Kerry Underwood

Archive for February 2019

PROFESSIONAL NEGLIGENCE: SUPREME COURT RULING

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Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Perry v Raleys Solicitors [2019] UKSC 5 (13 February 2019)

the Supreme Court restored the decision of the trial judge and held that the Court of Appeal had been wrong to overturn the findings of fact of the trial judge.

Here the claimant, a retired miner, made a Vibration White Finger claim under the government scheme and subsequently sued his former solicitors, the defendant here, for failing to claim certain heads of damages.

The trial judge found that the claimant had failed to establish causation.

The Court of Appeal overturned that decision and awarded damages, but the Supreme Court said that the claimant had failed to establish to the requisite high degree any of the grounds on which the Court of Appeal concluded that this was ”one of those rare cases where it was appropriate to reverse the trial judge’s findings on the issues of fact.”

The Supreme Court gave guidance as to the proper approach when considering causation in loss of chance cases and recognised the difficulties in counter-factual cases, that is where the court has to determine what would have happened if a professional person had complied with her or his duty of care.

Cases where the assessment of damages depends on the likelihood of future events, mean that the court will sometimes depart from the ordinary rule that facts must be proved on the balance of probabilities, but none of these issues affects the basic requirement in negligent cases for proof of loss caused by the breach of duty.

The case of  

Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602

establishes a sensible, fair and practicable dividing line between what must be proved, that is what the client would have done, on what is better assessed by evaluation of a lost chance, that is where the issue is dependent on what others would have done.

The claimant needed to show that, if properly advised by his solicitors, he would and could have made an honest claim and the relevant facts did not fall within “futurity or counter-factuality” and so had to be proved on the balance of probabilities and the solicitors were entitled to test them.

Comment

No new legal principle here, and hard to see why the matter was allowed to proceed to the Supreme Court.

Basically, all it does is to re-state that it will be very rare to justify overturning a trial judge’s findings of fact.

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Written by kerryunderwood

February 15, 2019 at 9:17 am

Posted in Uncategorized

SOLICITORS DENIED LIEN; THE RYANAIR CASE

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The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Bott & Co Solicitors Ltd v Ryanair DAC [2019] EWCA Civ 143 (12 February 2019)

the Court of Appeal has upheld the High Court’s decision that Ryanair was entitled to respond directly to passengers seeking compensation through solicitors, and had no liability to pay solicitors who had assisted in the claims.

Since the High Court ruling the Supreme Court had given judgment in

Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21 .

The High Court Judge here had been bound by

Meguerditchian v Lightbound [1917] 2 KB 298

to hold that mere negotiation by a solicitor resulting in recovery for a client could not give rise to a lien, but rather there had to be some form of proceedings, litigation or arbitration, but in Gavin Edmondson the Supreme Court had said that the fact that that no proceedings had been issued was not fatal to the equitable right of the solicitor.

Here the Court of Appeal said that the distinction between cases with or without proceedings could not survive the decision of the Supreme Court in Gavin Edmondson, and the boundary had shifted.

The key to fixing the boundary was to examine why equity will recognise a solicitor’s right to be paid and the courts had stated that access to justice lay behind the development of the principle.

Here, the Court of Appeal said that although formal proceedings were no longer necessary, the solicitor’s services must still be recognisable as litigation services, promoting access to justice.

This would include conducting litigation or contemplate litigation and would encompass proceedings under various protocols, such as the portal process as in Gavin Edmondson.

However, the Court of Appeal found that the flight compensation claim scheme was largely mechanical and formulaic and did not constitute litigation services required to promote access to justice.

The Court of Appeal held that passengers are entitled to use third parties to assist with their claim, but must go to the Ryanair claims process in the first instance.

In Gavin Edmondsonthe Supreme Court said:

“58. It is simply wrong in my view to seek to distil from those cases a general principle that equity will protect solicitors from any unconscionable interference with their expectations in relation to recovery of their charges.”

