procedural law seminar

PROCEDURAL LAW

JANUARY 2012

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COSTS MANAGEMENT

____________________________________

Ed Pepperall

St Philips Chambers

WHAT IS COSTS MANAGEMENT?

1. In Chapter 48 of his Preliminary Report on Civil Litigation Costs, Lord Justice Jackson

explained the concept of costs management:

“Costs management may manifest itself in different ways, but broadly speaking it is an instrument of case management, where the principal criterion or emphasis is on controlling costs.

“Costs management is concerned with ensuring that the incidence of costs is actively controlled by the court as the case moves from inception to its conclusion. Successful costs management might however, also have a part to play in avoiding detailed assessment hearings in all but the most exceptional cases. Specific approval or sanction of the incidence of costs at stated or approved levels throughout the life of the case ought to have the effect of removing or reducing the need for an ex post facto examination of whether the costs incurred should have been incurred or were reasonably incurred.”

THE PROBLEM

2. The potential liability to the very large and unpredictable costs of medium value civil

litigation is a major barrier to access to justice. A critique of current practice was given by a

working group set up by Lord Justice Jackson comprising representatives of third party

funders:

“It is certainly our experience that solicitors often fall into the trap of not subjecting the claim to a detailed enough costs and project management analysis at the outset.

“The common theme we detect is that lawyers simply do not explore cases in sufficient detail upfront in the way that funders do - it is a case of the client turning up, starting to tell the story and then receiving a letter of engagement setting out hourly rates and little more about the process. The client is then off and running, often with little notion of what the ultimate costs will or should be. No other commercial relationship is based on such high levels of uncertainty.

“A common issue which we have experienced in varying degrees is that few lawyers explain to the client what the litigation process involves and therefore what they will be charging them. Lawyers tend to be over optimistic about how long a case will last, how much it will cost and how soon it will settle. This can reflect itself in the budget suggested by the lawyers. Certainly some funders sense that lawyers are afraid to tell their clients the full story of the costs implications for fear they might not appoint them. The funders’ view is that it is far better that all concerned know what the journey looks like upfront rather than being disappointed almost immediately it is commenced.”

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3. Even if the client is given a reasonably good estimate of its own total costs bill, it will

usually have little idea as to its opponent’s costs. The client may also be rightly concerned

as to the extent to which it will recover its own costs in the event of success.

THE WOOLF REFORMS

4. The introduction of the Civil Procedure Rules 1998 ushered in a new culture of active

case management. The parties were no longer to be trusted to run their litigation efficiently

free from judicial scrutiny. The scandal of claims being dismissed for want of prosecution a

dozen years after issue was to be eradicated.

5. The Overriding Objective requires judges to ensure that cases are dealt with

proportionately (to their value, importance & complexity and to the parties’ financial

position) and so as to save expense.

6. Judges have therefore long been required to control the costs of litigation. Indeed proper

case management necessarily requires a judge to consider the most efficient and

proportionate way to deal with a case – whether that be by limiting expert evidence or

requiring the parties to instruct a joint expert, directing that there be a trial of certain key

issues, timetabling a trial or limiting disclosure.

7. Rule 1.4 gives clear guidance:

“Active case management includes – ….

(c) deciding promptly which issues need full investigation and trial and accordingly disposing summarily of the others; …

(e) encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure; …

(h) considering whether the likely benefits of taking a particular step justify the cost of taking it; … and

(l) giving directions to ensure that the trial of a case proceeds quickly and efficiently.”

8. Even before the advent of costs management, good case managers did not simply

sanction any major expense without enquiring as to its likely cost or its importance to the

resolution of the case.

9. The Woolf reforms included some useful innovations which helped bring the issue of costs

into focus:

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9.1 Summary assessment of costs: Instead of being kicked into the long grass,

costs are summarily assessed immediately after interlocutory hearings, one day

trials and some appeals. The costs are then payable within 14 days.

9.2 Payment on account of costs: Even where costs are sent off for detailed

assessment, the loser is often ordered to pay some money on account

immediately.

9.3 Fast track trial costs: Lower value claims are litigated on the fast track with fixed

advocacy fees. There may soon be further fixing of costs on the fast track.

9.4 Part 36 offers: Both sides are able to make Part 36 offers backed up by stronger

costs sanctions.

9.5 Limiting expert evidence: The Court is under a specific duty to limit expert

evidence. Even where experts are allowed, the Court may require the parties to

instruct a single joint expert or limit the expert evidence to written reports and

answers.

9.6 Keeping the parties informed: Lawyers are under a specific duty to keep clients

informed about costs orders.

9.7 Limiting disclosure: The Court has express power to limit or even dispense with

disclosure. Alternatively disclosure can be ordered in stages.

10. However, Lord Woolf stopped short of a formal system of cost budgeting. Referring to a

discussion paper by Professor Zuckerman, Lord Woolf observed (at paragraph 17 of his

Access to Justice Report):

“The paper occasioned a general outcry from the legal profession. Prospective budget-setting was seen as unworkable, unfair and likely to be abused by the creation of inflated budgets. The ability of judges to be involved in the hard detail of matters such as cost was generally doubted. The imposition of fixed fees, even relating only to inter partes costs, was seen as unrealistic and as interference with parties' rights to decide how to instruct their own lawyers. There was widespread concern that these suggestions heralded an attempt to control solicitor and own client costs. The restrictions were generally seen as ‘artificial and unworkable.’”

