Kerry Underwood

Archive for September 2018


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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 Lewis v Tindale (1), Motor Insurers’ Bureau (2) and Secretary of State for Transport (3) [2018] EWHC 2376 (QB)

the Queen’s Bench Division of the High Court held that the Motor Insurers’ Bureau was liable to indemnify the claimant who suffered serious injuries when he was struck by an uninsured 4×4 vehicle whilst walking on private land.

The claimant obtained judgment against the driver and the issue was whether the Motor Insurers’ Bureau was liable to indemnify him in those circumstances.

The High Court held that the Motor Insurers’ Bureau is an emanation of the state for the purposes of the European Union Insurance Directives and was therefore bound to indemnify the claimant at least to the minimum European Union cover of €1 million per victim.

The judgment is very long and reviews all of the authorities in detail and differs from earlier judgments of the High Court.

Although only binding on these particular facts there is now a powerful argument that all of the other exclusions in the Motor Insurers’ Bureau agreements, save for the one allowed by the European Union Directive, that is the exclusion for knowingly entering an uninsured vehicle, are illegal, an argument that has long been made by many critics of the Motor Insurers’ Bureau Scheme.

Thus the decision follows that of the European Court of Justice in

Vnuk v Zavarovalnica Triglav dd (Case C-162/13) [2016] RTR 10.

The claim against that the Secretary of State was a Francovich claim, that is for alleged failure to implement the Directive, in accordance with the decision in

Francovich v Italian Republic (joined cases c – 6/90 and c – 9/90) [1995] ICR 722.

That claim was stayed pending resolution of the claim against the Motor Insurers’ Bureau.

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September 28, 2018 at 7:20 am

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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 Sabados v Facebook Ireland [2018] EWHC 2369 (12 June 2018)

the High Court granted a Norwich Pharmacal order requiring Facebook to disclose the identity of the person unknown who requested deletion of the deceased’s profile.

The claimant, Sabados, had been in a close personal relationship with the deceased and deletion resulted in the irrecoverable loss of posts and messages including photos of the two together.

Some of the information on the deceased’s profile, such as messages the claimant sent to the deceased, contained her personal data and procuring deletion would amount to a breach of the Data Protection Act 1998.

Facebook did not acknowledge service and were not represented at the hearing.

The order was required because Facebook declined to reveal who made the deletion request.

The claimant satisfied the three conditions for a Norwich Pharmacal order:

  • there was a good arguable case that the deletion of the deceased’s profile amounted to breach of the Data Protection Act 1998 and misuse of private information.

It was also arguable that the requestor committed a breach of confidence/misuse of private information if they had access to the deceased’s profile prior to deletion.

  • The claimant did not have sufficient information to formulate her claims without the order.
  • Facebook was unequivocally mixed up in the unknown person’s wrongdoing

Although the court was concerned by the proposition that it could take jurisdiction on the basis of distress suffered in England in respect of actions which took place in the Republic of Ireland, and possibly Bosnia, it held that there was an arguable case that the English court had jurisdiction under the Recast Brussels Regulation (RBR) to make the order on the basis that the alleged damage was suffered in England for the purposes of Article 7(2) of the Recast Brussels Regulation.

This case was heard under the Data Protection Act 1998 but is a useful reminder of the care required when handling requests for deletion of personal data both to ensure the requestor has appropriate authority and in relation to any third party data involved.

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September 27, 2018 at 8:06 am

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

In Re LB Holdings Intermediate 2 Ltd (in administration) and Re Lehman Bros Holdings plc (in administration) [2018] EWHC 2017 (Ch) (24 July 2018)

D and L applied under CPR 19.2(2) to be joined as respondents to proceedings brought by the administrators of a company in the Lehman group (I2 proceedings).

Those proceedings had been conjoined with other proceedings (PLC proceedings) brought by the administrators of another group company (PLC).

D was a respondent in the PLC proceedings, as a subordinated creditor of PLC, and PLC’s administrators were respondents in the I2 proceedings.

D argued it had a “separate perspective” because it was the only party seeking to establish the relative priority for the payment of certain loans made by PLC to I2; PLC’s administrators were taking a neutral stance in the PLC proceedings and adopting a positive case in the I2 proceedings.

L argued that it also had a separate perspective, and that the neutrality of the PLC administrators might hamper the argument in the I2 proceedings.

Mann J granted D’s application to be joined but refused L’s.

Although both parties had sufficient economic interest to justify joinder, it would not be ordered speculatively and the parties had to make out a positive case.

For D, the neutrality of PLC’s administrators in the PLC proceedings was “technical”, and would not hamper them from adducing arguments in the I2 proceedings.

However, D had established, by a narrow margin, a sufficient difference in its perspective, and a vigour in relation to the proceedings, to make it appropriate to order joinder.

D’s undertakings not to duplicate effort or add to costs were important.

Although L demonstrated a strong economic interest, that was insufficient.

