Kerry Underwood

2017: SOME PREDICTIONS

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Joan, who once produced six Nettleweed and Avocado teabags from her handbag when they had run out of coffee at the Isles of Scilly North Property Solicitors Organisation Subcommittee, will be the Law Society Gazette’s Legal Personality of the Year.

The Association of British Insurers welcomes the new £10 million fee for issuing personal injury claims.

Motor insurance premiums do not fall.

The Briggs Court online McKenzie Friend scheme runs into trouble when the Digital Court accesses the wrong Friend site and gets some digital content it did not expect.

The Ministry of Justice expresses surprise that court fee income has dropped, not risen, since the introduction of a minimum £25 million issue fee.

Cameras pick out confidential papers being carried by the Lord Chancellor. Legal commentators speculate on the significance of Janet and John and Noddy goes to the High Court.

Motor insurance premiums do not fall.

The MOJ announces reverse damages – the more you are injured the more you have to pay the insurance company.

The Daily Mail intervenes in the Supreme Court to argue that small men with little moustaches, not Parliament, should make the law.

Following the new £1 billion court fee only Bolton County Court has any cases.

Bolton Council is asked to explain why it has spent the entire UK budget on court fees for Asons.

Police struggle to control a mass demonstration of lawyers chanting “Bring back Osborne and Grayling”.

Legal aid is reintroduced for everyone, provided that they pay the £10 billion court fee themselves.

Queen’s Park Rangers will not be promoted.

Motor insurance premiums do not fall.

Written by kerryunderwood

December 7, 2016 at 9:08 am

Posted in Uncategorized

AWARDING COSTS OF THIRD PARTY FUNDING – HAS THE HIGH COURT JUST REINTRODUCED RECOVERABILITY OF SUCCESS FEES?

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In Essar Oilfield Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC 2361 (Comm)

 

the Commercial Court, a division of the High Court, in refusing to set aside part of an arbitrator’s award held that an arbitrator’s general power to award costs included the power to award the costs of third party funding.

 

In an International Chamber of Commerce Arbitration, the arbitrator ordered Essar to pay costs on an indemnity basis, including £1.94 million which Norscot had paid to a third party funder.

 

The arbitrator held that Essar had deliberately put Norscot in a position where it could not fund the arbitration from its own resources and therefore it was reasonable for Norscot to obtain third party funding.

 

That funding consisted of an advance of around £650,000.00 on the basis that if successful, Norscot would repay either 300% of that sum, that is £1.94 million, or 35% of the damages.

 

Essar challenged the award on the basis of serious irregularity under Section 68(2) (b) of the Arbitration Act 1996 but the High Court rejected that challenge and held that the third party costs were recoverable in principle under Section 59(1) (c) of the Act and the relevant International Chamber of Commerce Arbitration Rules.

 

The High Court held that the third party costs fell within the definition of “other costs” as referred to in Section 59(1) (c).

 

The court said that as a matter of language, context and logic, “other costs” could include the costs of obtaining litigation funding, given that they were related to, and for the purpose of, the arbitral proceedings.

 

It was entirely a matter of discretion whether a tribunal awarded such costs in any given case.

 

The judge expressly distinguished the position under the Civil Procedure Rules, where there is no similar provision enabling a court to order a losing party to pay “other costs” as compared with legal costs.

 

Thus the general view is that this case has no application to ordinary litigation.

 

I am not so sure.

 

Generally the position in English law has been that the cost of financing litigation has been irrecoverable as an item of costs, and is rather reflected in an award of interest – see for example Motto v Trafigura Ltd [2012] 1WLR 657 for comments on the fact that the cost of funding is not recoverable.

 

See also Simcoe v Jacuzzi [2012] 1 WLR 2392 which explains that the purpose of an award of interest on costs is to compensate for the cost of financing that litigation.

 

However, until this case, everyone would have said the same about arbitration awards. It is worth noting that this decision was made under an Act of Parliament of the United Kingdom, namely the Arbitration Act 1996 and I see no reason why a court should not construe the Civil Procedure Rules in a way consistent with that Act of Parliament.

 

After all there can be no logic whatsoever in a matter which could be referred to arbitration, or could be heard by the conventional court system having entirely different rules as to what costs are recoverable and what costs are not recoverable.

 

Also, the statement that I set out above, which reflects the general view, that the cost of funding has never been recoverable in English law is not in fact correct. Success fees and After-the-Event insurance premiums clearly represented the cost of funding, rather than funding itself, and were recoverable between 2000 and 2013, because an Act of Parliament said so.

 

It is true that recoverability has been repealed by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, but it does show that Parliament was prepared to allow recoverability of the cost of funding.

 

Nowhere in English law is there any specific prohibition of recovery of the cost of funding and as we have seen the Arbitration Act 1996, as interpreted by the High Court in this case, specifically allows, in appropriate cases, the recovery of the third party funder’s fee from the losing party.

