Legal Costs update by Gary Knight
Whilst December may have been the holiday season with thoughts of well earned down time with family and friends there were still matters to be determined by the Courts and the following matters may justify consideration during the early weeks of the New Year
LINDA ENGEHAM V (1) LONDON & QUADRANT HOUSING LTD (2) ACADEMY OF PLUMBING LTD – CA (Civ Div) – Lord Dyson MR, Floyd J, LJ Simon – 01/12/15
The Claimant had entered into a CFA with her solicitors following injury when her bathroom ceiling fell on her. The 1st Named Defendant was the Claimant’s Landlord and the CFA made no mention of the 2nd named Defendant who had not, at the time of the agreement, been identified as a potential party. The CFA set out that in the event the claim was successful the Claimant would be liable for the firm’s basic charges, disbursements and success fee.
The claim was pursued against both Defendants and settled against both under the terms of a Tomlin order which provided for payment by the 2nd Defendant of damages for £10,000.00 plus costs to be assessed if not agreed.
Costs were sought against the 2nd Defendant however on assessment by a Costs Officer the same were disallowed as the Costs Officer considered the CFA did not cover the costs of a claim against the 2nd Defendant and therefore found the claim to be in breach of the indemnity principle. The decision was upheld on review but overturned on an appeal to the Central London County Court whereat it was held that the Claimant had derived benefit from the claim irrespective of who had to pay, and therefore was liable for her solicitors costs under the CFA and accordingly entitled to recover the same from the 2nd Defendant.
The Court of Appeal agreed with the County Court when dismissing the Appeal finding against the 2nd Defendant’s submission that the reference to “your claim” as set out in the CFA, meant the claim in contemplation of the parties at the time the agreement was concluded which, a the time of the CFA, was only against the first Defendant.
The COA held that it was not “realistic” to say that the Claimant had not won and had not secured an agreement for payment of damages. The Tomlin order was an agreement to pay damages for the purposes of the CFA and it was not relevant that it was the 2nd Defendant rather than the 1st Defendant paying.
THE QUEEN (on the application of FRANK KIGEN and JANET CHERUIYOT) –and- SECRETARY of STATE for the HOME DEPARTMENT – Lord Justice Moore-Bick, LJ Davis and LJ Simon– 11/12/15 – [2015] EWCA Civ 1286
An appeal against the order of Upper Tribunal Judge Freemen dismissing the appellants’ application for an extension of time in which to renew their application for judicial review.
The appellants sought to establish their right to remain in the UK by reason of Mr Kigen’s decent from his maternal grandfather.
The appellants’ were seeking to challenge what was the latest decision of the Secretary of State rejecting their claim and set out in a letter 30 May 2014. Time for the issue of application seeking a judicial review expired Monday 1 September 2014 proceedings were issued 2 September 2014 – one day late.
The application for permission was considered on papers and absent satisfactory explanation for the issue out of time was declined.
The decision was relayed to the appellants’ solicitors 3 October 2014 though it was accepted that the decision may not have been received until 5 November 2014.
Any request for the permission to reconsider should have been made within 9 days after the decision to refuse permission was sent however the same was not submitted until 27 November 2014 and included a request for the necessary extension of time. The statement served in support referred to difficulties in obtaining the necessary funding from the Legal Aid Agency as it was not until 25 November 2014 that the Agency decided to grant funding.
Judge Freeman on accepting that the decision declining the application had been received on 5 November 2014 found the appellants’ to be 13 days out of time and declined to grant an extension of time but granted permission to appeal to give the Court of Appeal the opportunity to consider whether delay awaiting a decision of the LAA still provided, as in older cases, good reason for failing to comply with time limits imposed by CPR or orders of the Court the Judge having considered the matter in the context of the Court of Appeal’s decisions in R (Hysaj) v Secretary of State, Mitchell v News Group Newspapers Ltd and Denton v T H White Ltd.
The Court of Appeal gave detailed consideration to the modern landscape in light of concerns that litigation had become subject to unacceptable delays with LJ Moore-Bick confirming his view in Hysaj that shortage of funds was not a good reason for delay and held that the principles derived from Denton and Hysaj were to be applied – namely whether the delay was serious and significant. In context of the short period of nine days allowed when lodging the request for reconsideration a delay of thirteen days could not be regarded as trivial or insignificant. Whilst accepting that the delay was not of such a length as to effect the progress of the proceedings LJ Moore-Bick did not find the explanation for the delay – namely that solicitors were awaiting a response with regard to funding– to be satisfactory in the circumstances of the case.
Having regard to the overall circumstances of the case the Lord Justice found it difficult to criticise the appellants themselves who were following advice from solicitors and he acknowledged that solicitors had acted with reasonable expedition in their dealings with the LAA; he further acknowledged that the court must also consider whether to grant or refuse relief would have a disproportionate effect on one or other party with the Lord Justice finding this was not a case in which the Secretary of State could point to any particular prejudice by reason of the delay whereas the appellants would suffer a degree of prejudice in the event they were prevented from having their application for permission to apply for judicial review reconsidered.
