Kerry Underwood

PROFESSIONAL NEGLIGENCE: SUPREME COURT RULING

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Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Perry v Raleys Solicitors [2019] UKSC 5 (13 February 2019)

the Supreme Court restored the decision of the trial judge and held that the Court of Appeal had been wrong to overturn the findings of fact of the trial judge.

Here the claimant, a retired miner, made a Vibration White Finger claim under the government scheme and subsequently sued his former solicitors, the defendant here, for failing to claim certain heads of damages.

The trial judge found that the claimant had failed to establish causation.

The Court of Appeal overturned that decision and awarded damages, but the Supreme Court said that the claimant had failed to establish to the requisite high degree any of the grounds on which the Court of Appeal concluded that this was ”one of those rare cases where it was appropriate to reverse the trial judge’s findings on the issues of fact.”

The Supreme Court gave guidance as to the proper approach when considering causation in loss of chance cases and recognised the difficulties in counter-factual cases, that is where the court has to determine what would have happened if a professional person had complied with her or his duty of care.

Cases where the assessment of damages depends on the likelihood of future events, mean that the court will sometimes depart from the ordinary rule that facts must be proved on the balance of probabilities, but none of these issues affects the basic requirement in negligent cases for proof of loss caused by the breach of duty.

The case of  

Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602

establishes a sensible, fair and practicable dividing line between what must be proved, that is what the client would have done, on what is better assessed by evaluation of a lost chance, that is where the issue is dependent on what others would have done.

The claimant needed to show that, if properly advised by his solicitors, he would and could have made an honest claim and the relevant facts did not fall within “futurity or counter-factuality” and so had to be proved on the balance of probabilities and the solicitors were entitled to test them.

Comment

No new legal principle here, and hard to see why the matter was allowed to proceed to the Supreme Court.

Basically, all it does is to re-state that it will be very rare to justify overturning a trial judge’s findings of fact.

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Written by kerryunderwood

February 15, 2019 at 9:17 am

Posted in Uncategorized

SOLICITORS DENIED LIEN; THE RYANAIR CASE

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The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Bott & Co Solicitors Ltd v Ryanair DAC [2019] EWCA Civ 143 (12 February 2019)

the Court of Appeal has upheld the High Court’s decision that Ryanair was entitled to respond directly to passengers seeking compensation through solicitors, and had no liability to pay solicitors who had assisted in the claims.

Since the High Court ruling the Supreme Court had given judgment in

Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21 .

The High Court Judge here had been bound by

Meguerditchian v Lightbound [1917] 2 KB 298

to hold that mere negotiation by a solicitor resulting in recovery for a client could not give rise to a lien, but rather there had to be some form of proceedings, litigation or arbitration, but in Gavin Edmondson the Supreme Court had said that the fact that that no proceedings had been issued was not fatal to the equitable right of the solicitor.

Here the Court of Appeal said that the distinction between cases with or without proceedings could not survive the decision of the Supreme Court in Gavin Edmondson, and the boundary had shifted.

The key to fixing the boundary was to examine why equity will recognise a solicitor’s right to be paid and the courts had stated that access to justice lay behind the development of the principle.

Here, the Court of Appeal said that although formal proceedings were no longer necessary, the solicitor’s services must still be recognisable as litigation services, promoting access to justice.

This would include conducting litigation or contemplate litigation and would encompass proceedings under various protocols, such as the portal process as in Gavin Edmondson.

However, the Court of Appeal found that the flight compensation claim scheme was largely mechanical and formulaic and did not constitute litigation services required to promote access to justice.

The Court of Appeal held that passengers are entitled to use third parties to assist with their claim, but must go to the Ryanair claims process in the first instance.

In Gavin Edmondsonthe Supreme Court said:

“58. It is simply wrong in my view to seek to distil from those cases a general principle that equity will protect solicitors from any unconscionable interference with their expectations in relation to recovery of their charges.”

Here the Court of Appeal quoted from the Supreme Court’s decision at Paragraph 1 setting out the basis of the court’s recognition of a solicitor’s lien:

“It is a judge-made remedy, motivated not by any fondness for solicitors as fellow lawyers or even as officers of the court, but rather because it promotes access to justice. Specifically it enables solicitors to offer litigation services on credit to clients who, although they have a meritorious case, lack the financial resources to pay up front for its pursuit. It is called a solicitor’s lien because solicitors used to have a virtual monopoly on the pursuit of litigation in the higher courts. Nothing in this judgment should be read as deciding whether the relaxation of that monopoly means that the lien is still limited only to solicitors.”

Although this is an equitable remedy, the Court of Appeal considered that the statutory definitions of litigation captured the essence of the principle underpinning the right to a lien.

The court quoted section 119 of the Courts and Legal Services Act 1990 which defines “litigation services” as

“any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or any contemplated proceedings, to provide.”

In section 87 of the Solicitors Act 1974, “contentious business” is defined as:

“business done … in or for the purposes of proceedings begun before a court or arbitrator”.

The Court of Appeal said that this would include proceedings under one of the many protocols that now exist, as well, potentially, in Alternative Dispute Resolution, and the court made the point that ADR by definition only comes into play when there is a dispute to resolve.

Here, the Court of Appeal said that unless and until Ryanair refuses a claim, there is no dispute.

