Kerry Underwood

Archive for September 2018

COSTS UPDATE: THREE NEW CASES: GROUP LITIGATION ORDERS, COURT OF PROTECTION AND DISCONTINUANCE

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In September and October I am delivering my new course – Getting the Retainer Right – in 10 cities – details and booking form here.

Indemnity Costs of Premature, Uncoordinated GLO Application Awarded Against Claimants

In Crossley v Volkswagen Aktiengesellschaft and others (VW Nox Emissions Group Litigation) [2018] EWHC 2308 (QB) (4 September 2018)

a Senior Master of the High Court held that an application for a group litigation order (GLO) had been made prematurely and awarded indemnity costs against the claimants in relation to the costs of preparing for, and attending, a number of hearings, including the adjourned hearing of the GLO application.

The costs are said to be around £450,000.

The claimants had issued the GLO application in November 2016, but it was only heard in March 2018.

In the meantime, there had been satellite litigation between two main law firms seeking to represent the claimants, requiring determination at an expedited trial.

The defendant argued that, in light of matters including the satellite litigation, it had been premature for the claimants to make and progress the GLO application, resulting in unnecessary hearings and costs; the claimants had significantly breached settled principles and practices regarding the commencement and progression of group claims by, among other things, proceeding prematurely, in an uncoordinated way and failing to provide a notional lead lawyer who could speak with the authority of the coordinated group.

 

In reaching her decision, the Senior Master explained that:

 

  • While not every issue had to be agreed and a draft order finalised before a GLO could be sought, the court expected the claims to be at a stage where the GLO issues and any differences between the claimants’ claims could be identified, as well as the position on funding and costs.

 

Different firms of claimants’ solicitors should have agreed a common approach, a solicitors’ group should have been formed and lead solicitors identified.

 

  • Insufficient time had been allowed for pre-action exchanges.

 

It was not possible for the court to deal with the GLO application on the state of the evidence and information before it.

 

It was obvious that the hearing would need to be adjourned, as the claimants conceded at the hearing.

 

  • There were no limitation reasons for issuing prematurely and even if there had been, they could have been dealt with by agreement or, if that was not possible, by issuing proceedings and seeking a stay.

 

  • The timing of issuing the GLO application was a commercially driven decision linked to the funding arrangements sought by one of the firms vying to represent the claimants: it was not for the claimants’ benefit.

 

 

  • A number as aspects of this case took it “outside the norm” and therefore an award of indemnity costs was appropriate.

 

The judgment contains useful guidance in relation to applications for group litigation orders.

 

“85. It is not the case that the court expects all issues to have been agreed and a final formulation of the draft GLO to be in place by the time of the application or the hearing. Although in many GLO applications the draft GLO is wholly or substantially agreed, in a significant number there are still issues not agreed that need to be determined by the court. However, the claims need to be at a stage where GLO issues can be identified, and where some claimants may have different claims in law, these need to be identified so that the court can decide whether they should be included in the GLO or dealt with outside the GLO. Proper vetting of claims must have occurred so that weak or unmeritorious claims can be weeded out. Satisfactory funding of the litigation and ATE insurance (or other demonstration of an ability to pay adverse costs orders) needs to have been arranged, or at least be some way towards that being achieved. The common and individual costs provisions of the draft order need to have been discussed and agreed if possible. This is usually an area capable of agreement in most cases. A realistic timetable for service of GPOC and a Generic Defence needs to have been discussed. The different firms of claimant solicitors need to have had substantial discussions so that a common approach can be agreed if possible, and if not the issues of difference, and the reasons for them, identified. The formation of a Solicitors Group needs to be discussed and agreed, and identification, and agreement if possible, of lead solicitors. The defendants need to be involved in discussions once there is a sufficiently identified common approach, or differences of approach are capable of being identified. If there are limitation issues agreement for stays pending the GLO need to be canvassed, and applications made if agreement cannot be reached. The court needs a substantial amount of information before it can determine such issues.

