Kerry Underwood

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In Barron and others v Collins (1) and United Kingdom Independence Party (2) [2018] EWHC 253 (QB)

the Queen’s Bench Division of the High Court made a third party costs order against UKIP, who had been joined to the action for the purpose of determining that question.


Here it the court’s own summary of the case.


“1.   The Court gives judgment on an application by the claimants for a third-party costs order against the second defendant (UKIP, or the Party). UKIP agreed to be joined to the action for the purposes of resolving the question of whether it should pay costs incurred by the claimants in their successful claims for slander and libel against the first defendant (Ms Collins), who is and has at all relevant times been the MEP for Yorkshire and North Lincolnshire, and a member of the Party.

  1. The background is set out at [2]-[10].
  • The claimants are three Labour MPs for constituencies in or near Rotherham. They sued Ms Collins for libelling them in a speech she gave to the UKIP Party Conference on 26 September 2014, at which time the 2015 Election was in prospect and Ms Collins was the prospective UKIP Parliamentary Candidate for the constituency of Rotherham.


  • In a Judgment of April 2015, the Court found the speech referred to all three claimants, and bore three defamatory meanings about them, to the effect that they had known many of the details of the scandalous child sexual exploitation that took place in Rotherham, yet deliberately chose not to intervene but to allow the abuse to continue; that they had done this for motives of political correctness, cowardice, or selfishness; and that they were thereby guilty of misconduct so grave that it was or should be criminal.


  • In May 2015, Ms Collins made and the claimants accepted an Offer of Amends pursuant to the Defamation Act 1996. After that, Ms Collins parted company with her lawyers, and made applications to “vacate” her Offer of Amends and to stay the proceedings pending an opinion from the European Parliament on whether her role as as an MEP meant she was immune from the claims. The Parliament’s opinion was that she was not, and the Court refused to stay the claim further, and dismissed the application to vacate the Offer of Amends.


  • After a hearing in January 2017, the Court awarded compensation of £54,000 to each of the claimants, and ordered Ms Collins to pay their costs, with an interim payment on account of £120,000.


  • None of those sums have been paid. As a result of disclosure given by Ms Collins in the course of enforcement proceedings the claimants brought the present application.
  1. The case for the claimants was that UKIP had provided financial support to Ms Collins and sought to influence the conduct of the action for its own ends, so that it was just to order that it bear the costs of the action. It argued that UKIP had regarded the conduct of the litigation as “part and parcel of its 2015 General Election campaign.” UKIP accepted that it had funded Ms Collins for a period of months, in the sum of some £31,000, but maintained that it would be unjust to make any such order as it did not seek control of the litigation; its primary concern was to help Ms Collins settle the claims; the claimants would have incurred the same expense in any event; and it would be wrong to make an order when UKIP had only been put on notice of the claim for costs in July 2017. See [11]-[16].
  2. The Court identifies the basis of its discretionary power to make a third-party costs order, and the legal principles that apply: [17]-[22], [79]-[82]. The history of UKIP’s role in relation to the libel claims is examined in detail: [29]-[78]. Applying the legal principles to the facts as found, the Court reaches these conclusions at [83]-[89]:
  • It would be unjust to make any order in respect of the period up to the end of February 2015. The Party is not to be held responsible in these proceedings for causing or allowing Ms Collins to make the speech. It began by acting in good faith, funding the provision of initial advice and representation for a defendant towards whom it felt some moral responsibility. Thereafter, it played a supportive role, aiming to facilitate and fund a settlement.


  • But things changed significantly in late February and early March 2015. “In that period the Party took a deliberate, informed and calculated decision, for reasons of party political advantage, to ensure that the case was not settled before the General Election. In my judgment, it very probably did thereby prevent a settlement that it had been advised should be made and which would otherwise have occurred quite swiftly. The likelihood is that, but for its role, the case would have settled” by 20 March 2015, at UKIP’s expense [83(7)], and [84].


  • Ms Collins’ conduct as a litigant in person between June 2015 and January 2017 was not caused or contributed to by UKIP, nor was it foreseen or reasonably foreseeable by the Party. It would be unjust to make them pay towards the costs incurred as a result. [83(8)].


  • But there is every likelihood that a settlement in the Spring of 2015 would have obviated any need for the assessment hearing of January 2017. [83(9)].
  1. The Court therefore makes an order that UKIP should pay the claimants’ costs from 20 March 2015 to 23 June 2015 and their costs of the assessment hearing.
  2. The judgment determines the issue of principle, but the order will be subject to a detailed assessment. That gives the Party the opportunity to challenge the recoverability of individual elements of the Bill and/or the reasonableness of the sums claimed: [15]. The order makes the Party liable in addition to and not in substitution for the orders made against Ms Collins, who remains liable: [22].”

Written by kerryunderwood

April 20, 2018 at 8:27 am

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Varying Security for Costs Orders

Recovery Partners GB Limited and Another v Rukhadze and Others [2018] EWHC 95 (Comm)

the Business and Property Court, part of the Queen’s Bench Division of the High Court, gave guidance on the appropriate approach when a party seeks to change the basis on which security for costs, already ordered, is to be provided.

This was an application by the claimant’s solicitors seeking to be released from undertakings to hold sums of money as security for costs, on the basis that instead, security would be provided by a Deed of Indemnity from an insurance company that had provided the claimants with After the Event insurance (“ATE”).

