Kerry Underwood

Archive for July 2018

PROPORTIONALITY AND NON-FINANCIAL MATTERS

leave a comment »


This blog first appeared on the Practical Law Dispute Resolution Blog on 30 July.

Kerry is undertaking a 10 city Autumn Tour with his new course – Getting the Retainer Right.

For full details and to book click here

In three recent cases the courts have considered how to apply the proportionality test in CPR 44.3(5) in cases where damages are not the main issue, or where no damages are in issue at all.

CPR 44.3(5) reads:

(5) Costs incurred are proportionate if they bear a reasonable relationship to –

 

(a) the sums in issue in the proceedings;

 

(b) the value of any non-monetary relief in issue in the proceedings;

 

(c) the complexity of the litigation;

 

(d) any additional work generated by the conduct of the paying party; and

 

(e) any wider factors involved in the proceedings, such as reputation or public importance.”

 

In Various Claimants v MGN Ltd [2018] EWHC 1244 (Ch) (24 May 2018)

the Chief Costs Master dealt with costs and costs management issues in the daily Mirror Hacking Litigation which is not subject to a Group Litigation Order under CPR 19.10 to 19.15, but its structure is similar, with Individual Costs and Common Costs.

Template Costs Budgets apply to Individual Costs and Common Costs, with the template to follow Precedent H in so far as possible.

Two of the claimants applied for an Individual Bespoke Budget.

The main points of interest in the judgment concern proportionality, with the Costs Judge saying that:

 

“…when the proportionality factors are put together, the financial value of the claims proves to be relatively unimportant because of the wider factors.”

 

The Costs Judge held that in such cases, reasonable costs will be proportionate.

 

“22. I do not find it easy to apply a principled approach to proportionality in relation to these budgets. I can infer, for what it is worth, from the parties’ agreement to having bespoke budgets that they consider larger amounts of costs than those in the template budgets will be reasonable and proportionate. It seems to me that the only principled way of applying the test in these cases is to have only very limited regard to the possibility that proportionality may produce a cap that will limit what would otherwise be a reasonable figure. This is what the parties have done in their submissions. To take any other approach in this bespoke litigation risks the court merely applying arbitrary limits because there is no financial reference point for proportionality.

  1. It seems to me that the wider factors I have summarised, in particular the public importance and test case factors, will have the effect that if the costs are reasonable they are proportionate. That conclusion chimes with the approach the parties have adopted and avoids the court wielding a concept of uncertain application.”

 

The key other factors here were the value of the non-monetary relief in issue in the proceedings and the wider factors in the proceedings, such as reputation or public importance – see CPR 44.3(5)(b) and CPR 44.3(5)(e).

Effectively the Costs Judge has restored the test in

 

Home Office v Lownds [2002] EWCA Civ 365 (21st March, 2002)

 

when considering proportionality in cases involving more than just money.

 

In Various Claimants v MGN Ltd [2018] EWHC B13 (Costs) 1 June 2018

the Chief Costs Master was again dealing with costs issues a writing out of the Daily Mirror Hacking Litigation.

The court here had to consider proportionality without first having carried out an item-by-item assessment as the parties had agreed reasonable costs and here the Master ruled that none of the agreed reasonable costs were disproportionate.

The Master recognised that the new proportionality test, since 2013, was intended to bring about a real change in the assessment of costs, as set out in the case of

 

BNM v MGN Ltd [2016] 3 Costs L.O 441

 

but this case was very different to that one and was not a typical case.

 

In this case the Master followed the approach adopted in

 

May v Wavell [2016] 3 Costs L.O 455,

 

but had particular regard to the wider factors set out in CPR 44.3(5), and in particular the value of the non-monetary relief sought in this matter.

Financial value is just one of five factors set out in CPR 44.3(5) and there will be cases where, by reason of the four factors other than the financial value of the claim, costs are proportionate even though they exceed the sums in issue.

CPR 44.3(5) does not identify any of the five factors as being more important than any of the others.

The claimants did not want just to win damages; they wanted to hold the defendants to account and the value of the non-monetary relief in issue was substantial, and at least as important as the financial sums in issue.

The Master said that a “lazy, but arguably foolproof” test of any particular issue, and its complexity and importance, was to consider the amount of time that the court was prepared to devote to it.

In Arjomandkhah v Nasrouallahi [2018] EWHC B11 (Costs) (6 July 2018) (Master Leonard)

the Senior Courts Costs Office upheld a detailed assessment of costs which had found that there was no basis for disallowing any costs as disproportionate.

The judgment provides guidance on the court’s approach to the new test of proportionality in a claim with limited financial value, but of importance to the parties.

Here, the claimant and defendant had been in a relationship, and after it ended the claimant obtained an interim judgment against the defendant preventing her from contacting him, or his wife or children or from showing images of him to anyone else.

The claimant alleged that the defendant had blackmailed him and tried to make the injunction permanent, but he lost and was ordered to pay the defendant’s costs on the standard basis and the reasonable costs were assessed at just under £20,000.

On appeal Master Leonard, in the SCCO, rejected the claimant’s submission that proportionality should be judged by reference to a notional financial claim valued at between £3,000 and £5,000, as the Particulars of Claim sought only a final injunction, rather than damages or costs.

The court held that this ignored the wider criteria in CPR 44.3(5)(e) and CPR 44.4(3)(c) which were much more significant in this case, given the potential effect of the claim on the defendant’s reputation.

The Costs Master also considered that it was relevant to look at the claimant’s budgeted costs of £60,000 and pointed out that that did not assist his argument that costs assessed at one-third of that figure were disproportionate.

The court also rejected the claimant’s argument that his own disproportionate approach to the litigation was a matter for him and had no bearing on the proportionality of the defendant’s costs, as in the Master’s view, it would not be right if the defendant was then left with a debt to her own solicitors that she could not afford, simply because the claimant could afford to conduct the litigation in a disproportionate way.

It should also be noted that the figure in a costs budget is the figure that the party will seek to recover from the other side, and it is a standard basis figure, and not an indemnity basis figure, which is the basis on which the client pays his own solicitors.

In relation to the difference between reasonableness and proportionality, the court said that CPR 44.3(5) provided that costs were proportionate if they bore a reasonable relationship to specified criteria and that was not the same as whether they were reasonably incurred or reasonable in amount.

Matters such as the defendant’s approach to evidence and settlement had already been considered when the defendant’s costs were assessed as reasonably incurred and reasonable in amount.

Whilst reasonable costs may be disallowed as disproportionate, costs could not be disallowed as disproportionate solely on the basis that they were unreasonable.

Written by kerryunderwood

July 31, 2018 at 8:27 am

Posted in Uncategorized

NO REDUCTION IN BRIEF FEE ON LATE SETTLEMENT

with 2 comments


Kerry is undertaking a 10 city Autumn Tour with his new course – Getting the Retainer Right.

For full details and to book click here

In Hugh Cartwright & Amin v Devoy-Williams and another [2018] EWHC 1692 (QB) (4 July 2018) (Davies J)

the High Court has ruled that a Master had wrongly reduced counsel’s brief fee, on a challenge to a detailed costs assessment, whereby the case settled the day before the trial was due to start.

The brief fee claimed was £6,500, which Master Rowley considered reasonable for preparation and trial, but he allowed only £3,000 as the mediation time claimed by the solicitor indicated that the case had settled in the afternoon of the day before trial, but counsel had not been notified until 10.30 pm.

He held that had the brief been cancelled in the afternoon, some preparation could have been avoided and counsel could have done something else the next day.

The High Court held that there were no good grounds to reduce the fee.

In the context of this “high temperature” litigation, with allegations of fraud, misrepresentation and deceit, a case was not settled until it was finally settled and mediation had not ended until 10.30 pm.

No counsel properly observing their duty would stop work on the case until final settlement had been confirmed.

All the preparation work had been done.

Whether counsel could find something else to do was irrelevant to the brief fee, which was payable on a brief properly delivered.

The decision highlights the default position regarding the receiving party’s entitlement to the costs of detailed assessment proceedings under CPR 47.20(1).

The paying party had made a Calderbank offer in respect of the receiving party’s costs, which incorporated various conditions relating to a second action between the parties.

Master Rowley had accepted that the receiving party was incapable of accepting the offer because its insurers had conduct of the second action, but determined that the receiving party could have accepted quantum and either varied the conditions, or sought a hearing to determine set-off.

