Kerry Underwood

Archive for October 2015


with 2 comments

Yes, it is that time of year again – National Nick What You Want Week, aka National Pro Bono Week.

This year everyone is working for free! It is not just solicitors expected to work for nothing.

Best not to try these until  confirmed as they are criminal offences:-

Free petrol!

 Just fill up and drive away!

Free shopping!

 Get that supermarket trolley as full as you can and proceed straight to your car! Remember to pay 5p for the bags though.


 Why buy a ticket? Get on that bus or train and have a free trip!


 Just climb over the fence or turnstile. Steal a free programme while you are at it!

Rejected ideas

 The minutes of the National Oh No! Steering Advisory Council Committee Taskforce Thinktank Board show that, unsurprisingly, the following ridiculous – can you believe them?! ideas were rejected:

  • Free university education;
  • Legal aid;
  • Free dental care;
  • Free courts;
  • Free Employment Tribunals


Meanwhile I set out again an old favourite which is an actual exchange between a person we had had no previous contact with, who surprise surprise, obtained our name from an internet search, and Robert Males, my business partner, who, normally is rather milder mannered that me:-


are you able to provide free legal representation? I am working, however I am not able to afford solicitors fees.

Thank you

Robert Males’ reply


I thank you for your enquiry.

My firm does not provide free legal representation. If my firm’s bank provides interest free loans, my governing  body, the Solicitors Regulation Authority, will authorize my firm to practise for free, my firm’s professional indemnity insurance is reduced to nil, my firm’s staff will all work for nothing, if the computer company who I deal with will provide all computers and servicing free of charge and if the stationery business who we deal with will give us all paper and consumables for free and the utilities will provide gas, electricity and water for free then I may be in a position to provide free representation. Until that time I am not.

My firm does however do a considerable amount of free work for charitable institutions including the Royal British Legion and the Lord’s Taverners charity for disadvantaged children as well as making donations to other very good causes.

The only reason that we can do this is because we charge our clients for the very high quality legal advice and work that we do on their behalf.

Yours sincerely

Robert Males


Managing Partner


Please see my related blog:-




Written by kerryunderwood

October 26, 2015 at 12:11 pm

Posted in Uncategorized


with 3 comments

A solicitor cannot act for a bankrupt without the agreement of the Trustee in Bankruptcy; there are some limited exceptions which I deal with below. Note that the discharge of the bankruptcy does not change the position. As soon as a person is made bankrupt virtually everything vests in the trustee. The discharging of the bankruptcy does not affect the property, including a chose in action, all of which remains vested in the trustee.

Annulment does change the situation; it is as though the bankruptcy had never taken place. An analogy may be made with a marriage; a divorce ends the marriage but does not mean that the marriage never took place. That is akin to the discharge of a bankruptcy. In each case an annulment means that in law the event never took place.

Note that neither the Pre-Action Protocol for low value personal injury claims and road traffic accidents (the RTA Portal), nor the Pre-Action Protocol for low value personal injury (Employers’ Liability and Public Liability) Claims (the EL/PL Portal) applies where the claimant is a bankrupt. (RTA 4.5(5)), EL/PL 4.3(4).

In an RTA case the financial position of the defendant is irrelevant but in the EL/PL Portal cases are excluded “where the defendant is insolvent and there is no identifiable insurer;” (EL/PL 4.3(5)).

It makes no difference if the Trustee in Bankruptcy has adopted the case or assigned it. If the claimant is bankrupt it cannot go into either portal.

It appears that where a claimant is a discharged bankrupt the matter does go into the appropriate portal even though the claimant has no right to bring the claim if it has vested in the trustee.

In practice always ask a client if s/he is bankrupt and insist that the client informs you if s/he becomes bankrupt after instructing you. Mention this at the first interview and include it in the Client Care Letter.

You can also carry out a free search through the Government website of the Individual Insolvency Register (IIR) at

This gives details of all people in England and Wales who have become bankrupt or signed an agreement to deal with debts.

The IIR is an amalgamation of the Individual Insolvency, Bankruptcy Restrictions and Debt Relief Restrictions Registers. The Insolvency Service is required by statute to maintain these registers, keep them up to date and make them available for public inspection.

The register can be searched by name or by trading name for sole traders.

Records are usually removed three months after insolvency ends.

The IIR contains details of:-

  • Bankruptcies that are current or have ended in the last three months
  • Debt Relief Orders that are current or have ended in the last three months
  • Current Individual Voluntary Arrangements (IVAs) and Fast-Track Voluntary Arrangements (FTVAs), including those that have ended in the last three months
  • Current Bankruptcy Restrictions Orders or Undertakings (BROs/BRUs) and interim Bankruptcy Restriction Orders (iBROs)
  • Current Debt Relief Restrictions Orders or Undertakings (DRROs/DRRUs) and interim Debt Relief Restrictions Orders (iDRROs)

I advise that this be part of the file opening procedure. Otherwise you risk doing a huge amount of work and receiving no payment and even being ordered to pay the other side’s costs when you inevitably have to discontinue.


Section 306 of the Insolvency Act 1986 provides:

“(1)        The bankrupt’s estate shall vest in the trustee immediately on his appointment taking effect or, in the case of the official receiver, on his becoming trustee.

(2)          Where any property which is, or is to be , comprised in the bankrupt’s estate vests in the trustee (whether under this section or under any other provision of this Part), it shall so vest without any conveyance, assignment or transfer.”

Section 283 reads:

“(1)        Subject as follows, a bankrupt’s estate for the purposes of any of this Group of Parts comprises –

(a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and

(b) any property which by virtue of any of the following provisions of this Part is comprised in that estate or is treated as falling within the preceding paragraph.

