Kerry Underwood

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ESCAPING FIXED COSTS: THREE NEW CASES

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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.

 

Late Acceptance Of Part 36 Offer Not Exceptional Circumstances In Fixed Costs Case

In

Parsa v Smith and Another Case Nr C84YX807, unreported

the Queen’s Bench Division of the High Court upheld a decision of a Circuit Judge that late acceptance of a claimant’s Part 36 offer, just one week before trial, in a fixed costs case did not amount to “exceptional circumstances” under CPR 45.29J justifying an escape from fixed costs.

The Court of Appeal’s decision in

Hislop v Perde [2018] EWCA Civ 1726

that a claimant was not entitled to indemnity costs on a defendant’s late acceptance of a Part 36 offer in fixed costs cases did not consider the exceptional circumstances provision, as it was not argued in that case.

Here, the High Court also held that the claimant’s application to escape fixed costs was not an “interim application” and therefore did escape fixed costs, meaning that the successful defendant got £1,712.10 for that application.

 

Personal Injury Cases Settling for More Than £25,000

In

Lovatt v LEW Diecastings Ltd (In liquidation), County Court at Manchester (4 December 2018)

Manchester County Court had to consider the appropriate costs regime in relation to an employers’ liability/public liability portal claim which had exited the portal because the defendant did not admit liability, and which subsequently settled for £29,000 by way of the claimant accepting the defendant’s Part 36 offer in that sum.

The Civil Procedure Rules had changed between the date when the Part 36 offer was accepted and the date of the costs hearing before the judge whose decision was now under appeal.

Under the old provisions, the claimant maintained that he was entitled to assessment of costs on the standard basis, that is he would escape fixed costs, whereas the defendant said that the costs regime was governed by the new rules which meant that the claimant was entitled to fixed costs of £2,500 plus 10% of damages over £10,000 in accordance with table 6C read together with CPR 45.29D and CPR 45.29E.

There was an argument that under a strict reading of the old rules the claimant was in fact entitled to no costs at all.

The judge said that the test was whether applying the new rules would cause significant unfairness to the parties – see

L’Office Cherifien Des Phosphates v Yamashita Shinnihon Steamship Co Ltd [1994] 1 AC 486.

There was no rule that the procedural rules could not have retrospective effect – see

Yew Bon Tew v Kenderaan, a decision of the Privy Council [1983] AC, 553.

The District Judge had allowed fixed costs only, but the claimants argued that this meant that the costs payable were nil because the value of the claim exceeded the limit in table 6C and therefore they ought to get standard costs.

Thus the matter came before another District Judge to determine that point and that judge ordered that there be detailed assessment.

The old rule read:

“45.29D Subject to rules 45.29F, 45.29H and 45.29J…in a claim started under the EL/PL Protocol…the only costs allowed are: (a) fixed costs in Rule 45.29E; and (b) disbursements in accordance with Rule 45.29I.”

“11. 45.29E provided that the amount of fixed costs is set out (in respect of Employers’ Liability claims) in table 6C.  Table 6C contained four parts, part A of which is relevant: “If parties receive a settlement prior to the Claimant issuing proceedings under Part 7” then there are two sub-headings under that. The first is “agreed damages” and the relevant amount of agreed damages, for these purposes, reads as follows: “More than £10,000 but not more than £25,000”.  The fixed costs referable to that category is: “The total of a) £2,500; and b) 10% of the damages over £10,000.”

Here the court also considered the case of

Qader v ESure [2016] EWCA Civ 1109

where the Court of Appeal considered CPR 45.29B which corresponded to 45.29D, but dealing with road traffic claims rather than Employers’ Liability claims.

There the Court of Appeal held that as and when the matter was allocated to the multi-track it was no longer subject to fixed costs and the claimant did not have to demonstrate exceptional circumstances under CPR 45.29J.

What the Court of Appeal did in that case is to add the words “unless the case has been allocated to the multi-track” to CPR 45.29B.