The judge recognized the ATE insurance can provide security for costs and referred to


Harlequin v Kennedy [2015] EWHC 1122 (TCC); and


Premier Motorauctions Limited (in liquidation) v Price Water House Coopers LLP [2017] EWCA Civ 1872,


and held that the ATE policy here and the Deed of Indemnity in this case would constitute adequate security.


The judge treated that as the first issue and then set out the second issue as follows:


“3.The second issue, which might fairly be said to be the logically prior issue, is this: What approach should the court take in circumstances such as these where a party seeks to be released from an undertaking given in lieu of an order for security for costs? In particular, is it enough that the deed offered provides adequate security in the sense I have just described, or is some different approach required where security has already been given and the Claimant wants to substitute a new form of security for the security already given? If so, what is the proper approach and what is the appropriate outcome on the facts of this case?”

“8. On 6 February 2017, following requests by the Defendants for security, the Claimants’ solicitors Brown Rudnick wrote a letter giving an undertaking. So far as material, it provided as follows

This firm holds the sum of £200,000 (“the Security”) by way of security for the Defendants’ costs of these proceedings (up to and including the Case Management Conference).

Unless the parties agree and/or the Court orders otherwise, this firm irrevocably undertakes

  1. irrespective of any contrary instructions by the Claimants or any other person, to make payment from the Security of the amount of any award on costs relating to the period up to and including the first CMC … to [the Defendants’ solicitors].


  1. that the Security will not be used for any purpose other than that set out in paragraph 1 above.”

“9. That undertaking having been given, no application for an order for security for costs was made.”

“11. A second and similar undertaking was given by Brown Rudnick on 12 April 2017 but this time the sum held was (just short of) £366,000 and it was held “by way of security for the Defendants’ costs in respect of disclosure and work on the witness statements in these proceedings”. Again, having obtained the undertaking, the Defendants did not make the security for costs application that they had intimated.”

“12. After the undertakings were given, the Claimants obtained an after-the-event (“ATE”) “Litigation Insurance Policy” which took effect from 12 May 2017. It indemnified the Claimants for the costs of the Defendants up to a limit of £2,000,000. There was no cover for anything else.”

The judge then made this finding, at paragraph 32 of the judgement:

“32. The position is therefore that, had this been an application for security for costs, and one which I would otherwise have granted, I would have regarded the availability of the Deed of Indemnity, together with the ATE policy and the offer of an endorsement and a deed of charge, as providing sufficient security, so that no order for security was appropriate.”

The judge then address the second issue and said that he doubted that there had been the necessary “material change of circumstances” to justify a release of the undertaking, “but since the Defendants were content to proceed on the assumption that there had been, I will proceed on the same basis, without deciding the point.” (Paragraph 37).

Once there is a material change of circumstances, the court has a broad discretion, which should be exercised taking into account all relevant factors but remembering that the burden is on the party who seeks to be released from his undertaking to show that it is appropriate to allow that release.

The judge rejected the claimant’s submission that once there is a material change of circumstances, then the question should be approached simply as though it were a fresh application for security for cost.


The judge had this to say:


“39… Here, two threatened applications for security were, in effect, compromised by providing security by a London solicitor’s undertaking backed by cash, and, those deals having been struck, the Defendants incurred costs against the confidence that that security provided. What this application seeks to do is to wind back the clock and substitute for the security in fact given a different form of security. It does not seem to me to follow as a matter of logic that merely because the Court might have accepted the Deed and the ATE policy had they been available earlier this year, that it is therefore necessarily appropriate to allow them now to be substituted for the security previously given.”

Although the security offered was “clearly less attractive” to the defendants, that of itself did not determine the issue.

It might sometimes be appropriate to release an undertaking, or vary an order for security, even though the new security was marginally less attractive, if there was “some compelling consideration going the other way”, for example significant hardship to the claimant if the substitution was not made.

The burden is on the party seeking release from the undertaking and relevant factors that might be material, as in this case, include:


  • how long the old security has been in place and whether the costs which it secured have already been incurred;


  • the extent of the difference (if any) between the quality of the old security and the quality of the new security;


  • the strength of the explanation given for the Claimant’s change of position;


  • in particular, whether or not, and if so to what extent, declining to permit the change would cause hardship or prejudice to the Claimant or inhibit its ability to pursue its claim.


The judge then concluded:


“44. Applying those factors to this case: (1) the security has been in place for either 8 or 10 months and the costs it secures have all been incurred; (2) the new security offered is in a form which would be adequate to meet a security for costs application but is not, objectively, as attractive as a London solicitor’s undertaking backed with cash; (3) it is unclear whether or not the ATE policy and Deed now offered could have been offered at an earlier stage: the reason given by the Claimants to justify their change of position is simply that they would prefer to have the cash available to them; and (4) the Claimants do not suggest that they would suffer hardship or prejudice if the existing security were to stay in place.


  1. The fourth factor seems to me to carry particular weight. The security has been in place for some time and no strong reason is given for revisiting and changing the existing arrangements, after the event, to something less attractive to the Defendants.


  1. Weighing these factors I find that the Claimants have not demonstrated that it is appropriate that their solicitors be released from their undertakings. I therefore dismiss the application.”


Previous Litigation Findings, Timing and Quantification

In Bluewaters Communications Holdings LLC v Bayerische Landesbank Anstalt Des Offentlichen Rechts and others [2018] EWHC 78 (Comm)


the Business and Property Court, part of the Commercial Court, itself part of the Queen’s Bench Division of the High Court, was dealing with applications for security for costs where the claim was an alleged corrupt agreement to sell shares.


The second and third Defendants have made applications for security for costs pursuant to CPR 25.13(2)(a), which covers overseas claimants, and CPR 25.13(2)(c) which covers impecunious claimant companies.


