Kerry Underwood

Archive for April 2018


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In Marcura Equities FZE and another v Nisomar Ventures Ltd and another [2018] EWHC 523 (QB)

the High Court set out the approach to be taken on costs where a matter has settled save as to costs.

Here, the parties had settled the substantive issues in a claim relating to disclosure and use of confidential information.

The judge held that the defendants should pay the whole of the claimants’ costs, subject to assessment, as the claimants were the successful party and the general rule is that the loser pays costs, and there were no features of the settlement offers made, nor of the conduct of the claimants, justifying some other order under CPR 44.2.

The judge noted the authorities on costs after settlement before trial save as to costs, including

BCT Software Solutions Ltd v C Brewer & Sons Ltd [2003] EWCA Civ 939.

There the Court of Appeal had cautioned judges not to make costs orders where they were not in a position to decide who had been the successful party after settlement, but recognised that there may be cases where it was clear which party had been successful.

The judge agreed and said that it was hard to see why a claimant who was accorded all the relief he sought by consent should not recover his costs.

The claim form had sought £200,000 and, relying on

Medway Primary Care Trust v Sebastian Marcus [2011] EWCA Civ 750

the defendants submitted that the settlement sum of £35,000 was so modest that it could not justify awarding the claimants’ costs  of £450,000 as sought.

However, the judge distinguished Medway, observing that a personal injury case, where the only relief sought is damages, is very different from a confidential information case where there are often a series of motivations, and a corresponding range of claims.

In a confidential information case, where monetary claims are only a part, and sometimes the least important relief sought, it will rarely, if ever, be right to focus only on the payment of money when determining a costs order

Further, if the trial in this action had gone ahead and the claimants had been awarded damages to be assessed, it could not have been said that they should not have their costs because the assessed damages might be modest.

The judgment also contains useful guidance on the law in relation to negotiations on a Without Prejudice basis, and negotiations Without Prejudice Save As To Costs.



Written by kerryunderwood

April 30, 2018 at 8:34 am

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I have been a Lawyer for 43 years and this is the most complicated advice I have prepared!


This system applies to the National League, National League North and National League South.

Dates vary according to the league, and appear at the end.


Here I use Team 2 for the team coming second, Team 3 for the team coming third etc.


The Champions go up automatically – that is the easy bit!


Teams 2 and 3 are automatically in the semi-finals, and at home.


The Quarter Finals

  • Team 4 v Team 7;


  • Team 5 v Team 6;



The Semi-Finals

  • Team 2  v  winners of the 5 v 6 quarter final;


  • Team 3   v  winners of the 4 v 7 quarter final.



The Final

The final will be played at the home of the team that ended higher in the league of the two finalists.

All matches are just a single leg with extra time and penalties if necessary, but no replays and no second legs.

Thus Team 2 must always be at home and Team 7 must always be away, as by definition they must always be higher/lower than any other team involved in the playoffs.

Team 3 will be at home in the semi-final, and if they win, away if Team 2 wins the other semi-final, but home to anyone else.

Team 4 will be at home in the quarter final and will be away in the semi-final and whether they are home or away in the final depends on who wins the other semi-final.

Likewise Team 5 – the position is the same as for Team 4.

Team 6 is away in the quarter final and away in the semi-final and will only be at home in the final if the other finalist is Team 7.


What Hemel Hempstead Town have to do

Hemel Hempstead Town are in the play-offs and tomorrow’s final round of ordinary league games determines what position they finish in and whether they are straight through to the semi-finals, with an automatic home fixture, or at home in the quarter finals, or away in the quarter finals.


Away in the Quarter Finals

This can only happen if Hemel Hempstead Town lose and Truro City win, which would put Hemel Hempstead Town down to sixth, the lowest they can finish. So even a defeat leaves us with a home quarter final unless Truro City win their difficult fixture at Hampton & Richmond.


A Hemel Hempstead draw

If Hemel Hempstead Town draw than they are guaranteed at least fifth place, and therefore a home quarter final.

If Chelmsford City and Hampton & Richmond both lose, then Hemel Hempstead Town go third and straight into the semi-finals unless Truro City win by five goals at Hampton & Richmond.

This is because Teams 3, 4, 5 and 6 will all be on 71 points.

Hemel Hempstead Town have a goal difference of 21 and Chelmsford City have a goal difference of 20.

By definition if Hemel Hempstead Town draw and Chelmsford City lose, Hemel Hempstead Town’s goal difference stays the same and Chelmsford City’s gets worse, and therefore Hemel Hempstead Town must end above them.

Hampton & Richmond’s goal difference is identical to Hemel Hempstead Town’s, but the same point applies – it must get worse if they lose and Hemel Hempstead Town’s will stay the same.

Truro City’s goal difference is five worse than Hemel Hempstead Town’s but they have scored exactly the same number of goals, that is 70.

Thus if Truro City win by five goals at Hampton & Richmond then their goal difference is the same – plus 21 – but they would have scored 75 goals and thus have more goals scored than Hemel Hempstead Town, unless Hemel Hempstead Town draw 5-5, or have an even higher score and draw, at  Weston Super Mare.

In case you think that is unlikely, that was the exact score when the teams met on 30 January 2016!

A win by six clear goals by Truro City at Hampton & Richmond would see them move above Hemel Hempstead Town on goal difference, if Hemel Hempstead Town draw.


Hemel Hempstead Town win and Chelmsford City and Hampton draw or lose then we end third on points

Thus, overall, if Hemel Hempstead Town do better than Chelmsford City and Hampton then we end third, and thus are in the semi-final, unless Truro City win by five or more at Hampton, subject to the point raised above Hemel Hempstead Town being in a 5-5 draw or above at Weston Super Mare.

I hope that is clear!


League Table


Final round of Fixtures


National League


Wednesday 2nd May 2018

Qualifying Round – Match A – 5th place vs 6th place


Thursday 3rd May 2018

Qualifying Round – Match B – 4th place vs 7th Place


Saturday 5th May 2018

Semi Final – 2nd place vs winner of Match A


Sunday 6th May 2018

Semi Final- 3rd place vs winner of Match B


Saturday 12th May 2018

Promotion Final – Wembley Stadium



National League North


Wednesday 2nd May 2018

Qualifying Round – Match A – 5th place vs 6th place

Qualifying Round – Match B – 4th place vs 7th Place


Sunday 6th May 2018

Semi Final – 2nd place vs winner of Match A

Semi Final – 3rd place vs winner of Match B


Sunday 13th May 2018

Promotion Final



National League South


Wednesday 2nd May 2018

Qualifying Round – Match A – 5th place vs 6th place

Qualifying Round – Match B – 4th place vs 7th Place


Sunday 6th May 2018

Semi Final – 2nd place vs winner of Match A

Semi Final – 3rd place vs winner of Match B


Sunday 13th May 2018

Promotion Final




Written by kerryunderwood

April 27, 2018 at 1:23 pm

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In Brabners v The Commissioners for Her Majesty’s Revenue & Customs

the First-Tier Tribunal Tax Chamber held that VAT is payable on property searches when an agency is instructed to carry out the search.

