Kerry Underwood

Archive for June 2018

INSOLVENCY ROUND UP

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Insolvency Proceedings and Lawsuits under Insolvency Regulation 2000

In Tarrago da Silveira v Massa Insolvente da Espirito Santo Financial Group SA ([2018] EUECJ C 250/17 (6 June 2018)

the European Court of Justice has issued a preliminary ruling on the operation of Article 15 of Council Regulation (European Community) 1346/2000 on insolvency proceedings (Insolvency Regulation 2000).

Article 15 provides an exception to the general rule that the laws of the member state where insolvency proceedings are commenced govern the conduct of the insolvency.

Article 15 provides that the effects of insolvency proceedings in a member state on a lawsuit pending in another member state, where the lawsuit concerns an asset or a right of which the debtor has been divested, are governed by the laws of the member state where the lawsuit is pending.

In this case, an individual brought a claim for contractual damages in Portugal against a debtor.

When the debtor went into Luxembourg insolvency proceedings the Portuguese court stayed the individual’s claim as, under Portuguese law, the Luxembourg insolvency proceedings rendered the Portuguese proceedings otiose and entitled the court to refuse to hear the claim, even though under Luxembourg law such a claim could have continued notwithstanding the insolvency proceedings.

The matter was put to the European Court of Justice for a preliminary ruling and the European Court of Justice ruled that article 15 is wide enough to apply to claims for damages in respect of contractual claims, though not enforcement proceedings in relation to such a claim.

The ruling therefore accorded with the stance taken by the Portuguese court.

 

Setting Aside a Statutory Demand

In Black v Sale Service & Maintenance Limited [2018] EWHC 1344 (Ch)

the High Court overturned a District Judge’s decision to dismiss an application to set aside a statutory demand.

The High Court held that the decision was unjust and involved a serious procedural irregularity in that the District Judge dismissed the application at a 15-minute hearing that all parties had expected to be a directions hearing only.

15 minutes was not long enough for the District Judge to be taken through the evidence and decide that there was no triable issue.

The High Court ordered a re-hearing with a time estimate of two and a half hours.

Debtors seeking to set aside a statutory demand should expect directions from the court at a first hearing, provided that the applicant has established a triable issue.

The High Court also held that the decision was wrong in any event as the District Judge had held that the debtor’s liability for part of the sum in the demand had been established as the debtor’s company, whose debts the debtor had guaranteed, had unsuccessfully tried to pay the creditor £60,000.

This was merely prima facie evidence that the debtor owed £60,000, and there was known to be other, unconsidered by the judge, evidence that might establish a counterclaim by the debtor.

That evidence should be considered even if it might seem unlikely that ultimately it would assist the debtor.

 

Administration Order Made On Basis of A Disputed Debt When Debtor Otherwise Solvent

 

In Berkshire Homes (Northern) Ltd v Newbury Venture Capital Ltd [2018] EWHC 938 (Ch) (14 February 2018)

 

the High Court granted a creditor’s application for an administration order, although the creditor’s debt was disputed as the debtor company was claiming credits, cross-claims and set-off and the debtor was solvent apart from the debt.

 

The court held that the disputed debt rendered the claimant a creditor who could to apply for an order, and the existence of the debt, and the failure to pay it, meant that the company was unable to pay its debts, entitling the court to make an administration order.

 

Where the disputed debt was not only the basis of the creditor’s standing to apply for the administration order, but also formed the evidence of insolvency necessary to satisfy the administration condition of the company being, or being likely to become, unable to pay its debts, the debt had to be proved on the balance of probabilities.

 

After making allowance for the credits, cross-claims and set-offs, there was a balance rendering the company insolvent on a net assets basis.

 

There was a real prospect of the administration achieving its purpose, justifying the court placing the company into administration.

 

The decision affirms Hammonds (a firm) v Pro-Fit USA Ltd [2007] EWHC 1998 (Ch) and Fieldfisher LLP v Pennyfeathers Ltd [2016] EWHC 566 (Ch).