The High Court disagreed, ruling that a valid Calderbank offer had to be acceptable on its stated terms and should not be one which contemplated further negotiation.

The Master had incorrectly placed the burden on the receiving party to negotiate on the conditions or make a counter-offer.

That reflected neither the wording of the rules nor the nature of Calderbank offers.

Written by kerryunderwood

July 30, 2018 at 8:29 am

Posted in Uncategorized

DISCLOSURE OF FUNDING ARRANGEMENTS

leave a comment »


Kerry is undertaking a 10 city Autumn Tour with his new course – Getting the Retainer Right.

For full details and to book click here

In JSC BTA Bank v Ablyazov and another [2018] EWHC 1368 (Comm) (8 June 2018)

the Commercial Court ordered the second defendant, who was subject to a Worldwide Freezing Order, to provide full disclosure of how his legal expenses were being funded.

The court applied principles established in

JSC BTA Bank v Ablyazov [2011] EWHC 2664 (Comm)

and

JSC Mezhprom Bank v Pugachev [2017] EWHC 184i7 (Ch).

The second defendant claimed that his mother was funding the litigation.

The claimant bank did not believe that she had sufficient assets, and said there was reason to believe she was using funds belonging to the first defendant, who was also subject to Worldwide Freezing Orders.

The judge noted that it was for the claimant to show adequate grounds,as in Ablyazov and Pugachev.

She rejected the claimant’s submission that she could adopt findings in litigation against the first defendant to which the second defendant was not party, provided this “was not unfair”.

Nor did she consider that Eder J, in Okritie v Gersamia [2015] EWHC 821 (Comm), intended to say that findings of fact by an earlier court entitle a later court to arrive at the same conclusions without exercising its own judgment.

The claimant’s evidence showed a real risk of the Worldwide Freezing Orders being breached, which made it reasonable “to probe beyond” evidence in the second defendant’s mother’s witness statement.

Although the evidence did not raise a strong (as opposed to a good arguable) case of breach, the importance of maintaining the effectiveness of the court’s orders was a “potent factor” weighing heavily in favour of an order.

It was not oppressive for the second defendant to disclose information he knew or could reasonably find out.

The second defendant’s mother’s concerns about information being used against her in other proceedings could be addressed through a confidentiality club.

At the hearing, the claimant alternatively submitted that undisclosed assets of the second defendant might be funding the proceedings.

Initially, the judge saw some force in an objection based on the late addition of this point, but she found it impossible to ignore the fact that, since the hearing, the Court of Appeal had found a good arguable case that the second defendant had lied in disclosure regarding his personal assets.

It was not unfair to take account of these findings, which were binding on the second defendant, and it would be “wrong in principle” to ignore them.

Disclosure was necessary and appropriate to establish whether either of the scenarios applied.

 

 

 

 

 

Written by kerryunderwood

July 27, 2018 at 8:26 am

Posted in Uncategorized

INDEMNITY COSTS ORDERED ON LATE DISCONTINUANCE

leave a comment »


Kerry is undertaking a 10 city Autumn Tour with his new course – Getting the Retainer Right.

For full details and to book click here

In PJSC Aeroflot – Russian Airlines v Leeds and another (Trustees of the estate of Berezovsky) and others [2018] EWHC 1735 (Ch) (6 July 2018) (Rose J).

the High Court ordered the claimant to pay the defendants’ costs on an indemnity basis, following its application to discontinue the claim shortly before trial.

The defendants applied for an order that the claimant pay their costs on an indemnity basis following its discontinuance of the claim, without explanation, shortly before trial.

The Court considered that where a claimant made serious allegations of fraud, conspiracy and dishonesty as here, and then abandoned those allegations, an order for indemnity costs was likely to be the just result, unless the claimant could explain why it had decided those allegations were bound to fail.

This was on the basis that such conduct deprived the defendant of any opportunity to vindicate its reputation.

 

It followed the approach in

 

Clutterbuck and another v HSBC plc and others [2015] EWHC 3233 (Ch),

 

In the alternative, the court considered that circumstances “out of the norm” justified indemnity costs and took into account factors including, inaccurate statements made by the claimants during interlocutory proceedings and the aggressive stance adopted by the claimants during the litigation.

In particular, the judge criticised correspondence from the claimant’s solicitors following the death of the second defendant as “losing sight of any basic standard of decent and compassionate behaviour.”

The judge’s comments on the effect of the defendants’ refusal to mediate are also worth noting.

She did not consider it appropriate to take this into account when assessing costs, because she stated that where allegations of fraud and serious wrongdoing were made, proceedings were intrinsically unsuitable for mediation.

In her view, this would be penalising the defendants for insisting on their right to have their reputations vindicated through the trial process.

Her experience in case managing this case meant that she was satisfied that there was no possibility of the parties making progress through alternative dispute resolution.

She did not consider that they would have been able to agree a mediator.

Given the general trend towards encouraging parties to mediate and the mechanisms which can be used to deal with deadlock over choosing a mediator, it may be risky to rely, in insolation, on an argument that the parties would have been unable to agree a mediator as good reason for refusing to mediate.

Written by kerryunderwood

July 26, 2018 at 9:24 am

Posted in Uncategorized

SOLICITOR LITIGANTS COSTS FOR WORKING FOR HIMSELF

leave a comment »


Kerry is undertaking a 10 city Autumn Tour with his new course – Getting the Retainer Right.

For full details and to book click here

In Robinson v EMW Law LLP [2018] EWHC 1757 (Ch) (10 July 2018) (Roth J)

the High Court, on appeal from the Senior Courts Costs Office, held that a solicitor engaged as a consultant by a law firm instructed in relation to his own matter could recover legal costs for the time that he had personally spent working on the matter.

Thus the case applies the existing principles in relation to a solicitor-litigant’s ability to recover her or his legal costs for her own time to where a solicitor is engaged as a consultant for a law firm instructed by her or him.

The cases establishing the original principle of a solicitor being able to charge solicitor’s rates for work done as a litigant are contained in

 

London Scottish Benefit Society v Chorley and others (1884) 13 QBD 872;

Halborg v EMW Law LLP [2017] EWCA Civ 793 (23 June 2017)

Shackleton and Associates Ltd v Al Shamsi and others [2017] EWHC 304 (Comm)).

 

A separate issue, of wider application, arose as to the date from which the solicitor could recover from the other side ordinary costs that he was liable to pay his own solicitors.

The SCCO said that recovery only ran from the date of the written retainer between client and solicitor and refused to allow recovery in relation to pre-written retainer costs on the basis that the client, who happened to be a solicitor, could not positively demonstrate that he was liable for those costs, in accordance with the indemnity principle.

The High Court stated that that was the wrong way to approach the matter and the issue is whether it could be shown that the solicitors were instructed before the date of the written retainer, and here they clearly were as they were on the record for the client.

If that was the case, then unless it could be established that there was an agreement that the client would not be liable to pay the solicitors’ costs in any circumstances, the presumption was that a party instructing a firm to act for it would be responsible for paying the firm’s fees.

This is a decision of a full High Court Judge and is thus binding on all lower courts.

Written by kerryunderwood

July 24, 2018 at 10:22 am

Posted in Uncategorized

SECURITY FOR COSTS – DO NOT DELAY

leave a comment »


Kerry is undertaking a 10 city Autumn Tour with his new course – Getting the Retainer Right.

For further details click here

In Accident Exchange Ltd and another v McLean and others [2018] EWHC 1533 (Comm) (12 June 2018)

the Commercial Court has granted the solicitors’ application for security for costs, including firms of solicitors, whereby proceedings alleged conspiracy and deceit against defendants.

However, Teare J significantly reduced the amount ordered in respect of incurred costs due to the solicitors’ delay in making the application.

The decision highlights the importance of defendants taking proactive steps to monitor the claimant’s financial position to ensure that any anticipated improvement in that position which has caused the defendant to hold off from seeking security has, in fact, come to fruition.

The claimants’ case on delay originated from events in October 2016, when the claimants’ then solicitors had stated in correspondence that the claimant had completed, subject to shareholder approval, a refinancing which would strengthen the claimant’s financial position.

Consequently, the solicitors decided not to pursue security at that time.

However, the refinancing was not approved, and the solicitors did not make further enquiries until early 2018.

