Kerry Underwood

Archive for March 2020

INSOLVENCY ROUND-UP

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

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

Here I deal with a number of decisions concerning procedural issues of filing and service in relation to insolvency proceedings.

In particular the Court’s Electronic Filing System is a source of considerable confusion.

 

Extending Time for Service in Insolvency Litigation and Limitation

In

Bell and another v Ide and others [2020] EWHC 230 (Ch) (12 February 2020)

the High Court considered the requirements of rule 12.9(3) of the Insolvency (England and Wales) Rules 2016 to serve an application in insolvency proceedings at least 14 days before “the date fixed for its hearing”, holding that that referred to the date on which the application was actually heard, rather than any original, vacated, hearing date and declined to follow

Re HS Works Ltd [2018] EWHC 1405 (Ch)

which it held had been wrongly decided.

Here, this meant that the respondents to this claim, which concerned alleged preferences, transactions at an undervalue and transactions defrauding creditors, could not argue that the claim had been served out of time.

However, the court also considered, obiter, the effect if the claim had been served out of time.

It was common ground that claims in insolvency proceedings, unlike claims in general litigation, were not invalidated if served out of time – see rule 12.64 of the Insolvency Rules.

In insolvency proceedings, the court controls the time for service by setting the hearing date and service is a procedural, rather than substantive, step that could be cured, if defective, under rule 12.64 of the Insolvency (England and Wales) Rules 2016.

The court held that, as defective service did not automatically invalidate claims in insolvency proceedings, a court’s decision to extend time for service did not by itself rescue an otherwise defunct claim.

Further, as the claim’s validity did not solely depend on the court’s decision to extend time, a decision to extend time did not by itself deprive the respondents of a limitation defence that would apply if the proceedings had to be started with a new claim, and the decision to the contrary in

Re Kelcrown Homes Ltd (In Liquidation) [2017] EWHC 537 (Ch),

was wrong.

Insolvency legislation deals with service differently from the CPR.

While limitation periods do apply to claims in insolvency proceedings, they are unlikely to defeat a claim issued in time.

 

Defect in Electronic Filing and When Notice of Intention to Appoint Administrators Expires

In

Re Statebourne (Cryogenic) Limited [2020] EWHC 231 (Ch)

the High Court held that the identification in the Court’s Electronic Filing System of which Business and Property Court a Notice of Appointment of Administrators was to be filed in, was not a requirement of Schedule B1 to the Insolvency Act 1986  or of the Insolvency (England and Wales) Rules 2016.

Accordingly, a Notice of Appointment that specified a regional Business and Property Court that was not the same court to which court staff had allocated the preceding Notice of Intention to Appoint Administrators was, if it was defective at all, entitled to a waiver of any defect under CPR 3.10(b).

The court also held that the ten-business day period within which a Notice of Appointment could be filed following a preceding Notice of Intention should be calculated by including the day on which it was filed.  The decision to the contrary in

Re Keyworker Homes (North West) Limited [2019] EWHC 3499 (Ch)

was wrong.

Accordingly, a Notice of Intention filed on Friday 17 January expired at the end of Thursday 30 January 2020, and not at the end of Friday 31 January 2020, and here the Notice of Appointment had been filed out of time on 31 January 2020.

Nevertheless, no substantial injustice was caused by the appointment out of time, and the court granted orders under paragraph 104 of Schedule B1 and rule 12.64 of the Insolvency (England and Wales) Rules 2016 waiving the defect and declaring the administrators validly appointed from the time of filing of the Notice of Appointment on 31 January 2020.

 

Procedural Error When E-Filing Notice of Appointment of Administrator Curable by Court’s Powers Under CPR

In

Carter Moore Solicitors Ltd, Re [2020] EWHC 186 (Ch)

the High Court validated a directors’ Notice of Appointment of an Administrator that had been initially rejected by the court office when uploaded through the Court’s Electronic Filing System.

The Notice of Appointment had been rejected because the person filing it had erroneously tagged it as a “New Case” rather than “Existing Case” in the Court’s Electronic Filing System.

Following the rejection of the Notice of Appointment, it was filed again, correctly, though outside court hours.

It was then accepted by the court staff, but they subsequently referred it to the High Court Judge.

This referral was not strictly pursuant to the more recent guidance that Notice of Appointments purportedly filed through the Court’s Electronic Filing System outside court hours should be referred to a High Court Judge.

The court ultimately side-stepped the out-of-hours issue by only looking at whether to validate the first, in-hours, Notice of Appointment.

The court treated the first Notice of Appointment as having been validly filed, using its discretion under the Electronic Working Practice Direction to remedy procedural errors in Electronic Working (paragraph 5.3, CPR PD 51O).

This use of discretion was appropriate because there had been no breach of insolvency legislation given that the court was only looking at the first Notice of Appointment filing, made within court hours.

The mistake in the first filing was inadvertent and not an attempt to pay a smaller filing fee, and indeed resulted in a higher fee being due.

It had been clear that the first Notice of Appointment was part of an existing case from the documents filed with it.

The mistake was corrected within minutes of it having been notified to the filing party.

No third party would be prejudiced by the validation of the first Notice of Appointment.

Indeed, the second Notice of Appointment would probably have been out of time due to the expiry of the preceding notice of intention to appoint.

The court raised, but did not explore, the debate over how to calculate when it expired, but that issue has since been dealt with in the case of

Re Statebourne (Cryogenic) Limited [2020] EWHC 231 (Ch) 

– see above

The court also used separate common law powers to declare that the administrators’ appointment was valid as a result of its CPR order.

The court also stated that, pending new legislation, practitioners should avoid e-filing out-of-hours’ Notice of Appointments.

 

Effect of Out-Of-Hours E-Filing of Notices of Appointment

In

Re Symm & Company Ltd [2020] EWHC 317 (Ch) (5 February 2020)

the High Court validated a Notice of Appointment of Administrators that had been electronically filed by the insolvent company’s directors outside court hours at 5.36pm.

The court deemed the Notice of Appointment to take effect at 10am on the next working day.

