Archive for November 2019
STANDARD COSTS MEANS FIXED COSTS: COURT OF APPEAL DECISION
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
Ho v Adelekun [2019] EWCA Civ 1988
the Court of Appeal reinstated the decision of the Deputy District Judge that fixed costs continue to apply to a claim unless and until it is allocated to the multi-track and thus overturned the decision of the Circuit Judge on appeal.
This was a personal injury claim subject to the fixed recoverable cost scheme and the claimant accepted the defendant’s offer of £30,000 and which stated:
“If the offer is accepted within 21 days, our client will pay your client’s legal costs in accordance with Part 36 Rule 13 of the Civil Procedure Rules, such costs to be subject to detailed assessment if not agreed.”
The day after making the offer it was agreed that the matter be transferred from the fast track to the multi-track, but re-allocation never occurred as the offer was accepted before it could take place.
Had the matter been re-allocated to the multi-track, then the claimant would have been entitled to open, unfixed costs following the decision in
Qader v Esure Services Ltd [2016] EWCA Civ 1109
Here, the parties agreed a Tomlin Order stating:
“The defendant do pay the reasonable costs of the claimant on the standard basis to be the subject of detailed assessment if not agreed…”
The Deputy District Judge held that the action was subject to fixed recoverable costs, but on appeal a Circuit Judge held that fixed costs did not apply.
Here the Court of Appeal reinstated the decision of the Deputy District Judge.
The Court of Appeal said that for the sake of clarity:
“…parties who wish to settle on terms that fixed costs will be payable would be well advised to avoid reference to assessment “on the standard basis” in any offer letter or consent order which may be drawn up following acceptance of an offer.”
The correct reference in a fixed costs case is to CPR 36.20, and not CPR 36.13, although the Court of Appeal held that that did not affect the outcome in such cases.
Comment
In my blog on the Circuit Judge decision in this matter I commented as follows:
There are no score draws at court, or in my blogs.
On balance, but we are talking 51-49, my view is that the Deputy District Judge was right, that the Circuit Judge was wrong, and that the Court of Appeal should reinstate the Deputy District Judge’s decision, that is that fixed costs apply.
See my blog –
CONSENT ORDER TRUMPS FIXED COSTS
RYANAIR LIENS CASE GOES TO SUPREME COURT
Underwoods Solicitors have been advising and assisting Bott & Co Solicitors Ltd in relation to this matter.
Bott & Co Solicitors Ltd have been granted permission to appeal to the Supreme Court by the Supreme Court itself in relation to the issue of solicitors’ liens where a third party – Ryanair here – deliberately sends damages to the client, and not the solicitor acting for the client.
The Supreme Court will hear this matter on Tuesday 27 October 2020.
Very obviously that acts as a major disincentive to solicitors to take the risk of working on a no-win, no-fee basis where there will be no fund from which to take the costs.
It was thought that this issue had been put to bed by the Supreme Court itself in
Gavin Edmondson Solicitors Ltd v Haven Insurance Company Ltd [2018] UKSC 21
where it held that Haven Insurance must pay to the solicitors the costs that were due to the solicitors from their own client in circumstances where the insurance company had paid damages direct to the solicitor’s client.
Any other decision would effectively render the Courts and Legal Services Act 1990, with its introduction of Conditional Fee Agreements, useless and remove the major current method of providing access to justice, following the removal of legal aid.
Here, in
Bott & Co Solicitors Ltd v Ryanair DAC [2019] EWCA Civ 143
the Court of Appeal, in a decision bizarre even by its own recent anti-access to justice stance –
(see Herbert v HH Law [2019] EWCA Civ 527 )
declined to follow the Supreme Court’s decision in Edmondson, technically distinguishing it on grounds that would cause a first day trainee at my firm to get a rollicking.
Had Ryanair’s conduct been that of a solicitor it would be in clear, repeated and serious breach of the Solicitors Code of Conduct specifically indicative behaviour 11.4 which provides that you must ensure that you do not communicate with another party when you are aware that the other party has retained a lawyer in a matter, except:
(a) to request the name and address of the other party’s lawyer; or
(b) the other party’s lawyer consents to you communicating with the client; or
(c) where there are exceptional circumstances.
see my blog –
SOLICITORS DENIED LIEN; THE RYANAIR CASE
After the Unison decision, where again the Supreme Court had to overturn an anti-access to justice Court of Appeal decision, this is the most important access to justice matter to go to the Supreme Court in recent years.
I understand that the Law Society declined to intervene in relation to the Permission to Appeal stage.
It is to be hoped that the Law Society now takes a different view and intervenes in this matter of great importance to all solicitors – and most importantly their clients – whatever type of work is involved.
Here is my comment on the Court of Appeal decision in this case.
The Senior Judiciary need to think through rather more carefully the whole issue of access to justice and litigation and how it may be delivered.
At one level, lawyers are being encouraged to use portals and follow protocols and do everything to avoid litigation, and yet Bott & Co Solicitors Limited appear to be being punished for using such a scheme, and for making significant profits from it.
What on earth is the relevance to the legal principles of the fact that Bott’s income from claims against Ryanair was over £100,000 a month? (see Paragraph 16 of the judgment).
What is the relevance of the number of claims that Bott were handling, except to show the success of the scheme and the attraction to members of the public?
So, at one level, we are consistently urged to be efficient and be a business, with the provision of legal services opened up to every Tom Dick and Harry, but when a firm does exactly that they are punished by the courts by being refused a lien.
I can see no logical difference between the pre-action road traffic portal, where 99% of cases are settled, and the scheme operated by Bott & Co Solicitors Limited.
This decision should be overturned by the Supreme Court.
I deal with the decision of the High Court and the Supreme Court in my blogs –
COURT REFUSES TO GRANT SOLICITOR LIEN FOR COSTS ; and
SOLICITORS’ LIENS, RETAINERS, CFA LITE AND UNCONSCIONABLE CONDUCT – THE HAVEN INSURANCE COMPANY CASE
Underwoods Solicitors have been advising and assisting Bott & Co Solicitors Ltd in relation to this matter.
FAILED FRAUD ALLEGATION MEANS INDEMNITY COSTS
Same Must Apply to Fundamental Dishonesty
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
Natixis S.A v Marex Financial & Ors [2019] EWHC 2549 (Comm)
the Commercial Court, part of the Queen’s Bench Division of the High Court, awarded indemnity costs against a party which alleged fraud and lost.
This is in fact the usual position, even on discontinuance – see e.g. Clutterbuck v HSBC Plc [2015] EWHC 3233 (Ch) .
The significance of this decision, and previous ones, is that where an allegation of fundamental dishonesty in a personal injury action fails, then, as night follows day, an indemnity costs order should always be made against the defendant.
PERSONAL INJURY NEGLIGENCE: SUBSEQUENT EVIDENCE NOT RELEVANT IN TARIFF SCHEME
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
the Supreme Court upheld the decision of the Court of Appeal that in a claim under the tariff-based compensation scheme for miners suffering from Vibration White Finger, the correct time for assessing the value of the claim for negligence purposes was the time of the original claim.
Consequently, in contrast to the position at common law in non-tariff schemes – see
Bwllfa and Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426
– subsequent evidence tending to show that the claim was worthless, was inadmissible.
Here, a subsequent medical report suggested that the claimant’s symptoms would have been insufficient to found the basis of a valid services claim.
Only evidence available at the time of the notional claim could be considered. Subsequent evidence was “not relevant when constructing the counterfactual situation which would have arisen if Mr Watkins’ solicitors had fulfilled their duty to him”.
Had Mr Watkins pursued a services claim it would have proceeded under the Scheme’s procedures and he would have had a limited second medical examination and there would have been no equivalent of the expert’s report.
His entitlement to a services award would have been decided by the application of the Scheme and there was no justification for considering a further medical examination and report which would not have been commissioned under the Scheme.
The Supreme Court’s Press Summary is here:
Background To The Appeal
This appeal relates to a compensation scheme (the “Scheme”) set up in 1999 by the Department for Trade and Industry to provide tariff-based compensation to miners employed by the British Coal Corporation (“British Coal”) who suffered from a medical condition called vibration white finger (“VWF”) as a result of excessive exposure to vibration through the use of vibratory tools. The Scheme provided for compensation to be paid for pain, suffering and loss of amenity (“General Damages”) and handicap on the labour market and other financial losses including past and/or future loss of earnings (“Special Damages”), which could include a services award to cover the need for assistance in performing specified domestic tasks. Rather than conducting an individual assessment of each claimant’s ability to carry out the specified tasks, the Scheme applied a presumption based on the condition reaching a certain level of severity. Mr Arthur Watkins was employed by British Coal as a miner from 1964 until 1985 and had developed VWF by the early 1980s. In 1999 he instructed the appellant to act for him in relation to a claim under the Scheme. Findings from a medical examination and interview indicated that Mr Watkins could obtain General Damages and qualified for the presumption in his favour that he satisfied the requirements for a services award. Mr Watkins sought a services award. In 2003 he was instead offered the tariff award for General Damages in full and final settlement of his claims. The appellant wrote to Mr Watkins on 18 February 2003 reporting the offer. After a telephone conversation with an employee of the appellant, Mr Watkins accepted the offer. In 2008, Mr Watkins instructed new solicitors to bring a claim against the appellant for professional negligence, on the basis that as a result of the appellant’s negligence Mr Watkins had lost the opportunity to bring a services claim under the Scheme. Mr Watkins died in 2014 and his daughter, Mrs Jean Edwards, was appointed to continue the claim on behalf of his estate. The first-instance court held that the letter of 18 February 2003 and the advice given had been negligent and that had Mr Watkins received appropriate advice he would probably have rejected the offer and pursued his services claim. A jointly instructed medical expert, who had been instructed not to apply the presumption that would have applied under the Scheme, provided a report that concluded Mr Watkins’s symptoms would have been insufficient to succeed on a services claim. The court therefore held that Mr Watkins had suffered no loss and dismissed the claim. Mr Watkins successfully appealed to the Court of Appeal, which decided that the trial judge had been wrong to determine the value of the services claim on the basis of evidence that would not have been available at the time of the notional claim. The appellant seeks to appeal that decision.
The issue in the appeal is whether, in assessing the prospects of success of the negligence claim, the court should have taken account of the further medical report.
Judgment
The Supreme Court unanimously dismisses the appeal and remits the matter for assessment of the value of the loss of the opportunity to pursue the services claim. Lord Lloyd-Jones gives the judgment, with which all members of the Court agree.
Reasons For The Judgment
In order to succeed in his claim in the tort of negligence, Mr Watkins had to establish a negligent breach of duty, causation and loss. The trial judge found that there had been a negligent breach of duty and that causation was established. Neither conclusion has been appealed [22]. To succeed, therefore, Mr Watkins’s estate must prove loss, specifically that in losing the opportunity to pursue the claim Mr Watkins lost something of value, i.e. that his services claim had a real and substantial rather than merely a negligible prospect of success [23]. Mr Watkins’s original claim was within the Scheme, and it is therefore necessary to consider whether the claim was of more than negligible value within the context of that Scheme [25]. The expert report was concerned with causation, not loss, and was prepared to assist in the assessment of whether Mr Watkins’s failure to pursue a services claim arose from negligent advice or from an inability to assert truthfully that he had lost the ability to perform activities that would qualify him for a services award [27]. As a result, the expert was instructed not to apply the presumption used under the Scheme [28]. Had Mr Watkins pursued a services claim it would have proceeded on the basis of the Scheme’s procedures. He would have had to undergo only a limited second medical examination and there would have been no equivalent of the expert’s report. His entitlement to a services award would have been decided by the application of the Scheme’s presumption. There was no justification for considering a further medical examination and report which would not have been commissioned under the Scheme and therefore the judge erred in taking this into account [29]. Given other findings in the expert report, the court is unable to accept that the services claim had no chance of success so that the lost claim was of no value [30]. The first-instance judge should have proceeded to assess the value of the lost claim on a loss of opportunity basis. The court therefore dismisses the appeal and remits the matter for that assessment [32].
References in square brackets are to paragraphs in the judgment
COSTS BUDGETING: LATEST NEWS
Kerry Underwood offers consultancy services in relation to this and other matters and details are here.
I am grateful to Simon Gibbs and his excellent blog – COSTS BUDGETS AND EXPERTS’ TRIAL FEES for much of the comment that appears in this piece.
Costs Budget and Trial Fees and Trial Preparation Fees
On 1 October 2019, the update to Practice Direction 3E, of 7.4, came into force and the new Guidance Notes on Precedent H, following that update, moved trial brief fees from the Trial phase to the Trial Preparation phase, no doubt on the basis that the brief is delivered before the trial commences and generally that delivery creates a liability for the brief fee as between solicitor and counsel, whether or not any trial ever takes place.
Simon Gibbs notes that the Guidance Notes do not give any indication as to what phase any experts’ fees for attending trial should be placed in.
Traditionally, these fees have also been placed in the Trial phase, just like trial brief fees previously were, but most experts expect payment of part, if not all, of their fee for the trial, even if the matter settles early, on exactly the same basis that counsel do.
Simon Gibbs raises the point that, on that basis, experts’ fees should also be placed in the Trial Preparation phase, rather than the Trial phase.