  1. I reach the conclusion that the GLO application in this case was issued prematurely. For such a major piece of litigation there was simply not enough time allowed for preaction and pre- application correspondence with other Claimant groups and with the Defendants. The state of disarray in which the application reached me at the hearing on 30 January 2017 made that conclusion all too obvious. As I commented at the hearing, it was simply not possible for the court to have dealt with the GLO application on the state of the evidence and information before it. It was clear to me when reading the papers submitted for that hearing over the weekend before it was due to be heard, that there was no possibility that the application could be dealt with and that the VW Defendants’ application for an adjournment was, unless there was some development that I was unaware of, bound to be successful. When the hearing commenced on the morning of Monday 30 January 2017 the Relevant Claimants conceded that there would have to be an adjournment. That conclusion should have been reached by the Relevant Claimants at a much earlier stage.”

 

Comment

Is there any point in group litigation orders?

Would matters not be best left to the courts’ general case management powers?

This case is not much of an advertisement for the legal profession or for claimants’ solicitors.

 

Rare Costs Order Against Local Authority In Court of Protection

In London Borough of Lambeth v MCS (by her litigation friend the Official Solicitor) (1); and Lambeth CCG (2)[2018] EWCOP 20)

the Court of Protection, part of the High Court, took the exceptional decision to make a costs order.

The order was made against the London Borough of Lambeth and Lambeth Clinical Commissioning Group, both public bodies.

The subject of the Court of Protection order was a 55 year old woman from Colombia who collapsed in the street in the United Kingdom in 2014 and after that had cognitive problems and was transferred to hospital and remained there.

The lady wanted to return to Colombia and could not speak English and the London Borough of Lambeth applied to the Court of Protection.

The High Court Judge was very critical of both the London Borough of Lambeth and the Lambeth Clinical Commissioning Group saying:

 

“It is obvious that this Court is deeply critical of the manner in which this case was handled both before and after the institution of proceedings. It is further troubling that even within the written submissions are many misconceived assertions or contentions as to fact.”

 

and

 

“To submit that the CCG [Clinical Commissioning Group] was “throughout commendably assiduous” in seeking the return to Colombia is about as misplaced and offensive a submission as could possibly be contemplated.”

 

The judge said that the subject of the Court of Protection proceedings should have been repatriated to Colombia “years earlier, rather than being kept caged in an environment and jurisdiction where she was so obviously unhappy and did not belong”.

 

The judge concluded:

 

“5. Without hesitation I conclude that the circumstances of this case are so poor and so extreme (both in relation to institution of proceedings and their subsequent conduct) that I should make an order that the costs of the proceedings should be born by the Applicant and Second Respondent. It is submitted to me (at paragraph 2) that the Court is asked to consider that whilst the Applicant was a party throughout, the CCG only being joined towards the end of the proceedings, it was the CCG who was the decision maker. I am not entirely clear what is being submitted here, Ms Rowlands represents both, and I am unable to make any apportionment. They are both public bodies, I simply make an order against both jointly and severally.”

 

This is a very short judgment – just one and a half pages – and is well worth reading.

 

Discontinuance: Rare For Usual Rule to Be Disapplied 

In BAE Systems Pension Funds Trustees Ltd v Bowmer & Kirkland Ltd and Ors [2018] EWHC 1222 (TCC)

the Queen’s Bench Division of the High Court followed the usual rule that a discontinuing claimant must pay the defendant’s costs.

Here, the claimant discontinued against the second defendant, but sought an order that the costs of the second defendant be paid by the first defendant, rather than the claimant.

The court refused, and ordered that the usual consequences of CPR 38.6 should apply, that is that the claimant pay the costs of the defendant against whom it had discontinued.

The fact that, due to limitation issues, the claimant had sensibly issued against all possible defendants in circumstances where the claimant was unclear about the financial or insurance position of the potential defendants, made no difference.

