Kerry Underwood

Archive for August 2019

PART 36: 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.

 

No Damages Offer Is Valid

In

MR v Commissioner of Police for the Metropolis [2019] EWHC 1970 (QB) (21 August 2019)

the High Court, in overturning the trial judge’s decision, held that an offer to settle for no damages, but with an admission of liability, was a valid Part 36 offer entitling the claimant to the various uplifts when he was awarded £2,750 at trial.

Various Part 36 offers, and counter offers and rejections were made, but the key ones are set out below.

This was a claim for false imprisonment and assault and the defendant made a Part 36 offer of £4,000 which was rejected by the claimant and the defendant then offered a letter of apology, with no admission of liability.

The claimant then made a Part 36 offer on the basis “that the matter be settled in the sum of nil pounds with an admission of liability plus reasonable costs, to be assessed if not agreed”.

The defendant never responded and at trial the claimant was awarded £2,750 but with no order for costs.

On appeal the High Court upheld the order for no costs up to the date of expiry of the claimant’s Part 36 offer as that did justice to the parties given the background of the litigation.

However, the position was different following the claimant’s Part 36 offer.

The court had found that, to “clear his name”, the claimant had to pursue the litigation to trial.

The claimant was never going to obtain the admission he wanted from the defendant by pre-trial negotiation and settlement.

At trial, the claimant’s arrest was found unlawful, albeit on limited grounds, he was vindicated and so the court described him as the “successful party”.

The claimant won financial compensation, though it was less than the offer that had been made by the defendant.

It would be unjust for the defendant to recover costs on the basis of their Part 36 offer, and just because the claimant was entitled to proceed to court, it did not mean that he was “entitled” per se to his costs.

The court considered that the Part 36 consequences should apply to the claimant’s offer.

The court said that giving up any and all claim to a financial remedy is a significant concession and therefore a genuine Part 36 offer.

The claimant’s offer engaged CPR 36.17 and so he was entitled to his costs from the expiry of the relevant period and other consequences.

It was not unjust to apply CPR 36.17 in that way and it would be unjust not to do so.

Bizarrely the Metropolitan Police argued that agreeing to accept no damages was not a “genuine offer” within the meaning of CPR 36.17(5)(e) because it did not make a concession!

 

Unsurprisingly, that argument was given short shrift by the court.

 

“17.  As a matter of principle, the implications of costs should never overwhelm the issue at the centre of litigation. That remains so, notwithstanding the huge impact costs currently has on the conduct of litigation. This Appellant wanted to ‘clear his name’, the Judge found that to achieve that aim he had to pursue the litigation to trial. He was never going to obtain the admission he wanted from the Respondent by pre-trial negotiation and settlement. At trial, his arrest was found to be unlawful, albeit on limited grounds. He was vindicated and the Judge described him as the ‘successful party’. In addition, he won limited financial compensation, even though it was less than a previous offer made by the Respondent.

18. In the protracted course of the litigation the Appellant made an offer to forgo any financial remedy, if he could obtain the admission as to liability he sought, further that he would accept a reasonable order for costs by agreement or assessment, if agreement was not possible. Giving up any and all claim to a financial remedy is, in my judgment a significant concession and therefore is a genuine Part 36offer. The Judge referred to it as such, rightly. That offer did engage the provisions of CPR 36.17 and accordingly does mean that the Appellant is entitled to his costs from the expiry of the relevant period, 14 August 2017. It is not unjust to apply CPR 36.17 in that way and to follow its provisions in the usual way, it would be unjust not to do so. The Appellant failed to respond to the offer of a without prejudice discussion and the criticism of that failure has merit, (not least as matter of courtesy). However remiss that was it does not seem to me to have had, or be capable of having, any direct effect on the course of the litigation. The Respondent was not going to make the admission sought; there was no realistic prospect of such a resolution.

19. The Judge formed a view of the offers and counter offers made before 20 July 2017, that was entirely a matter within her discretion and no valid complaint can be made of that view. She was entitled to reach the decision she did as to the position before the making of a good and genuine Part 36offer which was not accepted by the Respondent.

20. Accordingly, the appeal succeeds in respect of that element of the costs incurred after the expiry of the relevant period on 14 August 2017 and the appellant is entitled to his reasonable costs on an indemnity basis, and the other entitlements set out in CPR Pt36.17(4)from that date, to be assessed, if not agreed. The part of the order as to no order for costs before that date remains unaltered. To that extent only, this appeal succeeds.”

 

Minor Breach Does Not Invalidate Part 36 Offer

In

Momonakaya v the Ministry of Defence [2019] EWHC 480 (QB) (05 February 2019)

the High Court held that a minor breach in relation to a Part 36 offer did not necessarily invalidate the offer.

Here, the breach was in relation to CPR 36.22(7) which provides:

 

“(7) If at the time the offeror makes the Part 36 offer the offeror has applied for, but has not received, a certificate, the offeror must clarify the offer by stating the matters referred to in paragraph (6)(b) and (c) not more than 7 days after the receipt of the certificate”.

 

Reference to the certificate is to a Compensation Recovery Unit certificate and the reference to (6)(a) and (b) is in relation to the gross amount of compensation and the name and amount of any deductible amounts by which the gross amount is reduced.

The certificate had not been received and therefore the offeror should have provided that information, but here failed to do so.

However, both parties were aware of the CRU figure from a previous, expired, certificate, and due to the period that had elapsed since the accident there would be no more deductions; this is known as the five-year rule.

The defendants successfully argued that the solicitors instructed by the claimant therefore had as much understanding and knowledge and ability to appreciate the position as the defendant itself in terms of such deductions.

Here the court concluded:

 

“…the failure to comply with that one sub-rule in r.36.22(7) is de minimis. It is not of any lasting consequence; no prejudice has been suffered. There was clarity between all parties as to what was being agreed and therefore I have come to the conclusion that Part 36 does apply so as to stay these proceedings.”

Written by kerryunderwood

August 30, 2019 at 7:58 am

Posted in Uncategorized

SMALL LOCAL FIRMS PREFERRED BY CLIENTS AND OMBUDSMAN’S ADVICE ON GOOD COSTS SERVICE

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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.

 

Here I look at two recent and helpful publications, and given the source of those publications those are slightly surprising words from me!

The Legal Services Consumer Panel Tracker Survey 2019 makes interesting reading.

This year’s report is more fact focused and its findings stem from YouGov survey of 3,589 users of legal services over the last two years, which is a significant sample.

This strongly anti-lawyer body finally appears to have recognised that “shopping around” is often a bad thing for clients, as price comparison sights are notoriously misleading.

By definition any lawyer trying to get work by being cheap is unlikely to be much good, just as in any other area of life.

This is reflected in the fact 77% of clients find it easy to understand price information from lawyers, but this drops to just 38% amongst those shopping around finding it easy to make a comparison between different providers, sharply down from 58% last year.

These figures need to be treated with a little caution, as, to put it bluntly, those shopping around online for legal services are likely to be less intelligent than those realising the importance of quality and reputation, and therefore less likely to understand.

Another factor is that in the United States and the United Kingdom, but almost nowhere else, it is seen as fashionable to shop around for price, rather than seeking quality, so there may be over-reporting.

French people do not boast about cheap meat full of water from a supermarket.

The proportion of clients receiving a face to face service has remained the same for the last five years, at around 45%.

The increase in services provided online largely reflects a drop in legal services being delivered by post.

In other words, postal delivery of legal service has switched to online delivery, but face to face contact remains as popular as ever.

Client satisfaction is extraordinarily high, with 87% saying they were satisfied with the outcome of their legal matter and 84% being satisfied with the service they received.

Online satisfaction was the lowest, at 78%, compared with 88% for those receiving service face to face or over the phone or through the post.

In 2012, 14% of people received legal services through legal aid, a trade union or their employer, but this is now down to 5%, and just 1% received legal services through their trade union.

Interestingly as many people had their legal services paid for by their employer as by a trade union.

73% of clients said that they had a wide range of choice.

