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.

 

Written by kerryunderwood

June 29, 2018 at 8:25 am

Posted in Uncategorized

NON-PARTY COSTS ORDERS

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THE DECISION SET OUT BELOW HAS BEEN OVERTURNED BY THE SUPREME COURT – SEE

Travelers Insurance Company Ltd v XYZ [2019] UKSC 48 (30 October 2019) 

SEE MY BLOG – 

NON-PARTY COSTS ORDERS: SUPREME COURT HOLDS INSURERS WILL RARELY BE LIABLE

 

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

SOLICITORS’ BILLS: NO CLIENT RIGHT OF ASSESSMENT OF A BILL NOT FORMALLY DELIVERED

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In Parvez v Mooney Everett Solicitors Ltd [2018] EWHC 62 (QB)

the Queen’s Bench Division of the High Court upheld a District Judge’s decision dismissing a claim by Parvez against her former solicitors  Mooney Everett for assessment under section 70 of the Solicitors Act 1974.

On 11 May 2018 a Single Judge of the Court of Appeal refused the lay client permission to appeal to the Court of Appeal here.

The document in question, which the client maintained was a bill, as it was headed “bill of costs” had been included in a file of papers sent to her new solicitors JG.

It had not previously been provided to her or referred to in correspondence and, applying

Kingstons Solicitors v. Reiss Solicitors [2014] EWCA Civ 172

the District Judge held that it was not a statute bill, as it had not been delivered, and, therefore, could not be the subject of assessment.

It was an internal document placed on the file, but never intended to be sent to the client.

 

On appeal the client argued that:

  • once delivered, the bill was a statute bill;

 

  • under the Solicitors Account Rules, the solicitors should have delivered it; and

 

  • where the solicitor had failed to do so, and the bill had otherwise come into the client’s possession, the client could elect to treat it as delivered.

 

Mr. Justice Soole, a full High Court Judge whose ruling is binding on all County Courts and the Senior Court Costs Office, rejected those arguments.

A client was not entitled to treat the bill as having been delivered, and it did not constitute a bill of costs.

 

Kingstons Solicitors v. Reiss Solicitors established that a document will be not be a bill of costs unless sent by the solicitor as a demand or claim of the sum therein stated to be due. Only the solicitor, and not the client or court, can determine the terms and content of the solicitor’s demand or claim for payment.

The court’s power under section 68 of the Solicitors Act 1974 to order a solicitor to deliver a bill of costs does not entitle the court to order, nor the client to seek, delivery of a specific identified document and thus to determine the terms and content of the solicitor’s claim for payment.

Even a breach of the Solicitors Accounts Rules would not entitle a client to treat an undelivered bill of costs as though it had been delivered, as that would enable the client to determine the terms and content of the claim for payment.

 

In refusing permission to appeal to the Court of Appeal the Single Judge gave the following reasons:

 

  1. The judge was right to hold that in order to be a “bill” the document in question must be sent as a demand for payment. A “bill” must have the same meaning in both s 69 and s 70. In addition the natural inference to be drawn from s 70 is that it permits challenges to bills that have been delivered in accordance with s 69.

 

  1. Whether or not the “August bill” was a bill, does not alter the fact that the “June bill” was not for the reasons given by the judge in relation to ground 1. The judge was right in his application of Kingstons Solicitors v. Reiss.

 

  1. The Defendants were not benefitting from their own wrong (as the judge correctly held at [60] last sentence). In those circumstances he was not bound to decide whether or not there was a breach of rule 17.2 (and I note that in any event whether there was a breach is disputed). Even if there had been such a breach, that does not turn an undelivered bill into a delivered one.

 

  1. The solicitors did determine the contents of the bill: it was the “August bill”. The Act does not permit the client to select a different document as amounting to the statute bill.

 

  1. An appeal would have no real prospect of success.

Written by kerryunderwood

June 14, 2018 at 10:47 am

Posted in Uncategorized

SOLICITORS’ BILLS, LIMITATION ACT AND ACKNOWLEDGEMENTS

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I deal with this in my book  Personal Injury Small Claims, Portals and Fixed Costs, which runs to three volumes and over 1,300 pages and available from Amazon here, or me here for £50.00

 

In Phillips and Co (a firm) v Bath Housing Co-Operative Ltd [2012] EWCA Civ 1591

the Court of Appeal held that a solicitor’s claim for costs, billed but not yet fixed by assessment or agreement, fell within the definition of “debt or other liquidated pecuniary claim” in section 29(5)(a) of the Limitation Act 1980, and thus was capable of acknowledgment, causing the six year limitation period to start running again.

Here, the work was completed in 2003 and as the solicitor’s fees had not been agreed, the solicitor was entitled to a reasonable amount under the quantum meruit rule.

On 10 September 2004 the solicitor claimant wrote to the client defendant stating the amount claimed.

On 20 September 2004 the client defendant replied, objecting to the amount.

On 8 September 2010 the solicitor sued and the client pleaded the lapse of time under the Limitation Act 1980, that is that more than six years had passed since the work was carried out.

The Court of Appeal held that the letter of 20 September 2004 was an acknowledgement under section 29(5) of the Limitation Act 1980 causing the six year period to start running again, and consequently the claim was in time and not statute-barred.

That left the issue of whether a claim for solicitor’s fees, absent a formal Contentious Business Agreement or Non-Contentious Business Agreement, was a claim in debt in the nature of a quantum meruit, as compared with a claim in damages.

It was, said the Court of Appeal. It was not relevant that it was not quantified unless and until it was either assessed by the court or agreed by the client or the subject of a judgment.

This was the first decision of the Court of Appeal on this point, even though the relevant provision had originally been in section 23(4) of the Limitation Act 1939.

The Limitation Act 1623 made no provision for time start again due to an acknowledgement or part payment but the courts got round this by treating an acknowledgement or part payment in the first six years as a promise to pay which revived the original action, described in Spencer v Hemmerde [1922] 1 AC 507 as “the task of decorously disregarding an Act of Parliament.”

Lord Tenterden’s Act of 1828 gave statutory effect to the policy of the courts.

In Thomas Watts and Co (a firm) v Smith [1998] 2 Costs LR 59

the court held that an unquantified debt due to a solicitor was analogous to a court case where judgment for damages to be assessed is given.

Here the Court of Appeal said:

“17. On the other hand, the liability of the client is clearly one in debt rather than in damages. A quantum meruit liability is in the nature of a debt, even if it has not yet been quantified in a binding manner between the parties.