Lord Justice Moore-Bick that he would “exceptionally, allow the appeal and grant a sufficient extension of time to enable the appellants to lodge a request to have their application for permission to apply for judicial review reconsidered at an oral hearing”.
Lord Justice Davis agreed with the judgment whilst adding the following words of warning:
For the reasons there given, the discretion as to whether or not to grant an extension of time for the application for reconsideration falls to be exercised afresh by this court. I have nevertheless hesitated as to whether the discretion should be exercised in favour of the appellants. In the event, I have been persuaded that it should be. This is so in circumstances where the appellants’ solicitors had at least written to the Upper Tribunal in the interim seeking to explain the delay (even if there was no application for an extension of time) and where there may well have been a perception, based on the older authorities, that awaiting a decision of the Legal Aid Agency would in itself provide a sufficient justification for the delay. For the future, however, practitioners and parties cannot proceed having any such expectation. On the contrary, they should proceed in the expectation that any explanation based on the proposition that the delay was “only” for a few days, whether or not coupled with an explanation that a decision from the Legal Aid Agency was awaited, will not be received with indulgence by the tribunal or court. It is most important that the requirements of the Tribunal Procedure (Upper Tribunal) Rules 2008 as to time limits – in the present case, the requirements of rule 30(5) – are observed.
ALAN YENTOB AND MGN LIMITED – Lady Justice Arden, LJ Rafferty and LJ Kitchin – 12/12/15 -[2015] EWCA Civ 1292
During proceedings MGN had made a Part 36 compliant offer to compromise the claim brought for damages arising from so called “phone hacking”.
At trial the Claimant recovered £85,000.00 in respect of damages but failed to beat the terms of the offer therefore under the usual consequence the Defendant was entitled to recover costs with interest from the last day the offer could have been accepted however Judge Mann applied the exceptional power bestowed by Part 36 to make another form of order as he was satisfied it would be “unjust” for the Claimant to pay any costs to the Defendant and made no order for costs for the period.
Before the Court of Appeal the Defendant renewed its application for permission to appeal the order made dealing with post Part 36 costs.
Lady Justice Arden advised that she would grant permission to appeal but would dismiss the appeal finding the Judge in the court below had applied the right test and had taken into account circumstances to which he had been bound to have regard.
LJ Arden was not persuaded that there had been, as submitted by Counsel for the Defendant “two errors of law” by the Judge namely that (1) the Judge had made no findings, as required by CPR 36.17(3) that it would be “unjust” for the normal circumstances to apply and (2) the judge was not entitled to rely on the factors he did – the limited admissions, the likelihood that the Defendant would not make a statement in open court and the fact that it was not apparent until trial that the Claimant could never get disclosure of the full extent of the hacking as the Judge had already decided the threshold issue in favour of the Defendant.
The Court of Appeal was unanimous in finding that the Judge had concluded that the Normal Consequences would be unjust and that the conclusion was based on relevant considerations.
ROSHAN GHISING and SECRETARY of STATE for the HOME DEPARTMENT – The Hon. Mrs Justice Patterson DBE sitting with Assessor Master O’Hare – 17/12/15 – [2015] EWHC 3706 (QB)
On 6 May 2015 Master Simons conducting a detailed assessment of costs in the Senior Courts Costs Office determined that the Clamant was (1) entitled to retrospective recovery of base costs under CFAs for both Solicitors and Counsel’s for work undertaken pre CFAs were entered into; (2) that the Claimant was entitled to recover base costs and a success fee of 67% for work done from the date of the CFAs and (3) that the Claimant was not allowed to recover any success fee for either Solicitor or Counsel for work done prior to the date of the CFAs
An appeal was brought against (3) the refusal in principle of a retrospective success fee for solicitors and counsel.
The appellant in this matter was one of multiple appellants involved in the case that concerned the lawfulness of refusal of entry clearance to dependant adult children of veterans of the Gurkha Brigade who had settled in the UK.
The appellant had been successful with is part of the appeal and costs were payable but could not be agreed.
The appellant’s solicitors had sought legal aid which was refused and the application was resubmitted and whilst the application was being considered it was necessary to apply for the appellant’s appeal to be conjoined with other matters listed for hearing 11 and 12 December 2012; the case was linked 26 November 2012 at which time no response had been received from the Legal Services Commission and absent any response the prospect of a CFA was broached if legal aid was not forthcoming and thereafter Mr Ghising entered a CFA 6 December 2012 with his solicitors which covered “Work relating to the application for the High Court, Court of Appeal and/or Supreme Court ensuing proceedings including any appeal and counter-claim”.
The CFA provided for a success fee of 100%
A CFA was entered into with Counsel 10 December 2012 which covered all work undertaken “including all interlocutory matters from 28 August 2012”
A significant difficulty faced by the Costs Judge was that of the risk assessment with submission made for the appellant that the risk in July 2012 was the same risk as faced in December 2012 when the CFA was entered into, a submission not accepted by the Costs Judge who considered that he was bound to allow a success fee that reflected the risk at the date the CFA was signed in December 2012
From the files it was evident that at the outset in July 2012 prospects of success for the purpose of obtaining Legal Aid at been put at 60-80% however in December 2012 Counsel had assessed prospects at 65%.
