Kerry Underwood

Archive for July 2019

AMENDING, AND DEPARTING FROM, COSTS BUDGETS: FOUR RECENT CASES

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

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

 

Change on Causation Justified Claimant Amending Costs Budget

In

Zeromska-Smith v United Lincolnshire Hospitals NHS Trust [2019] EWHC 630 (QB) (22 February 2019)

the Queen’s Bench Division of the High Court overturned a Master’s refusal to permit a claimant to amend her costs budget to allow for the instruction of leading counsel.

This decision illustrates a “significant development” under Practice Direction 3E.7.6.

Here, the defendant’s change of position on whether the claimant had suffered psychiatric injury as a result of the defendant’s admitted negligence constituted a significant development, as it had potentially significant consequences for the quantification of the claimant’s claim.

The claimant had brought a clinical negligence claim against the defendant after the claimant’s daughter was stillborn.

The claimant alleged that she had suffered psychiatric injury due to the defendant’s negligence and served a supportive expert’s report.

The parties discussed the extent to which the defendant admitted the claim and the basis on which judgment could be entered.

The claimant’s solicitor informed the defendant’s solicitor that the claimant could only agree to quantum-only directions if the defendant admitted liability, including both breach of duty and causation.

The defendant’s solicitor confirmed that judgment could be entered for the claimant “with extent of injury and loss to be assessed.”

The claimant understood the defendant to be admitting that the claimant had suffered a psychiatric injury due to the defendant’s admitted negligence.

The defendant had obtained its own expert evidence by the time of the case and costs management hearing, but did not serve it until eight months later.

It then emerged that the defendant was denying that the claimant had suffered any psychiatric injury at all.

The claimant considered that the defendant had resiled from the basis on which judgment had been entered and applied, unsuccessfully, to amend her costs budget to allow for the instruction of leading counsel.

On appeal, the High Court Judge held that, in deciding that there was no significant change justifying an amendment to the claimant’s costs budget, the Master had erred in law: he had failed to appreciate that the defendant was not simply disputing the extent of the psychiatric injury, but asserting that there was none.

The defendant’s change of position was significant because there was a qualitative difference between the defendant conceding damages only for the failure to successfully conclude the pregnancy.

 

Costs Offer Not A Benchmark Below Which Costs Cannot Be Budgeted

In

Gray v Commissioner of Police for the Metropolis [2019] EWHC 1780 (QB) (24 May 2019)

the Queen’s Bench Division of the High Court, on appeal, refused to revise the claimant’s costs budget upwards.

In reaching this decision, the key questions were whether the lower court judge had:

  • placed too much emphasis on the low value of the claim;
  • failed to take into account or place sufficient weight on other aspects of the case including the complexity of civil actions against the police; and
  • the difficulties which the claimant’s solicitors would have in taking the claimant’s instructions given his mental health issues.

The High Court held that the lower court  was not only entitled, but obliged, to take into account the relatively low value of the claim under CPR 44.3(5)and was entitled to conclude that the matter was relatively straightforward: the case centred around a series of factual disputes, which did not raise novel or particularly difficult legal issues.

As  to the specific items of the costs budget, the High Court Judge held that the court was not required to give reasons for allowing a sum for witness statement preparation which was lower than that which the defendant had offered; the figure offered by the defendant was not proportionate.

An offer for costs was not a benchmark below which costs could not be budgeted (paragraph 27).

A substantial amount of preparatory work had already been carried out in analysing the defendant’s disclosure, and large numbers of the documents disclosed were common to both parties, so they would have already been considered by the claimant’s solicitors.

Although the claimant’s mental health problems had to be borne in mind, they did not justify a significant increase in costs for witness statement preparation.

Although the lower court judge mistakenly thought the trial was three days instead of five days, this was not a factor which would have decreased the budgeted costs for trial preparation.

While the case was not “run of the mill”, the amounts allowed were not manifestly too low.

The budget as decided did not mean that the litigation was no longer economic.

 

No Significant Developments Justifying Revision Of Costs Budget

In

Seekings and another v Moores and others [2019] EWHC 1476 (Comm) (7 June 2019)

a High Court Judge refused a defendant’s application to increase its costs budget by £130,000.

There were two issues:

(i) whether there was any jurisdiction to make such an order when the vast majority of the costs had already been incurred, something considered in Sharp v Blank [2017] EWHC 3390 (Ch); and

(ii) whether there had been “significant developments” justifying revision of the budget, as per Practice Direction 3E, Paragraph 7.6.

The judge held that there had not been “significant developments” justifying revision and so did not need to consider the “difficult question of jurisdiction”.

In Sharp v Blank the court had interpreted “future costs” in Paragraph 7.6 of Practice Direction 3E as meaning costs after the last approved or agreed budget, rather than – well – future costs.

Virtually every commentator thinks that the decision in Sharp is wrong.

Here the court just considers the issue of significant developments and the judgment contains a useful summary of the existing case law, although generally the matter will be fact sensitive to each matter.

It is not consistent with the overriding objective to allow parties to amend budgets because they have overlooked something or made a careless mistake, or when the case develops in a way that should have been foreseen – see

Al-Najar and others v The Cumberland Hotel [2018] EWHC 3532 (QB)

which gives useful guidance.

Here, the judge concluded that continuing electronic platform costs should have been anticipated and were relatively minor and so did not warrant revision.

Requests for information pre-dated the budget and so the defendant should reasonably have anticipated the work required.

An increase in the documents for review did not warrant an increase either: they were the defendant’s documents and the defendant should reasonably have anticipated the extent of the review.

In relation to expert evidence reasons for the increases appeared to be “an amalgam of matters which should have reasonably been anticipated, and matters which did not warrant an increase”.

As to pleadings and lists of issues, these are common in this sort of litigation.

The work relied upon should reasonably have been anticipated and did not warrant revising the budget.

£85,000 had been agreed for this phase.

It was not proportionate to spend more.

As to Requests for further information the costs of hearings resulted from the defendant’s decision to resist the claimant’s applications, which were successful, and resulted in adverse costs orders against the defendant.

Even if they were a significant development, their outcome was such that no revision to the defendant’s budget was warranted.

The judge noted that the defendant should have followed the proper procedure for revision including identifying the changes and giving reasons for them.

7. The relevant parts of Practice Direction 3E are:

7.3 If the budgeted costs or incurred costs are agreed between all parties, the court will record the extent of such agreement. In so far as the budgeted costs are not agreed, the court will review them and, after making any appropriate revisions, record its approval of those budgeted costs. The court’s approval will relate only to the total figures for budgeted costs of each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure. When reviewing budgeted costs, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.

7.4 As part of the costs management process the court may not approve costs incurred before the date of any costs management hearing. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all budgeted costs.

7.5 The court may set a timetable or give other directions for future reviews of budgets.

7.6 Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions. Such amended budgets shall be submitted to the other parties for agreement. In default of agreement, the amended budgets shall be submitted to the court, together with a note of (a) the changes made and the reasons for those changes and (b) the objections of any other party. The court may approve, vary or disapprove the revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed.

 

Effect Of Settlement Of Claim On Good Reason To Depart From Budget Under CPR 3.18(B) When Costs Are Assessed

In

Barts Health NHS Trust v Salmon (unreported) (17 January 2019)

a County Court Judge allowed an appeal against a  decision taken by a master when assessing costs of a claim which had settled.

The receiving party claimed less than the budget sum for certain phases and the master assessed the bill as claimed.

The judge held that the master had been wrong in not explaining his reasons for assessing the bill as claimed and in not allowing the paying party to make submissions as to the appropriate sums in respect of those phases before assessing.

The County Court Judge said that where a party claimed less than the budget sum, because they spent less and because of the indemnity principle, that was a good reason for departing from the budget under CPR 3.18(b) –

see Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792

and there was no need to establish a “further” good reason in order to reduce the costs to a greater extent.

In any event, here, there were good reasons to justify a further downward departure from the budget figures; the phases were substantially incomplete and there was no alternative dispute resolution other than the making and acceptance of a Part 36 offer.

Once the court has found a good reason to depart downwards from the budgeted figure, the court should hear submissions from both parties on what the final figure should be.

The judge did not criticise the master for his approach to proportionality.

He considered that he went through the relevant factors, in a structured and analytical way, and carried out the balancing exercise.

However, the consequences of the conclusions reached on good reason in the appeal meant that the starting-point for the exercise of applying the proportionality test might have shifted.

In the absence of agreement, there would have to be a re-assessment of the reasonable costs and the court would have to re-assess proportionality if the starting figure was different to the figure that the master had as his starting point.

It suggests that whenever budgeted cases have settled before trial, costs are going to be open to challenge on assessment.

Written by kerryunderwood

July 31, 2019 at 8:14 am

Posted in Uncategorized

DIGITAL COURTS AND THE 10MB LIMIT: NODDY BECOMES AN EMPLOYMENT APPEAL TRIBUNAL JUDGE

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A bizarre, almost unbelievable, situation was dealt with by the Court of Appeal in

J v K & Anor [2019] EWCA Civ 5 (22 January 2019) .

The claimant brought Employment Tribunal proceedings which were struck out and he wished to appeal but the Employment Appeal Tribunal’s server was unable to accept emails and attachments of more than 10mb.

In a guide published on the gov.uk website, there was a warning about this and parties to an Employment Tribunal decision are sent a covering letter referring them to a booklet, which has a link to the online warning, but it was accepted that the mentally ill appellant litigant in person here never received it.

Five minutes before the 4.00pm deadline, the claimant emailed the EAT with an attachment containing his notice of appeal and all necessary documents, but the communication failed as the attachment exceeded 10mb.

The claimant immediately re-sent the attachments as a number of smaller files, but they were received after the deadline and his application for an extension was, bizarrely, refused on the papers, and he appealed, but the EAT, in an astonishing decision, rejected his appeal.

The Court of Appeal held that the EAT was wrong to refuse an extension of time to appeal in these circumstances.

An ordinary layman would reasonably have expected that the EAT’s server would have been able to accept the documents which the EAT itself required on an appeal.

An extension would be granted to render the claimant’s appeal to the EAT in time.

As the Court of Appeal here pointed out, the EAT has encouraged the lodging by email of the documents necessary to institute an appeal but has, in my words and not those of the Court of Appeal, an inbox capacity that would shame a five-year-old.

To put this in context, a basic Iphone photo uses up 2.5mb.