(2)          Subsection (1) does not apply to:

(a) such tools, books, vehicles and other items of equipment as are necessary to the bankrupt for use personally by him in his employment, business or vocation;

(b) such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying basic domestic needs of the bankrupt and his family”.

Section 436 says…

“ “property” includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property…”.

Thus, on the face of it a legal action, being a thing in action, is property and vests in the trustee.  However that is not the whole story as the courts have consistently held that certain actions, including personal injury general damages only actions, do not vest in the trustee.

In Heath v Tang [1993] 3 All ER 694 the Court of Appeal said:

“The property which vests in the trustee includes “things in action”: see s.436 of the 1986 Act.  Despite the breadth of this definition, there are certain causes of action personal to the bankrupt which do not vest in his trustee.  These include cases which –

“the damages are to be estimated  by immediate reference to pain felt by the bankrupt in respect of his body, mind, or character, and without immediate reference to his rights of property.”  (See Beckham v Drake [1849] 2 HL Cas S79 at 604, 9 ER 1214 at 122 per Erle J.  See also Wilson v United Counties Bank Ltd [1920] Ac 102, [1918-19] All ER Reg 1035).

“Actions for defamation and assault are obvious examples.  The bankruptcy does not affect his ability to litigate such claims.  But all other causes of action which were vested in the bankrupt at the commencement of the bankruptcy, whether for liquidated sums or unliquidated damages, vest in his trustee.  The bankrupt cannot commence any proceedings based upon such a cause of action and, if the proceedings have already been commenced, he ceases to have sufficient interest to continue them.  Under the old system of pleadings, the defendant was entitled to plead the plaintiff’s supervening bankruptcy as a plea in abatement.  Since the Supreme Court of Judicature Act 1875, the cause of action does not abate but the action will be stayed or dismissed unless the trustee is willing to be substituted as plaintiff: see

Jackson v North Eastern Railway Co (1877) LR 5 Ch D 844.

In  Ord v Upton [2000] 1 All ER 193, Ch 352

the Court of Appeal quoted that passage and said:

“Section 436 is not in truth a definition of the word “property”. It only sets out what is included. As will appear later from the cases that have been decided over many years, actions which relate to a bankrupt’s personal reputation or body have not been considered to be property and therefore they do not vest in anybody other than the bankrupt. They relate solely to his body, mind and character and any damages recovered are compensation for damage to his body, mind and character as opposed to other causes of action which have been considered to be a right of property. Thus causes of action to recover damages for pain and suffering have been held not to vest in the trustee. That has led to a number of oddities. For example, the parties agree that if at the time of the bankruptcy, the bankrupt had in his bank a sum which included money paid as damages for a libel, that sum would vest in his trustee because the right to the money formed part of his estate and therefore was available to pay off the bankrupt’s creditors. That was to be contrasted with an action personal to the bankrupt, such as a libel action, which was not settled before the end of the bankruptcy. In such circumstances the cause of action would remain with the bankrupt as would any damages awarded after discharge. If a cause of action is not personal to the bankrupt, it vests in the trustee and therefore any damages awarded whether before or after the discharge will be available to discharge the bankrupt’s liabilities.”

In Ord the claim was a negligence action for personal injury, including special damages, and the issue was whether the existence of the special damages claim took the case out of the exception, meaning that it vested in the trustee, or remained wholly within the exception, or could be severed so that the general damages claim remained with the bankrupt but the special damages claim vested in the trustee.

The Court of Appeal held that that was a single, indivisible action and therefore it either all remained with the bankrupt or all vested in the trustee, and that it was a hybrid claim, in part personal in part relating to property.

The Court of Appeal held that the action vested in the trustee and to fall within the exception a claim must relation only to a cause of action personal to the bankrupt, adding “All causes of action which seek to recover property vest in the trustee whether or not they contain other heads of damage to which the bankrupt is entitled.”

In Beckham v Drake (1849) 11 HLC 1213 the Court of Exchequer Chamber repeatedly used the term “assignees” in relation to the passing of the action to the trustee, and the terms was also used in Stanton v Collier (1854) 23 LJQB 116  and subsequent cases.

In Ord the Court of Appeal undertook an extensive review of the authorities and concluded that although the whole of the action vested in the trustee the actual general damages belonged to the bankrupt and did not form part of the trustee’s fund, and thus the damages must be split between the trustee and the bankrupt.

Thus if the claim is for general damages only then the claim does not vest in the trustee at all and thus the original Conditional Fee Agreement continues in place and the base costs, together with a recoverable success fee in a pre 1 April 2013, can be recovered in the usual way.

If the claim includes any element of special damages then the whole claim passes to the trustee, although any general damages recovered will belong to the bankrupt.

If the claim passes to the trustee then the issue arises as to the validity of the original Conditional Fee Agreement, that is can it be validly assigned?

As set out above the courts frequently referred to the trustee as being an assignee of the action, which lends support to the idea of the Conditional Fee Agreement being assignable.

Clearly if the special damages form only a small part of the claim a policy decision needs to be made as to whether to jettison that part of the claim, leaving a general damages claim only which undoubtedly remains with the bankrupt personally and thus no issue arises as to the validity of the original CFA.

If that is not an option, then the Trustee should be strongly advised to have the original CFA assigned to him or her.

There is no authority in relation to assigning the Conditional Fee Agreement in such cases. However it seems to me that if the chose in action can be assigned, then the retainer, which is inevitably parasitic upon the chose, must also be capable of assignment.

It will virtually always by in the interests of the creditors for this to happen as it represents the best opportunity of maximising the recovery of assets and if the success fee remains recoverable from the other side, rather than being payable out of damages, then that represents significant extra assets for the creditors.

