Kerry Underwood

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REPRESENTATIVE ACTION AGAINST GOOGLE GIVEN GO-AHEAD BY COURT OF APPEAL

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Underwoods Solicitors are the solicitors for Crowe UK LLP, the Joint Liquidators of the Cambridge Analytica Group of Companies

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

In

Richard Lloyd v Google LLC [2019] EWCA Civ 1599

the Court of Appeal allowed Mr Richard Lloyd to bring a representative action against Google LLC on behalf of a class of more than 4 million Apple iPhone users.

He alleges that Google secretly tracked some of their internet activity, for commercial purposes, between 9 August 2011 and 15 February 2012.

The Court of Appeal distinguished its own decision in

Vidal-Hall v Google Inc [2015] EWCA Civ 311.

The Court of Appeal thus overturned the High Court’s decision in

Lloyd v Google LLC [2018] EWHC 2599 (QB)

dealt with by me in my blog –

GOOGLE: ACTION FOR DAMAGES FOR BREACH OF DATA PROTECTION ACT FAILS.

I set out below part of the Court of Appeal’s own summary of their judgment.

 

Summary

Mr Lloyd alleges that Google was able to identify visits to any website displaying an advertisement from its vast advertising network, and to collect considerable amounts of information. It could tell the date and time of any visit to a given website, how long the user spent there, which pages were visited for how long, and what advertisements were viewed for how long. In some cases, by means of the IP address of the browser, the user’s approximate geographical location could be identified. Over time, Google could and did collect information as to the order in which and the frequency with which websites were visited.

Mr Lloyd alleges that this tracking and collating of Browser Generated Information (“BGI”) enabled Google to obtain or deduce information relating not only to users’ internet surfing habits and location, but also about such diverse factors as their interests and habits, race or ethnicity, social class, political or religious views or affiliations, age, health, gender, sexuality, and financial position. In addition, it is said that Google aggregated BGI from browsers displaying sufficiently similar patterns, creating groups with labels such as “football lovers”, or “current affairs enthusiasts”. Google’s DoubleClick service then offered these groups to subscribing advertisers, allowing them to choose the type of people to whom they wanted to direct their advertisements.

The first instance judge, Mr Justice Warby, had dismissed Mr Lloyd’s application for permission to serve Google outside the jurisdiction in the USA, so preventing the claim getting under way.

The Court of Appeal has reversed the judge’s decision and given Mr Lloyd the right to proceed with his representative proceedings against Google in the Media and Communications Court in London.

The Court of Appeal decided three legal questions as follows:

i) First, that a claimant can recover damages for loss of control of their data under section 13 of Data Protection Act 1998 (“DPA”), implementing article 23.1 of the Data Protection Directive (the “Directive”),1 without proving pecuniary loss or distress;

ii) Secondly, that the members of the class that Mr Lloyd seeks to represent did have the same interest as one another under Part 19.6(1) of the Civil Procedure Rules and were identifiable; and

iii) Thirdly, that the judge ought to have exercised his discretion to allow the action to proceed as a representative action.

The appeal raised important issues that were not decided by the Court of Appeal in Vidal-Hall v. Google Inc [2015] EWCA Civ 311 (“Vidal-Hall”). Although Vidal-Hall was argued on the basis of analogous underlying facts, there was one crucial difference. In that case, the individual claimants claimed damages for distress as a result of Google’s breaches of the DPA. In this case, Mr Lloyd claims a uniform amount by way of damages on behalf of each person without seeking to prove any distinctive facts affecting any of them, save that they did not consent to the abstraction of their data.

The court relied on the decision in the phone hacking case of Gulati v. MGN Limited [2015] EWCA Civ 1291 (CA) (“Gulati”) to decide that, if damages are available without proof of pecuniary loss or distress for the tort of misuse of private information, they should also be available for a non-trivial infringement of the DPA, as both claims are derived from the same fundamental right to data protection contained in article 8 of the Charter of Fundamental Rights of the European Union 2012/C 326/02 (the “Charter”): “[e]veryone has the right to the protection of personal data concerning him or her”.

The Court of Appeal rejected Google’s main argument that both article 23.1 of the Directive and section 13(1) of the DPA require proof of causation and consequential damage. The words in section 13 “[an] individual who suffers damage by reason of [a breach] is entitled to compensation” justify such an interpretation, when read in the context of the Directive and of article 8 of the European Convention on Human Rights and article 8 of the Charter, and having regard to the decision in Gulati. Only by construing the legislation in that way could individuals be provided with an effective remedy for the infringement of such rights.