Given the very substantial level of experts’ fees, this is no academic point and may result in very significant sums being recovered, or not, depending upon the phase where the fees truly belong, and the actual approved budget.
Leading Counsel’s Fees Can Still Be Recovered, Even If Not Approved
As will be seen in the case I report here, the fact that a particular expenditure is not approved by the court will not prevent it being recovered provided the costs for that phase are not exceeded.
In
Easteye Ltd v Malhotra Property Investments Ltd and others [2019] EWHC 2820 (Ch)
the Chancery Division of the High Court held that the statement by the Deputy District Judge in a costs management decision, where there had been no oral hearing, that:
“£120,000 is allowed in respect of the Claimant’s trial phase and instruction of leading Counsel is not approved”
was adequate so as to satisfy the test in
English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605
“It is not, in general, conducive to the efficient and cost-effective dispatch of costs management decisions if every part of those decisions has to be justified with extensive reasons like a judgment after trial” (Paragraph 34).
It was clear that the judge had preferred the defendant’s submission to those of the claimant and that was sufficient.
Furthermore, such an order did not prevent the claimant from recovering costs in relation to leading counsel.
“27. In this case, the total budget fixed by Deputy District Judge Pescod was £120,000 for the claimant’s trial phase and it is up to the claimant whether it spends all of that on junior counsel, or spends some of it on junior counsel and some on leading counsel, or indeed spends all of it on leading counsel. If they succeed in obtaining a costs order, they can expect to receive £120,000 for the trial phase. It would be possible to depart from the budgeted amount only if good reason is shown. So I do not regard that, in itself, as being a flaw in the Deputy District Judge’s order. Rather, I agree with Mr Pryor. The words which the Deputy District Judge has added to paragraph 5(iv) in his order are not intended to limit recoverability below the £120,000 so that nothing could be recovered in respect of leading counsel, but are intended to explain why the figure of £120,000 has been approved rather than the higher figure sought of £210,000; and that is because the Deputy District Judge was not satisfied it was appropriate to employ leading counsel.”
First Page of Precedent H Only
Practice Direction 3E, Paragraph 6(C) reads:
“In cases where a party’s budgeted costs do not exceed £25,000 or the value of the claim as stated on the claim form is less than £50,000, the parties must only use the first page of Precedent H.”
Fairly obviously the need to complete only the first page where the budgeted costs do not exceed £25,000 is that it would be disproportionate for a full budget to be prepared and in a budget of £25,000 or less the summary page will allow the court to make whatever decision is necessary.
I now quote from Simon Gibbs’ blog on the second part of the quoted section from the Practice Direction.
“The logic behind the first part of the provisions, that only the first page of a costs budget needs to be completed where the budgeted costs do not exceed £25,000, is presumably fairly straightforward. Where the costs being sought in the budget are relatively modest, it would be an unnecessary additional expense to prepare a full budget. It should be possible for a court to either approve the budget as drafted, or make minor amendments to it, based on the summary page alone.
The logic behind the second part of the provision, that only the first page of a costs budget needs to be completed where the value of the claim is stated to be less than £50,000 is harder to discern. At first blush, it might be viewed that where the value of the claim is less than £50,000 this would indicate that the matter is likely to relatively straightforward in terms of complexity and a full costs budget, showing a detailed breakdown of the estimated work and the assumptions behind the figures, is likely to be unnecessary to control costs through the costs management process.
However, the primary purpose of costs management is to control the overall level of costs that may be incurred. Outside of fixed costs matters (that are not subject to costs management in any event), there is not necessarily any direct link between the level of costs that may be incurred and the value of the claim. If the purpose of costs budgeting is to control excessive costs, why would the value of the claim be relevant as to the amount of detail that is required within the costs budget? The trigger point is surely the level of costs being sought, not the value of the claim.
Further, in addition to controlling the overall level of costs being incurred in litigation in general, a central part of costs management is to ensure that the recoverable costs are proportionate to the amounts and issues in dispute. Costs management therefore becomes much more important where the risk of disproportionate costs being incurred is greatest. Which of these two examples shows the greatest risk of disproportionate costs:
a commercial claim valued at £1,000,000 where the Claimant’s costs budget is claimed at £100,000, or
a clinical negligence claim valued at £30,000 where the Claimant’s costs budget is claimed at £100,000?
Surely it is the latter.
If that is so, where is the logic in requiring a full costs budget in the first example but only the first page in the second? The same amount of costs are claimed within each budget but the danger of disproportionality is greater in the second example. The task of the judge at the CCMC to set a proportionate budget in the second example is made much harder if the first page of the budget alone has been completed, meaning no assumptions are set out. Trying to tailor the directions so as to control the costs, and thereby reduce the proposed budget, becomes a much more difficult task with the first page only completed.”
Simon Gibbs states that the value of any claim should be irrelevant as to the issue of how detailed the costs budget needs to be and it is only the issue of the amount of costs to be claimed which should determine whether or not only the first page of Precedent H should be completed.
That must be right.
That is presumably also the logic as to why claims of £10 million or more do not require costs budgets, although my view is that all cases of all clients, except where fixed recoverable costs apply, should be subject to costs budgeting.
COSTS BUDGETING DECISIONS: DETAILED REASONS NOT REQUIRED
Kerry Underwood offers consultancy services in relation to this and other matters and details are here.
Leading Counsel’s Fees Can Still Be Recovered, Even If Not Approved
In
Easteye Ltd v Malhotra Property Investments Ltd and others [2019] EWHC 2820 (Ch)
the Chancery Division of the High Court held that the statement by the Deputy District Judge in a costs management decision, where there had been no oral hearing, that:
“£120,000 is allowed in respect of the Claimant’s trial phase and instruction of leading Counsel is not approved”
was adequate so as to satisfy the test in
English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605
“It is not, in general, conducive to the efficient and cost-effective dispatch of costs management decisions if every part of those decisions has to be justified with extensive reasons like a judgment after trial” (Paragraph 34).
It was clear that the judge had preferred the defendant’s submission to those of the claimant and that was sufficient.
Furthermore, such an order did not prevent the claimant from recovering costs in relation to leading counsel.
“27. In this case, the total budget fixed by Deputy District Judge Pescod was £120,000 for the claimant’s trial phase and it is up to the claimant whether it spends all of that on junior counsel, or spends some of it on junior counsel and some on leading counsel, or indeed spends all of it on leading counsel. If they succeed in obtaining a costs order, they can expect to receive £120,000 for the trial phase. It would be possible to depart from the budgeted amount only if good reason is shown. So I do not regard that, in itself, as being a flaw in the Deputy District Judge’s order. Rather, I agree with Mr Pryor. The words which the Deputy District Judge has added to paragraph 5(iv) in his order are not intended to limit recoverability below the £120,000 so that nothing could be recovered in respect of leading counsel, but are intended to explain why the figure of £120,000 has been approved rather than the higher figure sought of £210,000; and that is because the Deputy District Judge was not satisfied it was appropriate to employ leading counsel.”
PORTALS: STAGE 3 AND LATE EVIDENCE: COURT OF APPEAL DECISION
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
Wickes Building Supplies Ltd v Blair [2019] EWCA Civ 1934
the Court of Appeal ruled on the consequences of late service of evidence in the Employers’ Liability and Public Liability Pre-Action Protocol for Low Value Personal Injury Claims, generally known as the portal.
The same principles apply to the road traffic portal.
Here liability was admitted but quantum was not agreed and so the matter proceeded to Stage 3 of the portal process, but the claimant served evidence later than allowed by the rules.
The trial judge disregarded that evidence and determined quantum without reference to it.
The claimant argued that the judge should have dismissed the claim, thus allowing the claimant to start again under Part 7 and adduce the evidence, albeit at the risk of being penalised in costs.
On appeal the Circuit Judge allowed the claimant’s appeal, holding that the matter should have been dismissed, allowing the claimant to start again.
Here, the Court of Appeal restored the original decision of the District Judge, that is that the court can continue to deal with the matter in Stage 3 and ignore the late evidence.
The claimant unsuccessfully relied on paragraph 9 of Practice Direction 8B and the heading is:
“Dismissal of the claim
9.1 Where the defendant opposes the claim because the claimant has –
(1) not followed the procedure set out in the relevant Protocol; or
(2) filed and served additional or new evidence with the claim form that had not been provided under the relevant Protocol,
the court will dismiss the claim and the claimant may start proceedings under Part 7.
(Rule 45.24 sets out the costs consequences of failing to comply with the relevant Protocol.)”
The defendant successfully relied on paragraph 7 of the Practice Direction:
“Evidence – general
7.1 The parties may not rely upon evidence unless –
(1) it has been served in accordance with paragraph 6.4;
(2) it has been served in accordance with paragraph 8.2 and 11.3 [which relate to certificates of recoverable benefits, not relevant to this case]; or
(3) (where the court considers that it cannot properly determine the claim without it), the court orders otherwise and gives directions.
7.2 Where the court considers that –
(1) further evidence must be provided by any party; and
(2) the claim is not suitable to continue under the Stage 3 Procedure,
the court will order that the claim will continue under Part 7, allocate the claim to a track and give directions.
7.3 Where paragraph 7.2 applies the court will not allow the Stage 3 fixed costs.”
“31. Paragraph 9 addresses the situation where a defendant in his acknowledgement of service, or at a later stage, objects to the claim proceeding under the Protocol because the claimant has failed to comply with the procedure under the Protocol or has filed and served additional evidence with the claim form which has not been provided in accordance with the Protocol. But a defendant served with an additional statement not filed in accordance with the Protocol is not obliged to oppose the claim continuing under the Protocol. That situation must arise not infrequently in a process used by litigants in person. If all claims in those circumstances were removed from the Protocol process, it would deprive litigants of the benefits of the relatively inexpensive and speedy resolution of their claims which the Protocol provides. In my judgment, a defendant served with an additional statement not included in the material served under Stage 2 has the choice of opposing the claim proceeding under the Protocol or continuing with the process but objecting to the evidence being considered by the court. In this case, Wickes plainly chose the second option. It is crystal clear from the Acknowledgment of Service that Wickes was opposing the claim but not objecting to the use of the Stage 3 Procedure.
32. In those circumstances, the issue fell to be considered by the district judge under paragraph 7 of the Practice Direction. Under that paragraph, the court at the hearing must disregard any evidence not served in accordance with the Protocol and the Practice Direction unless the court considers that it cannot properly determine the claim without it. If it does conclude that the proper determination of the claimant requires the evidence to be admitted, the court may allow the party to rely on the evidence and, if so, will give appropriate directions under paragraph 7.1(3). In this case, the district judge simply concluded that the statement should be disregarded and proceeded to make a decision on the level of damages. In taking that course, he was acting in accordance with the terms of the Practice Direction and the aims of the Protocol.
33. I agree with Ms Cullen’s submission that, if Judge Hughes’ interpretation of paragraph 9.1 was correct, it would mean that, whenever a defendant objected to the late filing of evidence, the claim would be removed automatically from the Stage 3 Procedure. The court would essentially be deprived of any discretion to deal with the late service of evidence as it considers appropriate. Such a consequence would be contrary to the aims set out in paragraph 3 of the Protocol and may unfairly disadvantage the defendant. By contrast under paragraph 7.1, whilst the default position is that the evidence may not be relied upon, the court has a discretion to order otherwise under 7.1(3) if it considers that it cannot properly determine the claim without it.
34. In this case, by appealing to the circuit judge, the claimant was seeking to overturn the order on the grounds that the district judge should have dismissed his claim as a result of his own failure to comply with the Protocol. As Ms Cullen says, this would allow the claimant to re-litigate the entire claim under Part 7 in the hope of getting a better result.
35. The decision in Phillips v Willis is of no assistance to Ms Robson’s argument. Paragraph 8.1(3) is not disapplied from claims under the Practice Direction. Jackson LJ did not say that a judge conducting a Stage 3 hearing could not exercise the power under paragraph 8.1(3) to order the claim to continue as if the claimant had not used the Part 8 procedure. Rather, he said that, on the facts of that case, it would have been an impermissible exercise of the power to transfer the case out of Part 8 and into Part 7.
36. In my judgment, the correct interpretation of these various provisions is as follows.
(1) At a Stage 3 hearing of a claim where the parties have followed the Protocol but are unable to agree the amount of damages, they may only rely on evidence as permitted under paragraph 7.1 of the Practice Direction.
(2) In the circumstances described in paragraph 9.1 of the Practice Direction, the court is under a duty to dismiss the claim under the Protocol. The claimant may then start proceedings under Part 7, provided the limitation period has not expired. If the claimant is ultimately successful in the Part 7 proceedings, the court under CPR r.45.24 may order the defendant to pay no more than the fixed costs in r.45.18 plus disbursements allowed under r.45.19.
(3) In the circumstances described in paragraph 7.2 of the Practice Direction, the court is under a duty to order that the claim will continue under Part 7. In that event, the claimant is not at risk of his claim being time-barred but under paragraph 7.3 the court will not allow the claimant to recover the Stage 3 fixed costs.
(4) In all other circumstances, the court considering a claim under the Stage 3 Procedure has a discretion under CPR paragraph 8.1(3) to order the claim to continue as if the claimant had not used the Part 8 procedure, but in exercising that power the court must comply with the overriding objective and the aims of the Protocol.”