Here the Court of Appeal quoted from the Supreme Court’s decision at Paragraph 1 setting out the basis of the court’s recognition of a solicitor’s lien:

“It is a judge-made remedy, motivated not by any fondness for solicitors as fellow lawyers or even as officers of the court, but rather because it promotes access to justice. Specifically it enables solicitors to offer litigation services on credit to clients who, although they have a meritorious case, lack the financial resources to pay up front for its pursuit. It is called a solicitor’s lien because solicitors used to have a virtual monopoly on the pursuit of litigation in the higher courts. Nothing in this judgment should be read as deciding whether the relaxation of that monopoly means that the lien is still limited only to solicitors.”

Although this is an equitable remedy, the Court of Appeal considered that the statutory definitions of litigation captured the essence of the principle underpinning the right to a lien.

The court quoted section 119 of the Courts and Legal Services Act 1990 which defines “litigation services” as

“any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or any contemplated proceedings, to provide.”

In section 87 of the Solicitors Act 1974, “contentious business” is defined as:

“business done … in or for the purposes of proceedings begun before a court or arbitrator”.

The Court of Appeal said that this would include proceedings under one of the many protocols that now exist, as well, potentially, in Alternative Dispute Resolution, and the court made the point that ADR by definition only comes into play when there is a dispute to resolve.

Here, the Court of Appeal said that unless and until Ryanair refuses a claim, there is no dispute.

In

Gaynor v Central West London Buses Ltd. [2006] EWCA Civ 1120

Dyson LJ said at [17]:

“In my judgment, “contemplated proceedings” are proceedings of which it can be said that there is at least a real likelihood that they will be issued. Until the potential defendant disputes the claim, it is not possible to say that proceedings are contemplated. Advising a client as to whether he or she has a good prima facie case and writing a letter of claim are not enough to amount to litigation services.”

The Court of Appeal here went onto say:

“58.  The making of a claim under Regulation 261 is largely mechanical and formulaic. It requires little more than the flight distance and the length of the delay, in addition to details of the ticket purchase. The amount of compensation that a delayed passenger is entitled to receive is fixed by the Regulation. It is not a case in which the quantum of damages has to be evaluated. Bott’s evidence is that the “vast majority” of claims do not require the issue of court proceedings; and it claims a 99 per cent success rate. I do not consider that the services provided by Bott in processing that vast majority can be said either to be “litigation services” of the kind that Lord Briggs must have had in mind; or to be required in order to promote access to justice, unless and until Ryanair disputes a claim. In addition, to recognise the existence of an equitable right would place a solicitor in a far more privileged position than a claims handler performing the same services. I cannot see any justification for that; especially since the rationale for the equitable right is not motivated by any fondness for solicitors. If a claim is disputed, different considerations will arise.

59.       In my judgment, therefore, where Bott simply writes a letter of claim or assists a client to complete the on-line form, and the claim is paid in response to the letter or the form, it is not entitled to an interest in the compensation that equity will protect. I would reject this ground of appeal.”

Comment

The Senior Judiciary need to think through rather more carefully the whole issue of access to justice and litigation and how it may be delivered.

At one level, lawyers are being encouraged to use portals and follow protocols and do everything to avoid litigation, and yet Bott & Co Solicitors Limited appear to be being punished for using such a scheme, and for making significant profits from it.

What on earth is the relevance to the legal principles of the fact that Bott’s income from claims against Ryanair was over £100,000 a month? (see Paragraph 16 of the judgment).

What is the relevance of the number of claims that Bott were handling, except to show the success of the scheme and the attraction to members of the public?

So, at one level, we are consistently urged to be efficient and be a business, with the provision of legal services opened up to every Tom Dick and Harry, but when a firm does exactly that they are punished by the courts by being refused a lien.

I can see no logical difference between the pre-action road traffic portal, where 99% of cases are settled, and the scheme operated by Bott & Co Solicitors Limited.

This decision should be overturned by the Supreme Court.

