Archive for November 2017
ATE INSURANCE AND SECURITY FOR COSTS
the Court of Appeal considered the extent to which the existence of After the Event insurance is relevant when the court is considering an application for security for costs sought by the Defendants in a claim brought by an insolvent company in liquidation.
The Court of Appeal held that once a court is satisfied that a company is insolvent, then it has jurisdiction to order security for costs providing that ordering security does not stifle the claim, and in those circumstances it will normally be appropriate to order security for costs, whether or not there is After the Event insurance in place.
Nevertheless an appropriately framed ATE insurance policy “can in theory be an answer to an application for security.”
The Court of Appeal rejected the submissions on behalf of those seeking security to the effect that ATE insurance is not to be considered at all and said that it is necessary to consider whether the particular ATE insurance in any given case gives the Defendants sufficient protection.
On the facts of this case, the Court of Appeal held that the ATE policy did not give sufficient protection, and therefore ordered security for costs.
The judgment itself considers in detail the case law on the interplay between security for costs orders and ATE insurance, but holds that it will always be a fact sensitive issue, largely depending upon the terms of the particular ATE policy.
SOLICITORS ACT ASSESSMENTS: INTERIM STATUTE BILLS: CFA’s
A slightly different version of this post first appeared on the Practical Law Dispute Resolution Blog.
In Richard Slade and Company v Boodia and Boodia [2017] EWHC 2699 (QB)
the Queen’s Bench Division of the High Court, in an appeal from the Senior Courts Costs Office, upheld the Cost Master’s finding that interim statute bills must include disbursements.
As they had not done so here, they were not interim statute bills, and thus were not final bills for the period described, because not all of the costs were included in the bill.
Consequently the clients were not time-barred from seeking Solicitors Act Assessments for all 61 invoices involved.
The term “interim” statute bill is a little confusing as in fact the whole point of such a bill is that it is final and complete for the period it covers. That finality and completeness allows solicitors to sue on the bill pursuant to the provisions of Section 69 of the Solicitors Act 1974, but prevents the solicitor from charging any further fees for that period.
Thus finality and certainty is there for both parties and a client can decide whether or not to pay or dispute the bill.
The Shorter Oxford English Dictionary definition of “interim” is:
“A thing done in an interval; an interlude”
and thus the description is technically correct as, in the absence of contractual entitlement to the contrary, an interim statute bill can only be delivered when there is a natural break, or interlude, in the proceedings.
In fact most solicitor and client retainers create a contractual right to deliver an interim statute bill at any time.
However the other dictionary definition of “interim” is:
“A temporary or provisional arrangement”
and that is where the potential confusion arises as in relation to that period, the whole point is that the bill is a final and permanent arrangement for that time.
The courts have long realised that the wording is somewhat unfortunate. In
Bari v Rosen (trading as RA Rosen & Co Solicitors) [2012] 5 Costs LR 851
the court said
“15. … a solicitor may contract with his client for the right to issue statute bills from time to time during the currency of the retainer. Such bills are known as “interim statute bills”. They are nevertheless final bills in respect of the work they cover, in that there can be no subsequent adjustment in the light of the outcome of the business. They are complete self-contained bills of costs to date.”
Here the High Court adopted that wording and reasoning.
It is important to note the wording that “there can be no subsequent adjustment in light of the outcome of the business.”
Thus if a bill is genuinely an interim statute bill charged at the discounted rate in a No Win Lower Fee Agreement, then there can be no subsequent further charge.
Here the court did briefly refer to the situation in a Conditional Fee Agreement case saying:
“The only potentially practical difficulty would be in a CFA case. Until the outcome of the case was known the client’s liability for costs could not be determined. However, where a decision was to be made between an interpretation that caused inconvenience to a solicitor and one which caused prejudice to a client, the client’s interest prevails.”
The point here is that generally a solicitor can deliver an interim statute bill, as they will know the work done to date and any disbursements incurred, and thus a final interim statute bill can be delivered and the client has to pay it and the solicitor can sue on the bill if it is not paid.
Obviously that cannot be done in a conditional fee case, as the final bill for that period will not be known until the case is concluded.
It is also most important that solicitors in conditional fee cases, whether No Win No Fee or No Win Lower Fee cases, make it clear when delivering a disbursements only bill, that it is not an interim statute bill. Otherwise it may be found that the solicitor can deliver no further charges for that period, and thus cannot charge profit costs.
