Kerry Underwood

WITHOUT PREJUDICE SAVE AS TO COSTS CORRESPONDENCE ADMISSIBLE IN APPLICATION FOR NON-PARTY COSTS

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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

Willers v Joyce & Ors [2019] EWHC 937 (Ch)

the High Court held that correspondence marked “without prejudice save as to costs” was admissible in a subsequent application for non-party costs under section 51 of the Senior Courts Act 1981.

The lawyers represented the claimant in a failed action against the applicants for malicious prosecution and the claimant was ordered to pay the applicants’ costs but the claimant had no money.

The applicants claimed their costs from the lawyers on the basis that those lawyers had a substantial financial interest in the outcome of the claim, as the damages claimed represented costs owed by the claimant to the lawyers in the related proceedings.

The applicants argued that correspondence marked without prejudice save as to costs between the respective firms of solicitors concerning a failed mediation, was admissible as evidence of the respondent lawyers’ attitude to the litigation.

The High Court held that the evidence was admissible solely on the basis that the parties had agreed that the correspondence could be used in the context of an argument about costs.

The High Court did not accept that, by marking the correspondence without prejudice save as to costs, the respondent lawyers were confining the relaxation of the without prejudice rule to the hearing of an application for costs against the claimant.

The High Court did however reject the argument that the correspondence fell within the “independent fact” exception to the without prejudice rule identified in

Muller v Linsley & Mortimer [1996] P.N.L.R. 74.

The High Court did not see how the extent of the influence the respondent lawyers had over the claim, could properly be separated from the content of the settlement negotiations themselves.

Admitting evidence for this purpose would undermine the policy underlying the without prejudice rule and lawyers would not be able to speak freely about settlement if they thought that that information could later be used in costs proceedings against them.

Relying on the recent case of

Briggs v Clay [2019] EWHC 102 (Ch) (25 February 2019),

the High Court held that there was no reason why the without prejudice protection afforded to the claimant could not be relied upon by his legal representatives in a subsequent action for costs in the same action, made against them personally, under the section 51 procedure.

However, in this case, that protection had been waived.

The judgment contains a detailed analysis of the without prejudice rule and, as set out above, refers to the recent decision in Briggs v Clay where the rule was also looked at in detail.

The effect of this decision is that “without prejudice save as to costs” excludes from protection section 51 applications as well as ordinary between the parties’ costs issues.

If a party did not wish to waive the without prejudice rule for section 51 purposes it would need to use wording such as:

“Without prejudice save as to costs between the parties, but still without prejudice in relation to applications under section 51 of the Senior Courts Act 1981.”

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Written by kerryunderwood

April 25, 2019 at 7:00 am

Posted in Uncategorized

DIRECTORS’ ADMINISTRATION APPOINTMENT BY ELECTRONIC FILING OUT OF COURT HOURS IS VALID

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In

Wright and others v HMV Ecommerce Ltd and another [2019] EWHC 903 (Ch)

the High Court considered the validity of a purported appointment of administrators where directors of a company filed a notice of appointment electronically out of usual court opening hours.

The court held that the filing was either not in breach of paragraph 8.1 of the Practice Direction – Insolvency Proceedings July 2018, which was ambiguous; or alternatively was a breach or defect, but one that did not invalidate the purported appointment.

Any non-compliance with paragraph 8.1 of the Practice Direction – Insolvency Proceedings 2018 was capable of being remedied by order or declaration of the court under paragraph 104 of Schedule B1 to the Insolvency Act 1986, rule 12.64 of the Insolvency (England and Wales) Rules 2016 SI 2016/1024, and Part 3 of the Civil Procedure Rules.

Underwoods Solicitors are the solicitors for the Liquidators in the Cambridge Analytica case.

Written by kerryunderwood

April 24, 2019 at 10:41 am

Posted in Uncategorized

COUNSEL, SOLICITORS AND INSOLVENCY

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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

Gwinnutt v George and Ryan [2019] EWCA Civ 656

the Court of Appeal considered the status of counsel’s fees prior to 2013, which was the date when solicitors and barristers were first able to enter into contracts with one another, pursuant to the Supply of Legal Services by Barristers to Authorised Persons 2012.

Here, the barrister had become bankrupt and one of the issues was whether the non-contractual pre-2013 fees vested in the trustee in bankruptcy, the claimant in this matter.

The judge at first instance held that they did not so vest.

The Court of Appeal overturned that decision and held that the fees did vest in the trustee in bankruptcy, and the judgment contains a detailed analysis of what constitutes property for this purpose.

