Kerry Underwood

Archive for May 2019

PART 36: UNJUST TO AWARD DAMAGES UPLIFT WHERE OFFER DEALT ONLY WITH HOURLY RATES ON ASSESSMENT

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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

White & Anor v Wincott Galliford Ltd [2019] EWHC B6 (Costs) (28 May 2019)

the Senior Courts Costs Office was considering the situation where a receiving party in provisional assessment costs proceedings purported to make a Part 36 offer, simply on the hourly rates, which the court subsequently allowed.

The claimants argued that they had beaten their Part 36 offer and consequently the amount of the the hourly rate, and therefore the entire profit costs, should attract the 10% damages uplift.

Here matters were resolved by way of provisional assessment and in accordance with CPR 47.15(5) the costs of the assessment cannot exceed £1,500 plus VAT and court fees, and that applies even where the receiving party has beaten its own Part 36 offer.

This follows from the case of

Lowin v W Portsmouth & Co [2017] EWCA Civ 2172 ,

where the Court of Appeal distinguished its own reasoning in the case of

Broadhurst & Anor v Tan & Anor [2016] EWCA Civ 94 .

The Lowin case dealt only with the amount of costs and did not deal with the issue of the 10% uplift on damages under CPR 36.17(4)(d).

Essentially the paying party said that the offer related only to the hourly rates and not the bill of costs in total, and that could not be within the spirit or purpose of Part 36.

The receiving party said that Part 36.2(3) clearly states that Part 36 offer may be made “in respect of the whole, or part of, or any issue that arises…”.

The receiving party drew an analogy with a party in substantive proceedings making a Part 36 offer in relation to a single head of loss, rather than the whole claim.

Here the Master, one might think somewhat surprisingly, held that this was a valid Part 36 offer and then applied the test of justness under CPR 36.17(4) which provides:

“(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, …”.

The Master found that it was unjust.

The reasons are far from convincing, to put it mildly.

The Master said that although Part 36 was intended to be used to allow a party to gain tactical advantage, “the court must guard against it being used for the purposes of mere gamesmanship.”

I, for one, cannot see any meaningful difference between “tactical advantage” and “mere gamesmanship”.

The Master also said that the court should take into account its own resources and effectively said that if a Part 36 offer would not save the court time, then it would be unjust to allow the 10% damages uplift.

I have not seen that in the Act, Civil Procedure Rules or case reports.

The Master also said, consistent with his previous view, that he had the power, not exercised here, to allow a partial uplift on damages, and not a straight “all or nothing” 10%.

As he did not do so here, that is obiter, but again is at odds with the clear wording of CPR 36.17, which as I have pointed out before, uses the term “not exceeding” in CPR 36.17(4)(a) and (c), relating to interest, but does not contain those words in CPR 36.17(4)(d) in relation to the 10% uplift.

The ultimate decision is correct.

If a party was able to get the Part 36 consequences simply by beating the hourly rate, or an item of work, then as pointed out by the paying party here a receiving party could receive a 10% uplift on everything by, for example, simply beating a time claimed of 24 minutes for a tiny piece of work.

In another scenario the receiving party could put forward an hourly rate, and match or beat it, and then get the full uplift on an enormous bill of costs.

It would be the equivalent of having a costs budget which said:

 

“We are going to charge £200 an hour, but we are not going to tell you how much work we will do. Please agree the budget.”

 

In substantive proceedings it is the equivalent of making an offer “In relation to loss of earnings” without stating the amount, or “In relation to lots of painkillers costing £1 a packet, but I don’t know how many packets I will buy, or have bought.”

Although this was not a Solicitors Act 1974 assessment, that Act arguably does not allow a challenge to the hourly rate, but concentrates on the amount of work done, whether it was properly and necessarily done, and by whom it was done.

My view here is that the true position was this was not an offer under Part 36 of the Civil Procedure Rules but was a good old fashioned Calderbank offer.

Written by kerryunderwood

May 31, 2019 at 8:12 am

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PART 36: ADDITIONAL AMOUNT DOES NOT ATTRACT INTEREST

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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

FZO v Adams & Anor [2019] EWHC 1286 (QB) (23 May 2019)

the Queen’s Bench Division of the High Court held that interest is not payable on the 10% damages uplift prescribed by CPR 36.17(4)(d) when a claimant matches or beats its own offer at trial.

Although this case involved the maximum uplift of £75,000, the interest issue was not decided on that point, that is that the addition of interest would have caused the maximum to be exceeded.

Consequently if the uplift is say, £50,000, no interest is payable, even though the total would not exceed the maximum of £75,000.

CPR 36.17(4)(a) provides for interest to be paid “on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting at the relevant date”.

The claimant here submitted that that was widely drawn and included the additional payment as well as the basic judgment sum.

If it was intended that interest should be excluded from the payment, then the rule would say so and this is consistent with CPR 36 which is intended to encourage offers to settle by claimants.

The defendants argued that the additional amount is not a “sum awarded” as it does not feature in the court’s judgment and that the words “ additional” and “amount” clearly show that this is a further financial sanction to  be paid by the unsuccessful defendant in addition to the enhanced interest on the damages, costs on the indemnity basis and enhanced interest on costs to which the claimant is entitled.

To award enhanced interest on this sum will be to impose a sanction on a sanction, and to do that the rule would have to be drafted to make it clear.

The High Court accepted the defendant’s interpretation and noting that where interest is payable consequent to any other paragraph of CPR 36.17(4) on any amount, it is specifically stated.

Written by kerryunderwood

May 31, 2019 at 7:39 am

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“APPROPRIATE COURT” TO IMPOSE CHARGING ORDER OVER FUNDS PAID INTO COURT PURSUANT TO COURT OF APPEAL’S ORDER

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

In

A v B [2019] EWHC 953 (Comm) (15 March 2019)

the Commercial Court granted a judgment creditor a Final Charging Order over funds paid into court by the judgment debtor in separate proceedings, although the Court of Appeal had ordered the payment in.

The judge held that he had jurisdiction to make the Final Charging Order because the court in which the funds had been lodged for the purposes of section 1 of the Charging Orders Act 1979 was the Commercial Court.

This judgment illustrates how sums paid into court in separate proceedings may be vulnerable to a charging order and is of interest for its analysis, in that context, of “the appropriate court” for the purposes of section 1 of the Charging Orders Act 1979.

Section 1(1) of the Charging Orders Act 1979 provides that, where a High Court judgment requires a debtor to pay money to a creditor, “the appropriate court” may impose on any of the debtor’s property a charge for securing the payment due, or becoming due, under the judgment.

If the property to be charged is a fund in court, section 1(2) defines “the appropriate court” as “the court in which that fund is lodged”.

Here, a judgment creditor had obtained an arbitration award against the judgment debtor and sought an Final Charging Order over money that the Court of Appeal had ordered the judgment debtor to pay into court as a condition of granting the judgment debtor permission to appeal against a Commercial Court judgment obtained by another company against the judgment debtor.

The judgment creditor had also issued an application under CPR 72.10 for payment out of the money in court, primarily so that if any other party sought payment out, it would be notified.

The court held that the effect of the Court of Appeal requiring the judgment debtor to pay the company’s judgment sum into court was that if the judgment debtor’s appeal was dismissed, the company would be able to enforce against that sum.

The Commercial Court was the court in which the fund was lodged, because it was to stand as security for the payment of a Commercial Court judgment.

The judge rejected the judgment debtor’s submission that the charging order application was otiose in light of the CPR 72.10 application.

The remedies provided by the Charging Orders Act 1979 and CPR 72.10 were cumulative, not exclusive, and by obtaining an Final Charging Order, the judgment creditor would achieve priority over any other creditor except the company.