 

 

Bankruptcy Order Annulled Following Appeal against Dismissal of Application and Refusal to Adjourn Hearing on Uncontested Medical Grounds

In Rafferty v Sealants International Ltd and another [2018] EWHC 1380 (Ch) (2 May 2018)

 

the High Court has annulled a bankruptcy order where it was clear that, at the time it was made, evidence existed, which had not been put before the court, of the bankrupt’s ability to pay the petition debt.

 

The annulment order was made conditional on paying the creditor’s debt and costs.

 

The bankrupt was also ordered to pay the costs of the Official Receiver (OR).

 

During protracted bankruptcy proceedings in the county court, the bankrupt had applied to annul his bankruptcy order.

He subsequently requested an adjournment of the hearing of his application on medical grounds.

 

It was refused in his absence despite the OR consenting. His request was not raised with the petitioner who had unexpectedly attended.

 

The court went on to dismiss the annulment application as it was not satisfied that appropriate grounds had been made out.

 

The bankrupt appealed to the High Court, and the OR remained neutral on the bankrupt’s appeal as did the petitioner, providing that no costs were sought against them.

 

The High Court held that while adjournments are generally case management decisions, the court must consider procedural fairness, and sometimes the material before the appeal court indicates that there had been “some mistake or fundamental error” in the process.

 

Medical evidence may not justify a request for an adjournment if it is contested (Simou v Salliss [2017] EWCA Civ 312) but in this case it was not.

 

As the bankrupt’s request for an adjournment had not been raised with the petitioner at the hearing, something had clearly gone wrong.

 

Permission to appeal the refusal to adjourn was, therefore, allowed.

 

The High Court then considered the bankrupt’s substantive application, brought on grounds existing at the time of the bankruptcy order that it ought not to have been made – section 282(1)(a) of the Insolvency Act 1986.

 

It held that there was a reasonable prospect that the petitioner would be paid within a reasonable time, and where such evidence existed but was not put before the court, as in this case, the High Court considered there were grounds to annul and that the proper application of principles justified a conditional annulment order (Sekhon v Edginton [2015] EWCA Civ 816 and 1st Credit (Finance) Ltd v Carr [2013] EWHC 2318 (Ch)).

 

 

Joint Creditors Must Both Petition For Bankruptcy

In Aabar Block S.a.r.l. and another v Maud [2018] EWHC 1414 (Ch), 11 June 2018

 

two petitioning creditors were relying on a joint debt, one creditor was not entitled to seek a bankruptcy order without the agreement of the other.

 

In this case, the petitioning creditors were joint owners of a debt and both issued the bankruptcy petition. One of the creditors no longer wished to proceed and was not willing to proceed with the petition.

 

On a hearing of the petition the court held that the creditor who wished to proceed could not do so unless it could show that the other creditor was acting in breach of its duty as trustee of the jointly owned debt.

 

The court also decided that it would consider whether the petition constituted an abuse of process, notwithstanding that it had previously considered the issue at the stage when the statutory demand was issued.

 

This was because there had been a change of circumstances and the abuse of process point was being taken by the petitioning creditor who wished the petition to be adjourned rather than by the debtor.

 

The court considered that the same principle would apply to a winding up petition in a corporate context.

 

Security for Costs Application Dismissed Against a Company in Liquidation

In  Absolute Living Developments Ltd v DS7 Ltd and others [2018] EWHC 1432 (Ch) (24 May 2018)
the High Court dismissed a defendant’s application for security for costs against a company in insolvent liquidation following a consideration of the two-stage test under CPR 25.13(1) and (2)(c).

 

It held there was a clear risk that an order would stifle a bona fide and genuine claim by the liquidator.

 

The test is firstly, is there reason to believe that the claimant would be unable to meet the defendant’s costs and if so, secondly, is it just, in all the circumstances, to make an order? – criteria for the exercise of discretion set out in Sir Lindsay Parkinson and Co v Triplan [1973] QB 609.

