piBlawg

the personal injury and clinical negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Paying the (full) price? Underpaid fees and limitation periods

If you pay less than the appropriate fee when issuing your claim before the expiry of the limitation period is your claim in time? Or do you pay the price by being statute barred?   On 7 April 2016 Warby J. sitting in the QBD was asked to determine a summary judgment/strike out application in case called in Bhatti v Asghar which raised this issue.   The claimants in this breach of contract case had underpaid the relevant court fees on issue.   The defendants applied for summary judgment /to strike out of the claimants’ claim, as they said the failure to pay the correct court fees meant the proceedings were invalid and given the expiry of the limitation period, no valid claim had been brought in time.   Warby J did not allow the strike out application, which on its face seems logically to follow from the underpayment. The reasoning is seemingly a cautionary tale.   As a matter of law an action was only "brought" for the purposes of the Limitation Act 1980 where a claimant had done all it could to set the claim in motion, including paying the court fees, per Page v Hewetts Solicitors [2012] EWCA Civ 805, [2012] C.P. Rep. 40 and Lewis v Ward Hadaway [2015] EWHC 3503 (Ch), [2016] 4 W.L.R. 6.   The Civil Proceedings Fees (Amendment) Order 2014 Sch.1 prescribes the required fees for starting  proceedings and specifies separate fees imposed for specific money claims, interest claims, and claims for any other remedy. The fees for interest and other remedies were additional to the fee for a money claim.   It was alleged that the defendants, a solicitor and his firm, had asked the Claimant to invest in property in Dubai. They made payments to the first defendant but the property purchase never took place. The final payments had been made in 2009, more than six years before the instant hearing. One claimant  sought damages not exceeding £150,000, interest, loss of rental income since 2013, and "further relief". The other claimant sought damages not exceeding £1 million, interest, and again "further relief". Along with their claim forms, the claimants each paid a court fee in line with the amount of their damages claims as stated.   Oddly the defendants did not raise a limitation bar in their defences. They applied for summary judgment and/or striking out of the claims, but apparently, and again somewhat bizarrely, did not provide the grounds for the application until shortly before hearing. It was said that the claimants had not paid the correct court fees, the first claimant should have paid an additional £680 and the second should have paid an additional £480   Warby, J. said the court shared the concerns set out by the Court of Appeal in that a limitation defence could be brought based on a claimant's miscalculation of court fees, especially where sums were proportionately small, but the authorities were clear that in determining whether a claim had been brought, a party must have done all in its power to set the wheels of justice in motion; that would usually require paying the correct fee at the time of submitting the claim form for issue per Barnes v St Helens MBC [2006] EWCA Civ 1372, [2007] 1 W.L.R. 879.   In principle, a calculation error by the court staff could result in a claim being brought without the correct fee, and in that case a blameless claimant would have done all it could reasonably do.   In the instant case both claimants had underpaid the court fees: The second claimant’s claim for loss of rental income brought the money claim to a higher threshold, and both claimants had claimed "further relief" and that general phrase triggered the obligation to pay £480 under the Order. Accordingly the claim had not been brought, and the limitation period for the contract claims had expired. Was the payment of the wrong fee as a result of an error by the court staff?   Warby J declined to order that summary judgment be entered in favour of the Defendants or to strike out the claims. He noted the failure to raise limitation in the defences – or in the summary judgment application. Rightly the judge was of the view that there was no excuse for only raising the argument it at a late stage. Accordingly, the judge held that the claimants had not had a reasonable opportunity to address the defendants' arguments.   The judged also noted that the limitation argument applied only to the breach of contract part of the claims. He considered that the limitation issue would be addressed at trial which would allow the claimants an opportunity to address the factual issue of whether they had in fact ‘done everything in their power to bring the claim’. They would have the possibility of bringing evidence to show that the miscalculation had been the court's fault. The defendants were allowed to amend their pleading to include the limitation defence, so that the issue would be live at trial.   All of this shows that a failure to pay the correct fee prior to the expiry of limitation is not a ‘slam dunk’ for the Defendant. The reason for the failure to pay the correct fee is a highly material consideration.