Section 304(1) of the Insolvency Act 1986 reads as follows:-

“(1)        Where on an application under this section the court is satisfied—

(a) that the trustee of a bankrupt’s estate has misapplied or retained, or become accountable for, any money or other property comprised in the bankrupt’s estate, or

(b) that a bankrupt’s estate has suffered any loss in consequence of any misfeasance or breach of fiduciary or other duty by a trustee of the estate in the carrying out of his functions,

the court may order the trustee, for the benefit of the estate, to repay, restore or account for money or other property (together with interest at such rate as the court thinks just)or, as the case may require, to pay such sum by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just.”

It is clearly arguable that a failure by the Trustee to agree to the assignment of a Conditional Fee Agreement, especially a pre 1 April 2013 one, could result in a liability under section 304(1)(b).

Insolvency Direct Guidance

The Insolvency Direct Technical Manual gives guidance on some of the matters dealt with above.

31.9.41 Special damages and general damages

Often, in correspondence or papers relating to a claim, the official receiver will see reference to ‘special damages’ and ‘general damages’.

Generally speaking, for the purposes of deciding who owns which part of any claim,  special damages are ‘property’ which vest as part of a bankruptcy estate and general damages are ‘personal’ and thus remain in the ownership of the bankrupt.

31.9.42 Actions which involve damage to both the bankrupt’s person and property (amended July 2012)

Many events lead to damage to the bankrupt’s property and their person.  For example, a typical road accident may lead to an injury to the bankrupt’s body (for example, whiplash) and, also, damage to the bankrupt’s property (damage to the car) and/or the need to incur additional (and otherwise unnecessary) expenses (damage to the financial position – which is a property damage).  Following the relevant case law (see paragraph 31.9.37), this may cause a problem in deciding whether the action vests in the official receiver, as trustee, or not.

It used to be the case that such an action would be, effectively, ‘split’ between the personal damage and the property damage, and each claim pursued separately (one by the bankrupt and the other by his/her trustee) [note 11].  This way of deciding matters is not, however, considered good law any longer (see paragraph 31.9.43).

31.9.43 Current approach to actions which involve damage to both the bankrupt’s person and property – a ‘hybrid’ claim

It has been held that where a right of action involves damage to both the person and property of the bankrupt, there is only one cause of action, with different ‘heads’ of damage.  The right cannot be split –Stock v London Underground 30 July 1999 CA, Times August 13 1999 (see paragraph 31.9.44 for a limited exception to this principle).

This position was confirmed, and somewhat advanced upon, in Ord v Upton [2000] Ch 352 , where such an action (referred to in the judgment as a ‘hybrid’ claim) was held to be an action that would vest in a bankrupt’s estate, with any damages awarded for the personal element of the claim being held on a constructive trust (see paragraph 31.9.200) for the benefit of the bankrupt by his/her trustee.”

Hybrid Claims

Most personal injury claims will be hybrid claims. The Insolvency Direct Manual gives examples.

31.9.46 Examples of hybrid actions (amended July 2012)

Examples of hybrid actions are as follows:

  • An assault causing a bodily injury (personal) and damage to spectacles or clothing (property).
  • A car crash causing a broken ankle (personal) and the resultant need to pay a third party to carry out household tasks such as shopping/cleaning/gardening (property)
  • A car crash causing whiplash (personal), damage to a vehicle (property) and the need to use public transport at additional cost whilst the car was being repaired (property).
  • A fall causing a strained back (personal), the need to spend money travelling to the hospital (property) and to pay for a private physiotherapist (property).
  • Medical negligence leading to an arm injury (personal) and loss of earnings (property).
  • An assault on a taxi driver causing a bodily injury (personal), post-traumatic stress (personal), damage to the taxi (property) and an inability to work (loss of earnings – property).
  • A fall in the street leading to a broken arm (personal) and damage to a laptop computer (property).
  • A wrongful arrest (personal) where the bankrupt’s front door was destroyed in the arrest (property).

An action would be a hybrid action even if the property damages were directly connected to the personal damages – as in the second and fourth examples above.

31.9.47 Getting the bankrupt’s advisors to agree to the position in a hybrid claim

Where the official receiver is dealing with a ‘hybrid’ claim he/she should, as a first step, write to the bankrupt’s advisors, setting out the position outlined in paragraphs 31.9.42 to 31.9.45, asking them to form a view on whether the claim vests in the trustee of the bankruptcy estate, or not. Ideally, the position should be agreed.

The official receiver may use the letter attached at Annex C to this chapter for this purpose.

It is likely that, having read the cases referred to in the letter, the advisors will form the view that the actions vests in him/her as trustee.  If they do not, the matter should be referred to Technical Section.”

Fatal Accidents Act 1976

These are also covered and may be hybrid claims.

“31.9.67 Claims under the Fatal Accidents Act 1976

Where a death is caused by a wrongful act or neglect such as would (if death had not ensued) have entitled the deceased to bring an action for damages, the person liable shall still be liable to an action for damages despite the death of the person [note 30].  Such an action is for the benefit of the dependants of the person whose death was caused [note 31].

An action may include (or consist entirely) of a claim for damages for bereavement [note 32].  A claim which is entirely for bereavement is personal to the bankrupt and would not form part of the bankruptcy estate.  Where a claim is partly in respect of bereavement and partly in respect of a claim for financial losses resulting from the death, it would be a hybrid claim (see paragraph 31.9.43) and would vest in the official receiver, as trustee.”


Where a carer is made bankrupt the trustee may claim that part of the damages which is technically held on trust of the carer, even where the carer does not want the damages.

Consequently it is important to identify precisely what the care element of what any settlement is.

Rectifying the Situation

In Eaton v Mitchells and Butler plc [2015] EW Misc B26 (CC) 30 April 2015, Wrexham County Court, Judge Keyser QC

held than an action started or continued whilst the claimant was a bankrupt was not a nullity but would require immediate rectification.