The court granted the application.


On a security for costs application, the court will not consider the merits of the claim in detail unless a high degree of probability of success can be demonstrated – see Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534.


This case illustrates the potential challenges of meeting that threshold in factually and legally complex proceedings alleging fraud.


The court also commented on the timing of the application and endorsed the approach to quantification of security of costs as set out in



Vald Nielsen Holding AS v Baldorino [2017] EWHC 1033 (Comm)



described as “commonly applied” in the Commercial Court.


The claimant also submitted that the re-running of their previously unsuccessful defence by the defendant should not be condoned by granting security for the associated costs.


The judge regarded this as a quantum point and was not sufficiently certain of claimant’s success on the issue to refuse security.


As to the complaints by the claimant of delay, it was perfectly reasonable for the defendant to undertake most of the defence preparation work before seeking security, and in that respect the defendant had complied with the Commercial Court Guide.


Until the issues had been crystallised by initial exchange of detailed pleadings, the court could not have resolved any quantum-related dispute.


The court granted security in the amount that it considered the defendant was likely to recover on detailed assessment, if awarded standard basis costs at trial – see Vald Nielsen.


Here, 60 per cent of D’s costs incurred, and to be incurred to the end of the CMC, was proportionate in a claim worth US$500 million and involving serious allegations of fraud and complex factual and legal issues.


The total security ordered was £752,000.00.


The judge also gave Bluewaters liberty to apply to seek permission to provide that security in the form of an ATE insurance policy.






Written by kerryunderwood

April 19, 2018 at 8:38 am

Posted in Uncategorized


with 2 comments

The whole issue of Section 57 is dealt with at length in my book – Qualified One-Way Costs Shifting, Section 57 and Set-Off – Available here for £15 including P&P

There have been three recent and important High Court decisions in relation to how the fundamental dishonesty test under section 57 of the Criminal Justice and Courts Act 2015 should be applied.

That section requires a court to dismiss an otherwise valid personal injury claim if the claimant has been fundamentally dishonest in relation to the claim unless the claimant would suffer substantial injustice if the claim was dismissed.

It only applies to cases issued on or after 13 April 2015 and covers counterclaims as well.

The full text of section 57 and the Explanatory Notes are set out at the end of this piece.


In Ivey v Genting Casinos Limited (trading as Crockfords Club) [2017] 3 WLR 1212


the Supreme Court restated the common law test for dishonesty, holding that while dishonesty is a subjective state of mind, the standard by which the law determines whether that state of mind is dishonest is an objective one, and that if by ordinary standards a defendant’s mental state is dishonest, it is irrelevant that the defendant judges by a different standard.


In Razumas v Ministry of Justice [2018] EWHC 215 (QB)


the Queen’s Bench Division of the High Court dismissed a personal injury claim under section 57 of the Criminal Justice and Courts Act 2015.

The claimant brought a clinical negligence claim against the Ministry of Justice concerning treatment whilst he was a prisoner, maintaining that there had been a failure to diagnose a tumour leading to his leg being amputated.

The claimant lied about seeking treatment, which raised the issue of whether the claim should be dismissed under the fundamental dishonesty provisions of section 57.

However, there is an exception if the claimant would suffer “substantial injustice” if the claim was dismissed.

The claimant submitted that his dishonesty fell short of being fundamental, as the lies were barely significant in the context of the case and also that he would suffer substantial injustice because of the gross disproportion between the lies and the effect of depriving him of the award of damages.

The High Court held that fundamental dishonesty was made out as the admitted dishonesty was part of the potential success of the claim and had substantially affected presentation of his case.

The High Court also held that something more than the loss of damages was required before there could be substantial injustice, as the whole point of section 57 was to remove damages and any other result would “cut across what [section 57] is trying to achieve.”

The court here referred to


Howlett v Davies and Ageas Insurance Ltd [2017] EWCA Civ 1696


where the Court of Appeal approved the following passage of the County Court judgment in


Gosling v Hailo 29 April 2014


“44. It appears to me that this phrase in the rules has to be interpreted purposively and contextually in the light of the context. This is, of course, the determination of whether the claimant is ‘deserving’, as Jackson LJ put it, of the protection (from the costs liability that would otherwise fall on him) extended, for reasons of social policy, by the QOCS rules. It appears to me that when one looks at the matter in that way, one sees that what the rules are doing is distinguishing between two levels of dishonesty: dishonesty in relation to the claim which is not fundamental so as to expose such a claimant to costs liability, and dishonesty which is fundamental, so as to give rise to costs liability.

  1. The corollary term to ‘fundamental’ would be a word with some such meaning as ‘incidental’ or ‘collateral’. Thus, a claimant should not be exposed to costs liability merely because he is shown to have been dishonest as to some collateral matter or perhaps as to some minor, self-contained head of damage. If, on the other hand, the dishonesty went to the root of either the whole of his claim or a substantial part of his claim, then it appears to me that it would be a fundamentally dishonest claim: a claim which depended as to a substantial or important part of itself upon dishonesty.”


The court here also considered


London Organising Committee of the Olympic and Paralympic Games v Haydn Sinfield [2018] EWHC 51 (QB)


in which Mr Sinfield suffered an injury for which the Organising Committee was liable but where he dishonestly claimed gardening expenses, supported by fake invoices.