I deal with the decision of the High Court and the Supreme Court in my blogs –

COURT REFUSES TO GRANT SOLICITOR LIEN FOR COSTS ; and

SOLICITORS’ LIENS, RETAINERS, CFA LITE AND UNCONSCIONABLE CONDUCT – THE HAVEN INSURANCE COMPANY CASE

Written by kerryunderwood

February 15, 2019 at 8:18 am

Posted in Uncategorized

LEGAL FEES SETTLEMENT WAS NOT A CONTENTIOUS BUSINESS AGREEMENT

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Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Whitaker v Richard Slade & Company Plc [2018] EWHC B17 (Costs)

a High Court Master held that an agreement in relation to a specific sum for work done was not a Contentious Business Agreement and, if anything, was of benefit to the claimant client rather than the solicitors.

The former client issued proceedings, seeking a detailed assessment of £166,671.29.

The sum owed was in respect of fees for legal services to 31 December 2016, pursuant to a retainer entered into in 2014, which provided for hourly rates and monthly billing.

In March 2017 the parties entered into a Deed of Arrangement in which the client agreed to pay the sum of £86,000 for all the legal costs incurred.

That agreement related to sums due from the claimant to the defendant for work done up to the date of the agreement.

The claimant had been encouraged to obtain independent legal advice in relation that agreement.

The Master held that the agreement was not a Contentious Business Agreement.

The claimant had contended that the Agreement was an agreement to make interim payments and that the sums remained subject to assessment and in the alternative that it must be a Contentious Business Agreement within the meaning of section 59 of the Solicitors Act 1974, and should be set aside as being unfair and unreasonable.

Its natural meaning was that it provided for payment of a fixed sum for legal services to the end of 2016 without further assessment.

The right to assessment under section 70 of the Solicitors Act 1974 stems from service of the bill of costs and a characteristic of a business agreement, whether contentious or non-contentious, under the Act is that there is no right of assessment, so the sums due can be recovered as an ordinary debt, unless the agreement is set aside.

The Master rejected the client’s claim that if the Agreement was not treated as a request for payment on account it must be a Contentious Business Agreement.

It does not follow that if an agreement does not preserve the right to assessment, it must be a Contentious Business Agreement.

Some agreements between solicitors and clients are outside of the scope of section 59.

The Master said that if he was wrong, and the agreement was a Contentious Business Agreement, then it was fair and reasonable and should not be set aside.

The bill clearly identified the work done and who it was done by.

The client was an experienced businessman and a sophisticated client who had taken independent legal advice and knew that the compromise would preclude assessment.

The hourly rates were well below ordinary commercial rates for the type of work and the discount involving a substantial write-off of the costs and was favourable to the client and setting it aside would result in unfairness to the solicitor.  

Written by kerryunderwood

February 15, 2019 at 6:50 am

Posted in Uncategorized

SECURITY FOR DAMAGES AS CONDITION OF RELIEF FROM SANCTIONS

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In

Gama Aviation (UK) Ltd v Taleveras Petroleum Trading DMCC [2019] EWCA Civ 119 (07 February 2019)

the Court of Appeal overturned a decision of the Business and Property Courts that the defendant should pay £1 million security as a condition of being allowed to rely on a witness statement served just a few days before the hearing, failing which judgment would be entered against it for the full sum claimed with interest and costs.

If the defendant was unable to pay, then it would have been in a worse position than if the summary judgment application had been heard without the statement it wished to rely on, as at least the court would have had to consider the merits of the claim.

Here, the judge lost sight of the caution which the court must exercise before making such an order.

Furthermore the sanction of judgment being entered in the absence of the security was disproportionate.

The penalty for failing to provide the security, had that order been appropriate, which it was not, was the inability to rely on the witness statement.

The judgment contain a helpful explanation of the relevant case law.

Written by kerryunderwood

February 14, 2019 at 10:04 am

Posted in Uncategorized

INSOLVENCY ROUND-UP

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

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

Committal Proceedings against Bankrupt: Permission not needed

In

Bayliss v Saxton [2018] EWHC 3365 (QB)

the Queen’s Bench Division of the High Court held that section 285(3)(b) of the Insolvency Act 1986 did not apply to committal proceedings for contempt of court on the grounds of interference with due justice.

Section 285(3)(b) prevents proceedings, including criminal proceedings, being brought against a bankrupt or insolvent company without the permission of the court.