11. The furthest that Lord Woolf went was to introduce a limited requirement to estimate costs.

The Costs Practice Direction requires parties to provide some basic costs information at

certain key stages – on allocation and at PTRs.

12. Amendment to the Court’s wide armoury of case management powers under Part 3 also

introduced a specific power to order the parties to file and serve estimates of costs: CPR

r3.1(2)(ll).

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13. The required information is limited and in practice parties have often departed wildly from

their estimates with impunity: see Leigh v. Michelin Tyre plc [2003] EWCA Civ 1766,

[2004] 1 WLR 846. The current rules do, however, have some teeth:

13.1 The Court will now require explanation at detailed assessment if costs vary by

more than 20% from such estimates [Costs Practice Direction: paras 6.5A – 6.6].

13.2 Furthermore a party is at greater risk of being held to its costs estimate if the other

side reasonably relied upon the estimate: Douglas Tribe v. Southdown Gliding

Club Ltd (2007) and CPD para 6.6.

14. Lord Woolf probably always regarded his reforms as the first step towards some form of

costs capping. Indeed he observed in his Final Report that his other reforms needed to

“bed down” before going further down this road.

15. In his Preliminary Report Lord Justice Jackson reviewed the existing Rules. He reported

that judges already had the power to manage costs but they were not drawn together in

one place and were little-used in practice. Furthermore there was no requirement to

provide a detailed costs budget and no steer to the judiciary to engage in setting budgets.

COSTS BUDGETING

16. A commercial dispute is essentially a project. Before embarking on any other commercial

project, a prudent businessman would insist on undertaking a thorough cost/benefit

analysis and setting a realistic budget making proper allowance for foreseeable

contingencies. He would then keep the project under review and monitor performance

against the budget.

17. Litigation is no different and the old-fashioned response that it is impossible to predict the

costs of litigation is unacceptable. Indeed such a response is probably a breach of the

SRA Code of Conduct 2011 which requires solicitors to ensure that clients “receive the

best possible information, both at the time of engagement and when appropriate as their

matter progresses, about the likely overall cost of their matter.”1

18. In his Preliminary Report, Lord Justice Jackson quoted the work done by Professor John

Peysner:

“In a very instructive article entitled ‘Predictability and Budgeting’ Professor John Peysner sought to introduce the concept of project management into the litigation arena. He pointed out that project management involved a defined project and the teamwork necessary to achieve the project. He observed that a ‘project’ was a defined task with a beginning and an end, made up of a series of separate activities, each of which absorbs time and money, but which can occur in parallel or

1 Replacing a like obligation under rule 2.03 of the 2007 Solicitors Code of Conduct.

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subsequently. He concluded that this was akin to litigation and as such litigation was suitable for project management.

“Professor Peysner observed that the creation of project management tools for the litigation project did not need to be highly technical. He concluded that the key was to break down the steps in the project, for example taking witness statements, attaching a price or cost to the step by using average hours from a database, multiplied by an appropriate fee earner rate. He pointed out that modern case management systems produce this type of information automatically. These discrete steps could then be aggregated to produce a complete schedule. At the end one would be left with a costed overall project plan.”

19. This chimes with the view of the working party of third party funders:

“If a sensible period of time is spent with the client at the outset, the client and the lawyer should be able together to figure out, at that point in time, what is likely to be involved in the case ….

“Despite the perceived difficulty in predicting how a defendant might run a case, we feel that it is distinctly possible to assess what a case should cost at the outset by understanding what is going to be involved in the dispute, how long it is going to take, the number of documents and witnesses involved, whether an expert will be required and so on. Equally, it is simple to ascertain whether certain disbursements are likely to increase in amount over the life of an action e.g. Counsel’s fees upon taking Silk etc.

“Clearly any estimate/budget may be subject to ‘(un)known unknowns’ in the course of the litigation and thus it is important that the new costs/case management culture allows costs budgets to be ‘organic’, living documents. But we feel that an experienced solicitor ought to be able to provide a working estimate, with contingencies factored in, such that in all the actual costs expended as against the predicted costs should not deviate by more than 20-25%.”

20. These days competent commercial litigators understand their clients’ need to budget and

control costs. Many lawyers now provide proper budget information from an early stage.

However, until now, it has been very difficult to give clients meaningful advice as their

opponents’ costs.

21. Since costs management cannot work without the parties first engaging in costs budgeting,

its first benefit is to ensure best practice so that all clients have the advantage of a proper

costs budget from their lawyers.

COSTS MANAGEMENT

22. At its simplest, costs management involves the sharing of the budgets which good lawyers

prepare for their clients. Sharing budgets in this way gives the parties an unprecedented

amount of information as to their opponents’ likely costs. It also gives litigants an

opportunity to comment upon and shape their opponents’ spending plans.

23. Critically it also ensures that the judge understands the costs consequences of case

management decisions. The judge questions the parties about their spending plans and

can then approve or disapprove their budgets.

