Kerry Underwood

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

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

In

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

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

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

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

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

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

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

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

 

Please see –

COSTS ROUND-UP

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

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

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Written by kerryunderwood

August 7, 2019 at 8:30 am

Posted in Uncategorized

RECOVERING COSTS OF ATTENDING INQUESTS

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

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

 

In

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

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

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

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

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

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

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

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

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

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

 

Please see –

COSTS ROUND-UP

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

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

Written by kerryunderwood

August 7, 2019 at 8:21 am

Posted in Uncategorized

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

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

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

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

Written by kerryunderwood

August 6, 2019 at 8:00 am

Posted in Uncategorized

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

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

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

 

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

In

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

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

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

Quite right too.

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

Written by kerryunderwood

August 5, 2019 at 9:22 am

Posted in Uncategorized

COSTS ROUND-UP

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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.

 

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

In

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

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

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

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

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

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

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

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

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

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

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

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

 

Costs In Statutory Review and Judicial Review Claims

In

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

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

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

It was accepted that this was an Aarhus claim.

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

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

At present that cap is £10,000.

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

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

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

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

The High Court held that the principles established in

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

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

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

The Court of Appeal then reviewed the judgments in

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

and

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

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

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

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

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

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

 

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

That is now forbidden.

 

Recovering Costs of Attending Inquests

In

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

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

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

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

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

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

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

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

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

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

 

Non-Party Costs Orders And Disclosure

In

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

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

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

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

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

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

The court set out the general principles:

Funding Disclosure

Legal framework

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

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

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

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

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

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

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

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

11. Hamblen LJ went on to say this:

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

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

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

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

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

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

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

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

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

On the facts, the court refused the application.

 

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

In

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

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

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

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

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

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

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

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

 

Provisional Assessments: Jurisdiction of Costs Officers And Appeals

In

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

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

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

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

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

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

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

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

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

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

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

There should not be a fresh assessment.

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

 

Draft Charge As Security For Costs Does Not Breach Article 6

In

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

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

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

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

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

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

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

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

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

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

Written by kerryunderwood

August 2, 2019 at 8:39 am

Posted in Uncategorized

INSOLVENCY ROUND-UP: 4 CASES

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

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

 

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

In

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

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

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

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

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

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

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

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

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

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

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

 

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

In

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

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

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

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

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

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

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

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

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

 

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

In

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

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

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

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

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

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

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

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

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

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

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

 

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

In

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

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

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

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

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

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

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

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

Written by kerryunderwood

August 1, 2019 at 8:11 am

Posted in Uncategorized

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

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

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

 

Change on Causation Justified Claimant Amending Costs Budget

In

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Costs Offer Not A Benchmark Below Which Costs Cannot Be Budgeted

In

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

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

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

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

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

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

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

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

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

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

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

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

 

No Significant Developments Justifying Revision Of Costs Budget

In

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

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

There were two issues:

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

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

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

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

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

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

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

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

which gives useful guidance.

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

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

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

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

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

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

£85,000 had been agreed for this phase.

It was not proportionate to spend more.

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

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

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

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

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

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

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

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

 

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

In

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Written by kerryunderwood

July 31, 2019 at 8:14 am

Posted in Uncategorized

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