L had not identified any arguments not being advanced by another party, and did not have any further perspective to contribute.

The fruits of L’s document review work in the previous Lehman litigation could be made available “in a perfectly efficient and sensible manner without joinder”.

The decision emphasises that joinder will not be ordered on a speculative or precautionary basis; a positive case must be made out.

The court endorsed the approach taken in the Lehman Waterfall III proceedings (24 June 2016, unreported), namely that in complex insolvencies involving large numbers of parties, the court must be on its guard to keep representation within proper bounds, only allowing in parties who have some separate perspective or legal interest to illuminate for the benefit of the court.

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September 26, 2018 at 8:06 am

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

In Lock v Aylesbury Vale District Council [2018] EWHC 2015 (Ch) (9 July 2018)

the High Court set aside a bankruptcy order based on a petition re unpaid council tax on the basis that the debtor had no assets to satisfy her liability in bankruptcy and no investigation of her affairs would bring anything to light and so there was no point in making her bankrupt.

The debtor served evidence that she was living in social housing, was dependent on financial support from her daughter, and that as she had no assets there was no useful purpose in a bankruptcy order.

The District Judge made the bankruptcy order as there had been liability orders which had not been set aside or challenged.

The debtor appealed, relying on section 266(3) of the Insolvency Act 1986, which gives the court a general discretion to dismiss a petition.

The local authority had prepared a bankruptcy checklist, not in evidence before the District Judge who made the bankruptcy order, which showed it was aware before presentation of the petition that the debtor was unemployed, did not receive benefits nor own a home and noted that the case was an unusual one as there were no clear assets but that the debtor may have come into an inheritance, although there were no documents to support that belief.

It had not put those unusual circumstances before the court to enable the debtor to address them in evidence.

The debtor argued at the appeal that she had not received any inheritance nor was she likely to.

Where a bankruptcy petition was founded on unpaid council tax, there was a burden upon a public authority to show a prima facie case that a bankruptcy order would achieve some useful purpose.

The local authority should have put the unusual circumstances to the court.

The District Judge had failed to consider the debtor’s argument that a bankruptcy order would serve no useful purpose.

It was unjust to make the bankruptcy order and the appeal was allowed.

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September 25, 2018 at 8:06 am

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

In Sony/ATV Music Publishing LLC and another v WPMC Ltd and another [2018] EWCA Civ 2005 (6 September 2018)

the Court of Appeal allowed an appeal against a non-party costs order as the judge had erred in giving no weight to the lack of warning given to the non-party.

The appellant was the director and majority shareholder of WPMC Limited, the unsuccessful defendant in a copyright action.

WPMC Limited was ordered to pay the claimant’s costs.

WPMC Limited was then voluntarily wound up and a liquidator was appointed.

About a year later, the claimant, SATV, notified the appellant that they intended to seek a non-party costs order.

The appellant objected, but the court held that, although there was no explanation for the lack of warning, it would not have made any difference.

The Court of Appeal held that the absence of any warning here was fatal to the application for the non-party costs order, although each case will depend on its acts.

SATV knew that WPMC Limited would not be able to pay their costs and that WPMC Limited and the appellant were operating on the same assumption.

As such, the failure to warn for so long was manifestly unfair to the appellant because he was deprived of realistic opportunities to settle the litigation or to protect himself against the adverse effects of a non-party costs order by taking out ATE insurance, or to abandon the defence of the litigation at a much earlier stage.

“85. I have concluded that the judge left out of account features of the case which were relevant to the question he had to decide. I must therefore exercise the discretion afresh. I would accept that Mr Bailey provided limited funding for the litigation, and was responsible for keeping it alive, hoping ultimately to derive personal benefit. I nevertheless take into account that defending the proceedings for copyright infringement enabled the company to protect the Documentary for future exploitation, and the proceedings were thus in a very real sense in the interests of the company. The proceedings were also in the interests of Firefly, who would expect to be repaid their debt, in one way or another, out of any proceeds of exploitation. Whilst a neutral factor, I would observe that no criticism whatever could be, or was, made of Mr Bailey’s conduct in defending the proceedings on the basis of the legal advice he had received.

86. Thus far I would regard matters as fairly evenly balanced. It might be said that Mr Bailey, standing as he did to benefit from the outcome, was “a real party” if not the only one. However the absence of any form of warning is, in my judgment, fatal to the application for the NPCO. It is plain, as the judge indeed held, that SATV knew or should have appreciated that WPMC would not be able to pay their costs in the event that the claim succeeded, and they knew that WPMC, and Mr Bailey with whom they dealt directly, were operating on the same assumption. In those circumstances the failure to warn until a year after final judgment is given strikes me as manifestly unfair to Mr Bailey. It would be unjust because Mr Bailey was deprived of realistic opportunities to settle the litigation or to protect himself against the adverse effects of a NPCO, or to abandon the defence of the litigation at a much earlier stage.