Although this decision related to electronic searches, the same principle applies whenever an agent is used, whether the search is electronic or postal or personal, but HMRC has, by concession, treated postal searches as disbursements since 1991.

This was an appeal against a decision made by HMRC, and upheld by a departmental review, that the appellant firm of solicitors was liable to pay VAT on the search fees charged to it by search agencies.

The Tribunal held that the consumer of the search results is the firm of solicitors, as part of the conveyancing services which it provides to its clients, and not the clients themselves.

This decision relates to electronic searches conducted by Searchflow who obtained the required property searches from the local authorities digitised or dematerialised files and registers and passed them onto the firm of solicitors.

Searchflow invoiced the solicitors without the addition of VAT and the solicitors treated that fee as a disbursement which it then invoiced to its client without the addition of VAT.

HMRC successfully argued that the search fee could only be treated as disbursement if it satisfied the eight disbursement conditions in VAT Notice 700, Paragraph 25.1 which reads:


  • You acted as the agent of your client when you paid the third party


  • Your client actually received and used the goods or services provided by the third party (this condition usually prevents the agent’s own travelling and subsistence expenses, phone bills, postage, and other costs being treated as disbursements for VATpurposes)


  • Your client was responsible for paying the third party (examples include estate duty and stamp duty payable by your client on a contract to be made by the client)


  • Your client authorised you to make the payment on their behalf


  • Your client knew that the goods or services you paid for would be provided by a third party


  • Your outlay will be separately itemised when you invoice your client


  • You recover only the exact amount which you paid to the third party


  • The goods or services, which you paid for, are clearly additional to the supplies which you make to your client on your own account.


HMRC contended that the information within the search results is used by solicitors to give advice to their clients, and thus recovery of the outlay represents part of the overall value of the solicitors’ supply of services to its clients.

HMRC’s own internal manual states that if searches are passed on without analysis or comment, and the eight conditions are met, then the fees are not subject to VAT.

In any other circumstance the search fee is part of the cost of providing the solicitor’s service to the client, and thus is subject to VAT.

The solicitors argued that what was happening was that the client had requested or expressly authorised the solicitor to obtain a search on the client’s behalf and that the solicitor was merely acting as the client’s agent, with the report belonging to the client and not being part of a taxable supply.


The Tribunal said that the law relating to VAT draws a distinction between two scenarios:


  1. When the expense is paid to a third party (Searchflow) having been incurred by the solicitor in the course of making its own supply of services to the client and as part of the whole of the services rendered by the solicitors to the client; and


  1. Where specific services have been supplied by Searchflow to the client, and not to the solicitor, and the solicitor has merely acted as the client’s known and authorised representative in paying Searchflow.


Only the second case constitutes a disbursement, where VAT is not payable.

The first scenario represents part of the services supplied by the solicitor, and therefore subject to VAT.

The Tribunal referred to the well-known fact that although railway tickets are not subject to VAT, once a solicitor buys them in order to travel for the client, for example to court, then VAT must be charged to the client on the cost of the train tickets.

Here the Tribunal held that the relevant expenses paid to Searchflow were incurred by the solicitors “in the course of making its own supply of services to” the client “and as part of the whole of the services rendered by it to (its client)”.


The Tribunal said:


“50. The Appellants [the solicitors] are not simply a conduit or post-box for search results. Simple common sense dictates that clients engage the Appellant in transactional work since the Appellant knows what it is doing, knows what a search is, knows what searches to obtain, knows how to get them quickly and conveniently, and knows what to do with them when it gets them.”

The Tribunal said that this would be the case even if no report was prepared as silence from the solicitors would be taken by clients as an ‘all-clear’.

There is a twist in the judgment in that since 1 October 1991 HMRC has treated postal search fees as disbursements, that is not subject to VAT.

The Tribunal declined to state whether the concession in relation to postal search fees was right or wrong, although, reading between the lines, the Tribunal clearly thought it is wrong.

HMRC’s rationale for allowing postal search fees to escape VAT was that “the fee is charged for the supply of access to the official record and it is the solicitor rather than the client who received that service”.

It is hard to see the difference between that and what happens with an electronic search, in that in both instances the search is part of the whole of the services rendered by the solicitors to the client.



Thus the Tribunal differed from the Tribunal in

Barratt, Goff and Tomlinson (A firm) v HMRC (Law Society Intervening) [2011] UKFTT 71 (TC)

where the Tribunal allowed an appeal by a firm of solicitors and held that fees paid for medical records and reports in connection with personal injury claims were being purchased by the clients and were disbursements, and not therefore subject to VAT.

Here the Tribunal distinguished that case on the basis that the obtaining of medical legal records etc. required that the client’s consent, whereas the information contained in searches did not require a client’s consent.

Personally, I cannot see how that makes the slightest difference.


In Practice

What this means is that if, for example, the search company charges £100 for the search, then the solicitor must charge the client £100 plus VAT, and thus at present, with the VAT rate at 20% a charge of £120 would have to be made to the client.

Obviously the solicitor would then have to account to HMRC for VAT in the sum £20.

Written by kerryunderwood

April 27, 2018 at 8:29 am

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In Francois v Barclays Bank plc [2017] EWHC 3531 (QB)

the Queen’s Bench Division of the High Court allowed an appeal against a costs order, made by a circuit judge.

The order required the claimant to pay the defendant’s costs ,in respect of her race discrimination claim, on a fast track basis from a date when “it appeared” that the claim ,originally allocated to the small claims track, had been re-allocated to the fast track.

When making the costs order, the judge had said that he was “going to infer” that, on 21 January 2010, the matter had been re-allocated to the fast track.

The claimant submitted that, in finding that the case had been re-allocated to the fast track, even though there was no court order to that effect, the judge had misdirected himself in law.

On appeal, the High Court made the following points:

  • allocation of a case to a particular track is significant: not only for the procedure, but also for costs.

In the small claims track, claimants’ costs exposure is minimal (unless there is unreasonable conduct under CPR 27.14(2)(g)).

  • CPR 26.9 requires notification of the allocation of a claim to a particular track, a decision that can be appealed under PD 26.11.1.
  • Re-allocation has the same significance and importance as the original allocation.

The High Court Judge held that there is a requirement for re-allocation of a case to a different track to be notified to the parties.

Although a letter from the Central London Civil Justice Centre, dated 25 March 2010, referred to listing the case as fast track,  it could not be inferred from it that the court had made an order re-allocating the claim ,whether on 21 January 2010 or at all.

The date of re-allocation of a claim is “of considerable significance”, as the new costs regime applies from that date.

Consequently, it is “material and significant” for the parties, and the court, to know the date, and not just the rough time, that a decision to re-allocate is made.

The circuit judge erred in law, and also reached a conclusion that was not open to him on the evidence.

