Kerry Underwood


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In AXA Insurance UK plc v Financial Claims Solutions Ltd and others [2018] EWCA Civ 1330 (15 June 2018)

the Court of Appeal awarded exemplary damages of £20,000 each against the three defendants, who had faked road traffic accidents, created false documentation, and, in relation to the first defendant, conducted proceedings on the basis that it was a firm of solicitors, which it was not.

The defendants dishonestly manipulated the court process, including falsely stating that court documents had been served.

The defendants chose not to provide evidence as to their means and so it was appropriate to make a punitive award without reference to their ability to pay.

The Court of Appeal stressed that exemplary damages remained the exception to the rule, and said it was not appropriate to extend the scope of such awards beyond the three types of case recognised in

Rookes v Barnard [1964] AC 1129.

One of the categories identified in that case was where the defendant’s conduct was calculated to make a profit for the defendant which may exceed the compensation payable to the claimant, and that criterion was satisfied here.

The Court of Appeal gave guidance on the approach to be adopted in relation to this category.

The court should analyse the position from the point of view of when the tort was committed, when the wrongdoer did not know whether or not it would achieve the profit that it was seeking.

The court should not decline to make an order for exemplary damages simply because the wrongdoer’s profit could be fully recovered through an award of compensatory damages.

Such a policy would be inconsistent with the decision in


Ramzan v Brookwide [2011] EWCA Civ 985.


Actual or possible criminal proceedings, or contempt of court proceedings should not affect or reduce an award of exemplary damages.


The Court of Appeal approved the analysis in


Borders (UK) Ltd v Commissioner of Police of Metropolis [2005] EWCA Civ 197


that exemplary damages can be awarded to punish and deter outrageous conduct by the defendant.

Here the action was in the torts of deceit and unlawful means conspiracy.

The Trial Judge awarded the claimant compensatory damages of £24,954.31, but dismissed the claim for exemplary damages.

The Court of Appeal allowed the insurance company’s appeal against that ruling.

Here the fraudulent defendants stood to make a profit of £85,000, whereas the compensatory damages were only around £25,000, and this was the point which brought the case within one the categories in Rookes v Barnard [1964] AC 1129.






Written by kerryunderwood

July 6, 2018 at 1:06 pm

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Part 36: Dishonest Conduct No Reason to Depart From Usual Costs Order

In Tuson v Murphy [2018] EWCA Civ 1461 (22 June 2018)

the Court of Appeal held that a claimant who accepted a Part 36 offer after the expiry of the relevant period was not liable for costs incurred before the expiry of the relevant period even though she was dishonest and misleading.

The offer was unconditional and unwithdrawn and was made by the defendant with full knowledge of the claimant’s dishonesty.

This was a personal injury claim which included a claim for loss of earnings.

Three months after issuing proceedings, the claimant tried to develop a business franchise, but she abandoned it as it was losing money, and she failed to disclose this in her evidence and to the employment expert appointed  in relation to her loss of earnings claim.

After becoming aware of this, the defendant made a Part 36 offer, which was accepted by the claimant two months after the expiry of the relevant period.

The usual order would be that the claimant would get costs up to the expiry of the relevant period, but not afterwards, and would have to pay the defendant’s costs from the expiry of the relevant period onwards.

However, here, the first instance court ordered the claimant to pay the defendant’s costs from the point at which it could be said that the claimant had started to mislead the defendant.

The claimant appealed and the Court of Appeal allowed the appeal and substituted the usual order of the defendant paying the claimant’s costs up to the expiry of the relevant period with the claimant paying the defendant’s costs thereafter.

The Court of Appeal considered CPR 36.13(5) and the circumstances in which it may be unjust to make the usual costs order.


The Court of Appeal considered


Tiuta plc (In Liquidation) v Rawlinson & Hunter (A Firm) [2016] EWHC 3480 (QB)


and endorsed the approach of the court there, namely that if nothing emerges after the claimant’s acceptance of a Part 36 offer to show that the defendant’s assessment of the risks and benefits in making the offer is significantly upset, contradicted or misinformed, then it will be highly unlikely that applying the usual costs order will be unjust.

The court said there was a difference between the situation where the facts known to the defendant’s advisers at the time of the Part 36 offer did not change significantly during the period after the offer was made, but before the delayed acceptance, and the situation where the facts known to the defendant’s advisers when the Part 36 offer was made were upset or undermined by subsequent events, or subsequently discovered facts.

The judgment is also a reminder of the value of Calderbank offers, outside the framework of Part 36, which can be made in this type of situation, or indeed any other type of atypical situation.


This was a pre-2015 case. In a case issued after the implementation of Section 57 of the Criminal Justice and Courts Act 2015, the whole claim would have been dismissed on the basis of fundamental dishonesty.

Had the claimant accepted within the relevant period, then there could have been no argument – she would have been entitled to costs in any event.

The key for all parties in relation to Part 36 is certainty, and this decision is a sensible and correct one.

Obviously I have no idea why the defendants made a Part 36 offer, rather than a Calderbank offer, but I do know that generally many litigation lawyers have a woeful lack of knowledge and understanding of Part 36, which is an exceptionally complexed rule.