If the claimant had known that something was amiss then bringing or continuing with the action may have been an abuse of process.

The action was adjourned with the judge declaring that the continued conduct of the proceedings would be an abuse of process, leading to the claim being struck out, unless the irregularity was remedied within three months.

The irregularity was that the cause of action was not vested in the person pursuing the claim. This could be remedied in one of three ways:-

  • the claimant’s bankruptcy shall have been annulled and the cause of action against the defendant re-vested in him; or
  • the claimant’s trustee in bankruptcy shall have filed an application notice for an order substituting him as claimant; or
  • the claimant shall have taken an assignment of the cause of action and shall have filed an application notice for an order giving him permission to amend the claim form and/or particulars of claim to plead his right by assignment.

Eaton is a long and helpful judgment which examines the authorities in relation to bankruptcy and personal injury cases, as well as the situation where a potential personal injury claimant dies without making a will.

This claim for personal injury and consequential loss proceeded to trial on liability. The claimant won and interim payments on account of damages were made, both voluntarily and pursuant to court orders, and directions were given for the trial on quantum of damages.

Both sides knew of the bankruptcy.

Only then did it occur to anyone that there might be a problem: between the date of the accident and proceedings being issued the claim had been made bankrupt and discharged from that bankruptcy, but that meant that the cause of action had vested in his trustee in bankruptcy. As the judge here said:-

“It is remarkable that the case had proceeded all the way to a two-day trial, conducted (as I am told) by leading counsel for the claimant, without the point ever being noticed.”

The claim was brought by the claimant and the trustee was never joined as a party and did not assign the cause of action to the claimant.

The defendant claimed that the proceedings were a nullity, a concept rejected by the judge.

The claimant said that the proceedings could be saved by an annulment of the bankruptcy, for which he had applied, or by the assignment of the cause of action, or by the joinder of the trustee in bankruptcy as a claimant in substitution for the present claimant.

At paragraph 4 the judge set out the background to the case, which is also a helpful summary of the law:-

“4.          On 18 August 2007 the claimant suffered serious injuries in an accident that occurred, as has been found and as I shall suppose, by reason of the negligence of the defendant’s servants or agents. On 7 November 2007 the claimant was made bankrupt upon his own petition; the order recites that the petition was presented that same day (cf. rule 6.42 of the Insolvency Rules 1986). On 19 December 2007 the Official Receiver was appointed as trustee in bankruptcy upon the filing of the decision not to call a creditors’ meeting (see section 293(3) of the Insolvency Act 1986). Accordingly, the claimant’s estate then vested in the Official Receiver as trustee (see section 306). By section 283(1) the estate comprised all property belonging to or vested in the claimant at the commencement of the bankruptcy. That property included his right of action against the defendant, even though that is a so-called hybrid right, because that part of the right of action that related to physical injury was personal to the claimant and would be held by the trustee for the benefit of the claimant: see section 436 of the Act; see also Heath v. Tang [1993] 1 W.L.R. 1421 (CA), Ord v. Upton [2000] Ch. 352 (CA), and Hayes v. Butters [2014] E.W.H.C. 4557 Ch. On 25 April 2008 the claimant was discharged from his bankruptcy pursuant to section 279(2), now repealed, which provided for discharge before the standard 12-month period had elapsed.”

Proceedings were commenced on 12 August 2010.

The judge rejected the concept that the proceedings were a nullity holding that the decision by the Court of Appeal in

Ingall v Moran [1944] 1 KB 160,

relating to administrators acting without power, followed by the Court Appeal in

Millburn-Snell and others v Evans [2011] EWCA Civ 577

on virtually identical facts to Ingall v Moran was per incuriam, that is wrongly decided. The judge examined the principles upon which a court may find a decision to be per incuriam, as set out in Morelle Ltd v Wakeling [1955] 2 QB 379

subsequently cited with approval by the Court of Appeal in

Lloyd v London Borough of Lewisham [2013] EWCA Civ 1923.

In Smith v Henniker-Major & Co [2000] Ch 182

the Chancery Division of the High Court held that Ingall v Moran “described (while still extant) as a blot on English jurisprudence”, had been overturned by section 35(7) of the Limitation Act 1980 and CPR 17.4(4) and “so far as it embodied any larger principle it has been overtaken by the modern approach as described by Evans LJ in Hendry v Chartsearch Ltd [1998] CLC 1382, para 23. In that case this court disapproved the more rigid approach adopted in Eshelby v Federated European Bank Ltd [1932] 1 KB 254.”

This modern line was also adopted by the Court of Appeal in

Nelson v Nelson [1997] 1 WRL 233 and in

Pickthall v Hill Dickinson LLP [2009] EWCA Civ 543

the Court of Appeal also found a potential abuse of process, not a nullity, when a discharged bankrupt brought a professional negligence claim against solicitors.

The Court of Appeal specifically approved the practical approach outlined in Smith v Henniker-Major.

In Haq v Singh [2001] EWCA Civ 957

the claimant, an undischarged bankrupt, commenced a hybrid claim and took an assignment of the cause of action from the trustee to cure her lack of standing, as a discharged bankrupt, to bring the claim. The judge held that that assignment did indeed cure the defect.

The matter went to the Court of Appeal only on a limitation point; it was accepted that the original proceedings were not a nullity. The Court of Appeal also said, obiter, that CPR 17.4(4) had removed the effect of Ingall v Moran.