The claimant contended that there was culpable delay between around November 2016 and January 2018 because:

 

  • a prudent solicitor would have immediately asked for details of when shareholder approval was to be given.
  • the solicitor should have kept the matter under review, for example by inspecting the claimant’s accounts in March 2017, which would have revealed that approval had not been obtained.

 

Teare J observed that this was a major piece of litigation, involving very substantial costs (the solicitors’ total costs to the end of trial were estimated at £19 million).

Consequently, one would have expected the solicitors to pursue the matter and, had they done so, it was very likely that the lack of shareholder approval would have emerged.

Even if the claimant would still have suggested that the security application should await completion of refinancing negotiations, having regard to the date for trial, it would probably have been made earlier than it was.

On quantum, the judge noted that the solicitors sought security for 80% of their costs.

He referred to Stokors SA v IG Markets Ltd [2012] EWCA Civ 1706, in which the Court of Appeal supported the view that around 60% was appropriate.

Having regard to this and to the solicitors’ delay, he ordered “60 per cent of 60 per cent” of the incurred costs.

In relation to costs to be incurred, he ordered 60% of the costs claimed.

Written by kerryunderwood

July 23, 2018 at 8:45 am

Posted in Uncategorized

FIRST-TIER TRIBUNAL LACKED JURISDICTION TO DETERMINE POST-ISSUE LEGAL COSTS WHERE A CASE WAS TRANSFERRED FROM THE COUNTY COURT (UPPER TRIBUNAL (LANDS CHAMBER))

with 3 comments


Kerry is undertaking a 10 city Autumn Tour with his new course – Getting the Retainer Right.

For further details click here

In Avon Ground Rents Ltd v Child [2018] UKUT 204 (LC), 20 June 2018

The Upper Tribunal considered an appeal by a landlord against a costs determination made by the First-Tier Tribunal (Property Chamber), on the basis that the First-Tier Tribunal did not have jurisdiction to make such a determination.

The landlord had issued a claim in the County Court to recover unpaid service and administration charges from a tenant and the matter had been transferred to the First-Tier Tribunal by the County Court under section 176A of the Commonhold and Leasehold Reform Act 2002 (CLRA 2002).

The First-Tier Tribunal considered the reasonableness of the outstanding charges and then proceeded to determine the landlord’s post-issue legal costs, on the basis that these were also administration charges.

The Upper Tribunal (Lands Chamber) agreed that the First-Tier Tribunal had been acting outside its jurisdiction in determining the post-issue costs.

Although it was possible for a judge to act both as a First-Tier Tribunal Judge and a County Court Judge under the Residential Property Disputes Deployment Pilot, the statutory jurisdiction of each forum was unchanged.

The post-issue legal costs did not constitute administration charges, although it has since become possible for a lessee to make an application under paragraph 5A of Schedule 11 to the CLRA 2002 for determination of litigation costs that are yet to be incurred.

Under the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules (SI 2013/1169), the First-Tier Tribunal’s jurisdiction on costs is tightly prescribed.

The costs should therefore have been determined by the County Court under section 51 of the Senior Courts Act 1981.

Although it originated from a small claim, this case gave the Upper Tribunal the opportunity to provide welcome guidance on how the parallel jurisdictions of the First-tier Tribunal and the County Court should operate under the Pilot (see Guidance for future applications).

Although all matters in relation to a property dispute may now be determined by a single judge acting in two capacities, it will be very important for that judge to make it clear which role they are performing at which point in the proceedings and to notify the parties accordingly.

Written by kerryunderwood

July 20, 2018 at 9:42 am

Posted in Uncategorized

DEFENDANTS AND DISCOUNTED CONDITIONAL FEE AGREEMENTS

leave a comment »


Kerry is undertaking a 10 city Autumn Tour with his new course – Getting the Retainer Right.

For further details click here

How does a solicitor try and secure the balance of costs due from a successful client in a No Win Lower Fee Agreement where the client is the defendant, and thus is not receiving damages from which the balance due can be deducted?

Options include obtaining a personal guarantee and the client lodging money in client account etc., and although they work, it may be that the client will be reluctant to agree, or unable to make such payment, or has no personal funds to attack in the event of a personal guarantee being called upon etc.

However, in a case where there are Fixed Recoverable Costs there is a potential answer.

The whole point of fixed costs is that you are able to state with accuracy what the costs will be on any given eventuality.

By always having the balance due on success as being the fixed costs recoverable from the other side, or less, you can at least shift the effective liability for the balance of the full fee from your own client to the other party.

Effectively, this gives you two bites at the cherry, as if either the other party, or your client, is able to satisfy the balance of the costs due to you, then you are okay.

In an appropriate case you could apply for security for costs against the claimant.

Let us say you were dealing with the matter on a discounted fee arrangement, whereby the discounted fee is 50%.

Thus let us say that it is a Band 4 claim for £100,000.00 and you are in Stage 3 which is up to and including the Case Management Conference.

Recoverability at that point would be £25,000.00.

Thus you charge your client £50,000.00, discounted to £25,000.00, which sum you charge your client upfront as the discounted fee payable in any event, probably by reference to the stages as you move through them.

The Claimant then discontinues at that stage and has a liability to your client of £25,000.00, which of course exactly matches the balance of the full fee, because we have designed it that way.

If the Claimant pays up, then well and good and if the Claimant does not pay up then you are left in the same position as you would be now.

I appreciate that you already have the ability to enforce costs against the losing Claimant, but the structure of this means that if they do pay, then you have no need to claim anything further from your client.

It is also a very easy way to price up any given matter – you simply double the fixed costs figure and then discount it by 50% in the event of defeat.

Curiously, the costs payable on a between the parties basis by a losing Claimant are more certain in advance than the costs payable by a losing Defendant.

The reason for this is that the costs paid by a losing Claimant are calculated by reference to the amount claimed, whereas the costs of a successful Claimant are calculated by reference to the amount awarded by the court, or the settlement sum.

Thus a Claimant claims £100,000.00 and loses. The costs are calculated by reference to £100,000.00.

The Claimant claims £100,000.00 but settles for £50,000.00. The costs are settled by reference to a figure of £50,000.00.

Thus as soon as a Claim Form is issued the figure on which the losing Claimant’s costs will be based is certain whereas the figure on which a successful Claimant’s costs will be based is not certain.

The same principle could be utilised in commercial work by opting into the Commercial Court Pilot on claims valued at between £100,000 and £250,000.

Because of the lack of certainty in cases not a subject to Fixed Recoverable Costs, it is harder to achieve the same result.

However, if the amount not covered by the fees paid as the case goes along, under the discounted Conditional Fee Agreement, is kept roughly at the recovery that you would expect on an open standard basis on assessment from the other side, on success, then a similar result is achieved, and in any event the risk is minimised, even if not eliminated.

Written by kerryunderwood

July 19, 2018 at 11:23 am

Posted in Uncategorized

PART 36 AND LATE ACCEPTANCE OF A CLAIMANT’S OFFER

with 2 comments


Kerry is undertaking a 10 city Autumn Tour with his new course – Getting the Retainer Right.

For further details click here

 

As we await the decision in the case of the Hislop v Perde, it is interesting to look back at the views of the Court of Appeal on this subject on Thursday 21 March 2002 in the decision in

 

Home Office v Lownds [2002] EWCA Civ 365 (21st March, 2002).

 

This case is better known as being the case that set out the tests to be considered under the old, pre Jackson, proportionality test.

An important part of the judgment in fact concerns the incentives needed in order for claimants to make Part 36 offers, and the explanation given by the Court of Appeal in that case is highly relevant to the issue of whether a claimant should get indemnity costs on late acceptance by a defendant of a claimant’s offer.

Here is paragraph 8 of that judgment:

 

8. The new requirement of proportionality, which is in mandatory and unqualified terms in Part 44.4(2), is important in itself, since it should discourage parties from incurring disproportionate costs as those costs will not be recoverable unless an indemnity order is made. This restriction on costs should encourage parties to conduct litigation in a proportionate manner, which is an important objective of the CPR. The contrast between standard costs and indemnity costs is also important because of the impact it has on offers to settle, whether under Part 36 or otherwise, by claimants. A defendant, unlike a claimant, does not need to have an additional or particular incentive to make an offer to settle, since an offer to settle is likely to result in his obtaining an order for costs in his favour if the claimant does not obtain a better result than that which was offered. (See Part 36.20). A claimant does need to have an incentive to make an offer to settle since if he succeeds in an action he is normally entitled, without making any offer to settle, to his standard costs and interest. It is in order to provide the required incentive that Part 36.21 provides that the claimant who obtains a more favourable result than that contained in his Part 36 offer can receive interest at a higher rate and an indemnity order for costs from the latest date when the defendant could have accepted the offer without needing the permission of the court.”