  1. In Coburn v Colledge [1897] 1 QB 702 the solicitor’s cause of action was held to accrue as soon as the work is complete. The Court of Appeal said that a writ could have been issued at that time, though non-delivery of a bill might be a defence. It was not a necessary element of the cause of action for the solicitor to allege and prove that a bill had been delivered. Lopes LJ said at page 708 that “the solicitor would have sued in indebitatus assumpsit or on a common money count for work and labour”. Similarly, under section 69 of the 1974 Act, absent special circumstances mentioned in section 69(1), the solicitor cannot issue proceedings for recovery of the costs until the month has elapsed, but nevertheless the cause of action is complete before delivery of the bill.
  2. What I draw from these cases is that a solicitor’s claim for fees in circumstances such as this (leaving aside, therefore, cases of contentious or non-contentious business agreements) is a claim in debt (as opposed to damages) in the nature of a quantum meruit, but that it is not quantified unless and until it is either assessed by the court or agreed by the client or is the subject of a judgment (whether or not preceded by an assessment), and that the court’s task of assessment is to be carried out by a judicial process by reference to the relevant legislative provisions.”

 

A claim for damages for negligence or nuisance is not capable of acknowledgement under section 29(5)  – see

In Dwr Cymru v Carmarthenshire County Council [2004] EWHC 2991 (TCC)

 

Here, the Court of Appeal held that it did not need to decide whether a solicitor’s unquantified bill was a “debt” or an “other liquidated pecuniary claim.”

“One way or the other it is within the statutory phrase.” (Paragraph 48)

 

Acknowledgement

This will be a question of fact in each case and here the court noted that the client had expressed concern about the amount of the claim, but not about the fact of there being a claim at all.

The Court of Appeal said:

“If the letter had been entirely non-committal about the substance of the solicitors’ claim, then it may not have acknowledged anything, for example if the gist of it had been: we have received your letter, but we are under too much pressure to deal with it now, for reasons specified (or not), and we will come back to you when we have time.”

 

 

 

 

Written by kerryunderwood

June 13, 2018 at 8:37 am

Posted in Uncategorized

SOLICITORS’ BILLS: SIGNATURE REQUIREMENTS

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For the rest of this month I will be posting a series of blogs relating to getting the Solicitor and own client retainer right.

I deal with this in my book  Personal Injury Small Claims, Portals and Fixed Costs, which runs to three volumes and over 1,300 pages and available from Amazon here, or me here for £50.00

The relevant legislation is Section 69 of the Solicitors Act 1974 and the signature requirements are dealt with in Section 69 (2A) which reads:

 

“(2A) a bill is signed in accordance with this subsection if it is –

 

(a) signed by the solicitor or on his behalf by an employee of the solicitor authorized by him to sign, or

 

(b) enclosed in, or accompanied by, a letter which is signed as mentioned in paragraph (a) and refers to the bill.”

 

 

 

There is no further reference to authorization and thus that is entirely an internal matter and, in my view, as a matter of common law and general construction that authorization could be retrospective.

 

Certainly the client does not need to be informed that that employee is authorized by the solicitor to sign bills.

 

Section 69 (2A)(b) goes further and states that the bill is signed in accordance with the subsection if the bill is enclosed in, or accompanied by, a letter which is signed by the solicitor or by an employee of the solicitor authorized by him to sign.

 

For all intents and purposes the bill can be signed by anyone.

 

Section 69(2)(b) also requires the bill to be delivered in accordance with Section 69(2)(C) and that section reads:

 

“(2C) a bill is delivered in accordance with this subsection –

 

(a) it is delivered to the party to be charged with the bill personally;

 

(b) it is delivered to that party by being sent to him by post to, or left for him at, his place of business, dwelling house or last known place of abode, or

 

(c) it is delivered to that party –

 

(i) by means of an electronic communications network, or

 

(ii) by other means but in a form nevertheless requires the use of apparatus by the recipient to render it intelligible,

 

and that party has indicated to the person making the delivery his willingness to accept delivery of a bill sent in the form and manner used.

 

 

That last part appears to me to apply to both Section 69(2C)(c) (i) and (ii) and thus there is a requirement that the recipient of the bill has indicated willingness to accept delivery by email or in any other non-personal or non-postal form.

 

Section 69(2D) then provides that any indication given under Section 69(2C)(c) must state the address to be used and must be accompanied by such other information that person requires for the making of the delivery and may be modified or withdrawn at any time by a notice given to that person.
Section 69(2E) creates a statutory presumption that where a bill is proved to have been delivered in compliance with the requirements of sub-sections (2A) and (2C), it is not necessary in the first instance for the solicitor to prove the contents of the bill and it is to be presumed, until the contrary is shown, to be a bill bona fide complying with the Act.

 

Overall that represents a major relaxation of the earlier law.

 

Section 69(5) provides that references to an electronic signature are to be read in accordance with Section 7(2) of the Electronic Communications Act 2000. Section 69(6) provides that “Electronic Communications Network” has the same meaning as in the Communications Act 2003.
Section 7 of the Electronic Communications Act 2000 reads as follows:

 

“7.          Electronic signatures and related certificates.

 

(1) In any legal proceedings—

 

(a)          an electronic signature incorporated into or logically associated with a particular electronic communication or particular electronic data, and

 

(b)          the certification by any person of such a signature, shall each be admissible in evidence in relation to any question as to the authenticity of the communication or data or as to the integrity of the communication or data.

 

(2) For the purposes of this section an electronic signature is so much of anything in electronic form as—

 

(a)          is incorporated into or otherwise logically associated with any electronic communication or electronic data; and

 

(b)          purports to be used by the individual creating it to sign.

 

(3) For the purposes of this section an electronic signature incorporated into or associated with a particular electronic communication or particular electronic data is certified by any person if that person (whether before or after the making of the communication) has made a statement confirming that—

 

(a)          the signature,

 

(b)          a means of producing, communicating or verifying the signature, or

 

(c)           a procedure applied to the signature, is (either alone or in combination with other factors) a valid means of signing.”

 

 

The Communications Act 2003 has no fewer than 411 Sections and 19 Schedules and, happily, I do not think it necessary to make any further reference to it in this piece.