The most important factors when choosing a provider were:

                                                    %

reputation                                   79

price                                           72

specialism                                  69

 

Interestingly reputation is rising in percentage terms as the most important factor for clients.

Overall 51% of clients had a fixed fee arrangement and the highest areas were:

                                                  %

will writing                                69

conveyancing                            63

power of attorney                     59

 

Significantly, of general areas of work, accident and injury claims rate very poorly, both in terms of perception of choice and value for money (43%), even though virtually all such work is conducted on a no win, no fee basis, and the client nearly always wins.

My guess is that that reflects the fact that most such work is done without any face to face contact between the lawyer and the client, and that those injured feel pushed, often illegally by claims management companies, to particular solicitors.

This is a classic case of the illusion of choice – seemingly endless competition facts to work, but in fact poor choice, poor service and poor quality.

It is remarkable that in an area where clients do not pay upfront and virtually always get compensation the evidence is:

“Accident and injury claims is the service area users’ rate as having the lowest choice and value for money.”

The survey covers all providers and not just solicitors, but 64% of those surveyed used a solicitor.

77% of those who used a solicitor chose a small local firm with just 8% choosing a large corporate firm and only 7% a national brand with a local office.

Reputation, price, specialism and the convenience of a local office are all considered more important by clients now than when the surveys started in 2012.

Under half of those surveyed were influenced by a quality mark and less than one third buy the ability to track their matter online.

The results of this survey are excellent news for small local firms with a good reputation.

I believe that they are what used to be known as high street firms.

 

Legal Ombudsman – An Ombudsman’s View of Good Costs Service – Second Edition

Maybe I am softening, or maybe the regulators are waking up, but this too is a welcome and very useful report giving specific examples of good, and bad, service, as well as helpful advice.

 

Pre-Engagement

The Ombudsman advises keeping a record of the information displayed on your website and when and how it changes so that you know what the client saw at the time, rather than what is up now.

Much of my costs and funding litigation work arises from solicitors failing to print and keep key documents, such as the retainer and Conditional Fee Agreement.

Paperless offices are the ultimate madness as far as solicitors are concerned. Maybe one in one hundred can keep a fully accurate online record.

Print it – keep it! Must be the message in relation to any costs, retaining and funding matters.

 

Initial Meeting

“The consumer [client] should know where they stand when they walk through the door and not hear of any charge, if there is one, for the first time at the consultation”.

 

Contingencies

The report gives an example of a fixed fee by a firm instructed at the last minute in relation to a tribunal matter.

It was adjourned due to the other side’s failures. The firm charged a fixed fee plus and an extra fee for the extra hearing.

The Ombudsman halved the extra fee.

Had this been made clear in advance, that is that there would be an extra fee for an extra hearing, then there would have been no problem.

 

Estimates and Fixed Fees

“We know an estimate differs from a fixed fee, but not all customers [the clients] understand this distinction. We therefore look for evidence that this has been explained. An estimate being exceeded would not automatically constitute poor service, but we would normally expect to see reasons for this and look for evidence that the customer had been warned beforehand that this would happen. We would expect lawyers to know the estimate is being reached and warn the customers accordingly, as the customer may want to change instructions on how to proceed, in light of this information.”

 

VAT

The price should always include VAT, and if it is net of VAT then the client must be told how much they will have to pay including VAT.

If not, the Ombudsman is likely to order the client to pay only the lower, VAT exclusive, figure.

 

Disbursements

This term should never be used as it “means almost nothing to anyone other than lawyers.”

 

Overall Costs

When the complaint is that the bill is excessive, it is normally a reflection that the client was not expecting the bill to be so high, and thus is really about costs information rather than the costs themselves.

Failure to keep clients up to date with costs information is common and can be avoided by having a monthly review system on every file, with costs information being a mandatory matter to be dealt with.

 

Billing

The Ombudsman states that a common reason for a complaint is poor billing and states, reasonably, that if the Ombudsman has difficulty understanding the basis and meaning of the eventual bill, then that is likely to amount to poor service.

Again, in my experience, very poor, short barely comprehensible bills are very common.

The Ombudsman states:

“If a lawyer produces a bill which says “work done between 24 July and 18 August” and does not provide any further detail, we would consider this vague. We would want to know what the nature of the work was and will ask the lawyer to produce his or her ledgers as evidence that it had been done.”

I am not sure how ledgers would show what work was done, but the general point is clear.

 

Enforcement

“The Ombudsman cannot, and will not, interfere in a lawyer’s decision to enforce a bill while a complaint is ongoing. However, where we consider that any action was unreasonable, it will be reflected in the decision we make and any remedy we order.”

 

The Ombudsman has a range of further guidance on its website:

www.legalombudsman.org.uk/publications which might be useful to refer to:

Guide to Good Complaint Handling, provides an overview of how to respond to complaints.

– Signposting pack, sets out the signposting requirements and provides suggested text for you to use.

Approach to determining complaints, looks at the factors we take into account when we investigate and the questions we ask to determine if the service has been reasonable.

Our approach to putting things right, if we decide the service was unreasonable this guidance looks at the things we can do to resolve the situation.

Scheme Rules FAQ, common questions about our scheme rules.

 

If you would like to keep in touch with new guidance, research and courses that we run subscribe to our quarterly newsletter, LeO News.

Written by kerryunderwood

August 29, 2019 at 1:00 pm

Posted in Uncategorized

£2.6 MILLION CLAIM SHOULD NOT GO ON THE PORTAL: CLAIM STRUCK OUT

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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.

This decision has now been overturned by the Court of Appeal – see my blog

PORTALS: PUTTING CASE ON WRONGLY: WRONGLY USING PART 8 AND NOT PART 7: NO STRIKE OUT

 

In

Cable v Liverpool Victoria Insurance Company Limited, Liverpool County Court – Case number D34BI037

the Circuit Judge, hearing an appeal from a District Judge, upheld the District Judge’s decision to refuse to lift a stay on Part 8 proceedings, and the consequent striking out of the claim, in a case placed on the portal and “parked” there.

Here, the claimant issued Part 8 proceedings in a case which the claimant himself maintained at a value of £2.6 million as compared with the portal limit at £25,000.

The judge said that this was a case that “never, ever at the time they issued the claim form could it be said would have a value of £25,000 or less. That to me is an abuse of process and the abuse comes from using the procedure that is available to portal claims in a case that could not be said, on any stretch of the imagination, to be a portal claim….”.

Here, the claimant was injured in a road traffic accident in September 2014 and the solicitors placed the matter on the portal, and initially the claim was said to be low value but a medical report indicated that the claimant was still absent from work.

The defendant sought further information but got little response and the claimant engaged in what the District Judge called “radio silence”.

In July 2017 the claimant’s solicitors issued a Part 8 Claim Form and a stay was granted until August 2018, with the court ordering that a copy of the order be sent to the defendant by August 2017, although it was not in fact sent until February 2018.

In August 2018 the claimant’s solicitors told the defendant that the case was substantial with the claimant losing £130,000 a year through being unable to work.

The claimant applied to lift the stay and for the matter to proceed on a Part 7 basis and that application was granted without notice to the defendant, who then applied, and succeeded, in having that order set aside.

The District Judge refused to allow the matter to proceed by way of Part 7, and struck the claim out, and that decision was upheld by the Circuit Judge.

Written by kerryunderwood

August 14, 2019 at 8:07 am

Posted in Uncategorized

NO WASTED COSTS AGAINST LAWYERS ACTING FOR IMPECUNIOUS CLAIMANT

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

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

In

Willers v Joyce & Ors [2019] EWHC 2183 (Ch) (08 August 2019)

the Chancery Division of the High Court dismissed an application under section 51 of the Senior Courts Act 1981 for a costs order against solicitors and counsel representing an impecunious client who they had previously represented in a malicious prosecution and abuse of process claim on a conditional fee basis.

The claimant brought, and lost, an action for malicious prosecution and abuse of process and, after the case had ended, the defendant joined in as costs defendants under CPR 46.2(1)(a)  the solicitors, leading counsel and junior counsel who had acted for the claimant, alleging that the main reason for the claim was the claimant’s lawyers’ wish to recover unpaid fees from previous cases.

