Litigation Update July 2008

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1 Litigation Update July 2008 In brief... 2 CFA review... 2 New claims process for RTA claims... 2 New fast track limit... 2 Rome I and Rome II Regulations... 2 Service out of jurisdiction... 2 Amendment... 3 Kay and Brummer v Cuby adding new duty of care to particulars of claim outside limitation period... 3 Breach of pre-action protocol... 4 T J Brent Ltd v Black & Veatch Consulting Ltd tactical costs application... 4 Costs order against non-party... 5 Oriakhel v Vickers conspirator in fraudulent insurance claim... 5 Protective costs orders... 6 R (Compton) v Wiltshire Primary Care Trust when is an issue of general public importance?... 6 Mills & Reeve LLP is a limited liability partnership regulated by the Solicitors Regulation Authority and registered in England and Wales with registered number OC Its registered office is at Fountain House, 130 Fenchurch Street, London, EC3M 5DJ, which is the London office of Mills & Reeve LLP. A list of members may be inspected at any of the LLP's offices. The term "partner" is used to refer to a member of Mills & Reeve LLP. 1

2 In brief CFA review The government has commissioned an academic review of no win no fee arrangements in order to assess whether conditional fee agreements, and contingency fees in employment tribunals, are operating in the interests of justice. The review will focus on personal injury, employment and defamation/privacy claims. In addition to this review, the Master of the Rolls is also planning a costs review and we are waiting for the response to the consultation on CFAs in defamation and privacy cases which closed at the end of October last year. New claims process for RTA claims The government has published its response to the consultation paper Case track limits and the claims process for personal injury claims. It promises to set up a new claims process applying to road traffic accident personal injury claims which make up about 75% of all personal injury claims. A new streamlined procedure will provide for early notification of claims valued between 1,000 and 10,000, promote early admissions of liability and introduce fixed time periods and fixed recoverable costs. The process will not apply to clinical negligence claims nor to employers liability (EL) or public liability (PL) claims. To read the response, see New fast track limit In the response referred to above, the government has also concluded that there should be no change to the general small claims limit of 5,000 and the limit of 1,000 for personal injury and housing disrepair claims. It has accepted the recommendation of most respondents to the consultation that the fast track limit should be increased from 15,000 to 25,000. With regard to intellectual property claims, the response states that the government is going to consult the judiciary over whether all IP claims need to be allocated to the multi-track. Rome I and Rome II Regulations Rome I on the law applicable to contractual obligations will apply from 17 December 2009 to all contracts concluded after that date in all Member States, except the UK and Denmark. The UK may decide to opt in to Rome I before that date. Rome II, which governs noncontractual (principally tortious) obligations will apply from 1 January 2009 in the courts of all EU member states other than Denmark. Service out of jurisdiction The fact that a claim is remotely connected to a contract will not prevent it from being in respect of a contract for the purpose of obtaining permission to serve out of the jurisdiction under CPR 6.20(5) but it will be a factor when the court considers whether England is the proper place in which to bring the claim. A claim for contribution under the Civil Liability (Contribution) Act 1978 in connection with an ATE insurance policy fell within CPR 6.20(5) even though the claimant was not party to the contract and the claim was not brought under the contract (Greene Wood & McLean v Templeton Insurance Ltd). 2