The Qader case led to the Civil Procedure Rules being changed by way of the Civil Procedure (Amendment) Rules 2017 (S.I. 2017/95) and those rules came into effect on 6 April 2017 and added to CPR 45.29D the words “and for as long as the case is not allocated to the multi-track.”

The rule also removed the words “but not more than £25,000” from table 6C.

The effect of Qader and the change to the rules meant that here the claimant, under the new rule, would undoubtedly be entitled to fixed costs of £2,500 and 10% of damages over £10,000.

Thus the issue was whether that rule change was retrospective.

The judge held that had the old rules applied then under the strict reading of CPR 45.29D and table 6C, the claimant would have got nothing as his claim was not within the maximum fixed costs limit of £25,000, and in a matter started in the portals, only fixed costs could apply, and as the matter was outwith the limit, those fixed costs were zero.

That was the rule that was effectively changed by the Court of Appeal in Qader, confirmed by the rule change set out above.

As the judge here pointed out, the Court of Appeal had identified this problem when considering Qader v ESure.

The judge had this to say about the Court of Appeal’s approach:

“I pause to observe that Briggs LJ there identifies the problem which faces this court but says absolutely nothing to help us to reach a conclusion as to what to do in such a case.”

Quite.

 

Exceptional Circumstances  

In

Ferri v Gill [2019] EWHC 952 (QB) (17 April 2019)

the Queen’s Bench Division of the High Court considered the construction of the exceptional circumstances provision in CPR 45.29J which, if satisfied, means that fixed costs do not apply.

At present fixed recoverable costs apply to claims that have exited either of the portals, that is the road traffic accident portal or the employers’ liability/public liability portal, unless and until the claim is allocated to the multi-track.

Here, the claimant was injured while cycling and the GP’s report anticipated a full recovery and the matter was placed on the RTA portal.

The claimant then instructed new solicitors who obtained a report from an orthopaedic surgeon who diagnosed a more serious injury and so the new solicitors exited the case from the portal.

The claim settled for £42,000 without proceedings being issued.

At first instance Master McCloud held that the court had to look at exceptionality in the context of cases that are in the portal and the “there must be exceptionality in the sense that the case is taken out of the general run of this type of case by reason of some circumstance.”

This might include value, would often include costs, and could be all of the circumstances of the case.

The Master held that the test was a “low bar” one as the portal was intended to deal with simple cases, which would typically be fast-track ones.

The Master held that there were exceptional circumstances justifying a departure from fixed costs.

On appeal, the High Court noted that Section IIIA of CPR 45 expressly provides that ex-portal cases remain subject to fixed costs, subject only to the multi-track exception dealt with above.

Consequently exceptional circumstances must be evaluated against those cases covered by Section IIIA, not all of those in the portal as erroneously held by the Master.

The phrase “exceptional circumstances” had to be read in the context of where it appeared – see

R v Soneji [2005] UKHL 340.

That setting would determine whether it was a low bar or a high bar.

In

Hislop v Perde [2018] EWCA Civ 1726

the Court of Appeal, obiter, had referred to the test as being “already a high one” and the underlying policy of the fixed costs regime required a strict approach and not a “low bar” one.

Consequently the appeal was allowed and the case was remitted to a different Master for reconsideration.

 

Comment

Escaping fixed costs, absent allocation to the multi-track or matching or beating your own Part36 offer on judgment, is almost impossible.

Why not just pass a law saying injured people should never sue?

Oh, sorry, this Scrag End Parliament – it does not deserve the term Rump – has done just that in the Civil Liability Act.

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Written by kerryunderwood

April 30, 2019 at 9:44 am

Posted in Uncategorized

LIENS: A NEVER-ENDING SAGA

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

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.

Even though we have had 300 years of case law, there is still great uncertainty about the extent of solicitors’ liens, a subject which has become of much greater importance since the legalization of Conditional Fee Agreements and the virtual abolition of civil legal aid, as solicitors are now often acting on credit for clients throughout the whole case, rather than billing monthly, or having the security of legal aid.