The shortfall following the acceptance of a Part 36 offer in the previous case was a specific head of damages in the current action.

Although the claim was lost on the facts here, it is possible to claim costs as a head of damages

 – see my post – COSTS PERMITTED TO BE CLAIMED AS DAMAGES

reporting the case of

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

The decision contains no new law, but reviews the case law at length, including the key decision in

Sibthorpe v Southwark London Borough Council (Law Society intervening) [2011] EWCA Civ 25 .

The court reiterated the point that there is a strong public interest in ensuring that impecunious claimants can have access to justice, even if that means successful defendants are left out of pocket.

“54.In my judgment the principle that emerges clearly from the decisions of this Court in Tolstoy, Floods and Hamilton v Al Fayed is that there is a strong public interest in ensuring that impecunious claimants can have access to justice even if that means that successful defendants are left substantially out of pocket. Because of this, legal representatives should not be at risk of a third party costs order unless they are acting in some way outside the role of legal representative. The nature of the role of the legal representative means that the indicators useful in considering the liability of, for example, a pure funder, such as whether he has been closely involved in making decisions about the conduct of litigation or whether he has a substantial financial interest in the success of the litigation do not work. The legal representative will always be closely involved in taking decisions about the conduct of the litigation and will always have a financial interest in the outcome, particularly where he is working under a conditional fee agreement or because although he is invoicing the client regularly for work done, he knows that in practice he will never be paid unless the client wins the case.”

See my post – CONDITIONAL FEE AGREEMENTS, DAMAGES-BASED AGREEMENTS AND CONTINGENCY FEES

Written by kerryunderwood

August 13, 2019 at 7:33 am

Posted in Uncategorized

FIXED COSTS APPLY TO DEFENDANTS AS WELL AS CLAIMANTS

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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

Woodward v Hyder A2/2017/1929

the Court of Appeal, by consent, allowed the claimant’s appeal against the order of Nottingham County Court that he pay the costs of an interlocutory application on an open basis, rather than paying fixed costs in accordance with CPR 45.29H.

This is a reminder that fixed costs apply to defendants as well as to claimants.

The rule is crystal clear.

Not all judges get it.

The claimant here not only lost originally, but also lost at the first appeal stage.

See –  FIXED COSTS, ALL THE PORTALS AND FIXED RECOVERABLE COSTS

Written by kerryunderwood

August 12, 2019 at 3:35 pm

Posted in Uncategorized

PROVISIONAL ASSESSMENTS: JURISDICTION OF COSTS OFFICERS AND APPEALS

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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

PME v The Scout Association (30 July 2019), SCCO

the Senior Courts Costs Office has given guidance as to the jurisdiction of costs officers to undertake provisional assessments, and the scope of appeals from provisional assessments.

The Master referred to “costs officer” in his judgment as an “authorised court officer”, and held that costs officers had jurisdiction to conduct provisional assessments.

Under CPR 44.1 an “authorised court officer” means any officer of the County Court, a district registry of the High Court, the Principal Registry of the Family Division, the High Court or of the Senior Courts Costs Office, who is authorised by the Lord Chancellor to assess costs.

He interpreted CPR 47.3 (jurisdiction of authorised costs officer), supplemented by Practice Direction 47.3, and CPR 47.15 (provisional assessment), supplemented by Practice Direction 47.14, to mean that they should and CPR 47.15 did not alter that jurisdiction.

CPR 47.3 was not specifically mentioned in Practice Direction 47.14, where that set out the provisions of CPR and Practice Direction 47 applying to cases falling within CPR 47.15 (provisional assessment), because it did not need to be.

CPR 47.3 had to do with the jurisdiction of a costs officer, not with procedure.

Most bills under £75,000 were provisionally assessed and, in the Senior Courts Costs Office, mostly by costs officers.

The rules committee could not have intended that CPR 47.3 and Practice Direction 47.3 should confer upon costs officers jurisdiction to assess bills, and at the same time exclude them from assessing the vast majority of bills, that is those dealt with by way of provisional assessment.

There is no appeal from a provisional assessment, only from an oral hearing requested after such assessment under CPR 47.15(7).

While appeals from decisions of costs officers involve re-hearings rather than review – see CPR 47.24, the appeal of an oral hearing after provisional assessment is confined to a re-hearing of the matters decided at the oral hearing.

There should not be a fresh assessment.

This was consistent with the aim of the provisional assessment process, which was to save time and costs, and it could not be right that a party should have two rights to challenge the provisional assessment.

 

Please see –

COSTS ROUND-UP

LEGAL OMBUDSMAN: AN OMBUDSMAN’S VIEW OF GOOD COSTS SERVICE SECOND EDITION

COURTS MUST NOT CONSIDER JACKSON REFORMS ETC. SAYS COURT OF APPEAL

Written by kerryunderwood

August 9, 2019 at 8:20 am

Posted in Uncategorized

SUCCESS FEE AND INSURANCE PREMIUM RECOVERABLE ON SWITCH FROM LEGAL AID TO CONDITIONAL FEE AGREEMENT

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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

AB v Mid Cheshire Hospitals NHS Foundation Trust [2019] EWHC 1889 (QB) (16 July 2019)

the High Court dismissed an appeal against a Regional Costs Judge’s order that additional liabilities of a success fee and an ATE insurance premium were recoverable by the claimant, a protected party acting by his mother and litigation friend, from the defendant.

The claimant claimed damages for medical negligence relating to catastrophic brain injuries and the litigation friend instructed solicitors in 2010 and legal aid was granted but the litigation friend discharged the legal aid certificate and entered into a Conditional Fee Agreement in February 2013.

The claim was settled for a £3.8 million lump sum and annual periodic payments, by which time, the claimant had instructed 12 experts in various fields.

The litigation friend’s bill of costs amounted to just over £1 million, including a success fee of £388,173.40 and an ATE insurance premium of £29,256.

The court held that the Regional Costs Judge had been entitled to find that the additional liabilities were reasonably incurred.

The litigation friend’s decision to change to Conditional Fee Agreement funding was reasonable because a serious dispute had arisen between three experts about causation, which was critical to the claim’s success.

Experts had already been instructed and hourly rates had already been an issue for one of them although he had reduced his rate.

The Legal Services Commission’s approach to hourly rates also caused problems with other experts.

The Regional Costs Judge had been entitled to find that the failure of the litigation friend’s solicitors to provide Simmons v Castle advice that the claimant would lose the 10% uplift on damages did not make the decision to change funding unreasonable because advice on that point would not have affected her decision.

The court held that failure to advise on the potential liabilities for a higher hourly rate and success fee did not undermine the reasonableness of the change.

There was a very real risk of no recovery because of the causation issue, meaning that the requirement to have the freedom of a Conditional Fee Agreement to attempt to secure some recovery became the decisive feature.

 

Please see –

COSTS ROUND-UP

LEGAL OMBUDSMAN: AN OMBUDSMAN’S VIEW OF GOOD COSTS SERVICE SECOND EDITION

COURTS MUST NOT CONSIDER JACKSON REFORMS ETC. SAYS COURT OF APPEAL

Written by kerryunderwood

August 9, 2019 at 8:00 am

Posted in Uncategorized

NON-PARTY COSTS ORDERS AND DISCLOSURE

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

In

Rudd v Bridle & Anor [2019] EWHC 1986 (QB) (24 July 2019)

the Queen’s Bench Division of the High Court refused a claimant’s application for disclosure of the defendants’ funding arrangements, and in doing so set out the relevant legal principles.

The purpose of the application was to obtain information to support an application for a costs order against a non-party under section 51(3) of the Senior Courts Act 1981.

Here, the claimant succeeded in part against the first individual defendant, but failed against the second company defendant.

The losing individual was ordered to pay half of the claimant’s costs, but to pay, on the indemnity basis, the claimant’s costs in relation to the failed action against the company.

