Kerry Underwood

KERRY’S NEW BOOK ON QOCS – A TRAILER!

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Qualified One-Way Costs Shifting, Section 57 and Set-Off

Kerry’s New Book on QOCS – Booking Form – click here or get it on Amazon

This book is updated on Kerry on QOCS: Book Update and Links  and the links provide the full judgment of all cases, statutes, statutory instruments etc.

PRE – PUBLICATION REVIEWS
I read this compelling book in one sitting .Those who work in this area of law will suffer if they do not devour it as I did. It oozes pragmatic guidance at every turn. As essential for injury lawyers as The White Book itself.
Professor Dominic Regan
 
Comprehensive, authoritative, highly practical and always straight to the point – this book is everything we have come to expect from the leading expert Kerry Underwood. It will undoubtedly prove an essential resource no PI lawyer will want to be without.
Rachel Rothwell, editor, Litigation Funding magazine
“Fundamental Dishonesty”, “Substantial injustice” and Section57 of the Criminal Justice and Courts Act 2015 are the new kids on the Personal Injuries block. Who better to introduce them to you and consider their vagaries than Kerry Underwood?
His Honour Michael Cook, former Circuit Judge
When one wishes to find a decent curry in say Basingstoke, one Googles “curryhouseBasingstoke”. When one has a legal problem, particularly personal injury or Jackson related, one Googles “KerryUnderwood”. It really is that simple! There is just no need to look elsewhere.
Andrew Twambly, CEO, InjuryLawyers4U
Qualified One-Way Costs Shifting, Section 57 and Set-Off
Kerry Underwood
Partner, Underwoods Solicitors

To
 
My Goddaughter
Phoebe
Law Abroad PLC
Copyright © 2016 Kerry Underwood. All rights reserved
THANK YOU!
Special thanks to:
Doné Barnard
Jamiel Zaman
Thanks to:
British International School of Stavanger, Norway
Cynthia Barnes
His Honour Michael Cook
Katrina Caraska
Gordon Exall
Mark Harvey
PJ Kirby QC
Claire Long
Robert Males
Anna Patsalides
Mike Penning MP
Phoebe Ranger
Professor Dominic Regan
Rachel Rothwell
Stuart Thompson
Andrew Twambley
Nikki Valentine
Leah Waller
My Blog Subscribers
My followers on Twitter
I am particularly grateful to Professor Dominic Regan for proof reading this book. Any remaining mistakes are mine.
 
The Author
Kerry Underwood is a solicitor and is senior partner of Underwoods Solicitors. He is a lecturer, writer, broadcaster and former Employment Judge.
Kerry writes and edits the Costs and Funding section of Butterworths Personal Injury Litigation Service and is a regular contributor to Litigation Funding, New Law Journal, Claims Magazine and the Law Society’s Civil Justice Section Newsletter.
Kerry pioneered Conditional Fee Agreements, TV advertising by lawyers and off-shoring work to South Africa.
Former Councillor and Parliamentary Candidate.
Kerry travels extensively and home is his beloved adopted town of Hemel Hempstead. Underwoods Solicitors sponsor the town’s football club and rugby league club.
Interests include football, cricket, gardening and reading. Kerry still plays cricket and is Chairman of his village club Bovingdon Cricket Club.
Nelson Mandela, TS Eliot and Elvis are amongst his heroes.
See Kerry’s blog at: kerryunderwood.wordpress.com

Other titles by Kerry Underwood
Small Claims, Fixed Costs and Portals
Wasted Costs and Third Party Costs
Litigants in Person
Court and Tribunal Fees and Remissions
Conditional Fee Agreements, Damages-Based Agreements and Contingency Fees
Selected Legal Writings Volume 1
Selected Legal Writings Volume 2
Non – Law books
My Dad and Other Pieces
 
“Without lawyers, judges and courts, there is no access to justice and therefore no rule of law, and without the rule of law, society collapses”
Lord Neuberger
Supreme Court President
10 April 2015

HOW TO USE THIS BOOK
Readers will obtain far greater value out of this book by referring to the post on my blog: Kerry on QOCS: Book Update and Links, where every statute, statutory instrument, case, civil procedure rule and practice direction etc. can be accessed in full.
My blog can be seen at:kerryunderwood.wordpress.com.
You can subscribe to my blog by visiting the address above and scrolling down to the bottom of the archive posts list on the right hand side of the page where it says email subscription.
Type your email address and click subscribe, once you receive the email click the link in the email and you have subscribed.
All of the references appear in Part VI of this book, starts at page 217. Simply go to the case or whatever on the blog click on the link and it will open.
Thus the full text of the entire statute law, case law, civil procedure rules, Practice Directions and other publications can be accessed in seconds through the blog.
It also gives links to all my other blog posts. For example the interplay between QOCS and Part 36 is crucial. I deal with that in this book but my blog post – Part 36: The Dry Salvages – goes into far greater detail about all matters relating to Part 36.

I also constantly update this book, chapter by chapter, on the blog.

The blog has at the end a comments section. Please leave comments, ask questions and let me know of any cases etc that you are involved in.

Thank you.

Kerry Underwood

March 2016
 
PARTS AND CHAPTERS
Part I – WHAT IS COVERED?

  1. Introduction
  2. Scope
  3. Section 57
  4. Structure of CPR 44.12 to 44.17

Part II – EXCEPTIONS

  1. Fundamental Dishonesty
  2. Pre – Jackson Funding Agreements
  3. Part 36
  4. Discontinuance, Strike – out and Summary Judgment
  5. Financial Benefit of Another
  6. Miscellaneous