Therefore, the appeal succeeded and the costs order was set aside.

Written by kerryunderwood

April 26, 2018 at 8:33 am

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In Nash v Ministry of Defence [2018] EWHC B4 (Costs)

the Senior Courts Costs Office held that a reduction in hourly rates in relation to incurred costs did not require a reduction in the budgeted costs overall or for any given phase.

Hourly rates enjoyed no particular status.

The Master said that budgeting controlled the amount of money the parties could spend, not how they spend it.

  1. “By way of example, if a party budgets for 10 hours at £500/hr plus £2,000 on Counsel for future costs in the disclosure phase, the total of £7,000 is exactly the same as if the same party had budgeted for 100 hours at £50/hr plus £2,000 on Counsel. If £7,000 is approved for the budgeted (future) costs total then the court will not interfere with how that money is spent without good reason.
  2. A budget approved in these terms does not, for example, compel that party to spend £2,000 on Counsel for future costs relating to disclosure or use the fee earners anticipated when the budget was drawn. Similarly, it does not limit that party to spend £2,000 on Counsel for future costs relating to disclosure.
  3. The budget is set following the making of a costs management order, and Solicitors must thereafter cut their cloth accordingly.
  4. Taking the example above, where a rate of £500/hr is reduced to £100/hr in the incurred costs, it cannot be logical for a budget claiming 10 hours at £500/hr plus £2,000 for Counsel (total £7,000) to be reduced to £3,000 on assessment but where a budget claiming 100 hours at £50/hour plus £2,000 for Counsel (total £7,000) would suffer no reduction at all (where say £7,000 is claimed in that phase in the bill of costs).”


Written by kerryunderwood

April 25, 2018 at 8:24 am

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Today, 24 April 2018, sees the Second Reading in the House of Lords of the Civil Liability Bill which proposes a tariff for whiplash injuries in road traffic accidents.

Tariff is a weasel word. The Bill is an attack on the judiciary, the independence of the judiciary and the rule of law, as well as the poorer sections of the community, as a reduction at the lower end of damages affects the less well-off more.

Lawyers call this disparate impact.

Damages for such injuries will be reduced by between 62% and 87% if the government follows its previous proposals.

For example an injury of up to six months’ duration will now warrant an award of £450 instead of up to £3,630.

Damages for personal injury are already subject to extensive guidelines laid down by the Judicial College, an official body comprised of judges, academics and medics and they are regularly updated to take account of changes in treatment and the attitudes of society.

For example, damages for sexual abuse have been increased significantly.

The Judicial College Guidelines take into account damages for other types of wrong.

Judges determine damages at trial, normally at a hearing that just deals with how much an injured person should receive, as insurance companies nearly always admit that their insured caused the injury.

Insurers are extremely well-resourced and so able to fight any claim that they think is misguided or fraudulent, or where too much is being claimed.

Insurance companies already enjoy special laws as if any part of a claim is fundamentally dishonest, then the whole claim is lost, even if their insured was to blame. This does not happen in any other area of English and Welsh law.

Currently, judges make all of these decisions.

This bill destroys the work of the Judicial College and destroys judicial discretion and destroys judicial independence.

In reaction to a comment that this is an insane policy, the United Kingdom Association of Part Time Judges said:

Quite right. There is no reason to depart from the Judicial College Guidelines setting out fair compensation determined by judicial discretion.” (Underneath the Law Society Gazette 20 April 2018).

If this bill is passed, then the next target will be damages for injury to feelings in discrimination cases, where guideline damages are also set by judges and are known as the Vento Guidelines.

Unfortunately the legal profession has split into different groups doing different things and seemingly looking after their own interests.

Personal injury lawyers gave no support to employment lawyers fighting Employment Tribunal fees in the Unison case, and employment lawyers are giving no support here.

As both the physical courts and the civil and criminal justice systems crumble, “legal advisers”- civil servants – are set to replace judges in exercising 22 powers currently reserved to the judiciary.

Governments and ministers and ministries set a cultural tone.

At present it is a nasty and vindictive tone, as shown by the recent Windrush events.

This is not a party political point. The last Labour governments had a shameful record on all of these matters and did not oppose these measures in the Prisons and Courts Bill, lost due to last year’s General Election.

The endless attack by senior ministers on lawyers and the judiciary, and now the people they represent, who are least able to represent themselves, is extremely damaging to the rule of law and therefore society.

The rise in anti-Semitism and murder in London is a direct consequence.

This Bill should be voted down.


Without lawyers, judges and courts, there is no access to justice and therefore no rule of law, and without the rule of law, society collapses.

Lord Neuberger, Supreme Court President, 10 April 2015.


Written by kerryunderwood

April 24, 2018 at 12:00 pm

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Strike-Out and Summary Judgment 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

In Saeed and Another v Ibrahim and Others [2018] EWHC 3 (Ch)

the Chancery Division of the High Court considered the overlap between the court’s powers to strike-out under CPR 3.4 and its powers to enter summary judgment under CPR 24.

On the facts, the court refused the application to strike out, partly because it was made just seven weeks before the trial window, but the court also looked at the issues to be taken into account in relation to both CPR 3.4 and CPR 24.

The court said that the applicant should indicate, in its application notice, which of the three sub-paragraphs in CPR 3.4(2) it relies on.

The court accepted that there is some overlap between its powers under CPR 3.4 and its powers under CPR 24 and the court may treat an application under CPR 3.4(2)(a) as though it were an application under CPR 24, even though the requirements of CPR 24 had not been complied with.

The procedural safeguards in CPR 24 can be dispensed with when they achieve little or nothing, but the court should be slow to disregard them, as a respondent to such an application is entitled to notice of the case against it so as to be able to prepare for the application for summary judgment.

The applications should state which jurisdiction is relied on, and here the court refused to treat the application under CPR 3.4 as though it was also under CPR 24 as that latter provision was only mentioned in the applicant’s skeleton argument.

There is a real difference between the jurisdictions.

An application under CPR 3.4(2)(a) focuses almost exclusively on the statement of case, whereas an application under CPR 24 allows the court to look at the claim itself, and the defence, and all relevant evidence.

If the strike-out application relates to a flaw in the pleadings, then that should be clearly flagged up in advance of the hearing so as to allow the respondent to remedy that defect.

Generally, in applications under CPR 3.4(2)(a), witness statements should not be relied upon.

The authority for the view that the court may treat an application under CPR 3.4(2)(a) as if it were an application under CPR 24 is contained in the decisions of the Court of Appeal in


Moroney v Anglo-European College of Chiropractice [2009] EWCA Civ 1560; and


Ministry of Defence v AB [2010] EWCA Civ 1317.


In both of those decisions the Court of Appeal accepted that there was an overlap between the two rules and that there are circumstances in which a court is entitled to treat an application as if it were made under CPR 24, even though the requirements of that rule had not been complied with.

However, that did not mean that an applicant was entitled to request the court to deal with an application as if it had been made under CPR 24, without the application having been made in proper form.