The claimant sought an order relating to “the identity of the individuals, companies or entities who have financed or provided financial support to the defendants or either of them during and in relation to the present litigation and related documents.”

 

The court set out the general principles:

 

Funding Disclosure

Legal framework

8. The basic legal framework is not in dispute. The court has power to make orders for costs against non-parties. This is part of the general power to make orders as to the costs of proceedings which is conferred by s 51(3) of the Senior Courts Act 1981: see Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965. There are many circumstances that could in principle justify a third-party costs order, but commonly, third parties are targeted on the basis that they have funded an unmeritorious claim or defence.

9. The factors to be considered, and the relevant principles, have been the subject of consideration in a substantial number of reported and unreported cases, including Symphony Group Plc v Hodgson[1994] QB 179 (CA), Hamilton v Al Fayed (No 2)[2002] EWCA Civ 665[2003] QB 1175Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Others [2004] UK PC 39 [2004] 1 WLR 2807,Petroleo Brasileiro SA v Petromec Inc [2005] EWHC 2430 (Comm) [2005] All ER (D) 48, and Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23. The general principles that can be extracted from these authorities include the following:

(1) The power to make a costs order against a non-party is exceptional in the sense that such orders are not usually made. Such an order may only be made where there has been conduct by the non-party such as to render the order just and reasonable: see Symphony Group at 192H (Balcombe LJ);

(2) The power will not generally be used against “pure funders”, that is to say persons who provide financial support to a litigant but who have no personal interest in the litigation, who do not stand to benefit from it, who do not fund the litigation as a matter of business, and who do not seek to control its course: Dymocks [25(1) – (3)] (Lord Brown).

10. The modern jurisprudence is well summarised in Turvill v Bird [2016] EWCA Civ 703[2016] BLR 522, where Hamblen LJ (with whom Gross LJ agreed) said this:

“24. A number of recent authorities have stressed that this is a jurisdiction which must be exercised in the interests of justice and that its exercise should not be overcomplicated by authority.”

He was referring, among others, to these observations of Moore-Bick LJ in the Deutsche Bank case at [62]:

“We think it important to emphasise that the only immutable principle is that the discretion must be exercised justly. It should also be recognised that, since the decision involves an exercise of discretion, limited assistance is likely to be gained from the citation of other decisions at first instance in which judges have or have not granted an order of this kind.”

11. Hamblen LJ went on to say this:

“27. The authorities illustrate “the variety of circumstances in which the court is likely to be called upon to exercise the discretion” and “the kind of considerations upon which the court will focus”, but are not to be treated as providing “a rulebook”. The kind of considerations illustrated by the authorities include the following:

(1) Whether the non-party funds the proceedings and substantially also controls or is to benefit from them and is the “real party” to them;

(2) Whether the non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit;

(3) Whether there is impropriety by the non-party in the pursuit of the litigation.

(4) Whether the non-party causes costs to be incurred….

28.(1) (2) and (3) are all examples of circumstances in which non-party costs orders have been made. Generally (4), causation, is also required “to some extent” (per Morritt LJ in Global Equities Ltd v Globe Legal Services Ltd [1999] BLR 232) although it is not a necessary pre-condition, as held in Total Spares & Supplies Ltd v Antares SRL [2006] EWHC 1537 (Ch). In that case, however, there was still a causal link between the non-party’s actions and the claimant’s costs recovery in that he had deprived the claimant of any realistic opportunity of recovering its costs. The link was with the recovery of costs rather than the incurring of costs, but in both cases the claimant has to bear costs in circumstances where he otherwise would not have done.”

12. Procedurally, a court considering whether to exercise the power to make a third-party costs order must add the third party to the proceedings for the purposes of costs only, and give the person a reasonable opportunity to attend a hearing at which the court will consider the matter further: CPR 46.2(1). There may of course be a need to identify third parties, as a preliminary step towards engaging them in this process. Funders may be covert, or anonymous. It is clear that the court has a discretionary power, ancillary to its costs jurisdiction, to require a party to disclose to the other party the names of those who have financed the litigation: Abraham v Thompson[1997] 4 All ER 362, 368 (CA), Raiffeisen Zentralbank Osterreich AG v Crossseas Shipping Ltd[2003] EWHC 1381 (Comm)[7] (Morison J). This is the power relied on by the claimant on this application.

13. There is authority that this power extends to directing the disclosure of information going beyond the mere identity of the third-party funder. The court can make whatever ancillary orders will make the section 51 remedy effective, so that in an appropriate case the court may exercise a discretion to order more against the party who has been funded than simply the disclosure of the names of those individuals who have funded the litigation: see Automotive Latch Systems Ltd v Honeywell International Inc [2008] EWHC 3442 (Comm) [13], [16] (Flaux J).

14. The disclosure sought and ordered in the Automotive Latch case extended to the identities of any funders; the amount of such funding; the terms on which it was provided; the extent of each such party’s involvement in the conduct of the action; and the nature and extent of the third party’s interest (financial or otherwise) in the outcome of the action: see ibid [3] and [17]. The order sought on this application tracks the form of order granted in that case.”

 

On the facts, the court refused the application.

 

Please see –

COSTS ROUND-UP

LEGAL OMBUDSMAN: AN OMBUDSMAN’S VIEW OF GOOD COSTS SERVICE SECOND EDITION

COURTS MUST NOT CONSIDER JACKSON REFORMS ETC. SAYS COURT OF APPEAL

Written by kerryunderwood

August 8, 2019 at 8:54 am

Posted in Uncategorized

COSTS IN STATUTORY REVIEW AND JUDICIAL REVIEW CLAIMS

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

In

Campaign to Protect Rural England – Kent Branch v Secretary of State for Communities and Local Government and another [2019] EWCA Civ 1230 (15 July 2019)

the Court of Appeal held that an unsuccessful claimant in a planning statutory review was required to pay the costs of two defendants and an interested party, and that the collective application of an Aarhus cap for protection of environmental costs to these was permissible.

Thus the court awarded costs against the claimant in relation to three sets of defence costs, but in relation to the costs of the interested party, reduced them to £1,875.50, so that the overall total did not exceed the Aarhus cap of £10,000.

It was accepted that this was an Aarhus claim.

This is a reference to the Aarhus Convention of 1998 which provided that environmental litigation should not be “prohibitively expensive”.

The United Kingdom implemented this by providing in the Civil Procedure Rules, in 2017, that there should be a cap on the total costs liabilities of claimants to other parties.

At present that cap is £10,000.

The interested party did not appeal against the decision to cap only its costs so as to keep the total within the Aarhus cap, as compared with applying a pro rata reduction in respect of all three of the successful parties.

The claimant appealed, submitting that is was wrong to award more than one set of costs.

The claimant also submitted that it was wrong to absorb all of the Aarhus cap of £10,000 at the permission stage, as the cap applied to the whole costs of full proceedings.

The Court of Appeal held that there was no rule limiting the number of parties that could recover their reasonable and proportionate costs of preparing an Acknowledgement of Service if permission was refused to a claimant, and so the appeal on that point was dismissed.

The High Court held that the principles established in

R (Mount Cook Land Ltd) v Westminster City Council [2004] C.P Rep. 12

applied to statutory review cases as well as judicial review claims:

“It is plain that the guidance given… about the recoverability of the costs of an Acknowledgement of Service and summary grounds when permission is refused, was and is equally applicable to both judicial review and statutory review claims.”

The Court of Appeal then reviewed the judgments in

R (on the application of Mount Cook Land Limited) v Westminster City Council [2003] EWCA Civ 1346

and

Bolton Metropolitan District Council and others v Secretary of State for the Environment [1995] 1 WLR 1176,

and gave guidance on the extent to which the costs of multiple parties will be proportionate and therefore recoverable.

The Court of Appeal also rejected the argument that it was wrong to absorb all of the Aarhus cap at the permission stage.

The Court of Appeal also held that the position of interested parties was the same as that of actual defendants but observed that an interested party had greater freedom than a defendant to choose the extent to which they were involved in the proceedings.