The warning can only be seen by going to a link online, yet an appellant is specifically prohibited –

Desmond v Cheshire West and Chester Council HQ [2012] UKEAT 0007/12/2006 .

from getting around the Toytown IT system that the EAT has by having a link online to the appeal documents.

A hard copy of the warning, contained in document T440, is not sent to a proposed appellant.

As you will pick up, that specific prohibition was made by the Employment Appeal Tribunal which ruled that it was allowed to deprive people of the right to appeal by an online link, but they could not appeal by way of an online link.

The Court of Appeal said that it regarded it as surprising that the EAT server was unable to accept the documents that the EAT itself required and encouraged to be lodged by email.

“ … I should be reluctant to hold that would-be appellants are to be criticised for ignorance of information (a fortiori rather surprising information) which is only available in a guidance document which they are not advised to consult, even if many or most might in fact find it by their own efforts. (There is also a difference…between giving information in government guidance and making provision in the Rules and/or the EAT’s own Practice Direction, neither of which mention the limited capacity of the EAT server.)”

In a graphic passage the Court of Appeal, in dealing with the issue of appellants who leave matters to the last minute pointed out that this was not due to extraneous circumstances but:

 

“Rather, the problem was the limited capacity of the EAT’s own system (insufficiently notified to the Appellant). That seems to me to put the case into a rather different category. It is as if the Appellant had arrived at the EAT at 3.55 p.m. on the last day with the documents fully ready to serve but had been unable to deliver them because the doors or letterbox were jammed or everyone was on the street because of a fire alarm. It is inconceivable that in such a case an extension could fairly be refused…”.

 

The Court of Appeal observed that the best thing would obviously be for the EAT server’s capacity to be increased.

 

Comment

This is a real case and these are real facts. It is not one of my ironic Alice in Wonderland pieces.

These are real decisions by real Registrars and real judges.

This is a real server set up by a real IT department in a real government department.

There is a real Bill before Parliament to introduce video courts next year, and electronic filing is already compulsory in many courts.

Videos are really demanding in terms of the capacity they require on servers and bandwidth and so on.

Written by kerryunderwood

July 30, 2019 at 9:00 am

Posted in Uncategorized

ASSESSING RECOVERABLE AFTER-THE-EVENT INSURANCE PREMIUMS AND PROPORTIONALITY GENERALLY

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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

West v Stockport NHS Foundation Trust and Demouilpied v Stockport NHS Foundation Trust [2019] EWCA Civ 1220 (17 July 2019)

the Court of Appeal considered the correct approach to assessing After-the-Event insurance premiums in cases where the premium remains recoverable from the paying party.

Although this case concerned premiums in clinical negligence cases, the principles will apply in defamation and privacy cases, where recoverability of success fees has been abolished, but recoverability of After-the-Event insurance premiums remains.

This may well be the model used in other areas of civil litigation going forward as it provides access to justice, a point emphasized in this case by the Court of Appeal:

 

“Access to justice must therefore be the starting point for any debate about the recoverability of ATE insurance premiums in any dispute about costs.” (Paragraph 12)

 

“If a claimant’s right to recover the ATE insurance premium in clinical negligence cases is the subject of a capricious system of cost assessment, then a claimant may be denied the very access to justice which the exception at s.58C and the Regulations were designed to protect.” (Paragraph 29)

Here, judges at first instance and on appeal had refused to allow recovery of premiums in block-rated cases, that is where the premium is not linked to a particular case, but rather where there is a fixed premium set by reference to a wide basket of cases.

To avoid solicitors cherry-picking, that is using a standard premium policy then only insuring the riskier cases, normally a solicitor will be contractually obliged to offer the policy in every appropriate case.

The Court of Appeal was critical of the National Health Service Litigation Authority, asking why, if the risk of the claimant losing the case was very low, the NHSLA had not admitted the claim from the outset. (Paragraph 17).

The NHSLA also used, as a comparator, an insurance product called LAMP.

The Court of Appeal observed:

“It appears that LAMP was a company registered in Gibraltar. It is now insolvent, although it was apparently still trading at the time of the cost assessments in these cases.” (Paragraph 18).

“30. Thirdly, there are concerns about the respondent’s repeated reliance on the burden of proof. This can be seen in their Points of Dispute documents and other written submissions, and it was noted unfavourably in the Assessors’ Report (see paragraphs 42 and 45 below). The respondent’s strategy appears to be to offer something minimal to put the reasonableness or proportionality of the ATE premium in issue, and then assert that the burden of proof falls upon the individual claimant, who will usually be unable to deal with the wider questions that might be raised concerning the insurance market. On this aspect of the case at least, the respondent has access to much more information than an individual claimant, so that the respondent’s reliance on the burden of proof has potentially a distorting effect on the costs assessment.

31. Fourthly, and related to the previous point, we note the respondent’s use of so-called comparables. We consider that, when dealing with reasonableness, detailed evidence about unarguably comparable insurance policies and premiums would be admissible. What is not permissible is reliance on the production of a few photocopied pages of another policy which, taken as a whole, is not in fact comparable.

The very lengthy judgment has a flash of comedy, with the Chief Executive of LAMP disavowing the NHSLA’s use of its own policy as a comparable:

“He [Mr Cousins, then the CEO of LAMP] described the policies with a £9,000 indemnity limit, memorably, as a ‘pregnant albatross’, referring to the fact that schedules from those policies are regularly produced, out of context and without reference to availability or scheme specifics, to challenge on detailed assessment insurer’s clinical negligence ATE premiums. That includes, ironically, LAMP’s own premiums under other schemes, which can be significantly higher …” (Paragraph 41)

 

Reasonableness of the ATE Premium

The Court of Appeal set out the four principles to be distilled from the case law:

“56.

i) Disputes about the reasonableness and recoverability of the ATE insurance premium are not to be decided on the usual case-by-case basis. Questions of reasonableness are settled at a macro level by reference to the general run of cases and the macro-economics of the ATE insurance market, and not by reference to the facts in any specific case [McMenemy].

ii) Issues of reasonableness go beyond the dictates of a particular case and include the unavoidable characteristics of the ATE insurance market [Rogers].

iii) District judges and cost judges do not have the expertise to judge the reasonableness of a premium except in very broad-brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces [Rogers].

iv) It is for the paying party to raise a substantive issue as to the reasonableness of the premium which will generally only be capable of being resolved by way of expert evidence [Kris]”

The Court of Appeal said that these principles must be applied in every case because the After-the-Event insurance market is “integral to the means of providing access to justice in civil disputes [now limited to clinical negligence cases] in what may be called the post-legal aid world”, that being a direct quote from the case of

Rogers v Merthyr Tydfil County Borough Council [2006] EWCA Civ 1134.

In fact such premiums remain recoverable in mesothelioma cases and defamation and privacy cases, not just clinical negligence cases.

The suggestion in

Surrey and others v Barnet and Chase Farm Hospitals NHS Trust [2016] EWHC 1598 (QB)

that Rogers is out of date and that Costs Judges can consider ATE insurance premiums by engaging in a robust analysis and “entering the arena” is an incorrect statement of law and an unacceptable and wrong approach.

 

Guidance

If the ATE policy is a bespoke one, then the “grounds of challenge of the amount of the premium are relatively wide”. (Paragraph 64)

“65. As regards a block-rated policy, such as the policies in the present appeals, the ability of the paying party to mount a sustainable challenge will be much more restricted. The majority of challenges to block-rated premiums must relate back to the market in one way or another, and would therefore require expert evidence to resolve. In particular, it will not usually be enough for the paying party simply to give evidence that another policy was cheaper. It is not for district judges or costs judges to have to plough through the detail of allegedly comparable policies, still less to be required to assess the effect of any differences in content. An expert’s report would be required to the effect that the other policy was directly comparable to the policy under review.

66. Moreover, by reason of the contract terms commonly agreed between insurers and solicitors, an alternative block-rated policy may not in fact have been available to the receiving party in any event. That may not of itself rule out consideration of that policy as a comparable, but the challenge would involve difficult issues as to reasonableness to be resolved on the facts of the particular case.

67. Finally, a simple comparison between the value of the claim (either the claim made or the settlement sum) and the amount of the premium paid is not a reliable measure of the reasonableness of the ATE insurance premium. That would ignore the way in which the premium payable for a block-rated policy is fixed taking into account a basket of a wide range of cases. It is similar to the “swings and roundabouts” comments associated with fixed costs. In Sharp v Leeds City Council[2017] EWCA Civ 33[2017] 4 WLR 98, for example, Briggs LJ (as he then was) said:

“41. … The fixed costs regime inevitably contains swings and roundabouts, and lawyers who assist claimants by participating in it are accustomed to taking the rough with the smooth, in pursuing legal business which is profitable overall.””

 

Proportionality

The Court of Appeal ruled that a proportionality challenge is to be assessed by reference to all of the circumstances, and this encompasses matters which were not necessarily related to the case in question.

This is the so called “wider interpretation”.

A block-rated ATE premium can never be challenged on proportionality grounds.

It joins the categories of costs, such as court fees and VAT, which must always be left out of account. (see paragraphs 79 to 83).

Nevertheless, the court may still take into account the total bill, including these sacred items, and cut it on proportionality grounds, and reductions “will simply be by reference to other elements of cost, not the ATE insurance premium”.

“85. We recognise that this means that, when undertaking the proportionality exercise, it is those elements of cost which are not inevitable or which are not subject to an irreducible minimum which will be vulnerable to reduction on proportionality grounds in order that the final figure is proportionate. Such costs are, however, likely to be costs which have been incurred as a result of the exercise of judgement by the solicitor or counsel. Those are precisely the sorts of costs which the new rules as to proportionality were designed to control.

86. As should be apparent, leaving particular items out of account when considering proportionality because they are both reasonable and an unavoidable expenditure does not re-introduce theLowndstest, by which necessity always trumped proportionality. Most costs will still be subject to the proportionality requirement.”

The position will be different in relation to bespoke policies.

 

Costs Assessments Generally

The Court of Appeal gave guidance as to the correct approach to the assessment of costs generally.

“87. We are anxious not to restrict judges or force them, when assessing a bill of costs, to follow inflexible or overly-complex rules. One of the matters, however, which is apparent from the many cases cited to us, and from the submissions of counsel on the hearing of these appeals, is that there is an absence of consistency in the way in which costs bills are assessed. Taking the various points made above and drawing them together, we give the following guidance on an appropriate approach.

