to pay.

Comment

These decisions are of enormous practical importance for solicitors, and are extremely welcome and will be applauded by probably all but two law firms in the country.

I will be presenting a Zoominar on these cases next Thursday, 3 November 2022 at 4.00 – 5.00pm. £50 plus VAT for as many people as you want. Recording available whether or not you can attend. Please book here.

CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022 – DEADLINE 12 NOON TODAY

Part 4 – Consequences of the extension of Fixed Recoverable Costs

Here is my response.

RESPONSE TO CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022

Part 4 – Consequences of the extension of Fixed Recoverable Costs

4.1 To the extent you have not already commented on this point, what impact do the changes to fixed recoverable costs have on the issues raised in parts 1 to 3 above?

Costs budgeting is not required, obviously, in cases subject to Fixed Recoverable Costs, and Guideline Hourly Rates have no application in relation to such cases either.

The existing Fixed Recoverable Costs scheme, and the very substantial extension in April 2023 both deal with pre-issue costs.

Consequently, Fixed Recoverable Costs eliminate the need to consider any of the issues raised in Parts 1-3 above, which is a very significant benefit of Fixed Recoverable Costs.

Fixed Recoverable Costs should be extended to all civil litigation without exception.

4.2 Are there any other costs issues arising from the extension of fixed recoverable costs, including any other areas in which some form of fixed costs or cost capping scheme may be worthy of consideration? If so, please give details.

As stated above, Fixed Recoverable Costs should be extended to all areas of civil litigation.

Fixed costs are preferable to capped costs, in that capped costs still create uncertainty, and allow scope for argument about the level of costs within the cap, and still leaves open the possibility of assessment of costs, and the attendant delay and expense.

4.3 Should an extended form of costs capping arrangement be introduced for particular specialist areas (such as patent cases or the Shorter Trials Scheme more generally)? If so, please give details.

As stated above, fixed costs are preferable to capped costs, but capped costs are better than no costs control at all.

One obvious area, currently heavily abused, is Solicitors Act 1974 challenges, where there are open, generally indemnity costs, even on the most trivial of claims.

Fixed costs should be introduced here as a matter of urgency, and generally I see no reason why Part 8 applications should be excluded from the Fixed Costs Regime.

CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022 – DEADLINE 12 NOON TODAY

Part 3 – Costs Under Pre-Action Protocols/Portals and The Digital Justice System

Here is my response.

RESPONSE TO CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022

Part 3 – Costs Under Pre-Action Protocols/Portals and The Digital Justice System

3.1 What are the implications for costs associated with civil justice of the digitisation of dispute resolution?

Digitisation always leads to an increase in costs, as effectively the work has to be done twice, that is taking the information and then uploading it.

There are also significant extra costs in terms of maintaining the relevant software etc.

3.2 What is the impact on costs of pre-action protocols and portals?

3.3 Is there a need to reform the processes of assessing costs when a claim settles before issue, including both solicitor own client costs, and party and party costs?

3.4 What purpose(s) does the current distinction between contentious business and non-contentious business serve? Should it be retained?

I can deal with these together.

A key issue concerns assessing costs before court proceedings begin, and a recognition that in an age of portals, protocols and digital justice, whatever that means, there is not such an obvious point where the Rubicon is crossed, and proceedings are issued.

For example, in the existing portal system for personal injury work, do proceedings begin when:

i. The Claim Notification Form is lodged on the portal; or

ii. when Stage 3 is engaged, and a court fee paid; or

iii. only when the matter drops out of the process and substantive Part 7 proceedings are issued?

Pre-issue work is non-contentious, but becomes retrospectively contentious once proceedings are issued, which is why in a matter settled pre-issue there needs to be a contractual provision for costs, e.g.:

“The defendant will pay the claimant’s reasonable costs to be assessed if not agreed.”

What is, or is not, contentious, or a dispute, was considered recently by the Supreme Court in

Bott & Co Solicitors Ltd v Ryanair DAC [2022] UKSC 8 (16 March 2022)

and remains to be ruled upon by the Court of Appeal in the seemingly endless saga of

Belsner v Cam Legal Services Ltd [2020] EWHC 2755 (QB)

In the absence of an entitlement to costs pre-issue, there is an incentive to issue, which goes against current Government and Judicial thinking, partly, or even mainly, because of the shortage of judges and resources.

That is a different issue from the desirability of certainty in relation to costs where matters are resolved through a quasi-Judicial pre-issue portal process.

Both the existing personal injury pre-action process, and the general civil litigation fixed recoverable costs scheme from April 2023, provide an entitlement to fixed costs where the matter is settled pre-issue.

However, there is a fundamental difference between personal injury work and other civil litigation, in that Qualified One-Way Costs Shifting means that an unsuccessful personal injury claimant generally does not pay the successful defendant’s costs.