Part III – STATUTES ETC

  1. Statutes etc.

Part IV – EXTENDING QUALIFIED ONE-WAY COSTS SHIFTING

  1. Extending Qualified One-Way Costs Shifting

Part V – SET – OFF

  1. Set-Off

Part VI – REFERENCES

  1. References

CONTENTS
Part I – WHAT IS COVERED
1. INTRODUCTION 3
a. History 3
b. Modern Times 5
c. Interplay with Section 57 Criminal Justice and Courts Act 2015 6
d. Structure of the Book 8
e. Summary 9
f. Exercise 11
2. SCOPE 14
a. Type of Work 14
b. Issued Proceedings In England & Wales 15
c. Place of Injury 16
d. Date of Injury 16
e. Pre – Action Disclosure 17
f. Hybrid Claims 17
g. Section 57 19
h. Small Claims – Section 57 20
i. QOCS 21
j. Appeals 22
i. Section 57 22
ii. QOCS 23
iii. Liability Appeals 24
iv. Quantum Appeals 25
v. Defendants’ Appeals 25
vi. Multi-Party Claims 26
vii. Legally – Aided Claims 27
k. Motor Insurers Bureau Claims 28
i. Uninsured Drivers 28
ii. Untraced Drivers 28
iii. Qualified One Way Costs Shifting 30
iv. Appeals 31
v. Summary 32
l. Criminal Injuries Compensation Authority (CICA) Claims 33
m. Discrimination Cases 36
i. Actual Injury 36
ii. Employment Tribunals and QOCS 37
iii. Employment Tribunals and Section 57 37
iv. Injury to Feelings 38
v. Shorter Oxford English Dictionary 38
1. Impairment 38
2. Impair 38
3. Impaired 38
4. Impairment 38
5. Impair 38
6. Impaired 39
vi. Roget’s Thesaurus gives the following alternative for “impair” 39
vii. Roget’s Thesaurus gives the following alternatives for “impaired” 39
viii. Roget’s Thesaurus gives the following alternatives for “impairment” 39
n. Summary 45
i. QOCS 45
ii. Section 57 45
iii. Childrens Cases 46
iv. Those Lacking Capacity 46
v. Costs Proceedings 46
o. Simmons v Castle 10% uplift 48
3. SECTION 57 53
a. Commencement 53
b. Effect 54
c. Related Claim 55
d. Substantial injustice 55
e. Costs 55
f. Definitions 56
g. Criminal Proceedings 58
h. Problem areas 59
i. Success Fee and Charge to Client 60
j. After-the-Event Insurance 61
k. Self-insurance 62
l. Client Care Letter Wording 62
m. Substantial Injustice 64
n. Level of Burden of Proof re Substantial Injustice 66
o. What might be covered? 67
p. Children’s cases 68
q. Claimants lacking capacity 69
r. Loss of huge award 69
s. Other matters 69
t. Cost to state 69
u. Fundamental Dishonesty and Costs Proceedings 70
v. Section 57 and Part 36 71
w. Section 57 and Proportionate Costs Orders 72
x. Case Law 73
y. The Irish Experience 74
z. Criminal Liability 82
i. Criminal Justice and Courts Act 2015 83
ii. Civil Liability and Courts Act 2004 84
4. THE STRUCTURE OF CPR 44.12 to 44.17 88
a. Restriction is on enforcement, not the order 88
b. Partial enforcement without leave 89
c. Full enforcement without leave 90
d. Full enforcement with leave 90
e. Ambiguities 90
f. Set-off under CPR 93
g. Interim payments and CRU 94
Part II – EXCEPTIONS
5. FUNDAMENTAL DISHONESTY 97
a. Claimant Wins 99
b. Claimant Loses 99
c. Summers v Fairclough Homes Ltd [2012] UKSC 26 105
d. Other cases 109
e. Alpha Rocks Solicitors v Alade [2015] EWCA Civ 685 111
f. The Defence View 113
g. Procedure under QOCS re Fundamental Dishonesty 113
h. Advice re Fundamental Dishonesty 115
i. Multi-party cases 116
6. PRE – JACKSON FUNDING AGREEMENTS 117
a. Pre-Action Disclosure 118
b. Pre 1 April 2013 Conditional Fee Agreements,
ATE etc 118
c. Nil Success Fee 120
d. Appeals where recoverable additional liability in relation to original hearing 124
e. Joining new parties post 1 April 2013 125
f. Discontinuing and starting again 126
g. Assignment 126
h. CPR 52.9A 126
i. Retrospection 130
i. Retrospective retrospection 131
7. PART 36 135
a. The idea 135
b. The reality 135
c. Exercise 138
d. Case Study 140
8. DISCONTINUANCE, STRIKE-OUT and SUMMARY
JUDGMENT 143
a. Strike-Out and Summary Judgment 143
b. Strike out 143
i. No Reasonable Grounds 143
c. No Reasonable grounds 145
i. Oh What Tangled Webs we Weave 145
d. An Abuse of Process 146
i. Delay 146
e. Obstructing Just Disposal 146
i. Failure to attend trial 146
ii. Failure to file Pre-Trial Checklist 147
f. Discontinuance 148
i. Discontinuance- Not as simple as you may think 149
ii. Jumping the gun 151
iii. Court’s discretion to set aside Notice of Discontinuance 152
iv. Discontinuance- CPR 38.6 154
v. Discontinuance and Fundamental Dishonesty 155
9. FINANCIAL BENEFIT OF ANOTHER 159
a. Claims on behalf of the estate of a deceased person 165
10. MISCELLANEOUS 169
a. Provisional Assessment 169
b. Fixed Recoverable Costs 169
c. Does QOCS Apply To A Claim By a Defendant Against a Third Party? 169
d. Is QOCS Legal, That Is Is It Intra Vires? 171
e. Does The Existence Of Defence Junior Counsel’s Pre-1 April 2013 Conditional Fee Agreement Mean That QOCS Did Not Apply To It? 171
PART III – STATUTES ETC
11. STATUTES ETC 174
a. Criminal Justice and Courts Act 2015 174
b. CPR 44.13 – 44.17 176
i. 44.13 176
ii. 44.14 176
iii. 44.15 177
iv. 44.16 177
v. 44.17 178
c. Practice Direction 44 179
PART IV – EXTENDING QUALIFIED ONE WAY COSTS SHIFTING
12. EXTENDING QUALIFIED ONE WAY COSTS SHIFTING 183
a. Scope 185
b. Procedure 186
c. Retrospection 187
d. Agreement 187
e. Statement of Assets 187
f. Severe financial hardship 187
g. Means 188
i. Modest means – full costs protection – nil net liability (Draft CPR 44.22) 188
ii. Mid group of some means – partial costs protection – capped liability (Draft CPR 44.23) 188
iii. Reasonable Amount 189
iv. Substantial means – no costs protection 190
h. Confidentiality (Draft CPR 44.26(3)) 190
i. Variation or loss of costs protection (Draft CPR 44.21, 44.24 and 44.25) 190
j. Retrospective Orders (Draft CPR 44.27) 191
k. Enforcement 191
l. Costs of Applications 192
m. Extending the scheme 192
n. The Draft Civil Procedure Rules 192
o. Further extension 197
PART V SET OFF
13. SET OFF 200
a. Case Law 202
b. Reid v Cupper 211
PART VI REFERENCES
14. REFERENCES 217
a. Statutes 217
b. Statutory Instruments 218
c. Civil Procedure Rules 219
d. Practice Directions 220
e. Case Law 220
f. Other 224
GLOSSARY
 
Adverse costs: The other side’s costs that is adverse to the person paying them.
Aiel: A writ which lies where a man’s grandfather being seised of lands and tenements in fee simple the day that he died, and a stranger abated or entered the same day and dispossessed the heir of his inheritance.
Assessment: Procedure whereby the court decides what costs should be awarded. Assessment can be a summary, provisional or detailed.
Basic Costs/Base Costs: The amount the client is contractually obliged to pay to his or her solicitor, a part of which is recovered from an unsuccessful opponent in the event of a win. These costs are also known as Solicitor and Own Client Costs. The element recovered is known as “inter-partes” costs, “between the party” costs.
Cap: An agreed maximum to be charged to the client. In personal injury work this is now normally by reference to damages. In relation to the success fee element this is a statutory maximum of 25% but in relation to all costs it is a matter of contract between solicitor and client.
Civil Procedure Rules: Set of rules, constantly updated, which govern all civil proceedings in England and Wales.
Conditional Fee Agreement (CFA): A creature of statute. A form of contingency fee that is subject to additional conditions laid down by Parliament. In return for agreeing to charge no fee, or a lower fee, in the event of losing, the lawyer is entitled to charge an additional fee over and above her or his normal fee, in the event of a win. The distinguishing feature of Conditional Fee Agreements, as compared with straight forward Contingency Fee Agreements, is that the lawyer’s success fee is calculated by reference to the ordinary fee, rather than just damages. However the imposition of a cap on that additional fee effectively transforms conditional fees into contingency fees.
Contingency fee: An arrangement whereby the lawyer’s fee is expressed as a percentage of damages and is thus governed by the amount recovered and not directly by the amount of work done. Common in the United States.
Cosinage: Fraud, deceit.
Novel disseisin: Recent dispossession. This was an action to recover lands of which the plaintiff had been disseised, or dispossessed. The action became very popular due to its speed. Rather than dealing with the issue of lawful possession, it simply asked whether a dispossession had taken place and if it had the property was restored to the plaintiff immediately with the question of true ownership being dealt with later. It was dealt with at the assize of novel disseisin, which was one of three petty assizes established by the assize of Clarendeon by Henry II in 1166 along with the assize of Northampton 1176 and these three petty assizes lasted until 1833. The other two were the assize of mort d’ancestor and the assize of darrein presentment.
Costs following the event: See cost-shifting
Cost-Shifting: Rule whereby the losing party in litigation pays the winning party’s costs, or more generally, a percentage of them. Also known as “loser pays” or “costs following the event” or “two-way rule” or “winner takes all”.
Darrein presentment: An action brought to enquire who was the last patron to present a benefice to a church then vacant of which the plaintiff complained that he had been unlawfully deprived by the defendant. The action was related to the aristocratic privilege of the right to appoint a parson to a particular parish.
Demandant: Old name for a claimant.
Indemnity costs: The full amount of the costs incurred by a party. Normally a party recovers costs against the other side on the standard basis, rather than the indemnity basis. Standard costs are subject to the concept of proportionality whereas indemnity costs are not. Standard costs are for all intents and purposes subject to guideline hourly rates followed by the court whereas indemnity costs are not . The award of indemnity costs has traditionally marked disapproval by the court of the paying party’s conduct. However, and confusingly, indemnity costs should now be awarded where a claimant matches or beats its own Part 36 offer and that does not involve any criticism of the defendant. Because of the traditional association of indemnity costs with misconduct judges seem reluctant to award claimants indemnity costs where they match or beat their own Part 36 offer.
Indemnity principle: Extremely complicated principle which expressed simply means that the losing party is only liable for legal costs which the winning party has agreed to pay their lawyers. This has traditionally been interpreted as making Conditional Fee Agreements or Contingency Fee Agreements unenforceable as the law does not distinguish between a win and a loss. Thus in the event of a loss the client had agreed to pay his or her lawyer nothing, so under the indemnity principle, even if the client wins and had agreed to pay his lawyers in the event of a win, he can recover nothing from the other side. This has always encouraged solicitors to increase fees to justify recovery from the other side.
Inter-partes costs: Costs recovered by a winning party from a losing party. Now correctly known as “between the party costs”.
Legal aid: A form of financial assistance by the state for those of moderate means. Now abolished in civil matters with very limited exceptions.
Loser pays: Rule whereby the losing party in litigation pays the winning party’s costs, or more generally a percentage of them. Also known as “costs-shifting”, “costs following the event” or “two-way rule” or “winner takes all”.
Mort d’ancestor: An action brought by a plaintiff who claimed that the defendant had entered upon a freehold property belonging to the plaintiff following the death of one of his relatives.
Multi-party actions: Defined as cases where there are 10 or more people bringing a claim.
No-way rule: Rule whereby the court generally makes no order for costs, that is each party pays their own costs, win or lose. In contingency fee cases this means the losing party has no liability for costs, either to his own lawyers or to the winner’s lawyers. This system is in operation in the United States.
Obiter: A statement in a Judgment not necessary to decide the result of that case. Consequently an obiter statement is not binding on other courts but is persuasive.
One-way rule: Rule whereby one party only is potentially liable for the other side’s costs and one party is immune. This is the basis of one-way costs shifting.
Part 36: Technically Civil Procedure Rule no 36, but always known as Part 36. A rule of extreme complexity. Putting it very simply indeed where a defendant makes a Part 36 offer, and such offers are subject to considerable formalities, and the claimant fails to get more at trial than the offer then the claimant has to pay all of the defendant’s costs from 21 days after the offer was made. This applies even in Qualified One-Way Costs Shifting cases and many commentators take the view that it wrecks QOCS. If a claimant matches or beats its own Part 36 offer at trial then the claimant gets indemnity costs, rather than standard costs, from 21 days after the offer was made and also a 10% increase in damages.
Plaintiff: Old name for a claimant.
Practice Direction: Guidance, which is not legally binding, in relation to the Civil Procedure Rules.
Qualified One-Way Costs Shifting: A system of one-way costs shifting, subject to qualifications.
SCCO: Senior Courts Costs Office. A specialist court consisting of specialist costs judges whose technical status is that of a District Judge. Nevertheless in view of their expertise their decisions carry more weight than those of other first instance judges.
Small claims: A more informal procedure in the County Court in which costs do not follow the event, that is that each party is liable for their own lawyer’s fees and cannot recover them from the other side. The general small claims limit is £10,000.00 but in personal injury cases it is currently £1,000.00 and on 25 November 2015 government announced that it would be increased to £5,000.00. This will probably be from April 2017.
Solicitor and Own Client Costs: See Basic/Base Costs.
Standard costs: See indemnity costs.
Success fee: The additional fee, over and above ordinary fees, charged by a successful lawyer in a conditional fee case to reflect the risk of getting no fee, or a lower fee, in the event of defeat. Also known as uplift.
Taxation: Same as assessment. Assessment was the original term, used at least as early as the 16th century and to which we have now returned.
Uplift: See success fee.