Solicitors need the protection of a lien over damages in order to get their costs; otherwise we will stop acting for people who cannot afford to pay money on account.

This was accepted by the Supreme Court in

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

and many of us thought that that was that.

However, the Court of Appeal, in a curious decision, to put it mildly, has sought to distinguish that decision, but for all intents and purposes has declined to follow a very recent Supreme Court decision.

The relevant decision is

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

Bott & Co Solicitors Limited has applied to the Supreme Court for permission to appeal in what is a case of significant public importance concerning consumer protection.

Contrary to what the Court of Appeal may think, allowing clients more easily to cheat their solicitors, and that is what we are talking about, will simply lead to a refusal by the legal profession to act on credit. In other words solicitors will insist on money or security on account, and very it will be those of limited means who will be denied access to justice.

One of the key flaws in the reasoning and logic of the Court of Appeal in applying a common law principle in the Ryanair case is its apparent failure to understand the movement in the last 20 years,  sanctioned by Parliament, effectively to force parties in potential litigation to take pre-action steps to attempt settlement rather than issue proceedings.

This is reflected in the Pre-Action Protocols, which now cover every single type of civil action in England and Wales, together with the more formal portal structure for low value personal injury claims.

If the Court of Appeal’s decision is allowed to stand then solicitors will find themselves denied the protection of the equitable lien for the costs of work done in the pre-action period, even where such work is expressly contemplated by the retainer, and is required by the Pre-Action Protocol approved by Parliament.

The decision is a nonsense, and a dangerous anti-consumer nonsense which can be summarised in the old expression that the law, like the Ritz, is open to everyone.

I deal in detail below with the Ryanair case. I also deal with the West London Law case where, in another strange decision, the High Court refused a solicitor a lien in a legally-aided case.

Thus in 2019 we have already had a Court of Appeal decision and a High Court decision refusing liens, in spite of the Supreme Court’s decision in Gavin Edmondson last year.

I also look at the question of direct/public access barristers and liens.

Solicitors Denied Lien; The Ryanair Case

In

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

the Court of Appeal 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 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 contemplating 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 Edmondson the 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,  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 needs 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.

No Solicitor’s Lien Where Client Legally-Aided

In

West London Law Ltd v Sandhu [2019] EWHC 828 (7 March 2019)

an appeal against a conditional striking-out order, the High Court Judge held that claimant solicitors could not recover fees for work undertaken for a legally-aided client by invoking the court’s equitable jurisdiction to intervene to protect a solicitor’s equitable lien.

The ruling highlights that a solicitor’s equitable lien cannot arise in respect of legally-aided, as opposed to privately-funded work.

West London Law Limited had acted for a legally-aided client in litigation against his son, which succeeded, with costs awarded to the legally-aided client.

The legally-aided client died while his son’s appeal was pending.

The legally-aided client’s other son, as executor, continued instructing West London Law Limited, on a fee-paying basis.

The appeal failed and the other son was awarded costs.

The two sons settled the litigation without involving their solicitors, and acting in person, they entered into a Tomlin order providing for assessment of the legally-aided costs.

In the related settlement agreement, the other son gave up the right to enforce any costs orders against the first son.

West London Law Limited claimed their costs incurred in the litigation from the two sons, contending that they had agreed to cheat West London Law Limited out of their costs, or to compromise the litigation, on notice of West London Law Limited’s costs claim, without preserving West London Law Limited’s rights.

The court below held that there was a potential cause of action, citing case law including

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

but the Particulars of Claim lacked a “fundamental building block”: the solicitor’s lien.

Therefore, unless West London Law Limited amended its claim, it would be struck out.

On appeal, the High Court Judge reiterated two of the requirements for a solicitor’s equitable lien:

  • the client’s responsibility for the solicitor’s charges.
  • a fund in which the solicitor effectively claims an interest to get his fees paid, which could be cash or a chose in action such as a settlement agreement or court order.

Since legally-aided clients have no personal liability for costs, no solicitor’s lien could arise.