88. First, the judge should go through the bill line-by-line, assessing the reasonableness of each item of cost. If the judge considers it possible, appropriate and convenient when undertaking that exercise, he or she may also address the proportionality of any particular item at the same time. That is because, although reasonableness and proportionality are conceptually distinct, there can be an overlap between them, not least because reasonableness may be a necessary condition of proportionality: see Rogers at paragraph 104. This will be a matter for the judge. It will apply, for example, when the judge considers an item to be clearly disproportionate, irrespective of the final figures.

89. At the conclusion of the line-by-line exercise, there will be a total figure which the judge considers to be reasonable (and which may, as indicated, also take into account at least some aspects of proportionality). That total figure will have involved an assessment of every item of cost, including court fees, the ATE premium and the like.

90. The proportionality of that total figure must be assessed by reference to both r.44.3(5) and r.44.4(1). If that total figure is found to be proportionate, then no further assessment is required. If the judge regards the overall figure as disproportionate, then a further assessment is required. That should not be line-by-line, but should instead consider various categories of cost, such as disclosure or expert’s reports, or specific periods where particular costs were incurred, or particular parts of the profit costs.

91. At that stage, however, any reductions for proportionality should exclude those elements of costs which are properly regarded as unavoidable, such as court fees, the reasonable element of the ATE premium in clinical negligence cases, and the like. Specifically, therefore, if the ATE premium is assessed as reasonable, it will not fall to be reduced by any further assessment of proportionality.

92. The judge will undertake the proportionality assessment by looking at the different categories of costs (excluding the unavoidable items noted above) and considering, in respect of each such category, whether the costs incurred were disproportionate. If yes, then the judge will make such reduction as is appropriate. In that way, reductions for proportionality will be clear and transparent for both sides.

93. Once any further reductions have been made, the resulting figure will be the final amount of the costs assessment. There would be no further stage of standing back and, if necessary, undertaking a yet further review by reference to proportionality. That would introduce the risk of double-counting.

 

There can be no further look at proportionality.

The judgment contains a very lengthy report from the assessors, which is an extremely helpful explanation of how ATE insurance works, and how the premiums are calculated.

Written by kerryunderwood

July 30, 2019 at 7:49 am

Posted in Uncategorized

CIVIL LITIGATION SUMMER ROUND-UP

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

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

 

Transfer Out of Shorter Trials Scheme Refused

In

Sprint Electric Ltd v Buyer’s Dream Ltd and another [2019] EWHC 1853 (Ch)

the Chancery Division of the High Court refused the claimant permission to transfer an intellectual property claim out of the Shorter Trials Scheme.

The court was satisfied that it had power to transfer the case under CPR 3.1(2) – see

Family Mosaic Home Ownership Ltd v Peer Real Estate Ltd [2016] EWHC 257 (Ch) ­

even though there was no express provision in Practice Direction 57AB.

Otherwise there was a “very real and regrettable danger” that claims inappropriately started in the Shorter Trials Scheme without the defendant objecting, would have to remain there, even if that was unsuitable.

On the facts here, the court found that there were case management benefits for the court and both parties if the case remained within the scheme, although the court observed that split trials do not readily fit in to Practice Direction 57AB.

The stringency of controls and economy of procedures in the Shorter Trials Scheme would benefit the parties.

The court adopted a pragmatic approach to make the split trial work, but stressed that this ruling could not resolved that issue generally.

Here, liability had been determined and the remedies and quantum stage had been reached.

The claimant submitted that the complexity of the case, the likely volume of disclosure, the estimated hearing length and the limits on the length of witness statements made the Shorter Trials Scheme inappropriate, although it was the claimant who had voluntarily started the case there.

The court removed the 25-page limit on witness statements and adjusted the time estimate.

 

Disclosure Guidance Hearings – The Disclosure Pilot Scheme

In

Vannin Capital PCC v RBOS Shareholders Action Group Ltd and others [2019] EWHC 1617 (Ch)

the Chancery Division of the High Court granted the claimant’s application under Practice Direction 51U.17 for an order requiring the second defendant to carry out further searches in order to comply with the Extended Disclosure Order made, and refused the second defendant’s application under Practice Direction 51U.18.1 to vary the order to exclude one specified entity on the ground of proportionality.

This is one of the first cases under the Disclosure Pilot Scheme in Practice Direction 51U and the court gave useful guidance.

The court strongly encouraged the parties to seek guidance in Disclosure Guidance Hearings, under Practice Direction 51U.11 before making formal applications, as this was likely to save time and costs.

The court’s discretion to vary its own order for Extended Disclosure is not subject to the applicant satisfying the conditions in

Tibbles v SIG plc [2012] EWCA Civ 518 ,

that is that there has been a material change of circumstances since the order was made, or a misstatement of facts on which the original decision was based.

In an appropriate case, the court would exercise its discretion to reduce the scope of Extended Disclosure Order, and, as with requiring additional disclosure, the question in an application to reduce would centre upon proportionality.

 

Claimant Cannot Be Forced to Either Plead or Abandon a Claim

In

Pixdene Ltd v Paddington and Company Ltd and another [2019] EWHC 1842 (IPEC)

the Intellectual Property and Enterprise Court held that it had no power to order the claimant either to amend its particulars of claim to include matters mentioned in the draft particulars, or formally to abandon those claims.

The real issue was whether the conduct was an abuse of process, and the court noted that:

  • the rule in Henderson v Henderson did not require a party to pursue a claim or abandon it;
  • it would not make a ruling on a hypothetical basis that the claimant would bring further proceedings;
  • it was not inevitable that any further claim would fall foul of the rule in Henderson v Henderson, which states that a party should pursue its entire case in one action.

 

The court considered and set out the relevant case law, including:

 

No Default Judgment Where Defence Filed Late

In

Clements Smith v Berrymans Lace Mawer Service Company and another [2019] EWHC 1904 (QB) (18 July 2019

the Queen’s Bench Division of the High Court held that a judgment in default of defence must be set aside as of right, because the court did not have jurisdiction under CPR 12.3 to enter a default judgment where a defence had been filed, albeit after the expiry of the relevant time limit.

Thus, to succeed in obtaining a default judgment, the claimant must obtain in before a defence is filed, even if that defence is late. The expiry date for the defence is therefore irrelevant. The Denton Principles did not apply and there was no need for relief from sanctions.

The court granted permission to appeal to the Court of Appeal, given the absence of higher authority and inconsistent first instance decisions, and recognising the importance of the issue.

 

High Court Enforcement

In

Court Enforcement Services Ltd v Burlington Credit Ltd [2019] EWHC 1920 (QB) (19 July 2019)

the Queen’s Bench Division of the High Court held that where two creditors issue separate writs of control, priority will be given to the creditor whose writs are received first by a High Court Enforcement Officer, rather than to the creditor whose Enforcement Officer first gets money from the debtor.

Thus, where there are two High Court Enforcement Officers, priority is determined by who first got the writ, and not who first gets the money.

On 22 July 2019 the Ministry of Justice published an update, in a written statement, on its review of the implementation of the Enforcement Agent Reforms contained in the Tribunals, Courts and Enforcement Act 2007.

Consultation is continuing, but it will be compulsory for High Court Enforcement Officers and certified Enforcement Agents to have body-worn cameras when enforcing.

This change will not apply to County Court Bailiffs, as they are employed by Her Majesty’s Courts and Tribunal Service, and are outside the scope of the review.

 

Disclosure and Internet Service Providers

In

Mircom International Content Management & Consulting Ltd & Others v Virgin Media Ltd & Another [2019] EWHC 1827 (Ch) (16 July 2019)

the Chancery Division of the High Court considered the correct legal approach to granting Norwich Pharmacal relief requiring an internet service provider to disclose the names and addresses of tens of thousands of residential broadband subscribers  who had allegedly downloaded films in breach of copyright.

The court held that the general Data Protection Regulations had made no difference and that the approach set out in

Golden Eye (International) Ltd v Telefónica UK Ltd [2012] EWHC 723 (Ch) and

Golden Eye (International) Ltd v Telefónica UK Ltd (Open Rights Group intervening) [2012] EWCA Civ 1740

remained applicable.

 

Wrong Name Did Not Invalidate Notice of Adjudication

In

MG Scaffolding (Oxford) Ltd v Palmloch Ltd [2019] EWHC 1787 (TCC)

the Technology and Construction Court held that using the respondent party’s trading name instead of its correct name did not invalidate the Notice of Adjudication, the test being how it would appear to a reasonable recipient and looking at the substance rather than the form.

Here, the position was certain as the Notice referred to a specific property and project and was emailed to the person dealing with it.

The court considered and set out the case law in this area.

 

Jurisdiction

In

Gulf International Bank BSC v Aldwood [2019] EWHC 1666 (QB)

the High Court, in differing from several other first instance decisions, refused to stay proceedings in England and Wales against a defendant domiciled here, even though the bank’s claim was brought under a guarantee subject to Saudi Arabian jurisdiction.

The decision confirms that in Owusu, where the European Court of Justice held that the Brussels Convention prevented a court from declining jurisdiction on the ground that a court of a non-contracting state would be a more appropriate forum.

In

Sabbagh v Khoury [2019] EWCA Civ 1219

the Court of Appeal held that an English/Welsh court had jurisdiction to grant an anti-arbitration injunction to prevent vexatious and oppressive conduct, even if the courts of England and Wales are not the natural forum for the dispute.

The power is contained in section 37 of the Senior Courts Act 1981.

The judgment analyses in detail the exceptional circumstances in which such a decision may be made.

The relevant foreign jurisdiction here was that of the Lebanon.

 

Tomlin Order Not a Regulated Credit Agreement

In

CFL Finance Ltd v Bass & Ors [2019] EWHC 1839 (Ch)

the Chancery Division of the High Court held that a structured settlement clause providing for a debt to be paid over time, in the form of a Tomlin Order, does not extend “credit” or “financial accommodation” under section 9(1) of the Consumer Credit Act 1974 and thus the arrangements were not within the scope of consumer credit regulations.

 

Assessing Recoverable After the Event Insurance Premiums

In

West v Stockport NHS Foundation Trust and Demouilpied v Stockport NHS Foundation Trust [2019] EWCA Civ 1220

the Court of Appeal held that a block- rated After the Event Insurance policy, that is one where the premium is not fixed by reference to the individual case, is not subject to proportionality on assessment.

Although this case concerned premiums in clinical negligence cases, the principles will apply in defamation and privacy cases, where recoverability of success fees has been abolished, but recoverability of After the Event Insurance premiums remains.