This was because the out-of-hours filing was a defect that was simply an irregularity and caused no substantial injustice and so could be cured under rule 12.64 of the Insolvency (England and Wales) Rules 2016.

It was appropriate that a Notice of Appointment filed by directors should be deemed only to take effect when the court next opened, rather than at the out-of-hours time at which it was originally filed.

By contrast, if a Notice of Appointment was filed outside court hours by a Qualifying Floating Charge Holder, it could be appropriate that the Notice of Appointment be deemed to be filed at the time it was originally submitted.

This was because the Insolvency (England and Wales) Rules 2016 and Insolvency Rules 1986 had long permitted Qualifying Floating Charge Holders, and only Qualifying Floating Charge Holders, to file outside court hours.

The intended meaning of paragraph 8.1 of the Practice Direction on Insolvency Proceedings is to prevent any Notice of Appointment from being filed electronically outside court hours.

The remaining method of filing outside court hours through the email and fax process in the Insolvency (England and Wales) Rules 2016 had always been intended solely for Qualifying Floating Charge Holders, to compensate them for the loss of the 24-hour ability to appoint administrative receivers.

Although rule 1.46 of the Insolvency (England and Wales) Rules 2016 contemplated electronic delivery of court documents, this only reflected the expectation of a then future pilot scheme on electronic filing of court documents generally and did not reflect a policy change on Notice of Appointments.

This is the first reported decision following the recent High Court guidance on the process for dealing with out-of-hours Notice of Appointments in which the court has directly engaged with the relevant legal questions.

Earlier cases have been decided on other grounds.

Note: For those of you under 60, fax was a sort of very early email system which fell into disuse in about 1995.

 

Recognition of Foreign Insolvency Proceedings Under Cross-Border Insolvency Regulations 2006 Notwithstanding the Dissolution of The Debtor

In

Mendonca v KPMG Corporate Finance Sao Paulo, Brazil [2020] EWHC 351 (Ch)

the High Court ordered that Brazilian bankruptcy proceedings of an English limited liability partnership be recognised as foreign main insolvency proceedings under the Cross-Border Insolvency Regulations 2006 (SI 2006/1030) even though the debtor had been dissolved before the Brazilian bankruptcy order had been made.

The court considered whether the company was a “debtor” for the purposes of the Cross-Border Insolvency Regulations 2006 (SI 2006/1030).

Definitions used in the Cross-Border Insolvency Regulations 2006 (SI 2006/1030) of “foreign proceeding”, “foreign representative”, and “foreign main proceeding” were each predicated upon there being a debtor.

The court held that under sections 221(5) and 225 of the Insolvency Act 1986, it was able to wind up a dissolved unregistered company: this had been the case, for example, in

Re Eurodis Electron plc [2011] EWHC 1025 (Ch)

It also noted that in

Re Consumer Trust and others [2009] EWHC 2129 (Ch)

the High Court had recognised as foreign main proceedings US bankruptcy proceedings in respect of a US trust that had no legal personality for English law purposes.

It was consistent with the aims and purposes for which the Cross-Border Insolvency Regulations 2006 (SI 2006/1030) had been introduced that recognition should be granted, and to order otherwise would, in the light of the operation of sections 22(5) and 225 of the Insolvency Act 1986, be perverse.

The fact that the company’s assets had become bona vacantia under English law, however, led the court to refuse to make an order entrusting the assets of the company to the foreign representatives and it stated that the company should be restored to the register.

It permitted the foreign representatives to apply for such an order.

The court observed that, should similar circumstances arise in the future, notice of the recognition application should be served on the relevant bona vacantia authority which was determined by the debtor’s registered office location, and in this case was the Bona Vacantia Division of the Treasury Solicitor in good time before the hearing.

Written by kerryunderwood

March 26, 2020 at 12:47 pm

Posted in Uncategorized

INDEMNITY COSTS FOR FAILURE TO ENGAGE IN ALTERNATIVE DISPUTE RESOLUTION

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

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

 

In

DSN v Blackpool Football Club Ltd [2020] EWHC 670 (QB)

the Queen’s Bench Division of the High Court awarded the claimant indemnity costs on the basis that the defendant had refused to engage in alternative dispute resolution.

The claimant beat its own Part 36 offer at trial and thus got indemnity costs from the date of expiry of the time for accepting the offer, that is 23 December 2019.

However, the court also ordered indemnity costs from over 1 year earlier for the defendant’s failure to respond to earlier Part 36 offers and its failure “to engage in any discussion whatsoever about the possibility of a settlement”.

 

“27. In summary, the Defendant in this case failed and refused to engage in any discussion whatsoever about the possibility of settlement. It did not respond to any of the three Part 36 offers (except to reject the final one). It was required by paragraph 4 of the Order of Master McCloud “to consider settling this litigation by any means of Alternative Dispute Resolution (including Mediation)”. It was warned by the same Order that if it did not engage in any such means proposed by the Claimant it would have to give reasons, and it was also warned that the reasons it gave might in due course be shown to the trial judge when the question of costs arose.”

Written by kerryunderwood

March 23, 2020 at 12:18 pm

Posted in Uncategorized

CAPPED COSTS AND PERCENTAGE ORDERS IN JUDICIAL REVIEW PROCEEDINGS

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

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

 

In

Elan-Cane, R (on the application of) v The Secretary of State for the Home Department & Anor [2020] EWCA Civ 363

the Court of Appeal held that a percentage reduction to a costs award could be made to a capped costs sum, rather than the actual sum, in a case concerning the engagement, of Article 8 of the European Convention on Human Rights, the right to respect for private life.

The Court of Appeal unanimously dismissed the appellant’s appeal in the substantive case, holding that the Secretary of State for the Home Department could refuse to allow an application for a passport with an “X” marker in the gender field to indicate unspecified gender.

The parties had agreed to cap costs at £3,000 each by consent order.

After refusing permission to the appellant on the Article 8 challenge, the High Court ordered the appellant to pay £2,000 for the respondent’s costs, being a 33% reduction to capped costs as the appellant was partially successful in establishing the engagement of Article 8.