 

The first stage was conceded by the liquidator: the company was in insolvent liquidation and the proceedings were brought on a no win-no fee basis.

 

The Triplan guidance was applied to the second stage. The claim was properly brought and defended and the risk of an adverse costs order against the company was real.

 

There was insufficient certainty that the claimant’s inability to pay was attributable to the defendant.

 

The application for security appeared appropriate but the critical factor in deciding whether to make an order was one of principle: would it stifle a serious or genuine claim?

 

Weighing the competing interests of the company and the defendants, the balance clearly favoured the liquidator bringing claims for the benefit of the creditors and there was no source of funding available to the claimant that would enable it to pay a security for costs order.

 

If the court were to order security, in reality that would be provided by the liquidator, creating a situation entirely contrary to the public interest in the insolvency regime.

 

It was critical and in the public interest that liquidators may proceed in a manner that is uninhibited in terms of deciding how to bring actions, including how those actions are framed and funded.

 

This shows that security for costs will not always be ordered against an insolvent entity that appears unable to pay any costs order made against it.

 

It is welcome news to office-holders who may be unable to obtain after the event insurance, especially given the expensive premium cannot be claimed from the losing party in the event that the claim succeeds.

 

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Written by kerryunderwood

June 29, 2018 at 8:25 am

Posted in Uncategorized

NON-PARTY COSTS ORDERS

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In Travelers Insurance Company Ltd v XYZ [2018] EWCA Civ 1099

the Court of Appeal upheld the decision of the High Court that a non-party costs order under section 51 of the Senior Courts Act 1981 could be made against the liability insurers of an unsuccessful defendant, even though the relevant claims against the insured were not covered by the policy.

The Court of Appeal held that case law did not prescribe conditions to be fulfilled before a non-party costs order could be made against liability insurers and the only principle was that the court’s discretion must be exercised justly – see  Deutsche Bank AG v Sebastian Holdings Inc. [2016] EWCA Civ 23.

The use of the word “exceptional” in the case law only meant that the case was outside the ordinary run of cases where parties pursued or defended claims for their own benefit and at their own expense, and whether a case was exceptional was not to be judged according to what is, or might be, usual in the insurance industry.

A key factor was that the insurers funded the costs of the proceedings against the insured and stood to benefit from a successful outcome and although cases will be fact sensitive, insurers should note that if they continue to defend uninsured claims, then they risk paying the costs of an unsuccessful defence, even if those claims were not covered under the policy.

Furthermore there was an obvious problem with the insurers’ position.

Had they succeeded against all of the claimants, both insured and uninsured, they would have been liable equally to contribute towards the insured’s costs which would have benefited the insurers as it would have reduced their costs liability.

However, if their argument here was accepted, then failure, rather than success, on those very same issues would leave them liable for only around one third of the costs of the claimants.

That was neither reasonable nor just.

The Court of Appeal also said that the insurers’ interests were in play even when only the uninsured claims were being considered as the longer those claims continued, and therefore the greater the proportion of costs incurred in them, the lower the insurers’ potential costs liability.

The facts of this case were unusual in that Travelers Insurance Company Ltd had previously settled certain insured claims, but was uninsured in respect of the remaining claims as they fell outside the period of insurance cover, but the claimants had mistakenly believed that Travelers Insurance Company Ltd was insured as, following a court order, it had confirmed that it had insurance in place.

The first instance court had said that the fact that the insurers had insured other claims against Travelers Insurance Company Ltd did not entitle them to be involved in, or influence the conduct of, the uninsured claims, both of which they had done.

As well as funding the unsuccessful defence of the uninsured claims, they had withheld their consent to a proposed settlement of those claims.

But for the insurers’ involvement, Travelers Insurance Company Ltd would have disclosed at an early stage that the claims were not covered under their policy and the claimants would not have pursued the claims and incurred cost.