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24. Costs management is not about reducing lawyers’ incomes. It is about providing the

parties with greater certainty as to the costs of their case and ensuring that cases are

managed proportionately and efficiently. These are laudable aims.

25. Costs management is about managing the future costs of the litigation as a project; not

about costs already incurred or attempting to undertake a detailed costs assessment in

advance.

26. It is not cost capping:

26.1 A cost capping order is an order limiting the amount of future costs which a party

may recover [CPR r44.18]. The essence of costs management is that the litigation

is case managed in a way which promotes efficiency and saves costs. Costs

management does not impose a cap.

26.2 Costs management is not reserved for exceptional cases. Cf. CPR r44.18 in

respect of costs capping orders:

“(5) The court may at any stage of proceedings make a costs capping order against all

or any of the parties, if –

(a) it is in the interests of justice to do so;

(b) there is a substantial risk that without such an order costs will be

disproportionately incurred; and

(c) it is not satisfied that the risk in sub-paragraph (b) can be adequately

controlled by –

(i) case management directions or orders made under Part 3; and

(ii) detailed assessment of costs.

(6) In considering whether to exercise its discretion under this rule, the court will

consider all the circumstances of the case, including –

(a) whether there is a substantial imbalance between the financial position of

the parties;

(b) whether the costs of determining the amount of the cap are likely to be

proportionate to the overall costs of the litigation;

(c) the stage which the proceedings have reached; and

(d) the costs which have been incurred to date and the future costs.”

26.3 Costs management is automatic; it does not require a separate application and

hearing: cf CPR r44.19.

26.4 Costs management does not of itself cause the parties to incur substantial costs or

promote satellite litigation.

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THE BIRMINGHAM PILOT

27. In order to inform the debate a pilot scheme was introduced in the Birmingham Mercantile

Court and TCC on 1 June 2009. While technically voluntary, parties were clearly expected

to engage.

28. Take-up was at first slow. In the early days some lawyers gave the pilot insufficient care

and attention and poor quality estimates were given with little ability to justify the figures.

Done properly, the budgeting exercise proved to be an immensely useful tool.

29. Judges Simon Brown QC and David Grant reported that they had found the pilot to be “an

extremely useful adjunct to case management.” Both told Lord Justice Jackson that it took

them a little longer to prepare for the CMC and that the hearing time was slightly extended.

30. Judge Brown QC commented:

“The Costs Schedules are wonderful tools for both Costs and Case proper management – indeed essential. They are most effective when the cost paying customers are present at CMCs. Perhaps most importantly, it ensures that clients (they are the court consumers, customers and users not the lawyers) know how much they are at risk for if they are ‘unsuccessful’ (and in some quite astonishing cases I have had even what their own lawyers bills are as they do not appear to have been told!). I believe that most appearing in front of me at CMCs have better been able to make a Cost benefit analysis of their litigation due to the exchange of cost schedules and the court giving some guidance at that stage. I have had two cases settle within the week of a CMC. In another case, the barrister said the parties were now equipped for mediation without further expenditure in preparing the case towards trial – he said that as a mediator himself the exchange of such costs schedules was the first thing he suggested before any mediation.”

31. As a commercial barrister regularly conducting cases in the Birmingham courts, I endorse

this view. Indeed, speaking at a seminar with Lord Justice Jackson in Birmingham in

November 2010 I said:

“Proper budgeting broken down against the various steps of a commercial case is essential in focusing everyone’s minds on the cost of each step. It allows the Court and the parties to consider the most efficient and cost-effective way to resolve the case; whether that be by ordering the trial of preliminary issues, limiting disclosure or expert evidence or deciding the most appropriate time for mediation.

“Proper costs management also provides clients with far greater information about the likely costs of the case. Not only does the client get to see the likely size of his own lawyers’ bill, but he is told with more detail than ever before the costs which his opponent is intending to spend. This simple innovation is very valuable since the potential unquantifiable liability to the other side’s costs is, for many clients, a major obstacle to access to justice.

“Very few of the cases from the Birmingham pilot have come on for trial. However, Judge Brown QC has recently confirmed to me that the initial indications are that the parties are largely keeping to the budgets discussed at the case management conference.

“Generally the Bar has taken a conservative approach to costs management and the linked issue of costs capping, arguing that the fairest system is not to guess at the likely legal spend in advance but to retain the presumption that reasonably incurred costs will be recovered at the end of the case. This is, in my view, too complacent. It is essentially the status quo and has not been successful in controlling costs. Furthermore it does not help at all with predicting a client’s potential liability for an adverse costs order.

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“Commercial litigation should be run in a business-like way. In what other line of business would our clients spend significant sums without setting some budget and without any idea as to the potential costs of failure?”

THE DEFAMATION COSTS MANAGEMENT PILOT

32. In addition a mandatory costs management scheme has been piloted for defamation cases

in London and Manchester from 1 October 2009: PD51D.

33. Early feedback suggested that judges were treating costs management as a prospective

detailed assessment. This was never the intention and the Rule Committee has now

amended PD51D to make this clear:

“5.3B When approving or disapproving a budget, the court will not attempt to undertake a detailed assessment in advance, but will consider whether the budgeted totals for each stage of the work are within the broad range of reasonable and proportionate costs.”