Proper wording of the bill avoids that problem, but creates another problem, namely that the solicitor cannot sue on an interim on account bill as compared with an interim statute bill.
Thus it is essential to obtain payment on account of such costs, and then an interim on account bill can be delivered and the costs transferred from client account to office account to discharge that bill.
Generally, care needs to be taken when delivering an interim statute bill to ensure that all disbursements to date are included.
There is an obvious problem in relation to counsel’s fees in that counsel may be carrying on work generally and not have delivered a fee note for work done to date.
This is recognised in the judgment where the court says:
“54. Master James recognised in paragraph seven of her judgment the practical difficulties of obtaining and including disbursements such as fees for counsel and experts to coincide with the period in time to which a solicitor’s fees relate. The Master recognised that her answer that interim non-statute bill could be rendered carried the disadvantage by reason of Section 69 their payment cannot be enforced by taking proceedings.”
Depending upon the circumstances of the funding arrangement and the case, sometimes solicitors will want an interim bill to be a final statute bill for that period, and sometimes they will not.
The benefit of having a final interim statute bill is that the solicitor can sue on it and the client has strict time limits in which to challenge the bill under the Solicitors Act 1974.
The disadvantage from the solicitor’s point of view is that they cannot revisit the work done in that period, and thus it must be a carefully calculated and costed bill for work done during that period.
Thus if a solicitor, in a long ongoing matter, simply wishes to bill say £2,000.00 a month and then adjust the total each year, or at a natural interlude, or at the end of the case, then the solicitor must ensure that it is not an interim statute bill.
Perhaps the most significant area where solicitors must ensure that the bill is not an interim statute bill is where they are acting on No Win Lower Fee basis and thus charging the client the discounted fee as the matter proceeds, but with the right to charge the full primary fee, plus a success fee if appropriate, in the event of a successful outcome.
Let us assume the solicitor is charging £400.00 an hour, discounted to £200.00 an hour in the absence of access, and with a 100% success fee.
10 hours’ work is done and the matter is continuing.
The correct level of the bill is £2,000.00, reflecting the discounted rate, payable even in the event of defeat.
However, the solicitor will potentially be charging a further £600.00 an hour for that work, being the primary rate of £400.00 an hour plus a 100% success fee of £400.00 an hour, bringing the total up to £800.00 an hour, of which £200.00 per hour has been paid.
In those circumstances, which will become increasingly common in general civil and commercial work once fixed costs are extended, it is crucial that the bill delivered is not a statute bill.
Such bills are in fact “on account” bills and this should be made clear in the text of the bill.
Furthermore the bills should not refer to Solicitors Act assessments as that indicates that they are statute bills. That was the case here but the court held that it “would be reluctant to make a finding of a fatal flaw in the retainer” for that reason.
Where there is a series of interim, and not statute, bills delivered as part of a running account in respect of one piece of work, then the time for requesting assessment, and the time from when the solicitor can sue on the bills, runs from the date of delivery of the final, statute, bill.
Such a bill is known as a Chamberlain Bill, following the case of
Chamberlain v Boodle and King [1982] 3 All ER 188.
Here the court examined the authorities and stated that in order for a bill to be a statute bill, whether interim or final, it “must be complete, self-contained and final in relation to costs to date.”
A solicitor may render a bill and a client may pay that bill without it constituting a statute bill – see paragraph 22.
That is what is happening when a bill for the discounted element of the fee in a No Win Lower Fee Agreement is delivered and paid.
The assumption, as here, is that a solicitor will want any interim invoice to be an interim statute bill so that it can be sued upon and so that the client’s time for applying for an assessment starts to run.
However with conditional fee cases exactly the opposite is true.
In practice
Do not have the wording about the right to a Solicitors Act 1974 assessment on an “on account” bill.
Although it is not strictly necessary to include all disbursements for the relevant period in an “on account” bill, it is good practice. It also avoids a client saying something to the effect of “I knew there would be more legal costs payable if I won, but I thought that all the disbursements were already dealt with as I was paying those as we went along, win or lose.”
Include in an on account bill wording along the following lines:
“This is an interim on account bill. It is not a final bill for the work done during the period covered by this bill.
