Kerry Underwood

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In Harrap v Brighton and Sussex University Hospitals NHS Trust [2018] EWHC 1063 (QB) (9 May 2018)

the Queen’s Bench Division of the High Court held that the Defendant’s failure properly to deal with witness evidence was unreasonable conduct justifying departure from the usual rule that a discontinuing Claimant is liable for the Defendant’s costs (CPR 38.6(1)).

This was a clinical negligence action where the Claimant discontinued after cross examination of one of the Defendant’s witnesses at trial elicited new evidence which was fatal to the Claimant’s case on causation.

The evidence given by the defence witness in cross examination had not been in his Witness Statement.

The judge found that the new evidence amounted to a change of circumstances and was due to the unreasonable conduct of the Defendant and constituted a good reason to depart from the general rule in relation to costs on discontinuance as set out by the Court of Appeal in

Brookes v HSBC Bank [2011] EWCA Civ 354.

The Defendant had unreasonably failed to set out the full story in witness evidence and no explanation had been provided and it must have been obvious that such evidence was highly relevant following the service of the Claimant’s expert’s report.

There had been a failure to take a proper Witness Statement from the expert.

The High Court held that the appropriate order was that the Claimant bear the costs up to the date of service of the expert report and that thereafter there be no order for costs.


CPR 38.6(1) provides that:


Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant, against whom the claimant discontinues, incurred on or before the date on which the notice of discontinuance was served on the defendant.”


The key authorities are:

Teasdale v HSBC Bank Plc [2010] EWHC 612,

as approved by the Court of Appeal in one of the Teasdale appeals in


Erica Brookes v HSBC Bank [2011] EWCA Civ 354,

 where the Court of Appeal said:



i)           When a claimant discontinues the proceedings, there is a presumption by reason of CPR 38.6 that the defendant should recover his costs; the burden is on the claimant to show a good reason for departing from that position;

  1. ii) the fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason for doing so;

iii)           however if it is plain that the claim would have failed, that is an additional factor in favour of applying the presumption;

  1. iv) the mere fact that the claimant’s decision to discontinue may have been motivated by practical, pragmatic or financial reasons as opposed to a lack of confidence in the merits of the case will not suffice to displace the presumption;
  2. v) if the claimant is to succeed in displacing the presumption he will usually need to show a change of circumstances to which he himself has not contributed;
  3. vi) however, no change in circumstances is likely to suffice unless it has been brought about by some form of unreasonable conduct on the part of the defendant which in all the circumstances provides a good reason for departing from the rule.”


A discontinuing Claimant has a high hurdle to clear to displace the normal rule.

In Nelson’s Yard Management Co v Eziefula [2013] EWCA Civ 235,

the Court of Appeal stressed that higher threshold for avoiding the usual costs consequences of discontinuance and stated that once there was to be no trial, it was not the function of the court considering costs to decide whether or not the claim would have succeeded.



Written by kerryunderwood

May 25, 2018 at 8:23 am

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In Health & Care Management Ltd v The Physiotherapy Network Ltd [2018] EWHC 869 (QB)

the High Court considered the relationship between an express clause of good faith and a confidentiality clause which restricted disclosure only in the context of a referral agreement.

The referral agreement stated that Health & Care Management Ltd “anticipates making circa 700 referrals per month to TPN” and that it “shall act in good faith towards TPN at all times”.

The court found that Health & Care Management Ltd had breached the good faith clause in that it had set up a rival business and had obtained and used The Physiotherapy Network’s database, consisting of a list of clinics and its leading professionals, the number of referrals made, and the pricing structures.

It actively diverted referrals away from The Physiotherapy Network and misled that company about the rival business’ target market and failed to tell the truth about using The Physiotherapy Network’s database when confronted.

The judge stated that the act of covertly using the database to set up a rival business was probably sufficient of itself to be a breach of the good faith clause.

The Physiotherapy Network also argued that Health & Care Management Ltd’s use of the database to set up the rival business was itself a breach of the confidentiality clause, but the judge rejected that contention as the confidentiality clause only restricted the disclosure of confidential information, and did not restrict its use.

The Physiotherapy Network’s claim in passing off also failed but the court held that Physiotherapy Network’s database was protected under the Database Directive 1996/9/EC and that Health & Care Management Ltd had infringed the Directive by extracting a substantial part of the database on several occasions.