Here, the proceedings for committal had been brought on the ground that the bankrupt had continued litigation on behalf of his deceased mother for several years maintaining that she was alive.

The court distinguished the decision of the House of Lords in

 Re Smith (a Bankrupt) [1990] 2 AC 215

where the court had held that the court could stay committal proceedings for non-payment of rates as a type of “legal process” under section 285(1) of the Insolvency Act 1986.

Here the court held that section 285(1) concerned the court’s discretion to stay existing proceedings against a bankrupt, whereas section 285(3) contains a precondition to the bringing of new proceedings against a bankrupt, and thus the subsections covered different areas.

In Re Smith the warrant of commitment was a direct means of enforcement of a debt, whereas the purpose of committal proceedings for contempt of court in the current case was very different.

This is believed to be the first authority on this point.

Unassessed Intervention Costs are Liquidated Sum for Insolvency Purposes

In

The Law Society (Acting Through the Solicitors Regulation Authority) v Blavo [2018] EWCA Civ 2250

the Court of Appeal held that unassessed costs of an SRA intervention constitute a debt for a liquidated sum under section 267(2)(b) of the Insolvency Act 1986.

Applying the approach adopted in

McGuinness v Norwich and Peterborough Building Society [2011] EWCA Civ 1286 (09 November 2011)

the Court Appeal held that Paragraph 13, Part II, Schedule 1 to the Solicitors Act 1974, which permits recovery of intervention costs as a statutory debt, creates a pre-ascertained liability.

The fact that the liability is in relation to solicitors’ fees does not bring into play the general principle that a solicitor’s claim for remuneration is an unliquidated sum, being a reasonable and fair amount for the work done.

An SRA intervention agent’s costs required no further act under the Solicitors Act 1974.

Paragraph 13 provided the mechanism for determining the amount.

Consequently the costs were a debt for a liquidated sum and the High Court should not have set aside the statutory demands under rule 6.5(4)(b) of the Insolvency Rules 1986.

Postscript

In a separate High Court judgment on 21 December 2018 John Blavo was ordered to pay the government £22.1 million after the court found it more likely than not that systemic fraud had taken place in legal aid claims, and that there was an endemic culture of dishonesty.

An audit by the Legal Aid Agency in 2015 showed claims for representation in mental health hearings in 24,658 cases, but only 1,485 actual hearings.

See –

 The Lord Chancellor v Blavo & Co Solictors Ltd & Anor [2018] EWHC 3556 (QB) (21 December 2018)

Stays and the Cross-Border Insolvency Regulations 2006

In

Bakhshiyeva v Sberbank of Russia and others [2018] EWCA Civ 2802 (18 December 2018)

the Court of Appeal considered the jurisdiction of courts under the Cross-Border Insolvency Regulations 2006(SI 2006/1030) to grant an indefinite stay on actions against a foreign debtor’s assets by creditors with English law claims.

It held, disagreeing with the High Court, that there was no absolute jurisdictional bar to it granting assistance to foreign insolvency proceedings where this would substantially affect the rights of creditors with English law claims under Article 21 of Schedule 1 to the Regulations.

There could be circumstances where, to a limited extent, it may be appropriate to use the Regulations to achieve the discharge or variation of English law rights and uphold foreign law.

For example the court could remit assets back to a foreign liquidator under Article 21(1)(e).

However it is wrong for the court to grant a permanent stay under Article 21, and thereby assist foreign insolvency proceedings, if it would

  • prevent English and Wales law creditors from enforcing English and Wales law rights as a result of a foreign insolvency process, as this would breach the common law rule that contractual obligations can only be discharged under the law applicable to that contract, known as the rule in Gibbs;
  •  purport to continue a stay beyond the end of the foreign restructuring proceedings.

The Court of Appeal considered the Regulations to be a procedural tool which was not to affect the rights of creditors and it would not be appropriate to grant relief under Article 21 as that would override the rule in Gibbs, which is part of the common law of England and Wales.

Co-workers and Whistleblowing

In

Timis and another v Osipov [2018] EWCA Civ 2321

the Court of Appeal held that co-workers’ liabilities for damages for detriment suffered by a whistleblower, within the meaning of section 47B of the Employment Rights Act 1996, included loss suffered as a result of dismissal within section 103A of the Act.