NON-PARTY COSTS ORDERED AGAINST LIQUIDATOR’S FIRM THAT FUNDED UNSUCCESSFUL LITIGATION
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
Burnden Holdings (UK) Ltd & Anor v Fielding & Anor [2019] EWHC 2995 (Ch)
the Chancery Division of the High Court made a non-party costs order under section 51 of the Senior Courts Act 1981 against a firm which funded unsuccessful proceedings brought by one of its partners as liquidator of a company, the individual partner having already agreed to pay 15% of the costs.
The judge distinguished between the liquidator on the one hand, who was working on the basis of a 50% share of net recoveries, and his firm on the other hand which funded the litigation to the extent of £478,256.
The judge found that the liquidator’s firm did not exert any control over the litigation, but nevertheless had a sufficient interest in the litigation to characterise the firm as a real party for the purposes of a non-party costs order, and it was not a pure funder simply facilitating access to justice, even though its funding had that effect.
The provision of the partner of his services in return for 50% of the net recoveries was not third party funding sufficient to warrant a section 51 order.
While a distinction needed to be drawn between the firm, and one of its partners, nevertheless the firm stood to gain financially from that partner’s remuneration, and in terms of its funding the firm would recover 2.25 times its funding if the case was successful.
The only asset in the liquidation was the claim against the defendants.
The court held that it was just, in all the circumstances, to apply the Arkin cap, that is to limit the firm’s liability under the section 51 non-party costs order to the extent of its own funding.
The imposition of the Arkin cap is discretionary.
Here, the court took the view that the Arkin cap struck a fair balance between the successful defendants’ entitlement to costs and the risk of discouraging funding that facilitated access to justice, as the funding here had done.
The court also observed that the funding here had initially assisted successful appeals when other funding was not available and, while the firm should be treated as a real party in relation to the application, it did not stand to gain an enormous return on its investment, and its funding also stood to benefit creditors of the claimant.
Much of the funding was in relation to satisfying interim orders for costs in favour of the defendant and security for costs, and the additional funding amounted to only £100,000 and the defendants’ costs were a great deal more.
The case has potential significance for liquidators and the court said this about the individual liquidator’s work in return for 50% of net recoveries, as opposed to the specific cash funding by the firm:
“While in a loose sense, it might be said that Mr Hunt was “funding” his own work as liquidator by agreeing to be paid only from recoveries in the event that there were any, Mr Potts did not suggest that this would justify a liquidator being made liable for the costs of another party in litigation brought by the company in liquidation. It was common ground among Counsel that there is no reported case of such an order being made. There was no evidence as to what an appropriate percentage share of recoveries might be, so far as a liquidator’s remuneration in an equivalent liquidation is concerned. Mr Potts did not suggest that the level of recovery was per se objectionable in that sense.”
The court therefore refused to place a value on the work of Mr Hunt for inclusion in the Arkin cap.
The court also held that as the appointment of a liquidator is personal to that individual liquidator, it is wrong to characterise that individual’s firm as ascertaining control over the liquidation merely by reason of the fact that the individual is a partner in the firm.
There was no criticism of the rate of 2.25 times the funding as the reward if the case was successful, and indeed the court specifically accepted that it was justified.
Limitation by Reference to the Period of Funding
The court limited the order in relation to the defendants’ costs to the period during which the firm provided funding.
The fact that after the period of funding the firm maintained its potential benefit of 2.25 times the amount of the funding did not cause the continuation of the proceedings and nor did it cause the defendants to incur further costs.
Although the firm’s funding ensured that the proceedings were in existence and could therefore continue, the court did not accept that a “but for” test of causation was sufficient to impose liability as a funder when the funding ceased, and indeed others were providing funding.
Consequently, the firm’s liability was limited both to the amount of its funding as the Arkin cap, and to the costs incurred by the defendants during its actual period of funding.
The court here held that there should be no distinction between funds provided to satisfy costs orders and funds provided actually to fund the litigation. All should come into the reckoning for the purposes of the Arkin cap.
This follows the decision in
Excalibur Ventures LLC v Texas Keystone Inc (No.2) [2017] 1 WLR 2221 .
In that case the issue was whether money provided for security for costs should be included in the amount of the Arkin cap, and the court said that it should and found that:
“…no basis upon which a funder who advances money to enable security for costs to be provided by a litigant should be treated any differently from a funder who advances money to enable that litigant to meet the fees of its own lawyers or expert witnesses. Both the provision of security for costs, if ordered by the court, and the payment of the litigant’s own lawyers and experts, are costs of pursuing the litigation which, if not met, will result in the litigation being unable to proceed. I do not understand why contribution to different categories of the costs of pursuing the litigation should attract different regimes. All the sums advanced are used in pursuit of the common enterprise and for the benefit of all of the funders.”
Comment
This is an important decision concerning the potential liability of liquidators and their firms for non-party costs orders.
The judgment contains a detailed analysis of the relevant case law.
Underwoods Solicitors are the solicitors for Crowe UK LLP, the Joint Liquidators of the Cambridge Analytica Group of Companies
LITIGATION FRIEND’S DUTIES AND COURT’S POWER TO END APPOINTMENT
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Kerry Underwood offers consultancy services in relation to this and other matters and details are here.
In
Raqeeb, R (On the Application Of) v Begum & Anor [2019] EWHC 2976 (Admin)
the Administrative Court dismissed an application by Barts Health NHS Trust to terminate the appointment of a litigation friend acting for a child in judicial review proceedings concerning the provision of life-sustaining treatment for the child.
The court reviewed the duties of a litigation friend under CPR 21, and the court’s discretion under CPR 21.7 to terminate a litigation friend’s appointment.
The child, acting through her court-appointed litigation friend, a family member, brought a judicial review challenge against a refusal by the defendant hospital trust to permit the child to be transferred to a hospital in Italy for continued life-sustaining treatment.
During those proceedings, the defendant hospital trust applied for a determination that withdrawing such treatment was in the child’s best interests.
The defendant hospital trust also applied to terminate the court-appointed litigation friend’s appointment as the child’s litigation friend, arguing that the court-appointed litigation friend, owing to her familial love for the child as well as her religious beliefs, lacked the ability to take a balanced and even-handed approach regarding the child’s best interests.
The judge reviewed the authorities and set out the relevant principles.
The court has a wide discretion to terminate a litigation friend’s appointment.
A litigation friend, including one appointed by the court, must be able fairly and competently to conduct proceedings.
This includes acting under proper legal advice, but also being able to exercise some independent judgment on that advice.
A litigation friend who does not act on proper advice may be removed.
The litigation friend must have no interest adverse to that of the child, but there is no principle that a family member cannot act as a litigation friend, so long as they can take a balanced and even-handed approach to the relevant issues.
Religious beliefs of themselves do not disqualify a person from acting as a litigation friend.
Applying these principles, the judge dismissed the defendant hospital trust’s application.
The judge found that the defendant hospital trust’s arguments concerning the litigation friend’s religious views were only relevant to the consequences of a potentially successful outcome to the judicial review application, rather than the merits of the underlying application itself.
The litigation friend had taken legal advice on those merits from the child’s experienced, specialist legal team, and there was no suggestion by that team that the litigation friend acted inappropriately in the context of that advice or had an improper motive.
A litigation friend is an officer of the court whose duty is to take all measures for the benefit of the infant in the litigation – Rhodes v Swithenbank (1889) 22 QB 577.
A litigation friend must take legal advice, but must also be able to exercise some independent judgment on that advice – Nottinghamshire CC v Bottomley [2010] EWCA Civ 756.
COMPENSATION ORDER REGIME FOR DISQUALIFIED PERSONS CONSIDERED FOR FIRST TIME
In
the High Court ordered a disqualified director to pay compensation equal to misappropriated company funds which founded his disqualification.
This is the first case brought by the Secretary of State under the compensation order regime, introduced on 1 October 2015 by sections 15A and 15B of the Company Directors Disqualification Act 1986.
The sections are now supported by Compensation Orders (Disqualified Directors) Proceedings (England and Wales) Rules 2016 (SI 2016/890) and the Disqualified Directors Compensation Orders (Fees) (England and Wales) Order 2016 (SI 2016/1047).
Similar provisions apply to compensation undertakings, the variation or revocation of which is covered by section 15C of the Company Directors Disqualification Act 1986.
The High Court acknowledged academic concern that the new regime conflicted with the Insolvency Act 1986 and the principle of pari passu, which has applied since the mid-nineteenth century.
The court provided directions for allocating the compensation, focussing on specific unsecured creditors whose loss directly benefitted the director by his misconduct, which it considered fair and appropriate on the facts.
The contribution element, for the loss of the company’s assets, was made payable to the Secretary of State rather than the liquidator.
The court analysed the regime, which was designed in the public interest to cover the entirety of the misconduct for which a person may be disqualified under the Company Directors Disqualification Act 1986.
The court held that the regime is free-standing and, as it is based on loss to individual creditors rather than the insolvent company, creates a new cause of action between a director and creditor.
Consequently, there was no direct correlation with the remedies available to creditors under the Insolvency Act 1986.
The judgment is a detailed analysis and explanation of the new law.
Sections 15A and 15B read as follows:
“(1) The court may make a compensation order against a person on the application of the Secretary of State if it is satisfied that the conditions mentioned in subsection (3) are met…
(3) The conditions are that-
(a) the person is subject to a disqualification order… under this Act, and
(b) conduct for which the person is subject to the order… has caused loss to one or more creditors of an insolvent company of which the person has at any time been a director.
(4) An ‘insolvent company’ is a company that is or has been insolvent and a company becomes insolvent if-
(a) the company goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up,
(b) the company enters administration, or
(c) an administrative receiver of the company is appointed.
(5) The Secretary of State may apply for a compensation order at any time before the end of the period of two years beginning with the date on which the disqualification ordered referred to in paragraph
(a) of subsection (3) was made…
(7) In this section and 15B… ‘the court’ means-
(a) in a case where a disqualification order has been made, the court that made the order…”.
Underwoods Solicitors are the solicitors for Crowe UK LLP, the Joint Liquidators of the Cambridge Analytica Group of Companies
COURT HAS POWER TO COMMIT FOR CONTEMPT DURING PROTOCOL
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In
Jet 2 Holidays Ltd v Hughes & Anor [2019] EWCA Civ 1858 (08 November 2019)
the Court of Appeal held that false statements in a witness statement verified by a statement of truth, made by a prospective claimant, in purported compliance with a pre-action protocol, can give rise to contempt and be the subject of an application for committal for contempt, even though proceedings were never issued.
The defendants allegedly falsely claimed that they had had food poisoning while on a holiday arranged by the claimant and notified the claimant of their claims under the Personal Injury pre-action protocol.
The claimant obtained evidence that the defendants’ claims were untrue and rejected them, and the defendants did not commence proceedings.
The claimant sought an order for the defendants to be committed for contempt.
The lower court judge held that he had no jurisdiction to commit for contempt because, reading together CPR 32.14 and CPR 22, his jurisdiction extended only to witness statements served during the course of proceedings commenced under CPR 7.2 (paragraphs 16-21, judgment).
The Court of Appeal held that the court has an inherent power to commit for contempt irrespective of the CPR (CPR 81.2(3) and Practice Direction 81.5.7;
Malgar Ltd v RE Leach (Engineering) Ltd [1999] EWHC 843 (Ch)
and
Griffin v Griffin [2000] EWCA Civ 119.
It is well established that an act might be a contempt of court even if carried out before proceedings had begun.
The defendants’ conduct interfered with the due administration of justice and the parties’ solicitors believed that they were engaged in complying with the Personal Injury Claims pre-action protocol.
The defendants’ actions intended to give the claimant the impression that the defendants were serious about their case.
Pre-action protocols are “now an integral and highly important part of litigation architecture”.
Producing dishonest witness statement contravenes the Pre-Action Conduct Practice Direction paragraph 4 prohibition against a pre-action protocol and the Practice Direction being used as a tactical device to secure an unfair advantage.
The Court of Appeal said that it was unfortunate both that the situation in the present case fell outside CPR 32.14 and that an application to the Administrative Court for permission to bring contempt proceedings had been required under CPR 81.13(2).
It said that the Civil Procedure Rule Committee should examine the matter.
Comment
Quite right. If you engage in any process bringing a claim that you know to be false, you should go to prison.
Simple.
PART 36: EVERYTHING IN FULL HOWEVER SMALL THE MARGIN
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Kerry Underwood offers consultancy services in relation to this and other matters and details are here.
In
Hochtief (UK) Construction Ltd & Anor v Atkins Ltd [2019] EWHC 3028 (TCC)
the Technology and Construction Court, part of the High Court, allowed the claimant the Part 36 bonuses in full, where the claimant beat its own Part 36 offer of £875,000 by just £4,847.
The court awarded indemnity costs from the date of expiry of the time for accepting the offer and interest at 6% above base rate on those costs.
The court also awarded a damages uplift of £65,123.77 in accordance with the statutory formula, and interest on all damages at 6% above base rate.
The decision re-inforces the fact that the starting point is that a claimant who matches or beats its own Part 36 offer, by however small an amount, or indeed nothing where it matches the offer, should get the full Part 36 bonuses.
CONDITIONAL FEE AGREEMENT DEATH CLAUSE VALID: SIGNATURE HEAVILY LIMITS CHALLENGES
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.