The court said that it had a wide discretion under CPR 44 and was free to make such an order, although there was no authority on the point, but in any event it declined to do so.

The court gave as an example of where such an order might be appropriate, as where a claimant had been positively misled by the defendant into suing another defendant.

Some guidance could be obtained from the approach to Sanderson orders, that is where an unsuccessful defendant pays the costs of a successful defendant direct, and here the court referred to the decision of the Court of Appeal in

 

Irvine v Commissioner of Police for the Metropolis [2005] 3 Costs LR 380,

 

where it cited, with approval, this passage from the first instance decision:

 

“It does seem to me that this is a case where, as in all cases, parties and their legal teams have to take a careful and close look at the basis on which they seek to bring in another party to proceedings and to make a judgment for themselves on the basis of the information available to them as to whether or not they are likely to succeed in claims against those parties. They cannot expect, simply because one party seeks to lay the blame at the door of another, that they can necessarily pursue that other party at the expense of the one who is pointing the finger. Parties must give careful thought to how they are going to pursue their claims”.

 

Comment

It will be very rare for the usual rule on discontinuance, that is that the discontinuing party pays costs, to be disapplied.

It should be noted that even in Qualified One-Way Costs Shifting cases, where discontinuance occurs, a costs order is invariably made against the claimant in the usual way, and the issue then is as to whether or not that order can be enforced against the claimant.

 

 

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Written by kerryunderwood

September 21, 2018 at 8:10 am

Posted in Uncategorized

GETTING THE RETAINER RIGHT – INTRODUCTION, CHECKLISTS OF WHAT YOU CAN AGREE WITH YOUR CLIENTS AND MATTERS TO CONSIDER

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YOU CAN BOOK ONTO THE COURSE HERE

Here is the Introduction, the checklist for what you can agree with your client and the checklist of matters to consider with a client.

Introduction

The aim of this course is to consider the various solicitor and own client funding options, while maximising the prospects of maximum recovery from the other side on behalf of the client, which in spite of what you may read in the legal press, is actually the professional duty of any solicitor.

The relations between solicitors and their clients are of course very heavily regulated indeed, both by the Solicitors Code of Conduct and the Solicitors Act 1974, which in turn is a successor to various statutes going back to the Attorneys in County Courts Act 1235, the Recovery of Damages and Costs Act 1278 and the Statute of Westminster 1275, part of which is still in force governing the fees of solicitors.

However, until relatively recently, most individuals and businesses were honourable people who regarded a deal as a deal.

While most people and businesses remain the same, there is now a much larger group than previously who regard any attempt to get compensation for anything as fair game and who have adopted the odious cult of consumerism – that is that nothing and no-one but themselves matters.

Thus there has grown up organisations whose sole aim is to challenge solicitors’ bills, not normally on the merits, but on highly technical and abstruse grounds.

One of the main proposes of this course is to assist solicitors to get the retainer right and avoid technical challenges.

Unfortunately we are not always helped by the sheer greed of some of our fellow professionals.

For example see the Law Society Gazette piece of 19 September 2018 – Solicitor oversaw ‘obscene’ £5m costs overcharging against NHS.

Many disputes between solicitors and clients, like most other disputes, arise because the parties do not agree about what they agreed.

Clarity and certainty, so that there can be no doubt at all as to what was agreed, and keeping the client fully updated at all stages, are the best ways of avoiding disputes.

This course will help you achieve those aims, as well as providing model funding agreements and bills etc., together with relevant case law.

 

WHAT CAN YOU AGREE WITH YOUR CLIENT?