THE NATIONAL PILOT: PD51G

34. In 2011 Lord Justice Jackson asked a working party under the chairmanship of Senior

Costs Judge Hurst to prepare a new draft Practice Direction with the intention of rolling out

the Birmingham pilot to all Mercantile Courts and TCCs. The working party had the benefit

of input from the Birmingham pilot since its members included Judges Brown QC and

Grant and I served as the barrister member.

35. PD51G came into force on 1 October 2011 and creates a new year-long national pilot. The

pilot will achieve 4 objectives:

35.1 Entrenching best practice in ensuring that lawyers provide their own clients with

good quality and detailed costs estimates.

35.2 Sharing costs budgets in order to allow parties an unprecedented insight into their

opponents’ spending plans.

35.3 Ensuring that the costs of the different ways of resolving a dispute are at the

forefront of everyone’s minds when making case management decisions.

35.4 Reducing the need for detailed assessment.

THE FUTURE

36. Costs management is particularly appropriate in the Mercantile Court and TCC:

36.1 In both courts, case management is conducted by specialist circuit judges and not

the district bench.

36.2 In both courts there is a reasonably generous time allowance for CMCs and PTRs.

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36.3 Unlike the Commercial Court, both Courts typically deal with moderate value

disputes (ranging from, say, £50,000 to several million pounds). It is in this

category of case that the cost of civil litigation is perhaps of greatest concern.

37. The progress of the pilot is being monitored by Kings College London. However, it has the

clear support of the Rule Committee and is likely to become a permanent feature of this

class of business litigation.

38. Whether it can be rolled out more widely remains a matter for careful consideration. The

Rule Committee has been assured that the issue of judicial training is being addressed by

the Judicial College.

© ED PEPPERALL

JANUARY 2012

ST PHILIPS CHAMBERS

55 TEMPLE ROW

BIRMINGHAM B2 5LS

[email protected]

mailto:[email protected]

Birmingham Costs Management Pilot

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THE BIRMINGHAM COSTS MANAGEMENT PILOT – LORD JUSTICE JACKSON’S

GUIDELINES

1 The parties will submit detailed budgets of their ‘estimates of costs’ as attachments to

their Case Management Information Sheets and Pretrial Check Lists (or at such other

time as ordered by the court).

2 At the CMC and PTR, the judge will have before him/her these detailed budgets of both

parties for the litigation. He/she will take into account the costs involved in each

proposed procedural step when giving case management directions. The judge:

(i) will, either by agreement between the parties or after hearing argument, record

approval or disapproval of each side's budget for each step in the action.

(ii) may order attendance at regular hearings (by telephone if appropriate), the

purpose of which is to monitor expenditure. Parties will be expected to provide to

the judge any budget revisions in good time before such hearings to enable the

judge to prepare for the hearing.

(iii) may include provision in the directions for any party to apply to the court for

assistance if it considers that another party is behaving oppressively in seeking to

cause that party to spend money unnecessarily.

3 The budgets will be in a standard Excel template form, as per the attached example. Each

side will include separately in its budget:

(i) reasonable allowances for intended activities: e.g. disclosure (if appropriate,

showing comparative electronic and paper methodology), preparation of witness

statements, obtaining expert reports, mediation or any other steps which are

deemed necessary for the particular case;

(ii) reasonable allowances for specified contingencies e.g. specific disclosure

application (if an opponent fails to give proper disclosure); resisting applications

(if made inappropriately by opponent).

4 The budget must include reasonable allowances for disbursements, in particular, court

fees, counsel's fees and any mediator or expert fees.

5 It is intended that a party’s budget will be no more detailed than that which the solicitor

provides to his client for the purposes of paragraph 2.03 of the Solicitors’ Code of

Conduct 2007. Accordingly, no costs should be involved on either side in the preparation

of such estimate. A budget provided to the court will not (without consent) be released to

any other party, until that party is ready to exchange but it is expected that the parties

should discuss their budgets during the budget building process and before CMC, as they

should do in the instance of electronic disclosure (CPR 31PD2A.2).

Birmingham Costs Management Pilot

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6 At each subsequent CMC, PTR and at trial the judge will receive updated figures, in order

to ascertain what departures have occurred from each side's budget and why. A judge

will, either by agreement between the parties or after hearing argument, approve or

disapprove such departures from the previous budget as have occurred.

7 If any party exceeds the costs previously estimated for any activity, it shall notify all

other parties and the court of the amount of the excess.

8 Directions orders produced at the end of CMCs will be given to the parties on each side

by their respective lawyers, together with copies of the budgets which the court has

approved or disapproved.

9 Bearing in mind that in the majority of TCC and Mercantile cases costs are the most

important single issue, the judge will seek to manage the costs of the litigation as well as

the case itself. When the court or a party relies upon one party's estimate of costs, the

judge will record the fact of such reliance in the case management directions (for the

purpose of any future argument concerning paragraph 6.5A of the Costs Practice

Direction).

10 The objective of costs management is to control the litigation in such manner that the

costs of each party are proportionate to the amount at stake and to ensure that the parties

are on an equal footing.

