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the professional negligence blog

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Caught out by the court fee: a forewarning on issuing claims protectively

Facts The case of Richard Lewis & Others v Ward Hadaway [2015] EWHC 3503 (Ch) concerned 31 professional negligence claims brought against a firm of solicitors relating to conveyancing transactions. In the pre-action correspondence, the individual claims were each valued in the hundreds of thousands with a collective worth of £9 million. However, when the Claimants’ solicitors filled in the claim forms, the anticipated value for each case was considerably understated. Each claim form was then amended prior to service to reflect its true worth and the balance of the appropriate fee was paid. All the claims were sent to the court very near to the end of the limitation period, eleven of which being delivered to the court before, but not issued by the court until after, the expiry of the limitation period.  The Defendant’s alleged that this system was an abuse of process and sought to strike out the claims. In the alternative, the Defendants sought summary judgment on the eleven claims issued after expiry of limitation alleging that they were statute barred.  On 21 December 2015 Mr John Male QC, sitting as Deputy High Court Judge in the case, delivered judgment. Judgment With regards to the strike out application, Judge Male opined that intentionally issuing a claim form lower than its true value amounted to an abuse of process. He added that such practices materially affect the court system’s cash-flow and that it would not be in the public interest to condone such behaviour. His reasoning was supported by the fact that the Claimants’ solicitors had previously been critiqued in several other cases for employing such a scheme.  Interestingly, he did not go on to strike out the claims. Following Zahoor v Masood [2009] EWCA Civ 650 he held that allowing the Claimants to continue with their claims in light of the abuse of process would not be “an affront to the court”, paragraph [84]. His decision was based on the following findings: the prejudice that would result to the Claimants was substantial, the abuse of process did not go to the root of the claim, the potential worth of the claims was high and the Defendant would still able to argue limitation in some of the cases. He then went on to consider the application for summary judgment in respect of eleven of the claims. After considering the relevant CPR, statutory provisions and case-law he concluded that the claims were statute barred. His reasoning was that for a claim to be brought for the purposes of the Limitation Act 1980, the Claimant must have done “all that was in their power to do to set the wheels of justice in motion”, Aly v Aly (1984), paragraph [105]. He held that this had not been done for the eleven claims as the Claimants could have paid the appropriate issue fee.   Comment Whilst it is important to appreciate that Lewis v Hadaway is a High Court decision and is subject to review by the appellate courts, the potential ramifications of this judgment are far reaching. The decision is likely to result in a flurry of interlocutory applications brought by Defendants to extinguish claims where the claim form is issued and the court fee is increased after issue. In turn, this is likely to generate satellite litigation against solicitors, particularly in the professional negligence sphere where there is no recourse for claimants to a discretionary extension of the limitation period. The ruling also raises pertinent questions about access to justice. Last year court fees were significantly increased with a 5% levy on all claims over £10, 000. It is questionable where the dual effect of this judgment and the increases leave a Claimant who is impecunious but the potential recipient of a high-value claim. Judge Man alluded to this situation and held that for “a financially strapped litigant…[i]t may well be that, in that sort of case, there would be no abuse of process”, however, he went on to say that this would only be the case where there was “complete transparency” between the parties as to the undervaluing of the claim forms, paragraph [58]. It is difficult to see why the Defendant’s solicitors would permit such course of action when they can simply have the claim struck out. Some consolation comes from the court fee remission system which is open to Claimants who have a small amount of savings and receive certain benefits or are on a low income. However, whilst this may assist those at the lowest end of the spectrum it fails to address the plethora of Claimants who do not fulfil this criterion. The judicial reasoning is also worthy of analysis. Judge Male’s s ruling on summary judgment was a technical one; if the issue fee is not correctly paid and the claim form is issued by the court outside the limitation period then the action will be statute barred. It is interesting to compare this to an identical scenario but where the claim form is issued by the court before expiry, the only difference being when the court issues the claim form. Given that the intention of the parties is the same and that the issuing of the claim form by the court is down to administrative chance, is there really any difference between these two cases? Either the Claimants in both scenarios did everything in their power to set the wheels of justice in motion, or, if it is deemed they did not because the correct fee was not paid then surely both claims should be summarily dismissed? A strict application of Judge Male’s ratio will cause arbitrary distinctions between cases and one is left wondering whether focusing on abuse of the process would have been a more pragmatic approach.

Mitchell revised?