The judge rejected West London Law Limited ‘s submission, based on obiter remarks of Lord Denning in

Manley v The Law Society [1981] 1 WLR 335,

that an exception existed for legally-aided work, allowing equity to intervene even without a lien.

The conditional strike-out was overturned in relation to the privately-funded work.

The Particulars of Claim could have been clearer, but they identified the security sufficiently as the rights of the legally-aided client’s estate to commence detailed assessment against the first son.

Barristers’ Liens

Supposing a barrister is acting as a direct/public access barrister, instructed direct by the lay client, without the intervention of a solicitor, and the case is won and the defendant insurance company pays the lay client direct.

If a solicitor had been involved, then there is no doubt that the solicitor would have a lien over the damages, and that lien would include all of their costs, including counsel’s fees, and the insurance company would have to pay all of the fees to the solicitor and take its chance with getting the money back from the lay client.

That is the effect of case law dating back to 1729, most recently confirmed by the Supreme Court in

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

However, barristers are not allowed to hold client money, and it is trite law that costs belong to the client.

In those circumstances, I am satisfied that a direct/public access barrister does not have a lien, and indeed that a barrister can never have lien.

I suspect that this situation has arisen because in allowing barristers to act direct for clients, this point was never considered.

All Files Protected by Lien

In

Spencer-White v Harding Evans LLP [2017] EWCA Civ 434

the Court of Appeal held that, provided the retainer said so, a law firm was entitled to a lien over all of the files that it held in connection with that client, and not just the files where there were outstanding fees.

In that case the Terms of Business and the Client Care Letter both provided that the solicitors were entitled to retain all of the client’s papers and documents until any outstanding sums had been paid, the Court of Appeal held that that was effective and consequently the lien was not limited to files where there were outstanding fees.

The whole topic of liens needs revisiting, and the best way of doing this will be to codify the law in a new section of the Solicitors Act 1974, rather than have different courts arriving at different conclusions on apparently the same facts, and having to trawl through 290 years of case law.

Written by kerryunderwood

April 29, 2019 at 7:57 am

Posted in Uncategorized

WITHOUT PREJUDICE SAVE AS TO COSTS CORRESPONDENCE ADMISSIBLE IN APPLICATION FOR NON-PARTY COSTS

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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

Willers v Joyce & Ors [2019] EWHC 937 (Ch)

the High Court held that correspondence marked “without prejudice save as to costs” was admissible in a subsequent application for non-party costs under section 51 of the Senior Courts Act 1981.

The lawyers represented the claimant in a failed action against the applicants for malicious prosecution and the claimant was ordered to pay the applicants’ costs but the claimant had no money.

The applicants claimed their costs from the lawyers on the basis that those lawyers had a substantial financial interest in the outcome of the claim, as the damages claimed represented costs owed by the claimant to the lawyers in the related proceedings.

The applicants argued that correspondence marked without prejudice save as to costs between the respective firms of solicitors concerning a failed mediation, was admissible as evidence of the respondent lawyers’ attitude to the litigation.

The High Court held that the evidence was admissible solely on the basis that the parties had agreed that the correspondence could be used in the context of an argument about costs.

The High Court did not accept that, by marking the correspondence without prejudice save as to costs, the respondent lawyers were confining the relaxation of the without prejudice rule to the hearing of an application for costs against the claimant.

The High Court did however reject the argument that the correspondence fell within the “independent fact” exception to the without prejudice rule identified in

Muller v Linsley & Mortimer [1996] P.N.L.R. 74.

The High Court did not see how the extent of the influence the respondent lawyers had over the claim, could properly be separated from the content of the settlement negotiations themselves.

Admitting evidence for this purpose would undermine the policy underlying the without prejudice rule and lawyers would not be able to speak freely about settlement if they thought that that information could later be used in costs proceedings against them.

Relying on the recent case of

Briggs v Clay [2019] EWHC 102 (Ch) (25 February 2019),

the High Court held that there was no reason why the without prejudice protection afforded to the claimant could not be relied upon by his legal representatives in a subsequent action for costs in the same action, made against them personally, under the section 51 procedure.

