Insight from Horwich Farrelly s Large & Complex Injury Group Issue #78 19 April 2018 Alexander House 94 Talbot Road Manchester M16 0SP T. 03300 240 711 F. 03300 240 712 www.h-f.co.uk Page 1
Welcome to Insight In this week s edition of Insight, we will be covering cases relating to: Trying to settle RTA Portal cases without paying costs An allegation that part of a claim was fundamentally dishonest Indemnity costs where a ground of appeal was not pursued Malcolm Henke Partner & Head of LACIG Trying to settle RTA portal claims without paying costs Judgment has been handed down in the appeal in Gavin Edmondson Solicitors Limited v Haven Insurance Company Limited (2018) UKSC 21. Six claimants were involved in road traffic accidents involving vehicles insured by the appellant insurance company. They all entered into CFAs with the respondent solicitors firm, which notified the claims via the RTA online claims portal. Each claim was acknowledged by the insurer, which then made offers to compromise the claims on an inclusive basis, direct to the claimants. All of the individuals eventually accepted these offers and cancelled their CFAs with the solicitors. The solicitors claimed against the appellant for the fixed costs which they should have recovered had the claims been settled in accordance with the portal pre-action protocol. The claim was dismissed at first instance, but the Court of Appeal allowed the solicitors appeal in respect of their claim based on equitable interference. Before the UKSC, the appellant insurer repeated its main submission that the retainers created no contractual liability to pay the charges upon which an equitable lien or charge could be founded, and submitted that the Court of Appeal had been wrong to extend the equity of intervention as it did, the extension being contrary to settled principle....the respondents were entitled to the enforcement of the traditional equitable lien against the appellant... Dismissing the appeal, (on different grounds from those in the Court of Appeal) the UKSC held unanimously that the respondents were entitled to the enforcement of the traditional equitable lien against the appellant, as the client owed a contractual duty to pay the solicitors charges. However, the equitable lien should not have been modernised in the manner undertaken by the Court of Appeal. As the case law demonstrated, the solicitor s equitable lien was developed to promote access to justice. It enabled Page 2
solicitors to offer litigation services on credit to clients who, although they have a meritorious case, lacked the financial resources to pay up front for its pursuit. The equitable lien depended upon (i) the client having a liability to the solicitor for his charges; (ii) there being something in the nature of a fund in which equity could recognise that the solicitor had a claim (usually a debt owed by the defendant to the solicitor s client which owed its existence to the solicitor s services to the client); and (iii) something sufficiently affecting the conscience of the payer at the time of payment, either in the form of collusion with the client to cheat the solicitor or notice or knowledge of the solicitor s claim against or interest in the fund. The client care letter, which explained that the solicitor would be able to recover its costs from the losing side if the claimants won, so that the claimants would not need to put their hands in their own pockets, did not mean that the claimants were not contractually liable for the solicitors fees. It merely limited the recourse from which the respondent could satisfy that liability to the amount of its recoveries from the defendant, and it both preserved and affirmed the client s basic contractual liability. This was a sufficient foundation for the lien to operate as a security for payment, on a limited recourse basis. As such, the lien could be enforced against the appellant by requiring it to pay the fee amounts in the CFAs direct to the respondent, but only up to the amount of the agreed settlement payments. To that limited extent the order made by the Court of Appeal needed to be varied. It was not strictly necessary to address the Court of Appeal s approach in view of the decision on the traditional principle above, but the correctness or otherwise of the Court of Appeal s reformulation of the principle had been extensively argued, and the Law Society had intervened to support it. There were insuperable obstacles to extending the principle to cases where, although there was no contractual liability for the charges, the Protocol was breached. This included the fact that the Protocol was purely voluntary and created no debt or other relevant legal rights at all. Whilst equitable remedies were flexible, they still operated according to principle. One of the principles of the equitable lien was that the client must have a responsibility for the solicitor s charges. There was no general principle that equity would protect solicitors from any unconscionable interference with their expectations in relation to recovery of their charges. In all the cases before the court, the requirement that the settlement debts owed their creation to the respondent s services provided to the claimants under the CFAs was satisfied on the facts. The respondent s actions in logging the claim on the portal contributed to the settlement in two ways. First, it supplied the details of the claim to the insurer, and second, it demonstrated the claimant s serious intention to pursue the claim, and ability to do so with the benefit of a CFA. Once a defendant or his insurer was notified that a claimant in a road traffic accident case