piBlawg

the personal injury and clinical negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Have we started yet? Commencement of contested hearing and CFA uplifts

When a trial begins is of obvious import to any litigant where one or more party is funded by a conditional fee agreement which provides for an uplift per CPR 45.16 and 45.17. Mrs Justice Slade in a recent appeal from Master Campbell held that a contested hearing on the issue of liability had yet to commence before a subsequent settlement.   The facts of James v Ireland [2015] EWHC 1259 (QB) are unusual but not exceptional.   On the first day of a three day trial of a personal injuries case, the claimant successfully applied for an adjournment of the issue of quantum, it being intended that the issue of liability would proceed. Unusually however, late evidence disclosed by the defendant that hitherto unidentified independent witness. To allow for a statement to be taken from the same by the claimant, the matter was adjourned to the following day. The judge asked counsel what to read overnight. The next day it was revealed that attempts to contact the elusive independent witness had been unsuccessful. Nevertheless, the case was adjourned to the afternoon so that attempts could continue. These attempts were also fruitless, however given the likely importance of the witness the case was stood out. The judge reserved the matter to himself for a hearing at a later date. This hearing never took place as the claim was settled.   Had the liability trial commenced? The master held that it had. Counsel had entered court. Reading had commenced. Submissions had been provided and considered as to the adjournments. Thus, it was held that the claimant was entitled to the 100 percent costs uplift.   The defendant appealed, arguing that the master erred by failing to hold that nothing in the heard proceedings constituted a core event, such as would indicate that the liability trial had begun (Cutler v Stephenson and Manchester City Council [2008] EWHC 3622 (QB); Gandy v King [2010] EWHC 90177 (Costs)). It was further submitted that the judge would have held that the case was part heard had he considered the trial to have begun, rather than ordered it to be relisted reserved to himself. The claimant argued that the trial had begun as the judge had done pre-reading and that the submissions on the quantum aspect of the case would not have required further elucidation to open as to liability.   The Defendant’s submissions found favour with Mrs Justice Slade who held that a final contested hearing of the liability issue was not triggered by the commencement of any hearing of any nature related to the same. The hearing which was commenced was akin to a case management hearing, as the same did not consider any aspect necessary to determine the question of liability. The reading undertaken by the judge was held to have been prudent use of court time rather than a substantive consideration of a core issue. She held further that the transcripts actually supported the contention that the judge was unaware of the scope of the main issues of the case as to liability when the matter was stood out.

Two Recent CFA Cases: Effect of a Failure to Serve a Notice of Funding and Powers of the Ombudsman

There have been two recent decisions concerning Conditional Fee Agreements which should be of interest to any practitioner practising in any area of the law where such funding arrangements are prevalent.   The first is Harrision & Anor v Black Horse (20/12/13, Sen Cts Office per Maser Gordon-Saker), where the strict application of the Mitchell judgment was applied to a case where relief was sought by a CFA-funded party for its failure to serve a Notice of Funding. Whilst previously such a common default was excused by courts on the basis that the strict sanction for this failure (the irrecoverability of any additional liabilities, namely: uplift and ATE premium) was disproportionate to the nature of the default, now it seems that such parties cannot expect such lenience.   The second is a case which was widely reported in various newspapers last week: Layard Horsfall Ltd v Legal Ombudsman [2013] EWHC 4137 (QB) per Phillips J. Here a former CFA-funded client of a Law Firm was required to pay the firm’s base costs of £5,000 including VAT for a discontinued court case. The client complained to the Legal Ombudsman who held it was reasonable for him to pay a reduced amount of £1,500 plus VAT. The Law Firm applied for judicial review of this decision, arguing that the client’s complaint was not within the jurisdiction of the Ombudsman, which was limited by the Legal Ombudsman Scheme Rules r.2.8 to complaints about the standard of service provided by a solicitor to a client and not issues about whether fees were contractually due.   The Court disagreed and held that it would be an artificial and unworkable distinction if the Ombudsman could consider the quality and levels of services but not issues of wrongful charging or overcharging. Section 137(2) of the Legal Services Act 2007 provided that the Ombudsman could direct that the fees to which a respondent was entitled were limited to a specified amount. That would be a difficult provision to apply if the ombudsman could not consider what was the correct contractual starting point before making such a determination.