Written by kerryunderwood

May 31, 2019 at 7:00 am

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EMPLOYMENT: COURT OF APPEAL CLARIFIES WHEN A “DISPUTE HAS ARISEN” FOR JURISDICTION PURPOSES

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

In

Merinson v Yukos International UK BV and others [2019] EWCA Civ 830 (15 May 2019)

the Court of Appeal held that the courts of England and Wales had jurisdiction over a claim brought by employers against an employee domiciled in England and Wales, even though a settlement agreement provided for exclusive Dutch jurisdiction, and which at common law would have been actionable only in the Netherlands.

Article 22(1) of the Recast Brussels Regulation states that an employer may bring proceedings only in the courts of the member state in which the employee is domiciled.

This provision may be departed from only by a jurisdiction agreement which is entered into after the dispute has arisen.

The test was whether the parties had disagreed on a specific point, and whether litigation in relation to the dispute in question was either imminent or contemplated.

In the present case, in the absence of direct communication between the parties in advance of the settlement agreement, there was no actual dispute between them going to the subject matter of the English/Welsh action.

The special employment provisions of the Regulation apply to matters relating to individual contracts of employment.

They were engaged here because there was in reality or substance a material nexus between the employers’ claims for annulment of the settlement agreement and the employee’s contract of employment.

The court adopted the test in

Aspen Underwriting Ltd v Credit Europe Bank NV [2018] EWCA Civ 2590.

The Court of Appeal agreed with the original judge that Article 59, which provides for the enforceability of court settlements in other member states, did not preclude the jurisdiction of the  courts of England and Wales over the annulment claim.

This decision is relevant not only to the validity of jurisdiction agreements under the employment provisions of the Recast Brussels Regulation, but also to its similar consumer and insurance rules.

Written by kerryunderwood

May 30, 2019 at 8:45 am

Posted in Uncategorized

FUNDAMENTAL DISHONESTY: NO NEED FOR DAMAGES HEARING

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These principles, and the whole issue of Qualified One-Way Costs Shifting, is dealt with in my book – Qualified One-Way Costs Shifting, Section 57 and Set-Off – Available from me here for £15.

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

In

Patel v Arriva Midlands Ltd & Anor [2019] EWHC 1216 (QB) (14 May 2019)

the High Court dismissed a claimant’s personal injury claim on the ground of fundamental dishonesty, without the matter going to a quantum hearing, that is a hearing to decide the level of damages.

Here, the claimant was involved in a collision with a bus in January 2013 and then had a heart attack and his condition apparently deteriorated to the point where he was significantly disabled.

The claimant won the claim with a finding of 40% contributory negligence and the defendant’s insurers then applied to dismiss the claim before it went to a damages hearing, on the ground that it was fundamentally dishonest, as required by section 57 of the Criminal Justice and Courts Act 2015.

Experts had found the claimant in bed, mute and unresponsive and unable to move his hands, arms or legs, but with no apparent neurological reason, and they concluded that he was either feigning his disability, or had a subconscious conversion disorder.

However, the defendant secretly recorded the claimant over several days, showing him walking unaided, talking and engaging with what was going on.

One expert changed his view and said that the disability was feigned and that the claimant’s son, acting a Litigation Friend, had been deceitful, and the Judge accepted this evidence and said that even if the claimant’s condition changed from day to day, this should still have allowed him to correct the untrue information in the reports of the expert.

The claimant submitted that it was impossible for the court to find fundamental dishonesty without hearing all of the evidence, and that it should wait until after the damages hearing, a contention rejected by the judge:

“The claimant’s dishonesty has substantially affected the presentation of his case which potentially adversely affected the defendant in a significant way, and so that the claimant has been fundamentally dishonest.”

Comment

Spot on. However, we need to extend the fundamental dishonesty provisions to defendants in personal injury cases.

It is very simple – here is the draft of a new Section 57 A:

“In any personal injury claim where the court finds the defendant to have been fundamentally dishonest, the court shall increase by 100% the total damages and costs awarded to the claimant.”

Indeed, there is a compelling case to extend the fundamental dishonesty provisions to all civil and employment cases, for both parties.

Interestingly the same Judge – Her Honour Judge Melissa Clarke sitting as a judge of the High Court on 14 May 2019, held in

ATB Sales Ltd v Rich Energy Ltd & Anor [2019] EWHC 1207 (IPEC)

that it was not necessary to plead fraud or dishonesty, provided that the facts upon which an inference of dishonesty may be based are pleaded.

For all intents and purposes the courts now treat dishonesty, fundamental dishonesty and fraud as meaning the same thing, which must be right.

Written by kerryunderwood

May 30, 2019 at 8:12 am

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COURT OF APPEAL SLASHES SOLICITOR’S COSTS OF COSTS BY 92.82%

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

In

Jofa Ltd & Anor v Benherst Finance Ltd & Anor [2019] EWCA Civ 899 (24 May 2019)

the Court of Appeal, at a two-hour hearing, allowed an appeal against a decision that the appellant pay part of the respondent’s costs of the original case, substituting an order for no order for costs in that original matter.

The original costs award overturned by the Court of Appeal amounted to £23,000.

As the successful party on appeal, the appellant was entitled to its costs of that appeal.

The Court of Appeal cut those costs – dealing with a costs order of just £23,000 – from £71,072 to £13,000, that is a cut of 81.71%.

Excluding counsel’s fees and disbursements the solicitor’s costs element of the bill was cut from £62,682.50 to £4,500, that is a cut of 92.82%, or to put it another way, the solicitors were allowed just 7.18% of the costs that they claimed.

Here are paragraphs 50 and 51 of the judgment:

“50. Counsel’s own fees for advice on the appeal and for the hearing amount to £6,662.50 in total, and in my view are reasonable and proportionate. The costs claimed by the appellants’ solicitors, AMZ Law, however, include very large sums which appear, on their face, to be manifestly unreasonable as between themselves and their clients, let alone as costs claimed from the respondents. To give some glaring examples, costs are claimed for: (i) three solicitors each attending on Mr Farah for 5 hours; (ii) 15 hours spent “considering” the witness statement filed by the investors in support of their Norwich Pharmacal application, most of which was of little relevance to the issues on this appeal; (iii) 14 hours of “legal research” by two solicitors; (iv) another 14 hours spent preparing a 5 page witness statement from Mr Farah, although no application was ever made (or could realistically have been made) to introduce this statement as evidence on the appeal; (v) 18 hours spent preparing a straightforward bundle of documents (of some 200 pages), with a further 14 hours then spent “reviewing” the bundle; and (vi) 8 hours of attendance by each of two solicitors at a hearing for which the time estimate was one hour, with a further two hours each of travelling time.

51. As indicated in the Guide to the Summary Assessment of Costs, para 65, where both counsel and solicitors have been instructed on a short appeal, the reasonable fees of counsel are likely to exceed the reasonable fees of the solicitor, the main element of the solicitor’s work is to instruct counsel and prepare the appeal bundle, and there is usually no reason for the solicitor to spend many hours perusing papers or to work on legal submissions when the legal argument is being handled by counsel. In my view, a reasonable allowance for the costs incurred by the appellants’ solicitors on this appeal is £4,500 (representing 20 hours of work at an hourly rate of £225). Taking into account court fees of £1,727 and some other minor expenses incurred, I would summarily assess the costs recoverable by the appellants in a sum of £13,000.”

 

Comment

The Court of Appeal should have awarded the appellant no costs at all due to conduct in claiming such a ridiculous amount; exact round numbers of hours, rather than 7 hours 24 minutes or whatever, are always a giveaway.

Surely, whatever view anyone takes of fixed costs generally, we can all agree to introduce them for all costs work and costs appeals. The legal world has truly gone mad when you can claim £71,072 costs for an appeal about costs of £23,000.

I wonder if the Solicitors Regulation Authority will now become involved, or does that only apply in personal injury cases for the plebs and their solicitors, and not commercial work?