 

No reference there to there needing to be a judgment.

That, in my view, is an important and correct statement of the law and the principles behind the law, by the Court of Appeal and should be followed in the Hislop v Perde case.

If the Court of Appeal decides that the Civil Procedure Rules as written, are such that it simply cannot make that order, that is that a claimant should always, absent exceptional circumstances, get indemnity costs on late acceptance, then I hope that the Court of Appeal will express, in the strongest terms, its view that the Civil Procedure Rules need amending.

It should be noted that Parliament felt it necessary, in Section 55 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, to give claimants an even greater incentive to make a Part 36 offer, and that is the 10% uplift on damages if a claimant matches or beats its Part 36 offer.

It cannot be the case that Parliament intended to give claimants that extra incentive, but to have a set of Civil Procedure Rules that removed the indemnity costs incentive.

A purposive construction of the law leads to only one answer, and that is that a claimant is entitled to indemnity costs on late acceptance of its Part 36 offer by a defendant.

Written by kerryunderwood

July 17, 2018 at 11:59 am

Posted in Uncategorized

PORTALS: UNREASONABLE EXIT, NOT USING, PART 36 AND COSTS

leave a comment »


Two recent decisions highlighted the contradictions between the Civil Procedure Rules and the portal rules and within the Civil Procedure Rules themselves.

 

Ex-Portal Costs Restriction Only Applies When Judgment Entered

In Williams v The Secretary of State for Business, Energy & Industrial Strategy [2018] EWCA Civ 852 (20 April 2018)

the Court of Appeal held that CPR 45.24, restricting a claimant to portal costs where it had unreasonably exited the portal, or not utilised the portal in the first place, only applies where judgment has been entered, and not where a matter has settled.

 

That reflects the literal wording of CPR 45.24:

 

“(2) Subject to paragraph (2A), where a judgment is given in favour of the claimant but –”.

 

The Court of Appeal rejected the paying party’s submission that this was an obvious drafting error, which the court should correct.

Thus the provision in CPR 45.24 limiting costs to CPR 45.18 portal costs, only applies when judgment is entered, which is relatively rare.

That is not the end of it.

Although failure to engage the portal process cannot lead to an imposition of portal only costs unless judgment is entered, unreasonably exiting portal DOES lead to the imposition of portal only costs, by an entirely different route, and that is the EL/PL portal itself, which at paragraph 7.59 says:

 

“7.59 Where the claimant gives notice to the defendant that the claim is unsuitable for this Protocol (for example, because there are complex issues of fact or law or where claimants contemplate applying for a Group Litigation Order) then the claim will no longer continue under this Protocol. However, where the court considers that the claimant acted unreasonably in giving such notice it will award no more than the fixed costs in rule 45.18.”

 

Unfortunately the Court of Appeal misquoted that paragraph in its judgment at paragraph 19, not the only technical mistake in this decision.

 

Note that the RTA portal has a similar provision at paragraph 7.76:

 

7.76 Where the claimant gives notice to the defendant that the claim is unsuitable for this Protocol (for example, because there are complex issues of fact or law) then the claim will no longer continue under this Protocol.  However, where the court considers that the claimant acted unreasonably in giving such notice it will award no more than the fixed costs in rule 45.18.”

 

As Alex Hutton QC, who appeared for the defendant in this matter, said it is illogical that a claim which started in the portal and was then unreasonably removed from it would attract portal only costs, while a claimant that was unreasonably never placed on the portal would attract open, standard costs.

 

It is entirely understandable that there is no provision within the portals themselves providing for what happens when a matter is never placed on the portal, as by definition a matter not on the portal is outwith the portal process.

Here it is the drafter of the Civil Procedure Rules, who seems to have missed the point.

Overall, the portals are vastly better written than the Civil Procedure Rules dealing with the portals and fixed costs.

However, there is a major sting in the tail in this case.

The Court of Appeal held that the general costs rules in CPR 44 gave the court power, in detailed assessment, to limit the assessed costs to CPR 45.18 portal costs, in line with the principles set out in the decisions in

 

O’Beirne v Hudson [2010] EWCA Civ 52; and

 

Javed v British Telecommunications PLC [2015] EWHC 90212 (Costs).

 

This case involved the claimant accepting the defendant’s Part 36 offer and thus the provisions in CPR 44 are capable of overriding the usual costs provisions triggered by Part 36.

In particular CPR 36.20(2) which states:

“Where a Part 36 offer is accepted within the relevant period, the claimant is entitled to the fixed costs in Table 6B, Table 6C or Table 6D in Section IIIA of Part 45 for the stage applicable at the date on which notice of acceptance was served on the offeror.”

remains subject to the overall costs provision in CPR 44.

 

Comment

This decision may be technically right, but the drafting of CPR 45.24(2) fairly obviously does not reflect the intentions of the portal and fixed costs scheme.

That is recognised by the court in it sanctioning CPR 44 as the way to achieve the same result, but only after the lengthy, expensive and uncertain process of a detailed assessment.

How does that fit in with the overriding objective?

The Court of Appeal should have adopted a purposive approach, as suggested by Alexander QC, and added the words:

 

“or the claim settles for payment for a sum of money to the claimant before proceedings start”

 

and, after the words

“starts proceedings under Part 7”

adding in to CPR 45.24(2):

 

“where settlement is reached for payment of a sum of money to the claimant or where…”

 

Again, in this section, the Court of Appeal has misquoted the suggested wording by Alex Hutton QC, and appears to be unable to distinguish between claim and claimant.

In a separate part of the judgment, in relation to a separate matter, the Court of Appeal said that all of the portals are expressly designed to apply only in cases where there is one defendant – see paragraph 32 of judgment.

That is not the way portals have been understood; in relation to the EL and PL portal the general view has been that in industrial disease cases, the portal is indeed confined to matters where there is only one defendant, but in other EL/PL cases, the portal can, in principle, apply where there is more than one defendant.

That widespread interpretation arises from paragraph 4.3 of the EL/PL portal which states:

 

4.3        This Protocol does not apply to a claim –

(6) In the case of a disease claim, where there is more than one employer defendant;”

 

Had the portals intended to exclude all claims where there is more than one defendant, then the words “in the case of a disease claim”, would have been excluded so that the relevant provisions simply read that the protocol does not apply to a claim where there is more than one employer defendant

Not the Court of Appeal’s finest hour.

 

Part 36 and Unreasonable Exit from the Portal

In Ansell and Evans v A.T and T (GB) Holdings Limited, Oxford County Court, Case No C38YJ961, 14 December 2017

Oxford County Court, on appeal from a decision of a District Judge, held that where a claimant had accepted a defendant’s Part 36 offer in a fixed costs case which had exited the portal, the court could apply the provisions of CPR 45.24 and restrict the claimant’s costs to portal fixed costs under CPR 45.18, together with the disbursements allowed in accordance with CPR 45.19.

In simple terms CPR 45.24 restricts a claimant’s costs to portal costs if the court considers that the claimant has acted unreasonably in exiting the portal.

Here, the claimant exited the portal and the defendant then made a Part 36 offer, which the claimant accepted in time.

The claimant argued that it was entitled to the fixed costs applicable for the ex-portal, pre-issue, stage as Part 36 trumped CPR 45.24.

The defendant argued that the court always had a discretion to limit the claimant’s costs to CPR 45.18 portal fixed costs if it found, as here, that the claimant had unreasonably exited the portal.

Her Honour Circuit Judge Clarke found in favour of the defendant, that is that however an offer was made and accepted, either under Part 36 or as a Calderbank offer, the court retained its power under CPR 45.24 to limit costs to portal costs, where the claimant had exited unreasonably.

Thus CPR 45.24 is not trumped by Part 36.