Additionally, the court held that it is not necessary to show that the interests of a third party director and his company diverge before a non-party costs order can be made.

The court rejected the submission that if non-party costs orders were available where the interests of the company and its shareholders were aligned, several unprincipled consequences would follow, including piercing the corporate veil and undermining the need for a causative link between the third party’s actions and the costs.

The appellant was not the sole stakeholder as WPMC Limited had a substantial creditor which would also benefit from the successful defence of the proceedings.

There was no basis for extending the Arkin principle whereby a professional funder’s liability for costs is limited to the amount of funds it provided to this type of case.

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September 24, 2018 at 8:04 am

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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.

86. 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.”


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.”


“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”.


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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September 21, 2018 at 8:10 am

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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 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”.”


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.  

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September 19, 2018 at 10:20 am

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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 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.

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September 14, 2018 at 8:30 am

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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 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.


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.

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September 13, 2018 at 8:30 am

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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.

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September 12, 2018 at 10:08 am

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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 Hertel & Anor v Saunders & Anor [2018] EWCA Civ 1831

the Court of Appeal held that no valid Part 36 offer had been made, even though the parties had agreed before the Master that it was a valid Part 36 offer, and that it had been accepted.

The defendant, who had been ordered to pay the claimants’ costs on the claimants’ acceptance of the offer, then appealed to the High Court, arguing that contrary to their position before the Master, this was not a Part 36 offer.

The High Court agreed and ordered the claimants to pay the defendants’ costs, thus reversing the costs position under Part 36.

Here a claim had been made and the claimant then applied for permission to amend the Particulars of Claim and before they were amended the defendant wrote to the claimant stating that the claim, as currently pleaded, was bound to fail, but made an offer to settle the proposed amended claim.

That offer was purported to be made under Part 36.

This is how the Court of Appeal set out the case:

“2. This appeal raises a potential point of importance regarding the meaning of ‘claim or part of [a claim] or an issue’ as these words are used in CPR Part 36. It arises in circumstances where an offer was made by the defendants in respect of a new claim which had been indicated by the claimants by way of a proposed amendment to the particulars of claim, but which had not yet been the subject of a court order granting permission. All the pleaded claims were abandoned when that offer was accepted by the claimants. Deputy Master Lloyd said that the offer was in accordance with Part 36 and ordered that, in consequence, the defendants should pay the claimants’ costs of the abandoned claims. Morgan J allowed the appeal, finding that the offer was not in accordance with Part 36 and that, because the defendants were the successful party, the claimants should pay the defendants’ costs of the abandoned claims. The claimants appeal to this court, originally seeking to reinstate the order of Deputy Master Lloyd.”

The Court of Appeal said that the parties were not free to agree that an offer was a Part 36 offer, with the Part 36 consequences flowing, if, on analysis, the offer was not in fact a valid Part 36 offer.

The Court of Appeal said that if the offer letter fails to comply with a requirement of Part 36, then it will not be construed as complying with the rule, whatever heading it bears and whatever the objective intention of the parties – see

C v D [2012] 1 WLR 1962 and;

Carillion JM Ltd v PHI Group Ltd [2012] EWCA Civ 588.

Here the defendant argued that in relation to the proposed amendments, they do not form the whole of the claim or part of the claim, as until permission was granted, they were not part of the claim.

CPR 36 requires a Part 36 offer to state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so which part or issue.

The claimant relied on the fact that Part 36 allows an offer to be made at any time, including before  proceedings are commenced, when obviously there cannot be any issue of any pleadings.

Here, the Court of Appeal distinguished between that situation, that is an offer to settle a matter before proceedings have been issued, and the position where proceedings have been issued and there is a clear claim as per the Particulars of Claim.

Thus the Court of Appeal said that the fact that Part 36 can apply pre-commencement should not affect the proper interpretation of the words “a claim”, “a part of a claim” or “an issue” where a Part 36 offer is made after the commencement of proceedings.

The Court of Appeal then went on to say:

30. The next question is whether, in a case where proceedings are ongoing, the words ‘claim’, ‘a part of a claim’ or ‘an issue’ should be construed as meaning claims, parts of claims or issues which can be identified in or which arise from the pleadings, or whether they would also include claims, parts of claims or issues which have not been pleaded but which, for example, may have been mentioned in correspondence or in an informal conversation between solicitors.

31. In my view, this question only has to be posed for the answer to become immediately apparent. In civil proceedings, claims/parts/issues can only properly be defined by reference to the pleadings. Indeed, that is the principal purpose of pleadings. It would introduce unnecessary and unwelcome uncertainty if claims/parts/issues were given a wide definition that did not seek to anchor them to the pleadings which the parties have exchanged.