We reserve the right to deliver an additional, final, bill at the end of the matter.
Your time for challenging our costs and for applying for an assessment under Sections 70,71 and 72 of the Solicitors Act 1974 does not start until that final bill has been delivered.
We will advise you of your rights when we deliver that final bill.”
The following wording could be used for a Conditional Fee Agreement case, suitably adapted to effect the terms of the Conditional Fee Agreement:
“ This Interim on account bill represents the fees payable in any event, whether you win or lose your case and full details of the work done [are contained in this on account bill][are available on request][are contained in the attached schedule] and please ask us if you want any more information about that work.
These fees are calculated at the discounted rate in the Conditional Fee Agreement. If the case is won then you pay the full primary rate, together with a success fee”
[As the discounted rate is 50% of the full primary rate, then if you win the case you will pay the same sum again, being the difference between the primary rate and the discounted rate.
In addition, you will pay a success fee of []% on that full primary rate giving a further fee of [insert amount].
So, if you win, you will pay a further [Insert amount] in fees over and above the amount contained in this bill.
[However, the total charged to you, including this bill, is capped at []% of [damages][damages recovered].
This bill [does][does not] include all disbursements to date.
Theoretically, I think it possible to deliver a final interim statute bill for the discounted fee in a Conditional Fee Agreement, which would finalise the client’s liability in the event of defeat and enable the solicitor to sue on that element of the bill.
An additional bill could then be delivered on the basis that that is a free standing contractual entitlement to the balance of the full primary fee, plus the success fee.
However, given the fact that the Solicitors Act did not envisage Conditional Fee Agreements, and there is no authority on the point, I advise against such a course of action.
In any event if a solicitor is suing a client for the discounted fee part way through the case, it is hard to see how the solicitor client relationship could be one allowing the solicitor to continue to act until the end of the case.
QOCS AND FUNDAMENTAL DISHONESTY: NO NEED TO PLEAD FRAUD
These issues are dealt with in my book Qualified One-Way Costs Shifting, Section 57 Set-off available for £25.00 from Amazon here or me here.
In Howlett v Davies & Another [2017] EWCA Civ 1696
the Court of Appeal held that in the context of disqualifying a personal injury Claimant from the protection of Qualified One-Way Costs Shifting, a finding of fundamental dishonesty could be made even though the Defendant had not pleaded fraud.
All that is required is that the Claimant has been given adequate warning of, and a proper opportunity to deal with, the possibility that the judge might find dishonesty, and the matters that may lead the judge to that conclusion.
Here, the insurer’s defence and cross-examination had given the Claimant sufficient warning.
The Court of Appeal also endorsed as “common sense” the approach as to what is fundamental dishonesty taken in
Gosling v Hailo, unreported, 29 April 2014, Cambridge County Court
where HHJ Moloney said that a fundamentally dishonest claim was one “which depended as to a substantial or important part of itself upon dishonesty.”
In this case the Defendant had followed the guidance in
Kearsley v Klarfeld [2005] EWCA Civ 1510
on defending low speed traffic accident personal injury claims.
There, the Court of Appeal held that provided that Defendants complied with CPR 16.5 by setting out fully the facts from which the court was being asked to infer that the Claimant had not suffered the injuries as claimed, then there is no need to plead fraud or fabrication.
Comment
A pretty obvious decision.
Often it will be the evidence at trial which leads to a finding of fundamental dishonesty, as recognised here by the Court of Appeal.
Otherwise, taking an extreme case, a Claimant in cross-examination could say:
“Well, blow me – you got me bang to rights. I have made it all up.”
and escape a finding of fundamental dishonesty on the basis that the Defendant had not pleaded it, which absent a time machine would be difficult.
How do these matters ever get to the Court of Appeal?
PERSONAL INJURY: PROTECTED PARTIES: RESILING FROM A SETTLEMENT: A LAW BEYOND BELIEF
In Revill v Damiani [2017] EWHC 2630 (QB)
the Queen’s Bench Division of the High Court held that where the Claimant was a protected party, then the Defendant, and not just the Claimant, could resile from the compromise of the action contained in the Memorandum of Agreement reached between the parties.
The compromise arose out of a claim for damages caused by a road traffic accident and the Claimant at the relevant time was a protected party acting by his Litigation Friend.
