the professional negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

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. 

NHS England: are GPs getting a fair hearing?

  GPs may not perform NHS services in England unless they are included in a national list (“the List”) held by NHS England. NHS England has powers to manage admission, suspension and removal from the List. If a GP’s name is not on the List he/she is prevented from practising. Evidently, therefore, NHS England’s list determinations have very serious ramifications for clinicians. However, the decision making process is treated as an internal proceeding and therefore operates in a similar fashion to disciplinary procedures in the employment context meaning, for example, that GPs are not entitled to be legally represented. Following Knowsley (R. (on the Application of S) v Knowsley NHS Primary Care Trust [2006] EWHC 26 (Admin)), the Courts have held that the procedural regulations governing list determinations (now the National Health Service (Performers Lists) (England) Regulations 2013, “the Regulations”) should be read in such a way as to comply with Article 6 ECHR.     NHS England List Decision Panels are ill-equipped to carry out the reinterpretation called for by the Courts. The Panels do not commonly include legally-trained members. Moreover, the Panels do not have the benefit of a legal assessor. There have been instances where, refusing to hear legal submissions from lawyers and in circumstances where the GMC has allowed a GP to continue to practise, the clinician has been prevented from working because a Panel has suspended him/her from the List. Faced with having to interpret the Regulations so that they comply with Article 6 ECHR, in the individual circumstances of the GP, it is not surprising if Panel determinations are procedurally unfair, in some instances. The question that arises is whether this is a problem of significance, warranting legal assistance to be provided to the Panels in all determinations. In light of the serious consequences to clinicians of list determinations, and the difficulty of determining procedural fairness, the issue should be given serious consideration.  

Michael v Middleton - relief from sanctions under CPR 3.9 and solicitors negligence claims

Litigation solicitors up and down the country are no doubt assessing the implications of the latest procedural changes with an eye to their own risk management profile. Of particular importance has been the change to the provisions concerning relief from sanctions under CPR 3.9. The recent decision of Michael v Middleton [2013] EWHC 2881 (Ch) illustrates how tough the courts are becoming in implementing the Jackson reforms. It also raises the possibility of more solicitors’ negligence litigation in the future if caseloads are not managed efficiently. The case was a dispute between claimant business owners and their solicitor, the defendant. A key issue was how the defendant was to be paid, the defendant’s account being that he was to be given an interest in the claimants’ business as part of his remuneration. The claimants issued proceedings but failed to provide satisfactory disclosure and, in 2012, the claim was struck out for non-compliance with an `unless’ order. Approximately one year later (2013) the claimants instructed new solicitors but then waited for several months before finally issuing an application for relief from sanctions under CPR 3.9. It was accepted by the parties that the struck-out claim was not time-barred and that the claimants had been badly let down by their first solicitors. It was also in issue whether the second solicitors had unreasonably delayed in issuing the application for relief. HHJ David Cooke refused the claimants’ application for relief and stated that granting relief would ‘send a wrong message`. As part of his decision, he focussed on two specific aims of CPR 3.9 – conducting litigation efficiently and saving costs, and enforcing compliance with orders. Of particular relevance here, the Judge considered and rejected the submission that any claimant, who was denied relief, was bound to be disadvantaged by having to sue his solicitor instead. On the Judge’s findings, it was still open to the claimants to bring a fresh claim against the defendant, without being met either by limitation or abuse of process arguments. Nevertheless the implications of this decision are that the courts are going to adopt a less pragmatic approach to applications for relief. Instead of granting relief on the (unspoken) basis that there is little point in forcing a claimant to re-start the litigation, they are going to adopt a tough approach with potentially far-reaching consequences for any solicitor having conduct of the litigation at any stage.      