Written by kerryunderwood

May 29, 2019 at 12:57 pm

Posted in Uncategorized

COURT MAY ORDER INTERIM PAYMENT ON ACCOUNT OF QUANTUM COSTS BEFORE QUANTUM HAS BEEN RESOLVED

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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

X v Hull & East Yorkshire Hospitals NHS Trust [2019] 2 WLUK 723 (25 February 2019)

Sheffield County Court allowed the claimant’s appeal in clinical negligence proceedings, holding that the court has jurisdiction to order quantum costs, and an interim payment on account of such costs, before resolution of quantum.

The judgment highlights the risks of arguing complex, fact-sensitive applications over the telephones.

Liability was settled at 90% in December 2012, but the parties agreed that quantum could not be assessed until 2022.

The judge noted that costs generally followed the event, which was a formidable obstacle to a pre-emptive costs order – see

McDonald v Horn [1995] 1 All ER 961.

However, the judge considered CPR 44.2(1)-(2) wide enough to permit the order the claimant sought.

CPR 44.2(1) gave the court discretion as to whether costs were payable and, if so, the amount and timescale, and CPR 44.2(2) sets out the general rule that the unsuccessful party pays the successful party’s costs.

CPR 44.6(c), allows the court to order payment of costs from, or until, a certain date.

The claimant had already achieved partial success on quantum under CPR 44.2(4)(b) by securing £1.2 million in payments on account of damages, and the claimant’s final award was very likely to far exceed that figure.

As the defendant had not made any Part 36 offer, it was “a virtual certainty” that the claimant would be entitled to costs to date.

The lower court had determined an “exquisitely fact sensitive” issue summarily and at a busy telephone hearing, without the benefit of the far more detailed submissions made on appeal.

The claimant already had an order for liability costs down to December 2012, detailed assessment of which was yet to be commenced, but the lower court overlooked the fact that the claimant’s current solicitors would not benefit from that order; all their costs were incurred subsequently.

The defendant’s failure to make sensible voluntary interim payments without the claimant having to “go to the wire” sounded in conduct within CPR 44.2(5).

Further, a failure to ensure adequate cash flow during the delay between determination of liability and quantum could dissuade solicitors from taking on cases like this at an early stage.

Therefore, the County Court Judge ordered the defendant to pay the claimant’s costs up to the first instance hearing, and to make a £150,000 payment on account.

Any costs overpayment, very unlikely here, could be deducted from damages, and that is the primary remedy of a defendant who has overpaid costs to the claimant’s solicitors.

Written by kerryunderwood

May 29, 2019 at 9:14 am

Posted in Uncategorized

PART 36: UNJUST FOR CONSEQUENCES TO BE TRIGGERED

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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

Invista Textiles (UK) Ltd & Anor v Botes & Ors [2019] EWHC 1086 (Ch)

the Chancery Division of the High Court held that it was unjust to apply the costs consequences of Part 36 in circumstances where the claimant should not get all of the pre-Part 36 costs.

The case concerned the production of documents, and other matters, and the claimant was held to have lost on most matters and the Trial Judge ordered the claimants to pay the defendants 71% of costs to be assessed.

Nevertheless the claimants had beaten their own Part 36 offer.

Had the defendants accepted the offer, then they would have been liable for all of the claimants’ costs up to that point, as acceptance of a Part 36 offer is all or nothing as far as costs are concerned.

If it was otherwise, no certainty would be achieved and Part 36 would become largely pointless.

“41. Looking at it another way, if I stand at June 2018 and ask what would a court have ordered in terms of costs if the outcome of the case had been the same as the terms of that offer, would the costs order have been the defendants paying all or at least the majority of the claimants’ costs in those circumstances? The answer is a clear no. That demonstrates why this is very different from a low financial offer in a case purely about a sum of money. In my judgment, this is another factor to take into account.

42. Now, Invista says what the defendants should have done was come back and negotiate such as by offering a drop-hand on costs (that is no order as to costs). Now, after the Part 36 offer was made, as I have said, the defendants did come back and say that the relief was acceptable but not the costs and the parties did exchange further offers. The main point made repeatedly by the claimants is that the claimants offered to drop hands on costs, ie each party would bear its own, and the claimants criticise the defendants for not accepting it. In my judgment, there is no substance to this criticism. The refusal by the defendants to accept that they should shoulder the burden of all their costs of all these proceedings was legitimate in the circumstances and has been vindicated by the judgment.

43. Pulling all this together, I recognise that the hurdle is a formidable one. Nevertheless I find it would be unjust to enforce any of the consequences on the defendants. That is looking at all the circumstances. However, in particular, in my judgment, in the context in which it was made and given its terms, the Part 36 offer itself was not a genuine offer to settle. In fact, if anything, I think the offer has proved to be a barrier to settlement of this dispute because since the offer was made and not accepted and then the admissions were made, the claimants seem to have been approaching this case as if they were entirely protected as to costs.”

The judge, effectively reviewing his own decision due to errors of fact in relation to the first decision, upheld his original finding that the claimant do pay 71% of the defendants’ costs to be assessed.

There is no new law here and CPR 36.17(4) provides that the court must order the additional Part 36 benefits unless it considers it unjust to do so.

Written by kerryunderwood

May 28, 2019 at 12:18 pm

Posted in Uncategorized

PERSONAL INJURY AND CONTEMPT PROCEEDINGS: COURT OF APPEAL GUIDANCE

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These principles, and the whole issue of Qualified One-Way Costs Shifting, is dealt with in my book – Qualified One-Way Costs Shifting, Section 57 and Set-Off – Available from me here for £15.

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

In

Zurich Insurance Plc v Romaine [2019] EWCA Civ 851

the Court of Appeal allowed an appeal against a High Court Judge’s refusal to allow the insurance company to proceed with an application to commit the allegedly fraudulent personal injury claimant to prison for contempt of court.

The claimant, or his solicitors, lied in the clearest terms in his reply to Part 18 Requests, denying that he was a motorcyclist or performed professionally in a rock band, both potentially relevant in what was a noise-induced hearing loss claim.

The claimant was represented by Asons (intervened in by the Solicitors Regulatory Authority on 29 March 2017) and their successors Coops Law (intervened in by the Solicitors Regulatory Authority on 23 June 2017).

An issue to be resolved by the court is as to who signed the Statement of Truth on the replied Part 18 Requests, and the circumstances.

The claimant discontinued seven days after the insurance company made an application to strike out the claim.

The insurance company then issued and served, by way of a Part 8 claim form, committal proceedings contending that the claimant was guilty of contempt of court pursuant to CPR 81.17(1)(a) in that he had made a false statement in a document verified by a Statement of Truth, contrary to CPR 32.14.

For the stench that infects some part of the claimant personal injury market consider paragraph 40 of the judgment:

 

40. The Respondent relied upon his statement filed for his appeal under paragraph 19 of CPR PD 52 in which he stated as follows: (i) His involvement came about as a result of a ‘cold call’ from personal injury claim solicitors, Messrs Asons, specialists in hearing loss claims, who conducted a hearing test at his home and said he may have a claim in view of his engineering background. (ii) He was subsequently informed by Asons that they would lodge a claim of between £1,000 and £5,000 on his behalf and they would do the paperwork which he understood would be ‘generic’. (iii) At no stage did he sign a statement of truth or see the Part 18 responses which contained an electronic signature which had been applied by Asons. (iv) He felt he had been a victim of a claims management scheme to make money from his hearing loss predicament. (v) Both Asons and Coops Law (which took over his claim) were the subject of interventions by the Solicitors Regulatory Authority (on 29th March 2017 and 23rd June 2017 respectively). (vi) Apart from Asons’s first visit, he never met or was interviewed by any legal representative of either Asons or Coops Law; any conversations were by phone. (vii) He is now 69 years-old and has been undergoing chemotherapy for bladder cancer and has responsibilities for a foster-child. (viii) He discontinued the claim on 21st March 2017 without taking legal advice which, with hindsight, may not have been the right thing to do.”