Written by kerryunderwood

June 28, 2018 at 10:06 am

Posted in Uncategorized

SOLICITORS ACT: DOES FORMER CLIENT HAVE RIGHT TO FILE?

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In Riaz v Ashwood Solicitors Ltd [2018] EWHC B5 (Costs)

Master Leonard, sitting in the Senior Courts Costs Office refused an application by Mr Riaz a former client of Ashwood Solicitors Ltd seeking delivery up of papers from the firm so that he could take advice as to his right to detailed assessment of the firm’s fees.

Master Leonard commented that the courts were facing many applications of this nature.

Master Leonard had adopted the same approach in Green and others v SGI Legal LLP [2017] EWHC B27 (Costs), but other Masters have reached the opposite conclusion.

In this case two new arguments were advanced:

  • That the court could exercise its inherent jurisdiction over solicitors;

 

  • That the fiduciary duties owed by a law firm to a client should be taken into account when deciding whether the court should exercise its inherent jurisdiction over solicitors.

 

The solicitors firm argued that the court only had a residual jurisdiction that could only be exercised where there was a clear breach of duty and where there was no other way of avoiding injustice.

 

The Master rejected that contention and referred to the key case of

 

Assaubayev v Michael Wilson and Partners Ltd [2014] EWCA Civ 1491

 

which stated that it was for the court, in its discretion, to choose whether to exercise the jurisdiction and examples given in that case made it clear that it is a summary jurisdiction to be exercised only in clear-cut cases.

The Master said that equitable remedies for breaches of fiduciary duty are not usually matters for a Costs Judge and therefore the concept had to be approached with some caution.

 

The Master rejected the client’s arguments as:

 

  • There was no clear-cut evidence of conduct on the part of the solicitor that would make it appropriate for the court to exercise its inherent jurisdiction;

 

  • No fiduciary duty obliging a solicitor to supply copies of documents that did not belong to the client had been identified, and nor had any breach of any other fiduciary duty;

 

  • It was inappropriate to exercise the court’s inherent jurisdiction effectively to order pre-action disclosure based on the client’s suspicion that the solicitor had overcharged him. The criteria under CPR 31.16 were not satisfied.

 

  • Furthermore the time limits for applying for an assessment of the solicitors’ bills had expired some years earlier.

 

 

The court had this to say:

 

“It is important to put this application into context. One must bear in mind the criteria for pre-action disclosure set out by CPR 31.16, which this case does not meet. One must also bear in mind the stated purpose of the application, which is to allow the Claimant to take advice on the exercise of his statutory right to apply for assessment of the Defendant’s bills. Those rights are subject to time limits. Given that, on the evidence, the Claimant received bills and paid them about three years before he instructed his present solicitors to explore the possibility that he had been overcharged, it seems likely that those time limits expired some years ago.”

 

As with most recent cases, this matter involved a deduction by the solicitors of a success fee capped at 25% of general damages and part special damages, and it is clear and settled law that a solicitor cannot simply deduct 25%, but must justify the fees by reference to the solicitor and own client retainer, any shortfall between solicitor and own client cost and recovered cost, and in any event the success fee must not exceed 100% of base costs.

Thus the maximum is the lower of 25% of the Allowed Damages Pool or 100% of base costs.

There was no doubt that the documents sought here belonged to the solicitor and not the client and the issue was whether the client, on payment coping costs, had the right to obtain copies of documents in which he had no proprietary interest, from the solicitor.

Here the solicitors for the client put forward a wholly erroneous argument, which they have pursued in other cases and in correspondence with other solicitors, that the success fee is based on recovered costs rather than solicitor and own client costs.

Thus in this case, a portal case, the fees recovered were £600 being £500 plus VAT, which is the fixed road traffic accident portal fee.