The Court of Appeal also observed that it was wrong to introduce material surrounding the introduction of a new part of the Civil Procedure Rules:

 

“That is not good practice. The Rules say what they say and will be interpreted accordingly.”

 

That is an interesting, and potentially important, observation, as courts frequently quote various sections of reports, in particular the reports of Lord Justice Jackson, as background to the contents of Civil Procedure Rules.

That is now forbidden.

 

Please see –

COSTS ROUND-UP

LEGAL OMBUDSMAN: AN OMBUDSMAN’S VIEW OF GOOD COSTS SERVICE SECOND EDITION

COURTS MUST NOT CONSIDER JACKSON REFORMS ETC. SAYS COURT OF APPEAL

Written by kerryunderwood

August 8, 2019 at 8:15 am

Posted in Uncategorized

CPR 44 APPLIED TO REDUCE COSTS AWARDED TO TRUSTEE IN BANKRUPTCY OF SURPLUS ESTATE

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

In

Ardawa v Uppal and another [2019] EWHC 1663 (Ch) (28 June 2019)

the High Court held that the general Civil Procedure Rules about costs in CPR 44 applied to a costs order awarded to a trustee in bankruptcy made payable out of the bankrupt’s surplus estate.

It held that the court that heard and determined an appeal in insolvency proceedings also had jurisdiction to address the amount of costs it awarded, either by directing a detailed assessment or by a summary assessment where appropriate.

In most circumstances, including on the facts of this case, a summary assessment was appropriate as it aligned most closely with the CPR objectives.

Outside formal insolvency proceedings, and where there is an anticipated surplus of funds in the bankrupt’s estate, a bankrupt may challenge his trustee in bankruptcy’s excessive remuneration or expenses under rule 18.35 of the Insolvency (England and Wales) Rules 2016.

If the challenge is well-founded, the court must make an order reducing costs under rule 18.36(4) of the Insolvency (England and Wales) Rules 2016.

Rule 12.1 of the Insolvency (England and Wales) Rules 2016 confirms that the CPR apply to insolvency proceedings, unless disapplied or inconsistent with the Insolvency (England and Wales) Rules 2016.

Further, rule 12.41 of the Insolvency (England and Wales) Rules 2016 specifically applies CPR 44 to costs of insolvency proceedings.

 

Please see –

COSTS ROUND-UP

LEGAL OMBUDSMAN: AN OMBUDSMAN’S VIEW OF GOOD COSTS SERVICE SECOND EDITION

COURTS MUST NOT CONSIDER JACKSON REFORMS ETC. SAYS COURT OF APPEAL

Written by kerryunderwood

August 7, 2019 at 8:30 am

Posted in Uncategorized

RECOVERING COSTS OF ATTENDING INQUESTS

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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

Fullick & Ors v The Commissioner of Police for the Metropolis [2019] EWHC 1941 (QB) (25 July 2019)

the Queen’s Bench Division of the High Court held that the costs of attending an Inquest are potentially recoverable in a claim for damages following death, but the court must ensure that the costs allowed are reasonably necessary and proportionate in the pursuit of the civil claim, but proportionality does not just relate to the sums of money involved and the bill should set out sufficient detail to enable the Costs Judge to assess whether the sums claimed related to investigation of the civil claim.

The importance of the matters to the deceased family must be taken into account when considering proportionality, as well as the value of the claim.

It should also be noted that Inquests often led to the speedy resolution of the civil proceedings.

Here the claimants brought an action against the defendant following the death of a relative, and the Inquest lasted seven days and the jury held that there had been inadequate police policies, procedures and training; the action was then settled without service of a Letter of Claim or Particulars of Claim, for £18,798.

The claimants’ bill totalled £122,000, including the costs of attending two pre-inquest hearings and the Deputy Master allowed those costs and the defendant appealed on the ground that the costs of attending the Inquest should not be recoverable at all here, although accepting that they could be recovered in an appropriate case.

This is believed to be the first decision in relation to the recoverability of inquest costs since the Jackson reforms were implemented in 2013.

Here, the court held that authorities prior to the introduction of the Jackson reforms were still binding, and therefore the fact of this was the first case on this point since those reforms was not relevant.

The High Court reviewed the case law on recoverability of the costs of Inquests, saying that each case will depend upon its own facts, but first the court should consider whether any of the costs of an Inquest can in principle be claimed in the civil proceedings, and once that threshold of relevance has been passed then the Costs Judge will decide whether the costs claimed in respect of the Inquest were proportionate to the matters in issue in the civil proceedings.

That will be dealt with in the normal way that proportionality is dealt with in any other case.

 

Please see –

COSTS ROUND-UP

LEGAL OMBUDSMAN: AN OMBUDSMAN’S VIEW OF GOOD COSTS SERVICE SECOND EDITION

COURTS MUST NOT CONSIDER JACKSON REFORMS ETC. SAYS COURT OF APPEAL

Written by kerryunderwood

August 7, 2019 at 8:21 am

Posted in Uncategorized

LEGAL OMBUDSMAN: AN OMBUDSMAN’S VIEW OF GOOD COSTS SERVICE SECOND EDITION

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

I set out below in full the publication by the Legal Ombudsman: An Ombudsman’s View of Good Costs Service – Second Edition.

190509-An-Ombudsman-view-of-good-costs-service-01190509-An-Ombudsman-view-of-good-costs-service-02190509-An-Ombudsman-view-of-good-costs-service-03190509-An-Ombudsman-view-of-good-costs-service-04190509-An-Ombudsman-view-of-good-costs-service-05190509-An-Ombudsman-view-of-good-costs-service-06190509-An-Ombudsman-view-of-good-costs-service-07190509-An-Ombudsman-view-of-good-costs-service-08190509-An-Ombudsman-view-of-good-costs-service-09190509-An-Ombudsman-view-of-good-costs-service-10190509-An-Ombudsman-view-of-good-costs-service-11190509-An-Ombudsman-view-of-good-costs-service-12190509-An-Ombudsman-view-of-good-costs-service-13190509-An-Ombudsman-view-of-good-costs-service-14190509-An-Ombudsman-view-of-good-costs-service-15190509-An-Ombudsman-view-of-good-costs-service-16190509-An-Ombudsman-view-of-good-costs-service-17190509-An-Ombudsman-view-of-good-costs-service-18

Written by kerryunderwood

August 6, 2019 at 8:00 am

Posted in Uncategorized

COURTS MUST NOT CONSIDER JACKSON REFORMS ETC. SAYS COURT OF APPEAL

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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.

 

It has become very common indeed, almost standard practice, for courts to refer to Lord Justice Jackson’s Report and his reforms, as well as other extraneous material, when interpreting the Civil Procedure Rules.

In

Campaign to Protect Rural England – Kent Branch v Secretary of State for Communities and Local Government and another [2019] EWCA Civ 1230 (15 July 2019)

the Court of Appeal strongly disapproved of this practice and said that it was wrong to introduce material surrounding the introduction of a new part of the Civil Procedure Rules:

“That is not good practice. The Rules say what they say and will be interpreted accordingly.”

Quite right too.

Parliamentary material can only be referred to in rare circumstances – see Pepper (Inspector of Taxes) v Hart [1992] UKHL 3  – and yet courts merrily refer to, and quote from, various reports, but especially Lord Justice Jackson’s Report.

Written by kerryunderwood

August 5, 2019 at 9:22 am

Posted in Uncategorized

COSTS ROUND-UP

leave a comment »


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.

 

Success Fee and Insurance Premium Recoverable on Switch From Legal Aid To Conditional Fee Agreement

In

AB v Mid Cheshire Hospitals NHS Foundation Trust [2019] EWHC 1889 (QB) (16 July 2019)

the High Court dismissed an appeal against a Regional Costs Judge’s order that additional liabilities of a success fee and an ATE insurance premium were recoverable by the claimant, a protected party acting by his mother and litigation friend, from the defendant.

The claimant claimed damages for medical negligence relating to catastrophic brain injuries and the litigation friend instructed solicitors in 2010 and legal aid was granted but the litigation friend discharged the legal aid certificate and entered into a Conditional Fee Agreement in February 2013.