The claim was an unusual use of the representative procedure, but the Court held that it was permissible on the authorities. The claimants that Mr Lloyd seeks to represent will all have had their BGI – something of value – taken by Google without their consent in the same circumstances during the same period, and were not seeking to rely on any personal circumstances affecting any individual claimant (whether distress or volume of data abstracted). The represented class were all victims of the same alleged wrong, and had all sustained the same loss, namely loss of control over their BGI. Mr Lloyd’s concession that he would not rely on any facts affecting any individual represented claimant had the effect of reducing the damages that could be claimed to the lowest common denominator. But it did not mean that the represented claimants did not have the same interest in the claim. It was impossible to imagine that Google could raise any defence to one represented claimant that did not apply to all others.

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Written by kerryunderwood

October 15, 2019 at 8:47 am

Posted in Uncategorized

ELECTRONIC WORKING IN THE SENIOR COURTS COSTS OFFICE

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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.

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.

 

Electronic filing in the Senior Courts Costs Office is compulsory from 20 January 2020 for legally represented parties, including lawyers representing themselves – see  Electronic Working in the Senior Courts Costs Office – Practice Note by the Senior Costs Judge.

Documents sent to the Senior Courts Costs Office other than through the Courts Electronic Filing System (CE-File) will not be filed or issued.

The system is operating on a voluntary basis from 7 October 2019 to 19 January 2020.

The Practice Note deals with cases transferred to the Senior Courts Costs Office as well as dealing with documents subject to a confidentiality or anonymity order (paragraphs 17 and 18).

Draft orders must be filed as Word documents and electronic bills must be filed in both Excel spreadsheet and PDF format and all other documents must be filed in PDF format (paragraph 14).

Skeletons and chronologies may be filed using the CE-File or by email to scco@justice.gov.uk .

From 20 January 2020, statements of costs for summary assessment on Form N260 must be filed electronically (paragraph 21).

A hard copy is required for every hearing of an application (paragraphs 19 and 20).

Written by kerryunderwood

October 11, 2019 at 8:12 am

Posted in Uncategorized

£786 AN HOUR OK FOR GRADE B SAYS HIGH COURT (BUT YOU GET STRUCK OFF IF YOU ARE A PI LAWYER)

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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

Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC)

the Technology and Construction Court, part of the High Court, carried out a summary assessment of costs and, in considering hourly rates, said that solicitors providing the appropriate skill and expertise to ensure the proper and efficient conduct of litigation are entitled to charge the market hourly rate for their area of practice.

Here, the defendant successfully applied for a stay, and the claimant was liable for the defendant’s costs of that application, which were summarily assessed by a full High Court Judge.

This was a half-day interlocutory application concerning a dispute about claims and counterclaims arising out of the development and implementation of a digital online platform for buying and selling investment funds.

Thus, it was socially useless.

A full High Court Judge allowed recoverable costs, on the standard basis, at £46,000.

Those of us in Hemel Hempstead, and elsewhere would think about 5% of that figure, that is £2,300, is about right.

This Disney Land decision, by a full High Court Judge, is otherwise interesting for the comments in relation to the Senior Courts Costs Office guideline hourly rates:

“It is unsatisfactory that the guidelines are based on rates fixed in 2010 and reviewed in 2014, as they are not helpful in determining reasonable rates in 2019. The guideline rates are significantly lower than the current hourly rates in many London City solicitors, as used by both parties in this case. Further, updated guidelines, would be very welcome.” (Paragraph 14)

The judge allowed £534 an hour for a Grade C fee earner and £786 an hour for a Grade B fee earner.

Costs were allowed in relation to a Grade A fee earner, but the judge does not say how much per hour she allowed, but given the above figures, it must be pushing £1,000 an hour.

The same High Court struck off Mr Good, a personal injury lawyer, for claiming £400 an hour from the National Health Service Litigation Authority in clinical negligence matters, which are very obviously much more important than this litigation – see my blog

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

Shame on you!

Hasta la Victoria siempre!