CPR 17.4, so far as is relevant:-

“(1)        This rule applies where –

(a)          a party applies to amend his statement of case in one of the ways mentioned in this rule; and

(b)          a period of limitation has expired”

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

In Pathania v Adedji [2014] EWCA Civ 681

the claimant had the right to commence the proceedings but become bankrupt after they had been commenced and before trial. The Court of Appeal said:-

“15.        Where a bankrupt is commencing or pursuing a claim which he knows he does not have, the abuse of process in commencing or pursuing that claim is obvious. No claimant is entitled to sue on a right which he knows belongs to someone else. The abuse lies in knowingly pursuing a claim which, as presently constituted, is bound to fail. The abuse does, however, depend on actual knowledge of the lack of title to the cause of action, not on what he or she ought to have known.

  1. Nevertheless, where an action is commenced or continued after the cause of action has vested in a trustee in bankruptcy, the action does not abate and the position is capable of being regularised by the joinder of the trustee or by the taking of an assignment from him. Whether the court will permit that to happen will involve an exercise of discretion. It will be necessary to have regard to the interests of those likely to be affected, including the creditors in the bankruptcy. The court would be likely to stay the action until the position in the bankruptcy is clarified.”

In Munday v Hilburn [2014] EWHC 4496 (Ch)

the Chancery Division of the High Court held that the lack of a cause of action on the part of the claimant when the proceedings were commenced did not make the proceedings a nullity or incurably bad.

Having decided that proceedings by a bankrupt are not a nullity the court then considered the issue of whether it was an abuse of process warranting striking out. It quoted from Munday:-

“It follows, in my judgment, that there was in fact no abuse of process established either in the claimants issuing these proceedings or in continuing these proceedings. I think it is important to add that this does not mean that the Court is powerless to stop claims going forward where a claimant in fact has no standing but due to erroneous advice of his lawyers wrongly believes he does. In order to succeed at trial, a claimant must, of course, not only show that there is a good claim vested in someone but that it is vested in him. If, therefore, it can be shown that the claim, whether good or bad, is incontrovertibly not vested in him and for that reason the action is doomed to failure, whatever its merits, the Court must be in a position to stop the claim proceeding to trial. I do not see any procedural difficulty in this. The defendant in an appropriate case can apply to strike the claim out on the basis that the statement of case discloses no reasonable cause of action, see CPR rule 3.4(2)(a), or can apply for what is often called reverse summary judgment, see CPR Part 24, or can apply to have the matter determined as a preliminary issue. All that I have decided is that he cannot strike out on the basis that there is an abuse of the Pickthall type unless he establishes that the claimant either brought or continued the action knowing that the cause of action was not vested in him. Of course, if the Court rules, despite the claimant’s advisers’ best endeavours, that the cause of action is not vested in him, then it would constitute an abuse for the claimant to continue with the action thereafter at any rate if the position could not be cured.” (Italics of the judge in Eaton).

In BPE Solicitors and Another v Gabriel [2015] UKSC 39

the Supreme Court held that a Trustee in Bankruptcy is not personally liable for the costs of the court below merely by virtue of having adopted an appeal as Trustee in Bankruptcy.
The ordinary rule is that a Trustee in Bankruptcy is treated as a party to any legal proceedings which he commences or adopts, and is personally liable for any costs which may be awarded to the other side, subject to a right of indemnity against the insolvent estate to the full extent of the assets.

This ruling was made at a Directions Hearing pending an appeal and was vital as to the trustee’s decision as to whether to adopt the current appeal.

Here Mr Gabriel recovered £200,000.00 in negligence against BPE Solicitors, plus costs. The Court of Appeal reduced that sum to £2.00 and ordered Mr Gabriel to pay BPE’s costs; BPE put in a bill for £469,170.60.

Mr Gabriel became bankrupt and a Trustee in Bankruptcy was appointed and had to decide whether to adopt Mr Gabriel’s appeal to the Supreme Court against the decision of the Court of Appeal.

If the appeal was not pursued then unsecured creditors were likely to receive between 3p and 5p in the pound; if it was successfully pursued then that figure would rise to between 23p and 25p in the pound.

If the appeal was pursued and failed then the impact on creditors would depend on the trustee’s liability for costs. If the trustee’s liability for BPE’s costs is limited to the costs of the appeal to the Supreme Court then the dividend would be reduced subject to ATE insurance. If the liability extended to the costs of the courts below then they would exceed the entire assets of the estate leaving the creditors with no dividend and the trustee personally liable for the balance of the costs.

Nothing in the decision effects the discretion of the court to make such an order. All the decision means is that the Trustee in Bankruptcy is not liable for the costs below simply by virtue only of having adopted the appeal.

Bidding for cases

The Official Receiver, as liquidator or trustee has the action vested in that office and is free to continue the conduct of the case or to assign the cause of action.

The following are general principles that the Official Receiver should take into account:-

  • assignment should not be made without testing the market and this can include offering settlement to the defendant;


  • assignment may be barred by terms contained in the original contract and assignment should not be allowed to open the defendant up to vexatious litigation;


  • frivolous claims, that is ones that are unlikely to succeed, should not be assigned;


  • assignment should be absolute if the liquidator/trustee is to avoid being made a party to any judgment;


  • the liquidator/trustee is not required to assign a right of action when the only offer received from the potential assignee is derisory.


Some of these principles require a careful balancing of competing interests and it is likely that legal advice will be required to avoid the risk of an action being brought against the official receiver.

Bizarrely the action can be assigned to the other party, that is the defendant, and that will effectively bring the action to an end – see Official Receiver v Davis [1998] BPIR 771 but the assignment must not be used as a tool to stifle the claim – see Shepherd v Legal Services Commission [2003] BCC 728.

If the offer from the defendant is the best offer then that may be accepted but not before the value of any other offer from any other potential assignee, particularly a bankrupt, have been considered.

I am grateful to Gordon Exall for some of the material in this piece.


Written by kerryunderwood

October 26, 2015 at 9:51 am

Posted in Uncategorized


with 16 comments

In my blog earlier today – DIRECT LINE OR DIRECT LYING? – INSURERS AT IT AGAIN (7) I set out paragraph 14 of the Terms of Business sent by DLG Legal Services, a firm of solicitors and part of the Direct Line Group, to  clients.