The court also held that the wording of the referral clause, specifically the use of “anticipates” and “circa” did not create a contractual obligation on Health & Care Management Ltd to make any particular number of referrals, or indeed any referrals at all.

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May 18, 2018 at 8:22 am

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In Wall v Munday [2018] EWHC 879 (Ch)

the Chancery Division of the High Court allowed an appeal against the order of the Recorder in relation to the incidence of costs.

The substantive case concerned whether or not the estate was entitled to a share of the proceeds of a property that had been held by the deceased and his former wife as joint tenants.


The rival positions were:


  • Mrs Munday claimed she was entitled to “scoop” the lot as the survivor of a joint tenancy;


  • Mr Wall, on behalf of the estate, claimed that the estate was entitled to the whole sum;


  • In the alternative Mrs Munday counterclaimed that the property belonged beneficially to the estate and her in equal shares absolutely.



The Recorder dismissed Mr Wall’s claim and allowed Mrs Munday’s counterclaim, the net effect being that the proceeds of the property were to be split equally between the estate and Mrs Munday.

None of those findings was challenged on appeal, and the appeal related only costs.

The Recorder had ordered Mr Wall, on behalf of the estate, to pay 80% of Mrs Munday’s costs.

Mr Wall argued that he had been the true winner in the litigation as the starting point had been that the estate got nothing and the result was that the estate got 50% of the proceeds of sale and so the net effect was that the estate gained 50% of the proceeds of sale and Mrs Munday lost 50% of the proceeds of sale.

The Chancery Division agreed and overturned the Recorder’s decision and ordered Mrs Munday to pay the costs of the action.

However the Chancery Division recognised that there should be a discount from a 100% order to reflect those aspects of the case where Mr Wall had failed.

Consequently the Chancery Division discounted the costs that Mrs Munday had to pay to Mr Wall by 40% and thus allowed the appeal on costs and substituted for the Recorder’s order an order that Mrs Munday pay 60% of Mr Wall’s costs.

Thus the Chancery Division followed the line of cases whereby the person who has to write the cheque in the litigation, in this case clearly Mrs Munday, has to pay the costs.


The court also referred to the decision of the Court of Appeal in


Day v Day [2006] EWCA Civ 415


where the facts were very similar to this case and where the party who had lost part of the proceeds of sale was ordered to pay the costs.

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May 17, 2018 at 8:32 am

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In Mohamed and others v Abdelmamoud and another [2018] EWCA Civ 879

the Court of Appeal held that directors of a charitable company were not “directly affected” by a judgment in default entered against the charity, and therefore they lacked the standing to apply under CPR 40.9 to have the judgment set aside.


CPR 40.9 provides:

A person who is not a party but who is directly affected by a judgment or order may apply to have the judgment or order set aside or varied.”


The Court of Appeal also held that the individual directors could not seek permission to bring a derivative claim in their capacity as members of the charitable company, as such a claim would not be necessary given the powers of the Charity Commission and the Attorney General to act to protect the interests of charities.

Here the Court of Appeal gave guidance on circumstances in which a judgment can be set aside under CPR 40.9, and said that the power should only be exercised where the non-party applying to set aside the judgment would be able either to defend the claim itself, or on behalf of the defendant.

The court doubted that an application to set aside a judgment against a company could ever be justified on the basis that it was made by one or more of the company’s directors.

The judgment is also of interest for the views of the Court of Appeal on the application of the principle of derivative claims to charitable companies.


Useful guidance is given in paragraphs 35 and 36 of the judgment.


35. Derivative claims are nowadays provided for in Part 11 of the Companies Act 2006. By section 261 of that Act, a member of a company who brings a derivative claim must apply to the Court for permission to continue it. If the material put before the Court does not disclose a prima facie case for permission to be given, the application will be dismissed at that stage (see section 261). The application can otherwise be expected to proceed to a hearing at which the Court will consider whether permission should be given having regard to the various matters identified in section 263.