Written by kerryunderwood

January 15, 2016 at 12:41 pm

Posted in Uncategorized

LEGAL SERVICES CONSUMER PANEL: A BLOT ON THE LANDSCAPE

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Yes, this useless publicly funded body is at it again. This time it is a gibberish response to the Competition and Markets Authority’s interim report into the Legal Services Market.

 

Take this:-

 

“We agree with the overall finding that competition is not working well in this market because of a chronically weak demand side. Consumers are not empowered with the information they need to shop around or choose the most appropriate legal service provider for their needs. Consequently, their ability to drive competition is hampered.”

 

The response then complains that most people do not shop around and that their survey showed that in 2011 19% shopped around – “This had improved by 2016, but still only 25% of users of legal services said they had shopped around.”

 

Where do I begin? The idea that clients do not shop around is absurd and frankly a lie. Perhaps Elisabeth Davies, Chair, Legal Services Consumer Panel and author of this response, would care to come and sit in any solicitor’s office any day of the week and deal with the new client enquiries and give out the quotes for conveyancing and wills and Powers of Attorney and first free interviews etc.

 

Indeed Ms Davies is welcome to come in and look at my firm’s entire redacted new client enquiries file.

 

Virtually all solicitors now have things called websites and virtually all potential clients have access to computers to look at those websites. Those clients who want to shop around can, and do.

 

The Legal Services Consumer Panel starts on the basis that shopping around is good – see the term “improved” quoted above. Why so? If I am satisfied with an existing provider I do not shop around. I go to the same butcher each week. I do not shop around. I am interested in quality and service rather than price. Most people are the same.

 

Thus an increase in those shopping around is a bad thing, not a good thing, and we all know that shopping around is on price and not quality.

 

The good news is that on the Legal Services Consumer Panel’s own surveys 75% of people still do not feel the need to shop around in relation to the provision of legal services, presumably because they are entirely happy with their existing providers.

 

On this point please see Baseline survey to assess the impact of legal services reform.

 

Under “The case for regulatory intervention” there are then three paragraphs which I do not pretend to understand. Please read them for yourself and see if you can make any more sense of them.

 

Suffice to say that solicitors in England and Wales are subject to greater regulation in terms of pricing information to be given and the consequences of not giving it, than any other body on Earth.

 

A reminder to the Legal Services Consumer Panel: the Solicitors Act 1974 allows any client to challenge any solicitor’s bill. Any solicitor’s bill must be signed personally by a partner. That is an extreme form of regulatory intervention. Of course these parasitic quangos do not see Acts of Parliament as regulation. What they mean by regulation is the creation of endless, useless, expensive, damaging bodies like themselves handing out meaningless and damaging jobs at public expense.

 

Legal Services Ombudsman

 

There is a thing called the Legal Services Ombudsman. I could go on and on. Read it yourself. Even by the abysmal standards of these abysmal people this plumbs new depths. I set out the final section of the response:-

 

Rather than set out a detailed blueprint for change, the Panel suggested some success criteria to inform options for a future regulatory system:

 

  • Improved access to the Legal Ombudsman for legal services transactions

 

  • Regulation which is fully independent of the profession

 

  • Consumer-focused regulatory objectives

 

  • A simple system that starts from a consumer journey perspective

 

  • A flexible regime better targeted at the risks facing consumers, one focused on the activity rather than the person doing the work

 

  • Strong and effective consumer representation

 

  • A strong emphasis on evidence-based policy making including direct engagement with consumers and robust datasets

 

  • Transparent working and accountability for  performance

 

  • Avoidance of duplication of processes while respecting the diversity of providers

 

  • Sustainable resourcing and delivery of effective regulation with a level of investment that reflects the contribution which the sector makes to GDP and its importance to wider societal objectives”

 

What the hell does any of that mean?

 

“A simple system that starts from a consumer journey perspective”

 

Just take this headline.

 

Ah yes. A custody dispute involving two children. “One and two halves to the Divorce Court please”. You just get on the bus, read the paper, have a sandwich and get off at the other end.

 

There is a tiny problem. In litigation there is always someone else trying to stop your journey, derail your train, sink your boat or crash your bus.

 

It is like comparing a day trip to France with the D-Day landings.

 

“I know I robbed the bank and shot someone but from my consumer journey perspective I don’t want the journey to end in Wormwood Scrubs.”

 

It is Bridget “Baked Beans” Prentice all over again. The reason why buying baked beans is not the same as purchasing legal services is that in a supermarket there is not normally someone trying to throw all of your purchases out of the basket, as there is in litigation.

 

“A flexible regime better targeted at the risks facing consumers, one focused on the activity rather than the person doing the work”

 

Ah yes. We are all equal. Those who have trained and studied and qualified and have professional negligence insurance etc. should have no more rights than anyone else to practice law, or medicine or teach, or be a police officer, or serve in the army or whatever.

 

Let us transfer this concept over to the stage or sport.

 

On that basis 90,000 people will watch a football match in the park, the same as the number who will go to Wembley.

 

Fat Fred from the Dog and Duck will get the same TV audience as an Olympic gold medal winner.

 

Ten million people will go to the local Am-Dram production, just the same number as would watch a major TV drama with major stars.

 

And so it goes on.

 

These useless, publicly funded parasitic bodies should all be scrapped overnight.

 

Consumerism is all about the individual at the expense of society. It is a morally bankrupt concept.

Written by kerryunderwood

September 28, 2016 at 8:44 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 (Unreported)

 

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).

 

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!

 

I stress that I have not yet read the full judgment, which is apparently not yet available, and I will comment further once I have.

 

Written by kerryunderwood

September 27, 2016 at 7:49 am

Posted in Uncategorized

PART 36: A MAJOR PROBLEM

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A claimant makes a Part 36 offer and after the time for accepting the offer the defendant makes a higher Part 36 offer which the claimant then accepts.

 

Does the claimant then just get ordinary costs in the ordinary way or indemnity costs from the date of expiry of its own offer?

 

Thus the question can be asked:-

 

“Can a defendant avoid the costs consequences of late acceptance of a claimant’s Part 36 offer by making a higher offer, which the claimant then accepts, thus triggering a right to ordinary costs in the usual way, but not indemnity costs from expiry of the claimant’s offer, or will the court find that the claimant has beaten its first offer and is entitled to those indemnity costs?”

 

Does the same apply the other way round:-
“Can a claimant make a lower Part 36 offer than a previous one made by a defendant, thus avoiding paying costs from the expiry of the defendant’s offer?”

