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.

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Written by kerryunderwood

May 31, 2019 at 8:12 am

Posted in Uncategorized

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

Posted in Uncategorized

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

Posted in Uncategorized

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

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