The judgment also examines in detail the nature of the relationship between solicitor and counsel prior to 2013, and that will now largely, but not entirely, be of historical interest.

I say not entirely, because it is clear that the Civil Liability Act and associated personal injury reforms are leading to hundreds of firms of solicitors going out of business, and we all know that there are likely to be pre-2013 counsel’s fees involved.

In any event, in relation to post-2013 fees, counsel will rank like any other creditor.

Personal injury counsel in particular should be in a hurry to collect their fees.

There are special problems where counsel is acting on a no-win, no-fee basis and the solicitors’ firm becomes insolvent before a case is concluded.

As the contract is with the now insolvent firm of solicitors, any counsel’s fee in relation to work carried out on those solicitors’ instructions takes its place in the queue with other creditors.

In this case the Court of Appeal also held that counsel’s fees, pre and post-2013, are a possession within Article 1 of the First Protocol to the European Convention on Human Rights.

It is ironic that counsel would probably be economically safer contracting direct with the client, rather than a firm of solicitors, as in percentage terms over the next two years a far higher number of personal injury firms of solicitors will become insolvent, as compared with lay clients.

This is particularly true given that solicitors are now allowed to operate through the medium of limited companies, with limited liability.

The Withdrawal of Credit Scheme operated by the Bar Council, which essentially means that firms of solicitors can have credit withdrawn by the Bar, so that they have to pay counsel’s fees in advance, obviously has no effect on an insolvent law firm.

Likewise the Solicitors Regulation Authority’s disciplinary process, which includes sanctions for failing to manage the business properly, will have no effect on an insolvent firm.

Elsewhere I have blogged about the liability of solicitors for VAT on matters such as travel, medical reports and agency fees and conveyancing search fees incurred on behalf of clients, where the courts have held that the solicitor, and not the client, is liable although obviously the solicitor can reclaim the amounts from the clients.

Again, it is ironic, that medical reporting agencies would be economically safer contracting direct with clients rather than personal injury solicitors.

I am not saying that this is generally the case with solicitors’ practices, but any solicitors’ firm doing just personal injury work is clearly at economic risk over the next two years.

Written by kerryunderwood

April 24, 2019 at 7:38 am

Posted in Uncategorized

VAT, MEDICAL AGENCIES, SEARCH FEES AND TRAVEL: A COURT OF APPEAL DECISION

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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

British Airways Plc v Prosser [2019] EWCA Civ 547

the Court of Appeal held that, where a medical agency is instructed in relation to the obtaining of medical records and/or reports, VAT may be charged on the total cost, and not just on the agency’s administration fee.

This was on the basis that the agency was performing a service which allowed the solicitor to perform its service to the client, rather than the agency simply acting as a post-box.

The Court of Appeal said that in low value claims, where the amount of any VAT is not substantial, payment of VAT on the full amount was a cost that was “reasonably and proportionally incurred” and  “reasonable and proportionate in amount” so as to satisfy the requirements of CPR 44.3, regardless of whether the agency was obliged to charge VAT or not.

The Court of Appeal said that the position may sometimes be different and if “the VAT element were substantial, VAT should not in fact been imposed and the receiving party or his lawyers ought to have been aware that there was real doubt as to the VAT position, a Costs Judge might well conclude that the receiving party should not recover VAT.”

The decision also reviews the case law on related matters, such as VAT on travel expenses incurred by solicitors, and VAT on searches in conveyancing matters.

I am grateful to Steven Turner, the barrister who successfully represented John Prosser in this matter, for information concerning this case.

Please also see my related blog –

FIXED COSTS CASES: MEDICAL AGENCY FEES RECOVERABLE AS DISBURSEMENTS

Written by kerryunderwood

April 23, 2019 at 8:45 am

Posted in Uncategorized

COSTS ROUND-UP

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

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.

 

Can Amendment Amount to Discontinuance?

In

Galazi and another v Christoforou and others [2019] EWHC 670 (Ch)

the Chancery Master considered whether the very substantial amendments made to the Particulars of Claim amounted to a discontinuance of the whole or part of the claim, triggering the default position under CPR 38.6(1) that the discontinuing party is liable to pay the costs of the other party.

The Master held that abandoning one remedy, where there remained other remedies, did not of itself amount to discontinuance, but the abandonment of an entire cause of action may amount to a partial discontinuance.

Here the Master held that the claimants had discontinued the entire claims against two defendants, thus triggering CPR 38.6(1), and in relation to those matters, assessment of costs could take place immediately.