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Underwoods Solicitors advised the successful appellant Higgins & Co Lawyers Ltd in this matter.
In
Higgins & Co Lawyers Ltd v Evans [2019] EWHC 2809 (QB)
the Queen’s Bench Division of the High Court held that the death clause contained in the standard Law Society Model Conditional Fee Agreement, which allows a firm to terminate the agreement on the client’s death and recover basic charges from the estate, is valid and enforceable.
Here, the court at first instance had held that the clause was unenforceable on the basis that it was unusual and onerous and was not fairly and reasonably brought to the attention of the client, that is the now deceased client.
This is a lengthy, thorough, exemplary and very important judgment concerning solicitor – client contracts.
The original client was an 89-year-old man with asbestosis, and he instructed Higgins & Co Lawyers Ltd to bring a personal injury claim and signed a Conditional Fee Agreement in the Law Society Model Form and the relevant clause reads:
“(c) Death
This agreement automatically ends if you die before your claim for damages is concluded. We will be entitled to recover our basic charges up to the date of your death from your estate.
If your personal representatives wish to continue your claim for damages, we may offer them a new conditional fee agreement as long as they agree to pay the success fee on our basic charges from the beginning of the agreement with you”.
Here, the client died and Higgins & Co Lawyers Ltd claimed against the estate for its fees.
In relation to the Consumer Rights Act 2015, it was common ground that it applied to the Conditional Fee Agreement as a contract between a trader and a consumer as per section 61 of that Act.
The court held that the death clause was clear and transparent and phrased in simple language and was not hidden and did not require legal training to understand.
Consequently, it was not invalid under section 62 of the Consumer Rights Act 2015.
The original court had held that the clause was unenforceable under the principle set out in
Interfoto Picture Library Limited v Stiletto Visual Programmes Limited [1989] QB (CA).
The court here held that the principle in Interfoto was not concerned with a general doctrine of unfairness in contract law but rather with whether the term had been properly incorporated in the contract.
The court also held that the Interfoto principle did not apply where, as here, the document had been signed. The deceased had willingly signed the Conditional Fee Agreement and had been asked to read it carefully before signing it.
“VII. The Interfoto Principle
69. Before turning to the application of the law to the Clause in the CFA, I should summarise the substance of the principle in the modern case law which was reviewed relatively recently by the Court of Appeal in Goodlife Foods Ltd v Hall Fire Protection Ltd[2018] EWCA Civ 1371, [2018] BLR 491 at [32-33]. The basic principle, as restated at [29], is that:
“i] is a well-established principle of common law that, even if A knows that there are standard conditions provided as part of B’s tender, a condition which is “particularly onerous or unusual” will not be incorporated into the contract, unless it has been fairly and reasonably brought to A’s attention.”
70. Paragraph 13-015 of Chitty on Contracts (38th ed. 2018) summarises the relevant principle as follows:
“Although the party receiving the document knows it contains conditions, if the particular condition relied on is one which is a particularly onerous or unusual term, or is one which involves the abrogation of a right given by statute, the party tendering the document must show that it has been brought fairly and reasonably to the other’s attention.”
71. In Goodlife, the Court cited with approval Bingham LJ’s dictum in Interfoto that;
“The more outlandish the clause the greater the notice which the other party, if he is to be bound, must in all fairness be given.”
72. In assessing the correctness of the Master’s decision, the first question is whether the Clause was “onerous or unusual” (and, if so, how “outlandish” it is). The second is, if it is, whether it has been fairly and reasonably brought to the other party’s attention
73. It is clear that “onerous or unusual” is a high standard. The authorities also refer to like terms as “unreasonable and extortionate”, “particularly onerous”, “outlandish” and “Draconian”: Goodlife Foodsat para. 33. In another case such clauses are referred to as being like a “penalty”: Woodesen v Credit Suisse Limited [2018] EWCA Civ 1103, per Longmore LJ at para. [42]. Although not cited by the parties, one can add to this Rix LJ’s description of terms within the doctrine as being clauses which are “very onerous, unreasonable and extortionate”: HIH Casualty and General Insurance v New Hampshire Insurance Co Ltd[2001] EWCA Civ 735; [2001] 2 Lloyd’s Rep 161, para. [211]. One is looking for something out of the ordinary and which would cause serious fairness concerns.
74. For reasons which will become apparent, I will take the two requirements (“onerous or unusual” and “fairly and reasonably brought to the party’s attention”) in reverse order and start with the second which I label the “attention/notice requirement”.
Interfoto: “the attention/notice requirement”
75. As to this issue, the Master was regrettably deprived of the benefit of any authority or argument on this point. In particular, she was deprived of reference to the well-established principle that a party who signs a document knowing that it is intended to have legal effect will generallybe treated as being bound by its terms and will be taken to have read them and be on notice of them – at least absent the case being an extreme one where there is cogent evidence of the signature being obtained under pressure or by some other improper conduct.
76. I refer in this regard to L’Estrange v Graucob[1934] 2 KB 394, Ocean Chemical Transport Inc v Exnor Craggs Ltd[2000] 1 All ER (Comm) 519 and Do-Buy 925 Ltd v National Westminster Bank PLC [2010] EWHC 2862 (QB). I also find assistance in the Peekay case which was not cited to me but addresses the issue of signatures and was cited in Do-Buy 925 Ltd.”
The court also made the important point that a Conditional Fee Agreement does not have to be signed and “the signature was not therefore included merely as some general statutory requirement, but is instead included specifically to record the client’s assent to the terms of the agreement and his confirmation that he has read, understood and agrees to all of those terms”. (Paragraph 85)
At paragraph 101, in a key statement, the court said:
“(iii) … Without the ability to have terms which protect the solicitor in certain circumstances (be it death, or client ceasing to instruct otherwise), one can identify why some solicitors would not be prepared to enter into such agreements and access to justice – and in consequence, consumers rights generally – would be impaired”.
Comment
This is a very important and valuable decision and should put an end to many technical challenges to solicitor and own client retainers.
It is also very clearly at odds with the ludicrous, wrong and unintelligible decision of the Court of Appeal in
Herbert v HH Law Ltd [2019] EWCA Civ 527
and the extremely thorough and well-argued decision here is obviously right and the Court of Appeal is obviously wrong.
Importantly the court here rejected the submission that the clause was “onerous or unusual and held that the court at first instance had erred saying:
“Whether based on that model or on solicitors’ own variations of that model, it is not merely a, but the usual clause relating to the consequences of death in the context of a CFA and one which has been used in countless personal injury claims, including mesothelioma claims. Accordingly, it cannot properly bear the description of being “unusual”.”
That must be right.
However, in Herbert v HH Law Ltd the Court of Appeal proceeded on the basis of a concession made, very clearly wrongly in my view, by junior counsel for HH Law Ltd that an irrecoverable success fee could be regarded as a cost of an “unusual nature or amount”.
Given that Parliament has ruled that all success fees are irrecoverable, except now in mesothelioma claims, and given that all success fees were irrecoverable before the change in the law in 2000, since repealed by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, it is utterly absurd to say that an irrecoverable success fee is a cost of an unusual nature.
It is prescribed by Parliament.
The key paragraph from the decision in
Herbert v HH Law Ltd [2019] EWCA Civ 527
is paragraph 35:
“There is no longer any dispute between the parties in relation to CPR 46.9(3)(c). The Judge recorded (at [27]) that Mr Andrew Hogan, counsel for HH before him and junior counsel for HH before us, accepted that an irrecoverable success fee could be regarded as a cost of an “unusual nature or amount” but had submitted that, as the retainer made it clear that the success fee could not be recovered from the other party, the condition in CPR 46.9(3) (c)(ii) was not satisfied, and so there was no presumption under CPR 46.9(3)(c) that it was unreasonably incurred. The Judge agreed with that submission (at [47]). There is no respondent’s notice challenging that decision.”
It is well established that a finding made on the basis of a concession is of limited authority, and a concession was made in the original High Court decision in Herbert as well, and it is strongly arguable that the decision now given in
Higgins & Co Lawyers Ltd v Evans
takes precedence over a ruling made on the basis of a very obviously wrong concession.
Herbert v HH Law Ltd is wrong on so many levels, and I will blog about it shortly, but this aspect alone appears to strip the decision of any meaningful authority.
The factual matrix is that the model adopted by HH Law Ltd was accepted by everyone to be extremely common within the personal injury field, and could not therefore have been unusual.
Signature
Another important matter arising from the decision here is that the client’s signature on an agreement makes it very much harder for the client to challenge the agreement.
There is no legal requirement that a Conditional Fee Agreement be signed, just that it must be in writing, but always should insist that any Conditional Fee Agreement, or indeed any solicitor – client retainer, be signed by the client and should refuse to act if the client refuses to sign the retainer.
Higgins & Co Lawyers Ltd deserve the thanks of the profession for pushing this matter forward at considerable financial risk to the firm.
Underwoods Solicitors advised the successful appellant Higgins & Co Lawyers Ltd in this matter.
DATA PROTECTION UPDATE
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Damages Re Misuse of Data
In
Aviva Insurance Ltd v Oliver [2019] EWHC 2824 (Comm)
an intermediary who illegally purchased data from an employee of Aviva and sold it to claims management companies was ordered to pay £108,000 damages to Aviva, representing the costs of a team set up by Aviva to investigate misuse of the policy holders’ data.
Data Protection Hearings: Practice Direction
Certain Data Protection issues are heard by the First-tier Tribunal (General Regulatory Chamber).
These include:
(a) appeals against penalty notices (section 162 (1)(d) of the Data Protection Act 2018);
(b) orders to progress complaints (section 166(2) of the Data Protection Act 2018);
(c) certifying an offence to the Upper Tribunal (section 202(2) of the Data Protection Act 2018).
The Senior President of Tribunals is responsible for determining the composition of the panels to hear these matters.
The Senior President has issued a Practice Direction as follows:
A decision that disposes of proceedings or determines a preliminary issue in must be made by one judge, or where the Chamber President considers it appropriate, one judge and one or two other members.
Where the Tribunal has given a decision that disposes of proceedings (“the substantive decision”), any matter decided under, or in accordance with, rule 5(3)(l) or Part 4 of the 2009 Rules or section 9 of the Tribunals, Courts and Enforcement Act 2007 must be decided by one judge, unless the Chamber President considers it appropriate that it is decided either by:-
a. the same members of the Tribunal as gave the substantive decision; or
b. a Tribunal, constituted in accordance with paragraphs 4 to 14 comprised of different members of the Tribunal to that which gave the substantive decision.
Any other decision, including striking out a case under rule 8, making an order by consent under rule 37 or giving directions under rule 5 of the 2009 Rules (whether or not at a hearing), must be made by one judge.
Where the Tribunal consists of two or more members the “presiding member” for the purposes of article 7 of the 2008 Order will be the judge.
See –
Underwoods Solicitors are the solicitors for Crowe UK LLP, the Joint Liquidators of the Cambridge Analytica Group of Companies
INSOLVENCY PROHIBITION IN BRESCO IS NOT ABSOLUTE
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raised important points of principle arising out of the Court of Appeal’s decision in
Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27
when the court said if a company was in insolvent liquidation, it was “an exercise in futility” to allow an adjudication to continue; while an adjudicator had theoretical jurisdiction, it was of no practical use if a court would inevitably grant an injunction to prevent the adjudication from continuing.
However, the judge envisaged that exceptional circumstances may arise.
Here, the judge said that a case “is likely to be an exception” where the adjudication deals with a final net position between the parties under the relevant contract, and where satisfactory security is provided both in respect of any sum awarded in the adjudication, so that it could be repaid if overturned in the future, and in respect of any adverse costs order made against the insolvent company covering both adjudication enforcement and future litigation or arbitration costs.
It will be a question of fact as to what “satisfactory security” is, but it may be a liquidator undertaking to ringfence the adjudication sum so that it cannot be disturbed, or a third party providing a guarantee or bond, or it might be After-the-Event insurance.
In fact here, the court refused the application by the claimant for summary judgment, as it held that the funding agreement was subject to the Damages-Based Agreements Regulations 2013, but failed to comply with those regulations and thus was unenforceable as it was champertous.
I will deal with that issue in detail in another blog, but on the facts of this case it may well be that the decision is wrong in that, at paragraph 97, the judge appears to accept that the mere providing of financial assistance amounts to “claims management services”, an argument strongly rejected by the Competition Appeal Tribunal in
It is true that here the court held that the funder was supplying other services, which may have brought it within the definition of claims management service provider.
In any event, it will be rare that a decision on liability is influenced by the type of funding arrangement and therefore the significance of this decision are the factors required to establish an exception to the rule in
Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27.
See my blog –
COMPANY IN LIQUIDATION CANNOT COMMENCE ADJUDICATION
Underwoods Solicitors are the solicitors for Crowe UK LLP, the Joint Liquidators of the Cambridge Analytica Group of Companies
LITIGATION FUNDING AGREEMENTS ARE NOT DAMAGES-BASED AGREEMENTS – OR ARE THEY?
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
the Competition Appeal Tribunal ruled on a preliminary funding issue in the Collective Proceedings Order applications, dismissing the respondents’ argument that the applicants’ litigation funding agreements, which provided for the sum to be paid to the litigation funder to be determined by the amount of damages, was a Damages-Based Agreement under section 58AA of the Courts and Legal Services Act 1990.