The claim was settled for a £3.8 million lump sum and annual periodic payments, by which time, the claimant had instructed 12 experts in various fields.

The litigation friend’s bill of costs amounted to just over £1 million, including a success fee of £388,173.40 and an ATE insurance premium of £29,256.

The court held that the Regional Costs Judge had been entitled to find that the additional liabilities were reasonably incurred.

The litigation friend’s decision to change to Conditional Fee Agreement funding was reasonable because a serious dispute had arisen between three experts about causation, which was critical to the claim’s success.

Experts had already been instructed and hourly rates had already been an issue for one of them although he had reduced his rate.

The Legal Services Commission’s approach to hourly rates also caused problems with other experts.

The Regional Costs Judge had been entitled to find that the failure of the litigation friend’s solicitors to provide Simmons v Castle advice that the claimant would lose the 10% uplift on damages did not make the decision to change funding unreasonable because advice on that point would not have affected her decision.

The court held that failure to advise on the potential liabilities for a higher hourly rate and success fee did not undermine the reasonableness of the change.

There was a very real risk of no recovery because of the causation issue, meaning that the requirement to have the freedom of a Conditional Fee Agreement to attempt to secure some recovery became the decisive feature.

 

Costs In Statutory Review and Judicial Review Claims

In

Campaign to Protect Rural England – Kent Branch v Secretary of State for Communities and Local Government and another [2019] EWCA Civ 1230 (15 July 2019)

the Court of Appeal held that an unsuccessful claimant in a planning statutory review was required to pay the costs of two defendants and an interested party, and that the collective application of an Aarhus cap for protection of environmental costs to these was permissible.

Thus the court awarded costs against the claimant in relation to three sets of defence costs, but in relation to the costs of the interested party, reduced them to £1,875.50, so that the overall total did not exceed the Aarhus cap of £10,000.

It was accepted that this was an Aarhus claim.

This is a reference to the Aarhus Convention of 1998 which provided that environmental litigation should not be “prohibitively expensive”.

The United Kingdom implemented this by providing in the Civil Procedure Rules, in 2017, that there should be a cap on the total costs liabilities of claimants to other parties.

At present that cap is £10,000.

The interested party did not appeal against the decision to cap only its costs so as to keep the total within the Aarhus cap, as compared with applying a pro rata reduction in respect of all three of the successful parties.

The claimant appealed, submitting that is was wrong to award more than one set of costs.

The claimant also submitted that it was wrong to absorb all of the Aarhus cap of £10,000 at the permission stage, as the cap applied to the whole costs of full proceedings.

The Court of Appeal held that there was no rule limiting the number of parties that could recover their reasonable and proportionate costs of preparing an Acknowledgement of Service if permission was refused to a claimant, and so the appeal on that point was dismissed.

The High Court held that the principles established in

R (Mount Cook Land Ltd) v Westminster City Council [2004] C.P Rep. 12

applied to statutory review cases as well as judicial review claims:

“It is plain that the guidance given… about the recoverability of the costs of an Acknowledgement of Service and summary grounds when permission is refused, was and is equally applicable to both judicial review and statutory review claims.”

The Court of Appeal then reviewed the judgments in

R (on the application of Mount Cook Land Limited) v Westminster City Council [2003] EWCA Civ 1346

and

Bolton Metropolitan District Council and others v Secretary of State for the Environment [1995] 1 WLR 1176,

and gave guidance on the extent to which the costs of multiple parties will be proportionate and therefore recoverable.

The Court of Appeal also rejected the argument that it was wrong to absorb all of the Aarhus cap at the permission stage.

The Court of Appeal also held that the position of interested parties was the same as that of actual defendants but observed that an interested party had greater freedom than a defendant to choose the extent to which they were involved in the proceedings.

The Court of Appeal also observed that it was wrong to introduce material surrounding the introduction of a new part of the Civil Procedure Rules:

“That is not good practice. The Rules say what they say and will be interpreted accordingly.”

 

That is an interesting, and potentially important, observation, as courts frequently quote various sections of reports, in particular the reports of Lord Justice Jackson, as background to the contents of Civil Procedure Rules.

That is now forbidden.

 

Recovering Costs of Attending Inquests

In

Fullick & Ors v The Commissioner of Police for the Metropolis [2019] EWHC 1941 (QB) (25 July 2019)

the Queen’s Bench Division of the High Court held that the costs of attending an Inquest are potentially recoverable in a claim for damages following death, but the court must ensure that the costs allowed are reasonably necessary and proportionate in the pursuit of the civil claim, but proportionality does not just relate to the sums of money involved and the bill should set out sufficient detail to enable the Costs Judge to assess whether the sums claimed related to investigation of the civil claim.

The importance of the matters to the deceased family must be taken into account when considering proportionality, as well as the value of the claim.

It should also be noted that Inquests often led to the speedy resolution of the civil proceedings.

Here the claimants brought an action against the defendant following the death of a relative, and the Inquest lasted seven days and the jury held that there had been inadequate police policies, procedures and training; the action was then settled without service of a Letter of Claim or Particulars of Claim, for £18,798.

The claimants’ bill totalled £122,000, including the costs of attending two pre-inquest hearings and the Deputy Master allowed those costs and the defendant appealed on the ground that the costs of attending the Inquest should not be recoverable at all here, although accepting that they could be recovered in an appropriate case.

This is believed to be the first decision in relation to the recoverability of inquest costs since the Jackson reforms were implemented in 2013.

Here, the court held that authorities prior to the introduction of the Jackson reforms were still binding, and therefore the fact of this was the first case on this point since those reforms was not relevant.

The High Court reviewed the case law on recoverability of the costs of Inquests, saying that each case will depend upon its own facts, but first the court should consider whether any of the costs of an Inquest can in principle be claimed in the civil proceedings, and once that threshold of relevance has been passed then the Costs Judge will decide whether the costs claimed in respect of the Inquest were proportionate to the matters in issue in the civil proceedings.

That will be dealt with in the normal way that proportionality is dealt with in any other case.

 

Non-Party Costs Orders And Disclosure

In

Rudd v Bridle & Anor [2019] EWHC 1986 (QB) (24 July 2019)

the Queen’s Bench Division of the High Court refused a claimant’s application for disclosure of the defendants’ funding arrangements, and in doing so set out the relevant legal principles.

The purpose of the application was to obtain information to support an application for a costs order against a non-party under section 51(3) of the Senior Courts Act 1981.

Here, the claimant succeeded in part against the first individual defendant, but failed against the second company defendant.

The losing individual was ordered to pay half of the claimant’s costs, but to pay, on the indemnity basis, the claimant’s costs in relation to the failed action against the company.

The claimant sought an order relating to “the identity of the individuals, companies or entities who have financed or provided financial support to the defendants or either of them during and in relation to the present litigation and related documents.”

The court set out the general principles:

Funding Disclosure

Legal framework

8. The basic legal framework is not in dispute. The court has power to make orders for costs against non-parties. This is part of the general power to make orders as to the costs of proceedings which is conferred by s 51(3) of the Senior Courts Act 1981: see Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965. There are many circumstances that could in principle justify a third-party costs order, but commonly, third parties are targeted on the basis that they have funded an unmeritorious claim or defence.

9. The factors to be considered, and the relevant principles, have been the subject of consideration in a substantial number of reported and unreported cases, including Symphony Group Plc v Hodgson[1994] QB 179 (CA), Hamilton v Al Fayed (No 2)[2002] EWCA Civ 665[2003] QB 1175Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Others [2004] UK PC 39 [2004] 1 WLR 2807,Petroleo Brasileiro SA v Petromec Inc [2005] EWHC 2430 (Comm) [2005] All ER (D) 48, and Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23. The general principles that can be extracted from these authorities include the following:

(1) The power to make a costs order against a non-party is exceptional in the sense that such orders are not usually made. Such an order may only be made where there has been conduct by the non-party such as to render the order just and reasonable: see Symphony Group at 192H (Balcombe LJ);

(2) The power will not generally be used against “pure funders”, that is to say persons who provide financial support to a litigant but who have no personal interest in the litigation, who do not stand to benefit from it, who do not fund the litigation as a matter of business, and who do not seek to control its course: Dymocks [25(1) – (3)] (Lord Brown).