There the court dismissed the whole of the claim, relying on section 57 and said


“62. In my judgment, a claimant should be found to be fundamentally dishonest within the meaning of s 57(1)(b) if the defendant proves on a balance of probabilities that the claimant has acted dishonestly in relation to the primary claim and/or a related claim (as defined in s 57(8) ), and that he has thus substantially affected the presentation of his case, either in respects of liability or quantum, in a way which potentially adversely affected the defendant in a significant way, judged in the context of the particular facts and circumstances of the litigation. Dishonesty is to be judged according to the test set out by the Supreme Court in Ivey v Genting Casinos Limited (t/a Crockfords Club) , supra.

  1. By using the formulation ‘substantially affects’ I am intending to convey the same idea as the expressions ‘going to the root’ or ‘going to the heart’ of the claim. By potentially affecting the defendant’s liability in a significant way ‘in the context of the particular facts and circumstances of the litigation’ I mean (for example) that a dishonest claim for special damages of £9000 in a claim worth £10 000 in its entirety should be judged to significantly affect the defendant’s interests, notwithstanding that the defendant may be a multi-billion pound insurer to whom £9000 is a trivial sum.”


Here the court concluded:


  1. “I gratefully adopt the test set out by Julian Knowles J and ask myself first: Did Mr Razumas act dishonestly in relation to the primary claim and/or a related claim? To this the answer must be yes. He has one main claim, and the dishonesty went to one route to succeed on it in full. Has he thus substantially affected the presentation of his case, either in respect of liability or quantum, in a way which potentially adversely affected the defendant in a significant way? Again the answer must be yes. The argument which he advanced went to an entire factual section and pleaded occasion which would have entitled relief on the main claim. Thus the first part, fundamental dishonesty is made out.
  2. I do not consider that there could be any way out for Mr Razumasvia the argument on substantial injustice. It cannot in my judgement be right to say that substantial injustice would result in disallowing the claim where a claimant has advanced dishonestly a claim which if established would result in full compensation. That would be to cut across what the section is trying to achieve.
  3. In the Sinfield case Julian Knowles J had no difficulty in dismissing this argument in the context of a dishonesty which went only to part of the quantum claimed. At [89] he stated that it was plain from section 57(3):

“….something more is required than the mere loss of damages to which the claimant is entitled to establish substantial injustice. Parliament has provided that the default position is that a fundamentally dishonest claimant should lose his damages in their entirety, even though ex hypothesi, by s 57(1), he is properly entitled to some damages. It would render superfluous s 57(3) if the mere loss of genuine damages could constitute substantial injustice.”

  1. This, it seems to me, must be right. Something more is required. That something more is not made out here and so, if there were a claim it would fail at this stage.”


In London Organising Committee of the Olympic and Paralympic Games (In Liquidation) v Sinfield [2018] EWHC 51 (QB)


the Queen’s Bench Division of the High Court overturned the County Court’s award of damages and dismissed the claimant’s personal injury claim due to fundamental dishonesty under section 57 of the Criminal Justice and Courts Act 2015 in exaggerating the costs of gardening following his injury.

The claimant was injured whilst working as a volunteer at the 2012 Olympic Games and the defendant admitted liability.

The High Court said that the fact that the greater part of the claim was genuine is “neither here nor there.”

If something has “substantially affected the presentation of his case, either in respects of liability or quantum, in a way which potentially adversely affected the defendant in a significant way” then it amounts to fundamental dishonesty requiring the whole claim to be dismissed.

The claimant falsely claimed that he had spent thousands of pounds employing a gardener to manage his two acre garden after the accident.

The trial judge had said that he needed “evidence of weight” before finding dishonesty and held that the proper inference was that the claimant was “muddled, confused and careless” about the gardening claim, but that that did not contaminate the entire claim.

Here the High Court overturned that finding.

The gardening claim represented about 28% of the overall damages claim, but the false element was around 11% of the claim.

The trial judge had found that the claimant was not fundamentally dishonest within the meaning of section 57, but if he was wrong about that “it would be substantially unjust for the entire claim to be dismissed when the dishonesty relates to a peripheral part of the claim and the remainder of the claim was honest and genuine.”


Here the High Court said


“65.Given the infinite variety of circumstances which might arise, I prefer not to try and be prescriptive as to what sort of facts might satisfy the test of substantial injustice. However, it seems to me plain that substantial injustice must mean more than the mere fact that the claimant will lose his damages for those heads of claim that are not tainted with dishonesty. That must be so because of s 57(3). Parliament plainly intended that sub-section to be punitive and to operate as a deterrent. It was enacted so that claimants who are tempted to dishonestly exaggerate their claims know that if they do, and they are discovered, the default position is that they will lose their entire damages. It seems to me that it would effectively neuter the effect of s 57(3) if dishonest claimants were able to retain their ‘honest’ damages by pleading substantial injustice on the basis of the loss of those damages per se. What will generally be required is some substantial injustice arising as a consequence of the loss of those damages.”

Section 57 Criminal Justice and Courts Act 2015

“57 Personal injury claims: cases of fundamental dishonesty

  • This section applies where, in proceedings on a claim for damages in respect of personal injury (“the primary claim”)—


  • the court finds that the claimant is entitled to damages in respect of the claim, but


  • on an application by the defendant for the dismissal of the claim under this section, the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.

(2)  The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.


(3) The duty under subsection (2) includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.

(4) The court’s order dismissing the claim must record the amount of damages that the court would have awarded to the claimant in respect of the primary claim but for the dismissal of the claim.

(5) When assessing costs in the proceedings, a court which dismisses a claim under this section must deduct the amount recorded in accordance with subsection (4) from the amount which it would otherwise order the claimant to pay in respect of costs incurred by the defendant.