In

Gaynor v Central West London Buses Ltd. [2006] EWCA Civ 1120

Dyson LJ said at [17]:

“In my judgment, “contemplated proceedings” are proceedings of which it can be said that there is at least a real likelihood that they will be issued. Until the potential defendant disputes the claim, it is not possible to say that proceedings are contemplated. Advising a client as to whether he or she has a good prima facie case and writing a letter of claim are not enough to amount to litigation services.”

The Court of Appeal here went onto say:

“58.  The making of a claim under Regulation 261 is largely mechanical and formulaic. It requires little more than the flight distance and the length of the delay, in addition to details of the ticket purchase. The amount of compensation that a delayed passenger is entitled to receive is fixed by the Regulation. It is not a case in which the quantum of damages has to be evaluated. Bott’s evidence is that the “vast majority” of claims do not require the issue of court proceedings; and it claims a 99 per cent success rate. I do not consider that the services provided by Bott in processing that vast majority can be said either to be “litigation services” of the kind that Lord Briggs must have had in mind; or to be required in order to promote access to justice, unless and until Ryanair disputes a claim. In addition, to recognise the existence of an equitable right would place a solicitor in a far more privileged position than a claims handler performing the same services. I cannot see any justification for that; especially since the rationale for the equitable right is not motivated by any fondness for solicitors. If a claim is disputed, different considerations will arise.

59.       In my judgment, therefore, where Bott simply writes a letter of claim or assists a client to complete the on-line form, and the claim is paid in response to the letter or the form, it is not entitled to an interest in the compensation that equity will protect. I would reject this ground of appeal.”

Comment

The Senior Judiciary need to think through rather more carefully the whole issue of access to justice and litigation and how it may be delivered.

At one level, lawyers are being encouraged to use portals and follow protocols and do everything to avoid litigation, and yet Bott & Co Solicitors Limited appear to be being punished for using such a scheme, and for making significant profits from it.

What on earth is the relevance to the legal principles of the fact that Bott’s income from claims against Ryanair was over £100,000 a month? (see Paragraph 16 of the judgment).

What is the relevance of the number of claims that Bott were handling, except to show the success of the scheme and the attraction to members of the public?

So, at one level, we are consistently urged to be efficient and be a business, with the provision of legal services opened up to every Tom Dick and Harry, but when a firm does exactly that they are punished by the courts by being refused a lien.

I can see no logical difference between the pre-action road traffic portal, where 99% of cases are settled, and the scheme operated by Bott & Co Solicitors Limited.

This decision should be overturned by the Supreme Court.

I deal with the decision of the High Court and the Supreme Court in my blogs –

COURT REFUSES TO GRANT SOLICITOR LIEN FOR COSTS ; and

SOLICITORS’ LIENS, RETAINERS, CFA LITE AND UNCONSCIONABLE CONDUCT – THE HAVEN INSURANCE COMPANY CASE

Written by kerryunderwood

February 15, 2019 at 8:18 am

Posted in Uncategorized

LEGAL FEES SETTLEMENT WAS NOT A CONTENTIOUS BUSINESS AGREEMENT

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Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Whitaker v Richard Slade & Company Plc [2018] EWHC B17 (Costs)

a High Court Master held that an agreement in relation to a specific sum for work done was not a Contentious Business Agreement and, if anything, was of benefit to the claimant client rather than the solicitors.

The former client issued proceedings, seeking a detailed assessment of £166,671.29.

The sum owed was in respect of fees for legal services to 31 December 2016, pursuant to a retainer entered into in 2014, which provided for hourly rates and monthly billing.

In March 2017 the parties entered into a Deed of Arrangement in which the client agreed to pay the sum of £86,000 for all the legal costs incurred.

That agreement related to sums due from the claimant to the defendant for work done up to the date of the agreement.

The claimant had been encouraged to obtain independent legal advice in relation that agreement.

The Master held that the agreement was not a Contentious Business Agreement.

The claimant had contended that the Agreement was an agreement to make interim payments and that the sums remained subject to assessment and in the alternative that it must be a Contentious Business Agreement within the meaning of section 59 of the Solicitors Act 1974, and should be set aside as being unfair and unreasonable.

Its natural meaning was that it provided for payment of a fixed sum for legal services to the end of 2016 without further assessment.

The right to assessment under section 70 of the Solicitors Act 1974 stems from service of the bill of costs and a characteristic of a business agreement, whether contentious or non-contentious, under the Act is that there is no right of assessment, so the sums due can be recovered as an ordinary debt, unless the agreement is set aside.

The Master rejected the client’s claim that if the Agreement was not treated as a request for payment on account it must be a Contentious Business Agreement.

It does not follow that if an agreement does not preserve the right to assessment, it must be a Contentious Business Agreement.

Some agreements between solicitors and clients are outside of the scope of section 59.

The Master said that if he was wrong, and the agreement was a Contentious Business Agreement, then it was fair and reasonable and should not be set aside.

The bill clearly identified the work done and who it was done by.

The client was an experienced businessman and a sophisticated client who had taken independent legal advice and knew that the compromise would preclude assessment.

The hourly rates were well below ordinary commercial rates for the type of work and the discount involving a substantial write-off of the costs and was favourable to the client and setting it aside would result in unfairness to the solicitor.  