The Determination of Consequential Issues after Trial and the Apparently Biased Judge

Who should determine any questions as to costs at the conclusion of a trial? The standard – and it seems almost always correct – answer, would be the trial judge himself. The rationale is obvious and entirely sensible – that such ancillary issues should be determined by the tribunal which heard the case from which the such issues arise. However, the Court of Appeal last week suggested that this is not the universal rule, in the volubly-named case of Mengiste & Anor v Endowment Fund For The Rehabilitation Of Tigray & Ors: subnom Re An Application For Wasted Costs: (1) Endowment Fund For The Rehabilitation Of Tigray (2) Addis Pharamaceutical Factory Plc (3) Mesfin Industrial Engineering Plc v Rylatt Chubb [2013] Ewca Civ 1003. In this case, the Appellant solicitors appealed the decision of Mr Justice Peter Smith sitting in the Chancery Division below ([2012] EWHC 2782 (Ch)) in refusing to recuse himself from hearing a stage one application for wasted costs, and making such an order against them, in favour of the Defendant’s solicitors. The Appellants submitted that the judge should have recused himself after making such findings about them without hearing evidence, without warning, and without affording them the opportunity to address the court. Additionally, it was submitted that the stage one order should not have been made as the required prima facie strong case of improper, reckless, or negligent conduct had not been satisfied. The Court of Appeal (Arden, Patten, McFarlane LJJ) allowed this appeal in part. They held that whilst the usual rule was for the judge on a substantive application to deal with consequential issues as to costs, even when he had previously made adverse findings towards a party. However, the instant case was exceptional and the judge indeed had showed apparent bias. It was held that thus, he should have recused himself from hearing the wasted costs application because his criticism of the Appellants (which was held to have been designed to ward off an application for a wasted costs order against an expert witness in the case), was made in anticipation of an application that was never in fact made. The Court of Appeal further held that the judge had expressed his criticisms in absolute terms, failing to leave room for any explanation; and that the repetition of the criticisms and their severity made them extreme and unbalanced. Consequently, the stage one cost order was set aside. As to the second ground of appeal, the Court of Appeal noted that the Appellant solicitors has admitted seriously breaching their obligations as regards the instruction of experts to give evidence. It was held also that they had failed to invite the court to ignore and disregard certain offending passages in the expert’s report, which went beyond the proper boundaries of his role and expertise. As a result, it was held that the Appellant had failed to establish that indeed no judge could have concluded that a stage one order was appropriate in the circumstances. Whilst this decision undoubtedly affords guidance to the practitioner and the litigant, it is unlikely to have much practical impact upon judicial behaviour, given the necessity for judges at first instance to identify and (at least implicitly) accept the presence of the appearance of bias in themselves. Rather, the judgments oblique effect upon such tribunals may (perhaps it is optimistic to suggest) act as a further reminder upon judges not to risk putting themselves in such a position in the first place.

Disclosure of insurance cover

A common concern for many claimants and their lawyers in litigation is whether the defendants have effective insurance cover and can thus satisfy any judgment obtained them. When a claimant discovers that he only has a “paper” judgment, he often looks to blame his solicitor. This is what happened in the recent case of Dowling v Bennett Griffin (a firm) [2013] EWHC 1995 (Ch) in which Mr Dowling (“D”) failed to establish negligence by Bennett Griffin (“the Solicitors”) in the original litigation. As part of the earlier litigation, D had brought a counterclaim against P, who was later substituted for P’s limited company, APAL. The service of D’s counterclaim unfortunately led to the other parties’ insurance cover being avoided and the subsequent judgment in favour of D being of little value.   One argument that the judge, Kevin Prosser QC, considered in some detail was whether the solicitors ought to have obtained disclosure of the other parties’ insurance cover during the course of the proceedings. D criticised Bennett Griffin (“the Solicitors”) for failing to insist on disclosure of the insurance as a condition of APAL’s substitution for P as defendants to the counterclaim. The Judge rejected this argument because he considered that the court had no jurisdiction under the CPR or Third Parties (Rights against Insurers) Act 1930 to make this order. He noted that his conclusion was consistent with West London Pipeline & Storage Ltd v Total UL Ltd [2008] UKHC 1296) and previous authorities such as Bekhor v Bilton [1981] QB 923 and Cox v Bankside Members’ Agency [1995] CLY 4122. This case provides a timely reminder of the principle that insurance details are unlikely to be discoverable so long as the insured remains solvent.  