The Master comprehensively and correctly rejected the argument that the success fee was based on that figure:

“I do not accept that the evidence shows that an unlawful success fee has been charged. Mr Carlisle’s argument to that effect is based upon the assumption that the Defendant’s base costs are exactly £600 inclusive of VAT. That was however the amount received by way of costs between the parties. It does not follow that the Defendant was not entitled, under the terms of its retainer, to charge more than £600 to the Claimant by way of base costs on a solicitor/client basis. If the Defendant’s base costs, as payable by the client, were £650 or more then the success fee will not have been in excess of 100%.”

The reference to £650 reflects the fact that that was the sum deducted from damages by way of a success fee, being 25% of the Allowed Damages Pool.

 

­In Whale v Mooney Everett Solicitors Ltd [2018] EWHC B10 (Costs) (12 June 2018),

Master Leonard, sitting in the Senior Courts Costs Office, allowed the client correspondence from his former solicitors, upon payment of a fee, but nothing more.

The client was seeking to bring a claim over deductions from the settlement of a claim in 2015 for damages for personal injury arising out of a road traffic accident.

The court rejected the application for copies of invoices and client account ledgers, saying that there was no evidence of misconduct on the part of the law firm to justify an order and that the claimant was not owed any fiduciary duties relating to the documents that did not belong to him:

If, as the evidence indicates, the Claimant was, during and on the conclusion of the retainer, sent sufficient information to take any necessary advice on applying for the assessment of the Defendant’s costs, then no imbalance exists in any material sense. It is not suggested that the Claimant was in some way incapable of keeping an adequate record. He just did not do so.”

The judge said that there was no entitlement to internal records and no entitlement to have funding documents sent more than once.

 

In Green & Ors v SGI Legal LLP [2017] EWHC B27 (Costs)

the Senior Courts Costs Office gave guidance on applications by clients under section 68 of the Solicitors Act 1974 for the delivery up of documents in the possession of solicitors.

Here, the Master dismissed applications by the clients for delivery up of funding documents, all invoices and all correspondence sent to them.

 

The Master referred to

Re Wheatcroft (1877) 6 Ch.D. 9 and

Leicestershire County Council v Michael Faraday and Partners Ltd [1941] 2 KB 205

and said that they drew an important distinction between the property of a professional adviser and the property of a former client and the appropriate law was that of proprietary rights and not confidentiality or anything specific to a solicitor/client relationship.

It was for the claimants to show that they were entitled to receive copies of another person’s property.

The Master gave the following guidance:

If a person writes a letter to another, keeping a copy, the recipient was not, of right, entitled to a copy, even if they agreed to pay for it. The purpose of creating documents for a client’s benefit was fulfilled when the documents were originally given to the client.

A client wishing to challenge the bill, but who had lost key documents, would be disadvantaged, but it did not follow that the solicitor had any obligation to compensate. A client’s inability to provide required documents with an application for detailed assessment would not invalidate the application and the court could manage the issue.

Ralph Hume Garry (a firm) v Gwillim [2002] EWCA Civ 1500

was authority saying that a client did not need the whole file in order to challenge a bill.

Granting such applications would bypass the specific provisions of CPR 31.16 regarding pre-action disclosure.

 

A different view was taken in

Hanley v JC and A Solicitors Ltd [2017] EWHC B28 (Costs)

the Senior Courts Costs Office, in Part 8 proceedings,  refused to order a firm of solicitors to supply a former client with a copy of the entire file, including documents owned by the solicitor rather than the client.

The court noted that there is no binding authority where solicitors have been ordered to hand over papers which they, rather than the client, own.

It also referred to the the Law Society’s practice note Who owns the file which states that there are many papers on a solicitor’s file which do not have to be handed over to the former client.

 

The Master said

“However, I am also concerned by the floodgates that would likely be opened by a ruling that solicitors can be ordered to hand over their complete file in circumstances such as these; such a move would foreseeably instil considerable satellite litigation and I am not persuaded that this would be a positive step, and dismiss the Application accordingly.”