There was no reason to depart from the default position; it had been their choice to bring the claim in the form it took, which was wrong, and there was no unreasonable conduct on the part of the defendants in relation to the discontinuance.

Delaying assessment would involve extra costs.

Against other defendants they had partly discontinued and the court allowed immediate assessment on costs.

As to the costs of and occasioned by the amendments not amounting to discontinuance, the court ordered the claimant to pay these.

All such costs, whether occasioned by discontinuance or amendments not amounting to discontinuance, were to be paid on the indemnity basis as the claimants’ conduct was outside the norm.

 

Who Is the Real Winner?

In

Hamad M Aldrees & Partners v Rotex Europe Ltd [2019] EWHC 526 (TCC)

the Technology and Construction Court revisited the issue of who had truly won the case in circumstances where the claimant was awarded 2% of the amount claimed.

The classic theory is that he who writes the cheque is the loser.

Here the court ordered the unsuccessful defendant to pay 20% of the claimant’s costs.

Such cases will almost always be fact sensitive, but this lengthy judgment contains a full, detailed and helpful examination of the recent authorities on this issue.

 

No Protective Costs Order In Private Claim

In

Maugham v Uber London Ltd [2019] EWHC 391 (Ch)

the High Court refused the claimant’s application for a protective costs order limiting his costs to £20,000.

Here the claimant was seeking a declaration that the defendant provide a VAT invoice in relation to its alleged supply of transport services in the form of private hire vehicles and the defendant said that it was an intermediary and did not provide transport services, and therefore it was not liable to invoice for VAT.

The claimant believed that HMRC was failing to take action in respect of Uber’s alleged liability for output tax, and that therefore there was a public interest in the case in ensuring that any liability was collected and generally in the fair administration of the VAT scheme.

Protective costs orders are generally only made in public law claims, particularly in judicial review proceedings.

Here, the High Court held that this was private litigation in which a protective costs order could not be made and that the wider public interest in the tax issues did not justify changing that position.

The High Court said it was bound by the decision in

Eweida v British Airways PLC [2009] EWCA Civ 1025 

which held that a protective costs order could not be made in private litigation.

The High Court said that if it was wrong about its interpretation of Eweida it would not be just or fair to make a protective costs order in this case in any event as a properly formulated public law challenge by judicial review was the proper way of reviewing HMRC’s conduct in not exercising its VAT powers and that would then engage the possibility of a costs capping order.

The general principles governing protective costs orders were set out by the Court of Appeal in

R (on the application of Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192.

 

Costs Permitted To Be Claimed As Damages

In

Playboy Club London Ltd v Banca Nazionale Del Lavora SPA [2019] EWHC 303 (Comm) (21 February 2019)

the Commercial Court allowed an amendment to Particulars of Claim in deceit proceedings to include as a head of damages adverse costs incurred in respect of the defendant in these proceedings, that is the other party in the original proceedings.

Both the original proceedings, and the current ones, related to a credit reference relied upon by the claimant, the owner of a casino, and the original negligence claim succeeded in the High Court, but the Court of Appeal overturned that decision, and that finding of the Court of Appeal was upheld by the Supreme Court and thus the defendant won the claim and the claimant was ordered to pay the costs of the defendant.

The claimant then brought the current deceit proceedings and the defendant’s attempt to strike them out failed.

The proposed amendments in these proceedings pleaded that, although the claimant’s negligence claim had ultimately failed, it had at all relevant times at least a reasonable prospect of success, and that the claimant had acted reasonably in bringing and pursuing the claim and that the costs incurred formed part of the total costs exposure recoverable in the deceit claim.

The court recognised that damages are recoverable to a greater extent in a case of fraud, as compared with a claim in negligence, and found that the claimant had a more than merely fanciful prospect of success, and therefore it would be wrong to decide the question without a trial.

The defendant argued that, as a matter of principle, costs could not be recoverable as damages.

There was no authority involving costs of a previous legal action between the same parties, and where the claimant had been unsuccessful and had had costs awarded against it, being awarded damages in a subsequent legal action, to include those costs.

The defendant pointed out that the effect of this is to reverse the costs award previously made.

The court considered that although this was a novel and unprecedented claim which might be difficult to establish, the principle should not be determined without findings on all of the disputes of fact.

The matter should be decided at trial, and not by refusing permission to amend the pleadings, which would mean that the matter could not be argued at all.

 

Fixed Costs In Virtually All Claims Valued at £100,000 or Less

The government has announced a consultation on Lord Justice Jackson’s July 2017 Review of Civil Litigation Costs: Supplemental Report – Fixed Recoverable Costs.