had retained solicitors under a CFA, and that the solicitors were proceeding under the Protocol, they had the requisite notice and knowledge to make a subsequent payment of settlement monies direct to the claimant unconscionable, as an interference with the solicitor s interest in the fruits of the litigation. Comment Although this judgment does not explicitly prevent insurers from contacting or approaching claimants direct, it makes clear that where details of a claim come via a solicitor, that solicitor will be entitled to recover the charges and fixed the costs that are payable under the pre -action protocol applicable to the claim. In this case, the appellant had notice of the lien because it knew that each of the claimants had retained the respondent under a CFA, and also knew that the respondent was looking to the fruits of the claim for recovery of its charges. Page 3
Fundamental Dishonesty Wright v Satellite Information Services Limited (2018) EWHC 812 (QB) related to the defendant s appeal against the award to the claimant of 119,165.02 in damages for personal injury, with the defendant to pay 75% of the claimant s costs. The defendant argued that the claim should have been dismissed pursuant to S57 Criminal Justice and Courts Act 2015 on the basis that the claimant had been fundamentally dishonest. The claim arose out of an accident at work on 24th January 2014. The claimant, who was then aged 66, sustained injuries affecting his right lower limb. He was unable to return to work post-accident. The defendant admitted liability. Quantum remained in issue and fell to be determined by the court. It was the defendant's case that covert video surveillance had produced evidence that the claimant was far less disabled than he claimed and that he had deliberately and dishonestly exaggerated his claim. The trial judge identified that there were some real inconsistencies in the claimant's case, including as to how far he was able to walk; to what extent he needed to use a walking stick and the level of pain that he suffered. Having identified the defendant s concerns, particularly in regard to a care claim, the judge conducted a detailed analysis of all the evidence and the various elements of the claim before making a finding that the claimant was not guilty of dishonesty, still less dishonesty of a fundamental nature. The claim for future care had been pleaded in excess of 73,000. The judge allowed just 2,100 to cover the provision of some care following future surgery. Otherwise, he concluded that there was no true continuing care need. The defendant contended that the claimant's witness statements and his accounts given to the medical experts gave the impression that he had a significant ongoing claim for personal care whereas the judge found that he needed only minimal support. The claimant claimed for a significant amount of care when in fact he had no ongoing requirement for care. The defendant argued that the claimant signed the statement of truth on the schedule of loss and in doing so, when he would later admit in cross-examination that he had no ongoing need for care, the only possible conclusion was that he was dishonest. Dismissing the appeal, the High Court judge held that the claimant did not labour the point as far as his care claim was concerned in his later witness statements. In a statement dated February 2016, which was subsequently amended and re-dated April 2016, he simply stated that he still required assistance from his wife and remained unable to do domestic chores that were his before the accident. In his statement dated June 2016 he said that he still required assistance, especially with washing and that his wife still did all of the domestic chores. His wife's statement from the same time said that she continued to do "the vast majority of the household chores". She now did the gardening. The claimant coped with dressing although it took longer. He still required help with showering. She said that she was concerned for the future knowing that there would be periods after surgery when she would need to "be there for him and to care for him.". It appeared that the claimant had been broadly consistent in what he had said in relation to any need for ongoing assistance. The trial judge accepted that the claimant s wife might occasionally do tasks for him such as reaching Page 4
items out of a cupboard and that she would be present to provide support while he was showering. That fitted with what the claimant had said. The rejection of the care claim as pleaded seemed to have flowed from a proper analysis of what was actually being done for the claimant and the conclusion that this did not properly sound in damages. The judge concluded that "it is almost impossible in my view to value such occasional assistance."...in finding that the claimant had not established his claim for future care, the judge was not bound to find that the claimant had acted dishonestly merely in presenting such a claim Read in the context of the evidence and the way in which the claim was presented in the schedule of loss, it was clear that in finding that the claimant had not established his claim for future care, the judge was not bound to find that the claimant had acted dishonestly merely in presenting such a claim. The reason for the judge's rejection of this element of the claim was not that he found the claimant's evidence to be untruthful, but rather that a proper interpretation of that evidence did not support the assessment made by the care expert. The judge was not wrong in not treating the failure to establish the care claim as amounting to a finding of dishonesty. The issue