  1. Part 11 of the Companies Act 2006 is in principle capable of applying to charitable companies as well as to companies with commercial objects. I find it quite difficult, though, to envisage circumstances in which the Court would give permission for a derivative claim on behalf of a charitable company. Not only are charities overseen by the Charity Commission, whose functions include “taking remedial or protective action in connection with misconduct or mismanagement in the administration of charities” (see section 15(1) of the Charities Act 2011), but the Attorney General acts as the protector of charity and has a duty “to intervene for the purpose of protecting charities and affording advice and assistance to the court” in the administration of charities (see Wallis v Solicitor General of New Zealand [1903] AC 173, at 181). If the Commission or Attorney General is persuaded that there has been misconduct, it can be addressed without a derivative claim being brought. If, on the other hand, neither the Commission nor the Attorney General sees the need to intervene, it may be hard to persuade a Court that a derivative claim should be sanctioned. I would add that, on the face of it, an application to continue a derivative claim would require the blessing of either the Commission or the Court under section 115 of the Charities Act 2011 and that the Attorney General would seem to be a necessary party to such an application.”

Written by kerryunderwood

May 16, 2018 at 8:25 am

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In Jallow v Ministry of Defence [2018] EWHC B7 (Costs)

Master Rowley, sitting in the Senior Courts Costs Office held that neither the reduction of the hourly rates for incurred costs, nor the fact that the matter settled for a significantly lower sum than claimed, and on which the budgets were based, were good reasons to depart from the claimant’s costs budget.

Here Mr Jallow brought a personal injury claim against the Ministry of Defence claiming £185,000, or in the alternative £312,000.

Shortly before the quantum hearing to assess damages, the claimant accepted the defendant’s Part 36 Offer of £90,000.

At detailed assessment Master Rowley reduced some of the hourly rates of Mr Jallow’s solicitors for incurred costs, but these reductions would only apply to the budgeted costs if the Master found that the reduction in those hourly rates was a good reason to depart from the budget.

The Master held that the parties would need to raise something specific to the case to succeed in an argument that the costs budget should be departed from and there was nothing specific to this particular case in the hourly rates challenge, and if the budget was departed from for that reason, then the same point would apply in other, many cases.

The Master considered that a similar test to “good reason” was whether a “genuine issue” existed as in

Hazlett v Sefton Metropolitan Borough Council [2001] 1 Costs LR 89

and rejected Mr Jallow’s argument that there needed to be a “significant development” in the litigation.

The Master also pointed out the recent authorities that warned against costs judges adopting too low a threshold in relation to the question of what is a good reason – see for example

Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB)

The Master expressed concern that the lack of court scrutiny at the detailed assessment stage of the hourly rates or budgeted costs may encourage parties to incur costs up to the budget set for each phase, in the knowledge that these figures were unlikely to be successfully challenged on detailed assessment.

However, it acknowledged that the aim of costs management was to make detailed assessments shorter, and that that was a price that might have to be paid.

The Master also rejected the Ministry of Defence’s argument that the fact that the case settled for a much lower sum than the sum claimed was a good reason to depart from the budget.

The claimant had put forward alternative cases as to quantum, and that showed that he was alive to the issues surrounding the potential level of damages.

This case was one where a wide range of damages might be achieved, and it was reasonable for Mr Jallow to have believed that his case was worth the sum claimed.


This finding followed the case law on the old proportionality test, and in particular the decision of the Court of Appeal in

Lownds v Home Office [2002] EWCA Civ 365

where the Court of Appeal was alive to the issue of the sums claimed being higher than the sums achieved and said that the test was what it was reasonable for the claimant to consider that he could recover in the proceedings.

The Court of Appeal said:

“The rationale for this approach is that a claimant should be allowed to incur the cost necessary to pursue a reasonable claim but not allowed to recover costs increased or incurred by putting forward an exaggerated claim and a defendant should not be prejudiced if he assumes the claim which was made was one which was reasonable and incurs costs in contesting the claim on this assumption.”

Here the Master said that the essence of the point is whether it was reasonable for the claimant to believe that his case was worth the sum that he claimed.

It is only if the claimant could not reasonably have had that belief, because his claim was exaggerated in some way, that the budget might be considered to have been set on a false premise and as such should be departed from on assessment, and that was not the case here.

Written by kerryunderwood

May 15, 2018 at 8:26 am

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In Farah v Abdullahi & Ors [2018] EWHC 738 (QB)

Master Davison allowed service on an insurer of an unidentified driver in circumstances where the insurer had already obtained a declaration that the insurance policy was void.

This follows the decision in

Cameron v Hussain [2017] EWCA Civ 366

where the Court of Appeal held that the claimant, a victim in a road traffic accident, could add as a defendant a person who could only be described as “the person unknown driving vehicle registration number Y598 SPS who collided with vehicle registration number KG03 ZIZ on 26th May 2013”.