It runs until 6 June 2019.

The government intends to implement the Report as drafted, with the exception of the new track being referred to as the Extended Fast Track rather than the Intermediate Track.

The proposed figures for Fixed Recoverable Costs are exactly as in the Report.

LJ Jackson said that the Part 36 uplift on costs should be either 30% or 40%.

In an unsurprising move the government has proposed a fixed uplift of 35%.

The proposals are expected to be implemented on Monday 6 April 2020.

Clinical negligence claims and claims in the Business and Property Courts are not included in the scheme.

 

Pilot for Summary Assessment

On 1 April 2019 a voluntary pilot scheme for a New Statement of Costs For Summary Assessment came in and will last for two years.

It is dealt with in new Practice Direction 51X and two new forms – N260A and N260B accompany the pilots.

New Budget Discussion Report

On 25 April 2019 a new Precedent R – Budget Discussion Report – replaces the existing Precedent R annexed to Practice Direction 3E.

Success Fee Recoverability Scrapped In Defamation And Breach Of Privacy Cases

Recoverability of success fees, but significantly not recoverability of After-the-Event insurance premiums, is to be scrapped in relation to new defamation and privacy claims, that is claims from 6 April 2019 onwards.

I presume that it will relate to any Conditional Fee Agreement entered into on or after 6 April 2019.

The type of claims covered are:

  • defamation;
  • malicious falsehood;
  • breach of confidence involving a publication to the general public;
  • misuse of private information;
  • harassment,

but in each case only where the defendant is a news publisher, that is a person who publishes a newspaper, magazine or website containing news or information about or comment on current affairs.

Generally recoverability of both success fees and ATE premiums was abolished in relation to arrangements entered into on or after 1 April 2013, by virtue of section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

There were limited exceptions and the only ones that now remain are in relation to mesothelioma proceedings, where both the success fee and the ATE premium remain fully recoverable, and in clinical negligence proceedings where the success fee is not recoverable, but the ATE insurance premium is, but only to a limited extent.

In many ways the significance is not the abolition of recovery of the success fee, which was only ever a matter of time, but rather the decision to maintain the recoverability of the ATE premium.

Outside the field of personal injury, where Qualified One-Way Costs Shifting restricts the need for such insurance, this has been a key issue in relation to access to justice.

The system of Conditional Fee Agreements may mean that claimants can afford to pay their own lawyers, but if a losing client remains liable for the other side’s costs, which it does outside the QOCS protected field of personal injury, then access to justice is an illusion.

True it is that a claimant can seek to take out After-the-Event insurance, but the premium is then deducted from the damages if the claimant wins.

The winning claimant is almost certainly to be paying an unrecoverable success fee to its own solicitors in such cases as well.

As such schemes generally provide for no premium to be paid in a lost case, where the insurer has to pay out, a winning claimant is effectively paying for those premiums as well, which partly explains the high cost of ATE insurance.

Allowing recoverability of the ATE premium, but not the success fee, solves this problem and is a potential model for other types of cases.

Such insurance would generally cover the claimant’s own disbursements as well.

Whether it is just for a losing defendant to have to pay for the claimant to bring a claim against it is another matter.

Recoverability of success fees and After-the-Event insurance premiums was generally seen as involving identical considerations.

I always disagreed with that view, and while I always thought that recoverability of success fees was wrong, I took a different view about the recoverability of ATE premiums.

I refer above to it being potentially unjust for a defendant to finance the action against it, but ATE insurance at least gives a successful defendant a fund out of which it can enforce its costs order and generally defendants may prefer such a scheme, that is recoverable ATE insurance, to Qualified One-Way Costs Shifting.

 

Summary

General Civil Litigation, including Personal Injury Cases

The success fee remains recoverable only where the Conditional Fee Agreement was entered into on or before 31 March 2013.

Insolvency

The success fee remains recoverable only in relation to any Conditional Fee Agreement entered into on or before 5 April 2016.

Defamation and Privacy 

The success fee remains recoverable, but only in relation to Conditional Fee Agreements entered into on or before 5 April 2019.

Mesothelioma Claims

The success fee remains recoverable in all mesothelioma claims and there is no proposal to alter that position.

Written by kerryunderwood

April 9, 2019 at 7:43 am

Posted in Uncategorized

NO PROTECTIVE COSTS ORDER IN PRIVATE CLAIM

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

In

Maugham v Uber London Ltd [2019] EWHC 391 (Ch)

the High Court refused the claimant’s application for a protective costs order limiting his costs to £20,000.