Written by kerryunderwood

October 10, 2019 at 7:57 am

Posted in Uncategorized

INDEMNITY COSTS: COURT OF APPEAL DECISION: EAST THURROCK DIVIDED

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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

Ford & Anor v Bennett & Anor [2019] EWCA Civ 1604 (03 October 2019)

the Court of Appeal had a rare opportunity to consider the issue of indemnity costs.

There is no new law here, but the judgment reviews modern case law and states that “litigants are discouraged from citation of authority in what, particularly at first instance, is a well-travelled road, depending in each case on its particular circumstances and the discretion of the trial judge”.

It is also a fascinating read about the goings on at non-league football club East Thurrock United, which would be more appropriately named East Thurrock Divided.

Here the losing defendants had been ordered to pay the successful claimants’ cost on the indemnity basis, and the additional parties, who had joined the main defendant, Wayne Bennett, appealed, arguing that:

(1) the trial judge was wrong to award costs against the additional parties on the indemnity basis when there had been no express findings of dishonesty against them, or of collusion with Wayne, or of being responsible for knowing, even if not dishonestly so, that their claim was bad;

(2) the additional parties’ claim was not “out of the norm”, and therefore the judge was wrong to hold that it was “far out of the norm and is not a case of just witnesses not being believed”.

The Court of Appeal reviewed the case law and quoted from “the leading modern authority” of

Excelsior Commercial & Industrial Holdings Limited v. Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879 :

“… it is dangerous for the court to try and add to the requirements of the CPR which are not spelt out in the relevant parts of the CPR. This court can do no more than draw attention to the width of the discretion of the trial judge and re-emphasise the point that has already been made that, before an indemnity order can be made, there must be some conduct or some circumstance which takes the case out of the norm. That is the critical requirement.”

The Court of Appeal also quoted from

Three Rivers District Council & Ors v The Governor & Company of the Bank of England [2006] EWHC 816 (Comm) :

“(5) Where a claim is speculative, weak, opportunistic or thin, a claimant who chooses to pursue it is taking a high risk and can expect to pay indemnity costs if it fails.”

The Court of Appeal said:

“Parties who effectively join themselves, or allow themselves to be joined, to litigation on the basis of the assertion of a shared oral agreement, so long after the event, are clearly taking the risk of a speculative enterprise in litigation, which shall only reasonably be pursued after careful evaluation.”

The parties here were “in a common place, and making common cause”.

Therefore the appeal against the indemnity costs order was dismissed.

Written by kerryunderwood

October 9, 2019 at 8:24 am

Posted in Uncategorized

COSTS BUDGETING UPDATE

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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.

 

Costs of Costs and Case Management Conference Not Subject to Budgeting

The 109th Amendment to the Civil Procedure Rules came in on 1 October 2019.

One of the changes makes it clear that the costs of the Costs and Case Management Conference are incurred costs and thus do not fall to be budgeted.

The new Practice Direction 3E, Paragraph 7.4 reads:

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

 

Anticipated Consent Order Court Fees in Budget

Should a Precedent H costs budget include within the Alternative Dispute Resolution/Settlement phase an anticipated court fee for the Consent Order recording the Settlement Agreement?

Costs budgets assume that the matter will proceed to trial and therefore the total figure for the budget includes the costs to be incurred if the matter does not settle and proceed to trial, which suggests that the court fee for any Consent Order should not be included.

However, the Guidance Notes to Precedent H include, under examples of the work to be included within the Settlement phase:

“Drafting Settlement Agreement or Tomlin order”, which suggests that the court fee should be included.

 

What About Budgeted Costs for Work That Ends Up Not Being Done?

Simon Gibbs, in his excellent blog, poses the dilemma in these words:

“What happens then if a budget is approved/agreed that includes the court fee but the matter does not settle before trial? On detailed assessment, does the fact that one of the assumptions on which the budget was prepared (that the matter would settle within the ADR/Settlement phase) did not occur mean that there is a “good reason” to depart downwards from the budget? If so, to what extent?

For example, a claimant’s budget is prepared estimating, for the ADR/Settlement phase, £2,000 profit costs and £100 consent order fee. The budget is approved as drafted. Negotiations are unsuccessful and so no settlement agreement or Tomlin order is drafted and no consent order is filed. The claim succeeds at trial. The claimant serves a bill claiming exactly £2,100 profit costs. The court’s approval of the budget will “relate only to the total figures for budgeted costs of each phase of the proceedings” and the approved figure would have been a global total of £2,100, which the receiving party has not exceeded.