Written by kerryunderwood

February 15, 2019 at 6:50 am

Posted in Uncategorized

SECURITY FOR DAMAGES AS CONDITION OF RELIEF FROM SANCTIONS

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In

Gama Aviation (UK) Ltd v Taleveras Petroleum Trading DMCC [2019] EWCA Civ 119 (07 February 2019)

the Court of Appeal overturned a decision of the Business and Property Courts that the defendant should pay £1 million security as a condition of being allowed to rely on a witness statement served just a few days before the hearing, failing which judgment would be entered against it for the full sum claimed with interest and costs.

If the defendant was unable to pay, then it would have been in a worse position than if the summary judgment application had been heard without the statement it wished to rely on, as at least the court would have had to consider the merits of the claim.

Here, the judge lost sight of the caution which the court must exercise before making such an order.

Furthermore the sanction of judgment being entered in the absence of the security was disproportionate.

The penalty for failing to provide the security, had that order been appropriate, which it was not, was the inability to rely on the witness statement.

The judgment contain a helpful explanation of the relevant case law.

Written by kerryunderwood

February 14, 2019 at 10:04 am

Posted in Uncategorized

INSOLVENCY ROUND-UP

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

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

Committal Proceedings against Bankrupt: Permission not needed

In

Bayliss v Saxton [2018] EWHC 3365 (QB)

the Queen’s Bench Division of the High Court held that section 285(3)(b) of the Insolvency Act 1986 did not apply to committal proceedings for contempt of court on the grounds of interference with due justice.

Section 285(3)(b) prevents proceedings, including criminal proceedings, being brought against a bankrupt or insolvent company without the permission of the court.

Here, the proceedings for committal had been brought on the ground that the bankrupt had continued litigation on behalf of his deceased mother for several years maintaining that she was alive.

The court distinguished the decision of the House of Lords in

 Re Smith (a Bankrupt) [1990] 2 AC 215

where the court had held that the court could stay committal proceedings for non-payment of rates as a type of “legal process” under section 285(1) of the Insolvency Act 1986.

Here the court held that section 285(1) concerned the court’s discretion to stay existing proceedings against a bankrupt, whereas section 285(3) contains a precondition to the bringing of new proceedings against a bankrupt, and thus the subsections covered different areas.

In Re Smith the warrant of commitment was a direct means of enforcement of a debt, whereas the purpose of committal proceedings for contempt of court in the current case was very different.

This is believed to be the first authority on this point.

Unassessed Intervention Costs are Liquidated Sum for Insolvency Purposes

In

The Law Society (Acting Through the Solicitors Regulation Authority) v Blavo [2018] EWCA Civ 2250

the Court of Appeal held that unassessed costs of an SRA intervention constitute a debt for a liquidated sum under section 267(2)(b) of the Insolvency Act 1986.

Applying the approach adopted in

McGuinness v Norwich and Peterborough Building Society [2011] EWCA Civ 1286 (09 November 2011)

the Court Appeal held that Paragraph 13, Part II, Schedule 1 to the Solicitors Act 1974, which permits recovery of intervention costs as a statutory debt, creates a pre-ascertained liability.

The fact that the liability is in relation to solicitors’ fees does not bring into play the general principle that a solicitor’s claim for remuneration is an unliquidated sum, being a reasonable and fair amount for the work done.

An SRA intervention agent’s costs required no further act under the Solicitors Act 1974.

Paragraph 13 provided the mechanism for determining the amount.

Consequently the costs were a debt for a liquidated sum and the High Court should not have set aside the statutory demands under rule 6.5(4)(b) of the Insolvency Rules 1986.

Postscript

In a separate High Court judgment on 21 December 2018 John Blavo was ordered to pay the government £22.1 million after the court found it more likely than not that systemic fraud had taken place in legal aid claims, and that there was an endemic culture of dishonesty.

An audit by the Legal Aid Agency in 2015 showed claims for representation in mental health hearings in 24,658 cases, but only 1,485 actual hearings.

See –

 The Lord Chancellor v Blavo & Co Solictors Ltd & Anor [2018] EWHC 3556 (QB) (21 December 2018)

Stays and the Cross-Border Insolvency Regulations 2006

In

Bakhshiyeva v Sberbank of Russia and others [2018] EWCA Civ 2802 (18 December 2018)

the Court of Appeal considered the jurisdiction of courts under the Cross-Border Insolvency Regulations 2006(SI 2006/1030) to grant an indefinite stay on actions against a foreign debtor’s assets by creditors with English law claims.

It held, disagreeing with the High Court, that there was no absolute jurisdictional bar to it granting assistance to foreign insolvency proceedings where this would substantially affect the rights of creditors with English law claims under Article 21 of Schedule 1 to the Regulations.

There could be circumstances where, to a limited extent, it may be appropriate to use the Regulations to achieve the discharge or variation of English law rights and uphold foreign law.

For example the court could remit assets back to a foreign liquidator under Article 21(1)(e).

However it is wrong for the court to grant a permanent stay under Article 21, and thereby assist foreign insolvency proceedings, if it would

  • prevent English and Wales law creditors from enforcing English and Wales law rights as a result of a foreign insolvency process, as this would breach the common law rule that contractual obligations can only be discharged under the law applicable to that contract, known as the rule in Gibbs;
  •  purport to continue a stay beyond the end of the foreign restructuring proceedings.