 

On 17th August 2018, a High Court Judge dismissed the Appellant’s application for permission to commence contempt proceedings on paper without a hearing. In his order refusing permission, the Judge recited that he had read the Part 8 claim form, the witness statements filed on behalf of the Appellant and the Respondent’s witness statement and stated the reasons for refusing permission as follows:

“Whilst there is good evidence of false statements being made deliberately, the documents upon which the Statement of Truth appeared were not signed by the Defendant. This is not a sufficiently strong case bearing in mind the need for great caution before granting permission”

Although it is in the public interest that dishonesty in litigation is identified publically, it is not in the public interest that committal proceedings be brought in the circumstances of this case, where the Defendant discontinued his claim at a relatively early stage of the proceedings.”

The Court of Appeal then set out the relevant Civil Procedure Rule:

“24. Where a person makes or causes to be made a false statement in a document verified by a statement of truth without an honest belief in its truth, proceedings for Contempt of Court maybe brought against that person with permission of the court. CPR 32.14 provides as follows:

“32.14 – False statements

 (1)   Proceedings for contempt of court may be brought against a person if he makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.

(Part 22 makes provision for a statement of truth.)

(Section 6 of Part 81 contains provisions in relation to committal for making a false statement of truth.)””

The Court of Appeal then set out the principles involved and the relevant case law

26. In A Barnes t/a Pool Motors v Seabrook [2010] C P Rep 42, Hooper LJ set out the following propositions (which he derived from the Court of Appeal’s judgment in KJM Superbikes Ltd v Hinton [2009] 1 WLR 2406):

“(1) A person who makes a statement verified with a statement of truth or a false disclosure statement is only guilty of contempt if the statement is false and the person knew it to be so when he made it.

(2) It must be in the public interest for proceedings to be brought. In deciding whether it is the public interest, the following factors are relevant:

(a) The case against the alleged contemnor must be a strong case (there is an obvious    need to guard carefully against the risk of allowing vindictive litigants to use such proceedings to harass persons against whom they have a grievance);

(b) The false statements must have been significant in the proceedings;

(c) The court should ask itself whether the alleged contemnor understood the likely effect of the statement and the use to which it would be put in the proceedings;

(3) The court must give reasons but be careful to avoid prejudicing the outcome of the substantive proceedings;

(4)  Only limited weight should be attached to the likely penalty;

(5)  A failure to warn the alleged contemnor at the earliest opportunity of the fact that he may have committed a contempt is a matter that the court may take into account.””

See also paragraphs 27 to 34 of the judgment where the relevant case law is considered.

The Court of Appeal held that a warning of contempt proceedings is not essential:

“47. In practice, the absence of a warning is unlikely to be of any relevance where the alleged contemnor is himself the claimant in an underlying personal injury claim (such as the present case) and where the allegedly false statements are contained in claims documents prepared by himself or his solicitors and signed with a “Statement of Truth”. Whilst the CPR do not provide (or allow) for a penal notice to be attached to a “Statement of Truth”, it is difficult to conceive of circumstances where a claimant can be heard to say that he was prejudiced by the absence of warning about the risks of contempt proceedings if he, himself, has been responsible for bringing a fraudulent claim.”

Early discontinuance of an allegedly fraudulent claim will not avoid liability to committal proceedings.

The value of the claim is irrelevant, given the “growing problem” of low value insurance fraud.

 

Comment

Spot on by the Court of Appeal. The merits of this claim remain to be determined on the facts.

Any party to any proceedings who acts fraudulently, any lawyer who does so, and any expert who does so should be locked up.

Written by kerryunderwood

May 28, 2019 at 8:02 am

Posted in Uncategorized

CLINICAL NEGLIGENCE/DISCIPLINARY TRIBUNAL: SIR RUPERT JACKSON’S PROPOSAL

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This piece is published on this blog by kind permission of Sir Rupert Jackson and reflects a speech given at the Medico-Legal Conference on 16 May 2019, at which I also spoke.

MEDICAL ERRORS: SANCTIONS AND COMPENSATION – IS THERE ANOTHER WAY?

By Sir Rupert Jackson

1. INTRODUCTION

1.1 My position. I no longer have any responsibility for devising or implementing reforms to the civil justice system. Nevertheless, since I have been asked to deliver the keynote speech at this medico- legal conference, I have taken the opportunity to reflect upon how our legal system deals with medical mishaps and to ponder whether the present arrangements are in a state of perfection. I offer a few suggestions for others to take up or reject, as they see fit.

1.2 This lecture. This lecture1 addresses disciplinary proceedings against health professionals, decisions to prosecute and civil claims arising out of medical mishaps. The subject matter is not unimportant. A quarter of NHS staff say that within the preceding month they have witnessed an error that could have harmed patients or service users.2

1.3  Abbreviations. In this lecture:

‘FTT’ means First-Tier Tribunal.

‘GMC’ means General Medical Council.

“MoJ” means Ministry of Justice.

‘MPTS’ means Medical Practitioners Tribunal Service.

“NHS” means National Health Service.

“NMC” means Nursing & Midwifery Council.

‘Supplemental Report’ means the Review of Civil Litigation Costs, Supplemental Report published on 31st July 2017.

‘UT’ means Upper Tribunal.

1.4 The medico-justice system. The medical world intersects with the justice system in a variety of ways: for example, disciplinary proceedings, criminal proceedings, withdrawal of life support cases and civil claims for damages.3 But the legal system does not adopt a coherent approach to medical cases in the same way that it does to family cases or other specialist cases. It is therefore worth considering whether a more joined-up approach might be desirable.

1.5 Objectives of the medico-justice system. The first objective of the medico-justice system is to promote high quality treatment for patients. It pursues the first objective by (a) disciplining medical practitioners who fall below acceptable standards; (b) in extreme cases prosecuting them; (c) ordering health professionals or their employers to pay damages for injuries caused by their negligence; (d) delivering reasoned and publicly available decisions, which assist the health service in learning from past mistakes. The second objective is to compensate patients who have failed to recover or who have suffered injury because of clinical negligence. It pursues second objective, usually, by dipping into resources which would otherwise be available for the first objective. There

1 I am grateful to Sir Robert Francis QC for providing the information in section 2 of this paper and for helpful discussions about the issues. He bears no responsibility for the views which I express.

2 See the NHS staff survey in the Health Service Journal, March 2019. In King’s College NHS Foundation Trust 43% of staff said this.

3 In my work as a Court of Appeal judge, I have dealt with cases in all those four categories. When at the Bar, I acted in many cases both for and against doctors.

is nothing intrinsically wrong with this, provided that the available resources are distributed in a just and proportionate way. It is only right that the NHS, health professionals and their insurers should pay compensation to the victims of medical accidents. All other professions do the same.

1.6 Incentivising health professionals. The possibility of being sued for professional negligence or disciplined by your professional body are two of the factors which incentivise professional persons to perform well.4 Health professionals rightly have these incentives, like the rest of us. But it is important not to so demoralise health professionals who make honest mistakes that they are driven out of the profession. We can ill afford to lose doctors or medical staff, who have been trained at great public expense. If reasonably competent practitioners are driven out of the profession, that defeats the first objective of the medico-justice system.

1.7 The present position. Where a medical mishap occurs, it may fall for investigation in three different fora: (i) the MPTS or the NMC’s Fitness to Practise Committee or a similar professional institution’s tribunal, (ii) the civil courts and (iii) (in extreme cases) the criminal courts. This involves repetition of evidence, re-examination of the same documents and waste of scarce resources. The procedures generate massive costs, lengthy delays and much stress for all involved.