It was common ground, and correctly so, that CPR 21.10, dealing with protected parties, means that a compromise involving a protected party is not binding unless and until approved by the Court.
This has been interpreted, for reasons beyond me, to mean that either the protected party, or the other party may withdraw from the compromise at any time before its approval. That is not what the rule says.
Here the Claimant argued that the provisions of CPR 21.10, as interpreted by the House of Lords and the Court of Appeal in this country, were incompatible with his rights under Article 14 of the European Convention on Human Rights, when read with the Article 6 right to a fair trial and/or the Article 1 Protocol right to peaceful enjoyment of possessions.
The Claimant argued that the provisions of CPR 21.10 discriminated against him as a protected party, as compared with someone who is not a protected party.
The key issue here was the change in the discount rate.
At the time of the settlement the discount rate was 2.5%, but it was clear that it was about to be changed and the Memorandum of Agreement recited that “in the event of a reduction in the discount rate before the date of the court approval hearing the future losses as set out herein will be recalculated in accordance with the reduced discount rate”.
As everyone knows the discount rate was reduced to a far greater extent than expected, being cut from +2.5% to -0.75%.
In these circumstances the Defendant, effectively the insurance company, withdrew from the compromise, relying on the fact that the Claimant was a protected party and case law established that where either party is a protected party, then no compromise is binding until and unless approved by the court and that either party is entitled to resile from the agreement.
Here, the High Court set out the existing case law in relation to CPR 21.10 and its predecessor, Order 80, Rules 11 and 12 of the Rules of the Supreme Court.
The rules are for all intents and purposes the same.
It was accepted by both parties that unless the provisions of the Human Rights Act 1998 lead to a different result, then the High Court here was bound by previous domestic authority to allow the Defendant to withdraw from the settlement.
As to the Article 1 Protocol 1 point the court had this to say:
“48. In my judgment, the claim made by Mr Revill does not engage the provisions of article 14 with article 1 protocol 1 of the ECHR. This is because the question of whether Mr Revill has made a binding compromise does not affect Mr Revill’s peaceful enjoyment of his possessions for the purposes of article 1 protocol 1 of the ECHR. His claim for damages is a chose in action which will either have been converted into an entitlement to sums due under the compromise, or remain an existing chose in action. The law has not affected the peaceful enjoyment of his possessions or discriminated in the enjoyment of those possessions which continue to exist. In my judgment Mr Revill’s complaint falls to be addressed under articles 6 and 14 of the ECHR alone. This is because it is a complaint about discrimination in the treatment of protected parties when compared with unprotected parties in the settlement of legal claims. I should record that even if I had found the claim to be within the ambit of article 1 protocol 1 with article 14 of the ECHR, my conclusion on justification and proportionality set out below would have been the same.”
Here the parties agreed that the Claimant’s status as a protected party is an “other status” for the purposes of Article 14 and that Mr Revill’s claim came within Article 6 as it involved the determination of his civil rights.
It was also agreed that there was a difference of treatment between Mr Revill as a protected party and another litigant who is not a protected party as a non-protected party can compromise a claim without obtaining the approval of the court and that compromise is binding on both parties once it is made.
Thus the issue was whether the difference in treatment had an objective and reasonable justification in that:
1. the difference of treatment pursued a legitimate aim; and
2. there was a reasonable relationship of proportionality between the means employed and the aim sought to be realised.
The parties agreed that CPR 21 sought to pursue a legitimate aim, that is to protect the interest of the protected party and to ensure that money recovered by that party is properly looked after and to provide a means by which the Defendant may obtain a valid discharge of its obligations in relation to the claim.
Thus the effective issue was whether the measure was proportionate.
The court held that CPR 21.10 is a proportionate means of achieving legitimate aims and said:
“In my judgment the approach taken by CPR 21.10 to compromises and court approval was a proportionate means of achieving the legitimate aim of ensuring the protection of protected parties from: other parties; from themselves; and from legal representatives. This is because, as was common ground, the objects set out in paragraph 21 above required the implementation of a scheme which required court approval of a compromise made by a protected party before that compromise would bind the protected party. This was because the protected party required protection from inadequate compromises, other parties required a means of obtaining a valid compromise, and consequential matters of distribution of the damages and costs needed to be resolved. This means that, as was common ground, CPR 21.10 pursued a legitimate aim.”