(6) If a claim is dismissed under this section, subsection (7) applies to—

  • any subsequent criminal proceedings against the claimant in respect of the fundamental dishonesty mentioned in subsection (1)(b), and
  • any subsequent proceedings for contempt of court against the claimant in respect of that dishonesty.

(7) If the court in those proceedings finds the claimant guilty of an offence or of contempt of court, it must have regard to the dismissal of the primary claim under this section when sentencing the claimant or otherwise disposing of the proceedings.

(8) In this section—

  • “claim” includes a counter-claim and, accordingly, “claimant” includes a counter-claimant and “defendant” includes a defendant to a counter-claim;


  • “personal injury” includes any disease and any other impairment of a person’s physical or mental condition;


  • “related claim” means a claim for damages in respect of personal injury which is made—



in connection with the same incident or series of incidents in connection with which the primary claim is made, and



by a person other than the person who made the primary claim.


(9) This section does not apply to proceedings started by the issue of a claim form before the day on which this section comes into force.”


Section 57: Personal injury claims: cases of fundamental dishonesty


Section 57 provides that in any personal injury claim where the court finds that the claimant is entitled to damages, but on an application by the defendant for dismissal is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to either the claim itself (the primary claim) or a related claim, it must dismiss the primary claim entirely unless it is satisfied that the claimant would suffer substantial injustice as a result. A related claim is defined in subsection (8)as one which is made by another person in connection with the same incident or series of incidents in connection with which the primary claim is made. Subsection (3)makes clear that the requirement to dismiss the claim includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.


Subsection (4) requires the court to record in the order for dismissal the amount of damages that it would otherwise have awarded. This will be relevant in the event of an appeal and in determining what the claimant should pay the defendant in costs. It will also be relevant for the purposes of any criminal proceedings or proceedings for contempt of court which may be brought against the claimant in relation to the same behaviour.


Subsection (5) provides that when assessing costs in the proceedings, a court which dismisses a claim under this section must deduct the amount recorded in the order under subsection (4) from the amount which it would otherwise order the claimant to pay in respect of costs incurred by the defendant. For example, if the amount of damages which the court records that it would have awarded but for the dismissal of the claim were £50,000, and the amount that the court would otherwise order the claimant to pay in respect of the defendant’s costs was £100,000, the claimant could not be ordered to pay the defendant more than £50,000 in total.


Subsections (6) and (7) deal with the relationship between an order dismissing the claim and any subsequent proceedings against the claimant for contempt of court or criminal prosecution, and provide for the court hearing the latter proceedings to have regard to the order dismissing the claim when sentencing the claimant or otherwise disposing of the proceedings. It is intended that this will enable the court to ensure that any punishment imposed in those proceedings is proportionate.


In addition to defining a related claim, subsection (8) defines “personal injury” for the purposes of the section as including any disease and any other impairment of a person’s physical or mental condition, and provides for the definition of “claim” and related terms to cover counter-claims.


Subsection (9) provides that the section does not apply to proceedings started by the issue of a claim form before the date on which the section comes into force.”




In Wright v Satellite Information Services Ltd [2018] EWHC 812 (QB)


the Queen’s Bench Division of the High Court was hearing an appeal against the decision of a Circuit Judge awarding the claimant in a personal injury action damages of £119,165.02.

The defendant appealed on the basis that the claim should have been dismissed under section 57 of the Criminal Justice and Courts Act 2015 on the basis that the claimant had been fundamentally dishonest.


The defendant did not dispute any of the findings of fact made by the trial judge but stated that:


the Learned Judge, having found that the Claimant’s claim for the cost of care was not established, was wrong as a matter of law not to find that he had therefore been dishonest in his presentation of this element of the claim and that such dishonesty was ‘fundamental’ to the integrity of the claim within the meaning of section 57 of the Criminal Justice and Courts Act 2015.”


Here liability had been admitted but quantum remained in issue and fell to be determined by the court.

It was the defendant’s case that covert video surveillance demonstrated that the claimant was far less disabled than he claimed and that he had deliberately and dishonestly exaggerated his claim.

The judge held that the claimant was not guilty of dishonesty, still less dishonesty of a fundamental nature.

The judge went on to say that had he found that the claimant had been fundamentally dishonest, then he would have held under section 57(2) that the claimant would not have suffered substantial injustice if the claim was dismissed.

That conclusion was not challenged by the claimant and therefore the only issue on the appeal was whether the judge was wrong to find, on the balance of probabilities, that the claimant had not been fundamentally dishonest.

Here claim for future care had been pleaded in excess of £73,000.00, but the trial judge allowed just £2,100.00 to cover the provision of some care following future surgery.

The trial judge, whose reasoning the High Court upheld, found that the claimant’s evidence was not untruthful, but rather  that a proper interpretation of the evidence did not support the assessment of the care expert.

The High Court held that this was essentially a challenge to the trial judge’s findings of fact.

Here the High Court then gave some useful guidance on a court’s task in dealing with an application under section 57.


38. The first stage for the court when considering an application under section 57 is to decide whether, on a balance of probabilities, the defendant has established that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim. The judge was not satisfied that this was the case. On the facts and the evidence presented to him, it cannot be said that this was not a decision open to him. The issue of dishonesty is akin to a jury question. In the case of a civil trial before a judge alone, it is a matter for the trial judge who has seen and heard all the evidence unless some material flaw in approach or his analysis can be identified.”



The guilty party in this case was clearly the expert, as recognised by the court.