The Court of Appeal considered the Regulations to be a procedural tool which was not to affect the rights of creditors and it would not be appropriate to grant relief under Article 21 as that would override the rule in Gibbs, which is part of the common law of England and Wales.

Co-workers and Whistleblowing

In

Timis and another v Osipov [2018] EWCA Civ 2321

the Court of Appeal held that co-workers’ liabilities for damages for detriment suffered by a whistleblower, within the meaning of section 47B of the Employment Rights Act 1996, included loss suffered as a result of dismissal within section 103A of the Act.

Generally damages for detriment do not include damages flowing from dismissal as there is a separate cause of action against the employer for dismissal.

However there is no cause of action against a fellow worker for unfair dismissal.

Consequently the Court of Appeal upheld the decision of the Employment Tribunal and the Employment Appeal Tribunal that the liability of a co-worker for detriment did extend to detriment and damages flowing from dismissal.

The liability will generally be joint and several as between the co-worker and the employer, as here, and in any event the employer will generally be vicariously liable for the co-worker’s actions as well.

However, where the employer is insolvent this gives the victim of whistleblowing the ability to enforce the whole damages award against the co-worker, who will of course not enjoy the limited liability that most companies have.

Thus an insolvent employer avoids the debt, which becomes the sole responsibility of the fellow worker, although there is no liability for the basic award in unfair dismissal cases.

The same applies in relation to all forms of discrimination claim under the Equality Act 2010.

I suspect that this is not quite what Parliament had in mind.

No Bankruptcy against Person with no Assets

In

Lock v Aylesbury Vale District Council [2018] EWHC 2015 (Ch) (09 July 2018)

the Chancery Division of the High Court held that a bankruptcy petition should not have been granted where the bankrupt had nothing, as the court should not make orders that serve no useful purpose, and thus allowed an appeal against the decision of the District Judge.

Section 266(3) of the Insolvency Act 1986 gives the court a general power, where appropriate, to dismiss a bankruptcy petition for any reason.

Here, the bankrupt had no income, and due to ill health, no ability to earn income, and had capital of less than £100 and rented her home from a social landlord.

The petitioner was well aware of her position.

In

Re Betts [1897] 1 QB 50

the Court of Appeal said that where there were no assets, and no prospect of any coming into existence, the court had a discretion to refuse to make a bankruptcy order if the only effect will be a waste of money and costs.

In

Re Field [1978] Ch 371

the Chancery Division of the High Court said that a person may indeed be too poor to be made bankrupt.

The petitioner submitted that the court had jurisdiction to make a bankruptcy order in circumstances where a bankrupt had no assets and where the only purpose of the order was to enable an investigation to take place into the bankruptcy affairs – see

Bell Group Finance (Pty) Limited v The Bell Group (UK) Holdings Limited [1996] BCC 505.

Furthermore, if there were no assets, then the court could rescind the bankruptcy order.

However the court here said:

In bankruptcy petitions of the present kind, however, founded upon unpaid council tax, it does seem to me that there is a burden upon a public authority, petitioning for a debtor’s bankruptcy, to at least raise a prima facie case that a bankruptcy order will achieve some useful purpose.

The District Judge had failed properly to exercise his discretion, which meant it fell to the Appeal Court to exercise it, by virtue of CPR 52.21(3):

“(3) The appeal court will allow an appeal where the decision of the lower court was—

(a) wrong; or

(b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court.”

The Chancery Division held that the bankruptcy order was unjust because the District Judge did not consider whether any useful purpose would be served by making it.

“Everything in evidence about the bankrupt and her financial affairs indicated that she was not worth powder or shot, and that a bankruptcy order would achieve no useful purpose.”

Chancery Guide

A revised Chancery Guide was published on 21 January 2019.

Amendments to the insolvency appeals section reflects the fact that all appeals in individual insolvency proceedings from a District Judge, whether in the County Court or the High Court, and from an ICC judge, are to a High Court Judge in the Business and Property Courts – see paragraph 24.14.

Amendments are also made to chapter 25 – Insolvency and Companies List- reflecting changes introduced in the Practice Direction on Insolvency Proceedings (July 2018) including dealing with the distribution of insolvency between High Court judges, ICC judges and District Judges, and what constitutes local business for the County Court.

Hearing bundles must be lodged for all hearings before all judges and ICC judges, but no bundle is needed in winding up proceedings unless ordered by the court – see paragraph 25.27.

Written by kerryunderwood

February 4, 2019 at 6:58 am

Posted in Uncategorized

COSTS ROUND-UP

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The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

Permanent Stay of Costs

In

Raja v Van Hoogstraten & Ors [2018] EWHC 3261 (Ch) (29 November 2018)

the Chancery Division of the High Court refused an application permanently to stay costs orders pursuant to its power under CPR 40.8A, stating that the effect would be the same as setting aside the orders under CPR 3.1(7).

The court doubted that any court would set the orders aside under that provision on these facts and therefore declined to exercise its discretion permanently to stay the orders.

Here the judge had previously ordered interim stays of the costs orders of its own initiative, because the defendant was trying to enforce orders in its favour while at the same time flouting costs orders against it.

The defendant had failed to comply with orders requiring it to send to Her Majesty’s Revenue and Customs a transcript of a previous hearing together with an explanation of tax treatment of certain trust incomes.