However, in this case, that protection had been waived.

The judgment contains a detailed analysis of the without prejudice rule and, as set out above, refers to the recent decision in Briggs v Clay where the rule was also looked at in detail.

The effect of this decision is that “without prejudice save as to costs” excludes from protection section 51 applications as well as ordinary between the parties’ costs issues.

If a party did not wish to waive the without prejudice rule for section 51 purposes it would need to use wording such as:

“Without prejudice save as to costs between the parties, but still without prejudice in relation to applications under section 51 of the Senior Courts Act 1981.”

Written by kerryunderwood

April 25, 2019 at 7:00 am

Posted in Uncategorized

DIRECTORS’ ADMINISTRATION APPOINTMENT BY ELECTRONIC FILING OUT OF COURT HOURS IS VALID

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In

Wright and others v HMV Ecommerce Ltd and another [2019] EWHC 903 (Ch)

the High Court considered the validity of a purported appointment of administrators where directors of a company filed a notice of appointment electronically out of usual court opening hours.

The court held that the filing was either not in breach of paragraph 8.1 of the Practice Direction – Insolvency Proceedings July 2018, which was ambiguous; or alternatively was a breach or defect, but one that did not invalidate the purported appointment.

Any non-compliance with paragraph 8.1 of the Practice Direction – Insolvency Proceedings 2018 was capable of being remedied by order or declaration of the court under paragraph 104 of Schedule B1 to the Insolvency Act 1986, rule 12.64 of the Insolvency (England and Wales) Rules 2016 SI 2016/1024, and Part 3 of the Civil Procedure Rules.

Underwoods Solicitors are the solicitors for the Liquidators in the Cambridge Analytica case.

Written by kerryunderwood

April 24, 2019 at 10:41 am

Posted in Uncategorized

COUNSEL, SOLICITORS AND INSOLVENCY

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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

Gwinnutt v George and Ryan [2019] EWCA Civ 656

the Court of Appeal considered the status of counsel’s fees prior to 2013, which was the date when solicitors and barristers were first able to enter into contracts with one another, pursuant to the Supply of Legal Services by Barristers to Authorised Persons 2012.

Here, the barrister had become bankrupt and one of the issues was whether the non-contractual pre-2013 fees vested in the trustee in bankruptcy, the claimant in this matter.

The judge at first instance held that they did not so vest.

The Court of Appeal overturned that decision and held that the fees did vest in the trustee in bankruptcy, and the judgment contains a detailed analysis of what constitutes property for this purpose.

The judgment also examines in detail the nature of the relationship between solicitor and counsel prior to 2013, and that will now largely, but not entirely, be of historical interest.

I say not entirely, because it is clear that the Civil Liability Act and associated personal injury reforms are leading to hundreds of firms of solicitors going out of business, and we all know that there are likely to be pre-2013 counsel’s fees involved.

In any event, in relation to post-2013 fees, counsel will rank like any other creditor.

Personal injury counsel in particular should be in a hurry to collect their fees.

There are special problems where counsel is acting on a no-win, no-fee basis and the solicitors’ firm becomes insolvent before a case is concluded.

As the contract is with the now insolvent firm of solicitors, any counsel’s fee in relation to work carried out on those solicitors’ instructions takes its place in the queue with other creditors.

In this case the Court of Appeal also held that counsel’s fees, pre and post-2013, are a possession within Article 1 of the First Protocol to the European Convention on Human Rights.

It is ironic that counsel would probably be economically safer contracting direct with the client, rather than a firm of solicitors, as in percentage terms over the next two years a far higher number of personal injury firms of solicitors will become insolvent, as compared with lay clients.

This is particularly true given that solicitors are now allowed to operate through the medium of limited companies, with limited liability.

The Withdrawal of Credit Scheme operated by the Bar Council, which essentially means that firms of solicitors can have credit withdrawn by the Bar, so that they have to pay counsel’s fees in advance, obviously has no effect on an insolvent law firm.