Comment
Another fine piece of behaviour by an insurance company.
The case law, and this decision, do not begin to make any sense.
The whole point of CPR 21 is to protect a protected party; it is not to protect a paying party. Here CPR 21 has been successfully relied upon to get the Defendant off of the hook in relation to an unexpectedly large reduction in the discount rate.
That would be bad enough in any case, but the facts of this case are that the Defendant was sent to prison for causing serious injury by dangerous driving in this matter.
Thus the High Court has interpreted a rule protecting protected parties in a way that means that the protected party massively loses out and the actual beneficiary of this protection is a person sent to prison for causing those injuries to the protected party, and in fact causing the party to become a protected party.
This is madness.
Why should the law not be that in a case involving a protected party, while the settlement shall not be binding unless and until it is approved by the court, the non-protected party is prohibited from resiling from a compromise or settlement without the permission of the court?
An urgent change in the law is required.
CPR 21.10
Compromise etc. by or on behalf of a child or protected party
(1) Where a claim is made –
(a) by or on behalf of a child or protected party; or
(b) against a child or protected party,
no settlement, compromise or payment (including any voluntary interim payment) and no acceptance of money paid into court shall be valid, so far as it relates to the claim by, on behalf of or against the child or protected party, without the approval of the court.
(2) Where –
(a) before proceedings in which a claim is made by or on behalf of, or against, a child or protected party (whether alone or with any other person) are begun, an agreement is reached for the settlement of the claim; and
(b) the sole purpose of proceedings is to obtain the approval of the court to a settlement or compromise of the claim,
the claim must –
(i) be made using the procedure set out in Part 8 (alternative procedure for claims); and
(ii) include a request to the court for approval of the settlement or compromise.
(3) In proceedings to which Section II or Section III of Part 45 applies, the court will not make an order for detailed assessment of the costs payable to the child or protected party but will assess the costs in the manner set out in that Section.
(Rule 46.4 contains provisions about costs where money is payable to a child or protected party.)
BTE INSURANCE: ABSOLUTE RIGHT TO OWN SOLICITOR AT ALL TIMES
In Nobile v DAS Rechtsschutz-Versicherungs AG (Case E-21/16)
the European Free Trade Association (EFTA) Court considered whether provisions in a legal expenses insurance contract were compatible with the freedom for insured persons to appoint a lawyer set out in the Solvency II Directive (2009/138/EC).
Article 201(1)(a) of the Solvency II Directive states that, in relation to legal expenses insurance contracts, the insured person must be free to choose a lawyer, where recourse is had to a lawyer to represent the insured person in any inquiry or proceedings.
The court considered the compatibility of an insurer’s terms and conditions with Article 201(1)(a).
In reliance on its terms and conditions, the insurer had declared that it was not obliged to provide cover, as the insured person in question had instructed a lawyer without the insurer’s consent before the start of proceedings.
The court held that Article 201(1)(a) precludes terms and conditions in a legal expenses insurance contract that release the insurance company from its obligations under the contract if the insured person mandates an attorney to represent his interests, without the consent of the company, at a point in time when the insured person would be entitled to make a claim under the contract.
It rejected the argument that the application of the freedom to choose a lawyer was limited to judicial or administrative proceedings.
Here the court held that the right to choose one’s own lawyer applied at the stage of notification of the claim or any effort to settle a matter out of court, or any instruction of a lawyer to assess the legal and factual situation.
Thus the right arose as soon as a potential cause of action arose.
The court also held that it was not necessary for the insured to notify the BTE insurer in advance.
A BTE insurer has no right to deny coverage for the potential proceedings in issue because it deemed such proceedings to be unnecessary, or disproportionate or premature.
Such a right could motivate the insurance undertaking to reject coverage, which could deprive the insured person of the protection afforded by the legal expenses insurance contract.
If DAS’s contract was to be upheld then the insured person’s right freely to choose a lawyer would consist solely of the possibility of suggesting a lawyer, the acceptance of whom would be, ultimately, at the discretion of the insurance company.
It is incompatible with Solvency II Directive to accept that an insurance undertaking could be released from its obligations under legal expenses insurance contracts because the insured person breached some terms and conditions.
However that freedom to choose a lawyer cannot extend to obliging member states to require insurers to cover in full the costs incurred by the person instructed to represent the insured person.