  • Hourly rate – uncapped
  • Hourly rate – total capped
  • Hourly rate but total capped by reference to percentage of damages
  • No-win, No-fee with success fee not capped by reference to damages
  • No-win, No-fee – success fee capped by reference to damages
  • No-win, No-fee – no success fee
  • CFA-Lite – costs limited to those recovered
  • Fixed Fee
  • Fixed initial fee – then hourly rate with all above combinations
  • Fixed initial fee – then conditional fee with all above combinations
  • Credit for fixed initial fee in the event of a win?
  • Who is paying disbursements?
  • Interest
  • Higher hourly rate to reflect solicitor funding case
  • Part 36 – Who is taking the risk?
  • Retainer
  • Right to interim bill
  • Recovered costs plus a percentage of damages

 

CHECKLIST OF MATTERS TO CONSIDER WITH A CLIENT

 

  • Does the client have Before-the-Event insurance?
  • Topping up Before-the-Event insurance by way of a No-Win, Lower Fee Agreement
  • Lower fee to be the amount paid by the Before-the-Event insurer
  • After-the-Event insurance
  • Who is paying for the ATE insurance?
  • ATE insurance included in capped percentage of damages?
  • Use of counsel
  • Counsel’s fees
  • Will counsel be on a Conditional Fee Agreement?
  • Disbursements – who is paying and when?
  • Interest charged to client on disbursement/costs funding
  • Recovering interest from the other side
  • Third party funding
  • Types of third party funding
  • Who is the agreement between?
  • Who gets what and in what order?

Written by kerryunderwood

September 20, 2018 at 4:13 pm

Posted in Uncategorized

GUIDANCE ON LEGAL SERVICES ACT 2007 AND “CONDUCTING LITIGATION”

with 2 comments


In September and October I am delivering my new course – Getting the Retainer Right – in 10 cities – details and booking form here.

In Kassam v Gill and another (unreported), 13 August 2018, (County Court at Birmingham)

the County Court  considered the procedure for completing a statement of truth in an online claim form, providing guidance on what amounts to compliance with CPR requirements for statements of truth, under CPR 22 and CPR 5.3.

The judgment also provides helpful analysis of what constitutes “conduct of litigation” for the purposes of the Legal Services Act 2007.

The claimants instructed a firm to assist them with a possession claim.

The firm were not solicitors and were not authorised or exempt under the Legal Services Act.

A representative of the firm helped the claimants complete an online claim form.

The first claimant had ticked the box, or clicked the icon, on the online form to signify agreement to the statement of truth, on behalf of himself and the second claimant.

However, in the County Court’s view, this was not sufficient to satisfy the rules.

CPR 5.3 and PD 55B.9.1 envisaged that the signature was applied personally.

The County Court considered that a representative applied the signature when he entered the claimants’ names on the online form.

He acknowledged that there was no provision for entering the claimants’ names in the section of the form providing for verification of its contents by the statement of truth.

The claimants’ names and signatures were automatically inserted into the statement of truth once the box was ticked or the icon clicked.

The judge noted that this was “not a happy fit” with the requirements of the rules.

However, while the claimants’ actions did not comply with the letter of the rules, in the context of the online process, they met the purpose of the provisions.

Therefore, it was not appropriate to strike out the claim form. No doubt the court was influenced by the fact that the defendant, the claimants’ tenant, clearly owed a lot of rent.

The County Court’s analysis of what constitutes “conduct of litigation” for the purpose of Schedule 2, paragraph 4(1) of the Legal Services Act is also worth noting.

On the facts ,the court considered that the firm was closely involved in the issue and prosecution of the claim, including providing advice, drafting proceedings, preparing witness statements and bundles.

This was more than assisting with clerical or mechanical matters and, along with the fact that a representative had entered the firm’s address as the correspondence address on the claim form, breached the provisions of the Legal Services Act.

However, although the firm had committed an offence, this had no direct effect on the validity of the claimants’ cause of action and it was not just or proportionate to strike out the claimants’ claim as a result.

 

The court said:

“Courts should be slow to grant an application from a litigant for a right of audience or a right to conduct litigation to any lay person, including an MF [McKenzie friend] this is because a person exercising such rights must ordinarily be properly trained, be under professional discipline (including an obligation to insure against liability for negligence) and be subject to an overriding duty to the court. These requirements are necessary for the protection of all parties to litigation and are essential to the proper administration of justice.”