This may well be the model used in other areas of civil litigation going forward, as it provides access to justice, a point emphasised here by the Court of Appeal.

Written by kerryunderwood

July 29, 2019 at 8:06 am

Posted in Uncategorized

ARE PART 36 OFFERS IN SOLICITORS ACT 1974 ASSESSMENTS VALID?

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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.

Probably not, which is also the view of the Senior Costs Judge.

Part 36 is a self-contained code and CPR 47 specifically applies Part 36 to between the parties’ costs assessments and CPR 47.20 clearly relates to between the parties’ cases.

Solicitor and own client assessments are governed by primary legislation – the Solicitors Act 1974 – and the relevant CPR is Rule 46.

Section 70(9) of the Solicitors Act 1974 provides that for a challenging, that is paying, party to win and get costs, that party must achieve at least a 20% reduction in the bill.

Practice Direction 46 specifically refers to the court determining the costs of a solicitor and own client assessment by reference to this Rule.

Consequently, it is unlikely that the strict consequences of CPR 36.13 apply, so there would be no deemed order for costs made upon acceptance.

A Calderbank offer can still be made on terms as to costs, and if accepted that is that.

If it is not accepted and the paying party fails at trial to reduce the sum below that offered by the solicitors, then the court will take the offer into account.

It will almost certainly displace the One-fifth rule if the offer is not beaten – see

Angel Airlines SA v Dean & Dean (QBD) [2009] 2 Costs LR 159

So, the bill is £20,000.

The solicitors make a Calderbank offer of £15,000 and the court awards £15,500.

Over 20% has been knocked off, so the challenger has met the one-fifth rule and so, on the face of it, is entitled to costs.

However, the client has been ordered to pay more than the solicitor was prepared to accept.

The claimant should be ordered to pay costs from a reasonable period – say 21 days – after the date of the offer.

Written by kerryunderwood

July 26, 2019 at 8:39 am

Posted in Uncategorized

APPLICATION FOR EXTENSION OF TIME TO REQUEST SOLICITOR/CLIENT ASSESSMENT REFUSED

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

 

In

Rattan v Carter-Ruck Solicitors [2019] 5 WLUK 633 (20 May 2019)

a Master refused a client’s out-of-time application for an extension of time to request a hearing of a detailed assessment of a solicitor’s bill under CPR 46.10 and ordered the costs to be assessed as billed, in the sum of £340,000.

The Master’s decision indicates that CPR 3.9 applies to such an application and rejected the client’s argument that

Haji-Ioannou v Frangos and others [2006] EWCA Civ 1663 and

Less and others v Benedict [2005] EWHC 1643

applied.

Those cases suggested that the court should grant indulgence for breach of a court rule absent misconduct, but they pre-dated the 2013 reforms emphasising compliance, and also concerned a receiving party failing to serve a timely notice of commencement of detailed proceedings in between the parties’ costs proceedings, or to request a hearing under CPR 47.

These principles did not apply to a solicitor and own client assessment under the Solicitors Act 1974, which was governed by CPR 46, and which involved different considerations, as in between the parties’ proceedings the receiving party already had a costs order and so delay was more akin to a delay in enforcement of the judgment, rather than a delay in pursuing the substantive claim.

It was appropriate to treat the application like one for relief from sanction under CPR 3.9.

Mark v Universal Coatings & Services Ltd [2018] EWHC 3206 (QB)

found that the “implied sanction” doctrine does not apply the CPR 3.9 principles to every instance where the rules provide that something “must” be done but there is no express sanction.

It depends upon the significance of the consequences of non-compliance; it was right to apply the doctrine here.

Applying the Denton criteria, the Master found that the client’s delay of three years was clearly serious and significant, and there was no good reason, and it was irrelevant that the client was a litigant in person, which did not justify ignoring court orders.

Requesting a hearing was not onerous.

 

An extension would likely mean extending for months, possibly years, to accommodate other proceedings against the solicitor and directions, and ultimately, it was highly unlikely that the client would derive any material benefit.

Even if Denton did not apply, the Master considered it was not consistent with the overriding objective to allow the extension.

The client was seeking to reduce the solicitor’s costs below a sum authorised by him in a settlement arrangement, to which he freely agreed, from which he benefited, and which represented a substantial reduction of the costs to which the solicitor was contractually entitled.

Indeed, the contractual entitlement of the solicitors was over two and a half times the amount that they actually billed – see paragraph 23 of the judgment.

Their costs would likely be assessed as this sum, and even if not, the client was unlikely to achieve any significant reduction.

 

Comment

A correct decision.

The solicitors did an outstanding job and under-charged by a very considerable margin.

Surely the time has come to end the right of a client to challenge a solicitor’s bill, other than in a usual way by defending any action on the bill as a debt in the County Court/High Court.

 

Written by kerryunderwood

July 15, 2019 at 11:15 am

Posted in Uncategorized

ALCOHOL, PEDESTRIANS AND CONTRIBUTORY NEGLIGENCE

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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

Lee Edmunds v Motor Insurers’ Bureau, Arbitrator’s Decision, 10 May 2019

Arbitrator Colin McCaul QC was considering an appeal by the claimant against the decision of the Motor Insurers’ Bureau (MIB) in relation to a claim under the Untraced Drivers’ Agreement of 28 February 2017, where the MIB had held the claimant to be 50% liable for the accident due to the amount of alcohol that he had consumed and the clothes that he was wearing.

The claimant was a pedestrian at night, when he was struck by a car and his evidence was that he had drunk six pints of lager.

In

CC v TD [2018] EWHC 1240 (QB)

the Queen’s Bench Division of the High Court held that mere intoxication did not expose the claimant, in that case a pedestrian who died of his injuries, to criticism and that a claimant’s actions are to be judged by reference to a sober person.

There, the judge said that even if the claimant had been guilty of a degree of inadvertence, it did not amount to negligence.

In

Liddell v Middleton [1996] PIQR P36,

the Court of Appeal said:

“It is not the fact that a plaintiff [the old name for a claimant] has consumed too much alcohol that matters, it is what he does. If he steps in front of a car travelling at 30 mph at a time when the driver has no opportunity to avoid an accident, that is a very dangerous and unwise thing to do. The explanation of his conduct may be that he was drunk: but the fact of drunkenness does not, in my judgment, make the conduct any more or less dangerous and it does not in these circumstances increase the blameworthiness of it.”

In

Lunt v Khelifa [2002] EWCA Civ 801

the Court of Appeal said:

“It seems to me, as I have already indicated, that the fact that the appellant had taken drink was of undoubted significance if one was looking for some reason why he might have behaved in the way he did. But for the purposes of determining apportionment, the important question is what he did.”

The Arbitrator described the MIB’s criticism of the claimant for wearing flip flops, which are more likely to cause a person running to avoid a vehicle to trip over, as “faintly absurd”. It was the negligence of the driver that caused the flip flop to break and the claimant to stumble and fall.

The Arbitrator also had this to say about the MIB’s criticism of the claimant for wearing dark clothing at night:

The General Guidance to Pedestrians within the Highway Code at Rule 3 states that pedestrians should wear something light, coloured, bright or florescent in poor daylight conditions and use reflective materials when it is dark. Whilst that advice is not restricted in the countryside, there must be few, if any, pedestrians in citizen towns who adopt it. In consequence, I do not consider it negligent for the claimant to have worn the attire that he did.”

The Arbitrator held that the MIB, upon whom the onus of proof lies, failed to prove that the claimant was contributorily negligent.

 

Comment

A correct, sensible and practical decision.

Thank you to Lisa Quick, a Paralegal with Mooneerams Solicitors for information about this case.

Written by kerryunderwood

July 11, 2019 at 12:57 pm

Posted in Uncategorized

CROSS-EXAMINATION AS TO ASSETS ORDERED IN SUPPORT OF WORLDWIDE FREEZING ORDER AND NON-PARTY COSTS APPLICATION

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In

Kazakhstan Kagazy plc and others v Zhunus and others [2019] EWHC 1693 (Comm) (27 June 2019)

the Queen’s Bench Division of the High Court ordered cross-examination as to assets in support of a Worldwide Freezing Order that had been obtained in support of an application for a non-party costs order.

Although the principles in

Jenington International Inc v Assaubayev [2010] EWHC 2351 (Ch)

applied here, cross-examination orders in support of Worldwide Freezing Orders are the exception rather than the rule.

The claimants had an unsatisfied final judgment for approximately $300 million on a fraud claim against the fourth defendant’s husband and the claimants’ costs were around £13.2 million.

The fourth defendant had provided about £13.8 million to fund the fourth defendant’s husband’s defence and the claimants sought a non-party costs order against the fourth defendant under section 51, Senior Courts Act 1981 and in support of that application,  had obtained a Worldwide Freezing Order against the fourth defendant.

Granting the order, the judge held that cross-examining the fourth defendant as to her assets was likely to further the proper purpose of the Worldwide Freezing Order, in the sense that it might reveal assets that might otherwise be dissipated, preventing any costs order against the fourth defendant from being enforced.

The claimants had a strong case that the fourth defendant’s disclosure had been inadequate, and that cross-examination might lead to further disclosure and prevent asset-dissipation.

Confining cross-examination to identifying the fourth defendant’s assets against which the Worldwide Freezing Order should “bite” would prevent it from being oppressive or for an ulterior purpose.

The fact that there was overlap between the claim against the fourth defendant and other claims that the claimants was pursuing did not mean that it was oppressive for the claimants to seek the cross-examination order.

However, certain safeguards could be put in place including limiting cross-examination to one day and the claimants providing a list of topics for questions in advance.

The fact that substantive rights had not yet been determined was not a reason for the fourth defendant not complying with the Worldwide Freezing Order.

The fourth defendant’s argument that the section 51 application against her might fail, and accordingly, it was not just and convenient to order cross-examination, was rejected.

The judge said that the fourth defendant could avoid being cross-examined by making a payment into court or providing acceptable security over her assets.

Written by kerryunderwood

July 10, 2019 at 7:55 am

Posted in Uncategorized

CHARGING £400 AN HOUR TO OTHER SIDE WARRANTS STRIKING OFF: THE GOOD CASE: A TERRIBLE DECISION

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

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

In

Solicitors Regulation Authority v Good [2019] EWHC 817 (Admin) (02 April 2019)

the Administrative Court, part of the Queen’s Bench Division of the High Court, allowed an appeal under section 49 of the Solicitors Act 1974 by the Solicitors Regulation Authority and ordered the respondent to be struck off the Roll of Solicitors.