Limitations of coverage may, for example, relate to a single claim or to the economic value of a claim.
However, terms and conditions to limit the coverage may not be such as to render it impossible for the insured person freely to choose a lawyer.
Comment
This is an interpretation of an EU Directive and it is likely that the UK will form part of a non-EU European grouping, including countries like Norway and Switzerland, once we leave the EU.
Any which way, these decisions are likely to remain binding on BTE insurers operating in the UK.
Yet another case at the most senior level stating in the clearest possible terms that an insured person under a BTE insurance contract has an absolute right to instruct lawyers of their choice the moment the course of action, or potential course of action, arises.
Yet another defeat for DAS.
In spite of the plethora of decisions of the European Court of Justice on this point, I know that I will get emails from solicitors saying that BTE insurers are refusing to indemnify their insured and allow them freedom of choice of lawyer etc.
The answer is very simple: sue in contract and seek indemnity costs and a Wasted Costs Order against the insurance company.
No ifs, no buts.
LATE ACCEPTING CLAIMANT ORDERED TO PAY INDEMNITY COSTS: TIME TO SCRAP LIBEL?
In Optical Express Ltd & Others v Associated Newspapers Ltd [2017] EWHC 2707 (QB)
the Queen’s Bench Division of the High Court ordered a late accepting Claimant to pay indemnity costs from the period after the expiry of the Part 36 offer and also to pay standard costs for part of the period before the Part 36 offer was made.
The normal order under CPR 36.13(5) is that the Claimant receives standard basis costs up to expiry of the relevant period and the Defendant offeror receives standard basis costs from then on until date of acceptance.
The court must adopt such an approach unless it considers it unjust so to do.
The facts were highly exceptional and indeed the fact that the court ordered the Claimant to pay costs for a five month period before the Defendant’s Part 36 offer was even made, demonstrates that this case had more to do with the Claimant’s unreasonable behaviour than the technicalities of Part 36.
The Claim was for libel and was put at £21.5 million and during the case the Defendant asked how the claim was valued at that sum and the Claimant was extremely slow in providing the relevant information.
On 27 May 2016 the Defendant made a Part 36 offer of £125,000.00 which was rejected as “derisory”.
On 21 February 2017 the Claimant accepted that offer which it had described as derisory and thus accepted £125,000.00 as compared with their claim of £21.5 million.
The court had this to say:
“There is much that is outside the norm. The claim as pleaded was huge. The offer was a tiny proportion of the sum claimed. It was brusquely rejected as “derisory”, spurned for many months, and then accepted later on with no explanation. Nor has any explanation since been provided for the claimant’s volte face, or its eventual readiness to accept a sum so vastly less than the claim as pleaded. Sometimes there may be valid reasons for such a change of stance. Here, in the absence of any explanation, it is permissible to infer that the belated acceptance was prompted by a re-assessment of the claim which could and should have been made earlier; or by some external factor which meant that it happened to suit the claimant to bring an end to the claim at that time.”
The logic for awarding pre-Part 36 offer costs to the Defendant, albeit on a standard basis, was that had the Claimant given the requested information within a reasonable time, then the Defendant would probably have made its Part 36 offer in December 2015, rather than in May 2016.
Had that been the case, then the time for accepting the offer would have expired on 11 January 2016 and thus the court awarded the Defendant costs on the standard basis from that notional expiry date, and of course deprived the Claimant of its costs for that period.
Comment
I am not sure that I understand the logic of awarding the Defendant standard costs from January 2016 until the expiry of the actual offer and indemnity costs thereafter.
In reality this order has been made due to the Claimant’s unreasonable behaviour, and not for failure to beat a Part 36 offer, and therefore indemnity costs should have been ordered from the time when the Defendant would have made its offer had it been given the information that it requested.
This is essentially an unreasonableness case, rather than a Part 36 case.
Had I been deciding this matter I would have deprived the Claimant of all of its costs.
By my calculation the Claimant accepted an offer that was 0.58% of the sum claimed.
To put that in context, using lower figures, it is the equivalent of a Claimant in a personal injury claim pursuing damages of £100,000.00 but settling for £580.00.
Imagine the field day that the ABI, the Daily Mail etc. would have in such circumstances – and quite rightly so.