2. THE SCHEME PLANNED IN 2010 AND THE LAW COMMISSION REPORT OF 2014

2.1 The scheme. I understand from Sir Robert Francis QC that in 2009/2010 plans were developed to create a single tribunal for disciplinary proceedings involving all health professionals. This would have replaced the plethora of tribunals dealing with individual health professions. This scheme was abandoned after the 2010 General Election.

2.2 Bonfire of the Quangos. The so-called ‘bonfire of the Quangos’ in 2010 was a bad example of slogan-driven policy. The new Coalition Government set about abolishing institutions and projects without any proper evaluation of what it was destroying. The scheme described in the preceding paragraph was one of the casualties of that exercise.

2.3 Law Commission 2014 Report. On 2nd April 2014 the Law Commission published a report on the regulation of health care professionals and social care professionals. This proposed the creation of a single unified scheme for the regulation of all health care professionals and social care professionals. Under this scheme ‘fitness to practise’ panels would conduct ‘fitness to practise’ hearings in respect of any practitioner whose fitness to practise was seriously called into question. There was a consultation about proposals along these lines in 2017, but nothing has happened since then.

3. A MODEST PROPOSAL FOR THE REFORM OF DISCIPLINARY PROCEEDINGS

3.1 Time for reconsideration. Nine years have elapsed since the famous ‘bonfire’ and five years have elapsed since the publication of the Law Commission report. The MPTS remains outside the general structure of the tribunal system. It also remains separate from the tribunals dealing with other health professionals. The NMC has a Fitness to Practise Committee. The General Dental Council has a Professional Conduct Committee and a Professional Performance Committee. The General Optical Council has a Fitness to Practise Committee. And so forth. These regimes are all separate.

4 Of course, there are carrots as well as sticks. One carrot is the satisfaction of performing well. But the carrots are not the subject of this lecture.

3.2 The proposal. I propose that the MPTS and the various tribunals dealing with other health professionals be abolished. Instead disciplinary proceedings against all health professionals should be brought within the general tribunals system. There would be a Clinical Chamber of the FTT and a Clinical Chamber of the UT. These chambers could deal with all such proceedings. Upon the application of the GMC or the NMC or a similar body, they would determine whether an individual’s fitness to practise was impaired by reason of clinical incompetence, misconduct or poor health. The powers of the Clinical Chamber of the FTT and UT should include powers to:

(a) recommend that a case be considered by the CPS for prosecution,

(b) recommend that a case should not be considered by the CPS for prosecution, and/or

(c) recommend performance assessment/retraining

3.3 The Clinical Chamber of the FTT could have a tribunal judge, district judge or circuit judge (as appropriate) chairing the proceedings, as well as two other members with relevant expertise. The quality of decision-making would probably be higher than that achieved by the MPTS, even though the MPTS normally employs legally qualified chairs. To be ‘legally qualified’ is not the same as being an experienced judge. On appeal to the UT the chair of the panel could, if necessary, be a High Court judge. But again he/she would be sitting with panel members who have relevant expertise. The appellate process would be more satisfactory, with first appeals going to the UT and (occasionally) second appeals going to the Court of Appeal.

3.4 First benefit of this proposal. With such an appellate structure in place, there would be a higher quality of decision-making at all levels. A repetition of the Bawa-Garba saga5 would be less likely. Dr Bawa-Gerba appeared before the Crown Court in 2015, the criminal division of the Court of Appeal in 2016, the Medical Practitioners Tribunal in 2017, the Divisional Court in 2018 and finally the civil division of the Court of Appeal in July 2018. If there had been a dispute about civil liability, there would have been a High Court trial or a County Court trial as well. The Divisional Court, which (wrongly) reversed the decision of the Medical Practitioners Tribunal and ordered that Dr Bawa-Gerba be struck off, did not – indeed could not – include any medical practitioner.

3.5 Second benefit of this proposal. Disciplinary proceedings against all health professionals, such as doctors, dentists, nurses, opticians and physiotherapists, would be brought into the same structure, namely the now well-established tribunal system headed by the Senior President of Tribunals.6 This would end the present confusing proliferation of individual tribunals.

3.6 Third benefit of this proposal. Any recommendation concerning prosecution or non-prosecution would not be binding. But coming from such an authoritative source, it would carry weight both with the CPS and with anyone reviewing the CPS decision. To prosecute a doctor in the Crown Court for making a mistake, whilst working under extreme pressure in an under-resourced hospital, is a serious step. Other professionals do not face a comparable risk. It is doubtful whether Dr Bawa-Garba would have faced prosecution if the above scheme were in place. I note that on the only occasion when medical practitioners sat in judgment on Dr Bawa-Garba they did not consider that her conduct merited striking off.

3.7 In those very rare cases where a doctor is prosecuted for erroneous treatment, the prior thorough investigation by the Clinical Chamber will be beneficial. It may lead to agreement of facts and narrowing of the issues.

5 See Bawa-Garba v GMC [2018] EWCA Civ 1879.

6 Currently Sir Ernest Ryder

3.8 Fourth benefit of this proposal. The tribunals, which make vital decisions concerning both public safety and the livelihood of individual professional people, would be brought into an existing court- based system. The training of tribunal members would come under the Judicial College, which has expertise in the delivery of such training.

4. A NEW FORUM FOR CLINICAL NEGLIGENCE CLAIMS?

4.1 An inevitable question. If the above proposal for reforming disciplinary proceedings finds favour, the question inevitably arises: what other functions could the new Clinical Chamber of the FTT and UT usefully take over?

4.2 My 2017 report. In my Supplemental Report published in July 2017, amongst many other recommendations, I put forward proposals for fixing the costs of (a) clinical negligence claims up to £25,000 and (b) those clinical negligence claims above £25,000 which could be accommodated in the new intermediate track. See chapters 7 and 8. That report is currently the subject of an MoJ consultation.

4.3 The reaction to that report. By and large, the reactions during 2017 to the general recommendations in my Supplemental Report were positive. There have, however, been criticisms of my proposals for clinical negligence. Claimants point to the time and costs of pursuing such cases through the civil courts and say that this makes fixing the costs difficult, even for low value cases. Many on the defence side say that my proposals do not go far enough. For example, one lawyer in the House of Lords wrote to me expressing ‘disappointment’ that my recommendations did not go further.

4.4 How can my fixed costs proposals be made more attractive for the parties to clinical disputes? The answer, I suggest, may be to tribunalise the process. The new Clinical Chamber of the FTT and the UT could handle clinical negligence claims, as well as disciplinary matters. The same judges who currently hear clinical negligence claims would continue to do so, but in the tribunal context. They would be sitting alongside colleagues with medical expertise. Tribunals are, historically, ‘no cost’ or ‘low cost’ fora, because they bring to bear their own expert knowledge of the field. It may be easier to introduce and – in the future – extend my proposals for fixed costs, if the forum for clinical negligence litigation becomes a specialist chamber of the FTT or the UT. In respect of cases above the fixed costs regime, the tribunal would be well able to costs manage the proceedings.

4.5 Avoid a multiplicity of hearings. In any case where there are both disciplinary proceedings and civil litigation, it would be possible to have a single fact-finding hearing at which the relevant facts are established. After that, the tribunal could deal with (a) misconduct/ impaired fitness to practise issues as between the GMC and the doctor (or the NMC and the nurse); (b) the claim for damages as between the patient and the NHS Trust/private hospital/doctor/nurse or whoever is being sued. This approach would reduce the need for the same witnesses to give evidence twice over. It would also avoid the risk of inconsistent findings.

4.6 A similar recommendation in Ireland. In August 2018 Mr Justice Meenan was asked by the Irish Government to consider how claims arising from cervical checks might be reformed. His report dated 8th October 20187 proposed tribunalising the claims. The advantages which he identified included greater expedition, less formal hearings and reduced costs. The reforms proposed above would have similar advantages.

