Kerry Underwood

Archive for December 2018

NOVATION/ASSIGNMENT OF CONDITIONAL FEE AGREEMENTS: ANOTHER CASE

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In Warren v Hill Dickinson LLP [2018] EWHC 3322 (QB) (30 November 2018)

the Queen’s Bench Division of the High Court refused boxing promoter Frank Warren permission to appeal against a Costs’ Master’s decision that his Conditional Fee Agreement had been assigned or novated to the defendant firm of solicitors.

Consequently he was bound to pay the new firm’s fee.

The court held that there was no material difference between a firm ceasing to carry out personal injury work as in

 

Budana v The Leeds Teaching Hospitals NHS Trust & Anor [2017] EWCA Civ 1980 (05 December 2017)

 

and a firm ceasing to practise, as in this case.

 

Neither was there any relevant distinction between ceasing to practise altogether and the closure of a partnership and its reconstruction as a limited liability partnership as in

 

 

Plevin v Paragon Finance Ltd (No. 2) [2017] UKSC 23.

 

The original firm was not in breach of contract in ceasing to practise, and even if it had been, the Conditional Fee Agreements were not terminated unless the claimant accepted the alleged repudiation, whereas in fact he had consented to their transfer to the second firm.

 

The original decision appealed against is at [2018] EWHC B6 (Costs).

 

Comment

This decision is correct on the facts, but the court is surely in error in dealing with the issue of entire contracts.

Here the court found that Mr Warren had consented to the assignment/novation, so the issue is obiter, that is not necessary on the facts of the case and therefore not binding.

However, had he not consented, then surely the first firm of solicitors would have fallen foul of the entire contract rule and been entitled to nothing.

If the rule applies even where a party is paying an hourly rate, win or lose, then surely it must apply with more force in a conditional fee case, where not only does the solicitor have to finish the case, it also has to win it in order to get paid.

Thus Cutter v Powell (1795) 6 T.R. 320 must apply.

The court’s reasoning that the analogy breaks down as Mr Cutter died makes no sense. Here, the law firm died.

The statement that “the law firm remained in existence and capable of hiring a lawyer to conduct Mr Warren’s case” is in conflict with the court’s statement that “it ceased to practise on 30 September 2013.”

As with some other decisions on assignment/novation of Conditional Fee Agreements, this judgment does not make a lot of sense.

 

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Written by kerryunderwood

December 21, 2018 at 1:59 pm

Posted in Uncategorized

WASTED COSTS AND LITIGANTS IN PERSON

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In Ogiehor v Belinfantie [2018] EWCA Civ 2423

the Court of Appeal upheld the trial judge’s decision to make a wasted costs order against a litigant in person who had deliberately disclosed to the trial judge that the defendant had made a without prejudice save as to costs offer.

The disclosure, which the judge had tried to prevent, caused the trial to be adjourned.

The judge ordered the claimant to pay the wasted costs, and ordered that he make an interim payment of £10,000 within four months in order for the case to continue.

 

The Court of Appeal upheld the order, applying the three-stage test in

 

Ridehalgh v Horsefield [1994] Ch.205 CA

 

and noting that the standard of compliance with the rules to be expected of litigants in person as set out in

Barton (Appellant) v Wright Hassall LLP (Respondent) [2018] UKSC 12

 

Written by kerryunderwood

December 20, 2018 at 10:22 am

Posted in Uncategorized

SECURITY FOR COSTS

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This piece, in slightly different form, first appeared on the Practical Law Dispute Resolution Blog.

ATE Insurance; Shareholder Funding

There has been a number of recent cases in relation to security for costs.

In Lewis Thermal Ltd v Cleveland Cable Company Ltd [2018] EWHC 2654 (TCC) (15 August 2018)

the Technology and Construction Court, part of the High Court, ordered a dormant claimant company to provide security for the defendant’s costs in proceedings for breach of contract and fraudulent misrepresentation.

The case shows the difficulty of relying on After-the-Event insurance as security for costs and also is an example of the court taking into account the possibility of shareholder funding when deciding whether to order security against an impecunious company.

Here the claimant had taken an assignment of the claim from an electrical cabling installer shortly before the installer went into liquidation and the defendant had allegedly supplied defective cabling to the installer damaging the installer’s reputation and causing loss of business valued by the claimant at £8 million.

The claimant sought to rely on its ATE policy and the court accepted that it could, in principle, answer a security application – see

 

Premier Motor Auctions Ltd v PwC [2017] EWCA Civ 1872;  and

 

Harlequin Property (SVG) Ltd v Wilkins Kennedy [2015] EWHC 1122 (TCC).