The court ruled that the activities of a third party litigation funder do not constitute “claims management services”, and therefore do not come within the scope of the Damages-Based Agreements Regulations.
On 17 December 2019 the Competition Appeal Tribunal refused permission to appeal against this decision.
The original decision is at odds with the decision of the High Court given just 18 days earlier in the case of
Both are decisions of High Court judges and this matter needs to be determined by the Court of Appeal as a matter of urgency.
It remains a bizarre state of affairs that section 58B of the Courts and Legal Services Act 1990, inserted by section 28 of the Access to Justice Act 1999, which provided that a Litigation Funding Agreement would not be unenforceable by reason only of being a Litigation Funding Agreement, provided that it met certain prescribed conditions, including such requirements as the Lord Chancellor may set out in regulations, has never been brought into force but has not been repealed.
The prescribed conditions included a requirement that the sum to be paid by the litigant to the funder must consist of any costs payable to the litigant plus an amount calculated by reference to the funder’s anticipated expenditure, that is it could not be a Damages-Based payment.
This is all referred to in paragraph 23 of the judgment here, and on the face of it percentage based Litigation Funding Agreements are unlawful unless they comply with the Damages Based Agreements Regulations, and the court in the Meadowside case is correct.
The decision runs to 53 pages, and much of it deals with the funding requirements, in terms of adequacy, in an application for a Collective Proceedings Order, and I do not deal with that issue here.
Claims management services and Damages-Based Agreements are dealt with in section 58AA of the Courts and Legal Services Act 1990 and subsection (7) provides that ““claims management services” has the same meaning as in Part 2 of the Compensation Act 2006 (see s.4(2) of that Act)”.
Section 4(2)(b) of the Compensation Act 2006 states:
““claims management services” means advice or other services in relation to the making of a claim”.
Section 4(3) provides:
“For the purposes of this section-
(a) A reference to the provision of services includes, in particular, a reference to-
(i) the provision of financial services or assistance, …”
By further amendment, with effect from 29 November 2018, for the definition of “claims management services” in section 58AA(7) there is substituted:
““claims management services” has the same meaning as in the Financial Services and Markets Act 2000 (see s.419A of that Act)”.
This amendment takes effect in relation to Damages-Based Agreements entered into on or after 1 April 2019.
The respondents argued that as the arrangements constituted Damages-Based Agreements they were unenforceable as it was common ground that the litigation funding agreements did not comply with the very detailed requirements of the Damages-Based Agreements Regulations 2013, made pursuant to section 58AA(4) of the Courts and Legal Services Act 1990.
It was accepted that if the litigation funding agreements were indeed Damages-Based Agreements, then that would invalidate most, if not all, litigation funding agreements that had been agreed since litigation funding began.
The court here held that “the provision of financial services or assistance” “in relation to the making of a claim” is to be interpreted as applying in the context of the management of a claim.
Litigation funders, by contrast, are engaged in the funding of a claim, not the management of the making of a claim.
On that basis, as litigation funders are not engaged in providing claims management services, a litigation funding agreement does not come within the definition of a Damages-Based Agreement in section 58AA(3) of the Courts and Legal Services Act 1990.
“42. We consider that this result is supported by the proper construction of s.58AA itself. When viewed in its context, we think it is clear that s.58AA was never intended to apply to LFAs. On the contrary, in 2009 when s.58AA was introduced, there was already a distinct provision expressly designed to cover LFAs, i.e. s.58B CLSA: see para 23(2) above. It is of course true that this provision had not then been brought into force (nor has it since). Mr Thanki submitted that it was therefore irrelevant to the question of construction. We do not agree. S.58B CLSA was introduced into the statute book by the AJA, and the wording of s.108 AJA, in a form common to statutory commencement provisions, indicates the clear intention of Parliament that s.58B CLSA is to be brought into force if and when the Lord Chancellor considers it appropriate to introduce legislative regulation of LFAs: see R v Sec of State for the Home Department, Ex p Fire Brigades Union [1995] 2 AC 513 at 551, 570-571, 575. And when Parliament introduced statutory control of DBAs, by a provision to be inserted into the CLSA immediately after ss.58-58A concerning conditional fee agreements (“CFAs”), that new section was numbered s.58AA and not s.58B. That recognised the fact that there was already a s.58B on the statute book; that there was no intention to repeal it; and that it may in due course be brought into force. As at 2009, when s.58AA was enacted, s.58B was a provision which had been on the statute book for 10 years. Accordingly, as Mr Kirby put it, the arguments that s.58AA should be construed as applying to LFAs “do not bear any relation to the background to the introduction of that section” and would amount to bringing in regulation of LFAs by the back-door.
43. The proper interpretation of s.58AA is further buttressed by the wording of the DBA Regulations made pursuant to s.58AA(4). It would be a curious use of language to refer to a litigation funder as a “representative”, nor would a party requesting TPF and entering into a LFA commonly be regarded as a person “instructing” the funder. But those terms are understandable and apposite when applied to a party’s lawyer or claims manager as usually understood. This indicates that the DBA Regulations, and thus s.58AA, were never intended to apply to LFAs.
44. Furthermore, an important part of the context to s.58AA was the Jackson LJ review of costs. Mr Thanki sought to argue that this was irrelevant to the construction since Jackson LJ’s final report came out after s.58AA was introduced. However, the original s.58AA covered only DBAs in relation to employment matters and, we were told that, LFAs were not really used for such cases. Parliament returned to the question of DBAs in 2012, when s.58AA was amended to extend to all kinds of claim. By then, any consideration of costs was made against the background of the Jackson Report. Furthermore, the ALF Code envisaged by Jackson LJ’s recommendation had been introduced. In those circumstances, it would have been flying in the face of Jackson LJ’s conclusion on TPF if Parliament had, by amending s.58AA, rendered LFAs subject to statutory regulation as DBAs and rendered unenforceable LFAs which complied with the new Code of Conduct. That approach would indeed have been perpetuated when the definition of “claims management services” in s.58AA was amended in 2018 in the context of the transfer of the regulation of DBAs from the Ministry of Justice to the FCA.
45. For all these reasons, we conclude that s.58AA CLSA does not apply to LFAs with litigation funders. We note that this conclusion appears consistent with the view of Jackson LJ, with all his great expertise on the subject of civil costs, as set out in his 6th lecture in the Civil Litigation Costs Review Implementation Programme, “Third Party Funding or Litigation Funding” (23 November 2011). That lecture was delivered on the occasion of the launch of the ALF Code and while the Legal Aid, Sentencing and Punishment of Offenders Bill (which included the amendment to s.58AA so that it applied to all DBAs and to which Jackson LJ referred) was passing through Parliament. Jackson LJ observed that there was likely to be a greater role for litigation funders in the future. And he stated that the ALF Code marked the satisfactory implementation of recommendation 11 of his report, provided that all reputable litigation funders signed up to it. That recommendation stated that statutory regulation of TPF was not required: see para 31 above.”
COURT FEE REMISSION AND RECOVERABILITY
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.
A claimant who could have applied for remission of the court fee does not do so and wins the case.
Is the losing defendant liable for that court fee? No or Yes, depending upon which court you are in.
In
Stoney v Allianz Insurance Plc Case No: E14LV817, Liverpool County Court 7 November 2019
the court said no, holding that the fee was unreasonably incurred as the claimant may have been entitled to fee remission, that is he would not have had to pay the fee.
The judge accepted that this meant that a necessarily incurred court fee, caused by the negligence of the insured, would be borne by the state and not the insurance company, but said that that was a matter for Parliament or the Rules Committee.
In
Cook v Malcolm Nicholls Limited Case No: B57YP191, Coventry County Court 11 April 2019
the court said yes:
“I take the view that the court fee is the court fee. That has got to be paid.”
The latest addition to case law, again at County Court level, is
Ivanoy v Lubble (Central London County Court 17th January 2020)
where the court said:
“…. I am satisfied that it is not unreasonable for the Claimant to pass on the hearing fee to the Defendant”.
Comment
It would be a very simple matter indeed for the Civil Procedure Rules to say either:
“A successful claimant shall recover any court fee paid, whether or not that party could have sought remission of that fee”
or
“A defendant shall not be liable for a court fee incurred by a party who could have successfully claimed remission of that fee.”
Don’t hold your breath.
INTERIM STATUTE BILLS
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.
Normally a solicitor – client retainer is an entire contract – see
Vlamaki v Sookias & Sookias [2015] EWHC 3334 (QB) :
“A solicitor’s retainer is an example of what, although known as an “entire contract”, is perhaps better described as involving an “entire obligation”: a solicitor can generally only claim remuneration when all work has been completed, or when there is a natural break. That, however, is subject to any agreement to the contrary”.
So, ordinarily a statute bill will be delivered at the end of the retainer, that is a final statute bill, but solicitors and clients can agree that interim statute bills may be delivered during the retainer, and which are final statute bills for the period covered.
The advantage for the solicitor is that time then runs and there is little prospect of the fees being challenged at the end of the case, but they are final bills and cannot ordinarily be amended.
In
Harrods v Harrods (Buenos Aires)
the court said:
“That causes difficulty when you have litigation which is ongoing. The client is called upon by those provisions to challenge an interim bill within one month if he wants to do it as of right, and if he does not challenge it within 12 months then he has to show “special circumstances” to challenge his solicitor’s bill. That puts him in an impossible position. Either he challenges the solicitor’s bill – the very solicitor who is now acting for him – and continues to use that solicitor at the same time, or he has to change solicitor, all in the middle of litigation when he is facing another enemy”.
Problems sometimes arise because the retainer is ambiguous.
In
Adams v Al Malik [2014] 6 Costs LR 985
the court said:
“… the party must know what rights are being negotiated and dispensed with in the sense that the solicitor must make it plain to the client that the purpose of sending the bill at that time is that it is to be treated as a complete self-contained bill of costs to date”.
The retainer must make it clear that interim statute bills are to be delivered and what the consequences are in terms of the time limits on challenging fees, with any doubt being resolved in favour of the client, see Vlamaki:
“…if there were an ambiguity on a fundamental aspect of the terms and conditions that cannot otherwise be resolved, then the ambiguity is to be determined against the solicitors”.
The court there commented that a lay client cannot be expected to understand the Solicitors Act 1974.
However in Abedi v Penningtons [2000] 2 Costs LR 205 where there was no express terms as to the rendering of interim bills, the court held that the solicitors were entitled to rely on the fact that they had rendered bills, which had been paid, to enable them to assert that there was an agreement by conduct that they could deliver interim statute bills.
In
Ashfakul Bari v Arnold Rosen (t/a Ra Rosen And Co Solicitors) [2012] EWHC 1782 (QB)
the court found that the following wording did not provide for interim statute bills to be delivered:
“I shall send you a regular statutory final bill, which will not be altered subsequently… I require payment of the bill by return and will argue about any aspect of the charges subsequently. You have a right to have an assessment of any bills at any time in the High Court. Ask for details from me at any time… Apart from that, all bills are self-contained. You and I will agree that each such subsequent bill is fair and reasonable when billed. The bills are for acceptance; but I do reserve my rights to charge as and when appropriate”.
In Vlamaki v Sookias & Sookias the retainer said:
“To help you budget, we will send you a bill for our charges and expenses at the end of each month while the work is in progress. We will send you a final bill after completion of the work.”
The court said:
“Absent from those clauses in particular and the retainer in general is any express statement that each interim bill would be a final bill for the period that it covered”.
Thus, there must be a contractual right to deliver an interim statute bill, but that bill must comply with all the statutory and common law rules that apply to a final statute bill.
“Even if there was a contractual right to issue interim statute bills, it will be a question of fact whether any individual bill issued to the client was a statute bill. If there was no contractual entitlement to issue an interim statute bill, any interim bill issued could be no more than a request for payment on account”.
Solicitors can send separate disbursement and profit costs interim statute bills following the Court of Appeal decision in
Slade (t/a Richard Slade And Company) v Boodia & Anor [2018] EWCA Civ 2667
that interim statute bills need only be final for the period they cover under the element of the costs covered.
A statute bill must:
1. contain a sufficient narrative, whether in the bill or from information known to the client;
2. be a reasonably complete account of fees rendered;
3. give the client sufficient information to decide whether to have the fees assessed;
4. allow the client to assess the bill;
5. be a demand or request for payment.
If any of these requirements are not met, then the bill will be only a request for a payment on account and will not trigger the time limits on challenging it.
Termination
The unlawful termination of an entire retainer by a solicitor will lead to no costs being chargeable, even for work already done – see
Wild v Simpson [1919] 2 KB 544 (CA) 566
Chamberlain Bills
A Chamberlain Bill must meet the requirements of a statute bill as to narrative – see
Rahimian & Anor v Allan Janes LLP [2016] EWHC B18 (Costs) –
and is a statute bill comprising a series of bills with a deemed delivery date of the final invoice.
This may arise when the individual bills do not satisfy the rules, due to lack of agreement or natural break or meeting the statutory requirements.
Conditional Fee Agreements and Interim Statute Bills
Discounted conditional fee agreements and interim statute bills
In
Sprey v Rawlison Butler LLP [2018] EWHC 354 (QB)
the court considered whether monthly bills delivered by a solicitor to his client under a discounted conditional fee agreement were “statute bills”, and therefore capable of detailed assessment under section 70 of the Solicitors Act 1974.