 

Comment  

A correct decision, although arguably reached by the wrong route, on the wording of the rule – see the write up of

Williams v The Secretary of State for Business, Energy & Industrial Strategy [2018] EWCA Civ 852 (20 April 2018).

Given the wording of CPR 45.24, as interpreted by the Court of Appeal, the safest cause of action is to rely on the wording of the portal itself, rather than CPR 45.24.

However, the central point here, that Part 36 gives an entitlement to costs, and does not of itself, except in specified circumstances, say what those costs will be, is undoubtedly correct.

The claimant who has unreasonably exited the portal and thus is in the post portal fixed costs regime under CPR 45.29, is nevertheless only entitled to CPR 45.18 fixed costs.

Thus acceptance of a Part 36 offer creates an entitlement to the relevant fixed costs in a fixed costs case, but those may be CPR 45.18 portal costs, not CPR 45.29 post portal fixed costs, even if the case has reached that point.

The problem arises, as we have seen, in relation to a case that has never been on the portal, and obviously if it has never been on the portal, it cannot have exited the portal.

As the law stands, such a matter is not subject to fixed costs at all, and the paying party would have to rely on general costs provisions in CPR 44, and that involves going to a detailed assessment, which is lengthy, expensive and uncertain.

I far prefer the approach of Her Honour Judge Clarke.

 

 

 

 

 

 

 

Written by kerryunderwood

July 16, 2018 at 9:28 am

Posted in Uncategorized

CORONERS AND COSTS

leave a comment »


In R (Adath Yisroel Burial Society & Mrs Ita Cymerman) v HM Senior Coroner for Inner North London [2018] EWHC 1286 (ADMIN)

the Divisional Court of the Queen’s Bench Division considered the incidence of costs of a claim for judicial review against a coroner.

The Queen’s Bench Division pointed out that there appears to be a drafting error in Regulation 17 of the Coroners’ Allowances, Fees and Expenses Regulations 2013, made pursuant to Section 34 of, and Schedule 72 to, the Coroners and Justice Act 2009 as it does not refer to a coroner’s liability for costs.

Both the claimants in this action and the Chief Coroner had written to the court separately, stating that the regulations are defective.

The court said that the point needs to be considered and resolved and that coroners must have certainty about the scope and extent of the indemnity to which they are entitled under the legislation.

Here, the London Borough of Camden had originally indicated that it would not indemnify the coroner in respect of any adverse costs, but it subsequently changed its mind.

The court started with the proposition that it has a discretion on costs pursuant to CPR 44.2, but the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but pointed out that in relation to judicial officers such as coroners, that general rule does not necessarily apply.

 

The court stated that the leading authority on costs against coroners is

R (Davies) v Birmingham Deputy Coroner [2004] EWCA Civ 207; [2004] 1 WLR 2739 

and quoted from the judgment in that case:

 

“[47]  It will be apparent from this judgment that the answers to the questions I posed in para 3 above are: (1) the established practice of the courts was to make no order for costs against an inferior court or tribunal which did not appear before it except when there was a flagrant instance of improper behaviour or when the inferior court or tribunal unreasonably declined or neglected to sign a consent order disposing of the proceedings; (2) the established practice of the courts was to treat an inferior court or tribunal which resisted an application actively by way of argument in such a way that it made itself an active party to the litigation, as if it was such a party, so that in the normal course of things costs would follow the event; (3) if, however, an inferior court or tribunal appeared in the proceedings in order to assist the court neutrally on questions of jurisdiction, procedure, specialist case law and such like, the established practice of the courts was to treat it as a neutral party, so that it would not make an order for costs in its favour or an order for costs against it whatever the outcome of the application; (4) there are, however, a number of important considerations which might tend to make the courts exercise their discretion in a different way today in cases in category (3) above, so that a successful applicant, like Mr Touche, who has to finance his own litigation without external funding, may be fairly compensated out of a source of public funds and not be put to irrecoverable expense in asserting his rights after a coroner, or other inferior tribunal, has gone wrong in law, and [where] there is no other very obvious candidate available to pay his costs.”

The judgment sets out in detail the facts of this matter and the claimants and the Chief Coroner were represented by counsel at the hearing but the defendant coroner appeared as a Litigant in Person.

The claimants argued that they were entitled to their costs of the action on a number of grounds based on Davies as follows:

 

  1. The Defendant has not acted neutrally because she has actively sought to defend her policy.
  2. ii) The Defendant unreasonably declined to withdraw her policy or sign a consent order.

iii)           The case is distinguishable from Davies because the Defendant in making her policy was not making a judicial decision.

  1. iv) It is manifestly unjust that the Claimants should have to bear the costs of bringing and pursuing these proceedings.

 

The judgment deals with all of the arguments for and against, but concluded that the claimant should succeed on two related bases:

 

  1. first, the defendant’s failure to reconsider her policy in the light of the Chief Coroner’s intervention is an important consideration when considering where, in fairness, the claimants’ costs should fall within the fourth limb of the case in Davies.

 

  1. Secondly, the defendant’s Addendum Detailed Grounds, filed in answer to the Chief Coroner’s detailed grounds, mark the point at which the coroner ceased to be neutral in stance, as examined in the second limb of Davies. From that point on she was advocating the correctness of her policy and no longer simply giving information to the court.

 

For those reasons the court ordered that the defendant should pay the claimants’ reasonable costs from the date she filed her Addendum, with such costs to be the subject of detailed assessment if not agreed.

The court ordered the defendant to pay £68,000 on account of costs.

The court confirmed the general principle that the coroner who remains neutral should not ordinarily be liable for costs.

The court accepted that that itself may be considered to be unfair to a successful claimant and will have to bear their own costs of a successful action.

 

Comment

This is part of a wider issue, and that is in an era where court fees are extremely high, and the Justice Minister has cut fees to reflect the fact that the department was making a profit in many areas, should the parties have to bear their own costs incurred due to mistakes by the judiciary?

 

My view is that when a decision is overturned due to an error of law by the Lower Court, then the state should pay both parties’ costs of that appeal hearing, and any rehearing caused by the case being remitted to the first court again.

Legal costs are too high anyway; they should not be added to by innocent parties having to pay for the faults of the state and its officers.

Written by kerryunderwood

July 12, 2018 at 10:13 am

Posted in Uncategorized

CONDITIONAL FEE AGREEMENTS AND THE CORRECT OPPONENT: MORE CONFUSION

leave a comment »


In Malone v Birmingham Community NHS Trust [2018] EWCA Civ 1376 (19 June 2018)

the Court of Appeal allowed an appeal by a claimant against a first instance decision that the Conditional Fee Agreement was ineffective as the wrong defendant had been named and thus, due to the indemnity principle, there was no liability on the losing defendant to pay costs.

This was a personal injury action and the relevant part of the Conditional Fee Agreement provided that it covered:

 

All work conducted on your behalf following your instructions provided on [     ] regarding your claim against Home Office for damages for personal injury suffered in 2010.”

 

In the event the claim succeeded against Birmingham Community NHS Trust, and not the Home Office, although there had been uncertainty about who was responsible for the claimant’s medical care as he was a prisoner.

The Court of Appeal, in allowing the appeal, accepted that, on the facts of the case, the reference to “Home Office” described the instructions received, rather than the work to be done, and related to past instructions, rather than future work.

 

The Court of Appeal considered the Supreme Court decision in

 

 Wood v Capita Insurance Services [2017] UKSC 24

 

to the effect that context is a useful tool for determining the objective meaning of words, where, as here, the drafting was so poor.

There was no commercial reason to limit the claim to a particular defendant, nor was it in the interests of the parties to do so, especially given the uncertainty as to the correct defendant.

The decision, fair on the facts, does not actually deal with the position where the wrong defendant is named, as compared with stating what work is covered.

In that scenario there remained conflicting decisions and my advice to never name the defendant remains –

see my blogs –

CFAS: NEVER NAME THE DEFENDANT! (1)

CFAS: NEVER NAME THE DEFENDANT! (2)

 

In particular the Court of Appeal here distinguished the decision in

 

Law v Liverpool City Council [2005] EWHC 90020 (costs)

 

rather than overruling it.