As per HHJ Dight CBE in Barts Health NHS Trust v Salmon [2019]:

“it seems to me that the fact that the phase of the budget relating to experts was … substantially incomplete was capable of being a good reason, and it would have been open to the Master on that basis to consider whether to reduce the figure”

If this applies in this situation, by how much should the approved budget be reduced? It is unlikely anyone will lose too much sleep over the £100 court fee, but what about the additional costs? Will there always be a “good reason” to depart downwards from the ADR/Settlement phase if a matter proceeds to trial?””

 

I am grateful to Simon Gibbs for his discussion of this issue, and, as ever, with the Civil Procedure Rules, and especially budgeting issues, there are more question than answers.

Written by kerryunderwood

October 8, 2019 at 8:02 am

Posted in Uncategorized

PERSONS ABROAD ORDERED TO PRODUCE DOCUMENTS UNDER SECTION 236(3) INSOLVENCY ACT 1986

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

In

Wallace v Wallace [2019] EWHC 2503 (Ch) (25 September 2019)

the High Court held that the liquidator of an English or Welsh company was entitled to an order against a former bookkeeper of the company, resident in Ireland, to produce company documents in his control or possession, while noting that there were conflicting decisions as to the jurisdiction of the court to order the production of documents or the supply of information under section 236(3) of the Insolvency Act 1986.

In

Re MF Global UK Ltd [2015] EWHC 2319 (Ch)

the High Court held that it did not have jurisdiction to make an order against persons not in the jurisdiction but in

Official Receiver v Norriss [2015] EWHC 2697

the High Court held that it could make an order for the production of documents and information against a person abroad under section 236(3).

The court followed Norriss, holding that the power to require the production of documents under section 236(3) should be regarded as a standalone power separate from the power to summon a person out of the jurisdiction under section 236(2): section 236(3) was less invasive than section 236(2).

The court should take account of the international dimension in its assessment and be wary of making orders seeking to regulate the conduct of third parties abroad in respect of matters having no real connection with the jurisdiction or which involved excessive or exorbitant exercise of jurisdiction.

Here, the bookkeeper held critical information and could not reasonably complain about having to supply information, and as the company’s centre of main interests was in the UK, the order of the court would be recognised and enforced in Ireland under the Insolvency Regulations 2000.

The court therefore had a legitimate interest in regulating the bookkeeper’s conduct abroad and in requiring him to make documents and information available to the liquidator.

Section 236 is headed

Enquiry into company’s dealings, etc“,

and provides relevantly as follows:

“(1)  This section applies as does section 234; and it also applies in the case of a company in respect of which a winding-up order has been made by the Court in England and Wales as if references to the office-holder included the official receiver, whether or not he is the liquidator.

(2) The court may, on the application of the office-holder, summon to appear before it –

(a)  any officer of the company,

(b) any person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or

(c) any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company.

(3) The court may require any such person as is mentioned in sub-section 2(a) to (c) to submit to the court an account of his dealings with the company or to produce any books, papers or other records in his possession or under his control relating to the company or the matters mentioned in paragraph (c) of the sub-section.””

Written by kerryunderwood

October 7, 2019 at 8:19 am

Posted in Uncategorized

CHARGING INTEREST ON DISBURSEMENTS

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

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

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

There is no inherent right to charge a client interest on anything until a bill has been delivered and the simplest and cleanest way is to deliver a disbursement only bill with the standard wording at the bottom:

 

We will charge interest on unpaid bills at the rate payable on judgment debts, from one month after delivery of our bill.  This rate is currently 8% per annum in accordance with article 5 of the Solicitors (Non-Contentious Business) Remuneration Order 2009”.

 

 Article 5

“5 (1) A solicitor may charge interest on the unpaid amount of his costs plus any paid disbursements and value added tax, subject to the remainder of this article.

(2) Where an entitlement to interest arises under paragraph (1), and subject to any agreement made between a solicitor and client, the period for which interest may be charged runs from one month after the date of delivery of a bill.

(3) Subject to any agreement made between a solicitor and client, the rate of interest must not exceed the rate for the time being payable on a judgment debt.

(4) Interest charged under this article must be calculated, where applicable, by reference to –

(a) the amount specified in a determination of costs by the Law Society under schedule 1A to the Solicitors Act 1974;

(b) the amount ascertained on taxation if an application has been made for the bill to be taxed.”