Here the court said:

“It will be rare that an applicant under rule 3.4(2)(a) will be entitled to rely upon such evidence [the claimant’s witness statement] to make out that the statement of case does not show reasonable grounds for bringing the claim. An application will usually succeed or fail by reference only to the content of the statement of case. If conclusions have to be drawn for evidence, Part 24 is the appropriate rule to use.”



This is an important case in its own right, but it is also important in the context of Qualified One-way Cost Shifting, which currently only applies in personal injury cases.

Under CPR 44.15, order for costs made against a personal injury claimant may be enforced to the full extent of the order of the court, without the permission of the court, where the proceedings have been struck out on the grounds of –

(a) the claimant has disclosed no reasonable grounds for bringing the proceedings; or

(b) the proceedings are an abuse of the court’s process; or

(c) the conduct of –

(i) the claimant; or

(ii) the person acting on the claimant’s behalf and with the claimant’s knowledge of such conduct,

is likely to obstruct the just disposal of the proceedings.


CPR 44.15(a) reflects the test in CPR 3.4(2)(a)

CPR 44.15(b) and (c) reflects CPR 3.4(2)(b).

Thus CPR 44.15 effectively disqualifies a personal injury claimant from the protection of Qualified One-way Cost Shifting.


CPR 3.4(2) reads:

“(2) the court may strike out a statement of case if it appears the court –

(a) the statement of case discloses no reasonable grounds for bringing or defending the claim;

(b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or

(c) that there has been a failure to comply with a rule, practice direction or court order.”


Thus, although a claim may be struck out under CPR 3.4(2)(c), that does not deprive a personal injury claimant of QOCS protection.

Likewise, summary judgment under CPR 24 never, of itself, deprives a personal injury claimant of QOCS protection.

Thus the ability of the court to treat an application under CPR 3.4(2) as an application under CPR 24 is important.

Outside the field of personal injury it makes little difference; either which way the claim is struck out, or lost, if the applicant is successful.

However, if the court declines to strike out the claim under CPR 3.4(2) but exercises its discretion to enter summary judgment for the defendant under CPR 24, even if no such application has been made, then the losing claimant enjoys full protection under QOCS against the costs order being enforced.

Strike-Out and Summary Judgment 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 24, 2018 at 8:26 am

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In Dana Gas PJSC v Dana Gas Sukuk Ltd and others [2018] EWHC 332 (Comm)

the High Court dealt with applications for payments on account of costs.

It criticized the hourly rates. Six lawyers were charged out at over £700.00 per hour and a trainee was charged out at £282.00 an hour.

The High Court Judge said:

“From my experience of assessing costs and reviewing cost statements and budgets in complex cases in the Commercial Court, competent representation can be obtained at much lower rates, in the region of around half the hourly rates paid in this case.”

The judge also said that it would seldom be reasonable to claim the costs of attendance at the court of more than two solicitors.

Here, four had attended as well as senior and junior counsel.

Written by kerryunderwood

April 23, 2018 at 9:33 am

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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

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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

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Small new blog attaching judgment in  

Baxendale-Walker v APL Management Ltd [2018] EWHC 543 (Ch)

 This judgment contains a detailed analysis of the law, including case law, in relation to matters such as issue estoppel, the principle in Henderson v Henderson and res judicata etc., and related matters.

Written by kerryunderwood

April 12, 2018 at 8:17 am

Posted in Uncategorized


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In Springer (Personal Representative of The Estate of Wayne Anthony Springer (Deceased)) v University Hospitals of Leicester NHS Trust [2018] EWCA Civ 436

the Court of Appeal, in considering a second appeal against an order of a Deputy District Judge, dismissed the appeal against an order refusing the claimant relief from sanction following a failure to serve notice of funding in accordance with paragraph 9.3 of the old Practice Direction on Pre-Action Conduct.

This meant that the claimant could not recover the success fee under the conditional fee agreement for the period before notice was given and was also deprived of recovery of part of the After the Event insurance premium.

With limited exceptions, recovery of additional liabilities was abolished in relation to conditional fee agreements and After the Event insurance policies entered into on or after 1 April 2013, and thus this decision applies only to cases with pre–April 2013 funding arrangements, but this still covers a fair number of personal injury claims.

The decision will also be of relevance, albeit in relation to a different Practice Direction, where recoverability of additional liabilities remains, principally in mesothelioma cases, defamation and breach of privacy cases, and, in relation to clinical negligence cases, the After the Event insurance premium in relation to reports on causation and liability.


Paragraph 9.3 of the Practice Direction provided:


“Where a party enters into a funding arrangement within the meaning of rule 43.2(1)(k), that party should inform the other parties about this arrangement as soon as possible.”


This was effective from 1 April 2009 and prior to that there had been no requirement to inform the other parties “as soon as possible”.

Thus the decision is effective in relation to additional liabilities arrangements between 1 April 2009 and 31 March 2013 in relation to personal injury matters.

Just six months later, on 1 October 2009 the Practice Direction was changed yet again, and I set out the new paragraph 9.3 below, and it should be noted that the word “should” was replaced by the word “must”, which is mandatory and not just aspirational – see


Metcalfe v Clipson [2004] EWHC 9005 (Costs);




 Cullen v Chopra [2007] EWHC 90093 (Costs)

The new rule read:


“Where a party enters into a funding arrangement within the meaning of rule 43.2(1)(k), that party must inform the other parties about this arrangement as soon as possible and in any event either within 7 days of entering into the funding arrangement concerned or, where a claimant enters into a funding arrangement before sending a letter before claim, in the letter before claim.

(CPR rule 44.3B(1)(c) provides that a party may not recover certain additional costs where information about a funding arrangement was not provided.)”



CPR 44.3B(1) imposed a sanction on those who failed to provide funding information as required and for conditional fee agreements entered into on or after 1 October 2009, it provided, so far as is relevant:


“Unless the court orders otherwise, a party may not recover as an additional liability –

(c) any additional liability for any period during which that party failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order…”.



All three courts which considered this matter, ending in the Court of Appeal, held that “as soon as possible” meant just that, although the courts accepted that the wording of the Practice Direction was poor and did not sit well with the original Civil Procedure (Amendment No 3) Rules 2000 as far as the sanction for failure to give notification was concerned.

Here there was a long delay in giving notice on Form N251 of the additional liabilities.

The facts are long and complicated and set out in full in the judgment, but the key point is that “as soon as possible” means just that.

The Court of Appeal pointed out that such a formula is not unusual, for example judicial review proceedings must be brought promptly, and in any event within three months.

At paragraph 61 of the judgment the Court of Appeal pointed out that the White Book is wrong in its analysis of paragraph 9.3 of the Practice Direction.

The White Book does not have a good record of getting the law in relation to funding arrangements and conditional fee agreements etc. correct.

At paragraph 63 of the judgment the Court of Appeal said that if it was not possible to identify all, or possibly any, of the proposed defendants then it would not be possible to notify those unknown defendants and thus the obligation to notify them under paragraph 9.3 will not arise until they are identified.