 

 

“31. The defendant places considerable reliance on the decision of HHJ Stewart QC (as he then was) in Law v Liverpool City Council [2005] EWHC 90020 (costs), as did the judges below. In that case the CFA was stated to cover: “Your claim against Liverpool City Council for damages for personal injury suffered on 26th March 2003”. Proceedings were brought against the Council as the occupier of the property where the injury was suffered and a defence was served. Subsequently the Council stated that the property had been transferred shortly prior to the accident to a housing association, which was then added as a second defendant. The claim continued against both defendants and was settled by them, with both defendants acknowledging liability in principle for costs, subject to any points about the CFA. The housing association contended that as the CFA had never been varied to include it, there was no CFA in relation to the claim against it.

 

 

  1. HHJ Stewart QC held that the claim against the housing association was not covered by the CFA. His stated starting point was that a CFA which covers a claim against one defendant cannot be construed to encompass a claim against another defendant. He said that the fact that parties are often added to claims should be dealt with by careful drafting of the CFA or by appropriate amendments.

 

  1. There are a number of obvious differences between that case and the present one. In particular: (i) the wording used was more specific and restrictive – “Your claim against Liverpool City Council…”; (ii) there was no apparent careless drafting; (iii) the Council was an appropriate defendant; (iv) the Council remained a defendant up to and including settlement. It is also to be noted that the argument that the wording used was meant to be merely descriptive rather than prescriptive does not appear to have been raised. HHJ Stewart QC’s starting point bypassed that issue. In any event, little assistance is to be derived on issues of construction such as this from different cases, on different facts, involving materially different wording.”

 

 

Thus, contrary to what has been reported, this decision clouds, not clarifies, the issue.

 

Unsurprisingly, the ever astute Simon Gibbs, in his blog has got it right:

 

 

The impact of this decision is likely to increase, rather than decrease, the level of satellite litigation generated where the incorrect opponent is named in a CFA. The decision gives significant encouragement to paying parties that such a challenge may fall into the Law v Liverpool City Council category, whilst offering a glimmer of hope to receiving parties that the full factual matrix will be found to be favourable to them.”

 

 

Comment

 

How about a Supreme Court Diktat that a statement in a Conditional Fee Agreement that it covers “your personal injury matter” shall be deemed sufficient. That still leaves the paying party able to challenge costs on the usual grounds, of necessity, reasonableness and proportionality etc., but avoids these sterile, technical challenges.

Written by kerryunderwood

July 11, 2018 at 9:57 am

Posted in Uncategorized

PROPORTIONALITY AND NON-FINANCIAL MATTERS

leave a comment »


In Various Claimants v MGN Ltd [2018] EWHC 1244 (Ch) (24 May 2018)

the Chief Costs Master dealt with costs and costs management issues in the Daily Mirror Hacking Litigation which is not subject to a Group Litigation Order under CPR 19.10 to 19.15, but its structure is similar, with Individual Costs and Common Costs.

Template Costs Budgets apply to Individual Costs and Common Costs, with the template to follow Precedent H in so far as possible.

Two of the claimants applied for an Individual Bespoke Budget.

The main points of interest in the judgment concern proportionality, with the Costs Judge saying that:

 

“…when the proportionality factors are put together, the financial value of the claims proves to be relatively unimportant because of the wider factors.”

 

The Costs Judge held that in such cases, reasonable costs will be proportionate.

 

“22. I do not find it easy to apply a principled approach to proportionality in relation to these budgets. I can infer, for what it is worth, from the parties’ agreement to having bespoke budgets that they consider larger amounts of costs than those in the template budgets will be reasonable and proportionate. It seems to me that the only principled way of applying the test in these cases is to have only very limited regard to the possibility that proportionality may produce a cap that will limit what would otherwise be a reasonable figure. This is what the parties have done in their submissions. To take any other approach in this bespoke litigation risks the court merely applying arbitrary limits because there is no financial reference point for proportionality.

  1. It seems to me that the wider factors I have summarised, in particular the public importance and test case factors, will have the effect that if the costs are reasonable they are proportionate. That conclusion chimes with the approach the parties have adopted and avoids the court wielding a concept of uncertain application.”

 

The key other factors here were the value of the non-monetary relief in issue in the proceedings and the wider factors in the proceedings, such as reputation or public importance – see CPR 44.3(5)(b) and CPR 44.3(5)(e).

Effectively the Costs Judge has restored the test in

Home Office v Lownds [2002] EWCA Civ 365 (21st March, 2002)

when considering proportionality in cases involving more than just money.

Written by kerryunderwood

July 10, 2018 at 9:41 am

Posted in Uncategorized

PART 36: STANDARD AND INDEMNITY COSTS

with 2 comments


In Shalaby v London North West Healthcare NHS Trust [2018] EWCA Civ 1323

the Court of Appeal held that where a claimant failed at trial to beat a defendant’s offer, and consequently was ordered to pay the defendant’s costs from expiry of the relevant period, those costs were to be on the standard basis, and not the indemnity basis, absent any other special circumstance.

The Court of Appeal pointed out the difference between CPR 36.17(3) and CPR 36.17(4), noting that it is only when judgment is given against the defendant which is at least as good as the claimant’s Part 36 offer, that the claimant is awarded indemnity costs.

The Court of Appeal quoted from its own decision in

Excelsior Industrial and Commercial Holdings v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879

where it said:

 

“53. Before this Court Mr Cunnington fairly and candidly accepted that the judge did not receive the assistance from him that he should have done and therefore fell into error. The judge appears to have thought that the provision relating to costs on an indemnity basis also applied to the present sort of case, when judgment is entered against a claimant. In fact it has been made clear by this Court that the significance of the absence of any reference to an indemnity basis in what is now CPR 36.17(3) is that:

“… In normal circumstances, an order for costs which the court is required under that Part to make, unless it considers it unjust to do so, is an order for costs on the standard basis. That means that if the court is going to make an order for indemnity costs, as it can …, it should do so on the assumption that there must be some circumstance which justifies such an order being made … there must be conduct or (I add) some circumstance which takes the case out of the norm.” ”

 

The reasons are obvious, although apparently not to the number of first instance judges.

A winning claimant who fails to beat a defendant’s Part 36 offer is punished in two ways:

  • not getting costs from the expiry of the relevant period; and
  • having to pay costs to the defendant from the expiry of the relevant period.

It is important to remember in such case the claimant has won.

Where a claimant matches or beats its own offer, and again has won, it will get its costs on the standard basis anyway, for winning, irrespective of whether it made an offer itself.

That is why indemnity costs are required where a claimant matches or beats its own offer, so as to give the claimant an incentive to make an offer, in exactly the same way as defendants have incentives to make offers.

Awarding the claimant indemnity costs is equivalent to the costs shifting that a defendant benefits from in relation to a successful defendant’s offer.

That is also why Parliament has decided that a claimant who matches or beats its own offer should get an uplift on damages, that is to give the claimant an incentive to make such an offer.

That is also why, as a matter of logic and policy, if not the Civil Procedure Rules, a late accepting defendant should have to pay indemnity costs from expiry of the relevant period.

Written by kerryunderwood

July 9, 2018 at 10:02 am

Posted in Uncategorized

EXEMPLARY DAMAGES: COURT OF APPEAL GUIDANCE

with 2 comments


In AXA Insurance UK plc v Financial Claims Solutions Ltd and others [2018] EWCA Civ 1330 (15 June 2018)

the Court of Appeal awarded exemplary damages of £20,000 each against the three defendants, who had faked road traffic accidents, created false documentation, and, in relation to the first defendant, conducted proceedings on the basis that it was a firm of solicitors, which it was not.

The defendants dishonestly manipulated the court process, including falsely stating that court documents had been served.

The defendants chose not to provide evidence as to their means and so it was appropriate to make a punitive award without reference to their ability to pay.

The Court of Appeal stressed that exemplary damages remained the exception to the rule, and said it was not appropriate to extend the scope of such awards beyond the three types of case recognised in

Rookes v Barnard [1964] AC 1129.

One of the categories identified in that case was where the defendant’s conduct was calculated to make a profit for the defendant which may exceed the compensation payable to the claimant, and that criterion was satisfied here.

The Court of Appeal gave guidance on the approach to be adopted in relation to this category.

The court should analyse the position from the point of view of when the tort was committed, when the wrongdoer did not know whether or not it would achieve the profit that it was seeking.

The court should not decline to make an order for exemplary damages simply because the wrongdoer’s profit could be fully recovered through an award of compensatory damages.