 

The right to charge interest in relation to disbursements applies only to paid disbursements, and although the article does not say so, it must be implied from that that interest only runs from the date of payment of the disbursement and not any earlier date, even if a statute bill under the Solicitors Act 1974, including disbursements, has been delivered to the client.

Article 5(2) in any event provides that the period for which interest may be charged runs from one month after the date of delivery of a bill, reflecting the client’s absolute right to assessment under the Solicitors Act 1974 if application is made within one month of the delivery of a statute bill.

In the absence of any specific agreement with the client, a solicitor can charge interest on disbursements from the date of payment of the disbursement, or one month from the delivery of a statute bill under the Solicitors Act 1974, whichever is later.

Article 5(3) provides that subject to any agreement made between a solicitor and a client, the rate of interest must not exceed the rate for the time being payable on judgment debts, which is 8%, a high rate compared with market interest rates at present.

Article 5(4) is out of date in that the correct term is now assessment and not taxation, and the Law Society now has no ability to determine a bill of costs.

All that article 5(4) does is to determine, where appropriate, the capital sum on which interest may be charged and the only relevant part is article 5(4)(b)  is that interest can only be charged on the amount allowed by the Senior Courts Costs Office on detailed assessment following an application under the Solicitors Act 1974 by the client.

As is seen from the wording of the article, all of this is “subject to any agreement made between a solicitor and client”, save for the provisions concerning a detailed assessment, where there cannot be any opt out.

Thus, in theory, the parties may agree a rate of above 8% in the retainer.

However, as set out above, 8% is already higher than can be earnt in interest anywhere and  any court would find any higher rate unreasonable under the Solicitors Act 1974 and would disallow such sum and indeed could void the whole retainer, meaning that the client would have to pay nothing at all.

Quite separately, the court could find the retainer unfair if the client was not fully aware of the high rate of interest and the fact that this is an unusual charge, which a court would inevitably find to be the case.

My simple advice is do not go there. 8% is a high rate anyway and you do not need to specify this in the retainer, as in the absence of anything in the retainer, then the rate of interest is governed by article 5(3), and is 8%.

Of course, in advance of any potential dispute, a solicitor may explain to the client that if they do not pay up then interest will be charged at 8% on the disbursements.

As to the time from when interest runs, again I am satisfied that any court is likely to hold that a retainer which allows interest to be charged before a solicitor has paid the disbursement is likely to be both unfair and unreasonable under the Solicitors Act 1974.

I can see a possible exception, and that is where there is a contractual obligation to pay interest to the person providing the service for which the disbursement is being paid, as in those circumstances the client would simply be indemnifying the solicitor.

That leaves the issue of whether it is worth varying article 5 to have an agreement whereby, for example, the client is liable for interest running from when the disbursement is paid if that is earlier than one month from the delivery of a Solicitors Act 1974 bill.

It would need to be set out in detail in the retainer, and the solicitor would have to draw the client’s attention to the fact that it is an expense that they are unlikely to recover from the other side and that it is unusual in nature.

The place for this would be in a Conditional Fee Agreement, or the Service Level Agreement or whatever, but in the same place as the hourly rates and general charging information.

My  advice is simply to deliver a disbursement only bill as and when disbursements are incurred, but not to insist on payment while the client is co-operating, but if the client fails to co-operate then you can charge interest at 8% from one month after the delivery of a bill, or the payment of the disbursement, whichever is later.

You do not need to explain any of this in a Client Care Letter or Conditional Fee Agreement or Service Level Agreement or whatever.

 

From A Defendant at The Successful Conclusion to a Case (Assuming Disbursements Paid by Us)

There is an overlap between this heading and the one above, in that the indemnity principle potentially applies, and the ability to recover costs from a defendant may depend upon the terms of the retainer.

The leading modern case is

Jones and Ors v Secretary of State for Energy and Climate Change (2013) EWHC 1023 (QB)

where the Queen’s Bench Division of the High Court allowed pre-judgment interest on disbursements, where the disbursements had been paid by the claimants’ solicitors as the matter progressed, and where there was a credit agreement between the solicitors and the client.

The interest rate was 4% above base, payable only in the event of success, with the After-the-Event insurer paying the credit charge if unsuccessful.

The paying party conceded that in principle the claimants were entitled to pre-judgment interest on disbursements and here it was the rate of interest that was in dispute.