3 Amendment Kay and Brummer v Cuby adding new duty of care to particulars of claim outside limitation period [2008] EWHC (Adm) 25 June The first claimant, Sidney Cuby, sought permission to re-amend the particulars of claim to allege a breach of duty owed by the defendant accountants (BKB) to himself in a personal capacity. The original claim related only to a retainer between the accountants and Berkeley Seymour Property Finance Ltd (BSPF), of which Mr Cuby was the controller and principal shareholder and the second claimant, Finsbury, was also a shareholder. The application was made outside the relevant limitation period and was therefore only permissible under CPR 17.4 if the new cause of action arose from the same facts or substantially the same facts as were already in issue in the original action. The judge allowed the amendment, upholding the Master s decision below. The original statement of case had stated: The Defendant..has been responsible for advising the company in relation to all taxation issues that may affect the company, its directors and shareholders. The Defendant has been fully aware of the structure of BSPF and its close relationship with the Second Claimant and the Rock Settlement and the position of Mr Cuby in the Second Claimant. As the judge put it, given such a clear indication of the claimed relevance of the broader position of the related entities to the advice given, I agree with the Master that it is artificial to place an impenetrable partition between Sidney Cuby telephoning BKB for advice as to the effect of the proposed dividends on the shareholders on the one hand, as opposed to those known to BKB to have a wider beneficial interest on the other. Comment: although the outcome in this case seems to be fairly obvious given the breadth of the reference to the defendant accountants relationship with the company and its shareholders in the original particulars of claim, it is not always the case that the facts relevant to the new cause of action here breach of a duty to advise the controller of the company about his personal tax position will be sufficiently canvassed to satisfy CPR The accountants relied upon a passage in Del Grosso v Payne & Payne in which Maurice Kay LJ said that the claimant could not move from one account of what was said at a meeting to another very different account and therefore assert that it was still a dispute about what was said at the meeting. The judge in the present case was more influenced by Senior and Senior v Pearson and Ward in which, although the claimant s claim against his solicitor originally focused upon a single conversation, amendments were allowed which involved an examination of the whole of the retainer relationship over a long period. In the present case, however, what was permitted was an amendment to introduce a new cause of action on the ground that it concerned the same set of professional client/accountant relationship. This indicates that attempts by defendant professionals and their insurers to resist amendments outside the limitation period are likely to fail where the amendments concern the scope of the retainer or seek to rely upon wider duties owed to existing parties to the action. 3

4 Breach of pre-action protocol T J Brent Ltd v Black & Veatch Consulting Ltd tactical costs application [2008] EWHC 1497 (TCC) The court will not allow the pre-action protocols to be used as a weapon to gain a tactical advantage. Where the defendant knew of the substance of the contribution claims made against it from 2005 onwards and had refused to attend several invitations to attend without prejudice meetings, denying every aspect of the claim against it, the court was entitled to find that there had been substantial compliance with the Pre-action Protocol for Construction and Engineering Disputes. The claimants had asked without success for a standstill agreement from the defendant and were entitled to being proceedings, given the concerns about limitation, without serving a formal letter of claim. Comment: various additional factors conspired in the failure of this application for costs for breach of a protocol under para 2.3 of the Protocols Practice Direction. Continuing the pragmatic approach to protocol compliance he adopted earlier this year in Orange Personal Communication Services Ltd v Hoare Lee, Akenhead J rejected the application purely on the basis that there had been substantial compliance with the protocol. The additional factors are therefore not strictly material to the decision but they indicate how an applicant s general approach to a dispute can prejudice its position. The judge had stayed the action to enable the parties to mediate. The defendants proceeded with their application for costs despite the stay (they were technically entitled to since it had been issued before the order for a stay) in order to gain a tactical advantage at the mediation. The judge s annoyance at seeing them back again during the stay is clear a foolish piece of tactical manoeuvring all round given that the same judge was going to hear the costs application. Another important factor was the defendants failure to request a stay for the protocol procedure to be followed once the claim was issued in October This failure undermined their stance at the application. Defendants should take note if they intend to make this type of application for costs. Finally, to obtain a costs order in its favour, the defendant needed to show that if the protocol procedure had been followed to the letter, there was a good chance that the claim would have settled pre-action. Given the defendant s extremely uncooperative response to the claimants many attempts to engage them in settlement discussions preaction (the judge described them as more emphatic in their denials of liability than many defendants), this was virtually impossible. For an example of circumstances in which a such costs order was appropriate, see Charles Church Developments v Stent Foundations Ltd. There the claimant had not begun at any stage to comply with the protocol process and there was a good chance that the matter would have settled pre-action. 4