There, as here, the circumstances were that the claimant could not identify the driver, but could identify both the car and an insurer who had provided insurance cover for the vehicle at the time of the accident.

An important part of that case was the fact that a section 151 insurer, that is an insurer who, in spite of the fact that the use of their vehicle was outside the scope of the contract of insurance, was statutorily liable to meet the claim.

The case of

Bloomsbury Publishing Group Ltd. & Anor v News Group Newspapers Ltd. & Ors [2003] EWHC 1205 (Ch)

had established that there was no procedural bar to issuing proceedings and obtaining orders against persons unknown.

Here the Master said that the principal question was whether he should permit the claim to proceed even though the insurer had already obtained a declaration that it was entitled to avoid the policy from the beginning on the grounds of material non-disclosure.

Consequently, on the face of it, there was no section 151 insurer.

In those circumstances the Master had to consider whether the claim against the unnamed third defendant should be allowed to proceed.

The Master said:

“It seems to me that it would be both efficacious and consistent with the overriding objective to allow the claim to go forward in that way. The entitlement of a claimant to proceed against an unnamed driver should not depend on the section 151 liability of the insurer being incontrovertibly established.”

The Master also rejected an argument that permission of the court was required in order to issue against an unnamed party.

As well as being a sensible and a just decision, the judgment also gives helpful guidance about section 151 liabilities and also that the section 152(2) exception is incompatible with the Sixth Motor Insurance Directive 2009/103/EC:



8.   Section 151 of the Road Traffic Act 1988 provides that insurers must meet judgments in respect of insured third party liabilities even if the insurer is not liable to its insured as a matter of contract. A typical situation would be where the person driving was a partner or friend who was not actually a named driver on the policy. The insurer would have to meet a claim under section 151 in respect of liabilities incurred by such a driver. Indeed, section 151 would even extend to driving by a thief. But there are various “get-outs” for insurers. The relevant one for present purposes is contained in section 152(2). By that sub-section, (paraphrasing it), if a policy has been obtained by misrepresentation or failure to disclose material facts, then, if the insurer obtains a declaration that it is entitled to avoid the policy on these grounds, “no sum is payable … under section 151”. There are time limits to be observed if an insurer wishes to take advantage of section 152(2). The insurer must commence the action for a declaration “before or within three months after the commencement of” the proceedings leading to the judgment in favour of the victim of the road accident.

  1. There is an issue as to whether section 152(2) is compatible with the Sixth Motor Insurance Directive 2009/103/EC. The Directive (which is a consolidating measure) imposes on Member States an obligation to ensure that civil liability in respect of the use of vehicles based in each Member State’s territory is covered by insurance. Only where a vehicle is unidentified or uninsured is the victim of a road accident to be thrown back on to a body of last resort; (in the UK this body is the Motor Insurers’ Bureau). Thus, in Fidelidade-Companhia de Seguros SA v Caisse Suisse de Compensation & Ors Case C-287/16 [2017] RTR 26, the European Court of Justice held that national laws that permitted motor insurers to deny a third party claim on the ground that the policyholder’s misrepresentation rendered it void were contrary to EU law. Fidelidade led to a concession by the government in Roadpeace v Secretary of State for Transport & Anor [2017] EWHC 2725 (Admin) that section 152(2) was no longer compatible with EU law.”



Note that the Supreme Court has given the insurer in the Cameron case permission to appeal to the Supreme Court.

Written by kerryunderwood

May 14, 2018 at 8:34 am

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There have been three recent Court of Appeal decisions involving indemnity costs.



In Whaleys (Bradford) Ltd v Bennett& Anor [2017] EWCA Civ 2143 (15 December 2017) 

the Court of Appeal gave guidance in relation to the correct test when considering indemnity costs.


This was not in the context of Part 36.


Here the Defendants had been avoiding enforcement action in relation to a judgment debt and the judge awarded costs to the Claimants for three scheduled oral examination hearings, but only on the standard basis.


The Court of Appeal held that the conduct of the Defendants warranted indemnity costs.


Despite having the means to pay, they deliberately sought to avoid payment and were arrogant and disobedient towards court orders and evaded service of the order for oral examination.


They failed to comply with orders for rearranged hearings and were uncooperative.


All of this put the Claimants to unnecessary and considerable trouble and expense.