Nevertheless, lawyers must be increasingly wary of simply putting forward expert evidence without any real analysis of the truth of that evidence.

This has been a long standing problem, but the introduction of section 57 makes it a much more serious issue.

Clearly here the High Court was right not to interfere with the findings of fact of the trial judge, but one may consider that the claimant was a little fortunate at first instance.


The whole issue of Section 57 is dealt with at length in my book – Qualified One-Way Costs Shifting, Section 57 and Set-Off – Available here for £15 including P&P


Written by kerryunderwood

April 18, 2018 at 8:27 am

Posted in Uncategorized


leave a comment »

Switching funding arrangements can make a very significant difference to the potential liability of a paying party.

Recently the courts have considered two different scenarios and arrived at different conclusions:

(i) allowing a switch from a Damages Based Agreement to a Conditional Fee Agreement; but

(ii) disallowing a switch from legal aid to a Conditional Fee Agreement as far as recoverability from the other side was concerned.

Damages Based Agreement to a Conditional Fee Agreement


In Dial Partners LLP & Anor v Eastern Airways International Ltd & Ors [2018] EWHC B1


the Senior Courts Costs Office held that a claimant and solicitor could switch funding from a Damages Based Agreement (DBA) to a conditional fee agreement and recover costs from a third party under the conditional fee agreement, even though they were much higher than the maximum allowed under the DBA.

This was in spite of the fact that the defendants were informed of the fact that the matter was being funded under a DBA, which strictly limits recoverability, but were not then informed that the claimants had switched to a conditional fee agreement, with unlimited recoverability, 10 days before settlement.

The defendants say that they factored in the DBA limited costs liability when deciding to settle the matter.

The defendants sought to rely on


 Kellar v Williams [2004] UKPC 30


where the Privy Council held that where a costs agreement was amended after judgment, and hence after the making of the costs order, the paying party could elect to pay costs under the old agreement or the new one, as best suited then.


In Oyston v Royal Bank of Scotland [2006] EWHC 90053 (Costs)


the court said.


“Following the decision of the Privy Council in Kellar, it cannot be right that a Deed of Variation can be used to impose a greater burden on the Paying Party than existed before Judgment. The fact that the Client is in agreement, is of no assistance.”


The defendants also relied upon


Radford v Frade [2016] Costs LR 633,


where the court said


“The underlying rationale is in my judgment that the effect of a Costs Order is to create a liability, subject to Assessment, those costs which a party has paid or is liable to pay at the time the Order is made. The liability to pay costs crystallises at that point and, although its quantum will remain to be worked out, that process must be governed by the liabilities of the Receiving Party as they stand at that time. To allow enforcement of a retrospective agreement which increases those liabilities would be to alter retrospectively the effect of the Court’s Order.”


“23.      Again, Mr Williams’ criticism of the Judge seems to me to involve a mistaken analysis of his reasoning. The Judge did not start with a contractual interpretation and treat the risk assessment as “amending” or “curtailing” it, or as overriding or altering that interpretation. He treated the risk assessment as one factor in arriving at a single conclusion on the true construction of the key CFA wording. He was clearly justified in that approach. The risk assessment does serve the purpose of explaining the solicitors’ reasons for setting the success fee at the chosen level. But it is also a contemporaneous statement by the solicitors to their clients, identifying their understanding of the clients’ aim, the issues with which they would be dealing, the nature of the risks they were taking on in doing so, and what would amount to success. It is therefore objective evidence as to the scope of the work for which the parties intended to contract. It supports the narrow interpretation of the words “your claims…” which the Costs Judge adopted.

  1. As for the Covering Letter. this is an “extraneous” document in that, unlike the risk assessment, it does not form part of the contractual documentation. But in a broader sense it is part of the “package”. It is part of the factual matrix, as Mr Williams accepted in the course of argument. The Judge was not wrong to take account of it. As it happens, it is not obvious to me that he placed great weight on this document. But he was entitled to regard it as a communication between the contracting parties which could have “affected the way in which the language of the document would have been understood by a reasonable man.” It is proper, in construing the CFA, to give weight to the fact that the Covering Letter identifies the role of TH and Counsel as “to deal with the procedural position in England”. These were words of limitation, distinguishing the procedural issues from the substantive merits of the claim.
  2. Although the Costs Judge’s citation of passages from Mr Daulby’s witness statement might appear, if viewed in isolation, to place some reliance on the subjective intentions of TH, I do not believe that is a fair reading when regard is had to the context in which those citations appear. Mr Williams made clear that he was not suggesting that the Costs Judge had made impermissible use of the evidence filed by his clients, and rightly so in my view. The Costs Judge was well aware that the exercise calls for an objective assessment. Much of what Mr Daulby said was evidence of the factual matrix at the time, though it did not really add to what was evident from the documents of which the parties had shared knowledge. If, and to the extent that, the passages cited went beyond that, the Costs Judge was in my judgment doing no more than underlining the fact that his objective interpretation of the contractual wording was consistent with what Mr Daulby says were his subjective aims and intentions.
  3. The Judge’s reliance on what the parties contemplated at the time was not wrong. He did not treat this as a principle of interpretation. He treated it as an element of the factual matrix in which the parties used the words about “your claims …”. He was right to do so. It is of course open to the parties to a CFA to define the work covered by the agreement in such a way that it extends to work involving claims and/or defendants other than those in contemplation at the time of the agreement. This is often done, and examples were provided in the course of argument. The question here however is whether that is what these parties did, by the particular wording they used in this CFA. I consider the Costs Judge was right to conclude that they did not.
  4. The way the reasonable person would have seen this at the time is, put bluntly, that TH did not want to risk working without reward on anything other than the procedural applications challenging service and jurisdiction which were in the contemplation of the parties at the time of the CFA. They were unwilling to do work under a CFA which involved addressing the merits. It is not a good enough answer to point, as Mr Williams does, to the get-out clause. That would have allowed TH to end the agreement if they thought the clients were “unlikely to win”. But it by no means follows that they were happy to take on work of wider scope. The perceived merits of the client’s position are not the only factor that can influence a lawyer’s decision on whether or not to undertake work on a CFA. The lawyer will normally consider the scale as well as the degree of risk. On the wider interpretation, the CFA would have obliged TH to work on a merits-based application to dismiss, provided it was “likely” to succeed, whatever the scale of the commitment involved. TH themselves had made quite clear that they saw the task of assessing the merits as a huge one, and the case as a vastly expensive one to fight.