Long live the Litigant in Person

Some of the readership may have heard there was a move by the Civil Justice Council to rebrand LiP’s “Self Representing Litigants”.   This is now not going to happen. Lord Dyson, Master of the Rolls has stated:   “The term ‘Litigant in Person’ (LiP) should continue to be the sole term used to describe individuals who exercise their right to conduct legal proceedings on their own behalf “   See the short practice guidance by following this link:   https://dl.dropbox.com/u/18097599/annex-a-practice-guidance_litigants-in-person-2.pdf   This sensible decision is welcome as it was important to clear this up before "J day" as it is widely expected that there will be many more LiPs as a result of the costs reforms.    

After pasties and caravans … CFAs and DBAs?

Is it just me or should we all be concerned about the way in which the legislation to implement Lord Justice Jackson’s recommendations is being introduced?   Why have there been so few announcements about what are, after all, radical and far reaching public policy changes? If we as legal professionals are unsure about the proposed changes, how can we properly advise the public after 1 April 2013?   Will legal professionals soon be joining bakers and caravanning enthusiasts in pointing out to the government the potential far reaching consequences of over hasty legislation?   In the foreword to his final report on costs in civil litigation dated 21 December 2009 Lord Justice Jackson wrote:   “ … I therefore propose a coherent package of interlocking reforms, designed to control costs and promote access to justice ...”   He went on to make a total of 109 separate recommendations some but not all of which have found their way into proposed new legislation. In particular the Conditional Fee Agreements Order 2013 (the CFA Order) and the Damages-based Agreements Regulations 2013 (the DBA Regulations) have now been laid before Parliament and were subject to a Motion to Approve debate in the House of Lords on 26 February 2013.   Both have been described by the General Council for the Bar (GCB) as “not fit for purpose”. The GCB also suggested that the proposed order and regulations “will deny access to justice, burden the courts’ time with unnecessary satellite litigation and limit the commercial use of DBAs”.    There are certainly grounds for concern. As we all know, the success fee under a CFA entered into after 1 April 2013 for proceedings at first instance will be capped at 25%. Article 5(2) of the proposed CFA Order provides that this will be 25% of “(a) general damages for pain, suffering, and loss of amenity; and (b) damages for pecuniary loss, other than future pecuniary loss” (my emphasis). However, in a lecture given on 29 February 2012, Lord Justice Jackson amended his view in response to submissions from a number of parties and proposed that the cap should be 25% of all damages. There must be a risk that in larger and more complicated cases which are difficult to cost budget and involve significant initial disbursements, limiting the cap to 25% of past losses will not promote “access to justice” as Lord Justice Jackson hoped but may in fact prove to be a disincentive to  taking on such cases in the first place.   Then there is VAT. As drafted, the proposed CFA Order provides that the “damages” to which the 25% cap applies are “net of any sums recoverable by the Compensation Recovery Unit of the Department for Work and Pensions”. There is no exclusion for VAT. But if VAT is included in such damages there is not only scope for uncertainty (what happens, for example, if the VAT rate changes after the CFA has been entered into but before a bill of costs is rendered?) but in the larger and more complicated cases this may be a further reason why those contemplating taking on such cases may decline to do so on the grounds that the unpredictability of the risk will not be properly compensated by the level of the CFA.   The same objections apply to the proposed DBA Regulations. As presently drafted, the cap for DBAs is inclusive of VAT but exclusive of damages for future pecuniary loss. In addition, the DBA Regulations do not allow for “hybrid” agreements i.e. agreements under which some costs are recoverable if a “win” does not occur rather than no costs at all. This is again contrary to what Lord Justice Jackson recommended and may prove a disincentive to the use of DBAs particularly in commercial cases.   Access to justice may not be as newsworthy as Cornish pasties and static caravans but in resource-intensive cases, the government’s aim of protecting the damages recoverable by claimants may actually result in some claimants being unable to obtain legal representation and thus recovering no damages at all.       Image – cornishpasties.com

CFAs prior to 1st April 2013 - will the old or new rules apply?