 

A different view was taken in

Swain v JC and A Ltd [2018] EWHC B3 (Costs)

where a Master in the Senior Courts Costs Office ordered solicitors to provide a former client with documents from the file, so that the client could decide whether to seek a Solicitors Act assessment.

The application was made under section 68(1) of the Solicitors Act 1974 and the court’s inherent jurisdiction and sought disclosure of four schedules to the conditional fee agreement dealing with fees and expenses, together with any other documents forming part of the retainer.

Here, the Master said that the court had a discretion to order the provision of copies of the documents whether or not the client had a proprietary right to them.

He doubted that many clients would appreciate the need to retain the documents provided by their solicitors and would be at a significant disadvantage without them.

He realised that this may encourage satellite litigation, but that transparency might assist in the resolution of disputes and frivolous requests would be deterred if clients knew that they would have to pay for the copies.

The Master recognised that this decision differed from others of the SCCO and said that authoritative guidance would be useful.

The Master also queried the charging rate of £250.00 per hour as details of the fee-earner had been removed from the documents supplied.

“27. Further, quite apart from any concern as to the reasonableness of the fees generally and the necessity of expenses claimed in the bills in this case, it seems to me that there is a particular need to consider the status of the fee earner and the rates that were agreed for the fee earners (Pilbrow v Pearless de Rougmont & Co. [1999] 3 AER 355). In a letter dated 1 October 2015 the Claimant was told that a Legal Executive would be handling his claim but as I have recorded above the details of fee earners have been obscured in the documents disclosed. The rate of £250 per hour is perhaps a rate one would normally associate with a substantially higher-grade fee earner in a matter of significantly greater complexity and value. I would expect details as to the charging arrangements to be set out in the schedules to the CFA and I think it would be necessary to consider these prior to an application for an assessment in the context of a general consideration of the reasonableness of the funding arrangements and the charges.”

 

The Master also said

“29. I should perhaps add that the bills generated in 2015 do not state whether and, if so, what element of the charges consist of a success fee. Nor does the October bill assert any charge for a success fee. However, according to the Claim Notification Form the CFA provided for a success fee and as such the agreement would appear to be subject to the requirements of section 58 (4B) of the Courts and Legal Services Act 1990 and the Conditional Fee Agreements Order 2013 (no 689). The relevant information required by these provisions should be in the first of the schedules to the CFA.”

Both Green and Hanley are being appealed, with a decision likely before the summer 2018 break.

Written by kerryunderwood

June 25, 2018 at 9:38 am

Posted in Uncategorized

FIXED COSTS TRUMP CONSENT ORDER

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In Bratek v Clark-Drain Ltd – Case No B31YM002 – Cambridge County Court, 30 April 2018

Cambridge County Court, on appeal from a District Judge, was considering the interpretation of a consent order in relation to costs in a personal injury claim subject to fixed recoverable costs.

The matter had been in the EL/PL portal but had come out because liability was not admitted and was then set down for a fast track trial and was settled the day before the claim was due to be heard.

The consent order provided that the defendant do pay the claimant £10,000 in full and final settlement with the defendant to pay the claimant’s solicitor’s costs, on the standard basis, to be assessed if not agreed.

The claimant argued that this meant that this agreement took the matter outside the fixed costs regime, whereas the defendant said that that order left the matter subject to fixed recoverable costs.

The claimant’s argument was that the agreement should be construed on the basis that the parties had agreed that the fixed costs regime would not apply.

Here neither party had addressed themselves to the issue of whether there were exceptional circumstances for escaping fixed costs as set out in CPR 45.29J, and thus that was not an issue.

Here the judge held that the provisions of CPR 45.29D are mandatory and it is not possible for the parties to contract out of those provisions, and consequently unless CPR 45.29J, in relation to exceptional circumstances, applied, then in a fixed recoverable costs case the recoverable costs are indeed fixed.

Thus a consent order providing for costs to be assessed on the standard basis if not agreed, makes no difference at all.