  1. As Mr Hutton concedes, this last point has some superficial attraction. It is however substantially met by the answer he offers. The Retainer Letter served a number of purposes, not all of which were met by the CFA. One of these is compliance. I believe I can take judicial notice of the existence of regulatory requirements for the provision of client care letters. But regardless of that, the Retainer Letter and its accompanying “Information for Clients” document contain a range of provisions regulating the overall relationship between solicitor and client, which are not to be found reflected in the CFA. These are provisions which any prudent solicitor would wish to ensure were in place between him and his client. These include provisions as to conflict of interest, the responsibilities of the parties, confidentiality, limitation of liability, and a host of other matters. For these reasons it made complete sense for TH to send a Retainer letter to their new clients, the corporate defendants, even if the intention was for them to enter into a CFA. Furthermore, it remained at this point for the clients to decide whether they wished to enter into the CFA. It was at that stage an offer, not a contract. For these reasons the reissue of the Retainer Letter does not in my view serve to contradict or undermine the Costs Judge’s conclusion.
  2. The question remains of whether the Costs Judge was wrong to conclude that the CFA revoked the extant “traditional” retainer in its entirety. This is again a question of what the parties meant by their agreements, objectively assessed. The last sentence of Mr Daulby’s paragraph 10 (see [19] of the November Ruling) was either his after-the-event analysis of the situation, or evidence of his subjective intentions. Either way, it is inadmissible as an aid to the resolution of this issue. I do not consider it to represent the true position, objectively assessed. Analytically, it seems to me, the Costs Judge’s conclusion amounts to a finding that the parties agreed, upon entering into the CFA, to discharge the existing retainer and replace it with that agreement. In my judgment that is a proper interpretation of their conduct at the time. The reasonable person, looking at the Covering Letter, the CFA and the other enclosures against the background of the previous exchanges between TH and the defendants, would conclude that the CFA was being offered as one of the “alternative ways of funding your case” referred to in the Information for Clients document. The offer to the clients, which they accepted, was to substitute the traditional retainer with a more limited CFA.”

Here, the court also considered


Surrey v Barnet and Chase Farm Hospital NHS Trust and others [2016] EWHC Civ 1598 (QB)


and concluded that the defendants had not established a “genuine issue” as required by that case, regarding the reasonableness of the switch.


Legal Aid to Conditional Fee Agreement


In Surrey v Barnet and Chase Farm Hospitals NHS Trust [2018] EWCA Civ 451

the Court of Appeal held that the additional liabilities of a success fee and After the Event insurance premium were not recoverable in circumstances where the solicitors switched from legal aid to a conditional fee agreement shortly before the deadline for the abolition of recoverability of additional liabilities.

Recoverability was abolished by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and came into force in relation to conditional fee agreements signed on or after 1 April 2013.

Thus, where there was a conditional fee agreement and/or After the Event insurance premium in place before 1 April 2013, then those elements were recoverable from the other side.

This case involved three clients whose funding arrangements were switched from legal aid to conditional fee agreements in March 2013 and where the legal aid certificates had been entered into seven years earlier.

The District Judge held that these additional liabilities were not recoverable, but that was overturned on appeal to the High Court.

The Court of Appeal has now allowed the defendants’ appeals and restored the decision of the District Judge.


The District Judge had said:


“Where one of two or more options available to a client is more financially beneficial to the solicitor, the need for transparency becomes even greater.”


The Court of Appeal approved that and added:


“This a reflection of the fundamental principle of equity that where a person stands in a fiduciary relationship to another, the fiduciary is not permitted to retain a profit derived from that fiduciary relationship without the fully informed consent of the other.”

(Court’s italics)


The Court of Appeal also said:


“The bottom line is that in each of the three cases the advice given to the client had exaggerated (and in two cases misrepresented) the disadvantages of remaining with legal aid funding; and had omitted entirely any mention of the certain disadvantages of entering into a CFA.”


A key part of the finding revolved around the fact that in all cases where a client did not have a pre LASPO funding agreement, then general damages were to be increased by 10%, following the Court of Appeal’s decision in Simmons v Castle.

This applied to all cases, whenever they commenced, and the deciding issue was whether or not there was a pre LASPO conditional fee agreement with a recoverable success fee.

Thus the effect in these cases was that by switching from legal aid to a conditional fee agreement, the clients lost the benefit of that 10% uplift in damages.

Here, the Court of Appeal said that in each case the claimant’s litigation friend was not told by the solicitors that by moving to a conditional fee agreement they would lose this 10% uplift.

The High Court judge should not have interfered with the findings of fact made and the discretion exercised by the District Judge and Masters originally.