The respondent argued that the reduction should apply to actual costs and not capped costs, so that the court should initially consider costs, including any deductions, as though the cap did not exist and apply the cap afterwards.

 

“128. On the figures in the present case, the amount at stake on this issue is only £1,000. But the question is of potentially wider significance in all cases where a costs capping order has been made in connection with public interest judicial review proceedings by the High Court or the Court of Appeal under sections 88 to 90 of the Criminal Justice and Courts Act 2015 (“the 2015 Act”), or (as here) the parties have agreed to a costs capping order in lieu of an order under those sections. Since the irrecoverable costs of the SSHD in such cases are in effect funded by the taxpayer, the SSHD understandably wishes the question of principle to be tested. Permission to appeal was granted by Bean LJ on 20 December 2018.”

 

The court observed that costs capping under the Criminal Justice and Courts Act 2015 promoted access to justice in public interest proceedings at the expense of parties’ potentially irrecoverable costs, and this policy should inform the entire costs exercise in such proceedings.

No rule or principle was precluding a percentage reduction to a capped costs amount.

It might encourage “lax practice or unreasonable litigation conduct” if the successful party knew that it would receive all its capped costs, even if there were factors that would justify a substantial reduction of its uncapped costs.

 

“131. So far as material, sections 88 and 89 of the 2015 Act provide as follows:

88Capping of costs

(1) A costs capping order may not be made by the High Court or the Court of Appeal in connection with judicial review proceedings except in accordance with this section and sections 89 and 90.

(2) A “costs capping order” is an order limiting or removing the liability of a party to judicial review proceedings to pay another party’s costs in connection with any stage of the proceedings.

(3) The court may make a costs capping order only if leave to apply for judicial review has been granted.

(4) The court may make a costs capping order only on an application for such an order made by the applicant for judicial review in accordance with rules of court.

(5) Rules of court may, in particular, specify information that must be contained in the application, including –

(a) information about the source, nature and extent of financial resources available, or likely to be available, to the applicant to meet liabilities arising in connection with the application,

(6) The court may make a costs capping order only if it is satisfied that –

(a) the proceedings are public interest proceedings,

(b) in the absence of the order, the applicant for judicial review would withdraw the application for judicial review or cease to participate in the proceedings, and

(c) it would be reasonable for the applicant for judicial review to do so.

(7) The proceedings are “public interest proceedings” only if –

(a) an issue that is the subject of the proceedings is of general public importance,

(b) the public interest requires the issue to be resolved, and

(c) the proceedings are likely to provide an appropriate means of resolving it.

89. Capping of costs: orders and their terms

(1) The matters to which the court must have regard when considering whether to make a costs capping order in connection with judicial review proceedings, and what the terms of such an order should be, include –

(a) the financial resources of the parties to the proceedings, including the financial resources of any person who provides, or may provide, financial support to the parties;

(b) the extent to which the applicant for the order is likely to benefit if relief is granted to the applicant for judicial review;

(c) the extent to which any person who has provided, or may provide, the applicant with financial support is likely to benefit if relief is granted to the applicant for judicial review;

(d) whether legal representatives for the applicant for the order are acting free of charge;

(e) whether the applicant for the order is an appropriate person to represent the interests of other persons or the public interest generally.

(2) A costs capping order that limits or removes the liability of the applicant for judicial review to pay the costs of another party to the proceedings if relief is not granted to the applicant for judicial review must also limit or remove the liability of the other party to pay the applicant’s costs if it is.

…””

The relevant rules of court are contained in CPR 46.16 to 46.19 and Practice Direction 46, paragraphs 10.1 and 10.2.

Written by kerryunderwood

March 23, 2020 at 12:10 pm

Posted in Uncategorized

STUNNINGLY HIGH SATISFACTION RATES FOR SOLICITORS

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In February and March 2019 YouGov surveyed the legal need of individuals in England and Wales and interviewed 28,633 people who had experienced a legal issue in the previous four years, and that is the biggest ever such survey.

The summary report is here and the full report is here.

90% of people who had used a solicitor were satisfied with the service they received, rising to 94% for those given price information at the outset.

84% thought the solicitor provided value for money.

66% of those who received professional help felt that they had a fair outcome compared with 53% for those who did not.

76% of those receiving professional help thought the outcome was better or as good as they had hoped.

Unregulated providers received the worst ratings, with high levels of dissatisfaction with will-writers and McKenzie Friends; McKenzie Friends are unqualified people who are allowed by the court to assist litigants.

The original idea was that they were literally friends of the litigants and provided free help, but now it has become a major unregulated business.

53% of the legal issues were contentious.

 

The most common issues were:

 

Professional or defective goods/service              26%

Anti-social behaviour by neighbours                  14%

Employment                                                       11%

Wills                                                                   11%

Buying or selling property                                  11%

 

Solicitors are most likely to be the main advisers, advising in 30% of cases, rising to 40% for contentions matters.

Age is the key determining factor in seeking professional, as compared with informal or unregulated, advice.

 

The figures for those reporting that a solicitor was their main adviser are:

 

Aged 65 or over                                                 40%

50 to 64                                                            33%

30 to 49                                                            26%

18 to 29                                                            18%

 

79% of those who seek a solicitor do not shop around.

Of those who decided to get professional help, just 18% looked for or obtained information on prices or services.

 

Reasons for given for not shopping around were:

 

Happy with the first service they found              33%

Trusted a recommendation                                28%

Found the matter fairly simple                           22%

Found it easy to search for services                   93%

Found it easy to obtain details of services          89%

Found it easy to search for reviews                    89%

Found it was easy to find prices                         84%

 

This was before the new rules on price transparency came into effect.

 

Set out below is the percentage of people obtaining help, or not, by legal issue:

 

1

 

2

 

48% of the people did not understand what a regulated service is.