Comment

A correct decision.

Written by kerryunderwood

June 20, 2018 at 12:12 pm

Posted in Uncategorized

THE BILL TO THE CLIENT AND CALCULATING THE AMOUNT DUE FROM THE CLIENT

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In relation to costs recovered from the other side, a bill must be delivered to the client and will normally be along the lines of:

“To Mr & Mrs Jones (payable by Dennis the Defendant)”

If the recovered costs are fixed, then there is no need to provide any further details in the bill, beyond saying that the costs are fixed in accordance with the Fixed Costs Scheme, or whatever.

In non-fixed costs cases there should have been correspondence with the client as to whether or not the sum proposed by the paying party is acceptable, and there should be wording along the lines of:

“As advised to you in correspondence, and full details of which are available on request.”

If you are limiting the total charge to the client by reference to a percentage of damages, then it is unlikely that the amount recovered from the other side will affect the actual charge to the client.

However, what it will do is to alter the figure which is unrecovered solicitor and own client costs and that element, if any, which is the success fee.

The charge to the client can be done in two separate bills, one setting out the balance of unrecovered solicitor and own client costs and the other one setting out the amount of the success fee, if any.

The reason for that is that it will generally show a low, or indeed non-existent, success fee as most of the charge, if not all, will be solicitor and own client unrecovered costs.

Solicitor and own client basic costs are far harder to attack, as compared with a success fee, especially if the Conditional Fee Agreement is a Contentious Business Agreement.

As we know the level of success fee is now under attack, and thus the lower it turns out to be, the better.

The invoice to the client in relation to unrecovered solicitor and own client costs should be a full narrative bill with the full charge but then stating:

“Less recovered costs as per separate invoice number …”

Often, due to the total charged to the client being capped by reference to damages, you will not be charging the full gap between solicitor and own client costs and recovered costs, in which case the following wording can be added:

“But capped at £X being X% of damages as per our agreement.”

If you are charging a success fee and if the balance between solicitor and own client costs and recovered costs does not hit the cap, then the balance is indeed a success fee and the narrative in the invoice should read:

“Success fee being the difference between unrecovered solicitor and own client costs as per invoice… and the agreed maximum charge to you of X% of damages – £X  -which amounts to a success fee of X%.”

The success fee is calculated on the full base rate, not the recovered element.

Thus if the rate is £400.00 per hour and the total solicitor and own client costs, whether recovered or not, are £10,000.00 and after charging the client the unrecovered element, the balance due by way of a success fee is £1,000.00, then that is a success fee of 10%.

Written by kerryunderwood

June 19, 2018 at 10:42 am

Posted in Uncategorized

COURT REFUSES TO GRANT SOLICITOR LIEN FOR COSTS

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In Bott & Co Solicitors Ltd v Ryanair DAC [2018] EWHC 534 (Ch)

the High Court refused to grant Bott & Co Solicitors equitable relief to protect its lien for costs in relation to flight delay compensation obtained from Ryanair.

The judgment helpfully distils numerous authorities considering the circumstances in which the court will intervene on equitable grounds to protect a solicitor’s lien.

Notably, the court distinguished this case from

Gavin Edmondson Solicitors Ltd v Haven Insurance Company Ltd [2015] EWCA Civ 1230

  which is under appeal to the Supreme Court.

Ryanair had started to settle pre-action flight delay compensation claims directly with Bott & Co’s clients.

Bott & Co therefore lost the opportunity to deduct its fees from the clients’ compensation.

Bott & Co requested that Ryanair undertake to preserve Bott & Co’s lien over any claim proceeds in accordance with

Khans Solicitors v Chifuntwe [2013] EWCA Civ 481

which held that equity will intervene to protect a solicitor’s claim on funds recovered or due to be recovered by a client or former client, where the paying party has notice of the receiving party’s solicitor’s claim.