32. To take an extreme example, Mr Smith suggested in his oral submissions that, if the claimant’s solicitor introduced a possible new claim in a letter to his opponent, then that would be caught by the words of the rule, even if it had not been the subject of any formal amendment, and even if it had not been the subject of any kind of response by the defendant. I consider that such an interpretation would lead to uncertainty and confusion; it may even encourage the potential abuse of the Part 36 regime.

33Accordingly, like Morgan J, I would construe the words ‘claim’, ‘part of a claim’; and ‘issue’ as referring to pleaded claims, parts of claims or issues, and not other claims or issues which may have been intimated in some way but never pleaded. Once proceedings have started, the certainty required for Part 36 to operate properly can only be achieved by this interpretation. A new claim which has been intimated, but which is not part of the pleadings, is not therefore caught by r.36.2(2)(d) (current r.36.5(2)(d)).” 


This is a strange decision, to put it mildly.

The whole point of Part 36 is to enable parties to resolve any matter, including a matter where no proceedings have been issued.

Effectively to rule that once proceedings have been issued, then no other claim or potential claim can be resolved by Part 36 is in conflict with the words of the rule, as well as the spirit of the rule and common sense.

There may be potential for argument about what a Part 36 offer covers, and without going into detail here, there can be issues as to whether a particular expense is an item of special damages, or a disbursement in the proceedings.

Any such dispute can be resolved by the court.

Disputes about whether or not a Part 36 offer has been beaten are not uncommon, for example where the issue of interest comes up, or currency exchange rates.

That potential should not stop parties from being able to resolve potential claims once proceedings have been issued.

In this situation the intention of the parties should be the most important factor, and not subject to a highly technical construction of the rules.

I have recently dealt with the subject of when is a claim a claim in another blog, where I pointed out that the Supreme Court in the case of

Gavin Edmondson Solicitors Ltd v Haven Insurance Company Ltd [2018] UKSC21

referred throughout to “claims” and “claimants” in portal cases where no substantive proceedings had been issued.

I appreciate that it is possible to distinguish portal claims from unissued claims, but the whole issue needs a clear and authoritative statement from a superior court.

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September 10, 2018 at 8:10 am

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In Aviva Insurance v Lawrence, Oxford County Court 10 April 2018 Case No. C39YP13O

Her Honour Judge Melissa Clarke had to consider the issue of whether a matter in one of the personal injury portals is a “claim” or whether it is necessary for substantive proceedings to be issued before a matter can be described as a claim.

This arose in the context of section 57 of the Criminal Justice and Courts Act 2015 which reads:

“(1) This section applies where, in proceedings on a claim for damages in respect of personal injury (“the primary claim”) —

(a) the court finds that the claimant is entitled to damages in respect of the claim, but

(b) on an application by the defendant for the dismissal of the claim under this section, the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.

(2) The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.”

Here the issue was whether there had been a “related claim” for the purposes of section 57(1)(b).

Section 57(8) defines “claim” and “related claim” as follows:

“(8) In this section—

“claim” includes a counter-claim and, accordingly “claimant” includes a counter-claimant and “defendant” includes a defendant to a counter-claim;

“related claim” means a claim for damages in respect of personal injury which is made—

(a) in connection with the same incident or series of incidents in connection with which the primary claim is made, and

(b) by a person other than the person who made the primary claim.”

Here the judge set out a question to be answered as follows:

“6. What, however, is the position if Claimant B has not issued a claim in relation to the same incident as Claimant A, but has only notified that he has a claim by submission of a Claim Notification Form? Is that a “ related claim” pursuant to the definition in section 57(8), or does the fact that the claim has not been issued by a court take it outside that definition, such that the Court has no power to dismiss Claimant A’s claim on the basis of his fundamentally dishonest support of Claimant B’s claim?”

The first instance judge held that in those circumstances there was no related claim.

On appeal Her Honour Judge Clarke held that once a matter has been lodged on the portal it is a claim, and is therefore capable of being a related claim.

The court said that the wording of the portals, as well as Parts III and IIIA of CPR Part 45 make it very clear that in the context of the portals a claim begins pre-issue saying that “ this concept imbues the whole procedure.”

For example in CPR 45.29C there is a heading to Table 6B:

“Fixed costs where a claim no longer continues under the RTA protocol” 


This is a correct and sensible decision, as one would expect from this particular judge.

If it were otherwise, not only would dishonest claimants be able to avoid the consequences of their dishonesty by finalising one claim before the other was issued, as pointed out by the court here, but also defendants would have a strong incentive not to resolve matters in the portal if they had any doubts about the honesty of any aspect of anyone’s claim.

The whole issue of whether a portal matter is a claim is important. It is also important to consider whether a portal claim constitutes “proceedings” which is a different issue from whether there is a claim.

For example when the personal injury small claims limit goes up, it is likely that the key date is the date of issue and not the date of cause of action; in other words whether or not the matter is in the old costs bearing regime, or the new one with the much higher small claims limit, will depend on when the case was issued.