CPR 44.3(6)(g) allows a court to award interest on costs from or until a certain date, including a date before judgment, and the rate is in the discretion of the court.

This power was introduced by the Civil Procedure Rules and first exercised in

Bim Kemi AB v Blackburn Chemicals Limited [2003] EWCA Civ 889,

where the Court of Appeal said:

“…in principle there seems no reason why the court should not [award interest on costs] where a party has to put up money paying its solicitors and has been out of the use of that money in the meanwhile.”

The judgment here then considers various cases where the rate of interest had been considered, including

Jaura v Ahmed [2002] EWCA Civ 210

which deals with the issue in detail.

In

Tate and Lyle Food and Distribution Limited v Greater London Council [1982] 1 WLR 149

the High Court said that it would always be right to look at the rate “at which plaintiffs [claimants] with the general attributes of the actual plaintiff in the case… could borrow money as a guide to the appropriate interest rate.”

Examples of rates allowed include:

Jaura v Ahmed:                                                    3% above base rate

Bim Kemi:                                                            1% above base rate

Brown v KMR Services:                                         2% above base rate

Denney v Gooda Walker:                                      2% above base rate

Here, given that the claimants were individuals of modest means, the Court of Appeal found that in the open market the interest rate on an unsecured loan “would have been significantly in excess of the 4% above base rate” agreed with the solicitors, and thus allowed that sum.

The case is also of interest in that it takes as a given that the solicitors could have charged a higher hourly rate, and/or a higher success fee to reflect the fact that they were funding disbursements:

In some cases, the claimant’s solicitors might fund the disbursements, either by absorbing the cost as part of their overheads or by providing the funding in return for the payment on increased hourly rates of remuneration or an additional uplift in the success fee under a CFA.” (Paragraph 5)

The Court of Appeal regarded this as a separate and additional risk, beyond that of postponement of receipt of costs, warranting a higher hourly rate and/or success fee.

Given the fact that it is much harder for a client to challenge the hourly rate as compared with the success fee, claimants’ solicitors are advised to reflect the cost of funding in the hourly rate.

Also, a success fee is now not recoverable from a losing party, with the single exception of mesothelioma claims, whereas the solicitor and client full rate potentially is, where an indemnity costs order is made, for example because a claimant has matched or beaten its own Part 36 offer at trial, or on judgment being entered.

 

A key part of the judgment is Paragraph 5 which reads:

 

“5. Disbursements can be funded in a number of ways. A claimant with adequate means may pay the disbursements as the case progresses. If he or she does not have sufficient funds at his/her disposal, he/she may obtain a loan, e.g. from a bank. Alternatively there are commercial organisations which will fund disbursements for which they charge claimants a commercial rate of interest. In some cases, the claimant’s solicitors might fund the disbursements, either by absorbing the cost as part of their overheads or by providing the funding in return for the payment of increased hourly rates of remuneration or an additional uplift in their success fee under a CFA.”

 

The High Court there refers to “increased hourly rates of remuneration or an additional uplift in their success fee under a CFA.” (my bold).

Thus they see it as either/or. Logically, I agree, but it does not work like that as the success fee is always calculated by reference to a percentage uplift on the hourly rate, whatever that hourly rate is, and whatever the reason for that hourly rate.

Strictly, I think the agreement by the solicitors to fund disbursements should be reflected in the hourly rate, as it is an increased and premium service to the client, and the risk of recovery, or rather the risk of failing to recover costs, remains unchanged, although the potential amount of the unrecovered costs increases if the solicitors are funding the disbursements.

Consequently the hourly rate should be increased and the level of the success fee should not be increased, but if the hourly rate is increased, then the solicitor gets both the higher hourly rate and a higher success fee in cash terms, not percentage terms, because the success fee is based on the hourly rate.

Thus, there is effectively double billing. It could be argued that there is always double billing where there is a success fee, as the hourly rate is the fee for doing the work and the success fee is a bonus for risking not getting paid in the event of defeat.

This does happen in other parts of a claim. Let us say the success fee is correctly fixed at 100% at the outset, and no one disputes that. The matter settles. There are then negotiations about quantum, or indeed absolutely routine emails dealing with the mechanics of payment of agreed damages.

At this stage there is no risk whatsoever, but nevertheless that work still attracts a success fee of 100%.