When Ryanair refused to do so, the claimant issued proceedings for relief, including an indemnity in respect of fees where Bott & Co S had submitted a compensation claim to Ryanair on behalf of a client, and where Ryanair had paid the client directly, and the client had not settled Bott & Co’s fees.

Having reviewed the authorities pre-dating Gavin Edmondson, the court held that, in order for a solicitor to have an equitable lien in relation to property recovered or preserved, the following criteria must be fulfilled:

“(i) There must be a fund in sight;

(ii) recovered, preserved or established by the solicitor’s efforts or activity;

(iii) as a result of litigation or arbitration, including a compromise resulting from the pressure of litigation or arbitration between the solicitor’s client and the other party,

(iv) in which the solicitor has an interest that equity can protect and which is deserving of protection.”

A question arose as to the extent to which Gavin Edmondson had extended the third criterion.

The court observed that the justification for extending the Khans principle to Gavin Edmondson appeared to be that Edmondson’s clients, through its efforts, had participated in a voluntary but formalised scheme under the RTA Protocol, sanctioned by the judiciary, for the early resolution of claims involving personal injury, which, once the defendant insurers engaged with the relevant claims, gave rise to an entitlement to fixed costs under CPR 45.

The present case was “quite different” as there was no such scheme for the early resolution of flight delay compensation claims, much less one giving Bott & Co Solicitors an entitlement to costs under the CPR.

Consequently, there was “no principled basis” for extending to this case the protective principle exemplified in Khans and Gavin Edmondson.

Comment

This case has major implications for those solicitors faced with correspondence from the likes of JG and Checkmylegalfees.

If solicitors feel that there may potentially be small sums due to the lay client, then they can send that small sum to the lay client without any lien based liability for the new solicitors’ cost.

Any such costs would then be a matter between those new solicitors and the lay client.

Such cases clearly fall on the Bott & Co side of the line, and not the Gavin Edmondson side of the line.

Written by kerryunderwood

June 18, 2018 at 12:00 pm

Posted in Uncategorized

CLIENT’S LIABILITY FOR BILLS

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In Brookes (t/a Brookes & Co) v Atlantic Marine & Aviation LLP [2018] EWHC 1168 (Comm) (28 February 2018)

the Commercial Court held that a solicitor could bill her client, and the client was liable for the relevant fees, even though the solicitor had not provided any fee estimate before the work commenced, here.

The solicitor had acted for the client in a number of matters, and at the beginning of their relationship, the client had emailed the solicitor stating that, unless it was necessary to deal with the matter urgently, the client required a purchase order with a fee estimate before any work was commenced.

The footer to the client’s email stated that it did not constitute any offer, acceptance or contract and that no contract would be binding and no order placed or accepted without a signature on behalf of the client.

The solicitor replied stating that it was difficult to see how using purchase orders could work in practice and that it was difficult to give a firm estimate without more information about the claim.

The solicitor sent the client a Letter of Engagement and standard terms of business and the client gave instructions for work to be carried out and the solicitors delivered bills for that work.

The client then failed to pay the last bill and argued that a purchase order and estimate were conditions precedent to any liability for fees.

The court held that the footer on the client’s email deprived it of any contractual effect and that it needed to look at subsequent events.

The court noted that the client had not responded to the solicitor’s query about how the purchase order system could work in practice and had instructed the solicitor to do work without further mention of purchase orders.

Furthermore the solicitor’s Letter of Engagement made it clear that the solicitor’s terms and conditions of business applied.

It provided that if they were not signed and returned, then they were deemed to have been accepted.

Consequently there was no condition of precedent to the client’s liability for the bills and nor was there any implied retainer.

The solicitor’s terms governed the relationship and the solicitor was only obliged to use best endeavours to provide a costs estimate.

The appropriate way to resolve any dispute about the quantum of the outstanding bill was to send it for detailed assessment.

Written by kerryunderwood

June 15, 2018 at 10:05 am

Posted in Uncategorized

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