What do you have to do to ensure that Parts 43 to 48 of the existing rules continue to apply to CFAs entered into before 1st April 2013? Do advocacy or litigation services have to be provided before 1st April 2013 or not? For the existing rules to continue to apply to CFAs entered into before 1st April 2013 what needs to be done prior to 1st April 2013 will depend on whether you are acting under a Conditional Fee Agreement or a Collective Conditional Fee Agreement (those are the two funding arrangements defined by rule 43.2(1)(k)(i) of the existing rules). If you enter into a Conditional Fee Agreement prior to 1st April 2013 specifically for the purposes of provision of advocacy or litigation services to a person in relation to the matter which is the subject of proceedings then the new rules (CPR r.48.2(1)(a)(i)(aa)) state that the old Parts 43 to 48 will apply (with modifications about which we are yet to hear). There does not appear to be any suggestion that advocacy or litigation services actually need to be provided prior to 1st April 2013. The story is different if you have a Collective Conditional Fee Agreement. In that case the new rules seem to state that, for the old rules to apply, you have to have provided advocacy or litigation services to the person by whom the success fee is payable prior to 1st April 2013. The drafters of the rules could have made it a lot easier to understand what they were getting at by actually referring to CFAs in r.48.2(1)(a)(i)(aa) and CCFAs in r.48.2(1)(a)(i)(bb). A bit more clarity is provided by the explanatory note to Article 6 of the Conditional Fee Agreements Order 2013 (http://www.legislation.gov.uk/ukdsi/2013/9780111533437) which states “Article 6 contains a transitional and saving provision. The effect of the transitional provision is to provide that articles 4 and 5 do not apply to a CFA entered into in respect of a claim for personal injuries, or to a collective CFA under which advocacy or litigation services are provided to a person in respect of that claim, before the day on which these regulations comes into force” (i.e. 1st April 2013). That’s my take on the current rules which are still being finalised. I ought to add, in the time-honoured fashion, that this does not constitute legal advice and liability for any reliance placed on it is disclaimed…

Post Jackson CPR Amendments published – a brave new world?

The Civil Procedure Rule Committee has published CPR amendments due to come into force on 1st April 2013. Some of the key provisions for PI practitioners are as follows:- Amendment to the Overriding Objective The overriding objective will become not just “to deal with cases justly” but also “at proportionate cost”; and the definition of “dealing with a case justly” will now include “enforcing compliance with rules, practice directions and orders”. This puts both costs and compliance with directions right at the heart of the Rules – with these changes it will become more difficult to point a judge to the overriding objective when asking him or her to overlook a breach of the rules. Relief from Sanctions Talking about breaches or rules and court orders, CPR 3.9 is to be revised taking out the familiar checklist. Instead, the court will consider all the circumstances, including specifically the need for litigation to be conducted efficiently and at proportionate cost, and the need to enforce compliance with rules, practice directions and court orders. As above, this does represent a significant shift in approach. Costs Management The amendments will introduce a comprehensive set of rules on cost management for multi-track cases, including costs budgets. These merit detailed consideration. There are some sanctions in the event that these rules are not complied with – for example, failure to file a costs budget will mean the litigant is treated as having filed a budget comprising only the applicable court fees (unless the court orders otherwise – see above). Increased Small Claims Track limit The Small Claims Track limit is raised to £10,000: but low value personal injury claims for general damages over £1,000 will continue to be Fast Track cases. The current rules regarding harassment; unlawful eviction relating to residential premises; and disrepair will remain. New Provisions relating to Disclosure These will include a requirement for parties to discuss and seek to agree a proposal in relation to disclosure meeting the overriding objective. Bonus for Claimants beating Part 36 offers In addition to interest on damages; costs on the indemnity basis; and interest on those costs, Claimants who beat their own Part 36 offers will be entitled to an “additional amount”, 10% of the sum awarded to the Claimant (where the claim is a money claim) up to £500,000 and 5% of the sum above that, up to a maximum £75,000. For non-money claims, the bonus applies to the sum awarded to the Claimant in respect of costs. Costs CPR 43 is revoked, and Parts 44 – 48 are replaced in full. That’s to say, all the existing sections of the CPR relating to costs are to be changed. Below are some of the key points from the new provisions:- Assessment of Costs When assessing costs, the court will “only allow costs which are proportionate to the matters in issue”. Costs that are disproportionate may be disallowed even if they were reasonably or necessarily incurred. Costs are proportionate if they bear a “reasonable relationship” to the sums in issue; the value of non-monetary relief; the complexity of the litigation; additional work caused by the paying party’s conduct; any wider factors such as reputation or public importance. This rule only applies to cases commenced after 1st April 2013. Qualified One-Way Costs Shifting This applies in personal injuries and Fatal Accident claims. It does not apply to pre-action disclosure. There is no means test: this is of general application. Qualified one-way costs shifting means that costs orders may be enforced against a claimant only to the extent that the aggregate sum of such orders does not exceed the aggregate sum of damages and interest made in favour of the Claimant. In practice, this will work as follows:-   a) Where a claim is dismissed, the Claimant receives no damages or interest. A costs order will be made in the Defendant's favour, but the Defendant will not be able to enforce the costs order against the Claimant to any extent.   b) The Claimant recovers damages, but fails to beat the Defendant's Part 36 offer. A costs order will be made in the Defendant's favour pursuant to Part 36. But this can only be enforced up to the total of the damages and interest payable to the Claimant. So if the Claimant is awarded £20,000 damages and interest, this figure provides a cap on the costs that can be enforced against the Claimant.   c) Interim costs orders have been made in the Defendant's favour, but the Claimant untimately succeeds. As above, the Defendant will be able to enforce its costs orders, but only up to the total of the Claimant's damages and interest. There are some exceptions, though:- Where proceedings have been struck out on the basis that a) they disclose no reasonable grounds for bringing the proceedings; b) the proceedings are an abuse of process; or c) where the Claimant’s conduct is likely to obstruct the just disposal of proceedings, there is no qualified one-way costs shifting. Where the claim has been found to be “fundamentally dishonest” the court may grant permission for the Defendant fully to enforce the costs order. Claimant’s Costs where there is a Damages-Based Agreement The Court will make the same costs order in the Claimant’s favour as if there were no damages-based agreement.