In Tiuta the court said:


“…the authorities have repeatedly emphasised the importance of remembering that the part 36 regime is there to provide a clarity and balance for the encouragement of the resolution of claims that would otherwise be litigated through to a trial.”


Part 36 Offers: You Need to Track Them and Use Form N242a !

I have long advised that in every case every lawyer should have a separate document setting out all Part 36 offers in a case and that document, and any offers, should be reviewed each month as part of a regular file review.

Those of you working electronically only will need to find your own systems, but I suspect it is the lack of paper staring lawyers in the face which is causing some of these problems.

A particularly graphic case is

Hogg v Newton, Teesside County Court, 18 May 2018.

This was a road traffic accident and on 8 May 2012 it was put onto the portal and the Claim Notification Form stated that the claimant was hiring a vehicle – in fact on credit hire – as well as claiming for personal injury.

On 12 February 2013 the claimant’s solicitors made a Part 36 offer of “£1,600 in full and final settlement of this claim.”

That Part 36 offer was made by letter and elsewhere within the letter it stated that the offer was for “the whole of our client’s claim”.

In March 2014, the personal injury element of the claim was settled for £650, leaving the balance of the claimant’s offer at £950, that is £1,600 less the £650 agreed for the personal injury part of the claim.

The claimant instructed fresh solicitors and in March 2016 they issued proceedings with a damages claim of over £125,000, of which the credit hire claim amounted to over £122,000.

The defendants then accepted the original, unwithdrawn Part 36 offer and paid the balance of £950 and applied to the court for a declaration that the claim had been compromised.

The District Judge granted the application, and rejected the claimant’s argument that the reference to the whole of the claim should be read as meaning with the exception of credit hire, and the judge also rejected the argument that the offer lapsed on settlement of the personal injury element of the claim.

The claimant appealed and sought to argue a fresh ground, namely that the offer was not a Part 36 offer at all, having failed to comply with the CPR, as well as its original arguments.

The Circuit Judge agreed with the District Judge that the natural meaning of “the whole of our client’s claim” was just that and included the claim for credit hire.

The Circuit Judge also upheld the District Judge’s finding that settlement of part of a claim did not revoke a Part 36 offer, and noted that the offer had never been withdrawn, and that the claimant was free to withdraw the offer at any time after the expiry of the relevant period.

The Circuit Judge also rejected the fresh argument that the offer was not a genuine Part 36 offer.

The Circuit Judge allowed this point to be argued and he found that the reference in the letter to the claimant “seeking the full sanctions available under Part 36” was sufficient and that a reasonable person, or insurer, would have read the relevant passage as being part of a valid Part 36 offer.

It was not necessary specifically to include within the offer the phrase that the offer is intended to have the consequences of section 1 of Part 36, even though this is required by CPR 36.2(2)(b).

The statement that the defendant had “21 days to respond to this offer” was sufficient and the offer did not need to set out the full text of CPR 36.2(2)(c).



This decision is correct and illustrates a number of important points.

Firstly always, but always, use the HMCTS Form N242A, rather than trying to write your own Part 36 offer.

Completion of the official, approved form of Part 36 offer eliminates any chance of not getting the wording right.

Time and time again I am instructed by solicitors where the matter in issue is whether an offer made in a letter, rather than on Form N242A, is a valid offer.

Secondly, have a separate and clear document listing Part 36 offers, their terms and dates and review these offers each month as part of the file review.

Thirdly, take care in considering whether the offer is indeed intended to compromise the whole claim, or only part of it.

It is proper and acceptable to seek to compromise just part of the claim; indeed that is part of the purpose of Part 36 that discrete matters, such as special damages to date or whatever, can be resolved, so as to narrow down the issues.

Far too many firms take a cavalier attitude towards Part 36, which is unquestionably the most important rule in the book.


Written by kerryunderwood

July 5, 2018 at 11:06 am

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In Gempride Ltd v Bamrah and another [2018] EWCA Civ 1367, 21 June 2018

the Court of Appeal allowed an appeal against a Circuit Judge’s decision to overturn the order of a Costs Master who had disallowed the claimant her costs, utilising the provisions of CPR 44.11, having found misconduct on her behalf in relation to detailed assessment proceedings.

Here the claimant was a solicitor whose own firm initially acted for her in a personal injury claim and the Master found that she had certified a misleading bill of costs and had given untrue information about the funding of the case.

The personal injury case settled for £50,000 shortly after proceedings had been issued.

The claimant had claimed over £900,000.

The appeal by the solicitor against the Master’s order occupied a Circuit Judge for 13 days and the Circuit Judge allowed the solicitor’s appeal, finding that the claimant’s solicitor was not responsible for the errors of her costs draftsmen who had prepared the bill.

This was on the basis that they had not acted according to her instructions, that she had not acted dishonestly and that her statement in relation to the funding of the case was correct.

The Circuit Judge ordered the defendant to pay the claimant’s costs, including her own costs of attending the appeal, and these exceeded £950,000.