 

Commentators argue that the difference between arbitration and the Civil Procedure Rules is that Section 59(1)(c) of the Arbitration Act 1996 allows for the recovery of “the legal or other costs of the parties”, whereas in the Civil Procedure Rules there is no such reference to “other costs”.

 

Incidentally the fact that the Arbitration Act provides for “the legal or other costs of the parties” suggests that you cannot recover both legal costs and the costs of funding. If that was the case the wording should be “the legal and other costs of the parties”.

 

Thus it is strongly arguable that Parliament intended that phrase to mean, essentially, the costs of litigants in person.

 

Leaving that aside, let us look at the definition of costs in CPR 44.1(1). It reads:-

 

“‘costs’ includes fees, charges, disbursements, expenses, remuneration, reimbursement allowed to a litigant in person under rule 46.5 and any fee or reward charged by a lay representative for acting on behalf of a party in proceedings allocated to the small claims track;”

 

The new Shorter Oxford English Dictionary defines “expense” in the following terms:-

 

“1. The action or an act of expending something; the state of being expended; disbursement; consumption; loss;

 

  1. Money expended; an amount expended;

 

  1. Burden of expenditure; the charge or cost involved in or required for something; the charges etc. incurred by a person in the course of working for another or undertaking any enterprise; the amount paid in reimbursement.”

It seems to me beyond doubt that “expenses” could in an appropriate case include the cost of third-party funding.

 

Hence my comment in my original piece that if a success fee is in fact called a third-party funder’s fee then potentially recoverability is back.
The facts of Essar were unusual and the arbitrator was extremely critical of the conduct of the litigation by the losing, and therefore paying party and that was the main basis for the award of the third-party funder’s fee.

 

However if those facts arose in an appropriate case before the ordinary civil courts, then my view is that that court would have the power to make the same order.

 

At paragraph 69 of the judgment here the High Court said:-

 

“As a matter of justice, it would seem very odd and certainly unfortunate if the arbitrator was not entitled under s.59(1) (c) to include the costs of obtaining third party funding as part of “other costs” where they were so directly and immediately caused by the losing party.”

 

What would be wrong with the following statement in a judgment arising from ordinary civil litigation rather than arbitration:-
“As a matter of justice, it would seem very odd and certainly unfortunate if the judge was not entitled under CPR 44.1 to include the costs of obtaining third-party funding as part of “charges” or “expenses” where they were so directly and immediately caused by the losing party.”

 

Comment

 

Has the High Court just reintroduced recoverability of additional liabilities? If so, call it a third party funder’s fee and not a success fee, and hey-ho recoverability is back

 

Written by kerryunderwood

December 6, 2016 at 9:16 am

Posted in Uncategorized

2016: SOME PREDICTIONS

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As 2016 comes to an end – here is my post from 30 December 2015 with my predictions for 2016.
Not far off!

Kerry Underwood

Fred, who once stepped in at short notice to take the minutes at the Rutland West Junior Lawyers’ Division Social Events subcommittee, will be the Law Society Gazette’s Legal Personality of the year.
Approximately 638 lawyer wannabees who could not be bothered passing the exams will announce new systems of delivering law.
Each will be a game changer.
Each will be reported in banner headlines by the Law Society’s Gazette.
Each will be run by people who have failed and failed again running legal services providers.
Each will fail.
10 000 firms of solicitors will carry on serving their communities and that service will hardly get a column inch in the legal press.
Claimant personal injury lawyers will huff and puff about the small claims limit rise and everything else but in fact will quietly readjust, refocus their businesses and carry on successfully.
Personal injury defence firms will be in very…

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Written by kerryunderwood

December 6, 2016 at 6:23 am

Posted in Uncategorized

A Christmas Carol by the High Court

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As the Supreme Court is about to hear the appeal against the Administrative Court’s refusal to judicially review Employment Tribunal fees, this post I wrote at the time needs another airing.

Kerry Underwood

As the Supreme Court is about to hear the appeal against the Administrative Court’s refusal to judicially review Employment Tribunal fees, this post I wrote at the time needs another airing.

Scene: 

Any solicitor’s office in the country (except the Strand).

Solicitor:

So, Ms Peasant you have been sacked because you are pregnant and you have come in for a free interview.  Typical of your sort if I may say so.

Client: 

It’s so unfair.  I want to bring a claim.  You do no win no fee don’t you?

Solicitor: 

WE do. The State doesn’t.  Tribunal fees are £1,200.00 win or lose.

Client: 

I haven’t got that sort of money!  I am unemployed.  I’ve been sacked.

Solicitor: 

Come, come now.  I am an employment lawyer.  I know the minimum wage is £6.50 an hour.  Easy to remember; it is one hundredth of what I charge – 200 hours work and you…

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Written by kerryunderwood

December 6, 2016 at 6:21 am

Posted in Uncategorized

BREXIT & THE SUPREME COURT

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This week the Supreme Court considers the Government’s appeal against the decision of the Administrative Court on the issue of the United Kingdom leaving the European Union, specifically whether the triggering of Article 50 is a matter for Parliament and not the exercise of the Royal Prerogative on advice of the Government.