Written by kerryunderwood

June 12, 2018 at 8:25 am

Posted in Uncategorized

CONDITIONAL FEE AGREEMENTS AND INTERIM STATUTE BILLS

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Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

The High Court’s decision in

Richard Slade & Co Solicitors v Boodia and another [2017] EWHC 2699 (QB)

has been overturned by the Court of Appeal:  see

Slade (t/a Richard Slade And Company) v Boodia & Anor [2018] EWCA Civ 2667 (27 November 2018).

 

I deal with the decision of the Court of Appeal  in my blog –

 

 SOLICITORS ACT: STATUTE BILL NEED NOT INCLUDE DISBURSEMENTS

 

However I have left this blog, and the discussion, here as I believe it is useful in considering this whole issue.

Discounted Conditional Fee Agreements and Interim Statute Bills

In Sprey v Rawlison Butler LLP [2018] EWHC 354 (QB)

the court considered whether monthly bills delivered by a solicitor to his client under a discounted conditional fee agreement were “statute bills”, and therefore capable of detailed assessment under section 70 of the Solicitors Act 1974.

A solicitor’s retainer is an entire contract and usually the solicitor is entitled to be paid by the client only at the end of the retainer, such as at the conclusion of the litigation.

There are two exceptions to this:

  • where the solicitor and client have agreed that the solicitor may render interim bills;

 

  • at a natural break in lengthy litigation (Re Romer & Haslam [1893] 2 QB 286).

 

Agreement may be inferred from conduct, such as where the solicitor renders interim bills which the client accepts and pays (Abedi v Penningtons [2000] 2 Costs LR 205).

Here, the court said that the construction of the Conditional Fee Agreement did not permit or anticipate the rendering of interim statute bills.

Clause 11.1 under the section “Right to apply for an assessment” gave a clear indication that the invoices were not statute bills, as it said that the client had the right to challenge the bills under Section 70 of the Solicitors Act 1974, which was described as the “right to assessment by the court of the amount of the fees, Success Fee and/or Disbursements which are payable by the client under this agreement”.

The court said that unless those three items, that is fees, success fee and disbursements, were read separately, that is disjunctively, then the right to challenge them arose only at the end of the case.

Thus the interim bills were not statute bills, but rather requests for payment on account, or, in the circumstances, Chamberlain bills – see below.

There were other clauses which referred to fees being payable upon the final result of the claim.

A bill rendered by a solicitor to his client may be one of three things:

  • a “statute bill” (or, if the solicitor is entitled to render interim bills, an “interim statute bill”), that is, a final bill for the period that it covers, which complies with the requirements of the Solicitors Act 1974 (SA 1974), can be sued on by the solicitor (under section 69) and which is capable of detailed assessment under section 70;

 

  • a request for payment of a sum on account;
  • a “Chamberlainbill”, that is, a series of bills which become a statute bill only upon delivery of the last (after Chamberlain v Boodle & King [1982] 1 WLR 1443).

A statute bill cannot subsequently be amended without the consent of the parties or an order of the court, which will be granted only in exceptional circumstances (Polak v Marchioness of Winchester [1956] 1 WLR 819).

Statute bills are final bills in respect of the work that they cover, in that there can be no subsequent adjustment “in light of the outcome of the business”.

They are complete, self-contained bills of costs to date (Bari v Rosen [2012] EWHC 1782 (QB)).

Applications by a former client for an order for detailed assessment of the solicitor’s bill under section 70 of the SA 1974 are subject to time limits, as follows:

If the application is made more than 12 months after the client has paid the bill, no order can be made (section 70(4)).

If the application is made more than 12 months after the bill is delivered, or after the bill has been paid (but within 12 months of payment), the client must show special circumstances (section 70(3)).

If the application is made within 12 months of delivery of the bill, the court may impose terms when making an order for assessment, unless the application was made within one month of delivery, when it may not (section 70(2)).

If the client can show that the invoice or bill was no more than a demand for a payment on account, then he or she will be able to await the production of a statute bill and then make a request for an assessment within the time limits set out in the SA 1974.

 

In Richard Slade & Co Solicitors v Boodia and another [2017] EWHC 2699 (QB)

Slade J held that bills submitted by the claimant firm had not been statute bills.

That decision has been overturned by the Court of Appeal – see above – but I include the discussion of the matter here.

The firm had invoiced monthly for profit costs but had invoiced separately, and later, for disbursements incurred in periods already billed.

To constitute a bill of costs under section 70 of the SA 1970, an interim statute bill had to represent the totality of the costs incurred or payable in respect of the period of the bill to enable the client to decide whether to exercise their right to challenge the amount.

At paragraph 33 of her judgment, Slade J said:

 

 

“The period within which a client can seek an assessment of costs runs from delivery of the bill. On the facts of this case none of the bills contained both profit costs and disbursements. On the defendant’s argument time for applying for an assessment of the bills runs from the date of delivery of each monthly profit costs bill. The court would be asked to make an assessment without knowing what disbursements had been paid or were liable to be paid by the solicitor in respect of the same period. In my judgment such an exercise would be contrary to the provisions of s.70 which by s.70(5) give the court not the parties a discretion to order separate assessments of profit costs or other costs within a bill. Further, as Mr Dunne submitted, to undertake an assessment of profit costs without knowing what disbursements were for the same period may deprive the client [of] the information on which to decide whether to challenge the profit costs bill for, for example, duplication of work by solicitor and counsel.”

And at 56:

“The Master was bound by statute as explained in authority to hold that an interim statute bill must contain a bill of all costs including profit costs and disbursements in respect of agreed periods of time. Any practical difficulties which this requirement may cause to the solicitor are outweighed by the certainty given to the client, safeguarded by statute and authority, of knowing the total amount of costs they are being asked to pay. The client needs to know the total costs incurred over a certain period to enable them to form an evidenced based view of whether to exercise their right under s.70 to challenge the bill. The right of a client to apply for assessment under s.70 is time limited. After expiry of the specified time limit that right is lost as is asserted by the defendant in respect of the majority of bills in this case. The treatment of incomplete bills of costs as statutory bills could lead to a multiplicity of applications under s.70 merely to preserve the client’s right to apply for assessment”.

 

Comments:

It is unclear from the judgment as to whether a bill delivered during a no win lower fee case can ever be a statute bill.

Although the court said that here the wording of the Conditional Fee Agreement was inconsistent with the ability to deliver interim statute bills – a highly questionable conclusion which disagreed with the decision of the Costs Master – it is open to question whether a different wording would have made any difference.

This is due to the line of authorities that says that a client does not need to decide whether to challenge the bill until she/he knows the full amount, which in a conditional fee case will not be until the end.