Here the claimant was seeking a declaration that the defendant provide a VAT invoice in relation to its alleged supply of transport services in the form of private hire vehicles and the defendant said that it was an intermediary and did not provide transport services, and therefore it was not liable to invoice for VAT.

The claimant believed that HMRC was failing to take action in respect of Uber’s alleged liability for output tax, and that therefore there was a public interest in the case in ensuring that any liability was collected and generally in the fair administration of the VAT scheme.

Protective costs orders are generally only made in public law claims, particularly in judicial review proceedings.

Here, the High Court held that this was private litigation in which a protective costs order could not be made and that the wider public interest in the tax issues did not justify changing that position.

The High Court said it was bound by the decision in

Eweida v British Airways PLC [2009] EWCA Civ 1025

which held that a protective costs order could not be made in private litigation.

The High Court said that if it was wrong about its interpretation of Eweida it would not be just or fair to make a protective costs order in this case in any event as a properly formulated public law challenge by judicial review was the proper way of reviewing HMRC’s conduct in not exercising its VAT powers and that would then engage the possibility of a costs capping order.

The general principles governing protective costs orders were set out by the Court of Appeal in

R (on the application of Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192.

Written by kerryunderwood

March 25, 2019 at 6:40 am

Posted in Uncategorized

COURT OF APPEAL IN STRONG ATTACK ON MINISTRY OF JUSTICE

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In

Dunn v The Secretary of State for Justice & Anor [2018] EWCA Civ 1998

the Court of Appeal was considering whether the Employment Appeal Tribunal should have remitted a disability discrimination case to the Employment Tribunal, rather than substituting its own decision, having overturned the original decision of the Employment Tribunal.

It dismissed the appeal and held that the EAT was right not to remit.

Of greater interest is the Court of Appeal’s attack on the Ministry of Justice:

“… its ill-health retirement processes, which by definition are applied to people who are to a greater or lesser extent vulnerable, are so… arcane and unwieldy…”

It quoted from the Employment Tribunal:

“…There is a lack of proper management of individual cases, no one person oversees the case from beginning to end and there is a requirement to deal with three different contracted out services, all of which rely on different information held on computers in different parts of the organisations.”

The Employment Tribunal found that the ill-health retirement process was operated unreasonably “and perhaps even to some extent unfairly.”

It also found that this was “a difficult ill-health retirement process that demands a high hurdle before an individual is accepted as fulfilling the criteria for ill-health retirement, in part because the benefits provided are expensive to provide.”

In a damning statement quoted by the Court of Appeal, the Employment Appeal Tribunal said:

“We cannot leave this case without this further comment. The lay members in particular, who have experience of managing absence and ill-health retirement processes of the kind in focus in this case, are concerned by the manner in which it was applied and operated by MoJ as found by the Tribunal. The Tribunal found that the system operated in a manner that caused stress and anxiety to the Claimant, who was already unwell with depression and who suffered a worsening of his heart condition as a consequence. It undoubtedly led to inordinate delay. The systemic failures and the inordinate delay that occurred here may have impacted more harshly on the Claimant as a disabled person and in future might operate more harshly on others with disabilities. However, that was not the case advanced by the Claimant to the Tribunal and not a case, accordingly, that we have been able to address. The lay members in particular feel that these systemic failures and the delays that they cause should be addressed for the future by those with responsibility at MoJ so that others are not subjected to what may be both unfair and disadvantageous treatment.”

The Court of Appeal itself referred to “the reprehensible delay in dealing with the appellant’s ill-health retirement application.” It took the relevant person at the MoJ three months to even bother to read the claimant’s grievance.

The claimant lost because everyone at the MoJ, disabled or not, is treated like this, and therefore the conduct was not due to the claimant’s disability.

This is known among employment lawyers as “the bastard defence”, that is that the employer behaves terribly to everyone, and not just those with protected characteristics.

Comment

What a state of affairs this country has reached when the government department responsible for administrating the justice system of this country is in this state.

However, let us be clear where the blame lies – it is with the utterly destructive “austerity” policies of government whereby the Ministry of Justice’s budget is being cut by 51% between 2010 and 2024 – see Law Society Gazette – 18 March 2019.

As certain very significant expenses, such as judicial pensions, council tax etc. are ring-fenced and cannot be cut, the true day to day running cut is reckoned to be around 75%.

No organisation can function with that sort of cut.

Written by kerryunderwood

March 22, 2019 at 10:33 am

Posted in Uncategorized

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