 

From the number of emails and blog comments I am getting this is now happening a lot and both sides are taking advantage of this apparent lacuna.

 

For what it is worth my view is that in those circumstances the court should exercise its very wide discretion on costs and take into account the original offer.

 

If the court does not do so then in any case where there is effectively late acceptance, the paying party can simply make a higher offer that is say £5.00 above the original offer, or the receiving party could make an offer of say £5.00 below the original offer and effectively neuter Part 36.

 

Consequently my view is that public policy demands that in those circumstances the claimant would have to pay costs from the expiry of the original defendant’s offer and a defendant would have to pay indemnity costs from the expiry of the claimant’s Part 36 offer.

 

Any thoughts anyone? Any decisions on this point?

 

Please see my related blogs:-

 

PART 36: THE DRY SALVAGES: UNIFIED

 

PART 36 LIABILITY OFFERS ON DAY ONE

 

PART 36 & ISSUE BASED ORDERS

 

CLAIMANT’S PART 36 OFFER OVERRIDES FIXED COSTS

 

10% UPLIFT IN ALL CASES EXCEPT WHERE THERE IS A RECOVERABLE SUCCESS FEE

 

PART 36: DOES A CLAIMANT GET INDEMNITY COSTS ON LATE ACCEPTANCE?

 

CLAIMANTS’ PART 36 OFFERS: FIVE NEW KEY DECISIONS

 

 

Written by kerryunderwood

September 20, 2016 at 10:12 am

Posted in Uncategorized

ABS’s: THE ENEMY WITHIN AND THE CURIOUS INCIDENT

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As The Enemy Within seek further powers to destroy the legal system of England and Wales and thus to destroy society itself, it is worth considering the curious incident of the Ministry of Justice’s survey of the impact of Alternative Business Structures and Legal Services Reform generally.

 

The curious incident is that there has been no such survey.

 

In March 2010 the Ministry of Justice published a research paper entitled:

 

Baseline survey to assess the impact of legal services reform

 

Its findings are interesting and, arguably, surprising.  It is required reading for every lawyer in the land.

 

It shows a satisfaction rating rarely matched by any other group of professionals or workers, and proves what we all knew all along, that the Legal Services Act and Alternative Business Structures address a non-existent problem.

 

As the name suggests, the idea of a baseline survey is that you see what the position is before any given reforms and you then conduct a further survey to assess the impact of those reforms. This is borne out by the title of that March 2010 research paper as set out above.

 

That survey showed a satisfaction rating rarely matched by any other group of professionals or workers, and proves what we all knew all along, that the Legal Services Act and Alternative Business Structures sought to address a non-existent problem.

 

Nevertheless, it would still be very interesting to see what the public think of Legal Services Reform generally, such as the virtual abolition of legal aid, the enormous increase in court fees – over 600% in many instances, as well as Alternative Business Structures and bodies such as Quindell, Co-Op Legal Services, Eddie Stobart, Saga Law and various organizations which have already gone bust and/or pulled out of legal services.

 

Obviously the reason that the Ministry of Justice, not known for being a friend of the truth, has failed to commission a follow up survey, could not possibly be that it is virtually impossible to improve on the public’s rating of solicitors as shown by the baseline survey, could it?

 

Could it?
Here are the key points from that survey:-

 

Key findings

 

  • 34% of people in England and Wales aged over 16 had used legal services in the previous three years;

 

  • 91% felt that they had received a good service (84% agreeing a lot and 7% agreeing a little);

 

  • 92% were satisfied with the outcome;

 

  • 92% felt that the provider acted in their best interests;

 

  • 13% felt that they were not given good value for money;

 

  • 2% complained.

 

Detail

 

Services used and with the percentage using them were:

 

Use of legal services for personal matters in the last three years
Used in the last three years

%

The most recent matter

%

Conveyancing 50 38
Will writing 27 18
Probate 17 10
Family matters 15 9
Accident or injury claims 11 9
Housing, landlord or tenant problems 4 3
Employment disputes 3 2
Any offences or criminal charges 3 2
Immigration matters 2 2
Problems with consumer services or goods 1 1
Advice and appeals about benefits or tax credits 1 1
Debt or hire purchase problems 1 1

 

Authorised providers, that is lawyers, were used in 95% of cases.

 

81% of users said that the main person handling their matter was a solicitor or trainee solicitor.

 

 

Source

 

Recommendation by family or friends 29%
Past experience 23%
Referrals 23%
Advertising 5%
Information search (eg internet) 5%

 

 

Source by most recent matter type

Conveyancing Will writing Probate Family matters Accident or injury Other personal matter Total

%

Recommendation by family or friends 31 22 24 41 27 29 29
User or family member had used provider before 22 31 51 8 4 19 23
Referral by another organisation 29 11 5 15 49 23 23
Saw local offices 5 13 9 16 4 5 8
Responded to advertising or contact 2 14 1 4 8 6 5
Searched for information 3 3 3 13 6 10 5
Knew someone who worked there 6 2 2 1 2 2 3
Other answers 1 4 4 1 6 2
Don’t know 1 *

 

 

Multiple usage

 

Of the 34% who had used legal services in the previous three years;

 

  • 77% had during that period used legal services for at least one matter;

 

  • 31% had during that period used legal services for two or three other matters;

 

  • 25% had during that period used legal services for four or more other matters;

 

  • 4% had during that period used legal services for 10 or more other matters.

 

Payment

 

How legal services were paid for

 

Total

%

With own (or family’s or friend’s) money 78
Through legal aid 6
Through insurance 5
A free service (excluding no win, no fee arrangements) 5
Through a no win, no fee arrangement (conditional/contingency fee) 4
By trade union 1
In another way 3

 

Some methods of payment were associated with particular types of matter.  For example for accident and injury matters 42% were paid for through insurance and 39% through conditional or contingency fees.  In family matters 31% were paid for by legal aid.

 

 

How legal services were paid for by most recent type

 

Convey-ancing

%

Will writing

%

Probate

%

Family matters

%

Accident or injury

%

Other personal matter

%

Total

%

With own (or family’s or friend’s) money 99 93 97 67 6 49 78
Through legal aid 1 31 6 14 6
Through insurance 42 7 5
A free service (excluding no win, no fee arrangements) 1 4 3 8 6 17 5
Through a no win, no fee arrangement (conditional/ contingency fee) * 39 1 4
By trade union 2 6 2 1
In another way 1 2 2 4 10 3

 

 

 

 

Fees quoted by most recent matter or type

 

Conveyancing

%

Will writing

%

Probate

%

Family matters

%

Accident or injury

%

Other personal matter

%

Total

%

Fee quoted 96 90 82 95 25 78 88
fixed fee 61 70 27 11 8 36 51
estimate 31 15 39 42 15 25 27
hourly fee 4 5 16 42 3 17 9
No fee quoted 4 9 18 5 48 14 10
Told would not have to pay 1 28 8 3

 

 

Types of legal service providers used

 

Total %
Authorised providers 95
– Solicitors 94
– Barristers 3
– Notaries *
– Licensed conveyancers *
   
Non-authorised providers 5
Will writer 1
Citizens Advice Bureau 1
Financial adviser 1
Community legal advice centre 1
Trade union *
Company dealing with accident and injury claims *
Estate agent *

 

 

Source

 

How users first heard about main provider

 

Total %
Recommendation by family or friends 29
User or family member had used provider before 23
Referral by another organisation 23
Saw local offices 8
Responded to advertising or contact 5
Searched for information 5
Knew someone who worked there 3
Other answers 2
Don’t know *

 

The figure of 23% for referrals breaks down as follow, with the figures below being the percentage of the whole range of sources, not the percentage of referral work.

 

By another legal organization 4%
Insurance company/trade union                 5%
Others (claims management companies, estate agents, financial        advisers etc) 14%

 

 

Other

 

79% felt that they had a lot or a fair amount of choice of provider;

 

93% felt that it was very or fairly easy to choose a provider;

 

92% were given the name of a particular person who would handle their matter.

 

 

Basis of charging

 

 

Total %

Fee quoted 88
fixed fee 51
estimate 27
hourly fee 9
No fee quoted 10
Told would not have to pay 3

 

 

Communication

 

94% said that they were able to deal with their provider whey they needed to;
85% communicated by telephone;
59% visited the provider’s office;
46% communicated by post;
28% communicated by email

 

When users were asked to specify their main method of communication 59% said the telephone and 22% said personal visits.

 

When asked their preferred method of communication

 

51%        said telephone

41%        said personal visits

22%        said email

20%        said post

 

The report states:

 

“Personal contact was regarded as essential for progressing matters”

 

“Most people had chosen providers that were conveniently situation”.