The Solicitors Disciplinary Tribunal had imposed a fine of £30,000.

The allegations were that Mr Good had caused the firm routinely to overcharge the other party, generally the National Health Service Litigation Authority, by rendering bills of costs which were, and which they knew to be, excessive and often grossly excessive as regards hourly rates and success fees.

This was alleged to be contrary to Principle 2 of the Solicitors Regulation Authority Principles 2011, and Principle 6 in that the conduct was not such as maintained the trust the public placed in the solicitor and in the provision of legal services.

It was also alleged that Mr Good was dishonest, but the Solicitors Disciplinary Tribunal had found that he was not.

In relation to the firm’s Compliance Officer for Legal Practice, it was alleged that she had failed to take sufficient steps to investigate whether the hourly rates and success fees were reasonable, proportionate and recoverable.

Mr Good had set the hourly rate at £400 with a success fee of 100%.

The Solicitors Disciplinary Tribunal found that the £400 rate was excessive and that £250 an hour for a Grade D fee earner, that is a trainee or paralegal, was excessive.

This produced bills which were unreasonable and disproportionate.

The court felt it appropriate to refer to the Guideline Hourly Rates, even though those rates have traditionally been regarded as only appropriate for summary assessment in straightforward matters, and all of the matters here involved clinical negligence.

It is important to note that the issue here was the allegation of seeking to recover the supposedly excessive costs from the losing party, and this was not a solicitor and own client assessment.

At paragraph 20.62 of its judgment the Solicitors Disciplinary Tribunal said:

 

“The Tribunal accepted that with the £400.00 hourly rate being contained in the CFA [i.e. the Conditional Fee Agreement between the Firm and its client], there was no breach of the costs rules in including that rate in the Bills. However, the costs rules also required Bills to be proportionate. This was not a question of technical costs rules breaches; that had been conceded by the Applicant. The question was, as described by Mr James, an ethical one. The Tribunal agreed with DJ Besford’s assessment that this was not a commercially negotiated rate. In fact, the rate was one which the clients knew they would never be required to pay given the system operated by the Firm. The Tribunal found that the First Respondent had set the rate at an artificially high level in the knowledge that the clients would not object, so that he could maximise costs without regard for the need for those costs to be reasonable and proportionate.”

 

The success fee, set at 100% in all cases, was during the period of recoverability from the other side, and the law then required a risk assessment and it was accepted by Mr Good that this had not taken place in any of the cases.

In paragraph 18 of the present judgment the High Court quoted from the decision of the Solicitors Disciplinary Tribunal:

 

“Members of the public, whilst they viewed solicitors’ bills as expensive, would not expect a solicitor to institute a policy that led to charges being levied at almost four times the acceptable rate and to then charge a 100% uplift to what were already grossly excessive charges. Further less would they expect such charging practices to be levied against the NHS.”

 

Thus, the High Court has now stated in clear terms what any practising clinical negligence lawyer knows already, and that is that for all intents and purposes the National Health Service Litigation Authority is above the law when it comes to costs.

Thus, Thomas Fuller’s famous words, slightly adapted by Lord Denning must now read:

“Be you ever so high the law is above you, unless you are the National Health Service Litigation Authority”.

It is a matter for Parliament, and not the High Court, to decide whether it wants a different law in relation to costs in clinical negligence claims.

Ironically, under the government’s own proposals for the extension of fixed costs to all claims of up to £100,000, clinical negligence cases have been excepted as being too complicated, and involving too much work, to be subject to fixed recoverable costs.

One of the factors in this case was that the bill of costs submitted to the paying party did not identify the grade of each named fee earner.

The Solicitors Disciplinary Tribunal specifically found, at paragraph 20.77, that Mr Good “had demonstrated a calculated disregard for Practice Directions so as to create a lack of transparency intended to obscure from the paying party the true level of experience and ability of fee earners in order to attempt to charge wholly unwarranted excessive and preposterous costs.”

Here the court substituted a finding of dishonesty, in spite of the fact that it had not seen or heard the witnesses, unlike the Solicitors Disciplinary Tribunal which had seen and heard all of the evidence and had decided that Mr Good was not dishonest.

Helen Vernon, Chief Executive of NHS Resolution, is reported as having said:

“NHS Resolution will not hesitate to take action where it is confronted with dishonest behaviour. This is public money and Mr Good’s actions were an attempt on funds which should be used for patient care.”

NHS Resolution is the successor body to the National Health Service Litigation Authority. The irony of this body making this statement is considerable given its own previous conduct.

It is always telling when a public body changes its name – think Windscale/Sellafield.

Here are a few links to my previous blogs relating to National Health Service Litigation Authority.

 

THE NHS LYING AUTHORITY AT IT AGAIN

 

NHS LITIGATION AUTHORITY: HOW IT MISLED PARLIAMENT

 

NHSLA 2014/15: ANOTHER DISINGENUOUS REPORT TO PARLIAMENT

 

NHS LITIGATION AUTHORITY: STILL DRIVING UP COSTS

 

Comment

Perhaps the worst regulatory decision I have ever seen.

As countless solicitors have openly stated, they charge more than this an hour, and so do I.

Many have pointed out that the amounts that experts charge are often in excess of these rates, and also that the amounts charged by Insolvency Practitioners, again often in excess of these rates, come out of money which would otherwise go to creditors and where the state, through Her Majesty’s Revenue and Customs, is often a creditor.

Curiously, in

MXX v United Lincolnshire NHS Trust [2019] EWHC 1624 (QB) (27 June 2019)

a High Court Judge did not suggest that the claimant’s solicitor’s conduct in putting £465 an hour in a budget, when the retainer only allowed for £350 an hour, was a disciplinary matter.

While upholding the Master’s finding that this was improper conduct, the High Court held that it could be a factor allowing the assessing court to depart from the budget, under CPR 3.18(b).

This too was a clinical negligence matter.

As the court also held that CPR 44.11 covered both mis-certification of hourly rates in a budget, as well as in a bill of costs, it is hard to see what the distinguishing factors are.

I have recently read through Proportionality of Costs In Litigation: Case Analysis, by Practical Law Dispute Resolution, which lists and analyses all of the key cases on proportionality since the change in the law in April 2013.

Unsurprisingly, many of them deal with issues of costs perceived to be too high, and they only deal with between the parties’ costs, as proportionality does not apply to solicitor and own client costs.

In

GSK Project Management Ltd (In Liquidation) v QPR Holdings Ltd [2015] EWHC 2274 (TCC)

the High Court referred some of the incurred and estimated hours as “astonishing”, “quite simply absurd”, “exorbitant” and “grossly excessive”.

In

Vitol Bahrain EC v Nasdec General Trading LLC (unreported), 1 November 2013, Queen’s Bench Division Commercial Court,

the court referred to costs as “eye watering” and representing “charging on an epic scale”.

There are other similar comments in other cases, but it seems that, as set out above, it is only a disciplinary matter if the National Health Service is a defendant.

Comments on the Law Society Gazette article of 3 April 2019 include:

1. Anonymous

Commented on: 4 April 2019 15:31 GMT

“The comment at the end of the article by Helen Vernon of the NHS is a disgrace. What is a waste of public money is the NHSLA’s failure to admit liability at an early stage in obvious cases of negligence and their refusal to make sensible offers of settlement and thus avoid costs all round and do justice to innocent victims.”

If you had seen what I have seen. Kitchen sink defences having statements of truth signed in circs where the entire NHS team and their advisors know and have already agreed that they will concede breach, and are holding out only so as to postpone interim payment applications and/or in the hopes of getting a claimant to accept a swingeing percentage reduction to reflect their risk of litigating against the NHSLA!

2. Anonymous

Commented on: 4 April 2019 14:51 GMT

The problem is that there is pressure from above to make legal fees lower (even if in his case the client would never actually pay them). So it’s pretty much strike off now for costing too much or not putting your cheap as chips prices on your websites. Unless you have proper clients like rich people or large companies in which case fleece them as much as you can.

3. Anonymous

Commented on: 4 April 2019 14:38 GMT

The comment at the end of the article by Helen Vernon of the NHS is a disgrace. What is a waste of public money is the NHSLA’s failure to admit liability at an early stage in obvious cases of negligence and their refusal to make sensible offers of settlement and thus avoid costs all round and do justice to innocent victims.

4. Dominic Cooper

Commented on: 4 April 2019 14:12 GMT

This is an example of the Judge trying to achieve the “correct” outcome rather than actually applying the legal principles to the issue at hand. The decision is “oh I say, this Oik seems to have caused a spot of bother. Let’s strike him off”, and then the reasoning is worked back from there.

I hasten to add that there is surely no doubt that Sir Julian Flaux never charged so much as a penny over the relevant guideline hourly rates during his career at the bar. Of course not. (Yes I know that there are no guideline rates for Counsel, and probably none for anybody in 1978 when he was called, but the point stands).

We were told, quite forcefully and with devastating consequences, that even in a CFA matter, the indemnity principle applied. Therefore any technicality that would have rendered the agreement unenforceable meant no inter partes costs recovery irrespective of whether the client himself (or herself) cared one way or the other.

For the indemnity principle to apply, it means that the opponent is only liable to indemnify the client, in respect of a payment that the client is otherwise bound to make anyway.

So the starting point is not “how much are you seeking in an inter partes assessment from the NHS?”, but “how much has your client agreed to pay you if you win the case?”.

The inter partes assessment is only a function of the client’s own bill.

No if there is a rule of law, conduct, practice, procedure (or anything else) that specifies what and how much can be charged by agreement between a solicitor and his /her client, I’d love to know what that is.

The nearest thing I know of is section 74(3) Solicitors Act 1974 and CPR Part 46.9(2) the effect of which a solicitor may only charge the client in a County Court matter whatever you could get from the opponent unless there is a written agreement saying otherwise.

So surely in those circumstances a solicitor may charge the client whatever he / she wants, whether that be £400 per hour or £4,000 per hour.

The other party is only required to pay whatever the court decides is an appropriate amount. If the client is asked to pay, they also have the right to ask the court to decide the correct amount.

If a solicitor “tries it on” by seeking to recover too much, then the real sanction is the costs of the detailed assessment procedure, which end up being paid by the solicitor (whether against the client or the opponent).

And naive, and evidently stupid, as this solicitor’s strategy clearly was, I’m really not sure how it is even a lack of integrity let alone dishonesty. Nobody was ever going to be out of pocket – aside from the firms itself when it kept losing detailed assessments!