The claimant was a sole practitioner and she instructed herself under a Conditional Fee Agreement and throughout, the paying party, the defendant, had questioned the hourly rate and also whether Before-the-Event insurance was available.

The Court of Appeal allowed the defendant’s appeal and held that the claimant’s conduct had been unreasonable and improper for the purposes of CPR 44.11 and disallowed half of her costs of the original action.

The Court of Appeal held that unreasonable and improper conduct did not require dishonesty.

Here the claimant had retrospectively increased the hourly rate that being charged to herself and stated that her costs draftsmen had advised that this was proper.

The Court of Appeal held that her conduct in allowing a bill to be submitted with a rate that she knew exceeded the contractual rate had been at least reckless.

In any event the firm was responsible for the conduct of the costs draftsmen, who are agents for the claimant’s solicitor.

The Court of Appeal said that it was “an important matter of principle that solicitors on the record – and other authorised litigators and “legal representatives” for the purposes of the CPR – understand that they remain ultimately responsible for the acts and omissions of those to whom they delegate parts of the conduct of litigation, particularly where those to whom such work is delegated are not authorised. It is only in that way that the supervisory jurisdiction of the court can be effectively maintained”.

The Court of Appeal also held that the claimant, who gave evidence at the appeal before the Circuit Judge, could not claim the costs of attending that hearing as a solicitor, as she was attending as a party.

The decision runs to 186 paragraphs and sets out in a clear and helpful way the approach that the court should take when considering whether to make an order under CPR 44.11, following misconduct in relation to detailed assessment proceedings.

It reinforces the long held principle that the signing of the certificate on a bill of costs by a solicitor is a most serious matter.


The Court of Appeal also said:


Parliament requires that those who conduct a litigation or exercise a right of audience on behalf of others are subject to a rigorous regulatory scheme, and have an overriding duty to the court.” (Paragraph 4).


The decision also sets out in some detail the restrictions on conducting litigation or exercising a right of audience without being entitled to and points out that this is a criminal offence under Section 14 of the Legal Services Act 2007, a fact which seems almost routinely to be ignored by courts and McKenzie friends.

I have previously expressed my view that a judge who allows a paid McKenzie friend to appear in court is aiding and abetting a criminal offence under the Legal Services Act 2007, and I remain of that view.

They should read this decision.

The Court of Appeal also set out the relevant provisions of the Legal Services Act 2007 and provided, amongst other things, that authorised persons should maintain proper standards of work and that persons who exercise before any court a right of audience, or conduct a litigation in relation to proceedings in any court, by virtue of being authorised persons should comply with their duty to the court to act with independence in the interest of justice.


An authorised person is therefore subject to not only regulation by a professional regulator (which includes provision for sanctions for professional misconduct) but also supervision directly by the court.”(Paragraph 9).


The Court of Appeal reinforced the decision and comments in


Bailey v IBC Vehicles Limited [1998] 3 All ER 570 :


“As officers of the court, solicitors are trusted not to mislead or to allow the court to be misled. This elementary principle applies to the submission of a bill of costs.”


A solicitor is required to sign the bill of costs and:


In so signing he certifies that the contents of the bill are correct. That signature is no empty formality. The bill specifies the hourly rates applied, and the care and attention uplift claimed. If an agreement between the receiving solicitor and his client… restricted (say) the hourly rate payable by the client, that hourly rate is the most that can be claimed or recovered on taxation….The signature on the bill of costs under the rules is effectively the certificate by an officer of the court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client under a contentious business agreement.

The court can (and should unless there is evidence to the contrary) assume that his signature to the bill of costs shows that the indemnity principle has not been offended….

… [T]he other side of a presumption of trust afforded to the signature of an officer of the court must be that breach of that trust should be treated as a most serious disciplinary offence.”



The Court of Appeal then set out the relevant provisions in Section 51(6) of the Senior Courts Act 1981 dealing with wasted costs and the text of CPR 44.11 which reads:



“(1) The Court may make an order under this rule where –

(a) a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or

(b) it appears to the court that the conduct of a party or that party’s legal representative, before  or during the proceedings or in the assessment proceedings, was unreasonable or improper.

(2)  Where paragraph (1) applies, the court may –

(a) disallow all or part of the costs being assessed; or

(b) order the party at fault or that party’s legal representative to pay costs which that party or legal representative has caused the other party to incur”.


The Court of Appeal pointed out that the wasted costs jurisdiction is compensatory, whereas the CPR 44.11 jurisdiction is not:



“An order under CPR rule 44.11 can only be made against a party or a party’s legal representative. The jurisdiction is not compensatory: it is not necessary to show that the applicant has suffered any loss as a result of the misconduct. It is a jurisdiction intended to mark the court’s disapproval of the failure of a party or of a legal representative to comply with his duty to the court by way of an appropriate and proportionate sanction.


The Civil Procedure Rules do not define “unreasonable” law in proper conduct, although CPR Practice Direction 44, paragraph 11.2, provides:



Conduct which is unreasonable or improper includes steps which are calculated to prevent or inhibit the court from furthering the overriding objective.”