 

“The courts are generally less concerned with the question of whether the assistance a litigant is offered on an ad hoc basis by a trusted relative who is involved because he has the interests of the litigant at heart amounts to conducting litigation, than when that “assistance” is being provided by a commercial organization for a fee. … the policy which underlies the need for those conducting litigation to be trained, insured and subject to discipline is unlikely to be undermined by that sort of “assistance”.”

 

Comment

Parliament, the courts, and society generally, need to grapple with this issue.

Quite simply – are we to have a free market where unqualified, untrained and undisciplined people can practice law, or are we to insist that only qualified, regulated, disciplined and insured lawyers can conduct litigation?

There is no halfway house.  

 

Written by kerryunderwood

September 19, 2018 at 10:20 am

Posted in Uncategorized

GETTING THE RETAINER RIGHT: A CHECKLIST

with 2 comments


This is a detailed list of what I cover on my new course – Getting The Retainer Right – but readers may find it a useful checklist in any event.

The courses start this Friday 21 September in London, moving on to Cardiff and Swansea next week.

Full details and booking form here.

I am grateful to Invicta Capital for sponsoring all 10 events.

 

THE RETAINER

Getting the Retainer Right

Client Care Silver Service

Payment by Card

Interest

List of Funding Agreements

What can you agree with your client?

  • Hourly rate – uncapped
  • Hourly rate – total capped
  • Hourly rate but total capped by reference to percentage of damages
  • No-win, No-fee with success fee not capped by reference to damages
  • No-win, No-fee – success fee capped by reference to damages
  • No-win, No-fee – no success fee
  • CFA-Lite – costs limited to those recovered
  • Fixed Fee
  • Fixed initial fee – then hourly rate with all above combinations
  • Fixed initial fee – then conditional fee with all above combinations
  • Credit for fixed initial fee in the event of a win?
  • Who is paying disbursements?
  • Interest
  • Higher hourly rate to reflect solicitor funding case
  • Part 36 – Who is taking the risk?
  • Retainer
  • Right to interim bill
  • Recovered costs plus a percentage of damages

 

CONTINGENCY ARRANGEMENTS

Section 57 – Contingency Fee Agreements

Contingency Fee Agreements combined with Conditional Fee Agreements

Damages-Based Agreements

Discounted Conditional Fee Agreements

No-Win Lower-Fee: Hourly Rates and Fixed Fees

Topping up Before The Event Insurance

The Success Fee

The Hourly Rate

ATE Insurance

Counsel

Disbursements

Third Party Funding Retainers

 

GETTING THE DOCUMENTS RIGHT

Contingency Fee Agreement

Bridging Agreement

Conditional Fee Agreement – Civil Litigation – No Win No Fee – with success fee

Conditional Fee Agreement – Civil Litigation – No Win Lower Fee – with success fee

Model Client Care Letter

Cancellation of Contracts Regulations

Explanation of Funding Agreement – Vilvarajah and all that

The Indemnity Principle

Part 36

 

DURING THE CASE AND AFTER

Costs Information Updates

Disbursements

Estimates and Quotations

Interim and Final Statute Bills and Chamberlain Bills

Getting the Bill Right

Justifying the Charge to the client

 

DEALING WITH A SOLICITORS ACT 1974 CHALLENGE

Part III – Section 56 – Section 75 of Solicitors Act 1974

Regime for challenging legal bills may need reform – Judge

Contentious and non-Contentious Business

Basis of Solicitors Act Assessments

Complaints Procedure

Solicitors Act: Delivery of Papers

Time Limits

Contacting the Client Direct If Other Solicitors Instructed: The Ryanair and Haven Insurance Cases

Costs

Case Law Update

 

Written by kerryunderwood

September 18, 2018 at 8:33 am

Posted in Uncategorized

INJURY TO FEELINGS AWARDS AND INCOME TAX

with 4 comments


In September and October I am delivering my new course – Getting the Retainer Right – in 10 cities – details and booking form here.