Proportion of people who describe their contentious legal issue as each of the following:

 

3

 

53% of those with the contentious legal issues suffered stress

33% of those with the contentious legal issues offered financial loss

18% of those with a contentious legal issue suffered ill health or injury

Proportion of people who report each of the following experiences as part of or as the result of their contentious legal issue:

 

4

 

Proportion of people with a contentious legal issue who desired each of the following outcomes:

 

5

 

Desired outcome varies significantly based on the type of legal issue experienced, as might be expected. Those with a contentious family-related issue are much more likely than the others to be seeking a change in the nature of a relationship, while those with an issue related to employment/finance/welfare/benefits or the rights of individuals are more often than others wanting to change a decision.

Many groups, however, are seeking money or property as an outcome, as well as for somebody to recognise their rights or meet responsibilities.

 

Table by Subject of The Percentages Of Those Obtaining Legal Help

 

6

 

Table of Sources of Help

 

7

 

Use of Different Types of Advisers by Type of Legal Issue

 

8

 

How and Whether People Searched for Prices, Reviews etc, By Work Type

 

9

 

Reasons for Not Shopping Around

 

10

 

31% of those using an unregulated provider assumed that the adviser was in fact regulated.

Delivery of Services

 

11

 

How are Services Delivered

How services delivered – by work type

 

12

 

Satisfaction by Work Type

 

13

 

Satisfaction in Relation to Different Ways of Delivering the Service

 

14

 

It will be noted the satisfaction levels are very similar whether the services delivered.

Satisfaction by Type of Adviser

 

15

 

Reasons for Dissatisfaction

 

16

 

How People Paid for Service

 

17

 

How the Matter Was Funded for the People Who Did Not Pay All of the Costs Personally

 

18

 

Contentious Work Percentage of Those Thinking That Professional Help Led to A Better Outcome

 

19

Written by kerryunderwood

March 13, 2020 at 9:47 am

Posted in Uncategorized

FUNDAMENTAL DISHONESTY DESTROYS CLAIM EVEN IF CORRECTED

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

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

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

 

In

Roberts v Kesson & Anor [2020] EWHC 521 (QB)

the High Court allowed the defendant’s appeal and held that the trial judge should have found that the claimant had been fundamentally dishonest.

The claimant made an untrue witness statement which he subsequently corrected and the trial judge said:

 

“It is right that he has accepted that he was dishonest in part when making his first statement, but I do observe that he did not persist with that dishonesty.”

 

The High Court said:

 

“54. Ultimately, I have reached a different conclusion adverse to the interests of the Claimant on that claim in relation to his first witness statement. The language of Section 57 is important. The Court must be satisfied on the balance of probabilities that the Claimant has been fundamentally dishonest. The real question is whether the Claimant has been fundamentally dishonest and not whether he has persisted in that dishonesty. In my judgment, the only permissible conclusion on all the available evidence is that the Claimant has been fundamentally dishonest in advancing a false claim in the schedule of loss and a false claim in his first witness statement.”

 

The dishonesty is the key issue, not whether the claimant persisted in that dishonesty.

Written by kerryunderwood

March 12, 2020 at 7:28 am

Posted in Uncategorized

SOLICITORS OWE NO DUTY TO FUNDERS TO REPORT COUNSEL’S ADVICE ON PROSPECTS OF SUCCESS

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

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

 

In

Hall v Saunders Law Ltd & Ors [2020] EWHC 404 (Comm)

the Commercial Court allowed the defendant solicitors’ application for summary judgment in relation to a claim against them for breach of a funding agreement and breaches of a duty of care or fiduciary duty.

The court found that, under the terms of the funding agreement, the solicitors did not owe any duty to the funder to report pessimistic views expressed by counsel and it was not appropriate to imply any equivalent duty of care or fiduciary duty.

The claimant in the funded action entered into a tripartite funding agreement with the funder and its solicitors, and that action was lost.

The funder went into liquidation and its claims in relation to the funding agreement were assigned to the claimant.

The claimant alleged that the solicitors failed to communicate pessimistic advice received from counsel as to the prospects of success of the funded action, in breach of either the terms of the funding agreement, a common law duty of care, or a fiduciary duty owed by the solicitors to the funder to cease to act for the claimant, if it knew that the claimant was refusing to pass relevant information to the funder, or failing to instruct the solicitors to do so.

The High Court held that there was no freestanding reporting obligation on the solicitors.

There was no basis for implying such an obligation as the funding agreement did not lack commercial or practical coherence without it; reporting obligations on the claimant already provided protection for the funder.

The court noted that the fact that the parties were in a contractual relationship meant that he did not have to consider what duties may have been owed at common law in the absence of a contract.

Further, there was no basis for imposing any fiduciary duty on the solicitors.

The particular wording of the funding agreement in question was key to this decision.

Following this case, funders may seek to impose express reporting obligations on solicitors where that is not current practice.

Written by kerryunderwood

March 11, 2020 at 9:22 am

Posted in Uncategorized

LATEST COSTS ROUND-UP

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

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

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

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

 

Wasted Costs Against Expert

In

Thimmaya v Lancashire NHS Foundation Trust and another, Manchester County Court, 30 January 2020, Claim No: B57YP861

a Circuit Judge made a third party costs order against an expert in the sum of £88,801.68 under section 51 Senior Courts Act 1981.

The expert who appeared for the claimant at trial “was wholly unable to articulate the test to be applied in determining breach of duty in a clinical negligence case”.

As a result the claimant had to discontinue the case, and the defendant successfully obtained a third party costs order against him.

The parties agreed, and the court accepted, that the court’s jurisdiction in such a matter is to be exercised on the same basis as a wasted costs order.

 

Conditional Fee Agreement Void as Condition Precedent Not Met Re After-The-Event Insurance

In

Anthony v Collins [2020] EWHC B14 (Costs)

the Senior Courts Costs Office ruled that an apparent Conditional Fee Agreement had never come into being as it contained a condition precedent in relation to After-the-Event insurance which was not satisfied.

The condition precedent read:

“Our agreement is conditional upon you getting insurance cover to cover the risk that you may need to pay the legal costs of the other side, and we must approve the terms of the cover.”

As no insurance was ever taken out, there was no valid Conditional Fee Agreement and no other valid retainer and so the successful claimant here could not recover costs from the unsuccessful defendant.