Lawyers' liability for costs

  A recent decision of Mr Justice Edwards-Stuart in the Technology And Construction Court (“TCC”) in Webb Resolutions Ltd v JV Ltd t/a Shepherd Chartered Surveyors [2013] EWHC 509 (TCC) considers lawyers’ obligations when drawing up court orders. The Claimants were assignees of a centralised mortgage lender suing the Defendant surveyors in respect of three allegedly negligent loans. The issues in the current litigation include the validity of the various assignments, whether or not the lender was negligent or failed to mitigate its losses, and whether the individual valuations were made negligently. This action is one of many such claims brought by the Claimants against surveyors – e.g. Webb Resolutions v E Surv Ltd, which John Bryant considers in his posting on 7 February 2013.   At a CMC held last year, Mr Justice Edwards-Stuart directed that the issues of the validity of the assignments and the lender’s negligence should be tried first and the issue as to the individual valuations be tried separately. He limited disclosure and the exchange of witness evidence to the assignment and lending issues. The Claimants’ solicitors and counsel were, as is the usual practice in the TCC, asked to prepare a draft order for agreement with the Defendant’s legal team.   In his judgment, the Judge described what happened thereafter as being in his experience “unique”. Three days after the hearing, the Defendant was provided with a draft order that “bore no relation” to what the court had directed. In effect the draft order provided for disclosure, exchange of witness evidence and expert evidence on all issues, as opposed to the Judge’s more limited directions concerning the lending and assignment issues. Not surprisingly the Defendant was unable to agree the Claimants’ draft order and therefore provided its own version. The Claimants’ lawyers responded by returning the Defendant’s draft with extensive amendments, which were in turn unacceptable to the Defendant’s legal team.   In the course of correspondence with the parties’ solicitors, the court indicated that the Defendant’s draft reflected the order made at the CMC but that it was open to the Claimants to apply for a variation. Notwithstanding that indication, the Claimants did not agree to the Defendant’s version of the order until shortly before a further CMC. At the CMC the Defendant applied for a costs order against the Claimants’ solicitors.   Mr Justice Edwards-Stuart noted that if a party was charged with drawing up an order, it was the duty of its solicitors and counsel to produce a draft that “fairly reflects what they think the judge decided or directed…” What the Claimants’ solicitors had done in the instant case was produce an order that reflected the directions that they or their clients would like to have had, but not what the court ordered. This was, in the Judge’s view, “wholly unacceptable…. [and] not just unreasonable… [but] verging on the contumelious…” In making a costs order against the Claimants’ solicitors, the Judge stated that solicitors and counsel “had to give effect to court orders…. They [were] not to attempt to manipulate them to their own or their client’s perceived advantage…”   On a practical note, the Judge observed that where parties cannot agree precisely on what the judge directed (or intended to direct), the point or points in issue are usually raised with the court in correspondence and resolved by the judge without a further hearing. Further it is always open to a party unhappy with a draft to apply for either a variation of the order (under the provision giving permission to restore) or permission to appeal.    

Disclosure under the Professional Negligence Pre-Action Protocol: Webb Resolutions Ltd v Waller Needham & Green [2012]