7 Report on an alternative system for dealing with claims arising from cervical check: 8th October 2018

4.7 Room for some joined up thinking. Tom Kark QC and Jane Russell in their recent report8 commissioned by the Minister of State for Health have proposed setting up a tribunal, to be called the ‘Health Directors’ Standards Council’ (“HDSC”). This would have the power to bar individuals from being directors of NHS Trusts, on the grounds that they are not fit and proper persons for the role. The Kark Report makes eminent good sense. But would it not be better for the Clinical Chamber of the FTT (if such a chamber is set up) to take over the proposed functions of the HDSC? This would avoid adding yet another tribunal to the present thicket of health tribunals.

5. HOW SHOULD THE CLINICAL CHAMBER ASSESS NEGLIGENCE CLAIMS?

5.1 Standard of care. There is a looming problem here. As the population ages and the demands on the health service increase, doctors can more and more often rely upon systemic issues and say “I was doing my best in an impossible situation”. That, of course, is no defence for the NHS Trust, which is under a duty to deploy staff in sufficient numbers and of sufficient expertise to treat the claimant properly. But the time may come, for example in an unusually long and cold winter, when an NHS Trust can demonstrate that it simply did not have the funds to deploy the requisite staff. Neither the Bolam test nor the Montgomery test requires anyone to do the impossible. There may therefore be complex arguments about liability in the post-Brexit world. The needs of patients and their legitimate claims may be drowned out.

5.2 Oh dear. What is the answer? The answer is to simplify and objectify the test for liability. Let there be a new statutory test for liability in the medical context, namely whether the patient has suffered ‘reasonably avoidable injury’. If the injury was reasonably avoidable, then the fact that the doctor had been on a twelve-hour night shift and had numerous other patients to treat is neither here nor there. The relevant health trust or private hospital is liable. If this objective test is adopted, then (a) the patient is better protected and (b) the investigation of liability is depersonalised.

5.3 A further benefit of the proposed objective test. Even if the doctor or nurse involved is not joined as a party, they are often named in the proceedings. This (I am told) sometimes leads to conscientious practitioners leaving the profession. The risk of the profession losing competent doctors will be reduced if the process is depersonalised. The blunt fact is that all professional people make mistakes from time to time, especially in the early years of practice.9 They should not be so humiliated that they give up altogether.10

5.4 That all sounds lovely, but can we afford it? Yes. The costs of litigating before the tribunal should be lower than the costs of litigating in court. The process of assessing damages can be simplified. The Clinical Chamber could have scales for assessing future care costs. Defendant health trusts could do more to assist the tribunal by producing care plans for individual cases, hopefully agreed by claimant representatives.

5.5 Settlement. Settlement by negotiation or by mediation should be easier if there is a simple and objective test of liability, as suggested above. Settlement will also be easier to achieve, if the processes of assessing damages are standardised, as suggested. I would add that mediation can often be effective in those cases where bilateral negotiation or a joint settlement conference has failed.

8 A Review of the Fit and Proper Person Test, November 218

9 See e.g. FB v Princess Alexandra Hospital NHS Trust [2017] EWCA Civ 334 at [51]-[65].

10 See FB at [65].

5.6 Promoting early settlement. Against the background of a simple liability test and an effective tribunal system to handle clinical claims, there should be renewed effort to promote early settlement.11

5.7 Establishing a redress system. The best way to promote early settlement is for each NHS Trust or hospital to establish a patient-centred complaints/redress system in which support to match the need arising from whatever has gone wrong is provided at an early stage. A redress system has been operating in Wales since 2011.12 None has been set up in England. The NHS Redress Act 2006 has not been implemented.

5.8 Would these reforms generate a high volume of claims? Many people who suffer medical mishaps choose not to claim. Even so, if the liability test suggested above is adopted, I accept that there could be more claims. According to the NRLS national patient safety incident reports: commentary13 published by NHS Improvement in September 2018, in the year to March 2018 there were 51,495 incidents causing moderate harm, 5,501 incidents causing severe harm and 4,537 incidents causing death.

5.9 Would this push up the damages bill? Not necessarily. Damages could be tariff-based. This would enable an equitable distribution of the available compensation amongst all deserving claimants, in place of the present system in which a smaller proportion of deserving claimants recover higher damages.

5.10 Cutting the cake. The resources of the NHS, and the funds of those who insure private practitioners, are finite. They have to be divided equitably between (a) providing health care to patients, (b) compensating patients who have suffered reasonably avoidable injury and (c) paying lawyers. This fact is deeply unattractive. Nevertheless, those administering the civil justice system, those representing injured patients and those representing defendant clinicians must face up to reality.

6. LEARNING FROM PAST MISTAKES

6.1 You cannot undo mistakes, but you can try to prevent repetition. Learning from previous mistakes and preventing repetition should be a key aim of any reforms. This directly feeds into the first objective of the medico-justice system, as discussed above. Any redress system of the kind discussed in paragraph 5.7 above could operate in tandem with an objective investigation of the facts, involving both the patient and the health professional, so that learning from the mishap is used to prevent repetition. The Early Notification Scheme for birth injuries,14 which was set up by NHS resolution in 2017, operates along those lines. I understand that this is generally effective. It should be possible to develop a similar scheme which would apply to all serious injuries sustained during medical treatment.

6.2 The benefits from a unified tribunal system. The wider reforms canvassed in this paper might make a significant contribution to the vital task of learning from past mistakes. Instead of having an array of different tribunals and courts, we would have a single tribunal structure, comprising the

11 I have previously identified late settlement as being a particular problem in clinical negligence litigation: see Review of Civil Litigation Costs, Final Report (January 2010), chapter 23.

12 See http://www.wales.nhs.uk/sitesplus/documents/861/Healthcare%20Quality%20-%20Guidance%20-

%20Dealing%20with%20concerns%20about%20the%20NHS%20-%20Version%203%20-

%20CLEAN%20VERSION%20%20-%2020140122.pdf

13  See table 4 on page 12.

14 See https://resolution.nhs.uk/services/claims-management/clinical-claims/clinical-negligence-scheme-for- trusts/early-notification/

Clinical Chamber of the FTT and UT. They would be specialist tribunals, combining medical and judicial expertise, generating hopefully high quality publicly available decisions. It would be a straightforward task for some body, perhaps with the help of a university,15 to monitor that output and feed it back into the health system.

Rupert Jackson                                                                                                            16th May 2019

4 New Square

Lincoln’s Inn

WC2A 3RJ

Arbitrator, adjudicator and mediator

15 Many university teachers are looking for socially useful research projects, from which they can publish articles and demonstrate ‘impact’. I have on several occasions in the past found university lecturers who were willing to monitor pilot exercises in the courts at no cost.

Written by kerryunderwood

May 21, 2019 at 8:31 am

Posted in Uncategorized

HIGH COURT MAKES COSTS ORDER IN FOREIGN CURRENCY

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In

Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch)

the High Court held, for the first time, that  costs orders can be made in a foreign currency, and the judgment gives useful procedural guidance for parties seeking costs in a foreign currency.

The claimant had unsuccessfully applied for summary judgment and the defendant sought its costs in euros, with the claimant arguing that the costs order should be in sterling.

The defendant’s solicitors had accounted for their fees in euros and the defendant had paid their bills in euros.

Counsel had accounted for his fees in sterling, but the defendant had paid the counsel’s fees in euros.

Taking account of the overriding objective, the High Court interpreted the word “amount” in CPR 44.2(1)(b) and CPR 44.2(6)(b) as including a sum expressed in a foreign currency, and declined to imply a restriction on the court’s power under section 51 of the Senior Courts Act 1981 or CPR 44 as precluding costs awards being made in a foreign currency.