Likewise the Solicitors Regulation Authority’s disciplinary process, which includes sanctions for failing to manage the business properly, will have no effect on an insolvent firm.

Elsewhere I have blogged about the liability of solicitors for VAT on matters such as travel, medical reports and agency fees and conveyancing search fees incurred on behalf of clients, where the courts have held that the solicitor, and not the client, is liable although obviously the solicitor can reclaim the amounts from the clients.

Again, it is ironic, that medical reporting agencies would be economically safer contracting direct with clients rather than personal injury solicitors.

I am not saying that this is generally the case with solicitors’ practices, but any solicitors’ firm doing just personal injury work is clearly at economic risk over the next two years.

Written by kerryunderwood

April 24, 2019 at 7:38 am

Posted in Uncategorized

VAT, MEDICAL AGENCIES, SEARCH FEES AND TRAVEL: A COURT OF APPEAL DECISION

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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

British Airways Plc v Prosser [2019] EWCA Civ 547

the Court of Appeal held that, where a medical agency is instructed in relation to the obtaining of medical records and/or reports, VAT may be charged on the total cost, and not just on the agency’s administration fee.

This was on the basis that the agency was performing a service which allowed the solicitor to perform its service to the client, rather than the agency simply acting as a post-box.

The Court of Appeal said that in low value claims, where the amount of any VAT is not substantial, payment of VAT on the full amount was a cost that was “reasonably and proportionally incurred” and  “reasonable and proportionate in amount” so as to satisfy the requirements of CPR 44.3, regardless of whether the agency was obliged to charge VAT or not.

The Court of Appeal said that the position may sometimes be different and if “the VAT element were substantial, VAT should not in fact been imposed and the receiving party or his lawyers ought to have been aware that there was real doubt as to the VAT position, a Costs Judge might well conclude that the receiving party should not recover VAT.”

The decision also reviews the case law on related matters, such as VAT on travel expenses incurred by solicitors, and VAT on searches in conveyancing matters.

I am grateful to Steven Turner, the barrister who successfully represented John Prosser in this matter, for information concerning this case.

Please also see my related blog –

FIXED COSTS CASES: MEDICAL AGENCY FEES RECOVERABLE AS DISBURSEMENTS

Written by kerryunderwood

April 23, 2019 at 8:45 am

Posted in Uncategorized

COSTS ROUND-UP

with 2 comments


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

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.

 

Can Amendment Amount to Discontinuance?

In

Galazi and another v Christoforou and others [2019] EWHC 670 (Ch)

the Chancery Master considered whether the very substantial amendments made to the Particulars of Claim amounted to a discontinuance of the whole or part of the claim, triggering the default position under CPR 38.6(1) that the discontinuing party is liable to pay the costs of the other party.

The Master held that abandoning one remedy, where there remained other remedies, did not of itself amount to discontinuance, but the abandonment of an entire cause of action may amount to a partial discontinuance.

Here the Master held that the claimants had discontinued the entire claims against two defendants, thus triggering CPR 38.6(1), and in relation to those matters, assessment of costs could take place immediately.

There was no reason to depart from the default position; it had been their choice to bring the claim in the form it took, which was wrong, and there was no unreasonable conduct on the part of the defendants in relation to the discontinuance.

Delaying assessment would involve extra costs.

Against other defendants they had partly discontinued and the court allowed immediate assessment on costs.

As to the costs of and occasioned by the amendments not amounting to discontinuance, the court ordered the claimant to pay these.

All such costs, whether occasioned by discontinuance or amendments not amounting to discontinuance, were to be paid on the indemnity basis as the claimants’ conduct was outside the norm.

 

Who Is the Real Winner?

In

Hamad M Aldrees & Partners v Rotex Europe Ltd [2019] EWHC 526 (TCC)

the Technology and Construction Court revisited the issue of who had truly won the case in circumstances where the claimant was awarded 2% of the amount claimed.

The classic theory is that he who writes the cheque is the loser.