That makes no sense.

A client paying an hourly rate, win or lose, can be subject to interim statute bills even though s/he will not know until the end of the case how much the total will be.

Why should a no win lower fee client, paying a lower sum unless the case is won, be in a better position?

In any event, the client can calculate what the fee would be in the event of success.

 

Here the discounted fee was 40% of the full fee, with a 50% success fee.

 

So, if an interim statute bill of £40 is delivered, then the client knows the extent of the costs if the case is won:

 

£

Balance of fee                                                               60

 

50% success fee on the full fee of £100                   50

 

Total                                                                               110

 

This is a wrong decision.

 

Solicitors act assessments: interim statute bills: Conditional Fee Agreements

 

In Richard Slade and Company v Boodia and Boodia [2017] EWHC 2699 (QB)

the Queen’s Bench Division of the High Court, in an appeal from the Senior Courts Costs Office, upheld the Cost Master’s finding that interim statute bills must include disbursements.

As they had not done so here, they were not interim statute bills, and thus were not final bills for the period described, because not all of the costs were included in the bill.

Consequently the clients were not time-barred from seeking Solicitors Act Assessments for all 61 invoices involved.

The term “interim” statute bill is a little confusing as in fact the whole point of such a bill is that it is final and complete for the period it covers. That finality and completeness allows solicitors to sue on the bill pursuant to the provisions of Section 69 of the Solicitors Act 1974, but prevents the solicitor from charging any further fees for that period.

Thus finality and certainty is there for both parties and a client can decide whether or not to pay or dispute the bill.

 

The Shorter Oxford English Dictionary definition of “interim” is:

 

“A thing done in an interval; an interlude”

 

and thus the description is technically correct as, in the absence of contractual entitlement to the contrary, an interim statute bill can only be delivered when there is a natural break, or interlude, in the proceedings.

In fact most solicitor and client retainers create a contractual right to deliver an interim statute bill at any time.

However the other dictionary definition of “interim” is:

 

A temporary or provisional arrangement”

 

and that is where the potential confusion arises as in relation to that period, the whole point is that the bill is a final and permanent arrangement for that time.

The courts have long realised that the wording is somewhat unfortunate. In

Bari v Rosen (trading as RA Rosen & Co Solicitors) [2012] 5 Costs LR 851

the court said 

“15. … a solicitor may contract with his client for the right to issue statute bills from time to time during the currency of the retainer. Such bills are known as “interim statute bills”. They are nevertheless final bills in respect of the work they cover, in that there can be no subsequent adjustment in the light of the outcome of the business. They are complete self-contained bills of costs to date.”

 

Here the High Court adopted that wording and reasoning.

It is important to note the wording that “there can be no subsequent adjustment in light of the outcome of the business.”

Thus if a bill is genuinely an interim statute bill charged at the discounted rate in a No Win Lower Fee Agreement, then there can be no subsequent further charge.

Here the court did briefly refer to the situation in a Conditional Fee Agreement case saying:

 

 

“The only potentially practical difficulty would be in a CFA case. Until the outcome of the case was known the client’s liability for costs could not be determined. However, where a decision was to be made between an interpretation that caused inconvenience to a solicitor and one which caused prejudice to a client, the client’s interest prevails.”

 

The point here is that generally a solicitor can deliver an interim statute bill, as they will know the work done to date and any disbursements incurred, and thus a final interim statute bill can be delivered and the client has to pay it and the solicitor can sue on the bill if it is not paid.

Obviously that cannot be done in a conditional fee case, as the final bill for that period will not be known until the case is concluded.

It is also most important that solicitors in conditional fee cases, whether No Win No Fee or No Win Lower Fee cases, make it clear when delivering a disbursements only bill, that it is not an interim statute bill. Otherwise it may be found that the solicitor can deliver no further charges for that period, and thus cannot charge profit costs.

Proper wording of the bill avoids that problem, but creates another problem, namely that the solicitor cannot sue on an interim on account bill as compared with an interim statute bill.

Thus it is essential to obtain payment on account of such costs, and then an interim on account bill can be delivered and the costs transferred from client account to office account to discharge that bill.

Generally, care needs to be taken when delivering an interim statute bill to ensure that all disbursements to date are included.

There is an obvious problem in relation to counsel’s fees in that counsel may be carrying on work generally and not have delivered a fee note for work done to date.

This is recognised in the judgment where the court says:

 

“54. Master James recognised in paragraph seven of her judgment the practical difficulties of obtaining and including disbursements such as fees for counsel and experts to coincide with the period in time to which a solicitor’s fees relate. The Master recognised that her answer that interim non-statute bill could be rendered carried the disadvantage by reason of Section 69 their payment cannot be enforced by taking proceedings.”

 

Depending upon the circumstances of the funding arrangement and the case, sometimes solicitors will want an interim bill to be a final statute bill for that period, and sometimes they will not.

 

The benefit of having a final interim statute bill is that the solicitor can sue on it and the client has strict time limits in which to challenge the bill under the Solicitors Act 1974.

The disadvantage from the solicitor’s point of view is that they cannot revisit the work done in that period, and thus it must be a carefully calculated and costed bill for work done during that period.

 

Thus if a solicitor, in a long ongoing matter, simply wishes to bill say £2,000.00 a month and then adjust the total each year, or at a natural interlude, or at the end of the case, then the solicitor must ensure that it is not an interim statute bill.

 

Perhaps the most significant area where solicitors must ensure that the bill is not an interim statute bill is where they are acting on No Win Lower Fee basis and thus charging the client the discounted fee as the matter proceeds, but with the right to charge the full primary fee, plus a success fee if appropriate, in the event of a successful outcome.

 

Let us assume the solicitor is charging £400.00 an hour, discounted to £200.00 an hour in the absence of access, and with a 100% success fee.

10 hours’ work is done and the matter is continuing.

The correct level of the bill is £2,000.00, reflecting the discounted rate, payable even in the event of defeat.

However, the solicitor will potentially be charging a further £600.00 an hour for that work, being the primary rate of £400.00 an hour plus a 100% success fee of £400.00 an hour, bringing the total up to £800.00 an hour, of which £200.00 per hour has been paid.

In those circumstances, which will become increasingly common in general civil and commercial work once fixed costs are extended, it is crucial that the bill delivered is not a statute bill.

Such bills are in fact “on account” bills and this should be made clear in the text of the bill.