To imply such a restriction would be contrary to the authorities on foreign currency judgments since

Miliangos v George Frank (Textiles) Ltd [1976] AC 443,

which removed the prohibition on judgments being given in a foreign currency.

The appropriate currency in which to make the costs award, in respect of both solicitor’s fees and counsel’s fees, was the euro and the defendant’s costs were summarily assessed at EUR25,000.

The judgment also considers the rules governing witness evidence and the tendency for witness statements in the Business and Property Courts to stray into inadmissible argument and commentary on documents.

As there was a real risk of this happening in this case, the court exercised its case management powers to direct the parties under CPR 3.1(2)(m) and CPR 32.1(1) to identify in their pleadings the facts which they intended to prove by means of witness evidence, as this would assist the court at the Case Management Conference  and provide a helpful structure for witness statements in due course.

The judge also commented that, pending the outcome of the review of the rules governing witness statements in the Business and Property Courts there was no reason why courts should not enforce the current rules more vigorously in appropriate circumstances.

Written by kerryunderwood

May 20, 2019 at 1:24 pm

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COUNTY COURTS INTEREST BROUGHT IN LINE WITH HIGH COURT

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

 

The County Courts (Interest on Judgment Debts) (Amendment) Order 2019 was laid before Parliament on 1 May 2019 , effective 27 May 2019.

It is accompanied by an explanatory memorandum.

It amends the County Courts (Interest on Judgment Debts) Order 1991 in relation to the County Court’s powers to order judgment debt interest.

These amendments align the 1991 Order’s provisions with the powers in CPR 40.8, which allow the court to order that interest on a judgment debt can run from a date earlier than the date on which judgment is given.

The power to backdate interest has not previously been available to the County Court, since such a power could only be conferred under section 74 of the County Courts Act 1984 with the concurrence of the Treasury.

By aligning these provisions, the 2019 Order helps resolve concerns about access to justice arising from the same provisions not being applied across the civil courts.

In particular, it removes the detriment that a successful party in the County Court may otherwise incur by only receiving interest from the date of judgment or determination of the amount of judgment, compared to the backdated interest they could have received under CPR 40.8 had proceedings been brought in the High Court.

 

Written by kerryunderwood

May 14, 2019 at 7:28 am

Posted in Uncategorized

COSTS LAWYERS CAN DELEGATE WORK TO STAFF

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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

Allen v Brethertons LLP [2019] EWHC B3 (Costs) (08 May 2019)

a Master in the Senior Courts Costs Office was considering the assessment of costs of the successful claimant in an application for a final statute bill under the Solicitors Act 1974.

The person with effective conduct of the claimant’s case was a Costs Lawyer regulated by the Costs Lawyer Standards Board, whose guidance states that it authorises and regulates individual Costs Lawyers and not entities or licensed alternative business structures.

Consequently, on the face of it, a Costs Lawyer cannot delegate reserved legal activities such as the exercise of a right of audience or the conduct of litigation.

Here the Costs Lawyer was assisted by unqualified people and the paying party argued that the prohibition on delegation meant that the claimant could not recover costs in relation to work done by anyone other than the qualified Costs Lawyer.

The relevant provisions and definitions are contained in the Legal Services Act 2007 and section 13(1) states that the question of whether a person is entitled to carry on a reserved legal activity “is to be determined solely in accordance with the provisions of this Act.”

Section 12(3) defines legal activity as:

“(a)  an activity which is a reserved legal activity…

(b)  any other activity which consists of one or both of the following–

(i)  the provision of legal advice or assistance in connection with the application of the law or with any form of resolution of legal disputes;

(ii)  the provision of representation in connection with any matter concerning the application of the law or any form of resolution of legal disputes…”

Section 5 provides that a legal dispute includes a dispute as to any matter of fact, the resolution of which is relevant to determining the nature of any person’s legal rights or liabilities.

A person may carry on the activities if authorised, or if exempt by virtue of Schedule 3 to the Act.

Paragraph 16 of Schedule 3 provides that in relation to reserved instrument activities, a person is exempt if, as an individual, she or he carries on the activity at the direction and under the control of a connected person who is entitled to carry on that activity.

Following the decision in

Agassi v Robinson (Inspector of Taxes) (No 2) [2005] EWCA Civ 1507

the court here held that the giving of legal advice, the conduct of correspondence with an opposing party and the performance of administrative support services ancillary to the conduct of litigation, but not amounting to formal steps, constituted legal activity, but not “reserved legal activity” and can therefore be carried out by anyone.

Here, the court found that the work done by others did not, for the most part, constitute reserved activity, and in so far as it did, the relevant persons undertook it as exempt persons under the Legal Services Act 2007.

Any other interpretation would have the effect of rendering the Costs Lawyer’s working life “in practical terms impossible.”

Written by kerryunderwood

May 13, 2019 at 11:05 am

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PART 36 COVERS SUBSEQUENT CLAIMS: HERTEL DISTINGUISHED

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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

Calonne Construction Ltd v Dawnus Southern Ltd [2019] EWCA Civ 754

the Court of Appeal upheld the validity of a defendant’s Part 36 offer relating to an unpleaded counterclaim and which provided for interest at 8% a year after the expiry of the relevant period for accepting the Part 36 offer.

Here, the defendant in proceedings made an early Part 36 offer taking into account a counterclaim which it said it had, but which had not been pleaded at that stage.

The offer also made a specific claim for interest at 8% a year.

The offer read:

 

WITHOUT PREJUDICE SAVE AS TO COSTS

OFFER MADE PURSUANT TO CPR PART 36

As you are aware, we are in the process of preparing our client’s defence and counterclaim which will be filed on 3rd March 2017. . .

. . . We are therefore, authorised by our client to make your client, the following offer to settle under Part 36 (“the Offer”).

This Offer is intended to have the consequences set out in Part 36 of the Civil Procedure Rules. In particular, your client will be liable for our client’s costs up to the date of notice of acceptance which must be in writing (“Notice of Acceptance”), in accordance with CPR 36.11, if the offer is accepted within 21 days (“the Relevant Period”).

This offer will remain open for a period of 21 days from the date of receipt of this letter.

Terms of the Offer

Our client is willing to settle the whole of your client’s claim contained within the claim number HT2016000331, together with the counterclaim which our client will shortly be issuing within the same proceedings:

  1. You pay to our client the sum of £100,000 (“the Settlement Sum”) payable within 14 days of service of the Notice of Acceptance.
  2. The Settlement Sum does not include costs and, as mentioned above, your client will be liable to pay our client’s costs on the standard basis, to be assessed if not agreed, up to the date of service of Notice of Acceptance if this Offer is accepted within the Relevant Period.
  3. The Settlement Sum is inclusive of interest until the relevant period has expired. Thereafter, interest at a rate of 8% per annum will be added.

. . .”

The defendant subsequently served its defence and counterclaim.

The claimant failed at trial to match the defendant’s Part 36 offer and the claimant also lost part of its claim, but the defendant failed in some of its allegations.

Consequently the trial judge ordered the claimant to pay 75% of all of the costs of the defendant, on the standard basis up to expiry of the relevant period, and on the indemnity basis thereafter.

The trial judge rejected the claimant’s contention that the Part 36 offer was invalid as it included an as yet unpleaded counterclaim. The Court of Appeal upheld that ruling.

Given the breadth and reach of Part 36, the claimant’s contention was, on the face of it, hopeless.

However the claimant’s argument was supported by the fairly obviously wrong decision in

 

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

 

which I deal with in detail in my blog – PART 36: WHEN IS A CLAIM NOT A CLAIM?

Here the trial judge said that he was bound by, or must pay attention to, the Court of Appeal decision in  AF v BG [2009] EWCA Civ 757 which had not been cited in the Hertel case.

In AF v BG the Court of Appeal held that it did not matter that a counterclaim had not yet been pleaded as Part 36 specifically sanctions an offer before the commencement of proceedings.