That purports to limit liability in negligence to 200% of the amount of their fees for the individual matter or £100,000.00, whichever is the lesser.

Several people, including Richard Moorhead and my own business partner Robert Males have pointed out that this appears to be a  breach of the Solicitors Code of Conduct.

Outcome 1.8 of the Code of Conduct states that clients have the benefit of compulsory professional indemnity insurance “and you do not exclude or attempt to exclude liability below the minimum level of cover required by the SRA Indemnity Insurance Rules 2013 which require a minimum cover of £2 million for a partnership or £3 million for an incorporated firm.”

Outcomes are compulsory and are designed to achieve the principles which in this case would be:-

  • Act with integrity
  • Act in the best interest of each client
  • Behave in a way that maintains the trust the public places in you and in the provision of legal services.

I am not holding my breath that the Solicitors Regulation Authority will take any action. Of course if it was any ordinary firm of solicitors they would be down on us like a ton of bricks.









Written by kerryunderwood

October 23, 2015 at 1:02 pm

Posted in Uncategorized


with 13 comments

In Insurers At It Again (4) I commented on Direct Line Group and its relationship with DLG Legal Services, a firm of solicitors and part of the Direct Line Group.

The standard client care letter from that firm to its “clients” states “This firm is appointed by Direct Line.”

Clients – for which read insured of Direct Line – are not asked to sign anything but are rather told:-

“This letter and the attached Terms of Business set out the contract between us, and unless we hear from you to the contrary we will assume that you are happy for us to act based on the terms of the policy of insurance in place with your insurers.”

So what you may think. Well how about this, at paragraph 14 of the Terms of Business, which the client is not asked to sign:-

14. Limitation of Liability

Your relationship is solely with DLG Legal Services. We have sole legal liability for the work done for you. No director or member of staff working as an employee or in any other capacity at DLG Legal Services will have legal liability for that work whether in contract, tort, or on any other basis. Our liability to you for a breach of your instructions shall be limited to 200% of the amount of our fees for the matter or £100,000.00, whichever is the lesser, unless we expressly state a higher amount in the letter accompanying these Terms and Conditions of Business. We will not be liable for any consequential, special, indirect or exemplary damages, costs or losses, or any damages, costs or losses attributable to lost profits or opportunities. We can only limit our liability to the extent the law allows. In particular, we cannot limit our liability for death or personal injury caused by our negligence. Please ask if you would like us to explain any of the terms above.”

Let us say that firm settles a matter in the portal and receives a portal fee of £500.00. The client sues as it turns out that the claim may be worth £20,000.00 or whatever more than it was actually settled for.

This firm of solicitors, independent of, but “appointed by” – their words – Direct Line are seeking to limit their professional indemnity liability to £1,000.00 in a claim settled in the portal.

I wonder what view the Solicitors Regulation Authority would take of any of the rest of us who sought to do that:-

“Sorry, we screwed up on your conveyancing and you have lost £1 million, but we only charged you £400.00 so here is our cheque for £800.00.”

Why does my firm have to have minimum Professional Indemnity Insurance of £3 million if we are free to limit our liability to just twice our costs on any particular matter?

In 2012 the Financial Services Authority fined Direct Line and Churchill Insurance £2 million because 27 out 50 files requested by the Financial Services Authority for review were “altered improperly” before they were submitted to the Financial Services Authority and seven internal documents were found to contain signatures that had been forged – see Daily Mail 19 January 2012

At the time Direct Line was owned by the Royal Bank of Scotland. It no longer is. One year earlier the Royal Bank of Scotland was fined £2.8 million for “multiple failings” in complaints handling.

As at August 2015 the Government of the United Kingdom held and managed a 73% stake in the Royal Bank of Scotland through UK Financial Investments.

Imagine the consequences for any of the rest of us of altering improperly 27 out of 50 files requested by the Solicitors Regulation Authority and forging signatures. Why is Direct Line Group allowed to have any formal connection with a firm of solicitors?

UK Assistance

There is a company called UK Assistance, also part of Direct Line Insurance Group Plc and with the same registered office, and the “appointers” of DLG Legal Services, a firm of solicitors regulated – or perhaps not – by the Solicitors Regulation Authority.

Attached is a letter from UK Assistance to a client of a different firm of solicitors where a Claim Notification Form had already been submitted on the portal on that client’s behalf by that firm. Note the email contact details.

The text reads:-

Dear Mr

Road traffic accident on:

I have been instructed by Insurance Company, Peugeot, to contact you regarding this incident. A claim has been submitted in your name for personal injuries and we are required to check the details of the claim submitted before being in a position to proceed further.

UK Assistance provides specialist services to insurers, to assist them with their enquiries into incidents of this type.

Peugeot Insurance has requested that I arrange to meet you to discuss this incident in more detail. I would be grateful if you could telephone me on 07967 650 575 or email me at as soon as possible, in order to arrange an appointment.

I shall look forward to hearing from you.

Yours sincerely





UK Assistance then sent an investigator to the client’s home in the full knowledge that the client had already instructed solicitors to pursue a claim.

How ironic that governments of all parties have abolished legal aid and yet have poured billions of pounds into failed banks to allow them to act in this way against the ordinary decent people of this country who have to pay their taxes to bail out these failed multinational institutions.

Many of you may have a term stronger than ironic in mind.

See also my related blogs as listed below:-










Written by kerryunderwood

October 23, 2015 at 9:40 am

Posted in Uncategorized


with 12 comments

Kerry Underwood

This piece first appeared in Claims Magazine

As the dysfunctional Jackson shamble stumbles on, albeit now being progressively overturned by Parliament, it is time to look to the future and a constructive reform of the personal injury system rather than the Jackson-cut-costs-whatever-the-cost agenda. 