It also applied to set aside adverse costs orders, and after the interim stays of the costs orders in these proceedings, the defendant made an application relating to the adverse costs orders and that application was dismissed as totally without merit and the claimant was awarded indemnity costs.

The claimant submitted that the defendant’s conduct, and non-compliance with the adverse costs orders, amounted to matters occurring since the date of the costs orders, making it just to stay them permanently.

Here the court said that the orders were not conditional on the defendant complying with the adverse orders which had been made in the public interest and not for the benefit of the claimant.


The defendant’s non-compliance did not affect the claimant and therefore the defendant’s conduct since the costs orders should not affect the claimant’s liability to pay costs.

A person in contempt could be denied access to a court where that contempt would prevent justice from being done to the other party, but there was no suggestion of that here and therefore the application should be refused.

CPR 40.8 reads:

“40.8A – Without prejudice to rule 83.7(1), a party against whom a judgment has been given or an order made may apply to the court for—

(a) a stay of execution of the judgment or order; or

(b) other relief,

on the ground of matters which have occurred since the date of the judgment or order, and the court may by order grant such relief, and on such terms, as it thinks just.”

This appears to be the first authority in relation to the court’s discretion under CPR 40.8A.

Quantifying Security for Costs

In

Tugushev v Orlov & Ors [2018] EWHC 3471 (Comm) (14 December 2018)

the Commercial Court made an order for security of costs for £1.5 million, as compared with the sum of £2.7 million sought by the defendant.

The application was on the basis that the defendant’s costs were £3.389 million and the security sought represented 80% of certain incurred and estimated future costs of applications relating to the continuation of a worldwide freezing order.

Here the court held that on an application for security of costs the court should consider the applicant’s estimates of incurred and future costs in the same way as they would deal with a summary assessment of costs, or a costs budgeting exercise.

An applicant for security for costs must provide a sufficiently detailed breakdown to satisfy the court that the security ordered will avoid unnecessary prejudice to the other party, and any uncertainty arising from an inadequate breakdown should be resolved in favour of the party having to give the security.

Here the court set out ten principles to take into account when quantifying security for cost.

These were set out in paragraph 23 of the judgment as follows:

“23. The principles discussed in these authorities provide some assistance. However, at best, they provide guidance in what I believe both parties accepted was a “broad-brush” approach to assessing the quantum of security for costs. Nevertheless, I would venture the following principles which I shall take into account in undertaking this general quantification exercise:

(1)    The purpose of an order for security for costs is to provide protection to a defendant who is being sued by a claimant who may well not be in a position to satisfy a costs order made against the claimant at the conclusion of the action or of a particular stage of an action.

(2)    That protection must be suited for the purpose and therefore cannot exceed any sum which goes beyond what may reasonably be expected to be recovered by the defendant in the event that the claimant is ordered to pay the defendant’s costs.

(3)    In determining what may reasonably be expected to be recovered by way of a costs order, the Court should take into account the nature of the litigation, or the stage of the litigation, to which the proposed security relates, what that litigation entails in terms of the provision of legal services by both counsel and solicitors, the production of factual and expert evidence, and other associated costs and disbursements.

(4)       The costs associated with such litigation, or the relevant stage of the litigation, and for which security is sought should be costs which, as an estimate, can be considered by the Court to be both reasonably and proportionately incurred and reasonable and proportionate in amount. Costs which are unreasonably incurred or are unreasonable in amount should not be included in a security for costs order.

(5)       By CPR rule 44.3(5), costs incurred are proportionate if they bear a reasonable relationship to (a) the sums in issue in the proceedings, (b) the value of any non-monetary relief in issue in the proceedings, (c) the complexity of the litigation, (d) any additional work generated by the conduct of the paying party, and (e) any wider factors involved in the proceedings, such as reputation or public importance.

(6)       In determining a security for costs application, the Court should exclude from any security amount costs which the Court is not satisfied can be justified on any view as reasonable and proportionate. That is, the exercise of assessing the quantum of a security for costs order should not be influenced by any costs which a party chooses to incur over and above what is reasonable and proportionate in the circumstances.

(7)       The quantification of security is an objective assessment to be carried out by the Court as best it can based on the available evidence and information.

(8)       Although I accept that the quantification of an order for security for costs is necessarily a “broad-brush” exercise of assessment, bearing in mind the possible prejudice to the respondent of too much security being ordered, the Court must interrogate the estimates of incurred and future costs provided by the applicant. This exercise will of course not nearly approximate a detailed assessment of costs, but it will be similar to a summary assessment or a costs budgeting exercise. To this end, it is incumbent on the applicant to provide a sufficiently detailed breakdown of costs in support of its application to satisfy the Court that the amount of security which will be ordered will provide the necessary protection to the applicant and avoid any unnecessary prejudice to the respondent. In the event that a sufficiently detailed breakdown is before the Court, in order to ensure that the security ordered provides the necessary protection to the applicant, the Court should resolve any doubt in favour of the applicant. However, if there is no sufficiently detailed breakdown of costs before the Court, any uncertainty arising from the inadequate breakdown should be resolved in favour of the respondent.