Mr Ten Percent: Resolved

Further to Ivor and Simon's postings, this morning the Court of Appeal modified its ruling in Simmons v Castle as to how the 10 per cent increase in general damages recommended by Lord Justice Jackson will be applied.   The Court of Appeal made clear that Claimants who entered into CFAs before 1st April 2013 (who have the benefit of the current funding regime) will not benefit from this uplift.   The modified judgment now reads:-   “Accordingly, we take this opportunity to declare that, with effect from 1 April 2013, the proper level of general damages in all civil claims for (i) pain and suffering, (ii) loss of amenity, (iii) physical inconvenience and discomfort, (iv) social discredit, (v) mental distress, or (vi) loss of society of relatives, will be 10 per cent higher than previously, unless the claimant falls within section 44(6) of LASPO. “It therefore follows that, if the action now under appeal had been the subject of a judgment after 1 April 2013, then (unless the claimant had entered into a CFA before that date) the proper award of general damages would be 10 per cent higher than that agreed in this case, namely £22,000 rather than £20,000.”

Should the solicitor pay up?

Can a solicitor be liable for costs if he or she takes on a case for an impecunious claimant under a CFA where there is no ATE insurance policy in place and where he or she funds the disbursements necessary to allow the case to proceed?   Neil Hamilton famously sued Mohammed Al-Fayed for defamation over ‘cash for questions’, lost and was ordered to pay £1.3m in costs. Mr Al-Fayed then pursued Mr Hamilton’s financial backers (not parties to the litigation) for costs, lost and was ordered to pay their costs. Unsurprisingly there has not been as much media attention and public interest in the case of Tinseltime v Eryl Roberts [2012] EWHC 2628 which was a case in the technology and construction court. There was no personal injury involved: the claimant claimed that the defendant had created dust whilst demolishing a building and the dust had damaged machinery and caused a loss of profit. The claim was unsuccessful and the claimant was ordered to pay the defendant’s costs. The defendants applied for an order under section 51(3) of the Senior Courts Act 1981 and/or CPR 48.2 that the claimant’s solicitor pay the costs as a non-party funder. The claimant’s solicitor had entered into a CFA. He had been unduly optimistic about how straightforward the issue of liability would be. It was clear that he was aware that if the claimant lost it would not be able to pay costs. He estimated the overall costs likely to be incurred to be £20,000 and disbursements, £10,000. In the event disbursements amounted to £22,270 and so burnt a sizeable hole in his pocket. He had expected to recover the disbursements from the defendant (if successful). The judge concluded that the following were the correct legal principles to apply. The first question was whether it just in all the circumstances to make an order. Secondly, when considering a solicitor, had he acted beyond or outside his role as a solicitor conducting litigation? Thirdly, the fact that a solicitor is acting under a CFA and stands to benefit financial from the outcome does not mean he has acted beyond or outside his role as a solicitor. Fourthly, the starting point is that the position of a solicitor funding disbursements is no different from one who is not as both positions are legitimate and meet a legitimate public policy aim. The judge was of the view that, in order to be successful in applying for a non-party costs order there would have to be present either some financial benefit to the solicitor over and above the benefit which he could expect to receive from the CFA or some exercise of control of the litigation over and above that which would be expected from a solicitor acting on behalf of a client (or a combination of both). By way of example the judge suggested that a solicitor’s desire to achieve a successful outcome might cause him to take over the running of the litigation for his own ends. Another example was of a case where the damages claimed were modest in comparison to costs incurred so that the client had lost interest in the proceedings but the solicitor was wedded to them in order to recover his costs. The circumstances of a case might justify the conclusion that a solicitor was making all the decisions for his own benefit. The defendants argued that the claimant’s solicitor had acted improperly, unreasonably or negligently in his conduct of the case. The judge said this was the province of wasted costs (which were not awarded - although pursued in the alternative). He said courts should be astute to keep wasted costs and non-party costs separate. The claimant’s solicitor may have misjudged the case but he came out of the judgment rather well. The judge commented that he was not motivated solely by financial self-interest but with the laudable aim of providing access to justice to the claimant. He thought the claim was genuine and had written a file note stating “the company has been crippled by the defendant tortfeasors and needs assistance.” The judgment draws to a close effectively with a warning against letting financial self-interest get the better of you and an encouragement from a judge to practitioners to be motivated not solely by financial self-interest but by a concern for justice and access to justice. Such a consideration (and file-note for the record!) might well prove worthwhile… Photograph courtesy of freefoto.com