 

Comment

A poor and unfair decision.

Had the retainer been an hourly rate win or lose one, then any court would have found that by the solicitor continuing to deliver services and the client accepting them, there had been a waiver, or mutual variation, concerning the lack of After-the-Event cover.

Why is it any different with a Conditional Fee Agreement?

 

No Protective Costs Order In Private Claim: Another Court Of Appeal Disgrace

In

Swift v Carpenter [2020] EWCA Civ 165

the Court of Appeal considered the issue of the scope of Protective Costs Orders and the exercise of the court’s discretion and the need for speed in making an application, and the scope of the new CPR 52.19.

Here, the claimant sought a Protective Costs Order in relation to her appeal concerning the method of assessment of accommodation costs following a serious personal injury.

It was common ground that the claimant enjoyed Qualified One-Way Costs Shifting protection on the appeal, as in the proceedings at first instance.

The effect of QOCS is that no order for costs made against the claimant may be enforced without the permission of the court to the extent that the costs payable exceed the amount of damages and interest awarded.

The claimant argued that QOCS did not give her adequate protection and for all intents and purposes was meaningless as it still allowed her damages to be wiped out, even though there was no dispute on liability.

The Court of Appeal held that it was not appropriate to make a Protective Costs Order in a private case, but even if there was such a discretion, it would not have exercised it here.

The general purpose of a Protective Costs Order is to allow a claimant of limited means access to the court in order to advance their case without the fear of an order for substantial costs being made against them, a fear which would inhibit them from continuing with the case

 – see R (Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192.

In spite of the breadth of the court’s discretion under section 51 of Senior Courts Act 1981 and CPR 44, which the court here accepted gave it jurisdiction to make such an order “case law establishes that, as a matter of judicial policy and practice, we should not do so in the present case.”

 

Comment

Same old, same old right wing Court of Appeal, a serious blot now on the legal landscape.

The above quoted passage could have read:

“Parliament has told us in primary legislation that we can make Protective Costs Orders in private cases. The Civil Procedure Rules, approved by Parliament in secondary legislation, also say so.

But we do not like them because they give equality to individuals against massive multi-billion pound multi-national companies.

Cannot have that old boy can we?”

It really is a sickening judgment, parroting its own previous decisions in various cases, defying the will of Parliament to justify yet again defying the will of Parliament, and very obviously in this case depriving a very seriously injured person of access to justice.

 

Aarhus Convention Costs Liability Of Interested Party Clarified

In

R (Kent) v Teesside Magistrates’ Court and another [2020] EWHC 304 (Admin)

the claimant succeeded in arguing that a judicial review claim was an Aarhus Convention claim, and so had costs protection under Civil Procedure Rules 45.41-45.

This was despite an earlier direction it was not an Aarhus claim and the defendant initially stating that in its acknowledgment of service.

Concerning liability for the costs of that hearing, the interested party argued that the reference to “the defendant” in CPR 45.45(3)(b) means that in the event the court holds that it is an Aarhus Convention claim, the starting point is that the costs should be paid by the defendant.

This was partly because there is no reference in CPR 45 to the interested party.

The court disagreed and relied on the judgment of Coulson LJ in the Court of Appeal in

R (Campaign for the Protection of the Rural Environment Kent Branch) v Secretary of State for Communities and Local Government [2019] EWCA Civ 1230 ,

which decided that the reference only to a defendant in CPR 45.41-45.44 was not material.

The fact that the Campaign to Protect Rural England case concerned the opposite scenario, of the claimant being liable for the interested party’s costs, was not relevant.

 

Fundamental Dishonesty: £83,000 Damages Thrown Away

In

Grant v Newport City Council County Court, 18 December 2019

the County Court found that the claimant had been fundamentally dishonest within the meaning of Section 57 of the Criminal Justice and Courts Act 2015 and thus dismissed her claim.

There was no doubt that the claimant had suffered a serious injury, but surveillance evidence showed that she exaggerated her symptoms to a significant extent.

The judge found for the claimant on liability and held that had an honest claim been presented, she would have been awarded £83,000 in damages.

However, because of the dishonesty, the entire claim was dismissed, as required by Section 57.

“104. Having accepted that the claimant suffered real and significant injuries in this accident, I find that had she honestly presented her claim she would have been entitled to damages, and I will set out later what those would have been. However, she chose not to honestly present her claim. She pursued her claim, contending that she was significantly disabled, as set out in the medical evidence, which she voluntarily provided to the court. The fact that she loses her entitlement to honest damages is a consequence of this section: it is a consequence of her dishonesty.

105. Whilst this is a draconian step, it was made clear in the case of Sinfield that the creators of this section intended to use it to act as a deterrent to dishonest claimants who wanted to dishonestly exaggerate their claim. It is as a result of the claimant’s dishonesty that she loses her honest damages. There has been no suggestion to me that there would be any injustice in itself for section 57 not to be applied. In all of the circumstances, I dismiss the claimant’s claim in its entirety, recognising that she loses, not only the dishonestly sought damages, but her honestly sought damages too.”

 

Qualified One-Way Costs Shifting: Defendant Can Set Off Against Costs Awarded To Claimant

In

Faulkner v Secretary of State for Business, Energy And Industrial Strategy [2020] EWHC 296 (QB)

the Queen’s Bench Division of the High Court considered the Kafkaesque issue of whether a defendant failing to set aside a notice of discontinuance could then rely on that discontinuance to set off its costs – automatic on discontinuance – against the costs order made against it on its failed application.

I strongly suggest an ice-band around your head before you read on, or you could limber up with something comparatively simple, like TS Eliot’s The Waste Land.

In a classic understatement the High Court Judge here said:

“It is not without irony that the defendant sought to set aside a notice of discontinuance which, albeit served late in the day, had had the effect of saving it money”.

Here, the claimant in a personal injury case, protected by Qualified One-Way Costs Shifting, discontinued shortly before trial and the defendant applied to set aside the notice of discontinuance and to have QOCS protection set aside.