The success fee cannot be recovered from the defendant, except in mesothelioma claims. Even if an order is made on an indemnity basis, that does not allow recoverability of the success fee.

There is no advantage in charging a higher success fee in terms of recovery from the defendant, as the client would end up paying that from their damages.

Thus, the key issue is whether a higher hourly rate would indeed be recoverable from the defendant, and as far as I am aware, there is no authority on this particular point, that is whether or not a higher hourly rate reflecting the fact that a solicitor is funding disbursements, is recoverable.

There is a powerful argument that this is a classic example of solicitor and own client costs, which are not recoverable, that is that the higher hourly rate reflects a premium service to the client and is a matter between the solicitor and client, and not recoverable.

Having said that, if an order on the indemnity basis is made, then my view is that such hourly rate would be recoverable, as proportionality does not come into play, and there is no suggestion that it is unreasonable or unnecessary for the solicitor to fund the disbursements.

Indeed, the whole tone of the judgment goes the other way; that it is necessary for someone to fund the disbursements to allow a party of modest means to be able to litigate.

How much could the hourly rate could be increased without red flags being raised?

This is a difficult point, as the hourly rate is never, in my experience, split up with a higher rate reflecting a higher level of service.

That would be very easy to do, that is to say that the rate is, for example, £250 per hour with the client funding the disbursements, say £275 an hour with the solicitor funding the disbursements.

The only way that hourly rates are generally differentiated is by the level of lawyer dealing with the matter.

I think that it would be a mistake to isolate that out, as it gives a specific element of the hourly rate for the defendant to challenge on the basis that it is truly solicitor and own client cost.

However, in commercial work generally, it may well be that getting the solicitor to charge 10% more than they do already will not be picked up or raise any red flags, although that of course depends upon how much they are charging already.

In practice, the answer is probably to do both, that is to increase the hourly rate on the basis of the additional service to the client, but not isolate out that element in the hourly rate, but to seek to recover the whole rate from the defendant AND seek to recover the cost of interest as per the Jones case.

That would need little change to a typical retainer, because the attraction to a client is walking away with a minimum of, say, 60% of their damages, or whatever, and as we know that is all that the client is concerned with, and the client is right.

Thus it matters not whether the rate is £300 an hour or £3,000 an hour as far as the client is concerned; their protection is in the limiting of the costs to be deducted from damages.

Arguably the court should allow recoverability of a higher hourly rate to reflect the solicitor funding disbursements, as for all intents and purposes it is a form of interest, and the client is getting the benefit of being able to litigate.

However, in practice, the courts have a long history of awarding interest on damages and costs, albeit that the power to award interest in relation to a period pre-judgment is relatively new.

In the Jones judgment, the High Court returned to the matter in paragraph 23 stating this:

“They could have entered into an agreement with Hugh James that Hugh James would fund the disbursements in return for additional uplifts in their success fees. However, such uplifts would not have been recoverable from the defendant and, in the event that their claims succeeded, the claimants would have had to meet the additional uplifts out of their damages.”

Thus, there, the High Court mentions only increasing the success fee, and not the hourly rate, but at the same time states that the claimant should not have to pay the cost of funding disbursements out of their damages and obviously one way of dealing with that is to allow recoverability of that element from the defendant, as part of a higher hourly rate.

As to the risk of a Solicitors Act own client challenge to the amount charged, there is no doubt that it is much harder for a client to challenge the hourly rate, as compared with a client challenging the success fee.

 

Where Is Claimant Is Funded by A Third Party (Assuming Disbursements Paid by Funder)

In

Angela Jade Powell v Shrewsbury and Telford Hospital NHS Trust, 1 April 2016, Case Number O5Y02236

the claimant, a person of limited means, used disbursement funding and sought to recover the interest payments from the losing party.

Here, the paying party conceded that in principle the claimant could recover interest, but disputed the right to claim pre-judgment interest on three grounds:

  • the credit agreement was unenforceable as the claimant had not been properly advised;
  • the court did not have jurisdiction to re-open the Consent Order and thus changed what had been agreed;
  • 3% was an excessive rate of interest.

In the end, the defendant conceded on all points and paid £1,600 in interest.

The case that established this principle is

Jones and Ors v The Secretary of State for Energy and Climate Change and Anor [2013] EWHC 1023 (QB).


Written by kerryunderwood

October 4, 2019 at 8:16 am

Posted in Uncategorized

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