In Moorthy v Revenue and Customs [2018] EWCA Civ 847

the Court of Appeal held that compensation for injury to feelings paid in accordance with the terms of a Settlement Agreement is not taxable, as it falls within the exclusion from taxation of payments on account of “injury”.

Section 406 of the Income Tax (Earnings and Pensions) Act 2003 provides that a payment or other benefit provided “on account of injury to… an employee” on the termination of a person’s employment is not subject to income tax.

The issue here was whether a settlement in reference to a claim for injury to feelings, amongst other things, was subject to income tax or was excluded as coming within the definition of “injury”.

In holding that injury to feelings is indeed a species of injury exempting that part of the payment from tax, the Court of Appeal has resolved differences of opinion in the lower courts on this point.

Broadly the Employment Appeal Tribunal had held that injury to feelings awards are in relation to “injury” and are tax free – see for example:

 

Orthet Ltd v Vince-Cain [2004] IRLR 857;  and

Timothy James Consulting Ltd v Wilton [2015] IRLR 368

 

whereas the Tax Tribunals, as here, have held such payments liable to tax as not being in respect of an injury.

Here the Court of Appeal applied the Vento guidelines so as to exempt £30,000 from tax, even though that meant treating the balance of £170,000 as effectively compensation for unfair dismissal, even though that sum vastly exceeded the maximum statutory compensation for unfair dismissal.

There is a sting in the tail in relation to this issue, apparently now clarified by the Court of Appeal.

Section 5(7) of the Finance (No 2) Act 2017 has inserted, with effect for the tax year 2018/19 onwards, a new subsection (2) to section 406 of the Income Tax (Earnings and Pensions) Act 2003, which reads:

 

“Although “injury” in subsection (1) includes psychiatric injury, it does not include injured feelings.”

 

Thus there is now no doubt that awards and settlements for injury to feelings are subject to income tax, certainly on the termination of employment.

Presumably Employment Tribunals must now gross up awards so that, once income tax has been deducted, the employee is left net with the Vento guidelines sum.

Thus if the Employment Tribunal believes £30,000 to be the correct Vento sum, and the taxpayer is subject to 40% tax, then the award must be increased to £50,000, so that the employee actually gets £30,000 net of tax.

That view is supported by the decision in Orthet where the Employment Appeal Tribunal specifically considered the issue as to whether the injury to feelings award had to be grossed up to ensure that the employee received £15,000, the sum awarded by the Employment Tribunal on the assumption that it would not be subject to income tax in her hands.

The Employment Appeal Tribunal held that the Employment Tribunal had been correct in that assumption and therefore there was no need to gross up as no income tax was payable in any event on that element of the award.

The assumption was that if the award was to be subject to income tax, then it would have had to be grossed up to leave the employee with the correct Vento sum in her hands, net of tax.

Employees in the past who have paid income tax on injury to feelings payments should now get a refund from HMRC.

Section 406, now amended, is part of Chapter 3 of Part 6 of the Income Tax (Earnings and Pensions) Act 2003, which chapter is headed:

 

“Payments and Benefits on Termination of Employment etc.”

 

Thus it appears that awards for injury to feelings other than on termination remain free of income tax, which does not seem logical.

It also raises the issue of whether an employer and an employee can agree, shortly before actual termination, an injury to feelings award so as to avoid it being subject to termination income tax.

Written by kerryunderwood

September 14, 2018 at 8:30 am

Posted in Uncategorized

PART 36 AND FIXED COSTS:  CLAIMANTS’ OFFERS POINTLESS RULES COURT OF APPEAL

with 5 comments


In September and October I am delivering my new course – Getting the Retainer Right – in 10 cities – details and booking form here.