His plan (albeit not one that I would personally endorse) was just to try to work the system, based on how the rules have been devised. (Devised is the wrong word, nobody would devise the drivel that is CPR Parts 45 to 48; cobbled together and botched is the correct description).

On that basis even a fine seems excessive and wrong in principle to me. If the SRA want to introduce a new section in the code of conduct on costs (you must never charge your client more than the guideline hourly rates or you can charge your client what you like, but you must never seek more than guideline hourly rates on a detailed assessment) then fine, let them say that and punish those who do not comply.

But statements from the SDT and court are extremely worrying such as:-

* “the First Respondent’s conduct was motivated by his desire for the clinical negligence department to be profitable”(are we not supposed to make a profit?);

* a criticism that the solicitor placed “his assessment of the self-importance of his own opinion over and above that of no fewer than six different costs Judges” (can’t we have a different opinion to a judge now?)

* “The Tribunal accepted that with the £400.00 hourly rate being contained in the CFA [i.e. the Conditional Fee Agreement between the Firm and its client], there was no breach of the costs rules in including that rate in the Bills. However, the costs rules also required Bills to be proportionate.” (what is proportionate? Who is supposed to know what is proportionate)?

and the piece de resistance

* “The Tribunal found that the First Respondent had set the rate at an artificially high level in the knowledge that the clients would not object, so that he could maximise costs…”

So we should not seek to make a profit, must only charge what is “proportionate” (even though nobody from the Court of Appeal down knows how to define “proportionate”, can not ever disagree with a judge and most importantly, must not maximise costs. Presumably we have to minimise costs?

Ridiculous decision, and there’s even mention in the judgment that it is somehow worse (for reasons not specified) because the party who didn’t pay the costs bills claimed, but only paid the correct assessed amount was the NHS.

Unfortunately, because there is no challenge to the substantive decision, but only the sanction to be applied, and it is a fact specific determination, there is unlikely to be any prospect of an appeal, so we are stuck with this.

Others have pointed out that rates based on office location cannot be justified with modern working methods.

 

Here is the link to the Solicitors Disciplinary Tribunal’s original decision.

Written by kerryunderwood

July 9, 2019 at 7:54 am

Posted in Uncategorized

MISCONDUCT RE COSTS BUDGETS COVERED BY CPR 44.11 AND MAY PROVIDE GOOD REASON TO DEPART AT 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

MXX v United Lincolnshire NHS Trust [2019] EWHC 1624 (QB) (27 June 2019)

in detailed assessment proceedings, a High Court Judge partially allowed an appeal of a preliminary issue decision disallowing costs under CPR 44.11 by reason of mis-certification of rates in the claimant/receiving party’s costs budget.

The claimant had sought £465 an hour for a Grade 1 fee earner in the budget, but £350 in the bill of costs, which was the correct figure in the retainer at the relevant time, as a result of which the Master found improper conduct within the meaning of

Ridehalgh v Horsefield [1994] 1 WLR 462 ,

and there was no appeal against that finding.

The Master disallowed the costs in the bill of, and related to, the preparation of the budget and the defendant, the paying party here, appealed on the basis that that was too lenient a sanction, and that the Master had erred in failing to determine whether the improper conduct was a good reason under CPR 3.18 to depart from the budget.

The High Court confirmed that the principles regarding penalising misconduct in costs under CPR 44.11 set out in

Gempride v Bamrah and another [2018] EWCA Civ 1367 ,

which involved improper or unreasonable conduct in preparation of a bill of costs, apply equally to preparation of costs budgets.

The High Court disagreed with the Master on the effect of the conduct in this case, which contributed to his sanction. The Master’s finding that the misstatement of the rates in the budget did not affect the judge’s decision at the Case and Costs Management Conference was speculation not supported by evidence.

The Master had held that the District Judge had no intention of approving a budget containing an hourly rate of £465 for a Grade A fee earner, and would not have done so even if that had been reduced as £350.

Consequently the paying party had not been prejudiced.

That finding was unsupported by evidence and was an error of law.

The Master was also wrong in holding that the case here was indistinguishable from

Tucker v Griffiths and another [2017] 5 WLUK 461.

Whilst in both cases there was improper inflating of sums claimed as incurred costs in the budget, the conduct of the parties was different, as in Tucker the solicitors had used a “blended” rate, whereas here what the solicitor had done was to include an hourly rate for a Grade 1 fee earner which was greater than the claimant was obliged to pay under the terms of the retainer.

The High Court said that each case of penalty for breach of CPR 44.11 must be judged on its own facts.

The failure of the Master to decide whether the improper conduct in overstating the hourly rate beyond that in the retainer amounted to a good reason under CPR 3.18(b) to depart from the budget, was an error of law.

The High Court held that that issue remained to be determined on assessment and added that, without seeking to fetter the Master’s discretion, the court expected the Master to have regard to what was in this judgment.

Written by kerryunderwood

July 8, 2019 at 10:41 am

Posted in Uncategorized

OUT OF TIME ABOUT SOMETHING YOU KNOW NOTHING ABOUT BECAUSE THE COURT SYSTEM HAS COLLAPSED

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I have written up the case of

 JLE (a child by her mother and litigation friend, ELH) v Warrington & Halton Hospitals NHS Foundation Trust [2019] EWHC 1582 (QB)

in relation to Part 36.

The case also has a twist in relation to the High Court granting permission to appeal out of time.

This is a Kafkaesque story.

The appellant has 21 days to appeal, running from the date of judgment, which was given in the absence of the parties.

To appeal the appellant needs a sealed order, and although the appellant tried to file in time, the court office refused the application because there was no sealed order, as the court itself had not sent it out.

The sealed order was not sent out by the court until well after the time for appealing had passed.

I tweeted recently about a case in Central London County Court, where an unless order was made in the absence of the parties and not issued by the court until weeks after the time for complying with the unless order had expired.

Thus, we now have Draconian penalties for failing to comply with court orders that we know nothing about.

We have judges pontificating about how it is not just the case in hand where justice must be done, it is the effect on other court users, and so if injustice is done in a particular case, so be it; that is for the greater good of the efficiency of the system.

Except that the system has all but collapsed, and if the courts and judges were subject to the same discipline as solicitors, most would be removed from office.

I fully appreciate that this is not the fault of the judiciary or the staff – it is the fault of very right wing economic policies in this country.

However all judges should now stop insisting on rigorous adherence to timetables that they themselves cannot comply with.

I blogged recently about the Legal Services Ombudsman punishing solicitors for delay and failing to adhere to timetables, even though the Ombudsman admits that he is missing every single one of his targets, often by a country mile.

This is Star Chamber justice.

I have said it before, say it now, and will say it again – in this country we are on the road to Nuremberg.

 

Written by kerryunderwood

July 5, 2019 at 9:30 am

Posted in Uncategorized

PART 36: ERROR OF LAW TO CONSIDER HOW MUCH OFFER BEATEN BY

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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

JLE (a child by her mother and litigation friend, ELH) v Warrington & Halton Hospitals NHS Foundation Trust [2019] EWHC 1582 (QB)

the Queen’s Bench Division of the High Court, overturning a decision of Master McCloud, held that the amount by which a claimant beat its own Part 36 offer is irrelevant in considering whether it was unjust to make the additional 10% uplift on damages under CPR 36.17(4)(d), and to take that matter into account is an error of law.

Here the claimant served a bill of costs for £615,751 and then made a Part 36 offer to accept £425,000 and on assessment beat her offer by £7,000.

The Master awarded the sums provided for in CPR 36.17(4)(a)-(c) but held that it would be unjust to award the additional amount, that is the uplift on damages or, in this case, costs, under CPR 36.17(4)(d).

It was that decision which was overturned here by the High Court.

The High Court upheld the Master’s finding that, when considering injustice, the court may find it unjust to award some of the CPR 36.17(4)(a) – (d) bonuses, but not others.

In relation to the uplift the High Court said, in very clear terms, that it was not open to judges to take into account the amount by which a Part 36 offer had been beaten as this risked reintroducing the policy in

Carver v BAA Plc [2008] EWCA Civ 412,

which had been expressly reversed by Parliament.

Taking into account the large size of the 10% uplift relative to the margin by which the offer was beaten was an error of law. This additional amount was meant to include a penal element when a claimant had made an offer which it matched or beat, and looking at it as a bonus was an error of law.

The lack of disclosure in costs proceedings was irrelevant, and to consider the same was an error of law. Any pre-issue or pre-disclosure Part 36 offer in substantive proceedings would involve the same lack of disclosure.

The High Court also said, obiter, that the decision of Master Friston, not under appeal here, in

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

where he said there was a power to award a lower percentage than the 10% prescribed by CPR 36.17(4)(d) was wrong, and that the clear language of CPR 36.17(4) makes it clear that the 10% uplift in damages is all or nothing.

That  finding, and a similar finding in

Bataillion v Shone [2015] EWHC 3177 (QB)

are wrong.

Here the High Court adopted in full the reasoning set out in my blog

SUCCESSFUL PART 36 CLAIMANT DENIED UPLIFT – A MAD DECISION

in relation to the fact that the 10% uplift must be all or nothing, the court here adopted the reasoning in my blog

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

 This follows the Court of Appeal, in the case of

Calonne Construction Ltd v Dawnus Southern Ltd [2019] EWCA Civ 754 (03 May 2019)

adopting the reasoning in my blog –

PART 36: WHEN IS A CLAIM NOT A CLAIM?

 All of these decisions, and plenty more, are dealt with in my blog

PART 36: THE DIRTY BAKER’S DOZEN: 13 NEW CASES

 

The relevant parts of CPR 36.17 read as follows:

 

“Costs consequences following judgment

36.17 –

(1) … this rule applies where upon judgment being entered –

(a) …

(b) judgment against the [paying party] is at least as advantageous to the [receiving party] as the proposals contained in a [receiving party’s] Part 36 offer.

….

(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.

(4) … where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to –

(a) interest 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 with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10% above base rate; and

(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is –

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs –

Amount awarded by the court Prescribed percentage

Up to £500,000 10% of the amount awarded

Above £500,000 10% of the first £5000,000 and (subject to the limit of £75,000) 5% of any amount above that figure.

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including –

(a) the terms of any Part 36 offer;

(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

(c) the information available to the parties at the time when the Part 36 offer was made;

(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

(e) whether the offer was a genuine attempt to settle the proceedings.