The second issue was whether the claimant should be granted relief from sanctions in relation to the now well-known principles in


Denton v TH White Limited [2014] EWCA Civ 906


For reasons set out in the judgment the Court of Appeal held that the three stage test in Denton meant that the claimant should not be granted relief from sanctions.

The key finding was that the NHS Trust had suffered significant prejudice as a result of the breach because it lost the opportunity of taking proactive steps towards investigating and resolving the potential claim over the two and a half year period during which additional liabilities were being incurred without their knowledge.

Written by kerryunderwood

April 10, 2018 at 9:12 am

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A shorter version of this blog first appeared on the Practical Law Dispute Resolution Blog.

Just 11 new decisions at High Court level or above with the courts all over the place as the civil and criminal justice systems in the country break down.

Time to remember the wise words of Lord Neuberger when President of the Supreme Court

Without lawyers, judges and courts, there is no access to justice and therefore no rule of law, and without the rule of law, society collapses.

You have been warned.


In Lowin v Portsmouth [2017] EWCA Civ 2172   

the Court of Appeal, in overturning the decision of the High Court and restoring the decision of the Costs Master, held that in provisional assessment proceedings under CPR 47 the costs cap in CPR 47.15(5) applied even when a party was entitled to indemnity costs under CPR 36.17(4)(b), where it had matched or beaten its own Part 36 offer.

There was nothing in the rules to suggest otherwise and CPR 47.20(4) expressly provided that Part 36 applied to the costs of a detailed assessment subject to four express modifications and among those there was no mention of CPR 47.15(5) and thus it was not modified in anyway.

Had it been intended that that rule was to be disapplied on a costs assessment on the indemnity basis under CPR 36.17(4)(b), then there would have been an express reference to it in either or both of the provisions or in CPR 47.20(4).

The Court of Appeal disagreed with the judge below’s view that there was tension or conflict between the rules.

The cap did not prevent an assessment on the indemnity basis, but simply limited the amount that could be recovered.

The reference in CPR 36.17(4)(b) to an entitlement to “costs” was not to be read as an indemnity in relation to all of that party’s costs. That would create an unjustified distinction between indemnity costs and costs under CPR 44.3(1).

This seems a muddled confusion as indemnity costs orders are still subject to detailed assessment and are routinely made in non-capped costs cases.

Here, the Court of Appeal considered that its own decision in

Broadhurst v Tan [2016] EWCA Civ 94

where it held that Part 36 overrode the fixed costs rules where a claimant matched or beat its own offer at the trial, was not relevant, as there, there was a direct conflict between the rules as to fixed and assessed costs, with completely different provisions.


Whatever the policy rights and wrongs, I do not follow the logic of this decision.

Surely the very fact that none of the four express modification to Part 36 deals with the cap, then Part 36 does apply; otherwise the continued existence of the cap would have been stated as an exception to the usual Part 36 consequences.

In any event, we now have five different lines of authority in relation to the interplay between Part 36 and fixed and capped costs.

  1. Fixed costs are disapplied and the usual Part 36 consequences apply; –

Broadhurst v Tan [2016] EWCA Civ 94


  1. Capped costs impose an upper limit even when an indemnity costs order is made; –

Lowin v Portsmouth [2017] EWCA Civ 2172 


  1. Capped costs do not impose an upper limit when an indemnity costs order is made; –

Phonographic Performance Ltd v Hagan (trading as Lower Ground Bar and Brent Tavern) [2016] EWHC 3076 (IPEC)


  1. Capped costs do not impose an upper limit when an indemnity costs order is made, but those indemnity costs should be a fixed percentage increase as per Lord Justice Jackson’s proposal;-

Martin and another v Kogan and others [2017] EWHC 3266 (IPEC)


  1. Capped costs can be waived by the court before the end of the case; –

Aarhus convention cases


In fairness (4) can be regarded as having replaced (3) in the Intellectual Property Enterprise Court.

Interestingly here the Court of Appeal commented on the Phonographic Performance decision, but did not say it was an error of law, nor that it should not be applied, in spite of a submission to that effect.


“43.        It is also unnecessary to consider the alleged effect in relation to claims in the Intellectual Property Enterprise Court under Section IV Part 45, Aarhus Convention claims or to comment upon HHJ Hacon’s decision in the Phonographic case and whether the Judge gave proper consideration to the effect of her construction upon the provisional assessment regime which was intended to be low cost and to the alleged practical difficulties which would arise from her construction. It is equally unnecessary to consider whether the Judge gave proper weight to the alleged practical difficulties arising from her conclusions.”



In Martin and another v Kogan and others [2017] EWHC 3266 (IPEC)

the Intellectual Property Enterprise Court (IPEC) gave guidance on how the court should approach an award of indemnity costs under CPR 36.17(4)(b), where the claimant matched or beat its own Part 36 offer at trial.

HHJ Hacon upheld the principle set out in his earlier decision in


Phonographic Performance Ltd v Hagan (trading as Lower Ground Bar and Brent Tavern) [2016] EWHC 3076 (IPEC)


namely that costs caps did not affect an award of indemnity costs under CPR 36.17(4)(b), and did not limit those costs.

The judge suggested that the IPEC should adopt the proposals contained in Lord Justice Jackson’s Supplemental Report on Extending Fixed Recoverable Costs in relation to the pilot scheme for business cases.

Thus, in the absence of serious misconduct by the defendant, CPR 36.17(4)(b) should be applied so that the costs cap on each stage be raised by 25%, increasing the total cap from £50,000.00 to £62,500.00, subject in any case to the discretion of the court.

The judge said that where the defendant made a Part 36 offer which was not beaten, the stage and overall costs caps should remain in place, the point being that the defendant gets its post relevant period costs, and the claimant is deprived of its own costs, even though the defendant has lost.

Removing the caps where a claimant has failed to beat a defendant’s offer would tilt the balance unfairly in favour of defendants.


As the judge correctly states:


“No question of indemnity costs or an additional amount arises under Part 36 where a defendant makes a successful Part 36 offer because there is no need. Rule 36.17(3) provides that the defendant gets his costs from the date of expiry of the relevant period, plus interest.”



A very sensible decision by a judge who clearly understands Part 36 and its effects, so well done HHJ Hacon.

This judgment was given on 13 December 2017, following a hearing on 4 December 2017, and thus before the decision of the Court of Appeal in


Lowin v Portsmouth [2017] EWCA Civ 2172   


which was given on 19 December 2017.


There, in the context of provisional assessment, the Court of Appeal held that a capped costs regime, as compared with a fixed costs regime, overruled Part 36 and the cap could not be exceeded.

The judgment here is in contrast to that ruling, and thus its correctness must, unfortunately be doubted.

Having said that, the Court of Appeal in the Lowin case considered the Phonographic decision of the same judge to the same effect in the sense that Part 36 indemnity costs overrule the cap, and specifically declined to overturn it, or say that it was wrongly decided.