A solicitor’s retainer is an entire contract and usually the solicitor is entitled to be paid by the client only at the end of the retainer, such as at the conclusion of the litigation.
There are two exceptions to this:
- where the solicitor and client have agreed that the solicitor may render interim bills;
- at a natural break in lengthy litigation (Re Romer & Haslam [1893] 2 QB 286).
Agreement may be inferred from conduct, such as where the solicitor renders interim bills which the client accepts and pays (Abedi v Penningtons [2000] 2 Costs LR 205).
Here, the court said that the construction of the Conditional Fee Agreement did not permit or anticipate the rendering of interim statute bills.
Clause 11.1 under the section “Right to apply for an assessment” gave a clear indication that the invoices were not statute bills, as it said that the client had the right to challenge the bills under Section 70 of the Solicitors Act 1974, which was described as the “right to assessment by the court of the amount of the fees, Success Fee and/or Disbursements which are payable by the client under this agreement”.
The court said that unless those three items, that is fees, success fee and disbursements, were read separately, that is disjunctively, then the right to challenge them arose only at the end of the case.
Thus the interim bills were not statute bills, but rather requests for payment on account, or, in the circumstances, Chamberlain bills.
It is unclear from the judgment as to whether a bill delivered during a no win lower fee case can ever be a statute bill.
Although the court said that here the wording of the Conditional Fee Agreement was inconsistent with the ability to deliver interim statute bills – a highly questionable conclusion which disagreed with the decision of the Costs Master – it is open to question whether a different wording would have made any difference.
This is due to the line of authorities that says that a client does not need to decide whether to challenge the bill until she/he knows the full amount, which in a conditional fee case will not be until the end.
That makes no sense.
Theoretically, I think it possible to deliver a final interim statute bill for the discounted fee in a Conditional Fee Agreement, which would finalise the client’s liability in the event of defeat and enable the solicitor to sue on that element of the bill.
An additional bill could then be delivered on the basis that that is a free standing contractual entitlement to the balance of the full primary fee, plus the success fee.
However, given the fact that the Solicitors Act did not envisage Conditional Fee Agreements, and there is no authority on the point, I advise against such a course of action.
In any event if a solicitor is suing a client for the discounted fee part way through the case, it is hard to see how the solicitor client relationship could be one allowing the solicitor to continue to act until the end of the case.
NATIONAL PRO OH NO! WEEK! 2019
Yes, it is that time of year again – National Nick What You Want Week, aka National Pro Bono Week.
This year everyone is working for free! It is not just solicitors expected to work for nothing.
Best not to try these until confirmed as they are criminal offences: –
Free petrol!
Just fill up and drive away!
Free shopping!
Get that supermarket trolley as full as you can and proceed straight to your car! Remember to pay 5p for the bags though.
Travel
Why buy a ticket? Get on that bus or train and have a free trip!
Sports
Just climb over the fence or turnstile. Steal a free programme while you are at it!
Rejected ideas
The minutes of the National Oh No! Steering Advisory Council Committee Taskforce Thinktank Board show that, unsurprisingly, the following ridiculous – can you believe them?! ideas were rejected:
- Free university education;
- Legal aid;
- Free dental care;
- Free courts;
- Free Employment Tribunals
Meanwhile I set out again an old favourite which is an actual exchange between a person we had had no previous contact with, who surprise surprise, obtained our name from an internet search, and Robert Males, my business partner, who, normally is rather milder mannered that me:-
Hello,
are you able to provide free legal representation? I am working, however I am not able to afford solicitors fees.
Thank you
Robert Males’ reply
Dear
I thank you for your enquiry.
My firm does not provide free legal representation. If my firm’s bank provides interest free loans, my governing body, the Solicitors Regulation Authority, will authorize my firm to practise for free, my firm’s professional indemnity insurance is reduced to nil, my firm’s staff will all work for nothing, if the computer company who I deal with will provide all computers and servicing free of charge and if the stationery business who we deal with will give us all paper and consumables for free and the utilities will provide gas, electricity and water for free then I may be in a position to provide free representation. Until that time I am not.
My firm does however do a considerable amount of free work for charitable institutions including the Royal British Legion and the Lord’s Taverners charity for disadvantaged children as well as making donations to other very good causes.
The only reason that we can do this is because we charge our clients for the very high quality legal advice and work that we do on their behalf.
Yours sincerely
Robert Males
Solicitor
Managing Partner
UNDERWOODS SOLICITORS
Please see my related blogs: –
FREE LEGAL WORK (PRO BONO): NO THANKS!
A CHRISTMAS CAROL BY THE HIGH COURT
EMPLOYMENT APPEAL TRIBUNAL FEES: A MESS
COURT FEES: THREE NEW CASES
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.
Remission And Recoverability
A claimant who could have applied for remission of the court fee does not do so and wins the case.
Is the losing defendant liable for that court fee? No or Yes, depending upon which court you are in.
In
Stoney v Allianz Insurance Plc Case No: E14LV817, Liverpool County Court 7 November 2019
the court said no, holding that the fee was unreasonably incurred as the claimant may have been entitled to fee remission, that is he would not have had to pay the fee.
The judge accepted that this meant that a necessarily incurred court fee, caused by the negligence of the insured, would be borne by the state and not the insurance company, but said that that was a matter for Parliament or the Rules Committee.
In
Cook v Malcolm Nicholls Limited Case No: B57YP191, Coventry County Court 11 April 2019
the court said yes:
“I take the view that the court fee is the court fee. That has got to be paid.”
Comment
It would be a very simple matter indeed for the Civil Procedure Rules to say either:
“A successful claimant shall recover any court fee paid, whether or not that party could have sought remission of that fee”
or
“A defendant shall not be liable for a court fee incurred by a party who could have successfully claimed remission of that fee.”
Don’t hold your breath.
General Civil Restraint Orders
In
Chief Constable of Avon and Somerset v Gray [2019] EWCA Civ 1675 (11 October 2019)
the Court of Appeal allowed an appeal and set aside the High Court’s refusal to extend a General Civil Restraint Order.
It held that the High Court was wrong to conclude that the court fee payable under Practice Direction 3C.4.2- General Civil Restraint Order application fee- represented an absolute or effective bar to litigating which justified not extending the General Civil Restraint Order despite his finding that the respondent was very likely to bring civil claims, including unmeritorious ones, if the General Civil Restraint Order was lifted.
The Court of Appeal retrospectively extended the General Civil Restraint Order from the date of the High Court application.
The Court of Appeal considered that although the current fee of £55 may be a significant sum for someone in receipt of benefits, it was not open to the court to hold that the fee represented a bar to litigation without evidence showing that the individual would be unable to access that amount of money by borrowing, support from friends or family, or obtaining legal aid or legal representation subject to a damages based agreement or conditional fee agreement.
The Court of Appeal also noted that for a meritorious claim, the General Civil Restraint Order application fee is returnable, and therefore described this as a “cash-flow” problem.
It considered that the fact that the fee would not be returned in an unmeritorious claim, represented a legitimate deterrent to making such claims.
It should be noted that there is no fee remission scheme in relation to vexatious litigants, but rather a vexatious litigant in these circumstances has to pay the full fee but it is then refunded if the application is successful.
That is the effect of Paragraph 19 of Schedule 2 of the Civil Proceedings Fees Order 2008 and the court said this:
“32. In my view, the relevant language of these regulations is clear. There is a distinction between “remission” and the refunding of a fee. Subject to other provisions, an impecunious litigant can apply for remission of the fee under paragraph 15 of Schedule 2 and, upon making the application, the date for payment of the fee is disapplied. To the extent that the application for remission succeeds, that fee never becomes payable. However, where a restraint order is in force against such an individual, then the prescribed fee “is payable in full”, and it follows the individual cannot make the application for remission. It also follows that the date for payment cannot be “disapplied” and therefore the payment must be made before the relevant issue or step in the action. Paragraph 19(3) simply means that, if the relevant individual has a reasonable claim and is granted permission then they will be put back into the position they would have been had remission of the fee been open to them.
33. In my view, the intention of these provisions is obvious: the requirement to pay the fee at the initiation of action must be taken to be part of the discipline imposed on vexatious litigants.”
INTERIM COSTS ORDERS AFTER ACCEPTANCE OF A PART 36 OFFER
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
Global Assets Advisory Services Ltd & Anor v Grandlane Developments Ltd & Ors [2019] EWCA Civ 1764
the Court of Appeal held that a court can make an interim order for costs after a claimant has accepted a Part 36 offer within time.
The claimant accepted the defendants’ Part 36 offer in time and consequently the defendants were liable for the claimants’ costs.
The trial judge declined to make an interim payment for the claimants’ costs on the grounds that he should follow the decision in
Finnegan v Spiers [2018] 6 Costs LO 729; [2018] EWHC 3064 (Ch).
Here the Court of Appeal allowed the claimants’ appeal and held that the court had power to order an interim payment in circumstances where a claimant had accepted a Part 36 offer.
Although Part 36 is described as a self-contained procedural code about offers to settle made pursuant to the procedure, the Court of Appeal said that there is nothing in the terms of Part 36 which suggests that it is entirely freestanding and that all costs consequences of the acceptance of a Part 36 offer are to be found within “four corners of CPR”.
The court’s power to order an interim payment on account of costs pursuant to CPR 44.2(8) applied.
The decision in Finnegan v Spiers was based on the fact that Part 36 itself made no provision for a payment on account of costs, and nor did it provide the court with any discretion in such circumstances.
Here the Court of Appeal stated that section 51 of the Senior Courts Act 1981 creates a broad statutory discretion of the court in relation to the costs of an incidental to all proceedings in the High Court, but that is made expressly subject to the rules of court.
The Court of Appeal held that the jurisdiction to order a payment on account of costs pursuant to CPR 44.2(8) applies where there is a deemed order under CPR 44.9, and such a deemed order arises on acceptance of a Part 36 offer.
The finding to the contrary in Finnegan was wrong.
There is no need for the court physically to have made an order to trigger CPR 44.2(8) – a deemed order is sufficient.
A deemed order is no less an order of the court than an actual order and it is made in order to enable the matter to be progressed in a fair and proportionate way without further need for costs to be expended and court time and resources wasted.
“It would be perverse if, as a result, the successful party was at a disadvantage because an interim payment on account of those costs could only be made where the original order for costs had been made following a hearing or by consent”. (Paragraph 17).
The policy decision behind payments on account of costs are the same in either case, and that is to enable a receiving party to recover part of its expenditure on costs before the possibly protracted process of detailed assessment – see
Days Healthcare UK Ltd v Pihsiang Machinery Manufacturing Co Ltd [2006] EWHC 1444 (QB) .
Furthermore, the making of such an order may reduce the points of dispute in the detailed assessment and discourage the paying party from prolonging the assessment itself – Mars UK Ltd v Teknowledge Ltd [2000] FSR 138.
A person entitled to costs should not be kept out of the portion of those costs to which he is plainly entitled, pending a detailed assessment.
Those policy reasons remain the same whether or not the order is deemed to have been made; in both circumstances something should be paid without delay. (Paragraph 18).
This approach is consistent with the reasoning of the court in
Barnsley v Noble [2013] EWHC 3822 (Ch)
where the court held that it had power to order a payment on account where a deemed costs order had been made where a claim had been wholly discontinued.
There the court held that it had jurisdiction to order a payment on account of costs despite the fact that a discontinuance pursuant to CPR 38.6 gave rise to a deemed, rather than an actual, costs order.
“…CPR 44.12 [CPR r 44.9] is clear in its terms and the mischief which a costs order on account seeks to redress (namely that the person entitled to costs should not be kept out of the portion of costs to which he is plainly entitled pending detailed assessment) is the same whether there is a deemed order following discontinuance or an actual order following trial…” (Paragraph 26 in Barnsley v Noble).
The Court of Appeal also pointed out that if it were otherwise, then a late accepting claimant would be able to get a payment on account as CPR 36.13(4)(b) provides that the liability for costs must be determined by the court if the parties have not agreed it, but not if the offer is accepted within time.
Consequently, a claimant accepting in time would not be able to get an interim payment, but a claimant accepting a day late would. That would be perverse.
The Court of Appeal had the following to say about other anomalies:
“27. There would be a number of additional anomalies. Where a Part 36 offer is made before the action is commenced and is accepted within the relevant period, it is necessary to commence Part 8 proceedings pursuant to CPR r 46.14 in order to recover the costs to which a party is entitled. In those circumstances, therefore, it would be possible to make an order pursuant to CPR r 44.2(8). The same would be true in the circumstances set out in CPR r 36.14(4) or where the Part 36 offer relates only to part of the claim and the claimant abandons the balance of the claim within the relevant period because CPR r 36.13(2) contains a discretion as to costs.
28. Not only does such a distinction create perverse results, it would also enable the party accepting the Part 36 offer to determine whether it could be liable for a payment on account by choosing to accept a Part 36 offer immediately before the expiry of the relevant period rather than a day afterwards. That cannot be correct.