 

 

Other service standards

 

96% agreed that the lawyer explained things in a way that the client could understand;

 

95% agreed that the lawyer acted in a professional manner;
94% knew what was going on in the matter
94% agreed that the lawyer was approachable
89% agreed that the lawyer responded to calls and letters promptly;
86% said that they would be likely to recommend the provider and 63% said that they were very likely to do so.

 

 

Satisfaction rates

 

Conveyancing 95%

 

Will-writing 96%
Family 86%
Accidents 78%

 

 

Problems and complaints

 

10% said that there was a problem or issue with their legal service that they were unhappy about.

 

The rate of problems for family matters was 22% and for conveyancing 9% and for will writing 5%.

 

The following table shows the issues that the 10% had were

 

%
Delays/the amount of time the matter took 36
Mistakes 28
Not kept up to date/informed 27
Costs or bill too high 23
Standards/quality of service provided 21
Treatment by provider’s staff 11
Other answers 13
Don’t know 2

 

Written by kerryunderwood

September 15, 2016 at 7:45 am

Posted in Uncategorized

WASTED COSTS & NON-PARTY COSTS ORDERS AGAINST SOLICITORS: 5 NEW CASES

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There has been a flurry of recent cases concerning wasted costs orders and non-party costs orders, including non-party costs orders against solicitors.

 

Wasted costs orders can only be made against lawyers but non-party costs orders can be made against any person whatsoever, and that can include solicitors and such orders have a much lower threshold than wasted costs orders.

 

For a detailed examination of the whole subject see my blog: WASTED COSTS AND NON-PARTY COSTS ORDERS: UNIFIED.

 

Non-party costs order may be made before costs have been assessed

 

In Loson and another v Stack and another [2016] EWCA Civ 610 (27 April 2016)

 

the Court of Appeal refused a renewed application for permission to appeal against a non-party costs order and confirmed that a non-party costs order may be made before costs have been assessed.

 

Here a non-party costs order had been made against the applicant on the basis that he was the driving force behind his wife’s claim and he sought permission to appeal against that order, his main argument being that it was wrong for a non-party costs order to be made before costs have been assessed.

 

The Court of Appeal, having considered the wording of CPR 46.2 and the authorities on the application of that rule said that there was no basis for that submission.

 

The applicant could take any point about what costs should be allowed and about proportionality during the course of the assessment of costs.

 

An interesting twist in this case was that the husband was a solicitor and therefore was also acting as his wife’s solicitor as well as being joined as a party for the purposes of making a non-party costs order.

 

The application for a wasted costs order failed but the application for a non-party costs order was successful.

 

Mr Emezie, the husband and solicitor, raised the point about legal professional privilege but the court held that while that was clearly relevant in relation to a wasted costs order it was not relevant in relation to a non-party costs order:-

 

“…I do not see how the existence of legal professional privilege advances Mr Emezie’s position in relation to the present costs issue. The order made by the judge was not a claim for wasted costs, where sometimes the existence of legal professional privilege does put the lawyer against whom wasted costs are sought in professional difficulties.”

 

“16. This is a claim for a non-party costs order on the basis that Mr Emezie was the driving force behind his wife’s claim. I do not see how anything which is subject to legal or professional privilege could, if revealed, have constituted a defence to that claim. It was clear from the documentation, from the correspondence and from the course of events in court that Mr Emezie was indeed the driving force behind his wife’s conduct of the litigation.”

 

Although this decision only relates to an application for permission to appeal it is a brief and useful judgment, dealing not only with the issue of a non-party costs order being made before costs had been assessed but also the differences in principle between a wasted costs order and a non-party costs order.

 

It is a reminder that a solicitor faces a double jeopardy. Only lawyers are subject to wasted costs orders and the threshold for making such an order is high.

 

However lawyers are also potentially liable as a real party to the action and thus subject to a non-party costs order, where, as this cases demonstrates, the threshold is much lower and issues such as professional privilege do not come into play.

 

A solicitor can be liable for a non-party costs order in a variety of situations. Here it was because the solicitor was the husband of the nominal party and “was the architect of these proceedings brought by his wife and… the controlling mind.”

 

In that sense the fact that he was a solicitor was irrelevant.

 

There will be other cases, particularly in relation to costs matters, where the only point of that aspect of the dispute is potentially to benefit the solicitor as a solicitor and in those circumstances a solicitor can also be subject to a non-party costs order.

 

No security for costs in wasted costs applications

 

In MA Lloyd and Son Ltd (In Administration) v PPC International Ltd (t/a Professional Powercraft) [2016] EWHC 1583 (QB) (30 June 2016)

 

a High Court Master dismissed an application for security for costs to be made by a solicitor facing a wasted costs application and this appears to be the first authority on whether security for costs is available in such a situation.

 

That of itself was said to be significant as both security for costs applications and wasted costs applications were common.

 

The defendant sought a wasted costs order against the solicitor after proceedings by his client MA Lloyd and Son Ltd were struck out or abandoned and when the defendant PPC was unable to enforce a costs order against that client.

 

The court said:-

 

“From the literal wording it clearly provides that only a defendant to a claim may apply for security under these proceedings. The application for costs against Mr. McCarthy stands to be considered by the court pursuant to its discretionary jurisdiction under s.5 l of the Senior Coutts Act 1981. In my view it cannot be accepted that applications for costs arising as a consequence of a claim being brought should themselves be treated as equating to a substantive claim and I therefore do not accept that CPR Part 25 is intended to give the court jurisdiction to order security against a party in respect of issues relation to what are clearly ancillary proceedings.” (Paragraph 11).

 

Here the application for security had been made by the solicitor facing the wasted costs application.

 

The Master also declined to make an order for security as a sanction under CPR 3.1(5) as there was nothing about PPC’s conduct in bringing the wasted costs application which could be described as objectionable so as to give rise to an order for costs under that rule. The court said:-

 

“At paragraph 25.12.3 of the White Book it states “Rule 3.1(5) provides for applications for security for costs against any party, whether claimant, defendant, third-party or respondent to an appeal, who fails to comply with the rule” (emphasis added). The decisions on Olatawura v Abiloye [2002] EWCA Civ 998 and Ali v Hudson [2003] EWCA Civ 1793, referred to in paragraph 3.1.5 of the White Book, indicate that the circumstances in which it will be appropriate to order a payment into court will normally be limited to cases where a party has been flouting court rules, orders or procedures or otherwise considered to be demonstrating a want of good faith. In this context it is apparent that the want of good faith refers to the manner in which a party is litigating in accordance with the overriding objective. In my view there is nothing about the behaviour or conduct of the Defendant in the present case which can be described as objectionable so as to give rise to an order for costs under this rule.” (Paragraph 12).

 

Here the court said that the real purpose of the security application appeared to be to stifle the wasted costs application.

 

As the court had ruled that it had no power in the circumstances to make an order for security of costs it was not strictly necessary for it to consider whether grounds had been made out for granting security, had the court had the power so to do.

 

Nevertheless the court did, for the sake of completeness, do so and held that, even if it had had the power to order security for costs, it would have exercised its discretion against making such an order.

 

The court said that in those circumstances it was permissible to consider the strength of the application for a wasted costs order and although obiter the court’s comments are useful in considering when a court is likely to exercise its wasted costs discretion.

 

While accepting that wasted costs applications involve a high threshold the court here took into account the fact that Mr McCarthy was the supervising solicitor of an unqualified lawyer who had much of the day to day conduct of the cases. The court viewed it as significant that three separate sets of proceedings were commenced against the defendants on identical or very similar grounds and that they were all struck out or abandoned.

 

“Prima facie it is difficult to see how this could have occurred without “improper, unreasonable or negligent act or omission” (derived from the wording of s.51(7) of the Senior Courts Act 1981) by someone. Whether that is as a result of the acts or omissions of the legal advisers to the Claimant or as a result of instructions given by Mr. Key, acting on behalf of the Claimant, is a matter for the Court hearing the Main Application, however it is, in my view, appropriate to have in mind the following matters: (i) That the witness statement of Mr. Key dated the 3rd May 2016 (his sixth witness statement) contains material which strongly suggests that his legal advisers failed to provide him with adequate advice and/or commended proceedings and/or made certain applications without any, or at least adequate, instructions from Mr. Key; (ii) That I have ruled that the witness statement of Mr. Key just referred to is evidence upon which PPC may rely at the hearing of the Main Application to be heard on the 25th July 2016 and for the purposes of this application; (iii) That Mr. McCarthy failed to file or serve any evidence in the Main Application by 4th April 2016 in accordance with the directions made in the Order of the Court dated 4th March 2016 and (iv) That I understand that an application by Mr. McCarthy dated the 7th June 2016 and filed on the 23rd June 2016, seeking permission for Mr. McCarthy to file a witness statement in reply to the wasted costs application, was heard by the Hon Mr. Justice Singh on the 27th June 2016 and was dismissed. Therefore, and notwithstanding the provisions of CPR 46.8(2)… on the evidence presently available to the court, PPC has a very strong case against Mr. McCarthy for the recovery of some wasted costs although the precise circumstances and quantum will need to be considered…” (Paragraph 13(d)).