Generally damages for detriment do not include damages flowing from dismissal as there is a separate cause of action against the employer for dismissal.

However there is no cause of action against a fellow worker for unfair dismissal.

Consequently the Court of Appeal upheld the decision of the Employment Tribunal and the Employment Appeal Tribunal that the liability of a co-worker for detriment did extend to detriment and damages flowing from dismissal.

The liability will generally be joint and several as between the co-worker and the employer, as here, and in any event the employer will generally be vicariously liable for the co-worker’s actions as well.

However, where the employer is insolvent this gives the victim of whistleblowing the ability to enforce the whole damages award against the co-worker, who will of course not enjoy the limited liability that most companies have.

Thus an insolvent employer avoids the debt, which becomes the sole responsibility of the fellow worker, although there is no liability for the basic award in unfair dismissal cases.

The same applies in relation to all forms of discrimination claim under the Equality Act 2010.

I suspect that this is not quite what Parliament had in mind.

No Bankruptcy against Person with no Assets

In

Lock v Aylesbury Vale District Council [2018] EWHC 2015 (Ch) (09 July 2018)

the Chancery Division of the High Court held that a bankruptcy petition should not have been granted where the bankrupt had nothing, as the court should not make orders that serve no useful purpose, and thus allowed an appeal against the decision of the District Judge.

Section 266(3) of the Insolvency Act 1986 gives the court a general power, where appropriate, to dismiss a bankruptcy petition for any reason.

Here, the bankrupt had no income, and due to ill health, no ability to earn income, and had capital of less than £100 and rented her home from a social landlord.

The petitioner was well aware of her position.

In

Re Betts [1897] 1 QB 50

the Court of Appeal said that where there were no assets, and no prospect of any coming into existence, the court had a discretion to refuse to make a bankruptcy order if the only effect will be a waste of money and costs.

In

Re Field [1978] Ch 371

the Chancery Division of the High Court said that a person may indeed be too poor to be made bankrupt.

The petitioner submitted that the court had jurisdiction to make a bankruptcy order in circumstances where a bankrupt had no assets and where the only purpose of the order was to enable an investigation to take place into the bankruptcy affairs – see

Bell Group Finance (Pty) Limited v The Bell Group (UK) Holdings Limited [1996] BCC 505.

Furthermore, if there were no assets, then the court could rescind the bankruptcy order.

However the court here said:

In bankruptcy petitions of the present kind, however, founded upon unpaid council tax, it does seem to me that there is a burden upon a public authority, petitioning for a debtor’s bankruptcy, to at least raise a prima facie case that a bankruptcy order will achieve some useful purpose.

The District Judge had failed properly to exercise his discretion, which meant it fell to the Appeal Court to exercise it, by virtue of CPR 52.21(3):

“(3) The appeal court will allow an appeal where the decision of the lower court was—

(a) wrong; or

(b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court.”

The Chancery Division held that the bankruptcy order was unjust because the District Judge did not consider whether any useful purpose would be served by making it.

“Everything in evidence about the bankrupt and her financial affairs indicated that she was not worth powder or shot, and that a bankruptcy order would achieve no useful purpose.”

Chancery Guide

A revised Chancery Guide was published on 21 January 2019.

Amendments to the insolvency appeals section reflects the fact that all appeals in individual insolvency proceedings from a District Judge, whether in the County Court or the High Court, and from an ICC judge, are to a High Court Judge in the Business and Property Courts – see paragraph 24.14.

Amendments are also made to chapter 25 – Insolvency and Companies List- reflecting changes introduced in the Practice Direction on Insolvency Proceedings (July 2018) including dealing with the distribution of insolvency between High Court judges, ICC judges and District Judges, and what constitutes local business for the County Court.

Hearing bundles must be lodged for all hearings before all judges and ICC judges, but no bundle is needed in winding up proceedings unless ordered by the court – see paragraph 25.27.

Written by kerryunderwood

February 4, 2019 at 6:58 am

Posted in Uncategorized

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