29. It seems to me that it is equally unjustifiable to seek to distinguish the circumstances in which a deemed order arises on a discontinuance, as Birss J did in relation to Barnsley v Noble. Such a distinction requires one to accept that if a deemed costs order is made pursuant to CPR r 44.9(1)(c) on discontinuance pursuant to CPR 38.6, the court retains jurisdiction to make an order for a payment on account of costs, but where a Part 36 offer in relation to the whole claim is accepted within the relevant period pursuant to CPR 36.13(1) and a deemed order arises under CPR r 44.9(1)(b) it does not. In my judgment, that cannot be correct.”
The Court of Appeal also considered the tensions between CPR 36 and other provisions of the Civil Procedure Rules, although here it held that there was no tension on the facts of this case:
“33. Once one has concluded that the terms of CPR Part 36 itself do not form an exclusive code as to the costs consequences of offers to settle which comply with Part 36, it is necessary to determine whether there is a tension or conflict between CPR r 36.13 and CPR r 44.2(8) which must be resolved. In this regard, Mr Cohen referred us to Lowin v W Portsmouth & Co Ltd [2017] EWCA Civ 2172; [2018] 1 WLR 1890, Broadhurst v Tan [2016] 1 WLR 1928, Solomon v Cromwell Group plc [2012] 1 WRL 1048; [2011] EWCA Civ 1584 and Hislop v Perde [2019] 1 WLR 201. In each of those cases there was an apparent tension or conflict between two provisions of the CPR and it was necessary to determine first whether there was an actual tension which needed to be resolved and if so, which provision must prevail.
34. In this case, once one has concluded that it is possible to look outside CPR Part 36 itself, it seems to me that there is no conflict or tension between CPR r 36.13(1) and CPR r 44.2(8) at all. It is not necessary to determine which provision must prevail. The former entitles a party to its costs of the proceedings on a particular basis and is complemented or supplemented by the latter which creates the jurisdiction to order a payment on account of those costs. CPR r 44.2(8) does not undermine or conflict with CPR r 36.13(1) at all. I should add that although Mr Cohen made reference to the very wide statutory jurisdiction as to costs contained in section 51(1) of the Senior Courts Act 1981 and suggested that Birss J was wrong not to identify it as the source of the court’s jurisdiction to make an order for a payment on account, it seems to me that it does not take the matter any further. Section 51 provides expressly that it is subject to the Rules of court and as a result one is driven back to determine the relationship between CPR r 36.13 and CPR r 44.2(8).”
The Court of Appeal concluded that the decision in Finnegan v Spiers was wrong and that the decision in Barnsley v Noble is correct. There is no logical distinction to be made between the circumstances in which a deemed order is made on discontinuance and on the acceptance of a Part 36 offer.
Comment
This is an important decision, both in relation to the issue of an interim payment on account of costs, but also in relation to the interplay between Part 36 and other Civil Procedure Rules.
CONSTRUCTIVE TRUSTS: GUIDANCE FOR SETTING INTEREST RATE IN EQUITABLE COMPENSATION CLAIMS
Kerry Underwood offers consultancy services in relation to this and other matters and details are here.
In
Watson v KEA Investments Ltd [2019] EWCA Civ 1759 (23 October 2019)
the Court of Appeal provided guidance on setting the rate of interest in equitable compensation claims.
The court has a wide discretion to set a suitable rate of interest that a constructive trustee should pay in compensation for misuse of funds.
In this case, the High Court held the constructive trustee liable to pay interest at the rate of 6.5%, which represented the investment return the claimant could have expected to receive if trustees had invested the misapplied funds in proper trustee investments.
The judge referred to the performance indices for investment managers published by STEP and Asset Risk Consultants, assuming a medium risk profile.
The Court of Appeal confirmed that, although a constructive trustee was not formally appointed as a trustee, it would still be liable to account for wrongful receipt of funds as if it were a formal trustee.
Case law showed that awards of interest would reflect the economic conditions that applied at the particular time.
The rate of interest should reflect the type of claimant involved and might, therefore, involve taking into account what both capital and income beneficiaries might have received, for example.
This case provides a useful summary of the case law on interest rates for equitable compensation.
FUNDAMENTAL DISHONESTY
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.
These principles, and the whole issue of Qualified One-Way Costs Shifting, is dealt with in my book – Qualified One-Way Costs Shifting, Section 57 and Set-Off – Available from me here for £15.
In
Haider v DSM Demolition Ltd [2019] EWHC 2712 (QB) (16 October 2019)
a High Court Judge allowed the successful defendant’s appeal against the trial judge’s ruling that although the road traffic accident claim should be dismissed, the claimant had not been fundamentally dishonest.
This was a road traffic accident claim where the claimant was injured when his vehicle was struck from behind by the defendant’s vehicle.
The defendant’s case was that this was a staged crash.
The trial judge dismissed the claim, finding that the claimant’s recollection was hazy, but that he was not dishonest.
The significance of the fundamental dishonesty issue related primarily to the disqualification of the claimant’s costs protection under the regime of Qualified One-Way Costs Shifting.
However, as the claimant also appealed against the dismissal of his claim by the trial judge, any finding of fundamental dishonesty would result in the claimant’s claim being dismissed, even if he was successful on the appeal.
This is because section 57 of the Criminal Justice and Courts Act 2015 requires an otherwise successful claim to be dismissed if there is fundamental dishonesty.
Thus, the defendant argued that even if successful on appeal on liability, the claimant’s claim should then be dismissed due to fundamental dishonesty.
If unsuccessful on the appeal on liability, then the claimant should lose Qualified One-Way Costs Shifting protection, due to fundamental dishonesty.
Here, the court dismissed the claimant’s appeal on liability and allowed the defendant’s cross appeal against the trial judge’s finding that the claimant had not been fundamentally dishonest.
Thus, the claimant was deprived of Qualified One-Way Costs Shifting protection and ordered to pay costs.
An interesting feature of this case is that the fundamental dishonesty had nothing to do with the accident, but involved the claimant lying about the number of credit cards and bank accounts that he had, stating that he only had one of each, whereas in fact he had two bank accounts and two credit cards.
The relevance here was that the claimant also claimed for credit hire charges and a key issue in such claims is whether or not the claimant could afford to hire a car at normal rates, that is not on credit hire terms, which are vastly more expensive.
The court held:
“57. In my judgment this conclusion was not reasonably open to the judge. It was plainly dishonest for the Claimant not to have disclosed his credit cards or his second bank account and the accompanying documentation. The questions he was asked were not difficult (and he did not say that he had not properly understood them); they were in writing; he had time to consider his documentation; and he had the opportunity to take legal advice if he was unsure about how to answer and what to disclose. Even if he was telling the truth about his Barclaycard account having been closed, that did not relieve him of the obligation to disclose it and the associated paperwork. He gave no explanation at all for not disclosing his Vanquis Bank card, and his claim that somehow the bank had given him another account in error, into which he had just happened to pay his interim payment, was not credible. The Claimant’s actual state of knowledge was that he knew full well that he had two bank account and two credit cards, and that he had concealed this information. Nor, for the reasons I have given, could the Claimant’s failure be explained on the grounds that he was being asked to recall events from four years previously.
58. I have set out the judge’s reasoning but, with respect to him, he did not properly address the evidence. This was not simply a case where there had just been ‘not particularly good’ disclosure by the Claimant. He deliberately failed to disclose highly material evidence. There was simply no basis on which the judge could properly have concluded that the Claimant had simply got confused on these issues. The only possible reasonable inference from the evidence was that the Claimant intentionally failed to make full disclosure, and that failure can only be labelled as dishonest.
59. Was this dishonesty ‘fundamental’, in the sense explained in Howlett, supra ? In my judgment it was. The dishonesty in question did not relate to some collateral matter, but went to the root of a substantial part of the claim. The claim for credit hire charges (and associated losses) exceeded £30 000. The importance of the Claimant giving proper disclosure about his financial circumstances needs to be emphasised. Part of the purpose of a statement of truth is to bring home to party signing the solemn nature of what s/he is doing, and importance of telling the truth. To knowingly give a false statement of truth is a contempt of court: CPR r 17.6(1). Moreover, as the Defendant correctly observed in its Skeleton Argument, the County Court cannot carry out an assessment of the issue of impecuniosity when a litigant fails to give full financial disclosure. By doing as he did, the Claimant prevented the Defendant from carrying out a proper investigation into his claimed impecuniosity. This skewed and distorted the presentation of his claim in a way that can only be termed fundamentally dishonest.
60. It follows that the judge was wrong not to have concluded (per CPR r 44.16(1)) that the claim was not fundamentally dishonest so as to allow the order for costs made against the Claimant to be enforced to its full extent.
61. The Defendant relied on other matters but in light of my conclusion on the credit cards and bank accounts it is unnecessary for me to deal with them. Suffice to say I was not persuaded that the Claimant’s evidence about whether or not he applied his brakes was evidence of dishonesty, let alone fundamental dishonesty. That is something, as the judge observed, which could be explained by difficulties in recollection relating to a fleeting incident some years previously”.
Comment
Even if the claimant had been entirely successful on liability, his claim would have been dismissed under section 57 of the Criminal Justice and Courts Act 2015.
Thus, the facts of the accident were irrelevant – it was the dishonesty about the credit cards and bank accounts that was the key issue.
Claimants and their advisers often appear to be unaware of the reach and breadth of matters covered by fundamental dishonesty and tend to concentrate on liability issues.
One also wonders whether the defendant here would have appealed the fundamental dishonesty finding had the claimant not appealed the liability decision.
Fundamental dishonesty needs to be taken more seriously by claimant lawyers.
NON-PARTY COSTS ORDERS: SUPREME COURT HOLDS INSURERS WILL RARELY BE LIABLE
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.
These principles, and the whole issue of Qualified One-Way Costs Shifting, is dealt with in my book – Qualified One-Way Costs Shifting, Section 57 and Set-Off – Available from me here for £15.
In
Travelers Insurance Company Ltd v XYZ [2019] UKSC 48 (30 October 2019)
the Supreme Court held that product liability insurers were not liable under section 51 of the Senior Courts Act 1981 to pay the costs of claimants, who had unknowingly proceeded against an uninsured defendant.
The Supreme Court overturned the Court of Appeal decision in [2018] EWCA Civ 1099 , which I dealt with in my blog –
The Supreme Court also held that generally there had to be a causative link between the conduct of the non-party and the costs which are being sought against that non-party.
This decision, both in its tone and content, casts doubt on the accuracy of the recent decision in
Kazakhstan Kagazy Plc & Ors v Zhunus & Ors [2019] EWHC 2630 (Comm) (08 October 2019)
which I dealt with in my blog –
NON-PARTY COSTS ORDER AGAINST FAMILY MEMBERS: A VERY STRANGE DECISION ,
which I had in any event described as a poor decision which was likely to be distinguished by any other court.
Here 623 claimants sued a medical clinic in relation to defective silicone breast implants and Travelers Insurance Company Ltd funded the whole of the defendant’s defence and disclosed late in the day that the defendant was only insured in relation to 197 of the claimants.
The trial court made a section 51 costs order against Travelers in relation to all of the claimants, including those not insured by them, and that decision was upheld by the Court of Appeal, but overturned by the Supreme Court here.
The Supreme Court held that the issue of whether the insurer has either become the real defendant in relation to an insured claim, or has intermeddled in an uninsured claim, is fundamental to the court’s exercise of its section 51 jurisdiction in insurance cases.
Here, there was a very close connection between the insured and uninsured claims, raising common issues to be tried together in this group litigation.
Consequently, the legitimate interests of the insurer justified some involvement in the decision making and funding of the defence of the uninsured claim.
The control which insurers exercise over their insured’s defence arises from a pre-existing contractual entitlement and not from a freely made decision to intermeddle.
They are involuntary funders of litigation as they are typically required by the policy to fund the defence and, as a result, have the right to exercise substantial control over the conduct of the defence.
The Supreme Court also said that causation remains “an important element in what an applicant under section 51 has to prove, namely a causative link between the particular conduct of the non-party relied upon and the incurring by the claimant of the costs sought to be recovered under section 51. If all those costs would have been incurred in any event, it is unlikely that a section 51 order ought to be made.” (Paragraph 80).
The Supreme Court also commented on the so called “exceptionality test” saying that “exceptionality can scarcely be in itself an intelligible criterion for the making of a non-party costs order”, and is of little, if any significance. (Paragraph 109).
The Supreme Court also said that asymmetry, or lack of reciprocity in costs risk, as between the uninsured claimants and the defendant’s insurer, is unlikely on its own to be a reason for the making of a non-party costs order against the insurer where, as here, the asymmetry arises because a claimant sues an uninsured and insolvent defendant and incur several-only costs liability in group litigation. (Paragraph 82).
In practice it will now be difficult to obtain a section 51 order against an insurer.
Below is the Supreme Court’s own Press Summary.
Background to The Appeal
This appeal is about who should pay the legal costs of 426 claimants who successfully sued a medical group for the supply of defective silicone breast implants. It allows the Supreme Court to review the principles concerning third-party costs orders.
623 claims were brought against Transform Medical Group (CS) Ltd (“Transform”), a medical clinic which had supplied implants manufactured by Poly Implant Prothèse (“PIP”). Transform had insurance cover with Travelers Insurance Co Ltd (“Travelers”) in relation to claims brought against it.
