England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		10 February 2015

1. MR JUSTICE SIMON: The defendants' solicitors seek relief against sanctions in relation to an obligation that arises under CPR 44.15(2) in these terms:

"A party who seeks to recover an additional liability must provide information about the funding arrangements to the court and to other parties as required by the rules, practice directions or court order."

2. Paragraph 19.2 of the costs practice direction provides:

"(1) In this paragraph 'claim form' includes a petition and application notice, and the notice of funding to be filed or served is a notice containing the information set out in form N251 ...

(3) A defendant who has entered into a funding arrangement before filing any document -

(a) must provide information to the court by filing notice with his first document. A 'first document' may be an acknowledgement of service or defence, or any other document such as an application to set aside a default judgment

(b) must provide information to every party by serving notice. If he serves his first document himself, he must serve notice with that document. If the court is to serve his first document, the court will also serve the notice if the defendant provides with it sufficient copies for service.

(4) In all other circumstances, a party must file and serve notice within seven days of entering into the funding arrangements concerned."

3. Paragraph 19.4 of the costs practice direction provides:

"(2) Where the funding arrangement is a conditional fee agreement the party must state the date of the agreement and identify the claim or claims to which it relates including part 20."

4. The defendants' solicitors entered into a CFA with Lord Prescott on 28 February 2012. It is common ground that a notice of the CFA in form 251 should have been given to the claimant at least by the time of the notice of acknowledgement of service, 11 April 2012. The claimant argues that it should, in fact, have been given on 6 March. In any event, it was served either three or seven weeks or so late on 3 May 2012, although a prior indication of the likelihood of a CFA had been given in correspondence on 5 December 2011.
5. The claimant has taken the point, more recently, that no notice of a CFA was or has ever been given between Lord Prescott and either leading or junior counsel although it was referred to in correspondence. In a letter of 28 June 2012, in respect of junior counsel:

"By a letter of 3 May 2012, I have notified you that this firm is acting under a conditional fee agreement. We write to inform you that this firm has also entered into a conditional fee agreement with counsel. That conditional fee agreement provides for a success fee within the meaning of section 58.2 of the Courts and Legal Services Act 1990 (as amended)."

There was no date or, alternatively, only the date was missing depending on which way you look at it.

6. A further letter was written on 9 October 2012:

"As is clearly set out in Lord Prescott's estimate of costs, there will be a success fee payable on top of the base cost for both solicitors' and counsels' fees. Notice of funding was served on 3 May 2012 and our letter of 28 June 2012 advised that counsel, Andrew Moran, had also entered a conditional fee agreement. Please note that this firm is also in the process of entering into a conditional fee agreement with Michael Pooles, QC, who shall provide for a success fee within the meaning of section 58.2 of the Courts and Legal Services Act 1990 (as amended)."

The claimant points out not only is there no date but they have not been told when the agreement was made.

7. On 5 February 2015, after the defendants had seen a draft of the judgment, Lord Prescott's solicitors, Messrs Reynolds Colman Bradley, issued an application notice seeking relief from the consequences of filing their N251 form late. It did not cover any deficiency in relation to the notification of the CFA in respect of leading or junior counsel.
8. The argument between the parties has revolved around how the court should approach the application of CPR part 3.9: ' relief from sanctions':

"(1) on an application for relief from any sanction imposed for a failure to comply with any rule, practice, direction or court order, the court will consider all the circumstances of the case so as to enable to deal justly with the application including the need -

(a) for litigation to be conducted efficiently and at proportionate cost, and

(b) to enforce compliance with rules, practice directions and orders.

(2) An application for relief must be supported by evidence."

The evidence in this case is a witness statement from Ms Caird of the defendants' solicitors.