The application was dismissed and the unsuccessful applicant, that is the defendant, was ordered to pay the costs of the application to the claimant, who by virtue of discontinuing was of course the loser in the litigation with an automatic, but on the face it unenforceable, costs order against him.

That was the reason for the defendant’s application to have the discontinuance disapplied, and rather have the claim struck out.

This could only happen in a QOCS case. Bizarre hardly begins to do the process justice. It is the equivalent of a winning football team demanding a replay, or indeed a wholly successful litigant launching an appeal.

 

The judge here put it elegantly:

 

4. As it happens, the preliminary hearing never took place because the claimant served pre-emptive notice of the discontinuance of his claim. The defendant, however, applied, in response, to set aside the notice of discontinuance in the hope that, following the exhumation of the claimant’s claim, it could forthwith apply to extinguish it once more by striking it out. On the face of it, this might appear to amount to no more than an arbitrary procedural act of wanton posthumous desecration followed by a prompt and unceremonious reinterment. However, there was method in the madness of this procedural manoeuvre.

5. In short, the claimant enjoyed the protection afforded by the QOCS regime against the enforcement by the defendant of any costs orders against him. The service of a notice of discontinuance does not, of itself, remove such protection. Under CPR 44.15, however, the protection of the QOCS regime is stripped away where proceedings have been struck out on one or more of the grounds therein identified. Accordingly, the defendant hoped to reanimate the claim solely for the purpose of striking it out in such a way that it could proceed thereafter to enforce an order for costs against the claimant.

 

Initially the defendant argued that its liability to pay costs of the failed application – £7,000 – should be reduced by £3,500, being the sum awarded to the defendant in costs in any event in relation to an earlier application.

In other words the £3,500 should be set off against the £7,000, reducing the defendant’s liability to £3,500, coincidentally the same sum as the original costs order.

The judge raised the issue of whether the entire costs of the successful defendant came into play due to the automatic liability of a discontinuing claimant for the defendant’s costs.

The effect would be to extinguish any liability on the defendant’s part, which would mean that the effect of the claimant winning the application would be that it had, by virtue of the set-off, to pay its own costs of winning the application.

It should be noted that the QOCS rules, contained at CPR 44.13 onwards, allow enforcement of a costs order against a personal injury client “only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the client”.(CPR 44.14(1)).

The costs awarded to the claimant do not come into play as part of the fund to be enforced against.

However CPR 44.12, appearing immediately before the QOCS rules, does allow set-off against costs awarded to a claimant, or indeed a defendant.

CPR 44.12(1) reads:

 

“Where a party entitled to costs is also liable to pay costs, the court may assess the costs which that party is liable to pay and …

 

(a) set off the amount assessed against the amount the party is entitled to be paid and direct that party to pay any balance…”

 

The facts here were, for all intents and purposes, identical to those in

Darini v Markerstudy Group, 24 April 2017, Unreported

where the Circuit Judge, on appeal, rejected the defendant’s argument and refused to allow set-off, although in that case the District Judge, correctly as it will now be seen, had allowed the set-off.

However in

Howe v Motor Insurers’ Bureau [2017] EWCA Civ 932

the Court of Appeal found the opposite and held that set-off was not a form of enforcement and pointed out that CPR 44.14 enables enforcement without the permission of the court, whereas CPR 44.12 requires a court order before one set of costs can be set off against another.

Consequently, Darini was wrongly decided and the defendant here succeeded in its argument that the costs order in its favour could be set off against the costs order in favour of a QOCS protected claimant.

However, the court here also held that the Circuit Judge had been correct in Darini in saying that set-off was at the discretion of the court, and, as in Darini, the High Court here exercised its discretion against allowing set-off by the defendant.

 

23. There is an obvious danger in attempting to lay down general rules concerning the exercise of a pure discretion. The whole purpose of affording the court a procedural discretion is to provide for the flexibility necessary to achieve the overriding objective in circumstances of infinite potential permutation. I would not, therefore, conclude that the discretion to set off costs against costs is to be exercised against the defendant in every case in which it unsuccessfully applies to set aside notice of discontinuance of a claim falling within the QOCS regime – as the logic of Mr Mallalieu’s argument might otherwise appear to mandate. Each case must be decided on its own facts.

24. In this case, however, it became readily apparent that the application to set aside the notice of discontinuance was very weak. Indeed, the bid to strike out the resurrected claim under CPR 44.15 was doomed to failure. If the defendant had ever considered that such a strike out application had realistic prospects of success then it could and should have made it whilst the claim was still proceeding and weeks before the notice of discontinuance had been served. It was entirely inconsistent for the defendant to proceed towards the hearing of a preliminary issue in a case in which, as they were later to argue, the claimant’s case was so weak that it could have been struck out without the need for any such issue to be heard. One can understand the tactical reasons behind the defendant’s application but it was deeply flawed. There were, indeed, grounds upon which the claimant’s evidence was vulnerable. Doubtless, the defendant was fairly confident that the preliminary issue would be determined in its favour. Nevertheless, the strength of its case was never such as to justify a strike out application falling within one of the narrowly defined circumstances set out in CPR 44.15 and that is why one was never made until after the claim had already been discontinued.

25. Furthermore, if the claimant had not served notice to discontinue, the hearing of the preliminary issue would have gone ahead. The defendant would have incurred yet more costs. The claimant, however, even had it lost the issue, would still have enjoyed the full protection of the QOCS regime. It is not without irony that the defendant sought to set aside a notice of discontinuance which, albeit served late in the day, had had the effect of saving it money. I can well understand the defendant’s frustration that the notice was not served earlier but the resilience of the QOCS regime is such as to limit very strictly the inroads which can be made into the scope of its application.

26. I was told that the defendant would, in the event of success on the preliminary issue, have wanted to deploy the decision against claimants in later similar cases. But this was not a “lead case” in a GLO in which there was any court imposed restriction on settlement or discontinuance. I have suggested that, if the defendant remains eager to pursue such a procedural path in future, then suitable lead cases must be selected for that purpose.