 

CPR 3.1(5) provides:-

 

“(5)        The court may order a party to pay a sum of money into court if that party has, without good reason, failed to comply with a rule, practice direction or a relevant pre-action protocol.”

 

Third-Party funders, non-party funders, non-party costs order and security for costs

 

In Dawnus Sierra Leone Ltd v Timis Mining Corporation Ltd and Another [2016] EWHC B19 (TCC)

 

the Technology and Construction Court, part of the High Court, dealt with the related issues of disclosure of the identity of a third-party funder, costs orders against non-parties and security for costs orders.

 

Only a defendant can make an application for security for costs, but a claimant qualifies as a defendant if the original defendant makes a counterclaim.

 

The claimant, defending a counterclaim, applied for an order that the defendant/counterclaimant disclose the identity of its third-party funder and that it state whether such funder came within the conditions set out in CPR 25.14(2)(b).

 

CPR 25.14(2) (b) follows immediately the two rules that deal with an order for security for costs against a party and the relevant part reads:-

 

“(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 –

 

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

 

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

 

 

(2)          The conditions are that the person…

 

  • 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.”

 

The court held that it had the power to make an order for disclosure of the identity of a third party funder and had power to order that third party funder to provide security for costs.

 

However on the facts of this case the court declined to so order. The defendant’s evidence, that its funding came from itself and a third party which had no agreement to receive a share of the proceeds, nor receive a fee and who had taken no security, had not been contradicted.

 

In the alternative the claimant submitted that the court had power under Section 51 of the Senior Courts Act 1981 and CPR 46 to make a costs order against a third party, which can include a third party funder.

 

Such orders are generally known as Non-Party Costs Orders.

 

To give effect to that power the court had an ancillary power to order disclosure of the identity of the third party funder and, where appropriate, the basis of the funding agreement.

 

The court held that it would be inappropriate to make such an order at this stage as it would be intrusive and a fishing expedition. It would only become appropriate as and when the claimant was seeking a costs order against a third party funder and only then if there appeared to be grounds on which such an order might be made.

 

Here the application was “really in the alternative to the application for security for costs against the defendant…”.

 

Wrong information re funding arrangement: No wasted costs order made

 

In Price v Egbert H Taylor and Company Ltd, Birmingham County Court, 16 June 2016 (unreported) Claim no. A04YM127: Appeal ref: BM5/007/A

 

the court declined to make a wasted costs order against the solicitor for the claimant where that solicitor had wrongly advised the defendant that the claim was being funded by way of a pre-Jackson funding arrangement with a Conditional Fee Agreement with a recoverable success fee.

 

As a result of that statement the court held that the claimant was estopped from arguing that Qualified One-Way Costs Shifting applied as QOCS does not apply where such an agreement is in place.

 

The substantive action was struck out for failure to serve in time.

 

The effect of this was that the successful defendant was able to enforce the costs order against the claimant personally.
The court’s decision here did not affect either way the ability or otherwise of the claimant to sue the solicitors in negligence, either in relation to the failure to serve in time and/or the false statement concerning the funding arrangements which resulted in the claimant being deprived of the protection of Qualified One-Way Costs Shifting.
For further information about that aspect of the case please see my post – QOCS & Estoppel

 

Here the court found, one might think somewhat surprisingly, that there had been no improper and/or unreasonable conduct by the claimant’s solicitor and neither had there been a negligent act or omission.

 

The court said:-

 

“It is clear that “negligent” in this context does not mean that which is actionable as a breach of the duty of the solicitor to his client. It must be something more than that – “mere negligence”, it must be an act or omission akin to an abuse of process or breach of duty to the Court. I accept Mr Walder’s submissions that whilst the claimant’s solicitor may be criticised for a number of “errors” in the way in which it managed and recorded its relationship with the claimant, its acts and omissions fall short of the failures required to form the basis of a “wasted costs” order in respect of the hearing of 27 November 2015 nor at all. Therefore, I do not make a “wasted costs” order against the claimant’s solicitor in respect of the hearing of 27 November 2015.” (Paragraph 72 of the judgment).

 

The hearing of 27 November 2015 was an adjourned hearing which was adjourned for the claimant’s solicitor to show cause as to why a wasted costs order should not be made.

 

The decision may or may not be right on that point, but given the court’s finding on the estoppel point it is hard to see how the claimant’s solicitors obvious negligence in giving false information about the method of funding does not amount to negligence for the purposes of the wasted costs regime.

 

The whole point here was that if the defendant realised that the claimant enjoyed QOCS protection it may well have acted differently and it was effectively mislead by the wrong information given.

 

One suspects that the judge here was influenced by the fact that the claimant, who now has to pay costs due to the negligence of his own solicitor, has what looks like a cast iron case against the solicitor’s professional negligence insurers.

 

Thus the defendant is likely to get its costs and the claimant is likely to recover them from the solicitor’s insurers and the solicitor will be covered for negligence.

 

Had a wasted costs order been made it is unlikely that the solicitor’s professional negligence insurance would have covered that order.

 

That is not a sound basis for making a decision and on the wasted costs point this decision should be treated with caution.

 

£101,000.00 costs order against solicitor working for firm not authorized to conduct litigation.

 

In MA Lloyd & Son Ltd (In Administration) v PPC International Ltd (t/a Professional Powercraft) [2016] EWHC 2162 (QB)

 

the Queen’s Bench Division of the High Court made a wasted costs order against a solicitor in the sum of £101,058.00.

 

This is a long and detailed judgment running to 26 pages and it examines thoroughly the relevant case law in relation to wasted costs orders.

 

Mr McCarthy was a qualified solicitor who was employed by Charles Henry, a body registered with the Solicitors Regulatory Authority, but which was neither a firm of solicitors nor a limited legal partnership and which was not authorised to conduct litigation.

 

Mr McCarthy was responsible for the conduct of the litigation on behalf of MA Lloyd and Son Ltd.

 

The other side – PPC International Ltd – alleged that he acted in a way that was improper or unreasonable within the meaning of the wasted costs jurisdiction and that MA Lloyd and Son’s case was “solicitor-led”.

 

There were three sets of proceedings brought MA Lloyd and Son on broadly similar grounds.

 

In relation to one set of proceedings for alleged breaches of a Confidentiality Agreement an application to serve out of the jurisdiction was dismissed and MA Lloyd and Sons were ordered to pay the costs.

 

In the second set of proceedings the company was ordered to pay money into court and failed to do so and the action was consequently struck out.

 

The third action was stayed.

 

MA Lloyd and Son Ltd then went into administration with minimal prospects of the successful defendant in these cases recovering costs from them.

 

Here the judge was satisfied that the solicitor, Mr McCarthy, had supervised the conduct of the litigation so as to come within the jurisdiction in section 51(6) of the Senior Courts Act 1981 and he determined that wasted costs were indeed caused by the solicitor’s conduct of the proceedings, which had been unreasonable and improper.

 

Consequently it was proper to order Mr McCarthy, as legal representative of MA Lloyd and Son Ltd, to pay those wasted costs of £101,058.00.

 

The court said:-

 

“12. Mr McCarthy is a qualified solicitor. From a date at some time during 2012, he was employed by “Charles Henry” which is not a firm of solicitors or limited legal partnership, but which Mr Leigh Ellis the solicitor for PPC (in his Thirteenth Statement dated 1 February 2016) ‘understands to be a company limited by guarantee and a charity, which describes itself as ‘providing legal support to members of the public’ and which states on its formal notepaper that it “retains solicitors and other lawyers as consultants and enjoys direct access to the Bar”.

 

  1. The legislation in this field provides that only certain persons or bodies are licensed or authorised to carry out “reserved legal activities” (including advocacy and the conduct of litigation). Charles Henry was registered with the SRA (Solicitors Regulatory Authority) and Leigh Ellis in that witness statement states his understanding that it was not at any time licensed or authorised to carry out reserved legal activities. By comparison a qualified solicitor, doubtless subject to maintaining his practising certificate, would be authorised to carry out those activities. Mr McCarthy was a qualified solicitor. It is not suggested that he was not authorised or licensed to carry out the relevant activities.

 

  1. I find the role of Charles Henry in this litigation, as a body not authorised or licensed to carry out reserved legal activities, at least opaque. In this, I am in good company. In proceedings between Norseman Holding Limited –v- Warwick Court (Harold Hill) Management Company Limited [2013] EWHC 3868 (QB) Coulson J, stated that ‘certain aspects of NHL’s conduct of the litigation generally, and this appeal in particular, can only be described as extraordinary’:

 

“Throughout all this game playing, an issue arose – and continues to arise – in relation to the nature of those representing NHL. Charles Henry are on the record as solicitors, and indeed that is confirmed in a witness statement dated 18 January 2013 signed by Keith Gregory, who describes himself as a trainee legal executive at Charles Henry.