(9)          An allowance should be made for any reduction of costs which would be made in an eventual assessment of costs. In the ordinary course, costs will be assessed on the standard basis. However, it is relevant to consider whether or not there is a real possibility, whether probable or not, that an order for indemnity costs might be made against the claimant. That does not mean that the Court must decide whether the assessment of costs on an indemnity basis is likely to be appropriate. It is the realistic possibility of such an assessment being ordered which justifies the Court taking this into account in determining the quantum of any security to be provided.

(10)        The applicant for security for costs will bear the burden of satisfying the Court that the amount of the security for costs to be ordered is in accord with these considerations.”

In

Airways Pension Scheme Trustee Ltd v Fielder & Anor [2019] EWHC 29 (Ch) (15 January 2019)

the Chancery Division of the High Court limited the appellant’s costs of an appeal to the Supreme Court in advance of the appeal, restricting its costs to the same as those of the respondent.

This is a useful reminder of the little used powers of the court to cap costs in advance.

Do not get too excited – this is hardly a breakthrough in trying to make litigation costs reasonable, as the courts still allowed over £1 million for each side in relation to a single point of law with a time estimate of 1.5 days.

I would have thought £50,000 about the right figure.

Another Non-Party Costs Order Against an Insurer

In

Various Claimants v Giambrone & Law (a firm) and others (defendants) and AIG (Europe) Limited – Section 51 respondent [2019] EWHC 34 (QB)

the Queen’s Bench Division of the High Court made a non-party costs order against the insurers for the defendants.

The claimants succeeded in a professional negligence action against the defendants over legal advice given in relation to the purchase of properties in Italy.

They made an application under section 51 of the Senior Courts Act 1981 for a non-party costs order against the insurers AIG (Europe) Limited.

The judge held that AIG’s funding of the defence increased the claimants’ costs and ordered AIG to pay half of their total costs.

Although success in a section 51 application requires there to be exceptional circumstances, the threshold is lower than it may seem, as in

Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807

the Judicial Committee of the Privy Council said:

“Although costs orders against non-parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact-specific jurisdiction and that there will often be a number of different considerations in play, some militating in favour of an order, some against.”

(Quoted at Paragraph 11 of this judgment.)

Here the court said:

“78. In my view, where an indemnity insurer substantially relinquishes control of the conduct of the litigation to the insured (or fails to take steps to control it when there are grounds for intervening), and does so in the expectation that it will be immune from a costs liability towards the opposing party if the opposing party is successful, that expectation is open to be falsified by the court in a section 51 application, particularly if the prospects of success for the insured are assessed as poor.”

Comment

Given that actively controlling the litigation is a key factor in making a non-party potentially liable for costs, we are now close to the position that, in reality, the starting point is that an insurer will be liable for costs, either because it does control, or fails to control, the litigation.

Although this lengthy decision usefully examines in detail the relevant case law, it does not establish any new legal principle.

Consent Order Trumps Fixed Costs

In

Adelekun v Lai Ho Case No: A06YQ205 Central London County Court (18 October 2018)

a Circuit Judge held that in a fixed costs case under CPR 45, Section III A, where the parties had entered into a consent order providing for the claimant’s reasonable costs to be paid on the standard basis, the claimant succeeded in escaping the fixed costs regime.

The judge held that the consent order, following acceptance of a Part 36 offer of £30,000, was incompatible with fixed costs and overruled them and that the Deputy District Judge had been wrong to vary what the parties had agreed.

The relevant wording in the order was:

“The defendant do pay the reasonable costs of the claimant on the standard basis to be subject of detailed assessment if not agreed.”

This wording, in the view of the Circuit Judge on appeal, allowed him to distinguish previous cases such as

Bratek v Clark-Drain Limited, Cambridge County Court, 30 April 2018

where it was held that a consent order settling a fast-track employers’ /public liability claim, and which provided for payment of costs on the standard basis, could not overrule the mandatory provisions of CPR 45.29D.

The facts here were slightly unusual in that the claimant had applied to re-allocate the claim to the multi – track the day before the Part 36 offer was made and the defendant agreed to the terms of the consent order after making the Part 36 offer.

The Circuit Judge held that the costs consequences were consistent with that, and would have been in the parties’ minds when signing the order.

The court suggested that it might have been sensible to include the issue of re-allocation to the multi-track as a term of the consent order.

In fact re-allocation never took place.

The hearing of the application to re-allocate would have taken place within the 21 day period for accepting the Part 36 offer, had the parties not settled.

In

Solomon v Cromwell Group Plc [2011] EWCA Civ 1584 (19 December 2011)

the Court of Appeal held that, as a matter of construction, general rules gave way to specific rules in the Civil Procedure Rules, and therefore the general Part 36 rules gave way to the specific rules in CPR 45, Section II.

True it is that in that case the relevant wording was “reasonable costs” without mention of the standard basis.

It is also correct that in Solomon the Court of Appeal recognised the possibility of the parties agreeing costs outside the fixed costs regime, even in a fixed costs case.

Here, the Deputy District Judge held that that principle applied in this case and that the order to the contrary was ultra vires and should not have been approved by the court.

In

Qader v Esure Services Ltd [2016] EWCA Civ 1109

the Court of Appeal held that fixed costs in an ex-portal case, as here, applied unless and until a matter has been allocated to the multi-track, whatever the settlement value.

That principle was subsequently enshrined by Parliament in an amendment to the Civil Procedure Rules.