(6) Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest must not exceed 10% above base rate…”

Written by kerryunderwood

July 4, 2019 at 10:19 am

Posted in Uncategorized

PROPORTIONALITY: THE OLD TEST AND THE NEW TEST: TWO NEW CASES

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

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

 

The Old Test

In

East Sussex Fire and Rescue Service v Austin [2019] EWHC 1455 (QB) (10 June 2019)

The Queen’s Bench Division of the High Court considered the old proportionality test, that is the one prior to 1 April 2013, which applied to this case as it had commenced before then.

This was an appeal against the decision of the Senior Costs Master and the appeal was dismissed.

The Master had held that:

  • the base fees looked at globally, were not disproportionate;
  • the instruction of leading counsel was reasonable; and
  • leading counsel’s brief fee of £50,000 was reasonable.

The Master held that under the new test the costs claimed “are indeed obviously disproportionate” but that the old test was “rather gentler and more generous.”

The paying party challenged this statement, stating that the factors to be considered under the new test are not materially different from those under the old test.

It is the consequences which have changed.

The global assessment of proportionality is now typically undertaken after, rather than before, the item by item assessment and, therefore, the current regime is indeed tougher than the old one.

This was also the view of the Chancery Division of the High Court in the case of

Malmsten v Bohinc [2019] EWHC 1386 (Ch) (07 June 2019)

decided three days earlier.

Although the proportionality assessment itself is not substantiality different, the new regime is tougher as necessity and reasonableness do not trump proportionality, as they did under the old regime and the guidance given in

 Lownds v Home Office [2002] EWCA Civ 365. 

 

The New Test

In

Malmsten v Bohinc [2019] EWHC 1386 (Ch) (07 June 2019)

the Chancery Division of the High Court allowed an appeal in relation to a detailed assessment of costs, reducing the profit costs sum assessed by the Master from £47,500 to £15,000 on the ground of proportionality and held that the Master’s failure to make any deduction to reflect the disproportionality of the costs was an error of law.

The High Court also held that VAT and the costs of drawing up the bill should be excluded when considering proportionality.

It also confirmed that proportionality should be considered at the end of the assessment process, rather than at the start, a point also made in the case of

East Sussex Fire and Rescue Service v Austin [2019] EWHC 1455 (QB) (10 June 2019)

in a judgment delivered three days after this one.

This is believed to be the first time that the High Court on appeal has considered the law in relation to the new test of proportionality, that is the test that has been in since 2013 for cases commenced after April 2013.

The judgment contains a detailed analysis of how the proportionality test should be applied and this is contained at paragraphs 51-58 of the judgment.

“51. The present rules are very different. It is quite clear, from the express wording of CPR 44.3(2)(a) that there may be a reduction in costs on grounds of disproportionality even if those costs were reasonably or necessarily incurred.

52. That, to my mind, inevitably indicates that under the new rules a proportionality assessment must occur at the end of the process, whereas under the old rules it occurred at the beginning. In Lownds, when considering the old rules, Lord Woolf MR said this:

“…In a case where proportionality is likely to be an issue, a preliminary judgment as to the proportionality of the costs as a whole must be made at the outset. This will ensure that the costs judge applies the correct approach to the detailed assessment…Once a decision is reached as to proportionality of costs as a whole, the judge will be able to proceed to consider the costs, item by item, applying the appropriate test to each item.”

Self-evidently that must be right where proportionality determines the approach on a detailed assessment, but does not otherwise affect the outcome of that assessment.

53. It is already clear from Lord Woolf’s analysis in Lowndsthat proportionality is essentially a tool that controls the overallbill of costs. That is confirmed by the definition of proportionate in CPR 43.3(5). The five factors listed there are only meaningful when considered in relation to the overall bill of costs, rather than in relation to a specific item of costs. What the new rules require is for the judge, having completed a detailed assessment of costs, to take a step back, look at the assessed bill, and ask whether a further reduction is required on grounds of proportionality.

54. Although I have reached this conclusion on the basis of the wording of the rules, my conclusion is consistent with the views expressed by others extra-judicially. I quote the following passage from Friston, which quotes a speech from Senior Master Gordon-Saker, himself quoting Jackson LJ:

“In the editor’s view, the starting point is a keynote speech given in 2014, in which Senior Master Gordon Saker (speaking extrajudicially) said the following:

“It is said that we will need guidance on how to apply the new test. I disagree. The guidance is already there. It is likely that somebody will in some case or other seek to appeal the approach that has been taken. But I would suggest that there is no reason to suppose that the court hearing the appeal will do other than restate the guidance that has already been given by Jackson LJ in his final report.

“…I propose that in an assessment of costs on the standard basis, proportionality should prevail over reasonableness and the proportionality test should be applied on a global basis. The court should first make an assessment of reasonable costs, having regard to the individual items in the bill, the time reasonably spent on those items and the other factors listed in CPR 44.5(3). The court should then stand back and consider whether the total figure is proportionate. If the total figure is not proportionate, the court should make an appropriate reduction. There is already a precedent for this approach in relation to the assessment of legal aid costs in criminal proceedings: see R v. Supreme Court Taxing Office, ex parte John Singh and Co [1997] 1 Costs LR 49.”

In the 15th implementation lecture on 29 May 2012 – the lecture entitled “Proportionate Costs” – Lord Neuberger, then MR, quoted that passage and said that it seems likely that the courts will develop the approach to proportionality “as Sir Rupert described it” in that paragraph.”

Thus, if Master Gordon-Saker is right, it would seem that proportionality will now revive “the Singh adjustment”. This is noteworthy, because this was precisely the test that was urged upon the Court of Appeal by the paying party in Lownds more than 15 years ago.”

55. My conclusion is also consistent with the notes in the 2019 edition of Civil Procedure, which says this at [44.3.3]:

“As yet no guidance has been provided by the Court of Appeal as to how the test of proportionality introduced on 1 April 2014 by [CPR 44.3(2) and (5)] should be applied. The general practice on detailed assessment is to consider the reasonableness of each item that has been challenged and then to consider whether the total sum that would be allowed on that basis is proportionate or not. If it is not proportionate, the court will then reduce the total figure to a sum which is proportionate.”

56. The new rules accordingly replace the ex ante Lowndstest, with a new ex post test. Costs are assessed according to a reasonableness standard (see CPR 44.3(1): “the court will not…allow costs which have been unreasonably incurred or are unreasonable in amount”), with the final costs assessment then being subject to the proportionality test.

57. It would seem that the distinction between “reasonable” costs and “necessary” costs – intrinsic to the Lownds test – has been eliminated, given that CPR 44.3(1) refers only to costs “unreasonably” incurred or “unreasonable” in amount. The reference, in CPR 44.3(2)(a), to costs “reasonably or necessarily incurred” does not preserve the Lownds distinction, but simply makes clear that even costs necessarily incurred are subject to the overriding criterion of proportionality.

58. The approach that I have described will work equally well in the case of a summary assessment, albeit that there is, in the case of such assessment, no item-by-item consideration of costs.

(ii) When considering proportionality, is it appropriate to exclude VAT and the costs of drawing the bill?”

The court also held that it was in a position to effect a proportionality analysis without remitting the question of costs to another Costs Judge:

“This is because such an exercise does not involve, as I have explained, an item-by-item assessment, but rather taking a step back and asking whether, in light of the various factors that go to proportionality, the sum of £47,500 ought to be reduced on the grounds of proportionality. I consider that I can carry out such a proportionality assessment despite the presence, in the figure of £47,500, of costs that should not be recoverable at all.” 

The High Court reduced the costs, on proportionality grounds, from £47,500 to £15,000.

Written by kerryunderwood

July 3, 2019 at 8:34 am

Posted in Uncategorized

PART 36: OFFER INCLUDING TERMS AS TO COSTS IS NOT A VALID 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

Knight & Anor v Knight & Ors (Costs) [2019] EWHC 1545 (Ch) (17 June 2019)

the Chancery Division of the High Court held that a purported Part 36 offer which attempted to limit costs was not a valid Part 36 offer.

The court set out the terms of the offer in paragraph 3 of its judgment:

The offer

3.The letter of 27 July 2017 is headed “Part 36 Offer: Without Prejudice Save As to Costs”. The substance of the letter reads as follows:

“Following Monday’s failed mediation (in respect of which privilege is not waived) we are instructed to make the following offer.

The offer is made pursuant to CPR Part 36. As such, if it is not accepted within the relevant period (see below) but is (without having been withdrawn) later accepted then your client will be liable to our clients’ costs. If Administrators succeed in obtaining a greater sum at trial then your clients will be liable to our clients costs on the indemnity basis and with interest thereon at a rate not exceeding 10% above base rate together with the additional sum set out in CPR 36.17(4)(d).

The offer is to pay, from the net proceeds of sale of Close Court, the sum of £35,000. This sum is inclusive of your clients’ costs, which we understand to be under £20,000. The offer also excludes any payment by your client of our clients’ costs, which as you also know are around £30,000.

The remainder of the net proceeds will be paid to our client as the administrators of Steven Knight’s estate.

 Pursuant to CPR Part 36:

  • The relevant period means a period of not less than 21 days from the date of this offer.
  • The offer is made in respect of the whole claim over the net proceeds of Close Court

This offer will remain open until it is expressly withdrawn but the court’s permission will be required to accept it where any of 36.11(3) applies.””

The defendants’ solicitors responded to that letter, also marked “Without Prejudice Save As to Costs” saying that the offer “does not make sense in accordance with Part 36, as it refers to the sum of £35,000 being inclusive of our clients’ costs…”

This exchange took place before proceedings were issued and therefore before the form of the future proceedings, if any, was known, and before it was known who would be the claimant and who would be the defendant.

For example, the claimant could have been a stakeholder under CPR Part 86, brought by the conveyancing solicitors in whose client account the funds were still sitting or, as in fact it turned out to be, a claim brought by one set of claimants to the fund against the other and in those circumstances who was the claimant and who was defendant depended upon who initiated the claim.

At trial the judge decided that the net sale proceeds of £204,000 belonged beneficially to the claimant, who had thus clearly beaten its own offer and the issue now concerned the costs consequences of that set of facts.

The defendants argued that the offer was not a valid Part 36 offer, as it contained terms as to costs.

The defendants relied on the decisions of the Court of Appeal in

 

Mitchell v James [2004] 1 WLR 158,

and

French v Groupama Insurance Co Ltd [2011] 4 Costs LO 547, [2012] CP Rep 2 .