If date of issue is considered to be when substantive Part 7 proceedings are issued then a claim in stage 1 or 2 before the small claims limit goes up will be costs bearing, but will then cease to be costs bearing if it drops out after the small claims limit goes up.

That issue still needs resolving.

There is support for the concept of a matter in the portal being a claim from other parts of the Civil Procedure Rules.

For example CPR 36.7 provides that a Part 36 offer may be made at any time, “including before the commencement of proceedings.”

CPR 36.5(1)(d) provides that a Part 36 offer must state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue, and must also state whether it takes into account any counter-claim.

Thus Part 36 clearly envisages there being a claim with a claimant and a defendant before proceedings are issued, and indeed outside the field of the portals, before anything formal is done in relation to a Claim Notification Form or whatever.

It may well be that in such circumstances a claim begins when a party has served a Notice of Claim under the relevant pre-action protocol.

In Gavin Edmondson Solicitors Ltd v Haven Insurance Company Ltd [2018] UKSC 21     

the Supreme Court was considering the issue of a solicitors’ lien in cases a where a defendant’s insurance company sought to cut out the solicitors and to settle direct with the claimants.

These were all portal matters where substantive proceedings were not issued.

In the press summary, and throughout the judgment, the Supreme Court refers to “the claims” and “the claimants”.

Thus it seems clear beyond doubt that a matter on the portal is a claim, but that still leaves open the issue of whether proceedings have been issued by the placing of a matter on the portal.

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September 7, 2018 at 8:10 am

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The Original blog first appeared on the Practical Law Dispute Resolution Blog on 23 August


In  Advantage Insurance Co Ltd v Stoodley (1) and Trinity Lane Insurance Co Ltd (2) [2018] EWHC 2135 (QB)

a Queen’s Bench Division Master considered the law in relation to setting aside a notice of discontinuance.

CPR 38.4(1) reads:

“(1) Where the claimant discontinues under rule 38.2(1) the defendant may apply to have the notice of discontinuance set aside.”

This was a dispute between insurance companies as to who was liable to indemnify the guilty party in a road traffic accident claim.

It was a Part 8 claim.

In Stati & Ors v The Republic of Kazakhstan [2018] EWHC 1130 (Comm)

the Commercial Court adopted the principles set out in

High Commissioner for Pakistan in the United Kingdom v National Westminster Bank plc [2015] EWHC 55 (Ch)

that the court has a discretion which it should exercise with the aim of giving effect to the overriding objective of dealing with cases justly and at proportionate cost.

It is not necessary to establish an abuse of process, although that would be a powerful factor in favour of granting an application to set aside.

In Johnson v Gore Wood [2002] 2 AC 1

the court said that there should be finality in litigation and the fact that a party should not be vexed twice in the same matter was relevant to the issue of setting aside a notice of discontinuance.

CPR 38.7 in the context of discontinuance gives this principle force in limited circumstances:

“38.7. A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if –

(a) he discontinued the claim after the defendant filed a defence; and

(b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim.”

Here, there was no defence as such as it was a Part 8 claim, and so the court doubted that CPR 38.7 would bite, but held that that did not detract from the general principle upon which the rule is based.

The Master set aside the notice of discontinuance, stating that the clear purpose of the claim was to achieve an overall resolution of the insurance position as between the insurance companies.

CPR 1.4(2)(i) imposes a duty upon the court to further the overriding objective by active case management including “dealing with as many aspects of the case as it can on the same occasion.”

All matters should be raised so that they could be properly and efficiently dealt with. One party could not “keep its powder dry” for another case; that was likely to be an abuse of process.


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 and without any explanation.

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),

The court also 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 court did not consider it appropriate to take this into account failure to mediate when assessing costs, because where allegations of fraud and serious wrongdoing were made, proceedings were intrinsically unsuitable for mediation.

This would be penalising the defendants for exercising their right to have their reputations vindicated at trial.

Generally it is risky to rely on an argument that the parties would have been unable to agree a mediator as good reason for refusing to mediate.


In Two Right Feet Limited (in liquidation) v (1) National Westminster Bank Plc (2) Royal Bank of Scotland Plc (3) KPMG LLP [2017] EWHC 1745 (Ch)

the Mercantile Court, part of the High Court, ordered a discontinuing Claimant to pay the Defendants’ costs on the indemnity basis, rather than the standard basis.

Discontinuance triggers an automatic liability for costs in favour of the Defendant on the standard basis and here the Defendants sought indemnity costs.

CPR 38.3 provides that a Claimant may discontinue a claim by filing and serving a Notice of Discontinuance on the other parties and, under CPR 38.6(1):

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

CPR 44.9(1) deems that to be a Costs Order on the standard basis.

In Atlantic Bar and Grill Limited v Posthouse Hotels Limited [2000] C.P.REP32

the court held that the reference in CPR 38.6 to a court ordering otherwise allows a court to order indemnity costs.

CPR 44.2 deals with the court’s discretion to order indemnity costs and provides, among other things that in deciding what order, if any, to make about costs:

  • the court will have regard to all the circumstances, including the conduct of the parties, which includes conduct before as well as during the proceedings; and

  • in particular the extent to which the parties followed the Practice Direction and any Pre-Action Protocol;

  • whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; and

  • the manner in which a party has pursued or defended its case or a particular allegation in issue and whether a Claimant, who has succeeded in the claim in whole or in part has exaggerated its claim.

Here the court held that various matters took the case out of the norm, including the Claimant’s failure to engage in the Pre-Action Protocol, the exaggeration of quantum, failure to comply with a court order in relation to the appointment and instruction of a single joint expert and a “thoroughly misconceived” approach to disclosure.


This is a sensible decision on the facts and is a reminder that Notice of Discontinuance does not automatically restrict the Costs Order to one on a standard basis.

In personal injury cases, where Qualified One-Way Costs Shifting applies, the court can still examine the issue of fundamental dishonesty when discontinuance has taken place, so as to determine whether QOCS should be dis-applied and the Claimant should have the automatic costs order against it enforced.

Indeed the Court can of its own motion set aside the Notice of Discontinuance to allow such an enquiry to take place.

Under Lord Justice Jackson’s proposals for fixed costs in the new Intermediate Track, there will be a costs liability once a Letter of Claim has been sent, even if proceedings are never issued, and this reinforces the point that, for all intents and purposes, the Pre-Action Protocols are now part of the court process, with potentially severe costs penalties for failing to follow those protocols.


In Shaw v Medtronic Corevalve LLC & Others [2017] EWHC 1397 (QB)

the Queen’s Bench Division of the High Court refused to set aside a Notice of Discontinuance and refused to give permission to the Defendants to enforce a Costs Order in a Qualified One-Way Costs Shifting case.

The discontinuance was not an abuse of process and although there were elements of the claim outside the ambit of QOCS protection, they were either not pleaded, or were de minimis and did not add to the costs.

Previously the court had set aside permission to the Claimant to serve the First and Third Defendants out of the jurisdiction and the claim against the Fourth Defendant was struck out and the Claimant then discontinued against the Fifth Defendant.

Now, the Claimant sought permission to amend the Particulars of Claim against the Second Defendant, who was the only remaining Defendant.

The First, Third and Fifth Defendants applied for leave to enforce the Costs Orders made against the Claimant.

The judge refused permission to the Claimant to amend against the Second Defendant and then struck out the claim against that Defendant.

Thus the position in relation to claim was:

First Defendant:            Service set aside

Second Defendant:        Struck out

Third Defendant:           Service set aside

Fourth Defendant:         Struck out

Fifth Defendant:            Discontinued.

CPR 44.15 reads:

Exceptions to Qualified One-Way Costs Shifting where permission not required

44.15 Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the proceedings have been struck out on the grounds that –

(a) the claimant has disclosed no reasonable grounds for bringing the proceedings;

(b) the proceedings are an abuse of the court’s process; or

(c) the conduct of –

(i) the claimant; or

(ii) a person acting on the claimant’s behalf and with the claimant’s knowledge of such conduct,

is likely to obstruct the just disposal of the proceedings.”

In relation to the First and Third Defendants, the claim had not been struck out, even though the judge held that the Claimant had disclosed no reasonable grounds for bringing the proceedings and had said that had the Claim Form been served within the jurisdiction, he would have struck the claims out as having no reasonable grounds.

However, as the claim was served outside the jurisdiction the appropriate remedy was to set aside service.

Neither had the claim been struck out against the Fifth Defendant – it had been discontinued.

Thus CPR 44.15(1)(a), relating to strike-out, could not apply in relation to any of these three Defendants.

Setting aside discontinuance

The Fifth Defendant sought an order setting aside the Notice of Discontinuance, so as to allow the court to consider striking out the claim on the basis that the Claimant had no reasonable grounds for bringing the proceedings.

That would have the effect of bringing the matter back within the CPR 44.15(1)(a) exception to QOCS.

The judge refused, saying that:

“… the Claimant had a right to discontinue under CPR rule 38.2. It was a proper use of that power, and to be encouraged, for the Claimant to recognise … that her claim against the Fifth Defendant was not sustainable and to discontinue that claim (Paragraph 53).”

The court recognised that it had power under CPR 38.4 to set aside a Notice of Discontinuance if there had been an abuse of process in serving the Notice of Discontinuance.

The rule itself is silent as to when the power should be exercised.

The judge held that the facts here were not an abuse of process “or anything sufficient to justify setting aside the Notice of Discontinuance (Paragraph 58).”

It left open the possibility that servicing Notice of Discontinuance to avoid the claim being struck out on the no reasonable grounds basis, and thus triggering disqualification from QOCS protection, could be an abuse of process justifying the setting aside of the Notice of Discontinuance.

A claim made for the benefit of the Claimant other than a claim to which this section applies

This exception is interpreted to mean a non-personal injury claim.

There is an inherent problem with this exception, which is to be found in CPR 44.16(2)(b), and where the court’s permission to enforce a Costs Order is required.

The problem is that CPR 44.13(1) provides:

“(1) This Section applies to proceedings which include a claim for damages –

(a) for personal injuries;

Thus the whole of the claim does not need to be for personal injuries and the protection is not limited to the personal injury element.

If it were otherwise, the wording would have been something like:

“… which includes claim for damages for personal injuries, but only to those parts of the claim that are for personal injury.”

Even the judge got confused, referring to CPR 44.12.1. That deals with set-off.

Nevertheless the judge’s rulings at paragraphs 60 and 61 are useful guidance as to how such hybrid claims may be treated.

“60. This sub-rule applies if the Claim Form and Particulars of Claim include a claim which falls outside the scope of CPR 44.12.1. There were only two candidates for such a claim. The first is the claim for misrepresentation and deceit. This is referred to in the Claim Form, but not pleaded in the Particulars of Claim, as I noted in paragraph 12.2(d) of the First Judgment. I therefore ignore it. The second is the free-standing claim in unjust enrichment, but, as I said in paragraphs 32 to 35 of the First Judgment, it was unclear whether the Particulars of Claim did include a free-standing claim in unjust enrichment. Moreover, the Claimant did not obtain permission to serve the Claim Form out of the jurisdiction insofar as it contained a free-standing claim in unjust enrichment. Consequently, there was no such claim against the First and Third Defendants and CPR 44.16.1(b) does not apply to them.

61. Assuming that there is a pleaded free-standing claim in unjust enrichment against the Fifth Defendant, it overlaps entirely with the claim for restitutionary damages. The additional costs incurred in dealing with the free-standing claim are minimal and it would not be just to make an order under section 44.16.1(b) on that account. I would have reached the same conclusion in relation to the First and Third Defendants if I had found that CPR 44.16.1(b) applied to them.”

The judge also suggested that the Civil Procedure Rules Committee may care to reconsider the scope of CPR 44.15(1)(a).

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September 6, 2018 at 8:10 am

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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

I am grateful to Peter Bland of Scott Rees and Co for bringing this issue to my attention.

The Montreal Convention 1999 deals, among other things, with claims arising out of injuries sustained on aircraft, and was incorporated into the law of England and Wales by the Carriage by Air Act 1961 as amended.

In two recent cases involving British Airways, District Judges have held that such claims are not covered by the portal and fixed recoverable costs schemes, and in the second case dealt with below, that decision was made by a Regional Costs Judge.

In Mead v British Airways plc, Manchester County Court, 15 January 2018, Case No. CO4MA934

the matter was resolved by the claimant accepting the defendant’s Part 36 offer, which referred to paying fixed costs under CPR 45.18.

The claimant issued Part 8 proceedings resulting in detailed assessment and a paper provisional assessment in which a judge held that Montreal Convention claims were not subject to the portal process.

At this review hearing it was agreed that the central issue was whether a Montreal Convention claim falls within the definition of public liability claims in paragraph 1.1(18) of the portal, which provides that

“public liability claim  –

  • means a claim for damages for personal injuries arising out of a breach of a statutory or common law duty of care made against—

(i)  a person other than the claimant’s employer; or

(ii) the claimant’s employer in respect of matters arising other than in the course of the claimant’s employment; but

  • does not include a claim for damages arising from a disease that the claimant is alleged to have contracted as a consequence of breach of statutory or common law duties of care, other than a physical or psychological injury caused by an accident or other single event.”

Article 17 of the Convention provides:

“Article 17—Death and Injury of Passengers—Damage to Baggage

  1. The carrier is liable for damages sustained in case of death or bodily injury of a passenger upon condition only that the accident which caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking.”

A claimant is not required to prove fault on the part of the airline; it is a strict liability claim.

The court upheld the claimant’s submission that a Convention claim does not arise out of a breach of statutory or common law duty of care.

Thus it is not a public liability claim within the portal definition as Article 17 imposes a strict liability.

The Convention is a self-contained code and deprives the claimant of a common law claim.

It is irrelevant that but for the Convention, the facts would have given rise to a common law claim or other breach of duty claim.

The claim could not properly be put on the portal and therefore was not subject to fixed recoverable costs.

In McKendry v British Airways plc, Liverpool County Court, 16 May 2018 Case no. D06LV750

the case was also resolved by the claimant accepting the defendant’s Part 36 offer, followed by Part 8 proceedings and detailed assessment.

The point was exactly the same.

Here the judge was the Regional Costs Judge and he reviewed thoroughly the authorities and public policy issues and arrived at the same conclusion, namely that such claims are excluded from the portal process and thus are not covered by the fixed recoverable costs schemes.