A potential, but not actual, allocation to the multi-track is clearly capable of being an exceptional circumstance allowing an escape from fixed costs under CPR 45.29 (J)(1), a point accepted in this case, but that was not the issue here.

Indeed the Deputy District Judge, while holding that fixed costs applied here, specifically left it open for the claimant to argue that there were exceptional circumstances in the case, and these exceptional circumstances provisions are within the fixed costs rules themselves.

In

Sharp v Leeds City Council [2017] EWCA Civ 33 (01 February 2017)

the Court of Appeal held that the costs of an application for pre-action disclosure were governed by the fixed costs regime, although there, there was no agreement apparently to the contrary.

In

Hislop v Perde [2018] EWCA Civ 1726 (23 July 2018)

the Court of Appeal held that late acceptance of a Part 36 offer by a defendant did not allow a claimant to escape fixed costs.

Again, unlike here, there was no issue of contracting out of the fixed costs regime, and in any event many commentators believe that the decision in Hislop is wrong as a matter of law – see my blog

PART 36 AND FIXED COSTS:  CLAIMANTS’ OFFERS POINTLESS RULES COURT OF APPEAL

The Circuit Judge here held that the parties had consensually varied the usual rule, as envisaged in Solomon as being possible, and that the consent order was not vitiated by fraud, mistake, misrepresentation or incapacity,  and indeed it was not suggested otherwise.

He also held that the Deputy District Judge had no power to vary that consent order.

Matters were further complicated by the case of

Conlon v Royal Sun Alliance Insurance Plc [2015] EWCA Civ 92 (26 February 2015)

where the Court of Appeal held that the court had power, even after the end of a case, retrospectively to re-allocate it and thus retrospectively to alter the basis of assessment of costs.

Here the Deputy District Judge declined to re-allocate to the multi-track, which, in the absence of the issue of consensual variation would have left the case firmly caught by the Qader decision.

Comment

I have found this an extremely difficult matter to form a view on and have enormous sympathy with the judges having, yet again, to grapple with the mind-numbing contradictions of the Civil Procedure Rules.

It may be that the case, ultimately, is of limited importance moving forwards, as clearly the defendant’s solicitors were ill advised to leave the matter in any doubt by using the wording in the consent order.

The claimant’s solicitors may have been better advised to have delayed accepting the Part 36 offer until after re-allocation, although that would hardly have been consistent with the overriding objective of saving court time and costs.

It also seems pretty obvious as a matter of contract law that the parties were not, to use the old phrase, ad idem which means a meeting of the minds.

If two parties to a contract understand the terms and conditions of a contract in the same manner, then it is said that the parties are “ad idem”.

Such “meeting of minds” is essential to a valid contract.

How can that possibly have been the case here?

The point was seemingly not argued, – certainly it is not referred to in a very impressive and comprehensive judgment-  possibly because everyone involved seemed to be looking at the issue from a costs and personal injury point of view, rather than basic contract law.

Also, it is not clear why an agreement to pay standard costs in a fixed costs case means anything other than fixed costs.

After all they are the “standard” that is usual, or normal, costs for that type of work.

The true differentiation is between standard costs and indemnity costs, not between standard costs and fixed costs.

Conclusion

There are no score draws at court, or in my blogs.

On balance, but we are talking 51-49, my view is that the Deputy District Judge was right, that the Circuit Judge was wrong, and that the Court of Appeal should reinstate the Deputy District Judge’s decision, that is that fixed costs apply.

My unanimous decision, a 100-0, is that the Civil Procedure Rules Committee is not fit for purpose.

£550 An Hour Allowed In Budget

In

Arcadia Group Ltd & Ors v Telegraph Media Group Ltd (Rev 1) [2019] EWHC 96 (QB) (23 January 2019)

the Queen’s Bench Division, in a costs budgeting exercise, allowed a rate of £550 per hour on a between the parties basis for a partner in injunction proceedings concerning restraining the Telegraph Media Group from publishing information about the claimants.

The rate was reduced from £690.

A trainee rate of £190 per hour was allowed.

The decision was by a full High Court Judge.

Leaving aside the actual rates, it is of concern that the Judge referred to the Guideline Hourly Rates, which were never meant to apply to this type of case, and which have not been uprated since 2010.

Counter-Offer Is Not a Rejection of Original Offer In The Portal Process

In

Cox v Pace, Birmingham County Court, 23 October 2018, Claim D82YM554

a Deputy District Judge held that a counter-offer within the portal process did not amount to a rejection of the original offer, thus treating the portal rules as a self-contained code in the same way as Part 36.

As a matter of common contract law, a counter-offer acts as a rejection of the original offer, but that is not the case within the Part 36 regime, nor in the portal process.

I am grateful to Kevin McGough of MJP Solicitors for information about this case.

On Assessment Court Not To Re-visit Conduct of Case

In

Andrews and Smith v Retro Computers Limited and others [2019] EWHC B2 (Costs)

Deputy Master Friston held that generally courts dealing with detailed assessment proceedings should not revisit matters relating to the conduct of the case itself, as compared with the conduct of the assessment proceedings.

Although establishing no new principle of law, the judgment contains a very detailed and helpful analysis of all of the relevant authorities.