 

However ATE insurance was not adequate security where, for example, there was a risk of the claimant’s insolvency and no guarantee from the insurer to the defendant, and an exclusion of the Contracts (Rights of Third Parties) Act 1999 – see Harlequin above.

Neither was ATE insurance adequate security when there was a risk of the insurer avoiding the policy –

see Catalyst Managerial Services v Libya Africa Investment Portfolio [2017] EWHC 1236 (Comm).

Here the claimant’s ATE policy did not give the defendant direct rights against the insurer and it excluded the Contracts (Rights of Third Parties) Act 1999 and also contained other exclusions.

The court held that these were real and not fanciful risks and there was reason to believe that the claimant would be unable, either itself or through its ATE insurance, to pay the defendant’s costs if ordered to do so.

The court also took into account the fact the claimant’s shareholders, who had apparently already agreed to fund disbursements in the action, had funds available for security.

Subsequently the court varied the security order and allowed security to be provided by a deed of indemnity from the claimant’s After-the-Event insurers for the full amount of the defendant’s budgeted costs.

 

Security for Costs on Indemnity Basis

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 declining to make the order, particularly as there was no evidence that providing the security would be burdensome to the third party.

 

Additional Security for Costs

In Mayr v CMS Cameron McKenna Nabarro Olswang LLP [2018] EWHC 3093 (Comm)

the Commercial Court, part of the High Court, dealt with the principles to be applied when a party makes a second application for security for costs, that is an application for additional security.

This was a claim for professional negligence and in November 2017 the parties agreed that the claimant should provide security for costs in instalments and the defendant then made an application for additional security of £1.45 million.

The court pointed out that case law shows that a party cannot seek additional security purely because the original amount sought was now inadequate; in other words they could not have a second bite at the cherry.

However if there had been a material change of circumstances, then a party could seek additional security.

Here the claimants conceded that there had been a change in circumstances, but stated that it did not warrant the level of additional security being sought.

The court said that if there was doubt about the reasonableness of the figures then that doubt should be resolved in favour of the defendant as the prejudice to the defendant of risking being unable to recover its costs outweighed the prejudice to the claimant.

On the facts, the court made an order for further security in the sum of £1.3 million.

The court also said that on an application for security for costs it should adopt a broad-brush approach and not “descend into the level of detail which will be examined on a detailed assessment… ”

“The question is, what amount is it just to order to protect the defendant from a costs order which the claimant is unable to pay? It is a two stage test and to introduce a limit confining the increase in security to only those items which arise from a change in circumstances is not warranted.”

The overall purpose of giving security for costs is to protect the defendant and that purposes can only be achieved if the court considers the overall figures on the basis of the up to date estimate before the court.” 

 

Do Not Delay

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

the Commercial Court  granted the application for security for costs ,but significantly reduced the amount ordered in respect of incurred costs due to the solicitors’ delay in making the application.

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

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

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

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

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

 

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

 

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

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

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

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

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

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

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

 

Claimant Did Not Become Defendant By Opposing Discharge Of Receivership

In JSC VTB Bank v Skurikhin and others [2018] EWHC 3072 (Comm) (13 November 2018)

the Commercial Court, part of the High Court, rejected the claimant’s argument that, by resisting an application to discharge a receivership, it had effectively become the defendant, and thus could seek security for costs of that application.

Here receivers have been appointed by way of equitable execution over interests in a limited liability partnership and the claimant opposed the application to discharge that receivership.

It was the claimant who had secured this appointment with a view to recovering assets from the defendant who was the principal defendant in the main litigation.

Thus the claimant was now defending an application against it and argued that, therefore, in respect of that discharge application it was effectively a defendant within the meaning of CPR 25.12(1).

The claimant argued that although this was an interim application it raised issues between the parties that were in substance independent of the main action.

The court rejected the application stating that the claimant had instigated the receivership application in the first place and that the defendant, although the applicant in this application, had not chosen to become a party to the proceedings in the first place.

The application to discharge was a defensive measure by the defendant and had no independent life of its own.

The defendant was not asserting any positive claim against the claimant.

 

 

Comment

The ability to obtain security for costs is a powerful weapon in litigation, as shown by the unsuccessful attempt by the claimant in this case to put itself in the position of being a defendant.

This case reviews a number of the authorities concerning a security for costs.

Although there have been a number of recent cases, as this piece shows, it is still an underused tool by civil litigators.

 

 

Written by kerryunderwood

December 4, 2018 at 6:28 am

Posted in Uncategorized

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