Furthermore the bills should not refer to Solicitors Act assessments as that indicates that they are statute bills. That was the case here but the court held that it “would be reluctant to make a finding of a fatal flaw in the retainer” for that reason.

Where there is a series of interim, and not statute, bills delivered as part of a running account in respect of one piece of work, then the time for requesting assessment, and the time from when the solicitor can sue on the bills, runs from the date of delivery of the final, statute, bill.

Such a bill is known as a Chamberlain Bill, following the case of

 

Chamberlain v Boodle and King [1982] 3 All ER 188.

 

 

Here the court examined the authorities and stated that in order for a bill to be a statute bill, whether interim or final, it “must be complete, self-contained and final in relation to costs to date.”

 

A solicitor may render a bill and a client may pay that bill without it constituting a statute bill – see paragraph 22.

 

That is what is happening when a bill for the discounted element of the fee in a No Win Lower Fee Agreement is delivered and paid.

 

The assumption, as here, is that a solicitor will want any interim invoice to be an interim statute bill so that it can be sued upon and so that the client’s time for applying for an assessment starts to run.

 

However with conditional fee cases exactly the opposite is true.

 

 

In practice

 

Do not have the wording about the right to a Solicitors Act 1974 assessment on an “on account” bill.

 

Although it is not strictly necessary to include all disbursements for the relevant period in an “on account” bill, it is good practice.  It also avoids a client saying something to the effect of “I knew there would be more legal costs payable if I won, but I thought that all the disbursements were already dealt with as I was paying those as we went along, win or lose.”

 

Include in an on account bill wording along the following lines:

 

This is an interim on account bill. It is not a final bill for the work done during the period covered by this bill.

 

We reserve the right to deliver an additional, final, bill at the end of the matter.

 

Your time for challenging our costs and for applying for an assessment under Sections 70,71 and 72 of the Solicitors Act 1974 does not start until that final bill has been delivered.

 

We will advise you of your rights when we deliver that final bill.”

 

The following wording could be used for a Conditional Fee Agreement case, suitably adapted to effect the terms of the Conditional Fee Agreement:

 

This Interim on account bill represents the fees payable in any event, whether you win or lose your case and full details of the work done [are contained in this on account bill][are available on request][are contained in the attached schedule] and please ask us if you want any more information about that work.

 

These fees are calculated at the discounted rate in the Conditional Fee Agreement. If the case is won then you pay the full primary rate, together with a success fee”

 

[As the discounted rate is 50% of the full primary rate, then if you win the case you will pay the same sum again, being the difference between the primary rate and the discounted rate.

 

In addition, you will pay a success fee of []% on that full primary rate giving a further fee of [insert amount].

 

So, if you win, you will pay a further [Insert amount] in fees over and above the amount contained in this bill.

 

[However, the total charged to you, including this bill, is capped at []% of [damages][damages recovered].

 

This bill [does][does not] include all disbursements to date.

 

 

Theoretically, I think it possible to deliver a final interim statute bill for the discounted fee in a Conditional Fee Agreement, which would finalise the client’s liability in the event of defeat and enable the solicitor to sue on that element of the bill.

 

An additional bill could then be delivered on the basis that that is a free standing contractual entitlement to the balance of the full primary fee, plus the success fee.

 

However, given the fact that the Solicitors Act did not envisage Conditional Fee Agreements, and there is no authority on the point, I advise against such a course of action.

 

In any event if a solicitor is suing a client for the discounted fee part way through the case, it is hard to see how the solicitor client relationship could be one allowing the solicitor to continue to act until the end of the case.

 

 

Written by kerryunderwood

June 11, 2018 at 8:28 am

Posted in Uncategorized

FUNDAMENTAL DISHONESTY AND PERSONAL INJURY

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These issues are dealt with in my book Qualified One-Way Costs Shifting, Section 57 Set-off available from Amazon here or from me here

Fundamental dishonesty and section 57

In Molodi v Cambridge Vibration Maintenance Service (1) and Aviva Insurance Limited (2) [2018] EWHC 1288 (QB)

the High Court allowed the defendant’s appeal and held that the claim be dismissed on the ground that the claimant had been fundamentally dishonest within the meaning of Section 57 of the Criminal Justice and Courts Act 2015.

This was a road traffic accident and there was no doubt that the defendant was responsible for the accident – see paragraph 4 of the appeal judgment.

However, the claimant lied about various matters, including stating that he had only one previous claim, whereas he had had between five and seven previous claims, the duration of his symptoms, the cost of repairs to his vehicle, the need for physiotherapy sessions and the length of time off work.

The trial judge, in finding for the claimant, appears to have been influenced by the poor quality of legal staff involved in such cases:

 

“I have hardly seen a Claim Notification Form in the last number of years where the detail of the accident as I found it on the evidence, often on objective evidence, is properly recorded in the Claim Notification Form. The process itself is often, because of its nature, littered with inaccuracy, partly because the forms are filled out by relatively lowly junior people in the office who are not qualified, partly because they do not take sufficient care over setting out the details and sometimes as they type it up they make mistakes. I see it in almost every case. The fact that there is no mention made of the right hand does not of itself concern me. The other injuries are broadly referred to.”

 

 

The fact that fraud had not been pleaded did not prevent the court from making a finding of fundamental dishonesty – see

 

Kearsley v Klarfeld [2005] EWCA Civ 1510:

 

“There is no substantive obligation on the Defendant to plead fraud so long as his reasons for resisting the claim are clearly stated in accordance with CPR 16.5.”

 

The High Court also quoted from the Court of Appeal’s decision in

 

Howlett v Davies[2017] EWCA Civ 1696

 

31. Statements of case are, of course, crucial to the identification of the issues between the parties and what falls to be decided by the court. However, the mere fact that the opposing party has not alleged dishonesty in its pleadings will not necessarily bar a judge from finding a witness to have been lying: in fact, judges must regularly characterise witnesses to have been deliberately untruthful even where there has been no plea of fraud. On top of that, its seems to me that where an insurer in a case such as the present one, following the guidance given in Kearsley v Klarfeld, has denied a claim without putting forward a substantive case of fraud but setting out ‘the facts from which they would be inviting the judge to draw the inference that the plaintiff had not in fact suffered the injuries he asserted’, it must be open to the trial judge, assuming that the relevant points had been adequately explored during the oral evidence, to state in his judgment not just that the claimant has not proved his case but that, having regard to matters pleaded in the defence, he has concluded (say) that the alleged accident did not happen or that the claimant was not present. The key question in such a case would be whether the claimant has been given adequate warning of, and a proper opportunity to deal with, the possibility of such a conclusion and the matters leading the judge to it rather than whether the insurer had positively alleged fraud in its defence.”