In general civil litigation they do. Creating that liability pre-issue means that a putative claimant who does not go ahead with the claim is liable for the un-sued defendant’s costs.

Let us take an example.

It is April 2023. Charlie Claimant writes the email from hell to Denise Defendant claiming £100,000 and saying that it is a Band 4 case with maximum fixed recoverable costs.

Denise Defendant politely tells Charlie Claimant to go away and no further action is taken.

Under the new system the putative claimant has to pay the un-sued defendant £16,000 (see page 106 of Lord Justice Jackson’s Supplemental Report: Fixed Recoverable Costs).

That will come as a shock to some of the more aggressive litigators and their clients, and it throws up many issues.

When does liability crystalize?

In issued proceedings it would be on defeat, or on Notice of Discontinuance. Is there to be a form of pre-action strike out, so that if no action is taken for three months or whatever, then the inactive claimant becomes liable for costs?

Can a claimant keep it jogging along – at no extra costs as they are fixed – for the six-year limitation period?

What about a Litigant in Person who writes an email with it never occurring to them that they are thus engaging in a cost bearing litigation process?

Where does the system draw a line between, at one end, a mild Letter of Complaint, and at the other a full-blown Letter before Action?

The risk is that a digital process will be seen as a form of litigation and have the consequences of deterring parties from engaging and thus have exactly the opposite of the intended effect.

Small businesses in particular are concerned about this.

At the Civil Justice Council meeting there was a general view that there should be pre-issue costs liability, but no consensus on where to draw the line.

Whatever happens, it is hard now to justify the distinction between contentious and non-contentious business, and surely it is time that these terms were scrapped.

Likewise, the indemnity principle, which in any event has no application in fixed recoverable costs cases – see

Butt v Nizami [2006] EWHC 159 (QB)

The related matters of costs under pre-action protocols and portals and the digital justice system on the one hand, and fixed recoverable costs for pre-issue work whether the matter becomes issued or not, are of great importance if the desire is to have matters settled pre-issue.

At present there are more questions than answers.

CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022 – DEADLINE 12 NOON TODAY

Costs Budgeting

Here is my response.

RESPONSE TO CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022

Part 1 – Costs Budgeting

1.1 Is costs budgeting useful?

Costs budgeting has some use, and it does act as a discipline on parties, and lessens the need for detailed assessment.

However, it achieves nothing that could not be achieved much more effectively by the extension of Fixed Recoverable Costs to all civil work.

1.2 What if any changes should be made to the existing costs budgeting regime?

It should be extended to civil claims above £10 million. Excluding such cases makes no sense at all; it is the equivalent of having a full budget for constructing a shed, but no budget at all for building a house.

The extension of Fixed Recoverable Costs in April 2023 to virtually all Civil claims valued at £100,000 or less will dramatically reduce the number of cases where budgeting applies.

Lord Justice Jackson’s original proposal, in his speech before his Report was published, was that Fixed Recoverable Costs should be extended to virtually all civil claims valued at £250,000 or less, and in the Business and Property Courts claims up to that value will be subject to a costs capping pilot.

I would scrap now costs budgeting on all cases valued at £250,000 or less on the basis that the Fixed Recoverable Costs regime up to £100,000 gives the court sufficient guidance in relation to claims up to £250,000.

In other words the Fixed Recoverable Costs figures, meticulously worked out, can act as a guide for parties and the courts in claims up to £250,000.

This also deals with the issue of incurred costs, in the sense that the Fixed Recoverable Costs scheme covers all stages, including pre-issue, and therefore, is much more valuable than a court budgeting the matter halfway through.

This would obviously greatly reduce the pressure on the courts, and the time and costs to lawyers and their clients.

The time and costs of budgeting is disproportionate in lower-value cases, as it does not take significantly less time to prepare a costs budget for a claim worth £200,000, as compared with one worth, say, £1 million.

This change can be progressive, in that if Fixed Recoverable Costs are extended to claims up to £250,000, which is expected to happen in due course, then costs budgeting could be scrapped for any claim valued at £500,000 or less.

1.3 Should costs budgeting be abandoned?

Not at the moment, but we should work toward its elimination by the spread of Fixed Recoverable Costs to all civil litigation in due course.

1.4 If costs budgeting is retained, should it be on a “default on” or “default off” basis?

It should be on default-off basis, that is the parties and the court would need to show justification for costs budgeting in any given case.

1.5 For cases that continue within the costs budgeting regime, are there any high-level changes to the procedural requirements or general approach that should be made?

I believe that I have dealt with these points above.

There is a central flaw in the concept of budgeting, in the sense that it is a budget to be paid by someone else.

Consequently, there is a perverse incentive to make the budget as high as possible, so in a sense it becomes the reverse of a budget.