Kazakhstan Kagazy Plc and others v Zhunus and others [2015] EWHC 404

High Court determination of the correct amount of an interim payment on account of costs.

Following an unsuccessful application to amend his Particulars of Claim the Claimant was ordered to pay the Defendant’s costs.  The Defendant provided a statement of costs which totalled around £945,000.00.  The parties failed to agree any interim payments on account of costs and the Claimants stated if there was to be an order for a payment on account there would need to be a half day hearing to determine the amount of such a payment.

The Court stated a hearing to determine an interim payment was “utterly disproportionate and wasteful”.  The correct standard for an interim payment is the lowest amount of costs that a party could reasonably have been expected to send to ensure its case was conducted and presently proficiently.  The Defendant’s costs were unreasonable and disproportionate and a detailed assessment hearing would be required to determine the correct amount.  However, the Court ordered the likely recoverable costs conservatively, taking into account a discount to reflect any margin for error and take into account the principal that an interim payment should usually be less than what is recovered, the Claimants to pay £220,000.00 on account of costs. 

Laporte and another v The Commissioner of Police of the Metropolis [2015] EWHC 371 (QB)

The successful Defendant has their costs reduced for failing to engage with ADR.

The Claimants proposed a number of times that they meet for settlement discussions or arrange to mediate.  There was an attempt to organise a round table meeting but the Defendants subsequently changed their minds, stating they no longer considered ADR to be an appropriate use of resources.  They failed to set out any further reasoning. 

The Claimants lost at Trial but argued the Defendant should be deprived of costs because they failed to engage in ADR. The Defendant argued that it thought that the Claimants would only accept a financial offer which the Defendant was unlikely to make, therefore, ADR was not appropriate.

The Defendant’s argument was dismissed.  In exercising his discretion on costs the Judge took into account the Defendant’s noncompliance with the pre action protocol.  This was symptomatic of the Defendant’s failure to progress the case and to allocate sufficient time, attention and resources to dealing with ADR in parallel to substantive preparation.  The Defendant was awarded only two thirds of its costs.

This case demonstrates the importance of taking ADR proposals seriously. 

Devon and Cornwall Autistic Community Trust v The Cornwall Council [2015] EWHC 403 (QB)

The Court heard strike out and summary judgment applications at trial.

The Claimant served witness statements and a schedule of loss shortly before the Trial.  The defendant subsequently invited the Claimant to discontinue the claim, and, on receiving no response, applied for an order striking out the Claimant’s statement of case or for summary judgment.  The application was listed to be heard at the start of the trial.

HELD; It was unusual for such applications to be made at Trial, however, the application should not be rejected simply because of timing.  The Claimant had failed to comply with three successive Court Orders in relation to the provision of evidence, which was an abuse of the Court’s process.  Despite the late stage in proceedings it was appropriate for the Court to exercise its discretion to grant summary judgement.  The basis for the application only became apparent upon receipt of the evidence from the Claimant and the Defendant’s application as lodged 9 days later. 

Home Group Ltd v Matrejek [2015] EWHC 441 (QB)

Relief from sanction on ‘Mitchell’ principals upheld on appeal on ‘Denton’ principals.

The case linked the Respondent’s possession claim to Children’s Act proceedings. The Respondent failed to attend a directions hearing, and as a result its claim for possession was dismissed.  The Respondent applied for relief from sanction on the basis it genuinely did not believe the matter would be dealt with at a directions hearing, the Court had been informed no directions were required, and the appellant’s solicitors had written to the Court asking the hearing to be vacated.

Applying Mitchell HHJ Lochrane gave relief from sanction on the basis that, although the breach was deliberate, the Respondent had misunderstood the Court’s purpose and further cost and delay would be involved in issuing possession proceedings.

On appeal the order for relief was upheld.  The Respondent’s failure to attend was serious however, there was no prejudice to the appellant, whose case was also in some disarray at that time and they wanted and adjournment.

The case provides a reminder of the need for:

  • The purpose of Court Orders to be made clear;
  • Parties to comply with Orders; and
  • All the known circumstances to be considered with care, when imposing sanctions. 

Zaman v Paradise UK Ltd [2014] EWHC 4684 (QB) (Judgment handed down in December but only now available)

A Master was entitled to strike out a claim for delay even where liability had been admitted.

In this case liability had been admitted for a period of 6 years.  There had been delay, exaggeration and noncompliance with Court Orders by the Claimant during that period.  The Defendant therefore, made an application for the Claimant’s claim to be struck out, which was successful in the first instance.