Everyone is familiar with my views on the whole issue of late acceptance, and I think that generally the law is biased against Claimants on this point.
However, the Claimant’s behaviour here is outrageous and deserving of an absolute hammering in costs.
This type of claim brings the law into disrepute.
Like virtually everyone of my generation I was brought up on the principle of “Sticks and stones may break my bones but words will never hurt me.”
That may be something of an oversimplification, but as we face Whiplash Tariff Reforms, as we already have a maximum award for unfair dismissal claims, is it not time that we put an absolute cap on defamation damages, of say £50,000.00?
The current Judicial College Board Guidelines for damages for loss of sight in one eye is £39,270 to £43,710.
Would you rather be libelled or lose an eye?
In some quarters this decision has been reported as being significant in the context of Part 36 and late acceptance.
The whole point here is that there remains the highly charged issue of whether a late accepting Defendant should pay a Claimant indemnity costs and I have been one of the more vociferous in saying that Claimants should get indemnity costs in such cases, and pointing out that Defendants achieved costs on late acceptance by a Claimant, even though the Claimant has won and the penalty on a late accepting Claimant is that they are deprived of costs from the date of expiry and have to pay the Defendant’s costs from the date of expiry, even though they have won.
This decision has absolutely nothing to do with that, and as indicated above, it is too soft, if anything.
The real compensation culture, if there be such a thing, exists in defamation and commercial work much more than in personal injury and employment work.
To put this in context, had this been a personal injury claim then the Claimant would have lost completely, due to the provisions of Section 57 of the Criminal Justice and Courts Act 2015.
It is high time that that provision was extended to all civil litigation of all kinds.
Generally, the whole law of defamation and the ridiculous awards as compared with awards made in cases of people trafficking, slavery, discrimination, personal injury including extreme disability, are outrageous.
The costs in defamation and breach of privacy proceedings are so disproportionate and harmful to society generally that it is high time that costs following the event were scrapped in all defamation matters.
I do not begin to understand why success fees and ATE premiums remain recoverable in defamation and breach of privacy claims.
The law in this country is that for defamation and breach of privacy you can recover a success fee and an ATE insurance premium, whereas, with the exception of mesothelioma cases, these are not recoverable in any other proceedings.
In employment cases, generally there are no costs recoverable and in unfair dismissal claims there is a cap on damages.
Does anyone take seriously anything printed in the newspapers? We all know that all newspapers are liars.
Is it not time simply to abolish the whole concept of defamation?
INDEMNITY COSTS ON DISCONTINUANCE
the Mercantile Court, part of the High Court, ordered a discontinuing Claimant to pay the Defendants’ costs on the indemnity basis, rather than the standard basis.
Discontinuance triggers an automatic liability for costs in favour of the Defendant on the standard basis and here the Defendants sought to vary that standard order to provide for one for indemnity costs.
CPR 38.3 provides that a Claimant may discontinue a claim by filing and serving a Notice of Discontinuance on the other parties and, under CPR 38.6(1), it is provided that:
“Unless the court orders otherwise, the Claimant who discontinues is liable for the costs which a Defendant against whom the Claimant discontinues incurred on or before the date on which the Notice of Discontinuance was served…”
Under CPR 44.9(1) that is deemed to be a Costs Order on the standard basis.
In Atlantic Bar and Grill Limited v Posthouse Hotels Limited [2000] C.P.REP32
the court held that the reference in CPR 38.6 to a court ordering otherwise includes an ability for the court to order the costs be assessed on an indemnity basis, rather than the standard basis.
CPR 44.2 deals with the court’s discretion to order indemnity costs and provides, among other things that in deciding what order, if any, to make about costs:
- the court will have regard to all the circumstances, including the conduct of the parties, which includes conduct before as well as during the proceedings; and
- in particular the extent to which the parties followed the Practice Direction, Pre-Action Protocol or any other Pre-Action Protocol; and
- whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; and
- the manner in which a party has pursued or defended its case or a particular allegation in issue and whether a Claimant, who has succeeded in the claim in whole or in part has exaggerated its claim.
The court then reviewed the authorities in relation to the court’s discretion to award indemnity costs, which discretion is expressed to be extremely wide, but there must be some conduct or circumstances which take the case out of the norm.