11 At the end of the litigation the judge conducting a detailed or summary assessment will

have regard to the budget estimates of the receiving party and will generally approve as

reasonable and proportionate any costs claimed which fall within the previously approved

total.

12 Where all parties to an action agree that costs management as described above should be

undertaken by the court, the claimant's solicitor should notify the court manager of such

agreement on behalf of all parties.

Defamation Costs Management Pilot

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PRACTICE DIRECTION 51D – DEFAMATION PROCEEDINGS COSTS

MANAGEMENT SCHEME

General

1.1 This Practice Direction is made under rule 51.2. It provides for a pilot scheme (the

Defamation Proceedings Costs Management Scheme) to –

(1) operate from 1 October 2011 to 30 September 2012;

(2) operate in the Royal Courts of Justice and the District Registry at Manchester;

(3) apply to proceedings in which the claim was started on or after 1 October 2009.

(Rule 30.2(4) enables cases issued at other district registries to be transferred to London

or Manchester if those court centres are more appropriate.)

1.2 The Defamation Proceedings Costs Management Scheme will apply to proceedings

which include allegations of –

(1) libel;

(2) slander; and/or

(3) malicious falsehood.

1.3 The Defamation Proceedings Costs Management Scheme provides for costs management

based on the submission of detailed estimates of future base costs. The objective is to

manage the litigation so that the costs of each party are proportionate to the value of the

claim and the reputational issues at stake and so that the parties are on an equal footing.

Solicitors are already required by paragraph 2.03 of the Solicitors Code of Conduct 2007

to provide costs budgets to their clients. Accordingly, it should not be necessary for

solicitors to incur substantial additional costs in providing costs budgets to the court.

Modifications of relevant practice directions

2. During the operation of the Defamation Proceedings Costs Management Scheme –

Use of costs budgets in case and costs management

(1) Practice Direction 29 is modified by inserting after paragraph 3A –

‘Case management and costs in defamation proceedings

3B In cases within the scope of the Defamation Proceedings Costs

Management Scheme provided for in Practice Direction 51D, the court

will manage the costs of the litigation as well as the case itself, making

use of case management conferences and costs management conferences

in accordance with that practice direction.’

Estimates of costs to be detailed budgets

(2) Paragraph 6.4(1)(a) of the Costs Practice Direction does not apply to proceedings

within the scope of the Defamation Proceedings Costs Management Scheme.


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(3) Section 6 of the Costs Practice Direction is modified by substituting for

paragraph 6.5 the following –

‘Costs budgets in defamation proceedings

6.5 In proceedings within the scope of the Defamation Proceedings Costs

Management Scheme provided for in Practice Direction 51D the estimate

of costs must be presented as a detailed budget setting out the estimated

costs for the entire proceedings, in a standard template form which

substantially follows the precedent described as Precedent HA and

annexed to that practice direction.’

Preparation of the costs budget

3.1 Each party must prepare a costs budget or revised costs budget in the form of Precedent

HA –

(1) in advance of any case management conference or costs management conference;

(2) for service with the pre-trial checklist;

(3) at any time as ordered to by the court.

3.2 A litigant in person shall not be required to prepare a costs budget unless the court

otherwise orders.

3.3 Each party will include separately in its costs budget reasonable allowances for –

(1) intended activities, for example: disclosure, preparation of witness statements,

obtaining expert reports, mediation or any other steps which are deemed

necessary for the particular case;

(2) specified contingencies, for example: any application on meaning (if required);

specific disclosure applications (if an opponent fails to give proper disclosure);

resisting applications (if made inappropriately by opponent);

(3) disbursements, in particular, court fees, counsel's fees and any mediator or expert

fees.

3.4 Each party must update its budget for each subsequent case management conference or

costs management conference and for the pre-trial review. This should enable the judge

to review the updated figures, in order to ascertain what departures have occurred from

each side's budget and why.

Discussions between parties and exchange of budgets

4.1 During the preparation of costs budgets the parties should discuss the assumptions and

the timetable upon which their respective costs budgets are based.


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4.2 The parties must exchange and lodge with the court their costs budgets in the form of

Precedent HA not less than 7 days before the date of the hearing for which the costs

budgets are required.

4.3 A budget provided to the court will not (unless the providing party consents) be released

to any other party (except a litigant in person) until that party is ready to exchange.

Effect of budget on case management and costs

5.1 The court will manage the costs of the litigation as well as the case itself in a manner

which is proportionate to the value of the claim and the reputational and public interest

issues at stake. For this purpose, the court may order attendance at regular hearings

(‘costs management conferences’) by telephone wherever possible, in order to monitor

expenditure.

5.2 At any case management conference, costs management conference or pre-trial review,

the court will have before it the detailed costs budgets of both parties for the litigation,

updated as necessary, and will take into account the costs involved in each proposed

procedural step when giving case management directions.

5.3 At any case management conference, costs management conference or pre-trial review,

the court will, to the extent the budgets are not agreed between the parties, record

approval or disapproval of each side’s budget and, in the event of disapproval, will record

the court’s view.