The growing perils of litigating on a CFA without ATE...

The High Court has continued chipping away at the iniquitous (as some see it) situation where an impecunious claimant can bring proceedings on a CFA without ATE insurance protection. So if the claimant wins, the costs are paid, if the claimant looses – too bad, the defendant is left to sing for their costs incurred in defeating the claim.   A number of defendants faced with this situation have chosen to go after the claimant’s solicitor for their costs on the basis that, in reality, the Claimant’s solicitor is ‘funding’ the claim (or at least the disbursements) and accordingly they can be held liable for the whole or part of the costs incurred in defeating the Claimant’s claim.   Heretofore the courts have been very reluctant to make any orders that the solicitors firms acting for Claimants pays the winning parties’ costs.   However, very slowly, one senses a change of direction from the senior courts. Most recently in GILL GERMANY v GAVIN FLATMAN : BARCHESTER HEALTHCARE LTD v RICHARD WEDDALL [2011] EWHC 2945 (QB) Mr Justice Eady, in a decision handed down on Thursday 10 November 2011, found in favour of the Defendants on an interim appeal. The Defendants had, at first instance, been refused an order requiring Claimant’s solicitors to disclose the two Claimants’ funding arrangements.   Eady J allowing the appeal made clear that although orders against non-parties were to be regarded as exceptional, that only meant outside the ordinary run of cases where parties pursued claims for their own benefit and at their own expense. The ultimate test was whether it was just in all the circumstances to make the order. A third party costs order could be made in circumstances where the funder was "a real party" not just "the real party". A solicitor would become a funder if he paid out sums on the basis that they would be recovered from the other side in the event of success, or not at all in the event of failure. A solicitor would then be providing funds in the way of business. Any funding role by a solicitor would only be countenanced if it carried with it the risk of having to pay the defendant's costs if he was ultimately successful. A disclosure order was necessary to establish what exactly had passed between a claimant and his solicitor.   This is a trend to watch, I think, and one for firms acting for Claimant’s on CFA’s without ATE insurance to bear in mind.  

Clinical Negligence Claims against the NHS Up 30%

The NHSLA published its annual report on 4 August 2011. Last year: (a)    it faced 8,655 clinical negligence claims, an increase from 6,652 the year before (up about 30.11%); (b)   of those,  5,398 cases were settled with only about 4% being resolved by litigation; and (c)    it paid out £729,100,000 pursuant to these, which was an increase from £651,000,000 the year before;   The report welcomes the introduction of the reforms recommended by the Jackson Review and laments the increased costs they have been facing claimed by claimant solicitors. It states: “We paid over £257m in total legal costs, of which almost £200m (76% of the total costs expenditure) was paid to claimant lawyers... we paid over £257m in total legal costs, of which almost £200m (76% of the total costs expenditure) was paid to claimant lawyers.”   The Report raises many issues. Two of note would be: (a)    Why has there been this recorded increase in claims? Are doctors becoming more negligent, or is our culture simply becoming increasingly litigious and the legal markets have facilitated this? Has the Recession contributed to this? (b)   Whilst they will undoubtedly assist in maintaining proportionality between damages and costs, how will the Jackson Reforms (particularly the irrecovarability of CFA uplifts from unsuccessful defendants), affect access to justice?   The Report is available at: http://www.nhsla.com/NR/rdonlyres/3F5DFA84-2463-468B-890C-42C0FC16D4D6/0/NHSLAAnnualReportandAccounts2011.pdf