The Claimant appealed. HHJ Seymour QC refused the appeal as he did not accept that the decision was outside the acceptable range of his discretion.  The Master’s Judgment had set out the long history of the litigation and this had clearly been taken into account.    Although it was a bold thing to do it could not be said the Master had failed to give any, or adequate, reasons for his judgment.  The Claimant had not sought to bring assessment of the damages of his claim for a period of 6 years even though liability had been admitted.

The Claimant suggested incompetency of his solicitors but it was noted that in general the inaction of a party’s legal representative must be treated as the inaction of the party himself.

Duncum v Chum, Oxford County Court (12 September 2014) (Reported 18 February 2015)

Discretion to vary usual Part 36 cost consequences where a claim was exaggerated.

The Claimant commenced proceedings in 2011.  On 31 May 2013 she served a schedule of loss, claiming special damages of £1,000,000.00.  In January 2014 she served an amended schedule claiming around £500,000.00.  The Defendant then made a Part 36 offer of £220,000.00 which was accepted in July 2014.  The usual course would be the Defendant paid the Claimant’s costs to the date of expiration of the offer, and the Claimant paid the Defendant’s costs from that point to acceptance of the offer.

However, the judge held that it could legitimately be inferred that the case would have settled much sooner than it did if the claim had been reasonable and there was every reason this should be reflected in costs.  The original claim value was likely to have greatly inhibited the prospect of an early settlement and it would be unjust for the Defendant to bear costs incurred when the Claimant was looking to recover around 5 times what the case settled for. 

It was therefore, ordered that the Claimant pay the Defendant’s costs incurred from the date of service of the original schedule of loss, i.e. 31 May 2013.

Webb v Liverpool Womens’ NHS Foundation Trust [2015] EWHC 449 (QB)

The claimant, by her litigation friend, alleged that the defendant’s management of her birth six years previous had been negligent, with the result that she suffered a Brachial Plexus injury as a result of shoulder dystocia. The claimant’s allegations fell into two main parts: 

  1. that the need for a caesarean section was indicated on 3 occasions but, negligently no caesarean section was performed; and
  2. that the delivery itself was negligently managed because the midwives undertaking it failed to adopt recognised procedures to deal with shoulder dystocia that the claimant suffered in the course of delivery.

The Court found for the claimant in that it was concluded that the defendant’s employee had indeed been negligent in deciding not to proceed to a Caesarean section at the appropriate time. However, the Court was not satisfied that the claimant has established liability in respect of the defendant’s conduct at any other stage of the labour prior to delivery, nor was it satisfied that she had done so in respect of her claim under the second limb.

It was decided that the defendant was liable to the claimant for 100% of damages even though the claimant was unsuccessful in many of her specific allegations.

The Court then went on to consider the issue of costs and whether it was appropriate to make a proportionate costs order in circumstances where the claimant had beaten her Part 36 offer, despite failing on one limb of her claim.

The Court held that, in the absence of a Part 36 offer, an issues-based or proportionate costs order would have been appropriate to reflect the failure of the second limb. It was satisfied that the existence of the successful Part 36 offer did not preclude such a costs order. 

Although Part 36 is a self-contained regime which does not refer to issues-based or proportionate orders, the Court could make such orders if it was necessary to avoid injustice. The Court therefore made a costs order in favour of the claimant limited to a percentage of her costs reflecting the time expended on establishing the first limb of the claim, plus disbursements. The Court also warned parties about giving over-optimistic time estimates for hearings, which wasted time and costs in this case. It emphasised the importance of giving critical and constructive consideration to time estimates and said that parties should not work on the basis that a hearing would take no longer than the parties merely hoped it would take. This decision demonstrates the exercise of the Court’s discretion not to apply the usual costs consequences under CPR 36.14 where it considers it just to do so.

Hayward v Zurich Insurance Company PLC [2015] EWCA CIV 327

This case concerned an employer’s liability claim. Following an accident at work, H brought proceedings against his employers. He claimed that his injury continued to cause him serious back pain which restricted his mobility, that he had also developed a depressive illness and that is ability to work was seriously impaired. His claim was supported by expert evidence from an orthopaedic surgeon. The employers’ insurers admitted liability but disputed quantum on the basis that the claimant was exaggerating his injuries. Shortly before the issue of quantum was due to be tried, the parties reached a settlement.