Third Party Funders, The Arkin Cap And ATE Insurance

In

Bailey & Others v GlaxoSmithKline UK Limited [2017] EWHC 3195 (QB)

the Queen’s Bench Division of the High Court ordered the claimants’ litigation funder Managed Legal Solutions Limited (MLS) to pay security for costs pursuant to CPR 25.14, and in excess of the Arkin cap.

MLS had been joined as an Additional Party for the purposes of responding to this application.

The application covered costs from the date that MLS started funding the case and was made on the basis that the defendant intend to seek orders against it at the end of the case, if successful, pursuant to section 51 of the Senior Courts Act 1981, which deals with non-party costs orders.

In fact the key issue here was the amount of security, and the relevant factors to be taken into account in fixing that amount.

The claimants had ATE insurance of £750,000 and argued that all of that sum should be taken into account in relation to the security issue, relying on

Premier Motorauctions Limited v. PWC LLP & another [2017] EWCA Civ 1872.

The claimants also argued that any sum ordered should be limited by the approach referred to in

Arkin v Borchard Lines Limited (Nos 2 and 3) [2005] 1 WLR 3055

generally known as the Arkin cap, that is that the third party funder’s liability for adverse costs should be limited to the same sum as its own investment in the case.

CPR 25.14 specifically provides for security for costs orders to be made against third party funders.

“(1)   The defendant may seek an order against someone other than the claimant, and the court may make an order for security for costs against that person if –

(a)  it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and

(b)  one or more of the conditions in paragraph (2) applies.

(2)  The conditions are that the person –

(a)  has assigned the right to the claim to the claimant with a view to avoiding the possibility of a costs order being made against him; or

(b)  has contributed or agreed to contribute to the claimant’s costs in return for a share of any money or property which the claimant may recover in the proceedings; and

is a person against whom a costs order may be made.”

Managed Legal Solutions was balance sheet insolvent.

On the facts the court here held that two thirds of the value of the ATE insurance cover should be utilized to reduce the level of security for costs.

As the ATE cover was £750,000, the level of security that would otherwise have been made was reduced by £500,000.

The court also held that the Arkin cap did not apply.

This was on the basis that at the end of the case the court had a discretion to disapply that cap

“unless I take into account now the possibility that the cap will not be applied, there is a risk that the security ordered will be insufficient and the ultimate intention of the court of trial (and, perhaps, the Court of Appeal on appeal) so far as the costs are concerned will be frustrated.” (Paragraph 60)

Reading the decision as a whole, it comes close to saying that it thinks that Arkin was wrongly decided.

There is another interesting feature of the case.

Managed Legal Solutions was 49% owned by Mr Michael Hunt.

Mr Hunt was the sole shareholder of a company called Corporate Administration Management Limited, a creditor of Managed Legal Solutions to the tune of £3,465,299 – see paragraph 29 of the judgment.

The court had this to say at paragraph 9:

“Although it is some while ago, and the circumstances were different from those obtaining in the present situation, Mr Hunt, who had been managing director of Nissan UK, was sentenced to 8 years’ imprisonment and disqualified from being a company director in June 1993 following his conviction for serious dishonesty involving many millions of pounds. The press reports exhibited to Ms Caswell’s 5th witness statement indicate that at the time of his sentence, Mr Hunt was aged 59. He must now be in his mid-80s. The substantive assertions concerning his conviction and sentence have not been controverted.”

At present there is no statutory regulation of third party funders.

Maybe there should be.

Contingency Fees, Experts And Tribunals

In

Merlin Entertainments Group Limited v Cox (Valuation Officer) [2018] UKUT 406 (LC) 11 December 2018

the Upper Tribunal (Lands Chamber)(UT), in a valuation appeal, held that a party’s attempt to present expert evidence as factual evidence was an abuse of process as the objective was to hide the fact that the expert was acting under a Contingency Fee Agreement, which would normally result in the Upper Tribunal refusing to receive that evidence.

In

Gardiner and Theobald LLP v Jackson (Valuation Officer) [2018] UKUT 253 (LC)  

the Upper Tribunal stated that it was wholly unacceptable for an expert witness in tribunal proceedings to enter into a Contingency Fee Agreement without disclosing it to the tribunal and other parties, and here the Upper Tribunal stated that that applies when experts disclose information and give evidence on factual issues, as well as when they give an expert opinion.

The Upper Tribunal held that there was no distinction between an expert using her or his expertise to assemble information and data to assist a court or tribunal in deciding an issue, and an expert giving evidence for the same purpose.

It could not be right for an expert to present even purely factual evidence without disclosing to the court or tribunal, and to the other parties, that she or he was remunerated under a Contingency Fee Agreement.  

Written by kerryunderwood

January 29, 2019 at 12:02 pm

Posted in Uncategorized

COUNTER-OFFER IS NOT A REJECTION OF ORIGINAL OFFER IN THE PORTAL PROCESS

with 8 comments


The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Cox v Pace, Birmingham County Court, 23 October 2018, Claim D82YM554

a Deputy District Judge held that a counter-offer within the portal process did not amount to a rejection of the original offer, thus treating the portal rules as a self-contained code in the same way as Part 36.

As a matter of common contract law, a counter-offer acts as a rejection of the original offer, but that is not the case within the Part 36 regime, nor in the portal process.

I am grateful to Kevin McGough of MJP Solicitors for information about this case.

Written by kerryunderwood

January 28, 2019 at 10:39 am

Posted in Uncategorized

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