5.3A For the avoidance of doubt, the court cannot approve costs incurred before the date of the

first costs management conference. However, the court may record its comments on those

costs and should take those costs into account when considering the reasonableness and

proportionality of all subsequent costs.

5.3B When approving or disapproving a budget, the court will not attempt to undertake a

detailed assessment in advance, but will consider whether the budgeted totals for each

stage of the work are within the broad range of reasonable and proportionate costs.

5.4 Directions orders produced at the end of case management conferences and/or costs

management conferences must be given to the parties on each side by their respective

lawyers, together with copies of the budgets which the court has approved or

disapproved.

5.5 Solicitors must liaise monthly to check that the budget is not being exceeded. In the event

that the budget is or is likely to be exceeded, either party may apply to the court to fix a

costs management conference as described in paragraph 5.1 above.


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5.6 When assessing costs on the standard basis, the court –

(1) will have regard to the receiving party’s last approved budget; and

(2) will not depart from such approved budget unless satisfied that there is good

reason to do so.

National pilot for Mercantile Courts & TCCs

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PRACTICE DIRECTION 51G – COSTS MANAGEMENT IN MERCANTILE COURTS

AND TECHNOLOGY AND CONSTRUCTION COURTS – PILOT SCHEME

General

1.1 This Practice Direction is made under Rule 51.2. It provides for a pilot scheme (Costs

Management in Mercantile Courts and Technology and Construction Courts Scheme) to

–

(1) operate from 1 October 2011 to 30 September 2012;

(2) operate in all Mercantile Courts and Technology and Construction Courts; and

(3) apply to proceedings in which the first case management conference is heard on

or after 1 October 2011.

1.2 In this Practice Direction ‘costs management order’ means an order approving the costs

budget of any party to the proceedings, after the court has made any appropriate

revisions.

1.3 The court cannot approve costs incurred before the date of the first costs management

order, but the court –

(1) may record its comments on those costs; and

(2) should take those costs into account when considering the reasonableness and

proportionality of all subsequent costs.

1.4 Without prejudice to the court's general powers of management under rule 3.1, in any

case proceeding before a Mercantile Court or a Technology and Construction Court in

which the judge considers it appropriate to do so, or on the application of any party in

accordance with Part 23, the judge may make a costs management order.

Modifications of Relevant Practice Directions

2. During the operation of the Costs Management in Mercantile Courts and Technology and

Construction Courts Scheme –

Use of Costs Budgets in Case and Costs Management

(1) Practice Direction 29 is modified by inserting after paragraph 3A –

‘Case management and costs in Mercantile and Technology and Construction

Court cases

3B. In cases within the scope of the Costs Management in Mercantile Courts

and Technology and Construction Courts Scheme provided for in

Practice Direction 51G, the court will manage the costs of the litigation

as well as the case itself, making use of case management conferences

and cost management conferences in accordance with that Practice

Direction’.


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Estimates of Costs to be set out in detailed costs budgets

(2) Paragraph 6.4(1)(a) of the Costs Practice Direction does not apply to proceedings

within the scope of the Costs Management in Mercantile Courts and Technology

and Construction Courts Scheme.

(3) Section 6 of the Costs Practice Direction is modified by substituting for

paragraph 6.5 the following –

‘Costs Budgets in Mercantile Courts and Technology and Construction Courts

6.5 In proceedings within the scope of the Costs Management in Mercantile

Courts and Technology and Construction Courts Scheme provided for in

Practice Direction 51G, the estimate of costs must be presented as a

detailed budget setting out the estimated costs for the entire proceedings

in a standard template form, which substantially follows the precedent

described as Precedent HB and annexed to that Practice Direction.’.

Filing of Costs Budgets

3.1 Save where the court otherwise orders, as part of its preparation for the first case

management conference, at the same time as filing its Case Management Information

Sheet, each party shall file and exchange its costs budget substantially in the form set out

in Precedent HB annexed to this Practice Direction.

(In Mercantile Courts cases see paragraph 7.7 of the Practice Direction under Part 59.)

(In Technology and Construction Court cases see paragraph 8.3 of the Practice Direction

under Part 60.)

3.2 Each party should include separately in its costs budget reasonable allowances for –

(1) intended activities: e.g., disclosure (if appropriate, showing comparative

electronic and paper methodology), preparation of witness statements, obtaining

experts’ reports, mediation or any other steps which are deemed appropriate to

the particular case;

(2) identifiable contingencies, e.g., specific disclosure application or resisting

applications made or threatened by an opponent; and

(3) disbursements, in particular court fees, counsel’s fees and any mediator or expert

fees

Purpose of Costs Management

4.1 The court will seek to manage the costs of the litigation, as well as the case itself.

4.2 The objective of costs management is to control the costs of litigation in accordance with

the overriding objective. (See rule 1.1.)


- 9 -

4.3 At any case management conference or pre-trial review, the court will have regard to any

costs budgets filed pursuant to this Practice Direction and will decide whether or not it is

appropriate to make a costs management order.

4.4 If the court decides to make a costs management order it will, after making any

appropriate revisions, record its approval of a party’s budget and may order attendance at

a subsequent costs management hearing (by telephone if appropriate) in order to monitor

expenditure.