The judge had used the word “exceptional” instead of the phrase “out of the norm” when considering the application and the Court of Appeal said that “exceptional” suggests a stricter test and is best avoided and judges should use the test of whether conduct is “out of the norm” as previously established by the Court of Appeal in



Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (a firm) [2002] EWCA Civ 879.



This had been further explained by the Court of Appeal in



Esure Services Ltd v Quarcoo [2009] EWCA Civ 595



where the Court of Appeal said that a court can take account of conduct, whether it occurred frequently or was rare, and the word “norm” was not intended to reflect whether what occurred was something that happened often, so that it could be described as “normal”, but rather “something outside the ordinary and reasonable conduct of proceedings”.


Thus even ordinary conduct could be unreasonable and therefore render the party guilty of such conduct liable to an indemnity costs order against it.


Here the judge’s failure to award indemnity costs on the basis that debtors often avoid paying debts, and that he had seen more sophisticated attempts to avoid judgments, was an error of law justifying the Court of Appeal  overturning the decision.


This was a fixed costs case under CPR 45.8 which lays down fixed costs for enforcement.


Here the Trial Judge had allowed standard costs rather than fixed costs, and as we have seen the Court of Appeal substituted an order for indemnity costs.


The principles are the same in relation to fixed costs cases generally under CPR 45, including low value personal injury cases.



Indemnity Costs Ordered Against Home Secretary 

In Secretary of State for the Home Department v Barry [2018] EWCA Civ 790

the Court of Appeal was hearing a second-tier appeal by the Home Secretary against a decision of the Upper Tribunal (Immigration and Asylum Chamber).

The Home Secretary claimed that there had been a systemic failure by the Tribunals properly to apply the law, but that allegation was abandoned at the appeal, which failed, and the Court of Appeal then considered the issue of costs.

The Court of Appeal referred to the conduct of the Home Secretary as “troubling” (paragraph 31).

Here the Secretary of State had made what the Court of Appeal described as “an unusual allegation and a serious one” and said that that was clearly the basis on which the Single Judge of the Court of Appeal granted permission to appeal.

Having obtained that permission the Home Secretary failed either to make the sufficient good with evidence or to pursue the argument, but rather abandoned it “without even explaining why”.

The Court of Appeal found the Home Secretary’s conduct “unreasonable to a high degree”.

Consequently the Court of Appeal ordered the Home Secretary to pay costs on the indemnity basis, due to her unreasonable conduct.


Lawyers ordered to pay Indemnity Costs of Assessment

In GSD Law Ltd v Wardman & Ors [2017] EWCA Civ 2144

the Court of Appeal upheld a District Judge’s order in detailed assessment proceedings under CPR 44.11 whereby the judge had disallowed all costs claimed by the Claimant because of misconduct by their lawyers and ordered those lawyers, GSD Law Limited, to pay all of the costs of the assessment on the indemnity basis.


The court exercised its power under CPR 44.11 and rejected the solicitors’ argument that that was a summery jurisdiction akin to the wasted costs jurisdiction and therefore not suitable where there were detailed allegations of dishonest conduct.


GSD’s admitted conduct included forging a Conditional Fee Agreement. Other conduct including claiming for work which was not done and deliberately falsifying the status of the fee earner who had carried out work and claiming at a higher hourly rate than in the solicitor and own client retainer.


The Court of Appeal held that the guidance in relation to wasted costs matters was not relevant in relation to CPR 44.11.


For applications under CPR 44.11, the court should bear in mind the overriding objective and, particularly, proportionality.


It was possible to deal with applications under CPR 44.11 in the course of a pending assessment and conduct alleged as justifying the disallowance of costs may also be relevant as to how costs of the detailed assessment proceedings should be assessed.


In contrast a wasted costs application was a free standing one usually made when the litigation was over.


It was easier to determine unreasonable or improper conduct in relation to assessment proceedings than in relation to substantive proceedings.


Furthermore, unlike wasted costs applications, no issues of privilege could arise and there was no need for any investigation into the merits of the substantive claim.


There was a strong public interest in ensuring that solicitors did not dishonestly certify costs figures.


Given the seriousness of the allegations and the money at stake, it was not disproportionate to have held a three day hearing.


It was also important that the profession and parties generally maintained faith in the integrity of the costs negotiation system, as otherwise all matters would end up at detailed assessment.


Written by kerryunderwood

May 11, 2018 at 8:19 am

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