 

Here the High Court was clearly influenced by “the problem that fraudulent or exaggerated whiplash claims have presented for the insurance industry and the courts.”(paragraph 44).

The High Court set out detailed guidance as to what courts should expect to see in genuine whiplash claims:

 

44. Before considering the particular issues in this case, it is also pertinent to recognise the problem that fraudulent or exaggerated whiplash claims have presented for the insurance industry and the courts. This was recognised in March 2018 when the Ministry of Justice published a Civil Liability Bill which aims to tackle insurance fraud in the UK through tougher measures on fraudulent whiplash claims, proposing new, fixed caps on claims and banning the practise of seeking or offering to settle whiplash claims without medical evidence. The problem of fraudulent and exaggerated whiplash claims is well recognised and should, in my judgment, cause judges in the County Court to approach such claims with a degree of caution, if not suspicion. Of course, where a vehicle is shunted from the rear at a sufficient speed to cause the heads of those in the motorcar to move forwards and backwards in such a way as to be liable to cause “whiplash” injury, then genuine claimants should recover for genuine injuries sustained. The court would normally expect such claimants to have sought medical assistance from their GP or by attending A & E, to have returned in the event of non-recovery, to have sought appropriate treatment in the form of physiotherapy (without the prompting or intervention of solicitors) and to have given relatively consistent accounts of their injuries, the progression of symptoms and the timescale of recovery when questioned about it for the purposes of litigation, whether to their own solicitors or to an examining medical expert or for the purposes of witness statements. Of course, I recognise that claimants will sometimes make errors or forget relevant matters and that 100% consistency and recall cannot reasonably be expected. However, the courts are entitled to expect a measure of consistency and certainly, in any case where a claimant can be demonstrated to have been untruthful or where a claimant’s account has been so hopelessly inconsistent or contradictory or demonstrably untrue that their evidence cannot be promoted as having been reliable, the court should be reluctant to accept that the claim is genuine or, at least, deserving of an award of damages.”

 

 

In overturning the trial judge’s finding, the High Court said that the judge had “adopted a much too benevolent approach to evidence from a claimant which could be demonstrated to be inconsistent, unreliable and, on occasions, simply untruthful.”

 

The High Court also stressed the importance of the accuracy of the medical report in whiplash cases:

 

46. The medical evidence is at the heart of claims for whiplash injuries. Given the proliferation of claims that are either dishonest or exaggerated, for a medical report to be reliable, it is essential that the history given to the medical expert is as accurate as possible. This includes the history in relation to previous accidents as this goes to fundamental questions of causation: whether, if there are ongoing symptoms, those are attributable to the index accident or to previous accidents or to some idiopathic condition of the claimant. Furthermore, the knowledge that a claimant has been involved in many previous accidents might cause a medical expert to look rather more closely at what is being alleged on the incident occasion to see whether the claimant is being consistent and whether his reported injuries are in accordance with the reported circumstances of the accident. Once, as here, the Claimant could be shown to have been dishonest in respect of a fundamental matter and then to have maintained that dishonesty through his witness statement and into his evidence before the Court, it is difficult to see how the Learned Judge could have accepted any other part of the Claimant’s evidence or the medical report itself – and, without these, there was nothing left.”

 

The High Court upheld the defendant’s submission that the claimant had been fundamentally dishonest and that the claim should therefore be dismissed.

It went further and said that the trial judge should have dismissed the claim on the basis that the claimant had failed to prove his case that any injury occurred, even though the defendant admitted primary liability for the accident.

 

QOCS, fundamental dishonesty and discontinuance

In Alpha Insurance A/S v Roche and Roche [2018] EWHC 1342 (QB)

the Queen’s Bench Division of the High Court held that the Circuit Judge should have allowed the defendant’s allegation of fundamental dishonesty to be heard in circumstances where the claimants had discontinued the day before trial.

The starting point on discontinuance in a QOCS case is no different from a claimant losing the case –  there is a costs order in the defendant’s favour in the usual way, but generally it cannot be enforced unless certain circumstances set out in CPR 44.13 to CPR 44.17, dealing with QOCS, applies.

The Practice Direction accompanying CPR 44  provides at 12.4 that:

“(c) where the claimant has served a notice of discontinuance, the court may direct that issues arising out of an allegation that the claim was fundamentally dishonest be determined notwithstanding that the notice has not been set aside pursuant to rule 38.4;”

The Circuit Judge refused the defendant’s application on the ground that a further hearing would involve “a disproportionate use of limited and precious court resources, given the amount of time and court resources that have already been devoted to the pursuit of this case”.

The Circuit Judge went on to find that “there is nothing…which suggests that there is any particular exceptional quality about this particular case that should cause me to give further directions and to set aside further court time to allow this particular isolated issue of dishonesty to be ventilated.”

The High Court found that that constituted an error of law as there is no requirement in the Practice Direction of exceptionality.

The High Court pointed out that if a case is settled, rather than discontinued, then the Practice Direction does specifically require that there be exceptional circumstances before there is a hearing in relation to alleged fundamental dishonesty.

The Circuit Judge appears to have exercised his discretion on the failure to understand the law, and consequently had erred in law, allowing the High Court to set the decision aside.

On discontinuance the court has an unfettered discretion which requires it to weigh all relevant considerations in accordance with the overriding objective and there is no presumption either way, that is that the court will generally direct determination of the issue of fundamental dishonesty, nor that it will generally not make such a direction.

 

The High Court had this to say:

 

“18. The provision has been introduced expressly to allow issues of fundamental dishonesty to be determined after discontinuance. Inevitably, this involves the allocation of further court resources to a case in which the claim is no longer being pursued. It will not be uncommon for such cases to involve relatively modest costs. However, in considering proportionality, it does need to be recognised that there is a public interest in identifying false claims and in claimants who pursue such claims being required to meet the costs of the litigation.”

 

Two factors which weighed heavily in the balance for the High Court were the very late stage at which the claim was discontinued and the complete absence of any explanation from the claimants, in a case where the defendant had admitted negligence but had alleged that the second claimant’s claim was fraudulent.

Thus this would have brought Section 57 of the Criminal Justice and Courts Act 2015 into play had the matter gone to a contested hearing.