 

However it appears that Charles Henry are not an authorised body recognised by the Solicitors’ Regulation Authority for the purpose of carrying out litigation, and, at the contested hearing in front of Judge Davies on 21 January 2013, that was expressly confirmed by NHL’s Counsel, Mr Shrimpton who described Charles Henry as ‘not a firm and not able to conduct litigation’…..

 

Even for the purposes of this appeal, the issue as to who is acting for NHL as their solicitor is wholly muddled. In his skeleton argument, at paragraph 22, Mr Butler said that it was common ground that Dr Eiland was the solicitor conducting the litigation on behalf of NHL. I have seen nothing to confirm that Dr Eiland is or was NHL’s solicitor. Orally, I was told that this was wrong and that NHL’s solicitor is Mr Rory McCarthy, but again I have seen nothing to suggest that he is acting on the record as NHL’s solicitor.

 

There is, therefore, an unacceptable muddle as to who – if anyone – could be said to be the solicitor acting on behalf of NHL. That muddle lies at the heart of what happened next. At the hearing of 21 January 2013, before Judge Davies, NHL were represented by Mr Shrimpton of counsel. Mr Gregory and Mr McCarthy sat behind him. Dr Eiland was not in Court……”

 

At paragraph 57 the judge said this:-

 

“57… it is trite that where a party has direct knowledge of facts and matters, and may reasonably be expected to lodge evidence on points of importance, a Court may properly draw adverse inference against the person who has failed to bring such evidence before the Court. In my judgment this applies to the question whether Mr McCarthy was conducting the litigation, but also to the questions whether the Court is satisfied that it was unreasonable or improper conduct on his own part as opposed to that of others, and to the question whether it is the conduct of the solicitor which has caused costs to be incurred as opposed to instruction by the client or following the wishes of the client as expressed to the legal representative.”

 

The judge found that the costs had been unreasonably incurred:-

 

“59. Whether costs were unreasonably and/or improperly incurred. I refer above to the agreement as to the nature of the conduct of proceedings which resulted in the orders which PPC now seek to recover as wasted costs. The number of applications made by or on behalf of MAL, either simple applications or applications for permission for appeal, is extraordinary; as to be blunt is the vacuous nature of much of the material put forward under them. I would have had no hesitation in concluding that the conduct was improper and unreasonable in the sense explained in Ridehalgh, and that there was abuse of process in the refusal to pay previous costs orders which had been imposed, a continued series of purposeless and hopeless challenges and applications, which with few exceptions appear to have been for the ulterior purpose of attempting to outlast PPC’s willingness to litigate, and a repeated willingness to embrace and or seek delay.”

 

The wasted costs order was made against the solicitor personally and unless Charles Henry had insurance to cover it then Mr McCarthy is personally liable for that sum.

 

Please see my related blog:-

 

WASTED COSTS: CLAIMANT SOLICITORS AT IT

 

WASTED COSTS AND NON-PARTY COSTS ORDERS: UNIFIED.

Written by kerryunderwood

September 13, 2016 at 7:57 am

Posted in Uncategorized

THIRD PARTY CAPTURE: BTE INSURERS: PRACTICAL ADVICE

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As readers will have seen from my various blogs in relation to certain insurance companies there are various different things going on and I now set out some of the scenarios:-

 

  1. The other side’s insurance company contacts the injured person direct and seeks to persuade them to deal direct with the insurance company themselves rather than instructing a solicitor to do so.

 

There is nothing legally wrong with that approach, although most of us think it is morally and ethically wrong.

 

As solicitors, which of course insurance companies are not and they are not governed by the Solicitors Code of Conduct, we are obliged when writing to the other party to advise them to take independent advice from a solicitor.

 

In my view that should be the law for insurance companies in these circumstances. The advice to the injured person is always to see a solicitor. Virtually all solicitors dealing with this type of work do an initial free first interview and so nothing is lost.

 

  1. The insurer contacts the client, even though solicitors are acting.

 

In my view this is far worse than scenario one and would be a serious disciplinary issue for a solicitor, but appears, remarkably, to be both legal for insurance companies and not in breach of what appears to be almost meaningless regulation of such companies.

 

In my view it should be made a criminal offence.

 

The practical advice to the client is to report the matter immediately to their own solicitors and to ask those solicitors to report the insurance company to its regulatory body and the client and solicitor should both write to their Member of Parliament and also to the local and national press. Any use of social media should also be made.

 

  1. The insurance company is not acting for the other side but seeks to “capture” the injured person by writing direct to them and offering to refer them to their pet panel of solicitors.

 

This is less serious but the client is always best advised to choose their own solicitor and agree their own terms with that solicitor.

 

  1. The client/injured person has legal expenses insurance, often known as Before-the-Event insurance, and the insurance company seeks to push the client to their panel solicitors.

 

This is perhaps the least objectionable of the scenarios as the individual has knowingly, normally, taken out legal expenses insurance at a low cost and must be assumed to know that “you get what you pay for”.

 

The client still has full freedom of choice of solicitor but the legal expenses insurance company is free to impose reasonable terms on those solicitors.

 

I say that the client knows that they have taken out such insurance.

 

This used to not be the case as it was often included, supposedly at no extra cost, on for example motor insurance policies, household insurance policies etc.

 

That is no longer the case as customers/clients must not be given such insurance without positively opting in, and this has led to a dramatic reduction in the number of people having Before-the-Event insurance.

 

Also the insurers must state the cost of that apparently free insurance, and on a typical motor policy that is £60.00 or £70.00.

 

  1. The client has Before-the-Event insurance/legal expenses insurance and the legal expenses insurer seeks to prevent that client from instructing their own solicitors and seeks to induce that person to disinstruct those solicitors.

 

This is illegal, although apparently not a criminal offence, but I will return to that point.

 

The European Court of Justice, the United Kingdom’s highest court, has time and time again ruled that such conduct is unlawful and has been highly critical of it, but unfortunately insurers still try it on.

 

Insurers do this generally because their panel solicitors will work for much lower rates than they would have to pay other solicitors.

 

In my view if an insurance company knowingly states the law incorrectly in order to seek to achieve this objective, and intends by so doing to achieve that objective, then they are potentially committing the criminal offence of obtaining a pecuniary advantage by deception, the deception being the making of a statement to the insured that they know to be untrue, and the pecuniary advantage being the payment of lower costs to their panel solicitors.

 

Again the client in those circumstances should report the matter, and get their solicitor to report the matter, to all of the regulatory bodies and to the police.

 

The civil action is a claim for breach of contract, including a claim for aggravated damages. The aggravating factor is that the Before-the-Event insurance company is knowingly acting in clear breach of a number of decisions of the European Court of Justice.

 

Such conduct may also amount to the tort of inducing a breach of contract, depending on what has been agreed between solicitor and client. Such action may be brought by the firm of solicitors and does not require the involvement of the insured/client.

 

In particular I am well aware that certain Before-the-Event insurers have a standard, and misleading, letter that they send out to solicitors seeking to represent their clients under legal expenses insurance.

 

AA Legal Services has a section in such letters which I regard as misleading and legally inaccurate.  in my view maintenance of such position by AA Legal Services in any proceedings will almost certainly lead to an indemnity costs order against them, and depending on the way the case is conducted, could justify a wasted costs order personally against the solicitor involved.

 

For the avoidance of doubt I am not suggesting that the conduct of AA Legal Services is a breach of the criminal law.

 

For information on wasted costs and non-party costs orders please see WASTED COSTS AND NON-PARTY COSTS ORDERS: UNIFIED.

 

Obviously solicitors, as consumers, can move away from the AA to the RAC or such similar body that does not conduct itself in this manner.

 

 Here is the offending text:-

 

“It appears [client’s name] does have access to legal expense insurance through an AA Home Insurance policy. Details of our conditions of indemnity can be found in the legal section of the Home Policy booklet as well as the AA website and are available from inception of the policy.

 

We are aware of the case of Massar v Das Nederlande Rechtsbijstand Verzekeringsmaatschappij NV (Case C ¿ 460/14) 2016 which you refer to. With respect it appears you have interpreted the outcome of this case incorrectly. The court was asked to look at the definition of “inquiry” defined within Article 4 (1) of the Council’s Directive 87/334/EEC. Paragraph 28 of the judgement clearly states “¿Article 4 (1)(a) of Directive 87/334 must be interpreted as meaning the term “inquiry” referred to in that provision includes the procedure at the end which a public body authorises as employer to dismiss an employee who is covered by legal expenses insurance.” In light of this, we wonder how your client’s personal injury claim falls within the definition of “inquiry” as defined by the European Court.