The Costs Judge in his decision indicated that it was “not for the court to make its assessment of the risks in July 2012 and December 2012” where it seemed to him that the risks were so different however Mrs Justice Patterson when hearing the appeal was of the view that the risk was not “so different” and the appeal was allowed on the point of principle.
The matter gave consideration to Birmingham City Council v Forde – no reason of public policy why retrospective success fees should not be allowed and Motto v Trafigura – “When a Costs Judge, when assessing a reasonable success fee ignored or misunderstood relevant evidence, took irrelevant evidence into account, went wrong on any point of law, arithmetic or principle, or reached a conclusion which was plainly wrong” and to U v Liverpool City Council – the requirement for the court to assess the reasonableness of the success fee based on the risk when the CFA was entered into – Hindsight not permitted.
Many will recall that the Senior Costs Judge, as he was then, Master Peter Hurst, in Musa King v Telegraph Group Limited had stated that “it seems to me therefore to be quite wrong, and contrary to public policy, to permit the Claimant’s solicitors to recover a success fee prior to the signing of the CFA though the Judge in BCC v Forde did not consider it necessary to hold that a retrospective success fee was per se contrary to public policy but can a success fee be reasonably applied to work undertaken before the CFA was signed given the success fee is based on the risks as they reasonably appeared to the solicitor at the time the CFA was entered into? Hopefully details of the assessment, directed to take place on paper, in this matter will be disclosed in time.
RICHARD LEWIS & ORS V WARD HADAWAY (A FIRM) – John Male QC – 21/12/15 [2015] EWHC 3503 (Ch)
A warning shot across the bow of Claimants who deliberately understate the value of their claims in order to pay reduced court fees and stop limitation period running
Some thirty-one individuals brought claims against their former Solicitors for alleged professional negligence arising from the provision of services relating to conveyancing transactions.
Proceedings were issued very close to the end of the limitation periods and despite the substantial sums claimed in letters of claim, the fees paid on the Claimants’ behalf on issue of the claim forms reflected very much lower claims. The fees paid were between £35 (appropriate for a claim limited to £300 or less), through to £240 (appropriate for a claim limited to £15,000 or less), and, in just one instance, £1,475 (appropriate for a claim limited to £300,000 or less). However, it appeared that the Claimants never intended to limit their claims to these lower sums, but always intended to amend their claims to the hundreds of thousands of pounds mentioned in the letters of claim. In every case the claim forms were actually subsequently amended just before service to claim the larger sums and the balance of the appropriate larger fees was paid. This course of action was it was claimed taken deliberately by the Claimants so as to reduce the fees paid initially to the Court when the claims were issued to stop time running. In the course of argument the Claimants’ conduct was variously described as a “scheme” or a “dance” so as to avoid paying the correct fees at the outset of the claims. It is this conduct which gives rise to the application to strike out
The Defendant applied to (1) strike out the claims on the grounds of the claimants’ alleged abuse of process in the alternative (2) summary judgment on limitation grounds in respect of 12 of the claims.
The Court found there to be abuse of process holding that held that the Claimants, through their solicitors had deliberately underestimated the value of their claims in order to avoid or defer payment of the full and correct fees and that it was clear that it was always the Claimants intention to amend their claims at a later stage by reason of the pre-action protocol letters; notwithstanding the “proper” fees were later paid disruption to the cash flow for the Court system had occurred with increased administration required by reason of the need to process two sets of fees for the same form; the Court considered that it was a public interest in claimants not behaving in this way and questioned how the solicitors were able to sign the statement of truth on each claim form to the effect that the claimants expected to recover £15,000.00 when it was known that those claims were going to be amended to claim damages of more than £300,000.00
The Court went on to consider that the claims were arguable and that the Defendant’s potential liability in damages was £9 million therefore to strike out the claims would be to enable the Defendant to avoid the claims entirely without a trial on merits and since the claims were now time barred that would represent substantial prejudice to the claimants; there was no suggestion that the claimants’ conduct had been fraudulent or dishonest given it had not been concealed in any way and the prejudice suffered by the Claimant was limited and in the circumstances and having regard to the overriding objective it would be disproportionate to strike out the claims
With regard to the application for summary judgment by reason of limitation the Court considered that eleven Claimants did not do all that was in their power to do to set the wheels of justice in motion according to the process laid down; nor did the eleven Claimants do all that they reasonably could do to bring the matter before the Court for its process to follow adding “the Claimants could have conducted themselves in a way which was not an abuse of process. In my judgment, in this case, these eleven Claimants did the same in that they undertook the risk and that risk did not cease due to their conduct in acting in abuse of process. I therefore conclude that the appropriate fee was not paid in time…”It is common ground between Counsel, and I agree, that if the appropriate fee was not paid in time the application for summary judgment in these eleven cases must succeed. I will therefore grant summary judgment in those cases.