Such a policy would be inconsistent with the decision in

 

Ramzan v Brookwide [2011] EWCA Civ 985.

 

Actual or possible criminal proceedings, or contempt of court proceedings should not affect or reduce an award of exemplary damages.

 

The Court of Appeal approved the analysis in

 

Borders (UK) Ltd v Commissioner of Police of Metropolis [2005] EWCA Civ 197

 

that exemplary damages can be awarded to punish and deter outrageous conduct by the defendant.

Here the action was in the torts of deceit and unlawful means conspiracy.

The Trial Judge awarded the claimant compensatory damages of £24,954.31, but dismissed the claim for exemplary damages.

The Court of Appeal allowed the insurance company’s appeal against that ruling.

Here the fraudulent defendants stood to make a profit of £85,000, whereas the compensatory damages were only around £25,000, and this was the point which brought the case within one the categories in Rookes v Barnard [1964] AC 1129.

 

 

 

 

Written by kerryunderwood

July 6, 2018 at 1:06 pm

Posted in Uncategorized

PART 36: TWO NEW CASES: THINK ABOUT YOUR OFFER!

leave a comment »


 

Part 36: Dishonest Conduct No Reason to Depart From Usual Costs Order

In Tuson v Murphy [2018] EWCA Civ 1461 (22 June 2018)

the Court of Appeal held that a claimant who accepted a Part 36 offer after the expiry of the relevant period was not liable for costs incurred before the expiry of the relevant period even though she was dishonest and misleading.

The offer was unconditional and unwithdrawn and was made by the defendant with full knowledge of the claimant’s dishonesty.

This was a personal injury claim which included a claim for loss of earnings.

Three months after issuing proceedings, the claimant tried to develop a business franchise, but she abandoned it as it was losing money, and she failed to disclose this in her evidence and to the employment expert appointed  in relation to her loss of earnings claim.

After becoming aware of this, the defendant made a Part 36 offer, which was accepted by the claimant two months after the expiry of the relevant period.

The usual order would be that the claimant would get costs up to the expiry of the relevant period, but not afterwards, and would have to pay the defendant’s costs from the expiry of the relevant period onwards.

However, here, the first instance court ordered the claimant to pay the defendant’s costs from the point at which it could be said that the claimant had started to mislead the defendant.

The claimant appealed and the Court of Appeal allowed the appeal and substituted the usual order of the defendant paying the claimant’s costs up to the expiry of the relevant period with the claimant paying the defendant’s costs thereafter.

The Court of Appeal considered CPR 36.13(5) and the circumstances in which it may be unjust to make the usual costs order.

 

The Court of Appeal considered

 

Tiuta plc (In Liquidation) v Rawlinson & Hunter (A Firm) [2016] EWHC 3480 (QB)

 

and endorsed the approach of the court there, namely that if nothing emerges after the claimant’s acceptance of a Part 36 offer to show that the defendant’s assessment of the risks and benefits in making the offer is significantly upset, contradicted or misinformed, then it will be highly unlikely that applying the usual costs order will be unjust.

The court said there was a difference between the situation where the facts known to the defendant’s advisers at the time of the Part 36 offer did not change significantly during the period after the offer was made, but before the delayed acceptance, and the situation where the facts known to the defendant’s advisers when the Part 36 offer was made were upset or undermined by subsequent events, or subsequently discovered facts.

The judgment is also a reminder of the value of Calderbank offers, outside the framework of Part 36, which can be made in this type of situation, or indeed any other type of atypical situation.

Comment

This was a pre-2015 case. In a case issued after the implementation of Section 57 of the Criminal Justice and Courts Act 2015, the whole claim would have been dismissed on the basis of fundamental dishonesty.

Had the claimant accepted within the relevant period, then there could have been no argument – she would have been entitled to costs in any event.

The key for all parties in relation to Part 36 is certainty, and this decision is a sensible and correct one.

Obviously I have no idea why the defendants made a Part 36 offer, rather than a Calderbank offer, but I do know that generally many litigation lawyers have a woeful lack of knowledge and understanding of Part 36, which is an exceptionally complexed rule.

 

In Tiuta the court said:

 

“…the authorities have repeatedly emphasised the importance of remembering that the part 36 regime is there to provide a clarity and balance for the encouragement of the resolution of claims that would otherwise be litigated through to a trial.”

 

Part 36 Offers: You Need to Track Them and Use Form N242a !

I have long advised that in every case every lawyer should have a separate document setting out all Part 36 offers in a case and that document, and any offers, should be reviewed each month as part of a regular file review.

Those of you working electronically only will need to find your own systems, but I suspect it is the lack of paper staring lawyers in the face which is causing some of these problems.

A particularly graphic case is

Hogg v Newton, Teesside County Court, 18 May 2018.

This was a road traffic accident and on 8 May 2012 it was put onto the portal and the Claim Notification Form stated that the claimant was hiring a vehicle – in fact on credit hire – as well as claiming for personal injury.

On 12 February 2013 the claimant’s solicitors made a Part 36 offer of “£1,600 in full and final settlement of this claim.”

That Part 36 offer was made by letter and elsewhere within the letter it stated that the offer was for “the whole of our client’s claim”.

In March 2014, the personal injury element of the claim was settled for £650, leaving the balance of the claimant’s offer at £950, that is £1,600 less the £650 agreed for the personal injury part of the claim.

The claimant instructed fresh solicitors and in March 2016 they issued proceedings with a damages claim of over £125,000, of which the credit hire claim amounted to over £122,000.

The defendants then accepted the original, unwithdrawn Part 36 offer and paid the balance of £950 and applied to the court for a declaration that the claim had been compromised.

The District Judge granted the application, and rejected the claimant’s argument that the reference to the whole of the claim should be read as meaning with the exception of credit hire, and the judge also rejected the argument that the offer lapsed on settlement of the personal injury element of the claim.

The claimant appealed and sought to argue a fresh ground, namely that the offer was not a Part 36 offer at all, having failed to comply with the CPR, as well as its original arguments.

The Circuit Judge agreed with the District Judge that the natural meaning of “the whole of our client’s claim” was just that and included the claim for credit hire.

The Circuit Judge also upheld the District Judge’s finding that settlement of part of a claim did not revoke a Part 36 offer, and noted that the offer had never been withdrawn, and that the claimant was free to withdraw the offer at any time after the expiry of the relevant period.

The Circuit Judge also rejected the fresh argument that the offer was not a genuine Part 36 offer.

The Circuit Judge allowed this point to be argued and he found that the reference in the letter to the claimant “seeking the full sanctions available under Part 36” was sufficient and that a reasonable person, or insurer, would have read the relevant passage as being part of a valid Part 36 offer.

It was not necessary specifically to include within the offer the phrase that the offer is intended to have the consequences of section 1 of Part 36, even though this is required by CPR 36.2(2)(b).

The statement that the defendant had “21 days to respond to this offer” was sufficient and the offer did not need to set out the full text of CPR 36.2(2)(c).

 

Comment

This decision is correct and illustrates a number of important points.

Firstly always, but always, use the HMCTS Form N242A, rather than trying to write your own Part 36 offer.

Completion of the official, approved form of Part 36 offer eliminates any chance of not getting the wording right.

Time and time again I am instructed by solicitors where the matter in issue is whether an offer made in a letter, rather than on Form N242A, is a valid offer.

Secondly, have a separate and clear document listing Part 36 offers, their terms and dates and review these offers each month as part of the file review.

Thirdly, take care in considering whether the offer is indeed intended to compromise the whole claim, or only part of it.

It is proper and acceptable to seek to compromise just part of the claim; indeed that is part of the purpose of Part 36 that discrete matters, such as special damages to date or whatever, can be resolved, so as to narrow down the issues.

Far too many firms take a cavalier attitude towards Part 36, which is unquestionably the most important rule in the book.

 

Written by kerryunderwood

July 5, 2018 at 11:06 am

Posted in Uncategorized

SOLICITOR’S UNREASONABLE AND IMPROPER CONDUCT AND DETAILED ASSESSMENT

with 4 comments


In Gempride Ltd v Bamrah and another [2018] EWCA Civ 1367, 21 June 2018

the Court of Appeal allowed an appeal against a Circuit Judge’s decision to overturn the order of a Costs Master who had disallowed the claimant her costs, utilising the provisions of CPR 44.11, having found misconduct on her behalf in relation to detailed assessment proceedings.