of dishonesty was a prominent part of the trial. It was apparent that the judge had that issue at the forefront of his mind throughout. Looking at the transcripts of the evidence of the claimant and his wife, it was quite clear that the judge was interested in and focused on inconsistencies in the evidence which might support a finding of dishonesty. There were clearly matters which caused the judge some concern but a full analysis of all the evidence led him to find that the claimant had not been dishonest. Comment On a separate point, the appellate judge was highly critical of the schedule of loss prepared for and signed by the claimant. His criticism places under the spotlight the extent to which claimants fully understand the documents they are required to sign when making a claim. With the exception of the claim for loss of earnings the schedule of loss did not serve its intended purpose of setting out clearly the claimant s case. The judge stated that it was very important that lawyers draft schedules in such a way that the facts to which their client was attesting were clear (which was not the case here). Failing to do so was failing in their duty both to the client and to the court. This appeal was essentially a challenge to the trial judge's findings of fact. The first stage for the court when considering an application under S57 was to decide whether, on a balance of probabilities, the defendant had established that the claimant had been fundamentally dishonest in relation to the primary claim, or a related claim. The judge was not satisfied that was the case. On the facts and the evidence presented to him, it could not be said that this was not a decision open to him. The issue of dishonesty was akin to a jury question. In the case of a civil trial before a judge alone, it was a matter for the trial judge who had seen and heard all the evidence unless some material flaw in approach or his analysis could be identified. Page 5
Indemnity costs where a principal ground of appeal was not pursued The case of Secretary of State for the Home Department v Barry (2018) EWCA Civ 790 is of relevance on a narrow but important point on costs. Having lost its case before the First Tier Tribunal, the appellant Secretary of State also lost its first appeal to the Upper Tribunal. The Court of Appeal dismissed the appellant s further appeal. It was agreed that, in the circumstances, the appellant should have to pay the respondent's costs. The respondent applied for those costs to be awarded on an indemnity basis. The relevant test for present purposes was whether the conduct of a party was "unreasonable to a high degree". In this context "unreasonable" did not mean merely wrong or misguided in hindsight. The respondent submitted that the appellant had made a serious allegation against the Upper Tribunal, suggesting that the present case was not an isolated instance but potentially raised a "systemic" failure on the part of that tribunal to correct obvious errors of law by the First Tier Tribunal. It was argued that the appellant, unlike most litigants before this court, had access to statistical and other information which would tend to support or refute that suggestion of a systemic problem. The appellant failed to place any such evidence before this court. Having obtained permission to appeal on that basis, the appellant abandoned the argument without explanation. The appellant accepted that it should have made clear at an earlier stage that the "systemic failure" argument was no longer to be pursued. Some three years had passed by the time the appeal came to a substantive hearing and the appellant had taken the view that there was no longer any basis for asserting that there might be a more systemic issue. It was accepted that this should have been made clear to the respondent and the court but it was submitted that the real issue in this case was whether a party who obtained permission on one basis (but not the sole basis) was entitled to continue in an appeal when circumstances changed after the grant of permission and it decided not to pursue a certain aspect of it. appellant s conduct, then indemnity costs should not be awarded. Having obtained permission on (a particular) basis, the appellant failed either to make the submission good with evidence or to pursue the argument Finding in favour of the respondent, the Court of Appeal held that the fundamental point which the appellant s argument failed to meet was that this was a second appeal. The well known criteria for a second appeal were much more stringent than for a first appeal. It was also clear that, on the facts of this case, there was no issue of general importance other than the suggestion that there was a "systemic" problem in the Upper Tribunal. That was an unusual allegation and a serious one. That was clearly the basis on which permission to appeal had been granted. Having obtained permission on that basis, the appellant failed either to make the submission good with evidence or to pursue the argument. The appellant abandoned it without even explaining why. In all the circumstances of this case, the appellant's conduct was indeed unreasonable to a high degree and costs would be awarded on an indemnity basis. Comment The simple message to be taken from this case is that if permission is obtained to appeal a decision on a particular ground, there is a very real risk that if that ground is not pursued and the appeal is lost, indemnity costs will be awarded. Unless the continued appeal was hopeless, or where the respondent was put to additional costs because of the Page 6
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