In employment cases, uniquely as far as I am aware in English law, it is not possible for parties finally to settle a matter without the employee taking the advice of a qualified solicitor, legal executive or barrister.  Failure to do so means that the employee can take the money and still sue, which is an unattractive prospect for an employer. 

Consequently the custom has grown up whereby the employer pays the legal fees of the independent solicitor instructed by the employee.

Such a scheme in personal injury matters would solve, at a stroke, the third party capture problem whereby insurers seek to do a deal direct…

View original post 356 more words

Written by kerryunderwood

October 21, 2015 at 2:02 pm

Posted in Uncategorized


with 49 comments

Below is the text of a letter sent by MORE TH>N, a trading name of Royal & Sun Alliance Insurance plc, to a solicitor’s client questioning whether the client had actually instructed those solicitors at all. That appears to be an actionable libel, but let that pass.

The letter then assumes that the client has indeed instructed the solicitors. It asks the client to confirm that fact and writes to this client of a firm of solicitors on the other side:-

 “When responding we would also ask that you confirm how you came to instruct the firm in question?” [sic]

 “Did someone else refer you to them?

Did they contact you direct?

Did you contact them direct?”

Towards the end the letter says:-

“Deliberately fabricating losses, or exaggerating the value of your losses, is an offence under the Fraud Act 2006.”

Imagine a solicitor writing that to a lay client on the other side who has already instructed solicitors. That would be getting into striking off territory. It is potentially contempt of court to seek to dissuade another solicitor’s client direct from pursuing a claim by what could be construed as a threat, where those solicitors have initiated a claim through the court process, which lodging a CNF clearly is.

It gets worse.

The client telephoned MORE TH>N and was offered £1,500.00 direct and told that her solicitor, Infinity Law Ltd T/A DGM Solicitors as in the letter, would charge her more and she would come out with hardly anything.

They also told her that she had 14 days to cancel and so her solicitors could not charge her anything.

Thus a client protection measure – the right to cancel – becomes a way of the other side, seeking to prevent the client having legal representation. That is obviously very harmful to the client and causes far more damage than not having the right to cancel in the first place. The other side here is a massive insurance company.
The writer of this letter, without irony, is described as a “Customer Services Director”.

Here is a link to the actual Letter, the text of which is set out below. 


Claims Department

PO Box 21561



T   0330 1023630

F   01403 325889


07 August 2015

Claim Number:

Our Insured:

Date of Accident:

Dear Mr

We have received a personal injury claims notification form from Infinity Law Ltd T/A DGM Solicitors, advising that that you have asked them to make a claim for injury on your behalf following a road traffic accident on the above date.

In the interests of preventing fraud, which has been on the increase, we hope you will not mind us writing directly to you in order to confirm that you are aware that Infinity Law Ltd T/A DGM Solicitors have made a claim on your behalf alleging you have suffered whiplash as a result of the above accident.

What to do Next

This depends on whether or not you have asked Infinity Law Ltd T/A DGM Solicitors to make a claim for these injuries on your behalf.

If you have asked the solicitors to make a claim on your behalf:

If you did ask these Solicitors to make a personal injury claim on your behalf, then we would be grateful if you could please confirm this to us. When responding we would also ask that you confirm how you came to instruct the firm in question? Did someone refer you to them? Did they contact you direct? Did you contact them direct?

After we hear from you, we will; not contact you again directly, and will deal exclusively with your solicitors.

Please contact us using any of the following methods quoting reference:

Email at:

Telephone on number 01422325255

Post Po Box 256 Wymond, NR18 9DQ

If you have not asked the solicitors to make a personal injury claim on your behalf:

If you have not asked Infinity Law Ltd T/A DGM Solicitors to make a claim for injury against our policyholder please contact us without delay by calling this dedicated number 01422325536 or by e-mailing us at We will take immediate steps to protect the position of your personal data and will also look into this matter further on your behalf.

If you do not want to pursue a personal injury claim, but have been told by an agency or other party that you will be charged a fee, please telephone us on 01422325536 and we will be happy to offer you further assistance.

It would be helpful if when writing you provide a telephone number in order that we can contact you to discuss this matter further.

Please be assured that any communication will be dealt with in confidence.

General Information for all Claimants:

Like most people we are sure that you will agree that exaggerating or making up claims against insurers is wrong, it cause motor insurance premiums to increase, and puts genuine victims of accidents in a bad light. We thank you for your assistance in helping us and the insurance industry as whole combat fraudulent claims.

As part of the claims process, we are obliged by law to register your personal details with the Department for Work and Pensions (DWP) Compensation Recovery Unit. The DWP works with insurers to recover benefits arising out of insurance claims.

We also pass claims information to the Claims and Underwriting Exchange (CUE), MIAFTR and other databases in order to assist with the prevention and detection of fraud. We may also search these and other databases, as well as share claims data with other insurers and organisations for the same purpose.

Deliberately fabricating losses, or exaggerating the value of your losses, is an offence under the Fraud Act 2006.


Thank you for your attention and assistance.

Yours sincerely


Customer Service Director

See also my related blogs as listed below:-








Written by kerryunderwood

October 21, 2015 at 9:05 am

Posted in Uncategorized


with one comment

An accident involving a tram is clearly a road traffic accident and could also be an employers’ liability case, for example where the injured person is an employee, or a public liability case.