Here the claimant was a solicitor whose own firm initially acted for her in a personal injury claim and the Master found that she had certified a misleading bill of costs and had given untrue information about the funding of the case.

The personal injury case settled for £50,000 shortly after proceedings had been issued.

The claimant had claimed over £900,000.

The appeal by the solicitor against the Master’s order occupied a Circuit Judge for 13 days and the Circuit Judge allowed the solicitor’s appeal, finding that the claimant’s solicitor was not responsible for the errors of her costs draftsmen who had prepared the bill.

This was on the basis that they had not acted according to her instructions, that she had not acted dishonestly and that her statement in relation to the funding of the case was correct.

The Circuit Judge ordered the defendant to pay the claimant’s costs, including her own costs of attending the appeal, and these exceeded £950,000.

The claimant was a sole practitioner and she instructed herself under a Conditional Fee Agreement and throughout, the paying party, the defendant, had questioned the hourly rate and also whether Before-the-Event insurance was available.

The Court of Appeal allowed the defendant’s appeal and held that the claimant’s conduct had been unreasonable and improper for the purposes of CPR 44.11 and disallowed half of her costs of the original action.

The Court of Appeal held that unreasonable and improper conduct did not require dishonesty.

Here the claimant had retrospectively increased the hourly rate that being charged to herself and stated that her costs draftsmen had advised that this was proper.

The Court of Appeal held that her conduct in allowing a bill to be submitted with a rate that she knew exceeded the contractual rate had been at least reckless.

In any event the firm was responsible for the conduct of the costs draftsmen, who are agents for the claimant’s solicitor.

The Court of Appeal said that it was “an important matter of principle that solicitors on the record – and other authorised litigators and “legal representatives” for the purposes of the CPR – understand that they remain ultimately responsible for the acts and omissions of those to whom they delegate parts of the conduct of litigation, particularly where those to whom such work is delegated are not authorised. It is only in that way that the supervisory jurisdiction of the court can be effectively maintained”.

The Court of Appeal also held that the claimant, who gave evidence at the appeal before the Circuit Judge, could not claim the costs of attending that hearing as a solicitor, as she was attending as a party.

The decision runs to 186 paragraphs and sets out in a clear and helpful way the approach that the court should take when considering whether to make an order under CPR 44.11, following misconduct in relation to detailed assessment proceedings.

It reinforces the long held principle that the signing of the certificate on a bill of costs by a solicitor is a most serious matter.

 

The Court of Appeal also said:

 

Parliament requires that those who conduct a litigation or exercise a right of audience on behalf of others are subject to a rigorous regulatory scheme, and have an overriding duty to the court.” (Paragraph 4).

 

The decision also sets out in some detail the restrictions on conducting litigation or exercising a right of audience without being entitled to and points out that this is a criminal offence under Section 14 of the Legal Services Act 2007, a fact which seems almost routinely to be ignored by courts and McKenzie friends.

The Court of Appeal also set out the relevant provisions of the Legal Services Act 2007 and provided, amongst other things, that authorised persons should maintain proper standards of work and that persons who exercise before any court a right of audience, or conduct a litigation in relation to proceedings in any court, by virtue of being authorised persons should comply with their duty to the court to act with independence in the interest of justice.

 

An authorised person is therefore subject to not only regulation by a professional regulator (which includes provision for sanctions for professional misconduct) but also supervision directly by the court.”(Paragraph 9).

 

The Court of Appeal reinforced the decision and comments in

 

Bailey v IBC Vehicles Limited [1998] 3 All ER 570 :

 

“As officers of the court, solicitors are trusted not to mislead or to allow the court to be misled. This elementary principle applies to the submission of a bill of costs.”

 

A solicitor is required to sign the bill of costs and:

 

In so signing he certifies that the contents of the bill are correct. That signature is no empty formality. The bill specifies the hourly rates applied, and the care and attention uplift claimed. If an agreement between the receiving solicitor and his client… restricted (say) the hourly rate payable by the client, that hourly rate is the most that can be claimed or recovered on taxation….The signature on the bill of costs under the rules is effectively the certificate by an officer of the court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client under a contentious business agreement.

The court can (and should unless there is evidence to the contrary) assume that his signature to the bill of costs shows that the indemnity principle has not been offended….

… [T]he other side of a presumption of trust afforded to the signature of an officer of the court must be that breach of that trust should be treated as a most serious disciplinary offence.”

 

 

The Court of Appeal then set out the relevant provisions in Section 51(6) of the Senior Courts Act 1981 dealing with wasted costs and the text of CPR 44.11 which reads:

 

 

“(1) The Court may make an order under this rule where –

(a) a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or

(b) it appears to the court that the conduct of a party or that party’s legal representative, before  or during the proceedings or in the assessment proceedings, was unreasonable or improper.

(2)  Where paragraph (1) applies, the court may –

(a) disallow all or part of the costs being assessed; or

(b) order the party at fault or that party’s legal representative to pay costs which that party or legal representative has caused the other party to incur”.

 

The Court of Appeal pointed out that the wasted costs jurisdiction is compensatory, whereas the CPR 44.11 jurisdiction is not:

 

 

“An order under CPR rule 44.11 can only be made against a party or a party’s legal representative. The jurisdiction is not compensatory: it is not necessary to show that the applicant has suffered any loss as a result of the misconduct. It is a jurisdiction intended to mark the court’s disapproval of the failure of a party or of a legal representative to comply with his duty to the court by way of an appropriate and proportionate sanction.

 

The Civil Procedure Rules do not define “unreasonable” law in proper conduct, although CPR Practice Direction 44, paragraph 11.2, provides:

 

 

Conduct which is unreasonable or improper includes steps which are calculated to prevent or inhibit the court from furthering the overriding objective.”

 

However, the Court of Appeal said that “unreasonable” and “improper” for the purposes of CPR 44.11 have the same meanings as they have been given in the wasted costs provisions and the numerous decisions under those provisions.

 

The Court of Appeal took the view that it was unlikely that the drafters of CPR 44.11 thought that a legal representative should be liable under those provisions in circumstances in which a wasted costs order could not be made, save for the point made above, that a wasted costs order is compensatory, whereas a CPR 44.11 order is punitive, and not compensatory.

 

The Court of Appeal then goes through the case law in detail in relation to the wasted costs criteria.

 

The Court of Appeal then set out the relevant propositions in relation to CPR 44.11

i) A solicitor as a legal representative owes a duty to the court, and remains responsible for the conduct of anyone to whom he subcontracts work that he (the solicitor) is retained to do. That is particularly so where the subcontractor is not a legal representative and so does not himself owe an independent duty to the court.

ii) Whilst “unreasonable” and “improper” conduct are not self-contained concepts, “unreasonable” is essentially conduct which permits of no reasonable explanation, whilst “improper” has the hallmark of conduct which the consensus of professional opinion would regard as improper.

 

iii)           Mistake or error of judgment or negligence, without more, will be insufficient to amount to “unreasonable or improper” conduct.

iv) Although the conduct of the relevant legal representative must amount to a breach of duty owed by the representative to the court to perform his duty to the court, the conduct does not have be in breach of any formal professional rule nor dishonest.

v) Where an application under CPR rule 44.11 is made, the burden of proof lies on the applicant in the sense that the court cannot make an order unless it is satisfied that the conduct was “unreasonable or improper”.

vi) Even where the threshold criteria are satisfied, the court still has a discretion as to whether to make an order.

 

vii) If the court determines to make an order, any order made (or “sanction”) must be proportionate to the misconduct as found, in all the circumstances.

 

By the time the costs issue reached the Circuit Judge on appeal, the claimant had instructed other solicitors, that is other than her own firm, and thus she had attended that hearing as a party, but not as a solicitor.

Thus the Court of Appeal’s finding on this point does not mean that a firm of solicitors conducting litigation for itself, or one of its partners etc., does not get solicitors’ costs of attending in the usual way.

The reason why the Court of Appeal said that it is of particular importance that solicitors are held liable for the conduct of anyone to whom they contract work when those subcontractors are not themselves authorised is that such unauthorised subcontractors do not owe an independent duty to the court.

 

 

 

Written by kerryunderwood

July 4, 2018 at 9:22 am

Posted in Uncategorized

%d bloggers like this: