Kerry Underwood

Archive for October 2018

LIQUIDATION: INDIVIDUALS BEHIND LIMITED COMPANY: INDUCING BREACH OF CONTRACT AND UNLAWFUL MEANS CONSPIRACY

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In October I am delivering my new course – Getting the Retainer Right – in 7 cities – details and booking form here.

In Palmer Birch (A Partnership) v Lloyd [2018] EWHC 2316 (TCC)

the Technology and Construction Court  upheld economic tort  claims by a building contractor against two individuals who directed the affairs of the limited company with which the building contractor had contracted under a JCT contract.

 

The judge found that:

 

  • The first defendant and the second defendant had committed unlawful means conspiracy by colluding to bring about the limited company’s liquidation so that it could escape the contract and avoid having to pay the building contractor for the work done.
  • The first defendant, who was the limited company’s sole funder, though not a director, had induced the limited company’s breach of contract.

 

The contract concerned the renovation of a house in which the limited company had a leasehold interest and where the freehold was held by a company beneficially owned by the first defendant, whose English residence it was.

The first defendant was non-UK domiciled and had deliberately not become a director of the limited company so as to distance himself from the limited company’s affairs and by interposing the limited company between himself and the property, he benefitted financially.

However, he behaved throughout as the effective client under the contract, and the key decision-maker.

The first defendant’s decision to divert his funding away from the limited company persuaded the judge that he had crossed the line from “merely preventing” the contract to inducing its breach.

The first defendant had treated the works as a “pay as you go” arrangement, not a contractual commitment and the second defendant was denied the protection of the corporate veil regarding the conspiracy element.

He had acted neither constitutionally nor in good faith.

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Written by kerryunderwood

October 15, 2018 at 7:24 am

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ISSUE-BASED COSTS ORDERS

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In October I am delivering my new course – Getting the Retainer Right – in 7 cities – details and booking form here.

In Welsh v Walsall Healthcare NHS Trust (Costs) [2018] EWHC 2491 (QB)

the Queen’s Bench Division of the High Court, in making a costs order in a clinical negligence claim departing from the general rule that the “loser pays”, has provided useful guidance on issue-based costs orders, reviewing the authorities and rules in detail.

The High Court endorsed the approach set out in the notes of the White Book at paragraph 44.2.10 summarised below.

The rules do not require that an issue-based costs order only be made “in a suitably exceptional case”, and nor was this to be implied, although there needs to be a reason based on justice for departing from the general rule:

 

“… the extent to which costs of a particular issue are to be disallowed should be left to the evaluation and discretion of the judge by reference to the justice and circumstances of the particular case.”

 

The reasonableness of taking failed points, and the extra associated costs, should be considered.

The judge should express an issue-based order by reference to the costs of an issue when appropriate.

However, generally, because of practical difficulties, they should hesitate in doing this, and, where practicable, express the order as a percentage of total costs or with reference to a distinct period of time.

There is no automatic rule requiring an issue-based costs order in the form of a reduction of a successful party’s costs if he loses on one or more issues.

The mere fact that a successful party was not successful on every last issue cannot, of itself, justify an issue-based costs order.

The courts recognise that, in any litigation, any winning party is likely to fail on one or more issue and possibly issues on which the losing party could have taken steps to protect himself, at least to an extent, as to a costs liability.

 

The court then cited with approval the second principle set out in

 

Factortame v Secretary of State [2002] EWCA Civ 22:

 

Each case will turn on its own circumstances, but the court should be trying to assess” who in reality is the unsuccessful party and who has been responsible for the fact that costs have been incurred which should not have been””.

 

This was a clinical negligence case which the claimant won, but the claimant had made allegations of lack of informed consent to the operation, but dropped that allegation part way through the trial.

The defendant paying party argued that that issue had caused unnecessary costs and that the claimant should only recover part of its costs, and also be responsible for 30% of the defendant’s costs.

The court held that a claimant’s offer was not a valid Part 36 offer as it was made less than 21 days before trial.

Here, the court’s order reflected the fact that the claimant did not succeed on a discrete part of her case, which had taken up a substantial amount of time at trial and was ultimately withdrawn.

The court ordered the defendant to pay 85% of the claimant’s costs of the proceedings.

This was not based on any precise mathematical analysis, but rather the court’s judgment on doing justice in all of the circumstances.

The failure by the defendant to make an offer of settlement, or accept an offer by the claimant which would have left it in a better position than following trial, were relevant factors in determining the percentage reduction in the claimant’s costs when the claimant had unreasonably pursued an issue to trial.

The court reminded litigants that the best way for a defendant to protect itself in relation to costs is by making a Part 36 offer.

 

Written by kerryunderwood

October 12, 2018 at 7:40 am

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SECURITY FOR COSTS ON INDEMNITY BASIS

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In October I am delivering my new course – Getting the Retainer Right – in 7 cities – details and booking form here.

In Danilina v Chernukhin and others [2018] EWHC 2503 (Comm)

the Commercial Court ordered the claimant to pay further security to three defendants being 75% of incurred and expected costs, as there was a reasonable possibility of indemnity costs being ordered if the claimant lost, accepting the defendants’ argument that if the claimant lost at trial, it was highly likely that she would be ordered to pay indemnity costs, on the basis that she knowingly gave false evidence, as, on the facts, there was no room for mistaken recollection.

In the absence of a possible indemnity costs order, security was generally ordered by reference to 60 to 70% of incurred and expected costs.

This did not involve considering the merits of the claimant’s claims, it assumed she lost them.

The court held that if this happened, it was likely to be because the claimant was dishonest.

The first defendant was also involved in an arbitration with a third party which raised the same issue as one of the claimant’s claims.

The court held that the apportionment of the defendants’ future costs 65% to the claim and 35% to the arbitration was a reasonable possibility, so could be used for the purpose of the security order.

The claimant was unable to establish that her claim would be stifled if she was ordered to pay the level of security sought.

The third party had already provided funds to the claimant and made it clear that he wished her to pursue and win the proceedings.

The claimant’s statement that the third party had not agreed to provide further security was not “full, frank, clear and unequivocal evidence” that he was not willing or able to provide the security sought.

Although the claimant was being asked to provide security at a late stage, two months before trial, this did not justify not making the order, particularly as there was no evidence that providing the security would be burdensome to the third party.

 

 

Written by kerryunderwood

October 11, 2018 at 7:55 am

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COSTS: PAYMENT ON ACCOUNT

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In October I am delivering my new course – Getting the Retainer Right – in 7 cities – details and booking form here.

In Culliford & Anor v Thorpe [2018] EWHC 2532 (Ch) (02 October 2018)

the Chancery Division of the High Court held that a court could entertain an application for a payment on account of costs even after an order for costs has been made, drawn up and sealed.

“There is nothing in the rules that so requires, and there may be good reason why payment of the sum on account is not considered at the time the order was made.”

 

Indeed the starting point is that the court must, of its own volition, order a payment on account of costs, as CPR 44.2(8) states:

 

“Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.”

 

That was not done in this case and the successful defendant subsequently applied for a payment on account and the losing claimant argued that the good reason not to do so was that the defendant had not requested such a payment when the order was made.

Even though the defendant had failed to apply for a payment on account of costs at the hearing, the court here ordered the claimant to pay the costs of the application in accordance with the usual “loser pays” rule.

 

 

Written by kerryunderwood

October 10, 2018 at 7:26 am

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CLIENT CHALLENGES TO BILLS: IMPORTANT GUIDANCE

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In October I am delivering my new course – Getting the Retainer Right – in 7 cities – details and booking form here.

In Allen v Brethertons LLP [2018] EWHC B15 (Costs) (02 October 2018)

the Senior Courts Costs Office ordered the defendant solicitors to deliver a bill of costs, pursuant to its jurisdiction under 68 of the Solicitors Act 1974 and CPR 67.2.

The case has several points of interest.

It confirmed the requirement that a bill must be delivered to the client in relation to all costs received, including portal fixed costs paid by the other side.

Here the bills were addressed to the claimant at his home address and described as “Payable by Ageas Insurance Ltd” but not delivered to the claimant.

The court ordered delivery of bills, for that and for other reasons.

 

The case confirmed that a statement reading:

 

Therefore, if you obtain £10,000 compensation I would be able to deduct £2500 towards my success fee and you would receive £7500 …”

 

meant just that and so the solicitor could not deduct a further £150 in respect of the unrecovered element of a medical report fee.

There were also mathematical errors in the calculation of the extra sum claimed and the balance due to the client and none of the disbursements appeared in any bill, whether delivered to the claimant or not.

The reference throughout the “success fee” was wrong – much of it was unrecovered solicitor and own client costs.

Costs, even fixed costs, always belong to the client.

Where the amount of recoverable costs is prescribed by statute, those costs are not open to challenge by a paying party under the indemnity principle

 

– see Butt v Nizami [2006] EWHC 159 (QB) .

 

However, that does not mean that the costs become the costs of the solicitor rather than the client

 

– see Cobbett v Wood [1908] 2 KB 420.

 

Stage I and Stage II costs are described at CPR 45.18 as “the legal representative costs” only to distinguish them from an advocate’s costs. It does not create any exception to the principle referred to in Cobbett v Wood above.

A solicitor cannot on the one hand hold the claimant contractually responsible for all its costs and disbursements, even on a capped basis, and on the other hand assert that the client is not entitled to receive a bill for, or challenge, part of them because they are not his costs.

Here the claimant, that is the client/former client, was represented by Checkmylegalfees.com and the court added this important footnote, which should be read and understood by all of those dealing with Solicitors Act challenges.

 

Footnote

61. Ms Moore, the Claimant’s professional adviser, is a Costs Lawyer, that is to say a person regulated by the Costs Lawyer Standards Board and with the right, in cases such as this, to conduct litigation and to exercise a right of audience. In correspondence with the Defendant, she identified herself as such from an early stage and from the outset requested that the Defendant communicate with Checkmylegalfees.com, rather than with the Claimant directly.

  1. That seems to me to be consistent with the current provisions of the Solicitors’ Code of Conduct (at chapter 11), which indicate that a solicitor should not contact a party directly where that solicitor is aware that that party has instructed “a lawyer”, defined in the glossary to the Code of Conduct to include “a profession whose members are authorised to carry on legal activities by an approved regulator other than the SRA”.
  2. If the Defendant had been any doubt about Ms Moore’s status, a quick check of the public register maintained by the CLSB, and freely available on the Internet, would have confirmed it.
  3. The Defendant refused to comply with Ms Moore’s request not to contact the Claimant directly. Its response to Ms Moore’s initial communication was to write directly to the Claimant on the basis that Checkmylegalfees.com is not a firm of solicitors. Even after its file had been released to Checkmylegalfees.com and it had received notice that the Claimant’s application had been filed, the Defendant wrote its letter of 18 February 2018 directly to the Claimant, encouraging him to deal with the Defendant directly.
  4. I appreciate that the Defendant may have had some initial concerns about its authority to release papers to Checkmylegalfees.com, but by 18 February 2018 can have been no mistake about the Claimant’s wishes or Ms Moore’s professional status.
  5. Whether the Defendant has complied with the Code of Conduct is not a matter for me, but I would offer the view that Ms Moore, when acting as a Costs Lawyer with a right to conduct litigation, is at the least entitled to expect from the Defendant the same professional courtesy as a solicitor would expect. It does not seem to me that she has received it.”

 

 

 

Written by kerryunderwood

October 9, 2018 at 8:48 am

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COST CAPPING AND APPEALS

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In October I am delivering my new course – Getting the Retainer Right – in 7 cities – details and booking form here.

In Independent Workers’ Union of Great Britain v Central Arbitration Committee (Defendant) and Roofoods Ltd (t/a Deliveroo) (interested party) [2018] EWHC 1939 (Admin) [2018] IRLR 911

the Administrative Division of the High Court refused to make a Costs Capping Order when allowing an application for judicial review to proceed.

The court has power under CPR 46.16 to limit or remove the liability a claimant may have on judicial review for the costs of the interested party.

Here the applicant union contended that the proceedings were in the public interest within the meaning of section 88(7) of the Criminal Justice and Courts Act 2015 because the employment status of delivery riders is of common interest to hundreds of thousands of individuals in Britain engaged in the gig economy, and the issue raises a matter of general public importance.

The claimant relied on the fact that it was a small independent trade union whose members are low paid workers and that it had limited financial means and negligible assets whereas Deliveroo has substantial resources.

Solicitors and counsel had both acted pro bono throughout.

The court refused the application holding that the proceedings were brought by the trade union to secure recognition for itself and on behalf of its members and for their benefit and those members paid subscriptions to the union for it to act as a union on their behalf in just of these circumstances.

The status of workers was highly fact sensitive to any given case and therefore a decision in one case did not affect the decision in another case.

Therefore the court’s decision was not of common interest to all workers in the gig economy.

The court took the view, surprisingly one might think, that the outcome of the case would not form any sort of precedent for other companies or industries in the gig economy.

Therefore the issues were not of general public importance nor of public interest.

The court also took into account the fact that the claimant had launched a crowdfunding appeal and had stated that it had raised around £23,000, and therefore the court did not accept that it had limited financial means.

 

Comment

It is hard to see that there will be many cases where the court will impose a Costs Capping Order if it sets the bar as high as will set in this case.

An unfortunate decision in relation to costs.

Written by kerryunderwood

October 8, 2018 at 7:36 am

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COURT FEES, PART 8 APPLICATIONS AND INFANT APPROVAL

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

The fee on a Part 8 application for infant approval is £308 and not the fee payable on the issue of a Part 7 claim, or a Stage 3 portal claim.

Ministry of Justice guidance saying that the full fee applies to all Part 8 claims is wrong; it only applies to Stage 3 claims.

 

The court has itself suggested that:

 

You may, in order to assist the court, specify that the Claim is for an infant settlement, in bold print.”

 

You may indeed.

I am grateful to Gordon Exall and his outstanding blog – Civil Litigation Brief – for the information in this piece. Here is the link to the longer post on this subject. The Correct Fee on a Part 8 Application: Don’t Let The Court Staff Make You Hand Over Money For Nothing

Written by kerryunderwood

October 5, 2018 at 11:21 am

Posted in Uncategorized

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