As the case was discontinued, that ceased to be an issue, as the claimants lost the case in any event, and the issue here was fundamental dishonesty for the purpose of depriving the claimants of the protection of QOCS.

The High Court said:

However, where liability is not disputed save for the allegation of fundamental dishonesty and where the matter is close to trial, I believe some explanation can reasonably be expected.”

 

These issues are dealt with in my book Qualified One-Way Costs Shifting, Section 57 Set-off available from Amazon here or from me here

 

 

 

 

 

 

Written by kerryunderwood

June 8, 2018 at 8:30 am

Posted in Uncategorized

SPLIT TRIALS: AN EXTINCT SPECIES?

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In Howard & Ors v Chelsea Yacht And Boat Company Limited (1) & The Port of London Authority (2)  [2018] EWHC 1118 (Ch)

a Chancery Division Master refused to order the trial of a preliminary issue and considered a number of Court of Appeal authorities on the point, and these are set out in paragraphs 19 to 21 of the judgment.

Any given case will be fact sensitive, but this case is in line with a recent trend of refusing split trials.

The general view is that split trials result in further delay and increased costs and have been described by the Court of Appeal as “offering a siren song to the parties”.

The starting point now appears to be that the court will refuse such an application unless there are powerful arguments for allowing it.

Written by kerryunderwood

June 7, 2018 at 8:26 am

Posted in Uncategorized

COURT FEES

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COURT FEES – WHEN QUANTUM INCREASES

In Various Claimants v MGN Ltd [2017] EWHC 1883 (Ch)

the Chancery Division of the High Court dismissed the Defendant’s application to strike out the claims for abuse of process and allowed the Claimants to amend the statements of value on the claim form, and pay the increased court fees.

The claim forms originally stated a value of “up to £100,000″ and the Defendant offered that sum but the Claimants declined.

As the Defendant had complained about the Claimants incurring excessive costs, the Claimant sought the Defendant’s consent to incur the costs of amending the claim form to seek unlimited damages.

The Defendant declined and the Claimant suggested paying an increased issue fee if the damages at trial exceeded the sum on the claim forms.

The Defendant argued that the Claimants’ conduct in continuing the claims in spite of its offer was an abuse of process and applied to have the claims struck out and the Claimant cross-applied to amend the claim forms.

The Chancery Division said that although the Defendant had offered the Claimant what their claim form suggested they wanted, the Claimants had almost immediately made it clear that they wanted more, and from that time it was “an almost wilful misreading of the situation” to suggest that the Claimants had acted abusively by proceeding with a claim when the Defendant had offered to satisfy it.

The only reason that the Claimants had not applied immediately to amend the claim forms was because it wished to save the Defendant costs.

Following the decision in

Lewis v Ward Hadaway [2015] EWHC 3503 (Ch)

it could be an abuse of process deliberately to understate the amount claimed in order to avoid paying the appropriate court fee.

However, here, there was no suggestion that this had happened.

CPR 16.3(7) protects a Claimant from the potential adverse technical consequences of “leaving a low claim figure in the claim form but getting a higher award”.

However, where a Claimant’s expectations genuinely change during the proceedings, the Claimant should not “wait and see” if it recovers more at trial, but should amend the claim form at that time and thus trigger payment of an extra issue fee.

In this case, given the Defendant’s previous complaints about costs, the Claimants’ approach was understandable, but this was not a matter to be decided between the parties with the Claimants paying extra fees if they won sufficiently at trial.

Court fees depend upon expectations, not the level of the actual award.

 

COURT FEES AND STRIKING OUT

In Cross v Black Bull (Doncaster) Limited, Sheffield County Court, 21 December 2017,

the Circuit Judge allowed an appeal against the District Judge’s decision to strike out a case on the ground that failure to pay the correct fee was an abuse of process.

The Court of Appeal has now refused the Defendant permission to appeal against the decision of the Circuit Judge.

The Court of Appeal confirmed the Circuit Judge’s finding that it was for the applicant to establish the case of abuse of process, and not for the Claimant to disprove it.

Furthermore an allegation of abuse of process against any firm of solicitors is a serious matter which requires to be established on more than mere speculation.

Gordon Exall, in his excellent blog – Civil Litigation Brief says that he is unaware of any case at appeal level where a case has been struck out for under payment of court fees, or where an Appeal Court has upheld such a first instance striking out.

 

Written by kerryunderwood

June 6, 2018 at 8:36 am

Posted in Uncategorized

WINDING UP PETITIONS AND ADJUDICATORS’ DECISIONS

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In Victory House General Partner Ltd, Re A Company [2018] EWHC 1143 (Ch)

the Chancery Division of the High Court dismissed a winding up petition where a contractor sought to enforce a judgment debt arising out of an adjudicator’s decision.

There had been two adjudications and the first adjudicator had decided the sum due under interim application 30 (IA 30) and the second adjudicator then determined the contractor’s work up to and including IA 31.

The second adjudicator determined the gross value at £7.087 million and the net value at £6.98 million, which was less than then the sum of £8.5 million paid on account, and so there was nothing due under IA 31.

In the winding up proceedings, the employer argued that if it paid the judgment sum, then it would have a cross-claim based on the second adjudicator’s decision, which would immediately entitle it to request repayment in restitution.

The employer relied in part on

Grove Developments Ltd v S&T (UK) Ltd [2018] EWHC 123 (TCC)

and submitted that its case was stronger than in the Grove case as here the adjudicator had not been asked to consider the same interim application, but had carried out the sort of true valuation exercise envisaged in Grove.

The court accepted that the cross-claim was genuine and that the debt was disputed on substantial grounds – see

Re Bayoil SA [1998] EWCA Civ 1364.

The court held that dismissing the petition was a “more just result” particularly in circumstances where the employer had paid substantially more than the contractor was entitled to under the contract and it would be “quite wrong”  for the company to be wound up for failure to pay a further sum.

The case re-inforces the difficulty of using a winding up petition to enforce a judgment debt arising out of an adjudicator’s decision.

Written by kerryunderwood

June 5, 2018 at 8:27 am

Posted in Uncategorized

LITIGATION FRIEND APPOINTMENT BY COURT

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In Keays v Executors of the Late Parkinson [2018] EWHC 1006 (Ch) (8 May 2018)

a Chancery Division Master had a rare opportunity to deal with an application to replace a litigation friend under CPR 21.7.