However section 4.3(11) of the Employers’ Liability and Public Liability Protocol provides that that portal does not apply to a claim

“for damages arising out of a road traffic accident (as defined in paragraph 1.1(16) of the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents).”
The scope of the RTA Protocol is defined as follows:-

“4.1.       This Protocol applies where—

  • a claim for damages arises from a road traffic accident where the CNF is submitted on or after 31 July 2013”

The key question is whether an accident involving a tram is a road traffic accident. The definitions under the protocol read:-

“1.1. In this Protocol—

(13)        ‘motor vehicle’ means a mechanically propelled vehicle intended for use on roads…

(15)        ‘road’ means any highway and any other road to which the public has access and includes bridges over which a road passes;

(16)        ‘road traffic accident’ means an accident resulting in bodily injury to any person caused by, or arising out of, the use of a motor vehicle on a road or other public place in England and Wales unless the injury was caused wholly or in part by a breach by the defendant of one or more of the relevant statutory provisions as defined by section 53 of the Health and Safety at Work etc. Act 1974;”

An RTA is therefore an accident resulting in bodily injury to any person caused by, or arising out of, the use of a motor vehicle on a road or other public place in England and Wales.

Is a tram a motor vehicle?


The definition of motor vehicle under the protocol is limited but the Road Traffic Act 1988 specifically defines both motor vehicle and tram car.

Section 185 of that Act defines a motor vehicle as:-

“”motor car” means a mechanically propelled vehicle, not being a motor cycle or an invalid carriage, which is constructed itself to carry a load or passengers and the weight of which unladen—

  • if it is constructed solely for the carriage of passengers and their effects, is adapted to carry not more than seven passengers exclusive of the driver and is fitted with tyres of such type as may be specified in regulations made by the Secretary of State, does not exceed 3050 kilograms,
  • if it is constructed or adapted for use for the conveyance of goods or burden of any description, does not exceed 3050 kilograms, or 3500 kilograms if the vehicle carries a container or containers for holding for the purposes of its propulsion any fuel which is wholly gaseous at 17.5 degrees Celsius under a pressure of 1.013 bar or plant and materials for producing such fuel,
  • does not exceed 2540 kilograms in a case not falling within sub-paragraph (a) or (b) above,”

It is true that that is the definition of the motor car whereas the Road Traffic Accident Protocol refers to a motor vehicle and clearly that includes all sorts of motor vehicles which are not cars.

However Section 192 of the Road Traffic Act 1988  specifically defines a tram car:-

““tramcar” includes any carriage used on any road by virtue of an order under the Light Railways Act 1896, and

“trolley vehicle” means a mechanically propelled vehicle adapted for use on roads without rails power transmitted to it from some external source”

Given the separate definition I do not believe that a tram would fall under the RTA Protocol definition of a motor vehicle. The RTA Portal Claim Notification Form does not lend itself to a claim involving a tram; what would one put as the vehicle registration number for example?

The Pre-Action Protocol for low value personal injury (employers’ liability and public liability) claims defines a public liability claim as:-

“(18)      ‘public liability claim’—

(a)          means a claim for damages for personal injuries arising out of a breach of a statutory or common law duty of care made against—

  • a person other than the claimant’s employer…”

Thus a claim involving a tram car and a member of the public would fall under this broad definition but if the claim was by a driver or conductor or member of staff on tram car then it would fall under the Employers’ Liability Provision.

Actions for damages arising out of a road traffic accident, as defined in paragraph 1.1(16) of the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents are specifically excluded from the Employers’ Liability and Public Liability Portal, presumably to stop road traffic accidents attracting the higher fees in that portal.

However as set out above my view is that a tram car is not a motor vehicle and therefore does not come within the definition in paragraph 1.1(16) and so is not excluded from the Employers’ Liability and Public Liability Portal.

Consequently a tram car accident cannot go into the Road Traffic Accident Portal but can, in appropriate circumstances, go into the Employers’ Liability and Public Liability Portal.

Written by kerryunderwood

October 20, 2015 at 9:24 am

Posted in Uncategorized


with 19 comments

A client reports a matter to Aviva. Without her knowledge the information is sent to Minster Law who submit a Caim Notification Form (CNF) on the portal.

Two days after the accident her actual solicitors, who are unaware of this, submit CNFs for her and for the driver of the car. The client’s CNF is rejected as a duplicate.

The solicitors telephone and write several times to the third party insurer and eventually they ask the solicitors to resubmit the CNF, which they do, only for that also to be rejected.

Consequenty the solicitors issue proceedings and the matter proceeds to a disposal hearing.

Costs were not assessed on the day as the defendant alleged unreasonable removal from the portal, a point repeated in the Points of Dispute  during provisional assessment.

The matter is listed for an oral hearing. The day before that hearing solicitors for the defendant insurers  concede  the point and agree to pay the costs of the main case and of detailed assessment.

See also my related blogs:-








Written by kerryunderwood

October 19, 2015 at 7:41 am

Posted in Uncategorized


with 19 comments

A solicitor’s client is referred to DLG Legal Services Ltd (DLG), part of the Direct Line Group (DL). It is regulated by the Solicitors Regulation Authority but from its website it seems only to accept clients who have a DL legal expenses policy. It is a firm of solicitors, not an Alternative Business Structure.

A client care letter is sent by DLG at a flat rate of £275 an hour plus VAT, whoever is dealing with the matter. I have a copy of that letter.

They are way above the rates that DL will pay to firms of solicitors instructed as the client’s choice. So it pays itself getting on for double its usual rate.

Its client care letter has this odd paragraph, under “Introducers”:

” This firm is appointed by Direct Line. This firm is a member of the same Group of companies as Direct Line. Aside from that your insurer has no financial interest in referring your case to us. The advice we give to you will be independent.”

That is a variant on the old chestnut “Apart from that how did you enjoy the play Mrs Lincoln?”

In a free market why do not DL put the work out to firms who will happily work for a much lower rate than that?

See also my related blogs:-








Written by kerryunderwood

October 16, 2015 at 8:20 am

Posted in Uncategorized

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