 

CONCLUSION

27. It follows that, in the circumstances of this case, I exercise my discretion against allowing the defendant to set off any sum against the claimant’s costs of successfully resisting the application to set aside the notice to discontinue. The claimant is, therefore, entitled to a costs order in his favour in the sum of £7,000.”

 

At paragraph 21 of the judgment here, the court quoted Darini, with approval, in relation to the discretion issue.

“But for the defendant’s application, the position would have been simple. The claim had been discontinued, the defendant’s ability to enforce the deemed costs order in its favour by virtue of CPR 38.6 would have been effectively nil.

There were no damages, none of the exceptions in CPR 44.15 or 44.16 applied, and therefore 44.14(1) applied. From the claimants’ perspective, they would have incurred such costs as they incurred in bringing their claim unsuccessfully but would have no further liability. The QOCS regime would have operated as intended.

It cannot be correct that a defendant is able thereafter to bring an unsuccessful application which is dismissed with costs but, as a result, places the claimants in a worse position than they would have been but for that application. But for the application, the position would have been as set out above. The application has been brought and has caused the claimants to incur additional costs. The court has held that the claimants should be entitled to those costs in principle, thereby placing the claimants back in the position they would have been but for the application. However, the effect of the set-off is then to prevent the claimants from being placed back in that same position, but rather to leave them effectively paying their own costs for the defendant’s failed application.”

 

Comment

A correct decision and a helpful analysis of an incredibly badly written section of the Civil Procedure Rules, not that that narrows it down much.

 

Fixed Costs Ousted by Agreement

In

Turner v Cole, Liverpool County Court, 16 December 2019, Case No: F04LV884

a Regional Costs Judge held that an agreement between the parties ousted the fixed costs regime.

This was a road traffic accident which commenced in the portal but dropped out and it then became apparent that the value was over £25,000.

The defendant made an offer of £60,000 stating:

“In addition we will pay your reasonable costs, to be assed if these cannot be agreed”.

The claimant accept this offer on the basis that:

“…the Defendants will pay the Claimant’s legal costs to be (sic) detailed assessment if not agreed on the standard basis (and it is strictly accepted by the Defendants that costs will be paid on the standard basis and not in accordance with any portal, fixed costs or predictive costs basis).”

The claimant then served an informal costs schedule and bill of costs and the defendant then submitted that its insurer client – Tesco –  had not agreed any other basis than fixed costs.

Thus, here the court had to rule on the issue of contracting out of fixed costs.

The defendant, effectively Tesco Insurance Company, argued that it was not open to the parties to contract out of fixed costs and here the court considered the cases of

Solomon v Cromwell [2011] EWCA Civ 1584

and

Ho v Adelekun [2019] EWCA Civ 1988 .

The judge here held that, despite the intentions lying behind fixed cost regimes in terms of certainty, that following those two Court of Appeal cases, it is open to parties to contract out of the fixed costs by specific agreements.

On the facts here, the judge had “no hesitation” in concluding that the parties had, by concluded agreement, contracted out of the fixed cost regime and therefore that the claimant was entitled to her costs to be determined by detailed assessment on the standard basis.

 

No Detailed Assessment in Fixed Costs Cases

In

Nema v Kirkland [2019] EWHC B15(Costs)

a High Court Master struck out a claimant’s bill of costs as it was a fixed costs matter and should have been dealt with under the provision dealing with disputes relating to disbursements in fixed costs cases, contained in CPR 36.20(11), where a Part 36 offer has been accepted, as here.

Here, in a fixed costs case, the claimant accepted the defendant’s Part 36 offer but there arose a dispute as to disbursements, being counsel’s fees and engineers’ fees, resulting in the claimant issuing detailed assessment proceedings.

The court held at paragraph 29 that:

“By unambiguously limiting a claimant to fixed recoverable costs and permitted disbursements, CPR 36.20 is intended to eliminate the need for detailed assessment proceedings. The language of the rules indicates that cases subject to fixed recoverable costs fall within self-contained provisions of CPR 45 and generally outside the scope of detailed assessment.”

 

In

Mughal v Samuel Higgs & EUI Limited (Senior Courts Costs Office unreported, 6 October 2017)

a Master struck out a Notice of Commencement for the same reason.

“52. It also seems to me that, where following acceptance of a Part 36 offer, fixed costs are recoverable under CPR 45 Section IIIA, there can be no deemed order for costs under CPR 44.9. CPR 44.9 applies where a right to costs arises under CPR 36.13(1), but CPR 36.13(1) is expressly subject to CPR 36.20. CPR 36.20 provides that a claimant’s entitlement to costs and disbursements, following acceptance of a Part 36 offer, is dictated by Section IIIA of Part 45. That is quite inconsistent with the existence of a deemed order for costs on the standard basis, as is the requirement that any dispute be resolved by an order under CPR 36.20(11). The logical conclusion is that where CPR 36.20 applies, CPR 36.13(1) is disapplied.

53. As for the procedure to be followed under CPR 36.20(11), although CPR 36.20(12) refers expressly to costs payable to a defendant it is evident from that provision that the court is under CPR 36.20(11) required to make an order which determines the amount of costs due, whether to a claimant or a defendant. That is neither summary assessment nor detailed assessment. It is a different, self-contained procedure. CPR 44.6 (which excludes orders for fixed costs and is subject to “any rule, practice direction or other enactment”) and the provisions of Practice Direction 44, addressing the choice between summary and detailed assessment, have no application. Any issues will be limited, as will the amount in issue. There is no need for a judge who has dealt with the case to deal with the costs dispute: as Mr Hogan says, where settlement has taken place under Part 36, it is unlikely that a judge will have dealt with the case.

The only possible scenario in which there could be a detailed assessment in a fixed costs case is CPR 45.29J – the escape clause – where the whole point is that fixed costs should not apply.

 

“31. The only conceivable situation in which it would be appropriate for a claimant to commence detailed assessment proceedings following the acceptance of a defendant’s Part 36 offer in a case to which CPR 45, Section IIIA applies, would be where a claimant seeks costs exceeding fixed recoverable costs under CPR 45.29J. It is not suggested by either party that this is such a case.