The court also held that where there is a Part 20 defendant that is a separate matter triggering a further potential costs award of up to the cap of £50,000.00.



In Lokhova v Longmuir [2017] EWHC 3152 (QB)

the Queen’s Bench Division of the High Court ordered a late-accepting claimant to pay indemnity costs from expiry of the relevant period until acceptance.

Once again the court seemed not to take into account the fact that an order on a standard basis is a punishment in itself as the winning claimant is both being deprived of the costs for that period and being ordered to pay the losing party’s costs for that period.

If the conduct warranted indemnity costs in any event, then fair enough, but an award of indemnity costs merely for failing to accept the offer is wrong in principle.

In such circumstances the claimant suffers a triple penalty:

  1. deprivation of costs;


  1. payment of costs;


  • payment of costs on an indemnity basis.


This is brought all the more sharply in to focus by the fact that a late-accepting defendant usually faces no penalty at all and thus can accept late with impunity.


Take Paragraph 36 :


“36. In my judgment, however, it is also of importance that the Court should be willing to examine the   conduct of those who first refuse and then accept a Part 36 offer. If a claimant’s conduct in this respect is wholly or highly unreasonable, the Court should be prepared to contemplate an indemnity costs order. A readiness to do so should provide a proper incentive for the timely acceptance of fair and reasonable offers.” (My bold)


There is no suggestion here of any misconduct beyond accepting late, for which the claimant is doubly punished without indemnity costs.

Also, why do the courts not apply this reasoning in paragraph 36 to late accepting defendants?



In JMX (a child by his mother and litigation friend, FMX) v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB)

the Queen’s Bench Division of the High Court held that a Part 36 offer on liability of 90% of the damages to be agreed or assessed was a genuine offer of settlement within the meaning of CPR 36.17 (5)(e).

The High Court rejected the defendant’s argument that 10% was a token discount as it did not reflect any realistic assessment of the risk of litigation.

Here the time for accepting the offer expired one day before the trial, which the claimant then won.

One of the factors which the court must take into account is whether the office was a genuine attempt to settle the proceedings.

The High Court said:

“14. When an offer to accept 90% is made in a case such as this, I would regard it as a case where the Claimant’s team regard the claim as very strong, but is prepared to offer a modest discount to secure absolute certainty of obtaining substantial compensation. That is what Mr Nolan says prompted the offer in this case and I have no reason to doubt that that was so. Whilst, of course, it is open to the offeror to explain this kind of thinking in the letter making the offer if it is thought helpful, I do wonder whether in most cases it would assist. I can see the letter prompting a reply (sometimes expressed in language that does not help the settlement process) and it may be thought better simply to leave it to the recipient of the offer to assess the offer as it stands.


  1. If I was to accede to Mr Westcott’s submissions, it could have the effect that a 90% settlement in the clinical negligence sphere is hardly ever agreed. In my capacity as Judge in charge of the Queen’s Bench Division Civil List, I see a great many settlements in this area of litigation (and in serious personal injury claims not arising from clinical negligence) when I am asked to approve the settlement. I have not, of course, kept any kind of record, but my perception is that a wide variety of “percentage settlements” on liability/causation are agreed and approved by the court, including “90% settlements” from time to time. I can certainly recall several in my own practice in my last few years at the Bar. As I have said, if I were to accede to Mr Wescott’s submissions, I can see that no one will ever offer to accept 90% and the NHSR will never agree to it.”


This case follows a long line of cases, including ones where a 95% offer to settle has been held to be a genuine offer to settle.

The White Book commentary on this whole issue is wrong.



In Briggs v CEF Holdings Ltd [2017] EWCA Civ 2363

the Court of Appeal overturned a district judge’s decision not to order a late-accepting personal injury claimant to pay the defendant’s costs from expiry of the relevant period.

The district judge had held that it would be unjust to apply the usual rule as the extent of the injury had not been resolved and the prognosis was uncertain.

The Court of Appeal rejected that approach.

Uncertainty about the claimant’s prognosis is part of the usual risks of personal injury litigation and one of the purposes of Part 36 is to shift the risk to a party which does not accept an offer, and that aim should not be undermined.

To disapply the Part 36 consequences a party must demonstrate injustice, not just uncertainty.

Here, the Court of Appeal noted that it had applied the same principles in


SG (A Child) v Hewitt (Costs) [2012] EWCA Civ 1053


an extreme case where it had held that the usual costs order would be unjust due to difficulties in forming a prognosis following brain damage to a small child.

That was a “very clear case on the other side of the factual line” and was very different from this case where, simply as one of the contingencies of litigation, it was perhaps difficult to work out how it might turn out.



In Application in Private [2017] EWHC 3606 (Comm)

the Queen’s Bench Division of the High Court reviewed the law on withdrawal of a Part 36 offer during the relevant period when that period included the trial.

The court said that CPR 36.10, dealing with the withdrawal or changing of a Part 36 offer before the expiry of the relevant period, did not allow for the situation where an offer is withdrawn during trial and purportedly accepted during the trial, which requires the court’s permission.

The court held that CPR 36.10(3) applied indirectly where the recipient of the offer needed the court’s permission to accept an offer during the trial.

The court also gave guidance on the “change in circumstances” required for permission to withdraw the offer to be given.

This case related to fees paid to issuers of debit and credit cards by acquirers and was case managed with the Arcadia MasterCard litigation, involving many of the same issues and claimants.

On the day that judgment was given in favour of the defendant, MasterCard, in those proceedings, the defendants here purported to withdraw their Part 36 offer.

The next day, all but one of the claimants purported to accept that Part 36 offer.

The judge here refused to allow the defendants permission to withdraw the Part 36 offer, holding that a judgment handed down in a case involving similar issues was not a change in circumstance meaning that it would be unjust to hold the defendants to their Part 36 offer.

Permission is required to withdraw a Part 36 offer during a trial.

Permission is also required to accept a Part 36 offer during a trial.

If permission is given to accept a Part 36 offer during a trial, then the issue of costs is one for the court, as compared with the ordinary rule where automatic provisions apply unless the court thinks it unjust.

However, in determining the costs consequences, the court took into account the fact the claimants had deliberately chosen not to accept the Part 36 offer for three months while waiting to see how the proceedings progressed.

Here the court allowed the claimants their costs to 21 days after the Part 36 offer was made, and awarded the defendants costs thereafter.

The lengthy decision contains a useful review of the law in this field.



In Gamal v Synergy Lifestyle Ltd [2018] EWCA Civ 210

the Court of Appeal held that a payment on account by a party who had made an earlier Part 36 offer reduced that offer by the same sum as the payment on account.

The defendant made a Part 36 offer of £15,000.00 and then made a payment on account of £10,000.00 and the effect of this was to reduce its Part 36 offer to £5,000.00

If a paying party wishes to avoid this consequence, then it should make that clear as soon as possible, preferably when payment is made, although the decision suggests that a party may clarify its position at any time before judgment, or acceptance of the Part 36 offer.