A little light relief for Friday afternoon. A decision of Males J started doing the rounds last week:  Vivek Rattan v UBS AG, London Branch [2014] EWHC 665 (Comm). It is well worth a read, not least because it is short. The case concerned misselling (or as the Claimant put in its skeleton argument “misspelling”) of investments. The Claimant took the point that the Defendant’s costs budget had been filed less than the required seven days before the relevant CMC. Applying Mitchell (which of course also involved late service of a costs budget) the Claimant contended the Defendant was only entitled to court fees. Males J described this argument as “manifest nonsense”. That might seem surprising. Is this the start of the tide turning against the harshness of the Mitchell regime? It is nothing of the kind. Reading the case itself dispels any such a notion. The Claimant’s solicitors had written to their opponents asking for confirmation that they would file their budget “on 28 February 2014”; the Defendant’s solicitors agreed that they would file it “by 28 February 2014”. They filed it on 28 February 2014. That was six, not seven, clear days before the CMC. What is the difference between this case and Mitchell? As Males J put it with heavy irony, “the unsophisticated reader might think that [the correspondence] was the clearest possible agreement that a costs budget exchanged on 28 February 2014 would be in time but [Counsel for the Claimant] submits that such a reader would have failed to grasp the true subtlety of this correspondence”. The judge rejected this submission holding: “It is clear that there was an agreement. Even if [the Claimant’s] strained construction of the correspondence had been justified, the Defendant’s solicitors understanding of the position was entirely reasonable. If relief from sanctions had been necessary, which in my judgment it was not, the case for such relief would have been overwhelming”. In this author’s view, Rattan does not signal a dilution of the Mitchell principles. Instead, it is an illustration of the difference between a genuine Mitchell point and one which is, in the words of Males J, merely “futile and time-wasting” and will be discouraged by the courts. As Leggatt J put it in Generali Romania Asigurare Reasigurare SA v Ardaf SA Insurance & Insurance Co [2014] EWHC 398 (Comm): “The decision ... in Mitchell ... has rightly been described as a “game changer” [...]. It is important for litigants to understand, however, how the rules of the game have changed and how they have not. The defendants in this case have sought to rely on Mitchell to turn to their tactical advantage a short delay by the claimants in providing security for costs which in itself had no material impact on the material impact on the efficient conduct of litigation. [...] The defendants’ stance disregarded the duty of parties and their representatives to cooperate with each other in the conduct of proceedings and the need for litigation to be conducted efficiently and at proportionate costs. It stood Mitchell on its head.”

Failure to serve Witness Statements on time – better late than never?

Mitchell is still providing a rich source of material for articles, and concern for those worried about being the subject of the next big professional negligence action…   Following on from Andrew’s post last week, I recently encountered the scenario where one party sought to vary a Court timetable of directions but it was not agreed.  Clearly, if the directions themselves contained an express sanction then it would have been a simple matter of a ‘new’ CPR 3.9 Application for relief from the sanction.  However, the direction was a standard one that merely stated that compliance should have been by a certain time.    This raises the question of if a party is in default should it make a 3.9 Application or a 3.1 Application?  3.1 expressly refers to the possibility of an application being made after the date for compliance.  Nevertheless, it is probable that in reality the 3.1 Application would entail consideration of the ‘new’ 3.9 in any event, given the specific amendments to the overriding objective (as to complying with rules and orders) and hence be little different to Mitchell.  Further, there is the question of what exactly would be the effect of failing to comply?  There have been many applications for striking out but the starting point is merely a refusal to allow the party in breach permission to rely upon the subject matter of the direction: such as witness evidence in my case.  It is to be noted that there is a specific built-in sanction already for failing to serve witness evidence on time: CPR 3.10.   It seems the Courts are tending nowadays to view any breach of any direction without good cause as one which requires an early Application.  The Applications are usually brought still under 3.1 if within time but if the Application is made after the date for compliance it is tempting to apply in the alternative under 3.9.  The new overriding objective does not alter the need for the Courts to make its assessment of how to do justice to the parties.  Often, it seems an exceedingly short extension of time is considered the correct approach if there is good reason for the delay, backed up by an Unless Order: viz. Fons v Corporal (2013) EWHC 1278.  That was the result in my case.  Many courts have effectively disregarded the old prejudice to the other party test.  It is unclear if anything other than a strict approach will ever will be taken otherwise, as the Court of Appeal has pointed out, the Jackson Reforms will have no teeth.   What has become abundantly clear though, is that failing to comply with any Court order is more serious than a year ago and if you can pre-empt any breach with an Application (with good evidence in support!), then you will be in a much better position.  Opponents are less likely to agree variations/extensions nowadays since they don’t want to miss a trick and moreover don’t want to be criticised by the Court themselves.  In a sense, Jackson and Mitchell have curtailed some of the spirit of cooperation engendered by the Woolf Reforms, albeit by focusing upon proportionality and delay.  Time will tell if that is a good thing. 

The Return of the Omni Ombudsman

Our regular readers will recall that we recently blogged about the Legal Ombudsman’s interest in providing redress for clients of non-legal professionals. This is not the only area where LeO's domain may expand. The Legal Services Consumer Panel reported last year that non-client third parties should have a right of redress from LeO. The Panel has since looked into the  2,184 complaints from non-clients that LeO turned away last year for want of jurisdiction. Earlier this week the Panel published 39 case studies to illustrate the sorts of complaints that might merit redress by LeO. The case studies include conveyancing horrors, aggressive debt recovery, unpleasant experiences at court and failures to administer estates properly. A number of the case studies concern situations in which the legal professional would or might owe a duty of care to the complainant. LeO's rules allow for a complaint to be dismissed or discontinued if it would be more suitable for the issue to be dealt with by a court, but the Panel thought that the costs of going to court meant that redress by LeO might be the only realistic prospect of getting justice for some complainants. As a change to the classes of complainant to LeO requires an order of the Lord Chancellor under the Legal Services Act 2007 it might be sometime before non-clients can obtain redess from LeO. In the meantime the case studies should provide a rich source of inspiration to those setting interview questions, tort examinations and moot problems.