4.5 Any party may thereafter apply to the court if that party considers another party is

behaving oppressively in seeking to cause that party to spend money disproportionately

on costs.

Discussions between Parties and Exchange of Budgets

5. A party submitting a costs budget to the court under this Practice Direction is not

required to disclose it to any other party save by way of exchange. The parties should

however discuss their costs budgets during the costs budget building process and before

each case management conference, costs management hearing, pre-trial review or trial.

Revision of Approved Budget

6. In a case where a costs management order has been made, at least seven days before any

subsequent costs management hearing, case management conference or pre-trial review,

and before trial, a party whose costs budget is no longer accurate must file and serve a

budget revision showing what, if any, departures have occurred from that party’s last

approved budget, and the reasons for any increased budget. The court may approve or

disapprove such departures from the previous budget.

Keeping the Parties Informed

7. No later than seven days after the conclusion of any hearing, each party's legal

representative must –

(1) notify its client in writing of any costs management orders made at such hearing;

and

(2) provide its client with copies of any new or revised budgets which the court has

approved.

Effect on Subsequent Assessment of Costs

8. When assessing costs on the standard basis, the court –

(1) will have regard to the receiving party's last approved budget; and

(2) will not depart from such approved budget unless satisfied that there is good

reason to do so.

1 In the:

2 Parties:

3 Claim number:

4 Assumptions [to be completed as appropriate] (cont'd.) Profit Costs Total

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comprising incurred costs of:

and estimated costs of:

This estimate excludes:

VAT [if applicable]

Costs of detailed assessment

Success fees and ATE insurance premium (if applicable)

Other, specify:

A breakdown of the above figures is found on the following pages.

Assumed into the costs of each stage should be the time costs for (a) attendance on own client (b) correspondence with the other party and (c) the general project and strategy management of completing that stage

estimate of costs dated:

Party filing cost estimate:

PTR

Trial preparation

Trial

Settlement

Expert reports

GRAND TOTAL (including both incurred costs and estimated costs):-

Work done / to be done

Pre-action costs

Issue / pleadings

CMC

Disclosure

Witness statements

PRECEDENT HB

Disbursements

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Band A - solicitors with over 8 years post qualification experience including at least 8 years litigation experience.

Band B - solicitors and legal executives with over 4 years post qualification experience including at least 4 years litigation experience.

Band C - other solicitors and legal executives and fee earners of equivalent experience.

Band D - trainee solicitors, paralegals and other fee earners.

Incurred

Expert reports

Expert's costs (1)

Pre-action costs

Incurred

Disclosure

Estimated

Witness statements

Estimated Estimated

CMCIssue / pleadings

Sub-total fee earners' time costs

Band D

RATE (per hour)

Band B

Band C

Estimated

PRECEDENT HB

Estimated Estimated

Incurred Incurred


Grand Total

Court fees (3)

Other disbursements (4)

Explanation of disbursements [complete details indicating which disbursement (1)-(4)]

Fees

Disbursements

Counsel's fees [indicate seniority, number of years since called] (2)

Band A

Incurred IncurredSelect as applicable:

Total


Sub-total disbursements

Fee earners' time costs

Total

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Total

TrialContingent cost B:Contingent cost A:Settlement

negotiationmediation

Expert's costs (1)

Estimated

IncurredIncurred Incurred

estimate of costs dated: PRECEDENT HB

Estimated

IncurredIncurred

Estimated

RATE (per hour)

Grand Total

Court fees (3)


Fees

Disbursements


Trial preparation

Estimated


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Band D

Band A

Band B

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PTR

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Incurred

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Contingent cost C:

Total

Select as applicable: Incurred Incurred

Grand Total

Court fees (3)


Fees

Disbursements


PRECEDENT HB

Estimated Estimated Estimated

Incurred

Estimated


Estimated

Incurred


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Band B

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Disbursements


Band D

Band A

Band B

Band C

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Incurred

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Incurred IncurredSelect as applicable:

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Pre-action costs

Issue / pleadings


Assumptions [continued]

CMC

Witness statements

Disclosure


PRECEDENT HB

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3 Claim number:

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10 Contingent cost B:

Trial


Settlement

Assumptions [continued]

PTR

Trial preparation

PRECEDENT HBestimate of costs dated:

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3 Claim number:

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11

SECURITY FOR COSTS – A GUIDE

____________________________________

Marc Brown

St Philips Chambers

Introduction

1. In this talk, I will consider applications for security for costs. In particular, we will be looking

at the rules and authorities in relation to this subject, so as to provide a walkthrough guide to

considering, advising upon and preparing such applications.

2. We will look at this subject in four stages:

a. The Gateways;

b. The Discretion;

c. Procedure (both for Applicants and Respondents); and

d. Special cases, including non-parties and appeals.

3. Security for costs is governed by Rules 25.12 to 25.15 of the Civil Procedure Rules. Rule

25.12 provides as follows:

“Security for costs

25.12

(1) A defendant to any claim may apply under this Section of this Part for security for his costs of the

proceedings.

(2) An application for security for costs must be supported by written evidence.

(3) Where the court makes an order for security for costs, it will –

(a) determine the amount of security; and

(b) direct –

(i) the manner in which; and

(ii) the time within which the security must be given.”