Here the claimant sought £151,000.00 for an invoice for work done on the defendant’s home, but the invoice was fraudulent and concocted with the defendant to obtain payment from the trustees.

The defendant made a Part 36 offer of £15,000.00 and a subsequent payment on account of £10,000.00 and the balance awarded at trial was £14,275.59.

The Court of Appeal held that the £10,000.00 payment had reduced the Part 36 offer from £15,000.00 to £5,000.00 and thus it had been beaten.

Had it not been so reduced the offer would not have been beaten and the defendant would have got costs from the date of expiry of the unbeaten Part 36 offer in the usual way.


The Court of Appeal upheld the reasoning of the Court of Appeal in


Littlestone v Macleish [2016] EWCA 127


on the effect of admissions payments on Part 36 offers to payments on account, holding that a payment on account also reduces an earlier Part 36 offer.



In Ballard v Sussex Partnership NHS Foundation Trust [2018] EWHC 370 (QB)

the High Court considered the effect of a withdrawn Part 36 offer.

This was a personal injury case where liability had been admitted.

In January 2016 the defendant made a Part 36 offer of £50,000.00 but withdrew it in February 2017, and made a revised offer of £30,000.00.

At trial in September 2017, the claimant was awarded £23,315.13 and thus failed to beat either offer.

It was common ground that the claimant was liable for the defendant’s costs from expiry of the second offer in March 2017.

However, the trial judge also ordered the claimant to pay the defendant’s costs from expiry of the first, now withdrawn, offer in January 2016 and deprived the claimant of its costs from expiry of that offer.

The wording of the second offer was:

“We write further to our [other] letter today and hereby given the Claimant notice that the Defendant offers to pay compensation as set out in this letter in settlement of the whole of her claim. This is a Part 36 Offer and all previous offers in this matter are withdrawn. This offer is intended to have the consequences of Part 36. The Defendant’s offer is open for acceptance for 21 days from the date you are served with this letter, which we calculate to be until 4.00pm on 01.03.17. This offer can only be withdrawn or altered to be less advantageous to the Claimant before 01.03.17 with the permission of the Court.

The offer is gross of CRU benefits. The date for payment for the purpose of Section 9(1)(b) of the Social Security (Recovery of Benefits) Act (the 1997 Act) is the date of this offer. The CRU Certificate is valid until 15.02.17 and shows £819.43 payable in respect of Employment and Support Allowance. We enclose copy Certificate.

The gross amount of compensation that the Defendant offers to pay is £30,000. It includes all interest accruing up to 01.03.17, CRU benefits (£819.43) and interim payment (£nil).

If the Claimant accepts the Defendant’s offer by 01.03.17, the Defendant will:

  1. Pay the net amount of £29,180.57 within 14 days of the date of acceptance or (in cases requiring an order for payment) the date of the order for payment;
  2. Pay to the Department of Works & Pensions (“the DWP”) recoverable benefits (if any), including deductible benefits (if any), paid to the Claimant up to the date of this offer; and
  3. Pay the Claimant’s reasonable costs up until 01.03.17 or the date of acceptance of the Defendant’s offer, whichever is the earlier, such costs to be agreed or assessed on the standard basis in accordance with CPR Part 36.10. In addition, if approval is required by the Civil Procedure Rules, the Defendant will pay the Claimant’s reasonable costs of obtaining approval of the settlement.

For the avoidance of doubt, if the Claimant fails to obtain a Judgment more advantageous than the offer made in this letter then the Defendant will seek an Order that the Claimant should pay both Parties’ costs from 01.03.17.”

The effect of this offer was that it remained open until the day before the start of the trial. It was not accepted.

The claimant failed to beat it at trial.

The judge at first instance ordered the claimant to pay the defendant’s costs from expiry of the first offer and also deprived the claimant of its costs from then.

On appeal the claimant relied upon the clear wording of the second offer, that is that the defendant would seek costs from 1 March 2017.

Although the letter was silent about the costs from 16 February 2016, the date of expiry of the first offer, a reasonable interpretation was that the claimant’s costs would be met until the expiry of the second offer, even if she failed to better that second offer.

The potential relevance of the first offer stems from CPR 44.2(4)(c):

“(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

“(c) any payment into court or admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.”

The court here then reviewed the case law.

“21.    In Fox v Foundation Piling Ltd [2011] EWCA Civ 790, Jackson LJ, with whom Ward and Moore- Bick LJJ agreed, said two things of relevance to the current issue at [40] and [53] respectively:

(1) “Pankhurst v White …was a personal injuries action in which MacDuff J held that the claimant’s Part 36 offer retained its potency under Part 36 despite having been withdrawn. The case went to the Court of Appeal, but not on that issue. There were special features in Pankhurst and also that case was governed by the old version of Part 36 before the April 2007 amendments. In my view, Pankhurst is not authority for the proposition that a party which withdraws its Part 36 offer under what is now rule 36.3 (6) can reap the benefits of rule 36.14.”

(2) “A Part 36 offer which is subsequently withdrawn ceases to attract the consequences set out in rule 36.14. Such an offer then constitutes an “admissible offer to settle” within rule 44.3 (4)(c).”

  1. My attention has been drawn to a decision of His Honour Judge Hacon in Uwug Ltd & Anor v Ball [2015] EWHC 74 (IPEC) where he said, relying on CPR 44.2(4)(c), that “the usual consequences of a claimant failing to obtain a judgment more advantageous than the defendant’s Part 36 offer do not apply where the offer has been withdrawn … [but] it does not follow that [the defendant’s] first Part 36 offer [should be treated] as if it never happened.” That first offer had been withdrawn.
  1. There is, therefore, a tension between the proposition that an offeror who withdraws a Part 36 offer cannot “reap the benefits” of what is now r.36.17 (and thus, in the present situation, result in the almost inevitable result that all the costs incurred after the expiry of the offer should be paid by the Claimant) and the proposition that such an offer is still “relevant” on the issue of costs.
  1. Given what was said in Fox v Foundation Piling Ltd, the Judge (rightly) accepted that the first offer was potentially relevant on the issue of costs. In the paragraph of his ruling immediately before the paragraph quoted in paragraph 14 above, his thinking is revealed as follows:

“The first Part 36 offer is an offer which falls within [CPR r.44.2(4)(c)] and therefore Mr Loxton asks the Court to make an order reflecting that. Mr Heap opposes it on the grounds … that by withdrawing the original offer, and offering a less advantageous offer, somehow or other it would be unjust for the Court to exercise its discretion as Mr Loxton seeks. I simply cannot understand that argument. In my judgment the Claimant received a generous offer of £50,000 and that offer was on the table and could have been accepted for nearly a year with the costs consequences of Part 36. That it was not is not the Defendant’s fault and is a factor that the Court ought to pay strong regard to.”