In Hislop v Perde [2018] EWCA Civ 1726

the Court of Appeal held that in fixed costs cases a late accepting defendant has to pay only fixed costs, unless there are exceptional circumstances, and that of itself late acceptance is not an exceptional circumstance within CPR 45.29J.

A long delay without explanation may be a special circumstance, but a short delay with a reasonable explanation will not.

A claimant at trial, or on judgment being entered, who matches or beats her or his own Part 36 offer, still receives indemnity costs in accordance with the decision in

 

Broadhurst v Tan [2016] EWCA Civ 94

 

specifically endorsed here by the Court of Appeal, although unfortunately the Court of Appeal refers on several occasions to a claimant having to beat its offer at trial.

 

This is wrong on two points; firstly the claimant only has to match, not beat, its own offer, and secondly it is any judgment, and not just judgment after trial, which triggers the entitlement to indemnity costs.

 

Given that virtually all fixed costs cases settle before trial, this very limited exception is for all intents and purposes meaningless.

 

The Court of Appeal accepted that there was no authority as to when CPR 45.29J exceptional circumstances come into play, and here it chose to give no guidance, except the very limited, non-specific guidance set out above.

 

The issue of what happens on late acceptance of a Part 36 offer in non-fixed costs cases was not addressed.

 

 

Comment

A poor and chaotic decision which shows that this division of the Court of Appeal simply does not understand the funding mechanisms of civil litigation and fixed costs.

 

Paragraph 53 says it all:

 

“53. This is important. These rules demonstrate that, in the mirror image of the situation in which these claimants find themselves (namely, where a claimant has accepted a defendant’s offer late) there is no question of either indemnity or standard basis costs being awarded to the defendant. The defendant’s recovery for the period of delay is limited to fixed costs only. There could be no reason to treat the claimant in a radically different way and to go outside the fixed costs regime, and order standard or even indemnity costs, in circumstances where a defendant in a similar position to these claimants is not permitted to recover costs on that basis. In this way, my interpretation of the rules applies the same fixed costs regime to any party whose offer has not been accepted when it should have been.”

 

This shows a complete failure to understand Part 36 consequences. In no way is this a mirror image; a claimant who fails to beat a defendant’s Part 36 offer, or accepts late, pays the defendant’s costs and is deprived of its own costs, even though it has won.

Thus that is a double penalty. In contrast a defendant now suffers no penalty whatsoever on late acceptance.

The decision makes no sense at all. If the policy issue set out by the Court of Appeal are correct – and they are not – then why does a claimant at trial or on judgment get indemnity costs if it matches or beats its own Part 36 offer?

How can the happenstance of judgment or trial reverse entirely the policy objectives of certainty etc. trotted out by the Court of Appeal?

The Court of Appeal also falls into the trap of equating indemnity Part 36 costs with indemnity costs caused by misconduct or bad behaviour and here at paragraphs 35 and 36 the Court of Appeal recites the bad behaviour indemnity costs cases, which of course have nothing whatsoever to do with Part 36.

This totally misses the point. Why should a Part 36 penalty on a defendant require bad behaviour?

If so, then why, in the absence of bad behaviour, does a Part 36 late-accepting claimant have to pay the defendant’s costs and be deprived of its own costs, even though it has won the case?

This is all the more the case – a fortiori -in words the Court of Appeal might understand – as in personal injury cases, Qualified One-Way Costs Shifting applies, so failure to beat Part 36 imposes a costs penalty on a claimant, whereas normally a personal injury claimant is now not liable for costs, even in the event of complete defeat.

In the past that costs liability would have been covered by an After-the-Event insurance policy, with a premium recoverable from the defendant in the event of success.

The quid pro quo of the Jackson Reforms was QOCS protection in return for the abolition of recoverability of After-the-Event insurance premiums.

As I have pointed out previously the Part 36 regime drives a coach and horses through QOCS.