10. The modern jurisprudence is well summarised in Turvill v Bird [2016] EWCA Civ 703[2016] BLR 522, where Hamblen LJ (with whom Gross LJ agreed) said this:

“24. A number of recent authorities have stressed that this is a jurisdiction which must be exercised in the interests of justice and that its exercise should not be overcomplicated by authority.”

He was referring, among others, to these observations of Moore-Bick LJ in the Deutsche Bank case at [62]:

“We think it important to emphasise that the only immutable principle is that the discretion must be exercised justly. It should also be recognised that, since the decision involves an exercise of discretion, limited assistance is likely to be gained from the citation of other decisions at first instance in which judges have or have not granted an order of this kind.”

11. Hamblen LJ went on to say this:

“27. The authorities illustrate “the variety of circumstances in which the court is likely to be called upon to exercise the discretion” and “the kind of considerations upon which the court will focus”, but are not to be treated as providing “a rulebook”. The kind of considerations illustrated by the authorities include the following:

(1) Whether the non-party funds the proceedings and substantially also controls or is to benefit from them and is the “real party” to them;

(2) Whether the non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit;

(3) Whether there is impropriety by the non-party in the pursuit of the litigation.

(4) Whether the non-party causes costs to be incurred….

28.(1) (2) and (3) are all examples of circumstances in which non-party costs orders have been made. Generally (4), causation, is also required “to some extent” (per Morritt LJ in Global Equities Ltd v Globe Legal Services Ltd [1999] BLR 232) although it is not a necessary pre-condition, as held in Total Spares & Supplies Ltd v Antares SRL [2006] EWHC 1537 (Ch). In that case, however, there was still a causal link between the non-party’s actions and the claimant’s costs recovery in that he had deprived the claimant of any realistic opportunity of recovering its costs. The link was with the recovery of costs rather than the incurring of costs, but in both cases the claimant has to bear costs in circumstances where he otherwise would not have done.”

12. Procedurally, a court considering whether to exercise the power to make a third-party costs order must add the third party to the proceedings for the purposes of costs only, and give the person a reasonable opportunity to attend a hearing at which the court will consider the matter further: CPR 46.2(1). There may of course be a need to identify third parties, as a preliminary step towards engaging them in this process. Funders may be covert, or anonymous. It is clear that the court has a discretionary power, ancillary to its costs jurisdiction, to require a party to disclose to the other party the names of those who have financed the litigation: Abraham v Thompson[1997] 4 All ER 362, 368 (CA), Raiffeisen Zentralbank Osterreich AG v Crossseas Shipping Ltd[2003] EWHC 1381 (Comm)[7] (Morison J). This is the power relied on by the claimant on this application.

13. There is authority that this power extends to directing the disclosure of information going beyond the mere identity of the third-party funder. The court can make whatever ancillary orders will make the section 51 remedy effective, so that in an appropriate case the court may exercise a discretion to order more against the party who has been funded than simply the disclosure of the names of those individuals who have funded the litigation: see Automotive Latch Systems Ltd v Honeywell International Inc [2008] EWHC 3442 (Comm) [13], [16] (Flaux J).

14. The disclosure sought and ordered in the Automotive Latch case extended to the identities of any funders; the amount of such funding; the terms on which it was provided; the extent of each such party’s involvement in the conduct of the action; and the nature and extent of the third party’s interest (financial or otherwise) in the outcome of the action: see ibid [3] and [17]. The order sought on this application tracks the form of order granted in that case.”

On the facts, the court refused the application.

 

CPR 44 Applied to Reduce Costs Awarded To Trustee In Bankruptcy Of Surplus Estate

In

Ardawa v Uppal and another [2019] EWHC 1663 (Ch) (28 June 2019)

the High Court held that the general Civil Procedure Rules about costs in CPR 44 applied to a costs order awarded to a trustee in bankruptcy made payable out of the bankrupt’s surplus estate.

It held that the court that heard and determined an appeal in insolvency proceedings also had jurisdiction to address the amount of costs it awarded, either by directing a detailed assessment or by a summary assessment where appropriate.

In most circumstances, including on the facts of this case, a summary assessment was appropriate as it aligned most closely with the CPR objectives.

Outside formal insolvency proceedings, and where there is an anticipated surplus of funds in the bankrupt’s estate, a bankrupt may challenge his trustee in bankruptcy’s excessive remuneration or expenses under rule 18.35 of the Insolvency (England and Wales) Rules 2016.

If the challenge is well-founded, the court must make an order reducing costs under rule 18.36(4) of the Insolvency (England and Wales) Rules 2016.

Rule 12.1 of the Insolvency (England and Wales) Rules 2016 confirms that the CPR apply to insolvency proceedings, unless disapplied or inconsistent with the Insolvency (England and Wales) Rules 2016.

Further, rule 12.41 of the Insolvency (England and Wales) Rules 2016 specifically applies CPR 44 to costs of insolvency proceedings.

 

Provisional Assessments: Jurisdiction of Costs Officers And Appeals

In

PME v The Scout Association (30 July 2019), SCCO

the Senior Courts Costs Office has given guidance as to the jurisdiction of costs officers to undertake provisional assessments, and the scope of appeals from provisional assessments.

The Master referred to “costs officer” in his judgment as an “authorised court officer”, and held that costs officers had jurisdiction to conduct provisional assessments.

Under CPR 44.1 an “authorised court officer” means any officer of the County Court, a district registry of the High Court, the Principal Registry of the Family Division, the High Court or of the Senior Courts Costs Office, who is authorised by the Lord Chancellor to assess costs.

He interpreted CPR 47.3 (jurisdiction of authorised costs officer), supplemented by Practice Direction 47.3, and CPR 47.15 (provisional assessment), supplemented by Practice Direction 47.14, to mean that they should and CPR 47.15 did not alter that jurisdiction.

CPR 47.3 was not specifically mentioned in Practice Direction 47.14, where that set out the provisions of CPR and Practice Direction 47 applying to cases falling within CPR 47.15 (provisional assessment), because it did not need to be.

CPR 47.3 had to do with the jurisdiction of a costs officer, not with procedure.

Most bills under £75,000 were provisionally assessed and, in the Senior Courts Costs Office, mostly by costs officers.

The rules committee could not have intended that CPR 47.3 and Practice Direction 47.3 should confer upon costs officers jurisdiction to assess bills, and at the same time exclude them from assessing the vast majority of bills, that is those dealt with by way of provisional assessment.

There is no appeal from a provisional assessment, only from an oral hearing requested after such assessment under CPR 47.15(7).

While appeals from decisions of costs officers involve re-hearings rather than review – see CPR 47.24, the appeal of an oral hearing after provisional assessment is confined to a re-hearing of the matters decided at the oral hearing.

There should not be a fresh assessment.

This was consistent with the aim of the provisional assessment process, which was to save time and costs, and it could not be right that a party should have two rights to challenge the provisional assessment.

 

Draft Charge As Security For Costs Does Not Breach Article 6

In

Bull v Desporte [2019] EWHC 1952 (QB) (26 June 2019)

the High Court considered the appropriate sanction for a party’s failure to pay outstanding costs in a previous set of proceedings when they wanted to bring other proceedings.

The High Court held that the Master below had been wrong to order the appellant to pay outstanding costs in privacy proceedings in which she was a defendant, as a condition of her proceeding with a libel claim and this was conceded by the respondent, as it could unfairly stifle the libel claim.

However, the Master had not been wrong to order the appellant to provide a draft form of charge over her property as security for the costs of the libel proceedings.

CPR 3.1(3) empowers the court to order a party to pay a sum of money into court.

The libel claim was interlinked with the privacy claim, in which most of the costs had been incurred.