Maybe British Airways will now concede this point and concentrate on getting people’s luggage to its destination.

Written by kerryunderwood

September 5, 2018 at 8:10 am

Posted in Uncategorized


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 my blog Can Court Allocate to Small Claims Track after Trial? I ask that very question and reported that that had happened in Newport County Court.

I also refer to the case of

Conlon v Royal Sun Alliance and Insurance plc [2015] EWCA Civ 92

where the Court of Appeal, while on the facts of the case declining to re-allocate the claim, held that it did have the power to do so and the court has the power retrospectively to re-allocate the claim.

That has happened again, this time in the case of

Kavak v FMC Chemicals Limited, Manchester County Court 9 April 2018 Case No. DO7YM204.

There the case had been allocated to the fast-track and at trial the judge dismissed the claimant’s claim for personal injury but allowed a claim for damage to his vehicle, and also held that the claimant was 25% to blame for the accident.

The net effect was that judgment was entered for the claimant in the sum of £855.57.

There was no suggestion of dishonesty.

The claim had started in the RTA portal and as the defendant had disputed causation, and had alleged contributory negligence the matter exited the portal and became the subject of Part 7 proceedings.

The claimant contended that because the matter had started under the RTA portal, then the fixed costs regime should apply.

The defendant contended that the claim should never have gone on the portal as the claimant could not prove that he had suffered injury and that the value of the claim was such that it ought to have been commenced by proceedings which would then have been allocated to the small claims track.

The judge recognised that a case should only be re-allocated between tracks with retrospective effect where there is good reason to do so and accepted that retrospective re-allocation can lead to a situation in which a party has conducted litigation on certain expectations as to what steps are reasonable to take, and therefore what costs are reasonably incurred, which expectations are undermined by re-allocations.

Nevertheless, on the facts of the case, the judge came to the conclusion that it was right to re-allocate the matter after trial.

The decision as to whether to pursue a personal injury claim was that of the claimant and his lawyers and such a claim could not, or should not, have been pursued unless the claimant believed that he had suffered personal injury and his lawyers considered that he had a reasonable prospect of showing that.

The judge said that he could not “see that he could ever properly have brought a claim for such injury.”

He also said this:

“15. It should be noted that, based on the Claimant’s argument, there is an incentive to a claimant to state that he has suffered personal injury so as to seek to achieve the (perceived) benefits of a case being in the fast-track. There is certainly a potential benefit to those who may recover legal costs because of allocation to the fast-track. In my judgment it would be unattractive to make orders that put a premium on presenting a claim that cannot be justified.”




Written by kerryunderwood

September 4, 2018 at 8:10 am

Posted in Uncategorized


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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 McDermott v Inhealth Ltd [2018] EWHC 1835 (QB) (19 July 2018)

the Queen’s Bench Division of the High Court allowed the claimant’s appeal against “what was in effect a limited Bullock order”.

Where there are several defendants in a case, one successful and the other(s) not, a Bullock order usually requires a claimant to pay the successful defendant’s costs, but allows the claimant to recover those costs from the unsuccessful defendant(s).

Here the court reviewed the Bullock principles.

The claimant brought personal injury proceedings, consisting of two claims, following the defendants’ failure to diagnose his brain aneurysm.

The first claim alleged negligence against the second defendant in the design of the protocol used for the scanning process.

The second claim, against all three defendants, a scans claim, arose because the third defendant carried out a “GE scan” which showed the aneurysm, but the first defendant did not report this to the claimant.

There was an unresolved issue regarding which defendant was responsible for this omission.

The second defendant submitted to judgment on the protocol claim and the claimant discontinued against the third defendant with no order for costs, and against the first defendant.

The lower court considered the Bullock principles, but concluded this was not a classic Bullock case because the claimant succeeded on a free-standing claim against the second defendant in its own right, as in

Mulready v Bell [1953] 2 All ER 215

where a Bullock order was set aside on appeal.

The claimant was ordered to pay the first defendant’s costs.

The second defendant was ordered to pay the costs which the claimant was liable to pay to the first defendant and the claimant’s own non-generic costs of his action against the first defendant and the third defendant, but only post-1 December 2016, the lower court finding it unreasonable for the second defendant not to have admitted liability by that date.

The High Court held that the protocol claim and scans claim were not “perfectly independent causes of action … where the breaches of duty alleged are in no way connected …”

Mulready and the lower court erred in treating them as such.

The second defendant was a defendant to both claims and responsible for the protocol and arranging the claimant’s scans.

Both claims concerned the allegation that one or other of the defendants was responsible for the fact that the claimant’s aneurysm was not identified through a GE scan.

The first defendant and the third defendant relied on the protocol in defending the scans claim and, in resisting both claims, the second defendant sought to blame the first defendant and the third defendant.

The High Court substituted an unrestricted Bullock order.

Written by kerryunderwood

September 3, 2018 at 8:10 am

Posted in Uncategorized

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