Written by kerryunderwood

April 17, 2018 at 8:22 am

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In Warren v Hill Dickinson LLP [2018] EWHC B6 (Costs)

the Senior Courts Costs Master held that two conditional fee agreements had been validly assigned from the first law firm to the second law firm after the individual solicitor had moved firms and the fact that the previous firm had ceased practising did not affect the validity of the assignment.

Thus the case could not be distinguished from

Budana v The Leeds Teaching Hospital NHS Trust [2017] EWCA Civ 1980.

In Budana the solicitors were unable or unwilling to continue representing the client and, in this case, the first set of solicitors had ceased to practice.

In the Costs Master’s view, the effect was exactly the same.

Furthermore, as in Budana, if the decision of the first firm of solicitors to cease practising could be treated as a repudiatory breach of contract, then it was for the client to accept that breach and to treat each conditional fee agreement as terminated, but he did not do so.

The client wanted to remain bound by the terms of the original conditional fee agreements, and therefore to have them assigned, so that he would not be liable for the first firm’s legal costs to the date that he withdrew instructions from them and so that he would not have to sign up to new conditional fee agreements with the new solicitors, or pay them on an hourly rate basis, win or lose.

On a second point the Costs Master held that there had been a win under the terms of the conditional fee agreements as the client had obtained judgments in the two sets of proceedings. He rejected the client’s assertion that there had been an overarching agreement between him and the individual fee earner, who had acted for him for a long time, that, on each occasion that she acted, she would only recover fees in the event that the matter resulted in a net gain to him.

Here the defendants to the proceedings that were subject of the conditional fee agreements had been made bankrupt and therefore there was no recovery from them, and so no net gain for the clients.

The Master found no evidence of the claimant’s assertion that there had to be a net gain under the terms of the agreement.


A sensible and practical decision.

However, it is richly ironic that in circumstances where there is no gain at all for the client under the conditional fee agreement, the costs and success fee can be charged to that client, depending upon the definition of a “win”.

The irony is that the High Court recently in

Herbert v HH Law Limited [2018] EWHC 580 (QB)

slashed the success fee from 100% to 15% where the solicitor had made full recovery.

It seems that the better you do for a client, the less you are entitled to be paid according to the likes of Mr Justice Soole, the judge in the Herbert case.

Why is it that a client who freely enters into an arrangement where 25% of any damages will be taken by the solicitor can avoid that agreement, but a client who is deemed to have held that what is very obviously not a win in real terms, is nevertheless a win, cannot challenge that retainer?

It also raises the issue of whether a solicitor who agrees only to charge fees and a success fee in the event of recovery of damages, is entitled to a higher success fee as, very obviously the achieving of a win under that definition is significantly riskier.

Written by kerryunderwood

April 16, 2018 at 9:19 am

Posted in Uncategorized


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In Dunhill v W Brook & Co (a firm) and another [2018] EWCA Civ 505

the Court of Appeal held that the defendant counsel and solicitors had not been negligent in under-settling a personal injury claim on the morning of a liability trial in 2003, itself in relation to a road traffic accident which occurred on 25 June 1999.

Following the reopening of the settlement by the Supreme Court on the basis that the claimant lacked capacity, the claimant later achieved a settlement at 55% of the value of her claim and received damages far greater than the original settlement sum of £12,500.

The decision to settle, and for what amount, had been taken by counsel at the door of the court when he was faced with a change of circumstances, namely the claimant’s son, who was a key witness, not turning up to give evidence.

The partner responsible for the case had sent a trainee to attend the trial.

The claimant claimed that the defendants had been negligent by under-settling the claim and that she had suffered loss as a result.

In dismissing the claim, the court agreed with the judge at first instance that, on the basis of the material available to counsel at the time, he had not been negligent in settling the claim.

It followed that the solicitors also had not been negligent.

Although the case follows established principles, it illustrates the high bar that claimants in similar cases will need to overcome in order for their negligence claim to succeed.

They must show that the advice was blatantly wrong: that is, that no competent and experienced practitioner would have given the advice.

It also confirms that, in assessing whether there has been a breach of duty, the court will consider the circumstances or context in which the relevant advice was given.

In the words of the court, the task of the judge at first instance had been to “exercise an evaluative judgement in relation to the thought processes and professional assessment of lawyers engaged in the extremely difficult task” of dealing with a change in the risks of success or failure in a case due to be tried immediately.

Solicitors should also give careful consideration to whether, in the particular circumstances of a case, it is appropriate to send a trainee solicitor to the trial, or whether a more experienced solicitor should attend in case there is a need to provide advice.

The Court of Appeal also said that it considered there to be merit in the proposition that it fulfils the solicitor’s duty of care to permit a trainee to accompany properly instructed counsel to a split trial provided that he or she has instructions that a solicitor, preferably the solicitor having the conduct of the case, is available should the lead arise.

Written by kerryunderwood

April 13, 2018 at 8:24 am

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In Steel and Another v NRAM Ltd [2018] UKSC 13


the Supreme Court unanimously held that a solicitor who innocently gave false information to a lender, for whom she was not acting, was not liable in negligent misrepresentation.


This is regarded as an important case, limiting the scope of liability of those firms of solicitors doing conveyancing work.


The solicitor had not assumed responsibility to the lender for the accuracy of her statements and it was not reasonable for the lender to rely on those statements and it should have made its own enquiries and the solicitor could not have foreseen that the lender would so rely on her statements.


It was irrelevant that the lender was acting in person.

Written by kerryunderwood

April 12, 2018 at 8:18 am

Posted in Uncategorized

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