Claims of alleged fraud not exempt from Denton

“The court cannot ignore that insurers are professional litigants, who can properly be held responsible for any blatant disregard of their own commercial interests.” - Gentry v Miller & Anor [2016] EWCA Civ 141 at 34. Such was the warning sent to insurers by the Court of Appeal earlier this month in allowing a Claimant’s appeal against a decision to set aside default judgment in what the Defendant’s insurer alleged was a fraudulent claim. The Facts The Claimant, Mr Gentry, alleged that he was in a road traffic accident with a Mr Miller on 17th March 2013 in a claims notification form valuing the claim at under £10,000. On 2nd April 2013 Mr Miller’s insurer admitted liability. On 8th April the Claimant’s solicitors wrote requesting immediate payment of the pre-accident value of his car (being £16,000) and warning that until that was received he was hiring a replacement vehicle under a credit hire facility. Proceedings were issued against Mr Miller alone on 3rd July and on 8th August the Claimant obtained default judgement. At no point in this period did the insurer instruct solicitors and it replied to only one of seven letters. In late August the insurer made a voluntary interim payment of £14,000 and a Part 36 Offer of £1,870. A further interim payment of £2,000 was ordered in September and paid. At a disposal hearing on 17th October 2013, DJ Benson awarded the Claimant damages of £75,089 consisting mostly of hire charges. On receipt of notification of this award the insurer instructed solicitors who, on 25th November, issued an application referring to CPR 13.3 (1). On 10th February 2014 those same solicitors applied to come off the record for Mr Miller, to add the insurer as the second defendant and to set aside both the default judgment and the order of 17th October. For the first time they alleged that Mr Gentry and Mr Miller were well known to each other and that the claim was a fraud. The application to set aside was granted by DJ Henthorn on 17th March 2014 and on 4th February 2015 Mr Recorder Gregory (as he then was) dismissed the Claimant’s appeal. The decision of the Court of Appeal The Court of Appeal considered the applications under CPR 13.3 and 39.3. In relation to the former Vos LJ was satisfied that the Defendant had demonstrated that it had a real prospect of successfully defending the claim but had to consider under CPR 13.3 (2) whether the application was made promptly. The delay to the application of 25th November was inexcusable. In particular Vos LJ noted that the insurer: Failed to adduce any evidence of its postal systems to explain how documents might not have reached it; Must have been aware after admitting liability at the beginning of April 2013 that it was at risk if it did not defend or attempt to settle the claim; Did not instruct solicitors or investigate fraud in the seven months after that admission; Was repeatedly warned of hire charge risks so that the suggestion that it believed the claim to be small and therefore impliedly not worth investigating did not hold water; In ignoring those warnings allowed the claim to grow; While not notified of the default judgment of 8th August as promptly as it might have been, clearly knew that proceedings were on foot when it made a Part 36 offer on 22nd August; Must also have been aware of proceedings when it paid the interim payment ordered by the court; Upon receiving costs schedules on 19th and 23rd September sent “ahead of the upcoming application hearing”, made no enquiry as to what that hearing was about. The court’s analysis then continued by application of the Denton test. It was common ground that Mr Miller’s default in not filing an acknowledgment of service was serious or significant. The fact that it was not served with the proceedings gave the insurer some reasonable excuse or explanation but it could and should have protected itself when it knew proceedings were being issued by appointing solicitors to accept service on behalf of Mr Miller. Finally, looking to all of the circumstances and in particular factors a) and b) it was held that “insurers are in a particularly good position to conduct litigation efficiently and proportionately and to comply with rules and orders”. It cannot avail an insurer who knows the risk from the moment it admits liability to say it was not a party at the time. The application under CPR 39.3 to set aside the order of 17th October, despite the insurer having notice, (although not a copy), of that order since 25th October, was not made until 26th February 2014. It had not been made promptly and therefore, even if the insurer could show it had a good reason for not attending the trial and a reasonable prospect of success, the application could not be granted. Again, it would in any event probably have failed the third stage of the Denton test. Key Lessons There are two key lessons for insurers arising out of this decision. The first is the reminder at the start of this post that insurers will be treated as professional litigants capable of protecting their own interests. The second is that a credible allegation of fraud is not a trump card. When weighing the competing policy interests of the desirability of testing the allegation of fraud against the requirement that there be finality of litigation, the latter at least can outweigh the former. At some point the insurer must be left to bring its own action in relation to the fraud.