“So the fact that the counterclaim had not been formulated or pleaded does not of itself matter.”

Although the Court of Appeal here distinguished Hertel, it is safe to say that Hertel is no longer to be regarded as good law.

In any event it related to the old CPR 36.10(2) which is no longer in the Civil Procedure Rules, and the replacement similar provision must now be interpreted as here in the Calonne case.

 

Comment

In my blog – PART 36: WHEN IS A CLAIM NOT A CLAIM? I described the Hertel decision as “a strange decision to put it mildly.”

I am glad that the Court of Appeal now agrees.

 

Interest

The Court of Appeal also held that the inclusion of a term as to interest after the end of the relevant period for accepting the Part 36 offer did not render it invalid.

Here the interest rate was 8%.

However, the Court of Appeal said that it would still be a valid offer if the rate was 25%, or 200%.

An offeror in those circumstances may find that the judgment was not more advantages than the offer and thus lose the Part 36 benefits.

Furthermore the offeree could make its own Part 36 offer in the same terms, without the offending rates of interest.

“It seems to me therefore, that there is no reason whether of policy or otherwise which renders an offer invalid for the purposes of Part 36 if it includes provisions as to interest after the expiration of the Relevant Period. After all, as Flaux LJ pointed out in the course of argument, there is nothing wrong with a party making a Part 36 offer expressed as a specified sum which includes interest during the Relevant Period calculated on the basis of a particularly high rate. He just has to take the consequences when it comes to be determined whether the offer has been “beaten”.”

Written by kerryunderwood

May 9, 2019 at 11:23 am

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LATE ACCEPTANCE OF PART 36 OFFER NOT EXCEPTIONAL CIRCUMSTANCES IN FIXED COSTS 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

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.

 

Comment

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.

See my blog – ESCAPING FIXED COSTS: THREE NEW CASES

Written by kerryunderwood

May 7, 2019 at 9:43 am

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INTEREST WHEN CLAIMANT MATCHES OWN PART 36 OFFER

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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

AssetCo Plc v Grant Thornton UK LLP [2019] EWHC 592 (Comm) (22 February 2019)

the Business and Property Court of England and Wales Commercial Court, part of the Queen’s Bench Division of the High Court, considered the consequences in relation to interest when a claimant matches or beats its own Part 36 offer at trial.

Here the claimant at trial obtained judgment for over £22 million, having made two Part 36 offers, one for £10 million and one for £17.5 million, both of which were clearly beaten.

The judgment reviews the authorities and the Commercial Court Guide.

On the facts here the court awarded an interest rate of 5% above LIBOR (The London Inter-bank Offered Rate), with 2% above LIBOR being the compensatory rate, and the additional 3% being enhanced interest pursuant to CPR 36.17(4)(a).

The court held that it was not appropriate here to award enhanced interest on costs, which were already on the indemnity basis.

Written by kerryunderwood

May 3, 2019 at 11:58 am

Posted in Uncategorized

LITIGATION FUNDERS’ LIABILITY NOW UNCAPPED: ARKIN NOT FOLLOWED

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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

Davey v Money and others [2019] EWHC 997 (Ch) (17 April 2019)

the High Court declined to apply the Arkin cap, which potentially limits a funder’s liability for adverse costs to the amount of the funding provided,  in relation to a costs order against commercial funders, who provided litigation funding to the claimant.

The Arkin cap gets its name from the Court of Appeal case of

Arkin v Borchard Lines (No 2) [2005] 1 WLR 3055.

The High Court held that the making of a third party costs order under section 51 of the Senior Courts Act 1981 is a matter of discretion, to be exercised on the basis of what is just in the circumstances of each case.

The Arkin cap should be considered in cases involving a commercial funder as the means of achieving a just result in all the circumstances, and not a rule.

Here the High Court held the commercial funders liable for all of the successful parties’ costs on an indemnity basis that were incurred after the date of the funding agreement.

The funders accepted that a non-party costs order should be made against them, but contended that it should be limited to the total amount of the funding to the unsuccessful claimant, that is that the Arkin approach should be adopted.

The funders also accepted that they should be liable on the indemnity basis as the unsuccessful funded claimant had been ordered to pay costs on that basis.

This follows the decision in

Excalibur Ventures LLC v Texas Keystone Inc [2016] EWCA Civ 1144

In relation to the period of liability, the receiving party argued that as the funders stood to benefit from all of the work done since the start of the litigation, they should be liable for all of the adverse costs, in the same way as an assignee of a claim who became the litigating party by substitution would be liable for all of the costs from the commencement of the action if it failed.

The High Court disagreed and said that previous authorities held that there had to be some causal connection between the involvement of the non-party and the incurring of costs.

In the Excalibur case the court had said:

“While I see the force of these considerations I do not think it appropriate to make an order the effect of which is that the Platinum funders or Blackrobe will be liable for costs which they have played no part in causing the defendants to incur. The fact that they are, in a sense, inheritors of the work of others is not sufficient reason.”

 

The Arkin Cap 

In

Bailey and others v GlaxoSmithKline UK Limited [2017] EWHC 3195 (Qb)

the High Court ordered a litigation funder to pay security for costs greater than its investment in the proceedings as it did not accept that the Arkin cap would necessarily apply at the end of the proceedings – see my blog – SECURITY FOR COSTS, 4 DECEMBER 2018.

The court here held that the funding arrangement was not champertous, and therefore its decision not to apply the Arkin cap was not made on that ground and Arkin was not distinguished on that basis.

Here the court concluded:

“In short, what has become known as the Arkin cap is, in my judgment, best understood as an approach which the Court of Appeal in Arkin intended should be considered for application in cases involving a commercial funder as a means of achieving a just result in all the circumstances of the particular case.  But I do not think that it is a rule to be applied automatically in all cases involving commercial funders, whatever the facts, and however unjust the result of doing so might be.”

It then considered the particular facts in this case:

the funders approached their involvement as a commercial investment upon which they intended to make a return;

there was a lack of discrimination in the allegations made, which included speculation and exaggeration and these significantly increased the defence costs.

Although the funders did not direct the case, they had every opportunity to investigate and form a view on the claim before choosing to fund it, and could not dissociate themselves from the claimant’s conduct – see Excalibur. Here the indemnity costs order against the claimant would be rendered in effective if the Arkin cap was applied;

the funders must have known that the claimant was most unlikely to be able to meet any substantial adverse costs award, and halved their investment from £2.5 million to £1.25 million while retaining the same projected share of recoveries;

there was no correlation between the amount that the funders chose to invest in the litigation and the costs to which the defendants were exposed, and the funders removed the requirement that the claimant take out After The Event insurance, which would have protected the defendant;

the funders negotiated to receive a substantial commercial profit which would have taken priority over any compensation payable to the claimant;

Litigation Funding in the United Kingdom has moved on significantly since the decision in Arkin.

The court ordered the litigation funders to pay all of the costs of the defendants on the indemnity basis from the date of the funding agreement.

 

Comment

Whatever the High Court says in this case, the reality is that it has changed the law and turned what everyone thought was a rule into guidance.

Lord Justice Jackson in his report, while arguing that the liability of third party funders should be open ended, as decided in this case, nevertheless said:

“4.7. I recommend that either by rule change or by legislation third party funders should be exposed to liability for adverse costs in respect of litigation which they fund. The extent of the funder’s liability should be a matter for the discretion of the judge in the individual case. The funder’s potential liability should not be limited by the extent of its investment in the case.”

That was 10 years ago and there has been no rule change or legislation, and therefore funders were, in my view, entitled to assume that the Arkin cap still applied.

I know that we do not really have a Parliament at the moment, but something as important as this should be decided by Parliament, and not on the whim of an individual judge.

Written by kerryunderwood

May 2, 2019 at 7:52 am

Posted in Uncategorized

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