However, the Court of Appeal said that “unreasonable” and “improper” for the purposes of CPR 44.11 have the same meanings as they have been given in the wasted costs provisions and the numerous decisions under those provisions.


The Court of Appeal took the view that it was unlikely that the drafters of CPR 44.11 thought that a legal representative should be liable under those provisions in circumstances in which a wasted costs order could not be made, save for the point made above, that a wasted costs order is compensatory, whereas a CPR 44.11 order is punitive, and not compensatory.


The Court of Appeal then goes through the case law in detail in relation to the wasted costs criteria.


The Court of Appeal then set out the relevant propositions in relation to CPR 44.11

i) A solicitor as a legal representative owes a duty to the court, and remains responsible for the conduct of anyone to whom he subcontracts work that he (the solicitor) is retained to do. That is particularly so where the subcontractor is not a legal representative and so does not himself owe an independent duty to the court.

ii) Whilst “unreasonable” and “improper” conduct are not self-contained concepts, “unreasonable” is essentially conduct which permits of no reasonable explanation, whilst “improper” has the hallmark of conduct which the consensus of professional opinion would regard as improper.


iii)           Mistake or error of judgment or negligence, without more, will be insufficient to amount to “unreasonable or improper” conduct.

iv) Although the conduct of the relevant legal representative must amount to a breach of duty owed by the representative to the court to perform his duty to the court, the conduct does not have be in breach of any formal professional rule nor dishonest.

v) Where an application under CPR rule 44.11 is made, the burden of proof lies on the applicant in the sense that the court cannot make an order unless it is satisfied that the conduct was “unreasonable or improper”.

vi) Even where the threshold criteria are satisfied, the court still has a discretion as to whether to make an order.


vii) If the court determines to make an order, any order made (or “sanction”) must be proportionate to the misconduct as found, in all the circumstances.


By the time the costs issue reached the Circuit Judge on appeal, the claimant had instructed other solicitors, that is other than her own firm, and thus she had attended that hearing as a party, but not as a solicitor.

Thus the Court of Appeal’s finding on this point does not mean that a firm of solicitors conducting litigation for itself, or one of its partners etc., does not get solicitors’ costs of attending in the usual way.

The reason why the Court of Appeal said that it is of particular importance that solicitors are held liable for the conduct of anyone to whom they contract work when those subcontractors are not themselves authorised is that such unauthorised subcontractors do not owe an independent duty to the court.




Written by kerryunderwood

July 4, 2018 at 9:22 am

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Insolvency Proceedings and Lawsuits under Insolvency Regulation 2000

In Tarrago da Silveira v Massa Insolvente da Espirito Santo Financial Group SA ([2018] EUECJ C 250/17 (6 June 2018)

the European Court of Justice has issued a preliminary ruling on the operation of Article 15 of Council Regulation (European Community) 1346/2000 on insolvency proceedings (Insolvency Regulation 2000).

Article 15 provides an exception to the general rule that the laws of the member state where insolvency proceedings are commenced govern the conduct of the insolvency.

Article 15 provides that the effects of insolvency proceedings in a member state on a lawsuit pending in another member state, where the lawsuit concerns an asset or a right of which the debtor has been divested, are governed by the laws of the member state where the lawsuit is pending.

In this case, an individual brought a claim for contractual damages in Portugal against a debtor.

When the debtor went into Luxembourg insolvency proceedings the Portuguese court stayed the individual’s claim as, under Portuguese law, the Luxembourg insolvency proceedings rendered the Portuguese proceedings otiose and entitled the court to refuse to hear the claim, even though under Luxembourg law such a claim could have continued notwithstanding the insolvency proceedings.

The matter was put to the European Court of Justice for a preliminary ruling and the European Court of Justice ruled that article 15 is wide enough to apply to claims for damages in respect of contractual claims, though not enforcement proceedings in relation to such a claim.

The ruling therefore accorded with the stance taken by the Portuguese court.


Setting Aside a Statutory Demand

In Black v Sale Service & Maintenance Limited [2018] EWHC 1344 (Ch)

the High Court overturned a District Judge’s decision to dismiss an application to set aside a statutory demand.

The High Court held that the decision was unjust and involved a serious procedural irregularity in that the District Judge dismissed the application at a 15-minute hearing that all parties had expected to be a directions hearing only.

15 minutes was not long enough for the District Judge to be taken through the evidence and decide that there was no triable issue.

The High Court ordered a re-hearing with a time estimate of two and a half hours.

Debtors seeking to set aside a statutory demand should expect directions from the court at a first hearing, provided that the applicant has established a triable issue.

The High Court also held that the decision was wrong in any event as the District Judge had held that the debtor’s liability for part of the sum in the demand had been established as the debtor’s company, whose debts the debtor had guaranteed, had unsuccessfully tried to pay the creditor £60,000.

This was merely prima facie evidence that the debtor owed £60,000, and there was known to be other, unconsidered by the judge, evidence that might establish a counterclaim by the debtor.

That evidence should be considered even if it might seem unlikely that ultimately it would assist the debtor.