This decision reinforces that point, and more so.

There is now no point in a claimant in a fixed costs case making a Part 36 offer on quantum.

On liability – yes – as if that issue is got out of the way, then there is less work to do and fixed costs are the same whether or not liability is in dispute.

A claimant in a fixed costs case is now best advised to just proceed as far as possible, so as to get through to the latest fixed costs stage possible.

For all intents and purposes, in fixed costs cases, Part 36 is now an issue for defendants, and because of the costs consequences on a claimant who fails to beat a defendant’s Part 36 offer, it is at that stage that a claimant must engage with Part 36.

Having said that, there is now little incentive on a defendant to admit liability; they can, at no penalty, force the fixed costs claimant to do extra work, for no extra costs, which of course leads to pressure to under settle.

This is an insurance company decision.

As far as the Court of Appeal is concerned, some litigants are more equal than others.

Written by kerryunderwood

September 13, 2018 at 8:30 am

Posted in Uncategorized

INSOLVENCY, EQUAL PAY AND TUPE TRANSFER

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In September and October I am delivering my new course – Getting the Retainer Right – in 10 cities – details and booking form here

In Graysons Restaurants Ltd v Jones & Ors and the Secretary Of State for Business, Energy and Industrial Strategy (Interested Party) [UKEAT/0277/16/JOJ]

the Employment Appeal Tribunal held that where a company becomes insolvent, employees could present a claim to the Secretary of State for payment of equal pay arrears up to the statutory maximum of eight weeks, as these were “arrears of pay” within sections 184 and 182 of the Employment Rights Act 1996.

In the case of employees transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) any balance over the eight weeks’ pay recoverable from the Secretary of State, is payable by the transferee.

Here, there was an ongoing equal pay claim by cooks and kitchen assistants against Liverpool City Council.

Their employment was transferred to a private company and then to another private company which went into administration.

Graysons then took over their contract as transferees under TUPE.

The Employment Appeal Tribunal held that an equal pay claim is a claim for arrears of pay, even if the equal pay claim has yet to be determined or quantified.

The EAT pointed out that the employees relied upon their contracts of employment as modified by the equality clause deemed by the Equal Pay Act 1970 to be incorporated into those contracts, and held that such a claim is just as much a claim in contract as a claim based on an express term said to have been breached resulting in arrears of pay being claimed.

Here it had been accepted that the claimants were employed on work rated as equivalent to that of their comparators, creating a presumption that the equality clauses operated, subject to a material factor defence.

This leaves open the position where an equal pay claim is outstanding without that presumption having been established.

In relation to the eight weeks’ arrears of pay payable by the Secretary of State, this liability did not transfer to the transferee as where a transferor is in “relevant insolvency proceedings”, Regulation 8(2) – (6) of TUPE provides that liability for sums payable to employees under the relevant statutory schemes shall not transfer.

Where the insolvency proceedings are analogous to bankruptcy proceedings and have been instituted with a view to liquidation of the assets, then there is no transfer of staff to the transferee and no claim for unfair dismissal, although other provisions of TUPE, such as the information and consultation regulations, continue to operate.

Here, it was accepted that there was a TUPE transfer.

The right to equal pay, previously contained in section 1 of the Equal Pay Act 1970, is now governed by section 66 of the Equality Act 2010 and although it was the earlier Act in force for the purposes of this case, the principles apply to the current legislation.

The finding that equal pay arrears, potentially going back many years as here, transfer on insolvency to the transferee has, as the EAT here recognised, “ significant ramifications”.

Although TUPE derives from the European Union’s Acquired Rights Directive, Member States are free to provide, subject to certain minimum protection for employees, that such liabilities do not transfer but the United Kingdom opted for provisions that mean that they do transfer, subject to the eight weeks payment by the Secretary of State.

Written by kerryunderwood

September 12, 2018 at 10:08 am

Posted in Uncategorized

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