Here the court ordered the unsuccessful defendant to pay 20% of the claimant’s costs.

Such cases will almost always be fact sensitive, but this lengthy judgment contains a full, detailed and helpful examination of the recent authorities on this issue.

 

No Protective Costs Order In Private Claim

In

Maugham v Uber London Ltd [2019] EWHC 391 (Ch)

the High Court refused the claimant’s application for a protective costs order limiting his costs to £20,000.

Here the claimant was seeking a declaration that the defendant provide a VAT invoice in relation to its alleged supply of transport services in the form of private hire vehicles and the defendant said that it was an intermediary and did not provide transport services, and therefore it was not liable to invoice for VAT.

The claimant believed that HMRC was failing to take action in respect of Uber’s alleged liability for output tax, and that therefore there was a public interest in the case in ensuring that any liability was collected and generally in the fair administration of the VAT scheme.

Protective costs orders are generally only made in public law claims, particularly in judicial review proceedings.

Here, the High Court held that this was private litigation in which a protective costs order could not be made and that the wider public interest in the tax issues did not justify changing that position.

The High Court said it was bound by the decision in

Eweida v British Airways PLC [2009] EWCA Civ 1025 

which held that a protective costs order could not be made in private litigation.

The High Court said that if it was wrong about its interpretation of Eweida it would not be just or fair to make a protective costs order in this case in any event as a properly formulated public law challenge by judicial review was the proper way of reviewing HMRC’s conduct in not exercising its VAT powers and that would then engage the possibility of a costs capping order.

The general principles governing protective costs orders were set out by the Court of Appeal in

R (on the application of Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192.

 

Costs Permitted To Be Claimed As Damages

In

Playboy Club London Ltd v Banca Nazionale Del Lavora SPA [2019] EWHC 303 (Comm) (21 February 2019)

the Commercial Court allowed an amendment to Particulars of Claim in deceit proceedings to include as a head of damages adverse costs incurred in respect of the defendant in these proceedings, that is the other party in the original proceedings.

Both the original proceedings, and the current ones, related to a credit reference relied upon by the claimant, the owner of a casino, and the original negligence claim succeeded in the High Court, but the Court of Appeal overturned that decision, and that finding of the Court of Appeal was upheld by the Supreme Court and thus the defendant won the claim and the claimant was ordered to pay the costs of the defendant.

The claimant then brought the current deceit proceedings and the defendant’s attempt to strike them out failed.

The proposed amendments in these proceedings pleaded that, although the claimant’s negligence claim had ultimately failed, it had at all relevant times at least a reasonable prospect of success, and that the claimant had acted reasonably in bringing and pursuing the claim and that the costs incurred formed part of the total costs exposure recoverable in the deceit claim.

The court recognised that damages are recoverable to a greater extent in a case of fraud, as compared with a claim in negligence, and found that the claimant had a more than merely fanciful prospect of success, and therefore it would be wrong to decide the question without a trial.

The defendant argued that, as a matter of principle, costs could not be recoverable as damages.

There was no authority involving costs of a previous legal action between the same parties, and where the claimant had been unsuccessful and had had costs awarded against it, being awarded damages in a subsequent legal action, to include those costs.

The defendant pointed out that the effect of this is to reverse the costs award previously made.

The court considered that although this was a novel and unprecedented claim which might be difficult to establish, the principle should not be determined without findings on all of the disputes of fact.

The matter should be decided at trial, and not by refusing permission to amend the pleadings, which would mean that the matter could not be argued at all.

 

Fixed Costs In Virtually All Claims Valued at £100,000 or Less

The government has announced a consultation on Lord Justice Jackson’s July 2017 Review of Civil Litigation Costs: Supplemental Report – Fixed Recoverable Costs.

It runs until 6 June 2019.

The government intends to implement the Report as drafted, with the exception of the new track being referred to as the Extended Fast Track rather than the Intermediate Track.

The proposed figures for Fixed Recoverable Costs are exactly as in the Report.