Administration Order Made On Basis of A Disputed Debt When Debtor Otherwise Solvent


In Berkshire Homes (Northern) Ltd v Newbury Venture Capital Ltd [2018] EWHC 938 (Ch) (14 February 2018)


the High Court granted a creditor’s application for an administration order, although the creditor’s debt was disputed as the debtor company was claiming credits, cross-claims and set-off and the debtor was solvent apart from the debt.


The court held that the disputed debt rendered the claimant a creditor who could to apply for an order, and the existence of the debt, and the failure to pay it, meant that the company was unable to pay its debts, entitling the court to make an administration order.


Where the disputed debt was not only the basis of the creditor’s standing to apply for the administration order, but also formed the evidence of insolvency necessary to satisfy the administration condition of the company being, or being likely to become, unable to pay its debts, the debt had to be proved on the balance of probabilities.


After making allowance for the credits, cross-claims and set-offs, there was a balance rendering the company insolvent on a net assets basis.


There was a real prospect of the administration achieving its purpose, justifying the court placing the company into administration.


The decision affirms Hammonds (a firm) v Pro-Fit USA Ltd [2007] EWHC 1998 (Ch) and Fieldfisher LLP v Pennyfeathers Ltd [2016] EWHC 566 (Ch).



Bankruptcy Order Annulled Following Appeal against Dismissal of Application and Refusal to Adjourn Hearing on Uncontested Medical Grounds

In Rafferty v Sealants International Ltd and another [2018] EWHC 1380 (Ch) (2 May 2018)


the High Court has annulled a bankruptcy order where it was clear that, at the time it was made, evidence existed, which had not been put before the court, of the bankrupt’s ability to pay the petition debt.


The annulment order was made conditional on paying the creditor’s debt and costs.


The bankrupt was also ordered to pay the costs of the Official Receiver (OR).


During protracted bankruptcy proceedings in the county court, the bankrupt had applied to annul his bankruptcy order.

He subsequently requested an adjournment of the hearing of his application on medical grounds.


It was refused in his absence despite the OR consenting. His request was not raised with the petitioner who had unexpectedly attended.


The court went on to dismiss the annulment application as it was not satisfied that appropriate grounds had been made out.


The bankrupt appealed to the High Court, and the OR remained neutral on the bankrupt’s appeal as did the petitioner, providing that no costs were sought against them.


The High Court held that while adjournments are generally case management decisions, the court must consider procedural fairness, and sometimes the material before the appeal court indicates that there had been “some mistake or fundamental error” in the process.


Medical evidence may not justify a request for an adjournment if it is contested (Simou v Salliss [2017] EWCA Civ 312) but in this case it was not.


As the bankrupt’s request for an adjournment had not been raised with the petitioner at the hearing, something had clearly gone wrong.


Permission to appeal the refusal to adjourn was, therefore, allowed.


The High Court then considered the bankrupt’s substantive application, brought on grounds existing at the time of the bankruptcy order that it ought not to have been made – section 282(1)(a) of the Insolvency Act 1986.


It held that there was a reasonable prospect that the petitioner would be paid within a reasonable time, and where such evidence existed but was not put before the court, as in this case, the High Court considered there were grounds to annul and that the proper application of principles justified a conditional annulment order (Sekhon v Edginton [2015] EWCA Civ 816 and 1st Credit (Finance) Ltd v Carr [2013] EWHC 2318 (Ch)).



Joint Creditors Must Both Petition For Bankruptcy

In Aabar Block S.a.r.l. and another v Maud [2018] EWHC 1414 (Ch), 11 June 2018


two petitioning creditors were relying on a joint debt, one creditor was not entitled to seek a bankruptcy order without the agreement of the other.


In this case, the petitioning creditors were joint owners of a debt and both issued the bankruptcy petition. One of the creditors no longer wished to proceed and was not willing to proceed with the petition.


On a hearing of the petition the court held that the creditor who wished to proceed could not do so unless it could show that the other creditor was acting in breach of its duty as trustee of the jointly owned debt.


The court also decided that it would consider whether the petition constituted an abuse of process, notwithstanding that it had previously considered the issue at the stage when the statutory demand was issued.


This was because there had been a change of circumstances and the abuse of process point was being taken by the petitioning creditor who wished the petition to be adjourned rather than by the debtor.


The court considered that the same principle would apply to a winding up petition in a corporate context.


Security for Costs Application Dismissed Against a Company in Liquidation

In  Absolute Living Developments Ltd v DS7 Ltd and others [2018] EWHC 1432 (Ch) (24 May 2018)
the High Court dismissed a defendant’s application for security for costs against a company in insolvent liquidation following a consideration of the two-stage test under CPR 25.13(1) and (2)(c).


It held there was a clear risk that an order would stifle a bona fide and genuine claim by the liquidator.


The test is firstly, is there reason to believe that the claimant would be unable to meet the defendant’s costs and if so, secondly, is it just, in all the circumstances, to make an order? – criteria for the exercise of discretion set out in Sir Lindsay Parkinson and Co v Triplan [1973] QB 609.