 

Comment

Quite right.

 

In

Ivanov v Lubbe, Central London County Court 17th January 2020

the court, on appeal, held that where costs under the fixed costs regime could not be agreed following its acceptance of a Part 36 offer within the relevant period, the correct procedure was to issue a Part 23 application, rather than seeking detailed assessment.

Here, the claimant had accepted the defendant’s Part 36 offer in an RTA claim and, under CPR 36.20, the claimant was entitled to the fixed costs in Section IIIA of CPR 45.

The parties agreed costs except the issue fee, which the defendant questioned, contending that the claimant was, or might have been, entitled to fee remission and it was not reasonable for him to have incurred it.

The claimant issued a Part 23 application for an order that the defendant pay the fee.

The Deputy District Judge dismissed the application, finding that, where CPR 36.20 was engaged, a deemed costs order arose so that a dispute over recoverable disbursements could only be determined by serving a bill of costs and commencing detailed assessment proceedings.

The claimant appealed.

The Circuit Judge noted that CPR 36.20 created a regime in which the claimant was entitled to costs, and those costs were quantified using Tables 6B-6D.

Since the costs were fixed, there was no need for an assessment of costs or prerequisite for a deemed costs order.

Accordingly, he held that there was no deemed costs order made under CPR 36 in a fixed costs case, so a party seeking to invoke the court’s costs jurisdiction had to make a Part 23 application.

Regarding the court fee, the Circuit Judge considered several cases which held that the claimant could elect to make a claim against the tortfeasor rather than relying on alternative sources of funding such as the state or insurance.

He concluded that there were strong policy grounds for finding that it was not unreasonable for a claimant to preserve the public purse and direct the cost of wrongdoing onto the tortfeasor.

Accordingly, he ordered the defendant to pay the issue fee.

 

Road Traffic Accident Portal Conclusion

In

Bateman v Devon County Council, Plymouth County Court, 2 September 2019

a Circuit Judge held that the portal and fixed costs process did not apply to a case where a motorist was injured due to a defective road.

It was common ground that the road traffic accident portal did not apply as the defendant was not a highway user.

The issue was whether the Public Liability portal applied.

At page 593 of my book – Personal Injury Small Claims, Portals and Fixed Costs – I suggested that such claims were not covered as that portal excludes claims.

“…for damages arising out of a road traffic accident (as defined in paragraph 1.1(16) of the

Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents).”

 

Paragraph 1.1(16) reads:

 

“(16) ‘road traffic accident’ means an accident resulting in bodily injury to any person caused by, or arising out of, the use of a motor vehicle on a road or other public place in England and Wales unless the injury was caused wholly or in part by a breach by the defendant of one or more of the relevant statutory provisions as defined by section 53 of the Health and Safety at Work etc Act 1974.”

 

Here, the court held that such a matter does not go into either of the portals and is therefore not subject to fixed recoverable costs.

The court conducted a thorough examination of the case law in relation to the definition of a road traffic accident in other contexts.

There is no binding authority on this particular point.

Written by kerryunderwood

March 10, 2020 at 7:56 am

Posted in Uncategorized

CONDITIONAL FEE AGREEMENTS AND SOLICITOR’S RIGHT TO TERMINATE: COURT OF APPEAL DECISION

with 8 comments


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

Butler v Bankside Commercial Ltd [2020] EWCA Civ 203

the Court of Appeal upheld the High Court’s decision that the wording of a Conditional Fee Agreement on offers of settlement applies to advice re an offer to be made by the client as well as to advice on offers received from the other side.

Here the solicitors represented a claimant and the defendant made an offer which was not accepted and the solicitors advised the claimant to make an offer of settlement.

The client rejected that advice and the solicitor terminated the retainer.

The client went on to win, but failed to beat the other side’s offer and thus was punished in costs.

The client then disputed that anything was due to the solicitor, but the Master entered summary judgment in favour of the solicitor, a decision upheld by the High Court, and now by the Court of Appeal.

 

The key issue centred on the wording in the Conditional Fee Agreement:

 

“7 (iii) We can end this agreement if you reject our opinion about making a settlement with your opponent.

You must then:

  • pay the basic charges and our disbursements, including barrister’s fees;
  • pay the success fee if you go on to win your claim for damages.”

 

The client argued that the solicitor’s right to terminate arose only on advice about “making a settlement” and not on advice about “making an offer” and that making an offer does not settle a case.

The Court of Appeal rejected that argument and quoted, with approval, from the High Court Judge’s decision at paragraphs 19, 22 and 23 of the original judgment.

 

“10. In an admirably concise and clear judgment, the judge accepted Bankside’s interpretation. At [19] he said:

“I am satisfied that the suggestion that any opinion about “making a settlement” is to be construed as being limited to the consideration of the acceptance [of] any offers made by the opponent is inconsistent with the language of the clause and would, in any event, lead to procedural distinctions devoid of either logical justification or practical coherence.”

11. He went on to point out the differences between a case where there is no CFA, in which case the client is entitled to ignore the advice of her solicitors, and a case governed by a CFA where the solicitors themselves are at financial risk. He said at [22]:

“Where, however, there is a CFA under which the solicitors, themselves, face significant economic risks in the event of an adverse result at trial, one would not expect the level of protection which they are afforded against the whims of the unreasonably optimistic client to turn upon the random happenstance of whether or not the other side has made an approach which can be categorised as a contractual offer capable of acceptance. For such solicitors to be required to wait, like Vladimir and Estragon, for an offer from the other side which might never come rather than, where appropriate, to take the initiative in negotiations would impose artificial and unjustifiable limits on their ability to protect their own legitimate interests.”

12. And at [23] he added:

“a solicitor’s opinion about making an offer, on the facts [of] any given case, is perfectly capable of being one which is about “making a settlement”. A settlement is an end point but the making of one is a process.””

 

Comment

Spot on.

Written by kerryunderwood

March 4, 2020 at 7:57 am

Posted in Uncategorized

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