Travelers funded the whole of Transform’s defence. It did not disclose until a relatively late stage that a substantial number of claimants were uninsured. The insurance policy only covered the claims of 197 claimants who suffered from a rupture of their implants between 31 March 2007 and 30 March 2011. Transform was uninsured in respect of the claims of the remaining 426 claimants. The uninsured claimants are the Respondents to this appeal.
Transform entered insolvent administration half-way through the litigation. The insured claims were settled by an agreement made in August 2015 and Travelers paid an agreed proportion of the damages and costs attributable to those insured claims. This left the insured claimants in a much better position than the uninsured claimants – who had obtained a judgment but recovered no damages or costs from Transform at all.
The 426 uninsured claimants applied to the court for an order that Travelers pay their costs. Lady Justice Thirlwall, sitting in the High Court, held that Travelers should be ordered to pay them. The Court of Appeal (Lord Justice Lewison and Lord Justice Patten) reached the same conclusion for slightly different reasons. Travelers appealed to the Supreme Court.
Judgment
The Supreme Court unanimously allows Travelers’ appeal. Lord Briggs gives the main judgment, with which Lady Black and Lord Kitchin agree. Lord Reed and Lord Sumption each give a concurring judgment.
Reasons for the Judgment
The court has a general power to order non-parties to pay costs under section 51 of the Senior Courts Act 1981 [25]-[26]. In the context of liability insurance, it is important for the courts to apply clear and reasonably detailed principles so that liability insurers can understand their position. It is not enough for the courts to ask whether the case is “exceptional” because this would not provide adequate certainty [33]; [51].
Broadly speaking, the authorities reveal two approaches to deciding whether a third party should pay costs: (1) whether the third party took control of the litigation and became “the real defendant”; and (2) whether the third party engaged in “unjustified intermeddling”.
The “real defendant” test, as explained by the Court of Appeal in TGA Chapman Ltd v Christopher [1998] 1 WLR 12, provides useful guidelines for cases where insurance exists but some part of the claim (including the claim for costs) lies outside the limits of cover [48]-[53]. However, it is inappropriate in cases like this where the claims are wholly uninsured [54]. In such cases, the appropriate question is whether the insurer engaged in “unjustified intermeddling” in litigation to which it was not a party. If the insurer has acted within a framework of contractual obligation, it may be very hard to establish that it has “intermeddled” [55]-[56]; [78]. It will usually be necessary to establish a causative link between the insurer’s involvement and the claimants’ incurring of costs [65]-[67]; [80].
In this case, all the claims were pursued within a single group action by common solicitors. They involved common issues which were being tried together in four test claims (which, as it turned out, comprised two insured and two uninsured claims) [68]; [79]. Travelers had a legitimate interest in Transform’s defence of the insured claims and, consequently, in Transform’s defence of the test cases and common issues. Travelers’ involvement was the natural result of its status as an insurer and did not amount to unjustified intermeddling [69].
The courts below relied on a number of specific instances of Travelers’ conduct. However, none of them crossed the line into unjustified intermeddling:
(1) Non-disclosure of the limits of cover. Travelers’ and Transform’s solicitors advised Transform not to disclose the limits of its insurance cover. However, as the law stands, parties are not legally obliged to disclose the details of their insurance [59]. The advice about nondisclosure fairly reflected Travelers’ rights relating to the insured claims [63]-[64]; [81].
(2) Offers and admissions. Travelers was involved in Transform’s decisions not to make offers of settlement or admissions to the uninsured claimants [70]-[71]. If necessary, the court would conclude this involvement was justified but in any event, it did not cause the claimants to incur costs. By 2015 the uninsured claimants were determined to pursue their claims to a judgment with costs, and an offer to settle without paying their costs would have made no difference [73]-[74].
(3) Asymmetry of risk. The Court of Appeal was concerned by the fact that the uninsured claimants faced failing to recover their costs if they won, whereas Transform could have recovered its costs if they had failed [58]. However, this “asymmetry” was not the product of Travelers’ intervention. It resulted from the fact that Transform was insolvent and largely uninsured, and the claimants’ liability for costs was several-only (i.e. each claimant was independently liable for a small proportion of the overall costs) [61]-[62]; [82].
Therefore, the courts below were wrong to order Travelers to pay the uninsured claimants’ costs [83].
Concurring judgments of Lord Reed and Lord Sumption
Lord Reed reviews the historical position in England, Australia and New Zealand relating to third party costs orders [85]-[93]; [106]-[112] and compares this to Scotland, where the courts may order expenses against a third party who has acted as the “real master of the litigation”, and where there is no equivalent concept to “intermeddling” [94]-[103]. Lord Reed adds that the suggestion that a costs order must be “exceptional” has little, if any, significance [106]-[112].
Lord Sumption discusses the “intermeddling” and “real defendant” approaches. He suggests that cases in which an insurer has engaged in “intermeddling” are likely to be rare, and an insurer who acts in good faith in relation to insured claims should not incur liability in costs [113]-[116].
References in square brackets are to paragraphs in the judgment.
ADMINISTRATOR APPOINTMENTS CANNOT BE MADE OUTSIDE COURT HOURS BY E-FILING
In
Eason and another v Skeggs Beef Ltd [2019] EWHC 2607 (Ch) (5 October 2019);
and
Edwards and another v SJ Henderson & Company Ltd [2019] EWHC 2742 (Ch) (10 October 2019)
two High Court decisions considered respectively, the ability of a qualifying floating charge holder and an insolvent company’s directors to use the courts’ electronic filing system to file a notice of appointment of an administrator out of court hours.
The court in each case held that it is not possible for any party to effect an administrator appointment out of court hours by using the e-filing system but they differed as to the consequence for any appointment attempted in just this way:
In
Re Skeggs Beef
a High Court Judge held that a Qualifying Floating Charge Holder’s appointment that had been made online at 5.03 pm, after the court closed at 4.30 pm, was valid, though defective.
As there was no incurable substantial injustice the court held that the appointment was valid from the time it was supposedly made.
However in
Re SJ Henderson and Re Triumph Furniture,
the Insolvency and Companies Court held that any out-of-hours appointment, though on the facts this was a purported director appointment, made using the e-filing system had no effect and was not curable.
However, any such filing, if accepted and endorsed by the court during that out-of-hours period, would automatically take effect at the time the court next opened which is usually 10.00 am.
It is not clear if an appointment made by e-filing outside these hours will need to be actively validated through a court application, or whether it will be automatically effective from 10.00 am the following working day.
TECHNOLOGY IN COURT: IT AIN’T WORKING (2)
In the Senior President of Tribunals’ report 2019 the President of the Tax Chambers says:
“However, while the IT platform used for the video hearings gave excellent sound and visual and was head-and-shoulders above old-style video conferencing, unfortunately most hearings suffered from connection breaks.”
TECHNOLOGY IN COURT, IT AIN’T WORKING
In
Invista Textiles (UK) Ltd & Anor v Botes & Ors [2019] EWHC 58 (Ch)
Mrs Justice Birss, sitting in the Chancery Division of the High Court in a claim involving restrictive covenants in employment had this to say:
“A general practical point
72. A feature of the cross-examination of all the witnesses was the use throughout the trial of an electronic document presentation system instead of a paper bundle. Having evidence available in an electronic form is very useful but can be done much more simply than this. I was not convinced the presentation system was helpful or worth the trouble it involved. Real flaws in the approach to cross-examination based on documents took place. For one thing the system often had an appreciable delay, not always obvious to the cross-examiner, which meant the witness and the cross-examiner were at cross-purposes. More significant was the way witnesses were given a single screen on which a single page being referred to was displayed in front of them. The display would frequently flash to a different page, often without warning, and often before the witness had a chance to digest it properly or understand its context. I am sure the witnesses did not always read the text as carefully as they would have done if they had some personal autonomy which allowed them some control of the text in front of them. That is the kind of autonomy a paper bundle gives a witness but it need not be on paper if the witness has some control over what is on their own screen. When it was clear this was happening I intervened to allow the witness to have a chance to read the material properly. Otherwise there would have been real unfairness. Unless such systems improve I will in future require witnesses to be given a paper bundle.”
Technology In Court: It Ain’t Working (2)
In the Senior President of Tribunals’ report 2019 the President of the Tax Chambers says:
“However, while the IT platform used for the video hearings gave excellent sound and visual and was head-and-shoulders above old-style video conferencing, unfortunately most hearings suffered from connection breaks.”
NON-PARTY COSTS ORDER AGAINST FAMILY MEMBERS: A VERY STRANGE DECISION
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
Kazakhstan Kagazy Plc & Ors v Zhunus & Ors [2019] EWHC 2630 (Comm) (08 October 2019)
the Commercial Court, part of the High Court, made non-party costs orders under section 51 of the Senior Courts Act 1981 against the wife and mother-in-law of the second defendant where they had funded that defendant’s unsuccessful defence of a very substantial fraud claim.
The relatives argued that non-party costs orders were not normally made against close family members who have provided funding and that there were no special circumstances here justifying a different result.
They were pure funders and as such had no personal financial interest in the litigation, did not stand to benefit from it, were not funding it as a business interest and did not seek to control the conduct of the litigation.
The court disagreed and stated that there were no firm rules as to how funding by family members was to be regarded for the purposes of section 1 and that each case was dependent upon the facts.
The wife’s funding began after she received US$181 million from a trust in which the defendant had an interest and this meant that the defendant looked to his wife, rather than the trustees, for the money to fund his defence.
It was relevant that the defendant and his funding wife had an extravagant lifestyle as the money paid to the defendant’s solicitors was to defeat very substantial claims which threatened that lifestyle.
Consequently, the wife was not a pure funder, but rather stood to benefit from the successful defence of the litigation.
The wife had transferred US$97.5 million to her mother, that is the defendant’s mother-in-law, as part of an asset dissipation exercise, but retained control of those funds.
Although the mother-in-law had not caused the claimant to incur extra costs, her conduct had impeded the successful claimant’s ability to recover its costs, and in those circumstances, justice required orders to be made against both the wife and the mother-in-law.
The court here quoted from
Travelers Insurance Company Ltd v XYZ [2018] EWCA Civ 1099 :
“On an application of this kind the court is not concerned with legal rights and obligations but with a broad discretion which it will seek to exercise in a manner that will do justice. The only immutable principle is that the discretion must be exercised justly… It also follows that previous cases in which judges have or have not exercised their discretion in different ways cannot be regarded as laying down prescriptive rules”.
22 days after the decision here, the Supreme Court unanimously reversed the decision of the Court of Appeal in the Travelers case –
Travelers Insurance Company Ltd v XYZ [2019] UKSC 48 (30 October 2019)
However, that case concerned the liability of insurers of a party and is only relevant in so far as it shows an approach less favourable to the making of section 51 orders against non-parties.
In
Deutsche Bank A.G. v Sebastian Holdings Inc & Anor [2016] EWCA Civ 23 (21 January 2016)
the Court of Appeal said:
“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”.
Following these decisions, the court here effectively held that the old rule that family members should not be regarded as pure funders no longer applied:
“In my view, however, these older authorities cannot (in the light of Sebastian and Travelers) be regarded as laying down any firm rule as to how funding provided by a family member is to be regarded in the context of an application under s.51”.
The court then reviewed the general principles of law and the facts of this case without being bound by the old principle; in other words, the same principles apply to family funders as anyone else.
Here the court also took the view that the Arkin cap – named after the case
Arkin v Borchard Lines Ltd & Ors [2005] EWCA Civ 655 (26 May 2005)
was of no real relevance to this case as it only applied to professional funders and that even in the case of professional funders the Arkin cap is not an inflexible rule and the court quoted from
Davey v Money [2019] EWHC 997 (Ch)
“[W]hat has become known as the Arkin cap is, in my judgment, best understood as an approach which the Court of Appeal in Arkin intended should be considered for application in cases involving a commercial funder as a means of achieving a just result in all the circumstances of the particular case. But I do not think that it is a rule to be applied automatically in all cases involving commercial funders, whatever the facts, and however unjust the result of doing so might be”.
Comment
It is hard to imagine a case in which a spouse will not have a financial interest in her or his spouse’s litigation and it is hard to see why the facts of this case are sufficiently exceptional to justify departure from the usual rule that family members will not be subject to non-party costs orders.
The risk in this decision is that family members will be unprepared to support their relatives in dealing with the costs of litigation.
The decision also turns the Arkin cap on its head, holding that non-commercial funders do not enjoy its benefit, thus exposing family members to a risk of a greater financial penalty than commercial funders who are investing in a case for profit!
The decision also suggests that funding a defence, as this was, of itself was somehow unreasonable, as compared with the usual test of the funder causing unreasonable or unnecessary costs to be incurred.
Part of the defence of the application was that the defendant, if unfunded by his relatives, would have carried on as a litigant in person, and thus the funding did not cause the claimant to incur any extra costs.
The court had this to say:
“There was in fact no evidence that Mr. Arip ever contemplated fighting the case as a litigant in person, or that he would have done so – rather than allowing the proceedings go undefended (sic)…” (Paragraph 103).
Thus, the court appears to be saying that a defendant who has run out of money should just give in and not defend the case.
In an ironic twist, the claimants were funded by professional, commercial funders.
Surprisingly, and unusually, this section 51 application was heard by a judge who had not heard the substantive case.
This is a poor decision which is likely to be distinguished by any other court.
Kerry Underwood 