The first stage was conceded by the liquidator: the company was in insolvent liquidation and the proceedings were brought on a no win-no fee basis.


The Triplan guidance was applied to the second stage. The claim was properly brought and defended and the risk of an adverse costs order against the company was real.


There was insufficient certainty that the claimant’s inability to pay was attributable to the defendant.


The application for security appeared appropriate but the critical factor in deciding whether to make an order was one of principle: would it stifle a serious or genuine claim?


Weighing the competing interests of the company and the defendants, the balance clearly favoured the liquidator bringing claims for the benefit of the creditors and there was no source of funding available to the claimant that would enable it to pay a security for costs order.


If the court were to order security, in reality that would be provided by the liquidator, creating a situation entirely contrary to the public interest in the insolvency regime.


It was critical and in the public interest that liquidators may proceed in a manner that is uninhibited in terms of deciding how to bring actions, including how those actions are framed and funded.


This shows that security for costs will not always be ordered against an insolvent entity that appears unable to pay any costs order made against it.


It is welcome news to office-holders who may be unable to obtain after the event insurance, especially given the expensive premium cannot be claimed from the losing party in the event that the claim succeeds.


Written by kerryunderwood

June 29, 2018 at 8:25 am

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In Travelers Insurance Company Ltd v XYZ [2018] EWCA Civ 1099

the Court of Appeal upheld the decision of the High Court that a non-party costs order under section 51 of the Senior Courts Act 1981 could be made against the liability insurers of an unsuccessful defendant, even though the relevant claims against the insured were not covered by the policy.

The Court of Appeal held that case law did not prescribe conditions to be fulfilled before a non-party costs order could be made against liability insurers and the only principle was that the court’s discretion must be exercised justly – see  Deutsche Bank AG v Sebastian Holdings Inc. [2016] EWCA Civ 23.

The use of the word “exceptional” in the case law only meant that the case was outside the ordinary run of cases where parties pursued or defended claims for their own benefit and at their own expense, and whether a case was exceptional was not to be judged according to what is, or might be, usual in the insurance industry.

A key factor was that the insurers funded the costs of the proceedings against the insured and stood to benefit from a successful outcome and although cases will be fact sensitive, insurers should note that if they continue to defend uninsured claims, then they risk paying the costs of an unsuccessful defence, even if those claims were not covered under the policy.

Furthermore there was an obvious problem with the insurers’ position.

Had they succeeded against all of the claimants, both insured and uninsured, they would have been liable equally to contribute towards the insured’s costs which would have benefited the insurers as it would have reduced their costs liability.

However, if their argument here was accepted, then failure, rather than success, on those very same issues would leave them liable for only around one third of the costs of the claimants.

That was neither reasonable nor just.

The Court of Appeal also said that the insurers’ interests were in play even when only the uninsured claims were being considered as the longer those claims continued, and therefore the greater the proportion of costs incurred in them, the lower the insurers’ potential costs liability.

The facts of this case were unusual in that Travelers Insurance Company Ltd had previously settled certain insured claims, but was uninsured in respect of the remaining claims as they fell outside the period of insurance cover, but the claimants had mistakenly believed that Travelers Insurance Company Ltd was insured as, following a court order, it had confirmed that it had insurance in place.

The first instance court had said that the fact that the insurers had insured other claims against Travelers Insurance Company Ltd did not entitle them to be involved in, or influence the conduct of, the uninsured claims, both of which they had done.

As well as funding the unsuccessful defence of the uninsured claims, they had withheld their consent to a proposed settlement of those claims.

But for the insurers’ involvement, Travelers Insurance Company Ltd would have disclosed at an early stage that the claims were not covered under their policy and the claimants would not have pursued the claims and incurred cost.

Written by kerryunderwood

June 28, 2018 at 10:06 am

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In Riaz v Ashwood Solicitors Ltd [2018] EWHC B5 (Costs)

Master Leonard, sitting in the Senior Courts Costs Office refused an application by Mr Riaz a former client of Ashwood Solicitors Ltd seeking delivery up of papers from the firm so that he could take advice as to his right to detailed assessment of the firm’s fees.

Master Leonard commented that the courts were facing many applications of this nature.

Master Leonard had adopted the same approach in Green and others v SGI Legal LLP [2017] EWHC B27 (Costs), but other Masters have reached the opposite conclusion.

In this case two new arguments were advanced:

  • That the court could exercise its inherent jurisdiction over solicitors;


  • That the fiduciary duties owed by a law firm to a client should be taken into account when deciding whether the court should exercise its inherent jurisdiction over solicitors.


The solicitors firm argued that the court only had a residual jurisdiction that could only be exercised where there was a clear breach of duty and where there was no other way of avoiding injustice.


The Master rejected that contention and referred to the key case of


Assaubayev v Michael Wilson and Partners Ltd [2014] EWCA Civ 1491


which stated that it was for the court, in its discretion, to choose whether to exercise the jurisdiction and examples given in that case made it clear that it is a summary jurisdiction to be exercised only in clear-cut cases.