 

The Insurance Companies (Legal Expenses Insurance) Regulations 1990 provide the right of choice of solicitor from the time litigation is commenced, until that time we reserve the decision as to the choice of solicitor.

 

The Financial Ombudsman Service confirmed this position in the Ombudsman News, page 19, issue 26 (March 2003) where it stated: “We would not require an insurer to offer the policyholder a choice of solicitor at the start of the claim.”

 

As such, when it is possible to provide assistance this is achieved by instructing our panel solicitors to act. It should therefore be taken into account that any costs which have been incurred will not be met by us.

 

Therefore if [client’s name] would like to continue with his personal injury claim utilising his legal expense insurance at this stage, we would instruct the AA’s panel solicitors who has a specialist personal injury department. As they would be able to advise [client’s name] from the outset, we are confident they have the resources and expertise to deal with his claim in an expeditious manner.

 

  1. The client has legal expenses insurance/Before-the-Event insurance and instructs the solicitors recommended by that insurance company without protest.

 

There is little wrong with this, although I would prefer there to be a law that the insurer in those circumstances must point out to the client/injured person that they have freedom of choice of solicitors.

 

Having said that a person who knowingly takes out obviously cheap legal expenses insurance and then, without protest, goes to the solicitors recommended by those insurers has little ground for complaint. Adults of full capacity must be assumed to know what they are doing.

 

Virtually all of my posts on these subjects derive from information supplied to me by solicitors, barristers and the judiciary. Please keep them coming.

 

I am very well aware that there are many claimant firms who act in an entirely unacceptable manner and therefore also welcome case reports and case studies etc. from insurance companies and those instructed by insurance companies.

 

There are many perfectly reputable and decent insurance companies, and society and each of us needs insurance and needs the insurance business to run satisfactorily. Those good insurers are just as keen as the rest of us to get rid of the unacceptable practices of some insurance companies.

 

I deal with this subject, and others, in my book Selected Writings Volume I, price just £5.00 and available from Amazon here.

 

Please see my related blogs:-

 

TESCO AT IT: DOES IT GET ANY WORSE THAN THIS?

INSURERS AT IT AGAIN (1) AND (2)

CLINICAL NEGLIGENCE – DEFENDANTS AT IT AGAIN (3),

INSURERS AT IT AGAIN? (4)

INSURERS AT IT AGAIN (5)

EVER SEEN WORSE TH>N MORE TH>N? – INSURERS AT IT AGAIN (6)

DIRECT LINE OR DIRECT LYING? – INSURERS AT IT AGAIN (7)

INSURERS AT IT AGAIN (LOST COUNT)

MEDICAL DEFENCE UNION: A SUITABLE CASE FOR TREATMENT

SETTLEMENT AGREEMENTS IN PERSONAL INJURY

DLG LEGAL SERVICES & SOLICITORS CODE OF CONDUCT

 

Written by kerryunderwood

September 8, 2016 at 11:05 am

Posted in Uncategorized

NHS LITIGATION AUTHORITY: STILL DRIVING UP COSTS

with 16 comments


Should all clinical negligence defence work now be done only on a Conditional Fee Basis?

 

Here is the link to the NHS Litigation Authority Annual Report to Parliament and Accounts 2015/16,

 

I am happy to report that it does not contain the lies and fabrications and misleading statements contained in previous reports – see my blogs:-

 

NHSLA 2014/15: ANOTHER DISINGENUOUS REPORT TO PARLIAMENT

THE NHS LYING AUTHORITY AT IT AGAIN

NHS LITIGATION AUTHORITY: HOW IT MISLED PARLIAMENT

NHS LITIGATION AUTHORITY: HAS IT MISLED PARLIAMENT?

MEDICAL DEFENCE UNION: A SUITABLE CASE FOR TREATMENT

However a more careful examination of the figures contained in the report concerning challenges to claimant solicitors’ costs, together with an examination of recent decisions of the courts, shows that while the conduct of those writing the NHSLA Annual Report has indeed improved the NHSLA’s “entirely unacceptable” conduct of cases has not. That quote is from a judgment, not me, by the way.

 

Most lawyers learn early on not to make boasts about, or issue press releases about, their fantastic success in a case where that decision is subject to appeal.

 

At page 32 of the report the NHSLA does just that in relation to switching cases from Legal Aid to Conditional Fee Agreements shortly prior to the abolition of recoverability of additional liabilities in relation to conditional fee agreements entered in to on or after 1 April 2013.

 

The specific case mentioned is Yesil v Doncaster & Bassetlaw Hospitals NHS Foundation Trust (unreported), 24 February 2016, (Kingston-Upon-Hull District Registry).

 

In its write-up the NHSLA refers to it as being “one of five cases where we successfully challenged the transfer of funding.” … “The five cases combined have seen a total of £750,000 taken off claimants’ legal bills.”

 

Or maybe not.

 

That ruling was overturned by the High Court in Surrey v Barnet and Chase Farm Hospitals NHS Trust [2016] EWHC 1598 (QB) (1 July 2016)  and other cases– see my post CONDITIONAL FEE AGREEMENTS: SWITCHING FROM LEGAL AID IS REASONABLE.

 

Thus far from saving anything the NHSLA has incurred very significant costs in taking this point on these cases and losing. It was ordered to pay the claimant’s solicitors costs in each case and thus has now to pay the £750,000.00 apparently taken off the bills, together with the costs of all those proceedings and its own legal costs.

 

The report itself contains further evidence that the NHSLA’s attitude towards costs, and its hard line generally, is costing, not saving, the NHSLA money.

 

On page 31 it states as follows:-

 

Legal costs

 

We continue to target overcharging by claimant law firms, challenge bills and points of principle at court, and report poor practice to the Solicitors Regulation Authority as appropriate.”

 

Yet on the same page the report shows that the average claimant legal costs as a percentage of the total claim value, where damages are below £100,000.00, rose from 51.88% in 2014/15 to 54.83% in 2015/16.

Thus it is clear that whatever the NHSLA is doing is achieving nothing whatsoever except increasing claimant solicitor bills, and obviously its own costs, with these unsuccessful challenges.

 

For reasons set out above in relation to the court’s finding in switching from legal aid to Conditional Fee Agreements, one can expect next year’s figures to be much worse for the NHSLA.

 

Further evidence of the unacceptable attitude of the NHSLA and its lawyers to the whole legal process is shown in the case of Nicole Chapman v Tameside Hospital NHS Foundation Trust, Bolton County Court, 15 June 2016, Case number B74YM281 which I deal with in my blog

 

FIXED COSTS, PRE-ACTION CONDUCT: DEFENDANT ORDERED TO PAY DISCONTINUING CLAIMANT’S COSTS.

 

There the defendant NHS Foundation Trust was ordered to pay the claimant’s costs where the claimant discontinued shortly before trial following disclosure by the defendant of documents which it should have disclosed during the portal process.

 

The court described the defendant’s conduct as “entirely unacceptable” and was critical of the National Health Service Litigation Authority saying:-

 

“15. The Defendant’s behaviour in the conduct of this litigation was entirely unacceptable. It’s exactly the type of conduct which Part 44.2 is designed to address. Under the modern costs provisions, of course, the costs sanctions become increasingly important. The Claimant’s solicitors are pursuing these matters, PI claims, and at the end of the claim are recovering costs which are fixed and which are not by any stretch of the imagination, generous. There is a danger of — I am not saying it has happened in this case — this is a pure inadequacy of approach by the Litigation Authority and the Trust, but there is a danger that defendants and their representatives will cause difficulties in the course of litigation, so as to run up the work which claimant’s solicitors are having to do in the knowledge that those solicitors cannot recover costs reflecting that work. And of course, it always has to be borne in mind the provisions of CPR 1.3, that the parties to litigation have an obligation to assist the Court to further the overriding objective. The overriding objective firstly being to try and avoid costs and the issue of proceedings if at all possible, which is the whole purpose of the pre-action protocol, of course and secondly, when such claims are brought that they be dealt with in an efficient manner, in a proper manner so as to avoid excessive costs, involving public resources, delay and so on.”

 

I refer to the NHSLA running up costs, but of course it is a publicly funded body and therefore what the people running the NHSLA and its lawyers are doing is to use our money to bring challenges against us which fail and which we then have to pay for.

 

Those defence firms working for the NHSLA are publicly funded. It is the last remnant of legal aid in personal injury work and how ironic that the NHSLA gets legal aid whereas the people suing the National Health Service no longer get legal aid. How ironic too that the courts have found it reasonable for claimants to switch from legal aid to Conditional Fee Agreements.

 

I propose a change in the law whereby all clinical negligence defence work can only be done on a no win no fee basis so that no public money whatsoever is spent on unmeritorious conduct by the NHSLA and its panel of solicitors.

Written by kerryunderwood

September 6, 2016 at 9:51 am

Posted in Uncategorized

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