5 Costs order against non-party Oriakhel v Vickers conspirator in fraudulent insurance claim [2008] EWCA Civ 748 Mr Khan was involved in setting up a fraudulent road accident claim by the claimant against the first defendant, Mr Vickers, and gave evidence to support the claimant at trial. Mr Vickers, also alleged to be involved in the fraud, failed to attend. The second defendant, Mr Vickers insurer, contended that the claim was bogus and applied to be joined to the action so as to allege a conspiracy to defraud, counterclaiming back sums it had paid to the claimant and the costs of the investigation. It did not join Mr Khan as a defendant to the proceedings and did not give him notice before the close of the evidence at trial that it would be claiming costs against him. The judge below refused to make a non-party costs order under s51 Supreme Court Act 1980 because Mr Khan had not funded or controlled the litigation. The Court of Appeal, whilst holding that there was jurisdiction to make such an order, dismissed the appeal. The insurer could have joined Mr Khan as a party to the action which would have given him the protection conferred by the rules and enabled him to take legal advice about his position. At the least, the insurer should have warned Mr Khan at an earlier stage that costs might be sought against him which would have given him an opportunity to apply to be joined as a party. Comment: the outcome in this case is not surprising given that the insurer is still free to sue Mr Khan for his part in the dishonest conspiracy and recover damages and costs via that route if it chooses to do so. The case is of interest because it confirms the fact it is not a requirement of a s51 order that the non-party funded or controlled the litigation. It also raises the question of witness immunity. Would an award of costs against a non-party witness on the basis of what he said in evidence infringe the principle that a witness cannot be sued in respect of a cause of action derived from his evidence? Arden LJ found that it would but left the precise ambit of the witness immunity rule in this context open for consideration in another case She went on to consider the limits of this principle. It would not prevent a witness from being liable for damages if he had been a party to a conspiracy to defraud another person by some means outside the scope of the immunity. So, for example, if the witness had fabricated evidence by creating a false invoice to support a claim under an insurance policy, the witness immunity rule would not apply to preclude such a claim. In the present case, the ambit of the alleged conspiracy had not yet been pleaded since Mr Khan was not a party to the action and there was a lack of clarity about the precise conduct by Mr Khan relied upon by the insurer. Separate proceedings were necessary to deal properly with these issues. 5

6 Protective costs orders R (Compton) v Wiltshire Primary Care Trust when is an issue of general public importance? [2008] EWCA Civ 749 The Court of Appeal reviewed the guidelines it gave on the exercise of the exceptional jurisdiction to make a protective costs order (PCO) in R (Corner House Research) v Secretary of State for Trade & Industry. A PCO protects pressure groups bringing public interest challenges by limiting the costs they will have to pay if their case is unsuccessful. A PCO may be made where: the issues raised are of general public importance the public interest requires the issues to be resolved the claimant has no private interest in the outcome of the case it is fair and just to make the order if the order is not made, the claimant will probably discontinue the proceedings. A PCO is more likely to be made where those acting for the claimant are doing so pro bono. Where the claimant s lawyers are not acting pro bono, a cost capping order for the claimant s costs is likely to be required. The court refined the Corner House principles by finding that the action does not have to be of interest to all the public nationally to be of general public importance. Nor is there any specific requirement to prove exceptionality. The reference to the jurisdiction to make a PCO being exercised only in exceptional cases in Corner House did not add another principle to the five listed above but was a prediction as to the effect of applying the principles. The court also reviewed the procedure for making an order, lamenting the failure of the Rules Committee to codify the Corner House guidance, and considered the procedure for reconsidering a PCO made for first instance proceedings where the beneficiary of the PCO wishes to appeal. Comment: the claimant s applications for judicial review were brought on behalf of Community Action for Savernake Hospital (CASH) which alleged that decisions to close the day hospital facility and the Minor Injuries Unit had been taken by the Primary Care Trust (PCT) by stealth. The PCOs made below were upheld by a majority of the Court of Appeal, with a strong dissenting judgment from Buxton LJ. In his view, the proceedings were not of general public importance. If they were, then so would most decisions on hospital provision, school reorganisation or any aspect of local government services. Had the court in Corner House intended that any decision of this type would potentially fall within the jurisdiction to make a PCO, it would have expressed itself quite differently. Moreover, he concluded that exceptionality was an additional requirement for the making of a PCO and the present judicial reviews were certainly not exceptional, raising no point of law of general importance and being almost entirely concerned with disputes of fact. Whilst the public may applaud the court s support for applications of this type, those on the receiving end of judicial review claims will share Buxton LJ s concern that the effect of the 6

7 decision in this case is very greatly to extend the types of cases in which a PCO can be made. The effect of a PCO is to shift part of the financial burden or risk of litigation from the claimant onto public funds, in this case those of the PCT. This decision is really about politics and the controversial limits on funding for public law litigation, dangerous territory for the courts to venture into. As Buxton LJ said the court should be very cautious in taking steps that extend support from public funds beyond that chosen by Parliament, especially when the funds used for that purpose are not those dedicated by Parliament to legal purposes. Miranda Whiteley Professional Support Lawyer for Mills & Reeve LLP +44(0) The contents of this document are copyright Mills & Reeve LLP. All rights reserved. This document contains general advice and comments only and therefore specific legal advice should be taken before reliance is placed upon it in any particular circumstances. Where hyperlinks are provided to third party websites, Mills & Reeve LLP is not responsible for the content of such sites. 7

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