  1. Having reviewed the transcript of the telephone call, it is clear that Mr Heap was, as part of his submissions, suggesting that the Defendant was putting the Claimant under unjustifiable pressure shortly before the trial for tactical reasons and that it would be unfair for the Claimant to be held liable for the costs from 16 February 2016. That appears to be the point upon which the Judge was focusing. However, Mr Heap did also say on two occasions during his submissions that the terms of the second offer (which was the only extant Part 36 offer) were such that the Claimant and her advisers were led to believe that if she failed to beat the offer, the only adverse consequence was that she would be liable for the costs after 21 days from the date of the letter – in other words, the costs of the trial. He submitted that this is what the second offer said.
  1. He did not refer specifically to the final paragraph of the letter beginning with the words “for the avoidance of doubt”, but that would plainly have been before the Judge for the Judge to read.
  1. Mr Heap’s argument before me was that whatever might have been in doubt about the impact or otherwise of the first offer after it had been withdrawn, it was resolved by the final paragraph of the letter. Not merely was the consequence that the Claimant would ordinarily be responsible for the costs after 21 days if she failed to better the offer pursuant to r. 36.17, but that was made crystal clear in the letter. The letter did not go on to say “and in that situation we will also be inviting the court to order the Claimant to pay the Defendant’s costs from 16 February 2016” or words to that effect.
  1. Mr Loxton submitted that the effect of this submission was effectively to be setting up some kind of estoppel and that it was necessary for the Claimant to demonstrate some detriment in reliance upon the statement in the letter. I do not, with respect, think there is anything in that point. A party is entitled to take the terms of an offer from a reputable and experienced firm such as Kennedys at face value, certainly in an area (such as clinical negligence) where it has considerable expertise. I do not know whether the argument that found favour with the Judge was the product of an afterthought or whether it had always been the intention to mount such an argument if the Claimant failed to beat the second offer. However, I do not consider that it is fair to the Claimant to send a detailed letter to her solicitors, apparently spelling out the consequences of failing to beat the Part 36 offer and then to argue that something different was intended, particularly where, as here, the consequence of the additional argument would probably diminish the Claimant’s net return from the litigation very considerably.
  1. The Judge was obviously very heavily influenced by the fact that the Claimant could have saved a great deal of expense by accepting the first offer. It is undoubtedly true that such expense would have been saved, but I do not consider it was right to regard the second offer as “irrelevant” with the consequence, if the judge so treated it, that the precise terms of the offer were also regarded as irrelevant. In my judgment, the Defendant cannot escape from the precise terms of the final paragraph of the second offer and as a result it is really the first offer that becomes irrelevant.”

Consequently the High Court allowed the appeal and substituted an order that the claimant get the costs up to and including 1 March 2017, but that she should pay the costs of the trial.


A sensible decision, with a useful review of the case law.

However, the facts are unusual due to the curious wording of the email from Kennedy’s.

Working on the assumption that most litigators in most firms have a rather better understanding of at least the basics of Part 36, these facts are unlikely to be repeated.



In Triple Point Technology Inc v PTT Public Company Ltd [2018] EWHC 45 (TCC)

the Technology and Construction Court considered the rates and period of interest payable on damages where the defendant had defeated the claim and won its counterclaim, and beaten its own Part 36 offer.

The court made the following findings.

The rate of interest to the date when the “offer expired” should be the US prime rate.

Although the contract to which the litigation related was concluded and largely performed in Thailand for a Thai company, Thai lending rates were irrelevant given the parties’ choice of law (English) and jurisdiction (England and Wales).

Referring to McGregor on Damages, Sweet & Maxwell, 19th ed, 2014, paragraph 18-120, the judge held that it is common, although not always the case to award interest at US prime rate where the currency of loss and damage is US dollars, and that was appropriate here.

The enhanced rate of interest thereafter should be 4% over US prime rate.


Unlike in OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195


there was no criticism of the claimant’s conduct; it would therefore be “wrong in principle to award the maximum rate of enhanced interest because it would leave nowhere to go.”

Nevertheless, the disruption the litigation caused the defendant after making a reasonable offer to settle should be recognised.

The enhanced rate should run until the date of the consequential hearing.

There was no rule or general practice that enhanced interest should only be payable up to the last day of trial, and this date recognised the time needed to give judgment in complex litigation.

In addition, the date of the consequential hearing was convenient to both parties and there was no reason why interest should not continue until that date.

Exercising its discretion to depart from the Judgments Act 1838 rate –


see Standard Chartered Bank v Petroleum [2011] EWHC 2094 followed


interest thereafter should be payable at the applicable US prime rate , this being the currency of the contract and losses claimed.

The judge’s reasoning provides guidance on interest rates and periods. It suggest that the longer it takes to hand down judgment, the longer the enhanced rate may return.

Presumably, the reference to date when the Part 36 offer expired refers to the end of the relevant period rather than withdrawal of the offer, otherwise CPR 36.14(4) would not have applied.




JMX v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 67C (QB)

is the second costs decision on Part 36 in the same case, and the case has not yet been determined.

In the first decision


JMX A child by his Mother and Litigation Friend, FMX v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 185


the High Court decided that a 90% offer on liability was a genuine and effective Part 36 offer.

The issue in this second judgment concerned the additional amounts payable under CPR 36.17(4)(d) which entitles the claimant to:

“(e) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000.00, calculated by applying the prescribed percentage set out below to an amount which is –

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs – …”

Here the claimant had won on liability and to use the court’s phrase, the claimant had an effective Part 36 offer on liability “in the bag”.

The issue here as to whether the additional amount was yet payable as there had been no “sum awarded to the claimant by the court”.

The court held that the case had not yet been decided as according to CPR 36.3(e) a case is “decided” when “all issues in the case have been determined, whether at one or more trials”.

That was sufficient to dispose of the matter.

The court also held that this did not require a Part 36 offer to cover the whole claim as that would neutralise the clear intent of Part 36, which is to encourage claimants to make offers on specific issues, such as breach of duty, and defendants to give them serious consideration with potential adverse consequences for the defendant if a clearly appropriate offer by a claimant has been rejected.

Thus an effective Part 36 offer on liability triggers the right to additional amounts, but they cannot be determined until after the quantum trial.

It is also the case that there can only one order for an additional amount in any case and CPR 36(4)(d) makes that clear – see the wording above.

Here the court held that was to prevent a claimant getting multiple orders for additional amounts if it beat various of its own Part 36 offers, for example on liability, breach of duty, quantum etc.

The court also rejected the suggestion that the order could be treated as a non-monetary award under CPR 36(4)(d)(ii) as the order was for “damages to be assesses”.

The court also said that if the issue of damages is settled, rather than returning to court, it will be open to the claimant in default of agreement as to the consequences, to restore to the court the issue of the payment of any “additional sum” arising from the Part 36 offer on liability.


A short, exemplary judgment on some important Part 36 issues.

Written by kerryunderwood

April 9, 2018 at 2:49 pm

Posted in Uncategorized

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