The Master said that equitable remedies for breaches of fiduciary duty are not usually matters for a Costs Judge and therefore the concept had to be approached with some caution.


The Master rejected the client’s arguments as:


  • There was no clear-cut evidence of conduct on the part of the solicitor that would make it appropriate for the court to exercise its inherent jurisdiction;


  • No fiduciary duty obliging a solicitor to supply copies of documents that did not belong to the client had been identified, and nor had any breach of any other fiduciary duty;


  • It was inappropriate to exercise the court’s inherent jurisdiction effectively to order pre-action disclosure based on the client’s suspicion that the solicitor had overcharged him. The criteria under CPR 31.16 were not satisfied.


  • Furthermore the time limits for applying for an assessment of the solicitors’ bills had expired some years earlier.



The court had this to say:


“It is important to put this application into context. One must bear in mind the criteria for pre-action disclosure set out by CPR 31.16, which this case does not meet. One must also bear in mind the stated purpose of the application, which is to allow the Claimant to take advice on the exercise of his statutory right to apply for assessment of the Defendant’s bills. Those rights are subject to time limits. Given that, on the evidence, the Claimant received bills and paid them about three years before he instructed his present solicitors to explore the possibility that he had been overcharged, it seems likely that those time limits expired some years ago.”


As with most recent cases, this matter involved a deduction by the solicitors of a success fee capped at 25% of general damages and part special damages, and it is clear and settled law that a solicitor cannot simply deduct 25%, but must justify the fees by reference to the solicitor and own client retainer, any shortfall between solicitor and own client cost and recovered cost, and in any event the success fee must not exceed 100% of base costs.

Thus the maximum is the lower of 25% of the Allowed Damages Pool or 100% of base costs.

There was no doubt that the documents sought here belonged to the solicitor and not the client and the issue was whether the client, on payment coping costs, had the right to obtain copies of documents in which he had no proprietary interest, from the solicitor.

Here the solicitors for the client put forward a wholly erroneous argument, which they have pursued in other cases and in correspondence with other solicitors, that the success fee is based on recovered costs rather than solicitor and own client costs.

Thus in this case, a portal case, the fees recovered were £600 being £500 plus VAT, which is the fixed road traffic accident portal fee.

The Master comprehensively and correctly rejected the argument that the success fee was based on that figure:

“I do not accept that the evidence shows that an unlawful success fee has been charged. Mr Carlisle’s argument to that effect is based upon the assumption that the Defendant’s base costs are exactly £600 inclusive of VAT. That was however the amount received by way of costs between the parties. It does not follow that the Defendant was not entitled, under the terms of its retainer, to charge more than £600 to the Claimant by way of base costs on a solicitor/client basis. If the Defendant’s base costs, as payable by the client, were £650 or more then the success fee will not have been in excess of 100%.”

The reference to £650 reflects the fact that that was the sum deducted from damages by way of a success fee, being 25% of the Allowed Damages Pool.


­In Whale v Mooney Everett Solicitors Ltd [2018] EWHC B10 (Costs) (12 June 2018),

Master Leonard, sitting in the Senior Courts Costs Office, allowed the client correspondence from his former solicitors, upon payment of a fee, but nothing more.

The client was seeking to bring a claim over deductions from the settlement of a claim in 2015 for damages for personal injury arising out of a road traffic accident.

The court rejected the application for copies of invoices and client account ledgers, saying that there was no evidence of misconduct on the part of the law firm to justify an order and that the claimant was not owed any fiduciary duties relating to the documents that did not belong to him:

If, as the evidence indicates, the Claimant was, during and on the conclusion of the retainer, sent sufficient information to take any necessary advice on applying for the assessment of the Defendant’s costs, then no imbalance exists in any material sense. It is not suggested that the Claimant was in some way incapable of keeping an adequate record. He just did not do so.”

The judge said that there was no entitlement to internal records and no entitlement to have funding documents sent more than once.


In Green & Ors v SGI Legal LLP [2017] EWHC B27 (Costs)

the Senior Courts Costs Office gave guidance on applications by clients under section 68 of the Solicitors Act 1974 for the delivery up of documents in the possession of solicitors.

Here, the Master dismissed applications by the clients for delivery up of funding documents, all invoices and all correspondence sent to them.


The Master referred to

Re Wheatcroft (1877) 6 Ch.D. 9 and

Leicestershire County Council v Michael Faraday and Partners Ltd [1941] 2 KB 205

and said that they drew an important distinction between the property of a professional adviser and the property of a former client and the appropriate law was that of proprietary rights and not confidentiality or anything specific to a solicitor/client relationship.

It was for the claimants to show that they were entitled to receive copies of another person’s property.

The Master gave the following guidance:

If a person writes a letter to another, keeping a copy, the recipient was not, of right, entitled to a copy, even if they agreed to pay for it. The purpose of creating documents for a client’s benefit was fulfilled when the documents were originally given to the client.

A client wishing to challenge the bill, but who had lost key documents, would be disadvantaged, but it did not follow that the solicitor had any obligation to compensate. A client’s inability to provide required documents with an application for detailed assessment would not invalidate the application and the court could manage the issue.