The appellant was  flouting costs orders incurred as a result of failed applications in her litigation with the respondent, some of which had been totally without merit.

As a result, she had been made subject to a limited civil restraint order.

Requiring the appellant to provide the respondent with security for his costs in the libel claim was, therefore, warranted, provided that it did not disproportionately interfere with her right of access to a court under Article 6(1) of the European Convention on Human Rights.

The judge did not consider that the requirement to provide the charge stifled the libel claim; it did not mean that the appellant would have to pay money to the respondent, but merely provide him with a form of security, and she was able to provide a charging order but had chosen not to.

Written by kerryunderwood

August 2, 2019 at 8:39 am

Posted in Uncategorized

INSOLVENCY ROUND-UP: 4 CASES

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Underwoods Solicitors are solicitors for the Joint Liquidators of The Cambridge Analytica Group of Companies.

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

 

Application to Discharge Receivership Order Refused On Grounds Of Abuse Of Process And Issue Estoppel

In

JSC VTB Bank v Skurikhin and others [2019] EWHC 1407 (Comm) (12 June 2019)

the Commercial Court dismissed a Liechtenstein foundation’s application to discharge an order appointing a receiver by way of equitable execution over the membership shares and interests in an English LLP.

The doctrines of abuse of process and issue estoppel apply to interim orders, and a party cannot seek to discharge an order in reliance on a “material change in circumstances” that it has itself brought about.

The claimant held judgments against the first defendant and in 2015, sought and obtained the receivership order on the basis that the first defendant was to be treated as beneficial owner of the fourth respondent’s assets, including the second defendant membership interests.

The fourth respondent did not attend the hearing. Its grounds for seeking to discharge the receivership order included that the first defendant had no interest in, or right to, the fourth respondent’s assets.

The court held that seeking to discharge the receivership order using evidence and arguments which could have been deployed in 2015 was an abuse of process; the fourth respondent was estopped from arguing issues on which specific findings were made, as well as issues that could have been, but were not, raised then.

Although the receivership order was “inherently temporary” and made on an interim application, it did not follow that the court’s factual findings regarding the first defendant’s beneficial ownership were only provisional.

The claimant asked the court to determine beneficial ownership and appoint receivers with a power of sale; the court could not have made the receivership order unless satisfied on the ownership issue, and its terms were consistent with a final determination of beneficial ownership.

The evidence as to the fourth respondent’s justification for not advancing its arguments in 2015  ,lack of futds for representation, was “unpersuasive”, and the court found that the fourth respondent had chosen not to attend the 2015 hearing and rejected the fourth respondent’s alternative argument that the first defendant’s irrevocable exclusion as a beneficiary of the fourth respondent constituted a “material change in circumstances” justifying discharge of the receivership order.

The fourth respondent could not rely on a change of circumstances it had brought about itself

It was an abuse of process to seek to reopen the receivership order by treating the first defendant’s exclusion as a “material change” when it was wholly within the fourth respondent’s control.

 

English/Welsh Court Has Jurisdiction Over Claims By Insolvent Company Against Scottish Law Firm

In

Holgate v Addleshaw Goddard (Scotland) LLP [2019] EWHC 1793 (Ch) (16 July 2019)

the High Court held that it has jurisdiction over a claim by an insolvent English company against a Scottish law firm in relation to the claimant’s claim for breach of fiduciary duty, breach of contract and negligence.

Jurisdiction as between the constituent parts of the UK in this case, is governed by Schedule 4 to the Civil Jurisdiction and Judgments Act 1982, which contains a “modified” version of the jurisdiction rules contained in the Recast Brussels Regulation.

The court rejected the defendant’s argument that the Regulation and therefore the Civil Jurisdiction and Judgments Act 1982 did not apply because the claim fell within the insolvency exception to the Regulation.

The claim was not closely linked to the administration of the claimant, because the defendant’s role was limited to acting on the administrators’ instructions.

Nor did the claim fall outside the Civil Jurisdiction and Judgments Act 1982 because of the exclusion in Schedule 5 of proceedings by which jurisdiction is conferred on the court having winding-up jurisdiction; in order for this exclusion to apply, the claim must be capable of being brought in the Insolvency and Companies List.

Applying the provisions of Schedule 4, the court held that it had jurisdiction by virtue of a related “anchor claim” in England for misfeasance, even though by the time the present proceedings were issued, the claimant had only applied for permission to bring the misfeasance claim, and had not yet issued that claim. and because the place of performance of the relevant obligation of the law firm was England.

Although the natural persons to whom the obligation was owed ,namely the joint administrators, were predominantly in Scotland, they received the defendant’s advice as agents for the claimant, and therefore the obligation was performed in England and Wales.

The judgment addresses a number of points regarding the allocation of jurisdiction as between constituent parts of the UK.

 

Administrators Granted Section 234 Application To Compel Transfer Of Property; Sub-Buyer Under Non-Completed Contract Can Assert Proprietary Rights Against Head Seller

In

Conn and another v Ezair; Re Charlotte Street Properties Ltd [2019] EWHC 1722 (Ch) (4 July 2019)

the High Court Judge held that a sub-buyer who had contracted to buy various properties and provided full consideration had a beneficial interest in those properties that was enforceable against the head seller.

This was despite the fact that there was no privity of contract between the two parties and that neither the head sale nor the sub-sale contracts had been completed, so no transfer of legal title had occurred.

The court granted an application under section 234 of the Insolvency Act 1986 brought by the administrators of the sub-buyer to compel the head seller to execute transfers of the legal title in favour of the sub-buyer.

In its findings, the court distinguished the Supreme Court decision in

Scott v Southern Pacific Mortgages Ltd (Re North East Property Buyers Litigation) [2014] UKSC 52,

which stated that the buyer of land cannot create a proprietary interest in the land, which is capable of being an overriding interest, until the buyer’s contract has been completed.

The court considered that Scott did not prevent the buyer of land from obtaining an existing beneficial interest, as opposed to creating a new beneficial interest, before the contract was completed.

The court then deployed various equitable principles to deem the transfer of the intermediate buyer’s beneficial interest to have been transferred to the sub-buyer.

It held that the head seller held the relevant properties on constructive trust for the sub-buyer and was estopped by his conduct from denying that the sub-buyer had taken over the intermediate buyer’s beneficial interest in the properties;

in any event, the sub-buyer could demand specific performance under its contract with the intermediate buyer and require the intermediate buyer to demand specific performance of the head contract, namely, transfer of the legal title to the intermediate buyer and on to the sub-buyer.

 

CPR 44 Applied to Reduce Costs Awarded To Trustee In Bankruptcy Of Surplus Estate

In

Ardawa v Uppal and another [2019] EWHC 1663 (Ch) (28 June 2019)

the High Court held that the general Civil Procedure Rules about costs in CPR 44 applied to a costs order awarded to a trustee in bankruptcy made payable out of the bankrupt’s surplus estate.

It held that the court that heard and determined an appeal in insolvency proceedings also had jurisdiction to address the amount of costs it awarded, either by directing a detailed assessment or by a summary assessment where appropriate.

In most circumstances, including on the facts of this case, a summary assessment was appropriate as it aligned most closely with the CPR objectives.

Outside formal insolvency proceedings, and where there is an anticipated surplus of funds in the bankrupt’s estate, a bankrupt may challenge his trustee in bankruptcy’s excessive remuneration or expenses under rule 18.35 of the Insolvency (England and Wales) Rules 2016.

If the challenge is well-founded, the court must make an order reducing costs under rule 18.36(4) of the Insolvency (England and Wales) Rules 2016.

Rule 12.1 of the Insolvency (England and Wales) Rules 2016 confirms that the CPR apply to insolvency proceedings, unless disapplied or inconsistent with the Insolvency (England and Wales) Rules 2016.

Further, rule 12.41 of the Insolvency (England and Wales) Rules 2016 specifically applies CPR 44 to costs of insolvency proceedings.

Written by kerryunderwood

August 1, 2019 at 8:11 am

Posted in Uncategorized

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