LJ Jackson said that the Part 36 uplift on costs should be either 30% or 40%.

In an unsurprising move the government has proposed a fixed uplift of 35%.

The proposals are expected to be implemented on Monday 6 April 2020.

Clinical negligence claims and claims in the Business and Property Courts are not included in the scheme.

 

Pilot for Summary Assessment

On 1 April 2019 a voluntary pilot scheme for a New Statement of Costs For Summary Assessment came in and will last for two years.

It is dealt with in new Practice Direction 51X and two new forms – N260A and N260B accompany the pilots.

New Budget Discussion Report

On 25 April 2019 a new Precedent R – Budget Discussion Report – replaces the existing Precedent R annexed to Practice Direction 3E.

Success Fee Recoverability Scrapped In Defamation And Breach Of Privacy Cases

Recoverability of success fees, but significantly not recoverability of After-the-Event insurance premiums, is to be scrapped in relation to new defamation and privacy claims, that is claims from 6 April 2019 onwards.

I presume that it will relate to any Conditional Fee Agreement entered into on or after 6 April 2019.

The type of claims covered are:

  • defamation;
  • malicious falsehood;
  • breach of confidence involving a publication to the general public;
  • misuse of private information;
  • harassment,

but in each case only where the defendant is a news publisher, that is a person who publishes a newspaper, magazine or website containing news or information about or comment on current affairs.

Generally recoverability of both success fees and ATE premiums was abolished in relation to arrangements entered into on or after 1 April 2013, by virtue of section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

There were limited exceptions and the only ones that now remain are in relation to mesothelioma proceedings, where both the success fee and the ATE premium remain fully recoverable, and in clinical negligence proceedings where the success fee is not recoverable, but the ATE insurance premium is, but only to a limited extent.

In many ways the significance is not the abolition of recovery of the success fee, which was only ever a matter of time, but rather the decision to maintain the recoverability of the ATE premium.

Outside the field of personal injury, where Qualified One-Way Costs Shifting restricts the need for such insurance, this has been a key issue in relation to access to justice.

The system of Conditional Fee Agreements may mean that claimants can afford to pay their own lawyers, but if a losing client remains liable for the other side’s costs, which it does outside the QOCS protected field of personal injury, then access to justice is an illusion.

True it is that a claimant can seek to take out After-the-Event insurance, but the premium is then deducted from the damages if the claimant wins.

The winning claimant is almost certainly to be paying an unrecoverable success fee to its own solicitors in such cases as well.

As such schemes generally provide for no premium to be paid in a lost case, where the insurer has to pay out, a winning claimant is effectively paying for those premiums as well, which partly explains the high cost of ATE insurance.

Allowing recoverability of the ATE premium, but not the success fee, solves this problem and is a potential model for other types of cases.

Such insurance would generally cover the claimant’s own disbursements as well.

Whether it is just for a losing defendant to have to pay for the claimant to bring a claim against it is another matter.

Recoverability of success fees and After-the-Event insurance premiums was generally seen as involving identical considerations.

I always disagreed with that view, and while I always thought that recoverability of success fees was wrong, I took a different view about the recoverability of ATE premiums.

I refer above to it being potentially unjust for a defendant to finance the action against it, but ATE insurance at least gives a successful defendant a fund out of which it can enforce its costs order and generally defendants may prefer such a scheme, that is recoverable ATE insurance, to Qualified One-Way Costs Shifting.

 

Summary

General Civil Litigation, including Personal Injury Cases

The success fee remains recoverable only where the Conditional Fee Agreement was entered into on or before 31 March 2013.

Insolvency

The success fee remains recoverable only in relation to any Conditional Fee Agreement entered into on or before 5 April 2016.

Defamation and Privacy 

The success fee remains recoverable, but only in relation to Conditional Fee Agreements entered into on or before 5 April 2019.

Mesothelioma Claims

The success fee remains recoverable in all mesothelioma claims and there is no proposal to alter that position.

Written by kerryunderwood

April 9, 2019 at 7:43 am

Posted in Uncategorized

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