Ralph Hume Garry (a firm) v Gwillim [2002] EWCA Civ 1500

was authority saying that a client did not need the whole file in order to challenge a bill.

Granting such applications would bypass the specific provisions of CPR 31.16 regarding pre-action disclosure.


A different view was taken in

Hanley v JC and A Solicitors Ltd [2017] EWHC B28 (Costs)

the Senior Courts Costs Office, in Part 8 proceedings,  refused to order a firm of solicitors to supply a former client with a copy of the entire file, including documents owned by the solicitor rather than the client.

The court noted that there is no binding authority where solicitors have been ordered to hand over papers which they, rather than the client, own.

It also referred to the the Law Society’s practice note Who owns the file which states that there are many papers on a solicitor’s file which do not have to be handed over to the former client.


The Master said

“However, I am also concerned by the floodgates that would likely be opened by a ruling that solicitors can be ordered to hand over their complete file in circumstances such as these; such a move would foreseeably instil considerable satellite litigation and I am not persuaded that this would be a positive step, and dismiss the Application accordingly.”


A different view was taken in

Swain v JC and A Ltd [2018] EWHC B3 (Costs)

where a Master in the Senior Courts Costs Office ordered solicitors to provide a former client with documents from the file, so that the client could decide whether to seek a Solicitors Act assessment.

The application was made under section 68(1) of the Solicitors Act 1974 and the court’s inherent jurisdiction and sought disclosure of four schedules to the conditional fee agreement dealing with fees and expenses, together with any other documents forming part of the retainer.

Here, the Master said that the court had a discretion to order the provision of copies of the documents whether or not the client had a proprietary right to them.

He doubted that many clients would appreciate the need to retain the documents provided by their solicitors and would be at a significant disadvantage without them.

He realised that this may encourage satellite litigation, but that transparency might assist in the resolution of disputes and frivolous requests would be deterred if clients knew that they would have to pay for the copies.

The Master recognised that this decision differed from others of the SCCO and said that authoritative guidance would be useful.

The Master also queried the charging rate of £250.00 per hour as details of the fee-earner had been removed from the documents supplied.

“27. Further, quite apart from any concern as to the reasonableness of the fees generally and the necessity of expenses claimed in the bills in this case, it seems to me that there is a particular need to consider the status of the fee earner and the rates that were agreed for the fee earners (Pilbrow v Pearless de Rougmont & Co. [1999] 3 AER 355). In a letter dated 1 October 2015 the Claimant was told that a Legal Executive would be handling his claim but as I have recorded above the details of fee earners have been obscured in the documents disclosed. The rate of £250 per hour is perhaps a rate one would normally associate with a substantially higher-grade fee earner in a matter of significantly greater complexity and value. I would expect details as to the charging arrangements to be set out in the schedules to the CFA and I think it would be necessary to consider these prior to an application for an assessment in the context of a general consideration of the reasonableness of the funding arrangements and the charges.”


The Master also said

“29. I should perhaps add that the bills generated in 2015 do not state whether and, if so, what element of the charges consist of a success fee. Nor does the October bill assert any charge for a success fee. However, according to the Claim Notification Form the CFA provided for a success fee and as such the agreement would appear to be subject to the requirements of section 58 (4B) of the Courts and Legal Services Act 1990 and the Conditional Fee Agreements Order 2013 (no 689). The relevant information required by these provisions should be in the first of the schedules to the CFA.”

Both Green and Hanley are being appealed, with a decision likely before the summer 2018 break.

Written by kerryunderwood

June 25, 2018 at 9:38 am

Posted in Uncategorized


with 2 comments

In Bratek v Clark-Drain Ltd – Case No B31YM002 – Cambridge County Court, 30 April 2018

Cambridge County Court, on appeal from a District Judge, was considering the interpretation of a consent order in relation to costs in a personal injury claim subject to fixed recoverable costs.

The matter had been in the EL/PL portal but had come out because liability was not admitted and was then set down for a fast track trial and was settled the day before the claim was due to be heard.

The consent order provided that the defendant do pay the claimant £10,000 in full and final settlement with the defendant to pay the claimant’s solicitor’s costs, on the standard basis, to be assessed if not agreed.

The claimant argued that this meant that this agreement took the matter outside the fixed costs regime, whereas the defendant said that that order left the matter subject to fixed recoverable costs.

The claimant’s argument was that the agreement should be construed on the basis that the parties had agreed that the fixed costs regime would not apply.

Here neither party had addressed themselves to the issue of whether there were exceptional circumstances for escaping fixed costs as set out in CPR 45.29J, and thus that was not an issue.

Here the judge held that the provisions of CPR 45.29D are mandatory and it is not possible for the parties to contract out of those provisions, and consequently unless CPR 45.29J, in relation to exceptional circumstances, applied, then in a fixed recoverable costs case the recoverable costs are indeed fixed.

Thus a consent order providing for costs to be assessed on the standard basis if not agreed, makes no difference at all.


A correct decision.

Written by kerryunderwood

June 20, 2018 at 12:12 pm

Posted in Uncategorized

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