The case involved Flora Keays, the daughter of the late Cecil Parkinson, the politician and Flora was represented by her mother, Sara Keays, in a claim against the estate under the Inheritance (Provision for Family and Dependants) Act 1975 and it was common ground that Flora lacked capacity to conduct the proceedings herself.

The Defendant executors sought to remove Sara Keays as Flora’s litigation friend, on the grounds that she could not fairly and competently conduct proceedings on Flora’s behalf and that she had an interest adverse to Flora’s interest.

Sara Keays did not object in principle to her being removed as litigation friend after the executors had agreed to fund the costs of a suitable litigation friend acting for Flora and also Flora’s litigation costs.

However, there was a dispute over who the replacement should be and that was the subject matter of this application.

Sara Keays proposed three solicitors but the executors objected to her preferred choice and the court considered whether the executors had shown grounds for removing Sara Keays as the litigation friend.

The court rejected the executors’ submission that Sara Keays was not a suitable litigation friend within the meaning of CPR 21.4 and stated that the evidence was that if she could instruct a competent solicitor with relevant expertise, then she would be able fairly and competently to conduct the proceedings.

The Master stated that a litigation friend had extensive dealings with the parent or the person responsible for the child or protected party and therefore the court should be reluctant to impose a litigation friend on that person and, should only do so if there is no other viable candidate.

The Master considered that Sara Keays should be entitled to appoint her preferred solicitor and the executors’ criticisms of that solicitor were not made out.

The Master therefore made an order appointing Sara Keays’ preferred choice of a solicitor as Flora’s litigation friend.

 

CPR 21.4 (3) provides:

 

‘If nobody has been appointed by the court or, in the case of a protected party, has been appointed as a deputy as set out in paragraph (2), a person may act as a litigation friend if he –

(a)          can fairly and competently conduct proceedings on behalf of the child or protected party;

(b)          has no interest adverse to that of the child or protected party; and

(c)           where the child or protected party is a claimant, undertakes to pay any costs which the child or protected party may be ordered to pay in relation to the proceedings, subject to any right he may have to be repaid from the assets of the child or protected party.’

The Civil Procedure Rules provide for self-certification by the litigation friend that she satisfies the conditions specified in CPR 21.4(3) – see CPR 21.5 – and Sara Keays filed and served such a certificate.

 

CPR 21.7 deals with the replacement of a litigation friend and provides:

 

“(1)        The court may –

 

(a)          direct that a person may not act as a litigation friend;

(b)          terminate a litigation friend’s appointment; or

(c)           appoint a new litigation friend in substitution for an existing one.

(2)          An application for an order under paragraph (1) must be supported by evidence.

(3)          The court may not appoint a litigation friend under this rule unless it is satisfied that the person to be appointed satisfies the conditions in rule 21.4(3).”

 

Here the Master considered the case of

 

Davila v Davila (18 April 2016) and adopted the remarks made by the judge in that case

 

137:

 

“(1)        As noted above, CPR 21.4(3)(b) stipulates that in order for a person to act as a litigation friend that person must have “no interest adverse to that of the …protected party”. The relevant inquiry here is directed towards the conduct and outcome of the litigation for which the individual is to be appointed as litigation friend, and it will in most cases not be relevant to search, outside the bounds of the particular litigation, for some factor that might suggest some potential conflict between the interests of the party and the interests of the litigation friend unless it can reasonably be said that this potential conflict may also affect the manner in which the litigation friend is likely to approach the conduct of the litigation itself.

(2)          Moreover, what this prohibition is directed towards is an interest that is “adverse” to that of the protected party. It follows that the fact that the person appointed as litigation friend has his own independent interest or reasons for wishing the litigation to be pursued ought not, in general, to be a sufficient reason for impeaching that appointment. Such an interest would, at least in general, run in the same direction as the protected party rather than being adverse to the protected party’s interests.

(3)          However, it is necessary in this context to have regard to the decision of the Court of Appeal in Nottingham CC v Bottomley and another [2010] EWCA Civ 756, the only authority on this issue to which I was referred. In dealing with the position of a litigation friend, Stanley Burnton LJ (with whom Rix and Maurice Kay LLJ agreed) emphasised the need for the litigation friend to “seek the best outcome” for the protected party and for a litigation friend to “be able to exercise some independent judgment on the advice she receives from those acting for a claimant, and …be expected to accept all the advice she is given”, something that might be difficult where, as in that case, the litigation friend worked for an organisation that would benefit from a settlement in a form that might not necessarily be to the benefit of the protected party itself.

(4).         This highlights the fact that, even where the interests of the protected party and litigation friend generally run in parallel or coincide, this does not of itself preclude the possibility that, in some contexts, those interests might diverge and become adverse. Whether or not that is so will, of course, always depend upon the facts of the particular case.”

 

 

The court rejected the executors’ submissions and allowed the appointment of the solicitor preferred by Sara Keays.

Bizarrely the executors themselves sought the appointment of a solicitor proposed by them which, in a masterful understatement, the Master referred to as “an unusual application”.

The barrister for the executors submitted that it was perverse for Sara Keays to insist upon a solicitor to whom the executors object, and the Master rejected that submission and said that provided the solicitor is otherwise suitable, Sara Keays should be entitled to choose the solicitor that she wanted.

The executors’ objection to the preferred solicitor was that she had taken an obstructive and unreasonable approach to settlement discussions in the claim and was likely to do so again, and that her costs were too high.

In other words the primary objection was that the solicitor would do her job in representing Flora Keays, a protected party.

 

The Master was unimpressed:

 

“The suggestion that the overriding objective requires harmonious personal interactions between solicitors acting for opposing parties seems to me to be unrealistic.” (Paragraph 55)

 

Finally the judge had this to say:

 

“57. Finally, I mention that although the executors in their capacity as such have no interest in the outcome of the claim, they have not taken a neutral position reflecting that absence of interest. Instead, they have actively defended the claim. This has included making the current application. The executors’ counsel informed the court that the stance taken by the executors was supported by the beneficiaries. This is not desirable because costs attributable to the executors’ role in the claim in their capacity as such ought to be clearly distinguishable from costs incurred in opposing the claim: see CPR PD 46, para 1.”

 

 

 

Comment

A useful and interesting analysis of the law relating to litigation friends, and their duties and responsibilities.

In my experience many solicitors fail properly to explain to litigation friends their duties and responsibilities and liabilities and treat the appointment of a litigation friend as almost a formality.

It most definitely is not.

Written by kerryunderwood

June 4, 2018 at 8:37 am

Posted in Uncategorized

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