9. The decision of the Court of Appeal in Denton & Ors v TH White Limited & Ors [2014] EWCA Civ 906 now provides revised guidance on the application of CPR part 3.9, softening, if that is the right word, the stricter approach set out by the Court in Mitchell v News Groups Newspapers Limited [2014] 1 WLR 795. It is common ground that a three-stage consideration of the facts is required.
10. The first stage is to identify and assess the seriousness and significance of the failure to comply with any rules, practice direction or court order which engages rule 3.9(1). The second stage is to consider why the default occurred. This is essentially an inquiry into whether the applicant can show a good reason for the default. The third stage is to evaluate all the circumstances in the case so as to enable the court to deal justly with the application including factors (a) and (b) in CPR 3.9(1). The promptness of the application is a relevant circumstance as are other past or current breaches of the rules, practice directions and court orders.
11. So far as the first stage of the inquiry is concerned, Mr Green QC submitted that a breach of the requirements as to the service of notice of funding is serious as the rules provide for an automatic sanction, in the event of breach, the irrecoverability of any success fees. In this case, the breaches are serious. They are repeated in the sense that it is not just one omission, there are apparently three CFAs and they are entered into on different dates and the requisite information has only been provided in respect of one and then late.
12. Secondly, in substance, they persist today. The requisite information in respect of two of the three CFAs, namely their dates, have still not been provided to this day. I should say in relation to that point that those representing the 11th defendant have been taken somewhat by surprise since no notification that it was going to be taken was given prior to the service of a skeleton argument very shortly before this hearing.
13. Thirdly, Mr Green submits that in this case the breaches are significant as the 11th defendant's advisors well knew that the claimant had taken out ATE insurance for the defendant's costs. He had served his own notices timeously.
14. Against this, Mr Pooles QC pointed out that after such notice as was given, the claimant would have been in a position to respond to the extent that he was aware that a CFA was in existence.
15. I am troubled in relation to the lack of detail, even now, about the CFAs entered into with counsel and I shall deal with that separately. However, I am not persuaded that the delay in relation to the proper notification of the CFA in relation to the solicitors is either serious or significant. The non-compliance had no effect on the conduct of the case nor has it impacted on other court users. Indeed, the claimant raised no objection to the notice, when it was sent, and has since done nothing to indicate that he was prejudiced by any delay.
16. It will impact on the claimant if relief is granted but I am concerned about the seriousness and significance of the breach and not the seriousness of the consequences to the claimant. (See, for example, the judgment of Hilliard J in Antonio Caliendo & Ors v Mishcon de Reya (a firm) & Ors [2014] EWHC 3414 (Ch) at [39]). In any event, the claimant had not been able to point to any material prejudice from the delay which, for these purposes, I assume to be a period of seven weeks.
17. I turn then to the third-stage inquiry since no good reason for the default is advanced other than oversight. Mr Green emphasised the importance of compliance with rules, practice directions and orders. He points out that the 11th defendant took a conscious decision by his solicitors not to make the present application promptly be it at the pre-trial review or at any earlier time. There was, thus, on the 11th defendant's case a conscious decision not to comply with practice direction 23A and, in any event, the well known need to apply promptly.
18. It seems to me that this point can be overstated. Once notice had been given it was not inevitable that a point would be taken as to the non-compliance with the rules. It is at least one view of the matter that costs would be saved by addressing the matter when the issues of costs directly arose.
19. Mr Green also argued that if a prompt application had been made, the harsher principles as described in Mitchell would have applied and there would have been no prospect at all of succeeding on the application, not least since it would not have deprived Lord Prescott of recovery of his base costs. The deliberate decision to ignore the rules and wait to make the application now should not improve the position of his solicitors.
20. It seems to me that there are problems with this submission, first theoretical and second practical. The first is that the law is presumed always to have been as stated by the most recent authoritative decision. The second problem is that in giving the judgment of the majority in Denton, Lord Dyson, MR specifically said that the decision in Mitchell had been misunderstood.
21. Looking at the matter broadly and considering all the matters that I must consider under CPR 3.9(1), issues of proportionality and compliance, but also dealing with the application justly, I have concluded that there should be relief against sanctions so far as the solicitors are concerned.
22. That leaves the position of the CFAs with counsel. The position is that notice was given that a CFA agreement had been entered into which provided for a success fee in relation to junior counsel and that in relation to leading counsel that it was intended to enter into a CFA with him which would provide for a success fee. That did not result in any response from solicitors acting for the claimant and that, in my view, is a material matter.
23. Asking myself the similar questions that I have asked in relation to the solicitors, I identify the similarity of the seriousness and significance of the failure to comply with the rules but, added to that, there is still a failure to comply with the details required in relation to the date of the CFA. For this reason, I would require in any event an undertaking that further information is provided by way of witness statement in relation to those matters.
24. The issues have, however, as I have already noted, arise, arisen very late and not apparently before the service of the skeleton argument dated either today or yesterday, notwithstanding that the material events took place at least in October 2012 and probably before.
25. So far as the third stage is concerned, the questions are again similar. I have to ask myself whether issues of proportionality and compliance, but also dealing with the application justly, lead to the conclusion that relief against sanctions is appropriate. By a relatively fine measure, I have concluded in favour of granting the relief against sanctions in relation to both those CFAs, not least because these were matters that were not thought to give rise to any issue at all until very shortly before this hearing. I do not regard the opposition to the 11^th Defendant's application as opportunism, but I do regard it as something which reasonably might not have been foreseen and requiring prompt action.
26. For those reasons, I have come to the conclusion that relief should be granted.