Non-compliance by claimants with their disclosure obligations under the Professional Negligence Pre-Action Protocol can prove an expensive mistake.  Webb Resolutions Ltd v Waller Needham & Green [2012] EWHC 3529 (Ch) shows why.   The Claimant, a purchaser of mortgage loans from institutional lenders – c.f. the preceding post – wished to sue the Defendant solicitors who had been engaged by the original lender.  In July 2010 it sent the Defendant a Letter of Claim.  After initial exchanges the Defendant wrote in January 2011 requesting sight of 12 classes of documents which it said it needed to prepare its Letter of Response.  The Claimant asserted that the documents were for the most part unnecessary and that no more would be provided until liability was admitted.  In May 2011 the Claimant made a Part 36 Offer on the usual 21-day terms.  The Defendant objected that it could neither serve a Letter of Response nor advise on the merits of the offer without receipt of the requested documents.   The Claimant was having none of that.  In September 2011 it went ahead and issued proceedings.  In its Defence the Defendant pleaded extensively from the Protocol and repeated its stance regarding the documents.  In March 2012 the Claimant provided standard disclosure, inspection took place, and in May 2012 the Defendant accepted the Part 36 Offer made a year earlier.   As the offer had been accepted after expiry of the 21-day period the automatic costs provision in rule 36.10(1) – defendant pays all – no longer applied, and instead costs became a matter for the court’s discretion under rule 36.10(4).  The default setting in that situation is that the claimant gets his costs up to the date when the relevant period expires, and the offeree is liable for the offeror’s costs thereafter until acceptance: rule 36.10(5).  The court should depart from the normal order only if it would be unjust not to, having regard to all the circumstances but in particular the four matters set out in the analogous rule 36.14(4): SG v Hewitt [2012] EWCA Civ 1053.   In this case the normal order would have resulted in the Defendant paying all of the Claimant’s costs both before and after issue.  However the judge (John Baldwin QC sitting as a deputy) was underwhelmed by the Claimant’s conduct.  He noted that the stated aim of the Protocol (paragraph A2) is to establish a framework in which there is an early exchange of information so that the claim can be fully investigated and, if possible, resolved without the need for litigation.  He found that although the Defendant’s early requests for disclosure were overambitious the Defendant had made out a good case for why it needed some of the documents and the Claimant, if acting reasonably, would have supplied copies of the files and not merely extracts from them.  By failing to do so the Claimant offended against the letter and the spirit of the Protocol.  That justified a departure from the normal order.   What order to make instead?  The judge began by holding that the Defendant should pay the Claimant’s costs incurred up until the end of the 21-day period (i.e. until June 2011), notwithstanding that the Defendant had been awaiting sight of the documents since the previous January.  He rejected the Defendant’s argument that the Claimant’s costs should be disallowed from that earlier date, reasoning that that would place the Defendant in a better position than if it had accepted the Claimant’s Part 36 Offer in time and the automatic costs order under rule 36.10(1) had taken effect.  It would be “rare indeed”, he said, that a party could improve his position on costs by waiting till the relevant period had expired, so as to take advantage of the more flexible position under rule 36.10(4).   In so saying the judge was perhaps overlooking two things.  First, it didn’t follow that settlement by acceptance of the Claimant’s Part 36 Offer was the best the Defendant could have hoped for.  Given the judge’s finding that the Claimant’s conduct had reduced the prospects of early settlement he could have concluded that, if the disclosure had been provided promptly, the case would probably have settled earlier even than June 2011 - for example, as the result of acceptance of a Part 36 Offer made by the Defendant upon viewing the documents.  (The Defendant had in fact made its own offer as early as December 2010, albeit at a nuisance level.)  So the judge wasn’t bound to treat all costs incurred prior to the end of the 21-day period as necessarily beyond the reach of his discretion.   Secondly, the automatic costs order under rule 36.10(1) is not quite as inflexible as it looks.  In Lahey v Pirelli Tyres Ltd [2007] EWCA Civ 91 the Court of Appeal held that although the rule deprived the court of its general discretionary powers under rule 44.3, nonetheless on any detailed assessment the costs judge could still disallow entire sections of the claimant’s bill of costs on the footing that they were costs "unreasonably incurred": rule 44.4(1).  The Court cited as an example (at [24]) that if the costs judge considered that the claimant had acted unreasonably in refusing an offer to settle made before proceedings were issued, he was entitled to disallow all the costs post-issue.  (See too Re (Edwards & Anor) v Environment Agency & Ors [2010] UKSC 57 at [21].)  So if the judge in Webb Resolutions had deprived the Claimant of some of its costs incurred before June 2011 he wouldn’t necessarily have been rewarding the Defendant for its delay: even if the matter had concluded with an acceptance of the Claimant’s Part 36 Offer, a costs judge could have disallowed just such costs on a detailed assessment anyway.   As for the costs incurred after June 2011, the judge felt unconstrained by the automatic rule and adopted a harder stance.  He held that it was significantly more likely than not that such costs would not have been incurred at all had the Claimant acted reasonably and responded properly to the letters of request for disclosure: by implication, the matter would have settled.  Therefore the Claimant, far from having its costs in respect of that period, should be ordered to pay the equivalent costs incurred by the Defendant.   One further point is worth making.  For the purposes of rule 36.10(1) “the relevant period” for accepting a Part 36 offer means, in the case of an offer made more than 21 days before trial, the period stipulated in the offer letter “or such longer period as the parties agree”: rule 36.3(1)(c)(i).  So a defendant who receives a Part 36 offer at a time when the information available to him is incomplete should be wary of negotiating any extension of time for acceptance until after provision of the missing documents.  If the defendant then accepts the offer within the extended period he will deprive himself of any opportunity to recover any of his own costs from the claimant, because the automatic rule will take effect.  Even if he then delays acceptance until after the extended deadline, he is still likely to be met with the argument that he must bear all the claimant’s costs up to the deadline on the authority of Webb Solutions.  Better, then, to protest at the claimant’s breach of the Protocol and let the original acceptance period go by default.