 

In Mitchell the claimants offered to settle proceedings on the basis that each party bear its own costs and the Court of Appeal held that that could not be capable of being a Part 36 offer.

In the French case the defendant relied on offers made before proceedings were issued to cover the entirety of the claimant’s claims, “inclusive of interest and costs”.

The court there also held that such an offer, inclusive of costs, could not be a Part 36 offer.

The claimants held that notwithstanding these authorities a person making a Part 36 offer may still include terms in the offer which limit payment of its own costs by the paying party.

The claimant relied on the decision of the High Court in

Proctor & Gamble Co v Svenska Celluslosa AB SCA [2013] 1 WLR 1464 .

In that case the claimant made a Part 36 offer including the terms that the claimant would be liable for the defendants’ costs up to the date of acceptance and the judge held that it was open to a claimant making a Part 36 offer to agree to forsake its entitlement to costs on acceptance of the offer and instead to pay the defendant its costs, and therefore the claimant’s offer was complied with Part 36.

Here, the High Court held that even if Proctor & Gamble applied on the facts, the court could not follow it as it contradicted the Court of Appeal authority in Mitchell and French and indeed the claimant’s offer here was “ materially indistinguishable” to that in French.

In the Proctor & Gamble case the judge considered the decision of the Court of Appeal in

F & C Alternative Investments (Holdings) Ltd v Barthelemy (No 3) [2013] 1 WLR 548 .

The F&C case involved an offer to settle which had been deliberately and expressly stated to be “outside the terms of Part 36”.

Nevertheless, the successful party sought to apply Part 36 by analogy to get the consequences that flow from a Part 36 offer, and Part 36 itself says that the court must take into account any non-Part 36 offer.

In F & C the Court of Appeal held that there was no reason or justification for extending Part 36 beyond its express ambit and said:

“[63] … in my view it is not permissible wholly to discount a number of failures to comply with the requirements of CPR Part 36 as the merest technicality. Perhaps there can be de minimis errors or obvious slips which mislead no one: but the general rule, in my opinion, is that for an offer to be a Part 36 offer it must strictly comply with the requirements.”

The court when on to say here

“It is, however, to be noted that Mitchell v James was not cited to the Court of Appeal in F & C Alternative Investments nor to Hildyard J in Proctor & Gamble. On the other hand, French v Groupama was briefly discussed, albeit in a different connection, by Davis LJ (at [65]) in the Court of Appeal in F & C Alternative Investments (but was not cited to Hildyard J in Proctor & Gamble).”

In Proctor & Gamble the court said:

“47. In my view, the issue in the F & C case was really whether an offer accepted not to be within Part 36 could be given, by analogy, the same consequences as would have followed if it had been compliant and intended to be so. Here, the issue is whether CPR 36.2(2), and thus the gateway to CPR 36.10 and 36.14, is to be so strictly construed that it requires (by rule 36.2(2)(c)) the offer made to provide for the defendant to be liable for the claimant’s costs even if the claimant expresses his offer to be a Part 36 offer, but as part of that offer, agrees to forsake that entitlement and instead pay the defendant his costs. Put another way, I do not accept that it is impossible for a claimant to comply with Part 36 unless he requires to be paid his costs and such payment to be made within a period of not less than 21 days.

48. As it seems to me, such a strict construction would tend to undermine a central objective of Part 36, identified by Davis LJ himself as being to encourage claimants to make sensible offers and provide an inducement to defendants to accept them lest otherwise they be exposed to the consequences provided. That objective would be advanced, not undermined, by reading CPR36.2(2)(c) as requiring a claimant who seeks his costs to specify a period of not less than 21 days within which the defendant will be liable to pay them, but not as mandating that the claimant must seek costs and make payment of them a condition of his offer.

49. I do not myself see why such a purposive approach to construction should not be available in the context of Part 36, as it is in the context of statutes and contracts and other instruments (subject, of course, to well-known limitations). Nor do I see that such an approach is precluded by the judgment of Davis LJ in F & C: this is not a matter of applying Part 36 by analogy; and the strict compliance required is of the statutory provision properly, and, if appropriate, purposively, construed.”

Here the court said that it understood the court in Proctor & Gamble to be saying that it is still possible to comply with Part 36 by including in the offer a terms as to costs, provided that that term reduced the burden on the paying party that would otherwise be imposed as a consequence of accepting the Part 36 offer, rather than increasing it.

In other words if the person making the offer was giving a concession to the paying party, then that did not invalidate the Part 36 offer.

The court here held that that was an incorrect statement of the law and was inconsistent with the decisions of the Court of Appeal in both the  Mitchell and French cases and “Accordingly, I hold that this offer is not a Part 36 offer, and therefore does not have the costs consequences of such an offer.”

Here, obiter, the court rejected the defendant’s argument that the claimant’s offer was not compliant with Part 36 in any event, because when made, the format of the future proceedings was unknown and it was uncertain whether the party making the offer would be the claimant or defendant.

The court said that once proceedings were issued, then whether a party was the claimant or the defendant would affect the consequences flowing from the offer, as Part 36 provided for different consequences depending on whether the person making the offer was the claimant or the defendant.

The court when on to say, obiter, that had Part 36 applied, then the claimants would have got the costs consequences under CPR 36 as the judgment which the claimants obtained was more advantageous to the claimants than the proposals contained in their offer.

However, the sum of £204,000 being the net proceeds of the sale of the property held by the conveyancing solicitors, was not a “sum of money awarded” in CPR 36.17(4)(a) nor a “sum awarded to the claimant by the court” as per CPR 36.17(4)(d).

Rather, what the court had ordered was that the ownership of an asset belonged to the claimant and this was based on trustee – beneficiary relationship and not a debtor – creditor one.

Consequently, had Part 36 applied, enhanced interest under CPR 36.17(4)(a) would not have been awarded and the additional amount under CPR 36.17(4)(d) would have been calculated by reference to the costs awarded to the claimant, and not by the value of the property of £204,000.

That followed from the terms of CPR 36.17(4)(d) which states in part:

“… an amount which is

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs…”

Thus, here, the court found that there was no “monetary award”.

The court also rejected the claimants’ argument that the defendants’ failure to accept a non-Part 36, but reasonable, offer should mean that the claimants should get indemnity costs as though they had made a valid Part 36 offer.

“31. …A mere failure to accept a reasonable offer is not enough. That happens every day of the week, with both parties acting reasonably and in accordance with the advice that they are receiving from their professional advisers. So if the matter is to be taken “out of the norm” there must be something more, something which prompts the court to visit the paying party with a special mark of condemnation. I see nothing of that kind here. In my judgment it is appropriate to order the defendants to pay the claimant’s costs on the standard basis.”

 

Comment

This decision, correct in every respect in my view, is another illustration of the complexity of Part 36.

It also reinforces the point that part is making and what they think of Part 36 offers should use the standard form N242A and never depart from it.

I see a huge number of apparently Part 36 offers made in emails, which are simply not compliant with Part 36.

When it comes to Part 36, reinventing the wheel is a very dangerous thing to do.

Written by kerryunderwood

July 2, 2019 at 9:15 am

Posted in Uncategorized

CHILDREN, LITIGATION FRIENDS AND COSTS

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

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

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

In

Barker v Confiànce Ltd & Ors [2019] EWHC 1401 (Ch) (05 June 2019)

the Chancery Division of the High Court considered the issue of costs orders against parties who are minors and/or their litigation friends, holding that there were no special principles preventing a costs order being made and that the court must consider all of the circumstances of the case.

Here, in a claim involving a number of child claimants, two of the children made an application which was dismissed and the respondents sought costs against the children and/or the litigation friend, who had not given the normal undertaking to pay costs, as required by CPR 21.4(3)(c), if the party is a claimant.

The decision contains a detailed discussion of the law in this area and the court rejected an argument that the litigation friend was only liable to pay costs in cases of gross misconduct.

The case also sets out the considerable duties of a litigation friend, something to which solicitors for litigation friends and their clients often pay scant attention.

The court said that there was a long line of cases, dating back nearly 300 years, which established the practice that in a case of an unsuccessful claim by a child claimant acting by a litigation friend, the usual order is that the litigation friend will be ordered to pay the successful defendant’s costs (Paragraph 26).

In effect, the courts treat the litigation friend as being responsible for the costs which would otherwise be ordered against the child if that party had been an adult.

Section 51 of the Senior Courts Act 1981 is couched in very wide terms and clearly allows this practice to continue to be applied, as does CPR 44.2(4).

The court held that the reasoning in the pre-Senior Courts Act cases remains valid, and that nothing in the Act or the Civil Procedure Rules calls for it to reconsidered.

In spite of the wording of CPR 21.4(3)(c), the court here held that a litigation friend for a defendant could be ordered to pay costs.

On the issue of liability of a litigation friend for costs the court said:

“53. When considering whether to make an order for costs against a litigation friend, who has acted for an unsuccessful child party, the court should apply the general approach that, as regards costs, the litigation friend is expected to be liable for such costs as the relevant party (if they had been an adult) would normally be required to pay. The governing rule is that the court has regard to all the circumstances of the case and it is open to the litigation friend to point to any circumstance as to their involvement in the litigation which might justify making a different order for costs from that which would normally be made against an adult party.”

As to the issue of an order for costs in favour of a litigation friend the court said:

“55. The position appears to be that a child or protected party who acts by a litigation friend and who would, applying the usual principles as to costs, be entitled to an order for costs in his favour, will be entitled to an order which makes the paying party pay the costs incurred by the litigation friend. It is not open to the paying party to say that as the party entitled to recover costs was a child or a protected party, they did not incur any costs because they did not retain the solicitors who were instead retained by the litigation friend.”

The court also said that the practice in a case involving a litigation friend is not to apply the indemnity principle so as to hold that the child has incurred no costs and so is not entitled to recover costs.

The costs incurred by the litigation friend are considered to be the costs of the party.

“Another way of analysing the matter might involve holding that the litigation friend is entitled to an indemnity from the party for whom they were the litigation friend and, in that way, the party does incur the liability for the costs in question.” (Paragraph 99).

 

Costs Against Children

The court reviewed case law going back to 1725 and concluded that there is no general rule that the court will not make an order for costs against a child unless it has been guilty of fraud or gross misconduct.

Rather, as always, the general rule is that the court must consider all of the circumstances of the case.

Written by kerryunderwood

July 1, 2019 at 8:00 am

Posted in Uncategorized

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