 

That anyone should think otherwise is extraordinary. That a matter so important, whatever your view and whatever your vote in the referendum, should be decided other than by Parliament, would render Parliament, and therefore elections, pointless.

 

Many of those who voted to leave the European Union did so in order to restore sovereignty to the Westminster Parliament, not to hand over dictatorial powers to ministers.

 

I am in that number.
The Administrative Court was right on every point.

 

I trust that the Supreme Court will uphold that decision 11 – 0.

 

No doubt the decision will be long and reasoned, but it need not be. Here is my draft:-

 

“The 11 judges of the Supreme Court unanimously uphold the decision of the Administrative Court that Parliament should decide on how and when the United Kingdom leaves the European Union.

 

It is inconceivable that any rational person or body respecting our system of Parliamentary democracy could think otherwise.”

 

I repeat that I voted to leave the European Union because I wanted power restored to Westminster, and not to be in Brussels and certainly not in Buckingham Palace upon the advice of ministers.

 

 

Next year I will be trekking 160 kilometres through the Sahara Desert to raise money for the Lord’s Taverners charity and EY Foundation. If you would like to show your support and make a donation please click here.

Written by kerryunderwood

December 5, 2016 at 8:39 am

Posted in Uncategorized

THE LEGAL CHRISTMAS SONG CONTEST: RAISING MONEY FOR CHARITY – GET THERE, GET THE T-SHIRT

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Civil Litigation Brief

What is the best title for a legal Christmas song?  In the run up to Christmas I am running a contest to find out.  Because it is Christmas we can also raise money for two charities.

This is likely to be the award of the year.  So get your entries in early (and often) so we can help the lives of young people.

THE CONTEST: THE BEST LEGAL CHRISTMAS SONG

Simple.  Either tweet, or put in the comments section of this blog below, the best title for a legal Christmas song.  The twitter hashtag is #lawsongs

The idea comes from a Twitter contest (ran for fun) last week to find the best classic novel that could arise from a boundary dispute.  The winner was “Fence and Fencibility”   (You may be getting the level).

THE WINNER – GETS THE T-SHIRT

The winner will get a specially designed T-Short “Legal Christmas…

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Written by kerryunderwood

December 5, 2016 at 6:58 am

Posted in Uncategorized

SOLICITORS’ DISBURSEMENT LOANS NOT COVERED BY PROFESSIONAL INDEMNITY INSURANCE

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In Impact Funding Solutions Ltd v AIG Europe Insurance Ltd [2016] UKSC 57

 

the Supreme Court held, by a 4:1 majority that the professional indemnity insurers for solicitors were not liable for loans provided by a funder to finance disbursements incurred by the clients of the solicitors firm.

 

In doing so the Supreme Court overturned the decision of the Court of Appeal which had held that the insurers were liable on the basis that the claim by the funder related to the solicitors’ obligations to their clients and not to obligations personal to the solicitors.

 

The Supreme Court reinstated the decision of the Trial Judge, which had been overturned by the Court of Appeal.

 

The claimant, the funder, relied on the Third Parties (Rights against Insurers) Act 1930, and sought to enforce against the insurers a judgment that they had obtained against the firm of solicitors for being in breach of a funding agreement that the funder had entered into with the solicitors and their clients.

 

The solicitors had become insolvent.

 

The solicitors’ professional indemnity insurance excluded, as is normal, any liability on the insurer’s part for claims or losses arising out of breach by the solicitors of the terms of any contract for the supply to, or use by, the solicitors of goods or services in the course of the solicitor’s practice.

 

The Supreme Court held that that exclusion applied here and that the funding arrangement was in reality a contract for the provisions of services to the solicitors within the meaning of the exclusion clause and this finding accorded with the purpose of the exclusion considered in the context of the relevant regulatory background.

 

The true position was that the loans provided by the funder were made for the benefit of the solicitors as they enabled the solicitors to offer additional services to clients and enabled them to act for those clients.

 

As the Supreme Court said about the case:-

 

“It raises a legal question of general public importance both because it concerns a term of an insurance policy, which is, or is similar to, terms in all professional indemnity insurance policies for solicitors in England and Wales and also because it is important to the business model by which many solicitors have funded litigation since state-funded legal aid for civil cases was significantly reduced.” (Paragraph 1).

 

Comment


 

This decision must be right.
Professional indemnity insurers are just that.

 

They are not there to cover bad business decisions made by solicitors or to reimburse them for running their businesses badly.

 

One wonders what the Court of Appeal were thinking of.

 

Written by kerryunderwood

December 1, 2016 at 11:02 am

Posted in Uncategorized

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