Here the court held that various matters took the case out of the norm, including the Claimant’s failure to engage in the Pre-Action Protocol, the exaggeration of quantum, failure to comply with a court order in relation to the appointment and instruction of a single joint expert and a “thoroughly misconceived” approach to disclosure.
Comment
This is a sensible decision on the facts and is a reminder that Notice of Discontinuance does not automatically restrict the Costs Order to one on a standard basis.
In personal injury cases, where Qualified One-Way Costs Shifting applies, the court can still examine the issue of fundamental dishonesty when discontinuance has taken place, so as to determine whether QOCS should be dis-applied and the Claimant should have the automatic costs order against it enforced.
Indeed the Court can of its own motion set aside the Notice of Discontinuance to allow such an enquiry to take place.
Under Lord Justice Jackson’s proposals for fixed costs in the new Intermediate Track, there will be a costs liability once a Letter of Claim has been sent, even if proceedings are never issued, and this reinforces the point that, for all intents and purposes, the Pre-Action Protocols are now part of the court process, with potentially severe costs penalties for failing to follow those protocols.
PROPORTIONALITY AND ADDITIONAL LIABILITIES
In BNM v MGN [2017] EWCA Civ 1767
the Court of Appeal held that the old pre-1 April 2013 proportionality test applies in relation to additional liabilities, that is success fees and After the Event insurance premiums, no matter when the additional liabilities were incurred.
The decision overturned the first instance decision of Master Gordon-Saker, who had held that the new rules applied.
The Court of Appeal said that if it had been intended that the new proportionality test was to apply, then that would have been made clear in the statutory provisions in relation to the new costs rules, but it was not.
The Court of Appeal rejected the paying party’s argument that the success fee and the ATE premium could be regarded as “fees and expenses”, according to the current definition of costs.
The general rule is that recoverability of additional liabilities remains only in relation to cases where the Conditional Fee Agreement and/or After the Event insurance arrangements were entered into on or before 31 March 2013 and thus this is a dwindling band of cases of nearly five years old or more.
However recoverability still applies in mesothelioma cases and also in defamation and breach of privacy cases, whenever the conditional fee agreement was entered into and whenever the after-the-event-insurance was taken out.
This ruling thus applies to all cases involving recoverable additional liabilities, whether or not the arrangements were entered into prior to 1 April 2013.
What the judgment did not do is to give any guidance as to how the new test of proportionality should be applied, in circumstances where the case is governed by the new rule.
Thus there is no guidance at all on what proportionality means in relation to ordinary recoverable costs in ordinary cases.
Thus we are no further on than we have been for the last five years.
Any such guidance would have been obiter and it makes sense to give guidance in a case where such guidance will be binding, not obiter, but it is to be hoped that that will be sooner, rather than later.
The Court of Appeal also commented that Lord Justice Jackson’s final report on costs did not assist in relation to the proportionality issue and, even if the report was properly admissible as an aid to construction, it was an unsound basis for undermining what the Court of Appeal considered to be the clear intention of the relevant Civil Procedure Rules and Practice Directions.
This was partly because the Civil Procedure Rules and Practice Directions did not implement Lord Justice Jackson’s proposals in relation to proportionality.
IMMEDIATE ASSESSMENT OF INTERLOCUTORY APPEAL COSTS
In Khaira & Others v Shergill & Others [2017] EWCA Civ 1687
the Court of Appeal held that where a party is awarded the costs of an interlocutory appeal it is not entitled to an immediate assessment of those costs unless there is an express order by the court to that effect.
The Court of Appeal also held that if the appellate court had not made such an order for immediate assessment, then a Costs Judge has no jurisdiction to make such an order.
Practice Direction 47, read with CPR 47.1 provided that the costs of any proceedings were not to be subject to detailed assessment until the court had finally determined the matters in issue, unless the court had made an express order to the contrary.
Reference to the court referred to the court that made the Costs Order and not a Costs Judge or anyone else.
The Court of Appeal also held that the fact that the Supreme Court had made an order that costs in both the Court of Appeal and the Supreme Court be assessed on the standard basis, and that the losing party pay £150,000.00 on account of their costs in both courts, did not mean that the Supreme Court was making an order that the costs in the Court of Appeal be assessed immediately.
The Supreme Court, which has its own costs rules, could have made such an order, but did not do so.
Kerry Underwood 