Two years post settlement, H’s neighbours approached the employers to say that they believed H’s claim to have suffered a serious back injury was dishonest. They believed H had made a complete recovery from his illness at least a year before settlement. They were referred to Zurich and provided full witness statements. After this further evidence of the fraud came to light, the insurers sought to set aside the settlement and reclaim much of the amount they had paid in a claim for deceit.

The claim was successful at first instance. However, the Court of Appeal disagreed. Underhill LJ recognised that the decision to allow the appeal was unattractive because it meant that the employee retained the benefit of a settlement far in excess of the value of his actual loss. However, there was a wider principle at stake: parties who settle claims with their eyes wide open should not be entitled to revive them when better evidence later comes to light. In such a case, a defendant will not be entitled at some later date to seek to have a settlement agreement set aside merely on the basis that he could then show that the claimant’s factual statements of the case as advanced were wrong or false. In deciding to settle, the defendant takes the risk that those statements are in fact untrue and pays a sum commensurate with his assessment of that risk. He could have taken the case to trial in order to disprove the statements in question but by settling he agrees to forego that opportunity and he cannot reserve the right to come back later for another attempt. If it were otherwise, no settlement would ever be final.

However, the position is different where factual statements advanced by a claimant and relied on by a defendant are not merely false but fraudulent. While it may be fair to treat the defendant as having taken the risk of the claimant’s statements in support of his claim being wrong, it will not, absent to any indication to the contrary, be fair to treat him as having taken the risk of them being dishonest. What risk the defendant is to be treated as having accepted must depend on the circumstances of the particular case.

The practical implications of this decision are that parties need to take care about alleging fraud or dishonesty and understand the implications of settling. It will be difficult to reopen settled cases unless there was no knowledge of fraud at the time of the settlement.

Peniuk and Others v Barclays Bank PLC [2014] EWHC 2946

The claimant made an application for specific disclosure shortly before the pre-trial review, which took place six weeks before the trial, arguing that without this evidence, they would be handicapped in cross examining the defendant’s expert. The judge noted that the fact the claimant admitted that they would rather have the documents, even at the risk of losing the trial date, showed how important the documents were to them. However, if he ordered disclosure now, it would result in substantial additional costs in preparing a further round of expert evidence, at a time when the parties should have been concentrating on preparing for trial. Ordering disclosure and maintaining the trial date were not really compatible and he was not persuaded that the application could not have been made any earlier. Therefore, he refused the application on the grounds that it was made too late.

The importance of maintaining the trial date has been a consistent theme in recent cases on relief from sanctions and time extensions. However, this case shows that the Court will take this into consideration in all types of interim applications, which should always be made at the earliest opportunity, to have the greatest chance of success.

Judgment handed down in August 2014, but only published in March 2015.

American Leisure Group LTD V Olswang LLP [2015] EWHC 629 (Ch)

The Court considered whether a master had jurisdiction to substitute a party under CPR 19.5 and, if so, whether he had correctly exercised his discretion under that jurisdiction to refuse substitution. 

In this case, a claim was mistakenly brought against a limited liability partnership of solicitors instead of the previous partnership just before limitation expired. The claimant made an application to substitute the incorrect party for the correct party. The substitution was refused and the claim struck out.

At Appeal, the Court confirmed that the pleading and evidence showed that this was a mistake of nomenclature rather than of identification and so the master had correctly found that he had jurisdiction to substitute under CPR 19.5.(3)(a). The Court then went on to hold, under its limited power to interfere with a case management decision, that, the master had correctly exercised his wide discretion to refuse the substitution. He had taken into account a number of factors and the Court considered that he had not erred in deciding that delay in the matter, combined with the failure to use the pre-action protocol, caused prejudice to the correct party, the previous partnership. By their inaction, the claimant’s solicitors were indicating that there was no claim to be brought against that partnership and, once limitation had passed, the partners of that partnership, which was a completely different entity to the one sued, were entitled to consider themselves protected by a limitation defence. The Court noted that without this defence, the partners had individual personal exposure to an enormous damages claim ($400 million) and the Court said that whilst the potential lack of full insurance cover was not a determinative factor, the master was entitled to take into account the stress and anxiety to the individuals involved.

This decision provides clarification of the Court’s jurisdiction to substitute a party named by mistake after the end of the relevant limitation period. It also demonstrates how delay and non-compliance with protocols may affect the exercise of discretion under that jurisdiction.