4. The purpose of an order for security for costs is to protect a party who obtains such an order

from the risk that they will be unable to enforce a costs order which they may later obtain.

12

5. In order to obtain an order for security for costs, there are essentially two stages. Firstly, the

Applicant must demonstrate the two gateway criteria - firstly that he is “a defendant to any

claim” and secondly that one of the threshold conditions set out in Rule 25.13(2) are

satisfied, or some other specific enactment permits the court to require security. Once these

two gateways are satisfied, the Applicant must persuade the Court that it should exercise its

discretion to make the order.

The Gateways

6. Firstly, an application can only be made by a defendant to a claim, by virtue of Rule

25.12(1). Rule 2.3 defines a defendant as a person against whom a claim is made. Whilst a

“claim” is not defined and is used in differing terms in the Rules to refer to the whole of the

case, or a particular cause of action, it does not seem to pose much difficulty in identifying

when a person is a defendant to a claim.

7. A defendant to a claim does include a claimant where the defendant has made a

counterclaim, as by virtue of the counterclaim, the claimant has become a defendant to a

claim. However, where a claimant seeks an order for security for costs relying upon a

counterclaim brought against him, particular factors will apply in relation to the exercise of

the discretion, which are dealt with below.

8. Once it is established that the first gateway is satisfied, we can go on to consider whether

one of the threshold conditions in Rule 25.13 applies. Rule 25.13 provides as follows:

“25.13

(1) The court may make an order for security for costs under rule 25.12 if –

(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an

order; and

(b) (i) one or more of the conditions in paragraph (2) applies, or

(ii) an enactment permits the court to require security for costs.

(2) The conditions are –

(a) the claimant is –

(i) resident out of the jurisdiction; but

(ii) not resident in a Brussels Contracting State, a State bound by the Lugano Convention or a

Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982;

(c) the claimant is a company or other body (whether incorporated inside or outside Great Britain) and

there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so;

(d) the claimant has changed his address since the claim was commenced with a view to evading the

consequences of the litigation;

(e) the claimant failed to give his address in the claim form, or gave an incorrect address in that form;

13

(f) the claimant is acting as a nominal claimant, other than as a representative claimant under Part 19,

and there is reason to believe that he will be unable to pay the defendant’s costs if ordered to do so;

(g) the claimant has taken steps in relation to his assets that would make it difficult to enforce an

order for costs against him.”

9. Rule 25.13(2) therefore provides us with a menu of conditions. In order for the applicant to

pass the threshold of pursuing an application, it must be demonstrated that one of these

conditions applies.

10. 25.13(2)(a) provides a threshold condition in circumstances where the claimant is resident

out of the jurisdiction. Rule 2.3 defines jurisdiction as England and Wales. It is for the

applicant to demonstrate that the respondent is resident out of the jurisdiction and residence

is a question of fact. It is should be determined according to its ordinary and natural

meaning. A person is ordinarily resident in a place if they habitually and normally reside

lawfully in that place from choice and for a settled purpose, other than for temporary or

occasional absences, even if their permanent residence is elsewhere - R v Barnett LBC ex

p Shah (Nilish) [1983] 2 AC 309. A company is ordinarily resident out of the jurisdiction

when its location of central management and control is so located - Re Little Olympian

Each Ways Ltd [1995] 1 WLR 560.

11. However, this condition will only be satisfied where the respondent is resident out of the

jurisdiction, but also out of a Brussels Contracting State, Lugano Convention state, or

Regulation state, as defined by the Civil Jurisdiction and Judgments Act 1982. Thus,

persons or companies resident in Austria, Belgium, Denmark, Finland, France, Germany,

Greece, Ireland, Iceland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Spain,

Sweden, Switzerland, and the UK will not satisfy this condition. Note, however, that the Isle

of Man and the Channel Islands are outside the jurisdiction and do not fall within the

treaties.

12. The second condition that may be satisfied is that the respondent is a company or other

body and there is reason to believe that it will be unable to pay the applicant’s costs if

ordered to do so. It must be remembered that satisfying this condition only a gateway

criteria - this factor by itself will not result in a order for security, as the Court’s discretion will

still have to be exercised.

13. The applicant must demonstrate with evidence why it is contended that the company would

not be able to satisfy a costs order - this evidence must provide a “reason to believe”. The

test to be applied is lower than the balance of probabilities, as the Court is not deciding

14

whether or not the respondent Company would be able to satisfy a costs order, but whether

there is a reason to believe so - Jirehouse Capital v Beller [2008] EWCA Civ 908. In

appropriate cases, the financial position of the respondent may require expert evidence.

14. The third condition applies where a respondent has changed his address since the claim

was commenced, and that this was done with a view to evading the consequences of

litigation. Both of these elements must be established in order to rely upon this condition.

15. The fourth condition applies where the respondent has either failed to give an address on

the claim form, or it can be shown that the address so given was incorrect.

16. The fifth condition applies where the claimant is a nominal claimant, other than a

representative claimant under Part 19 and there is reason to believe they will be unable to

pay the applicant’s costs if ordered to do so. Persons excluded by virtue of Part 19 include

representative parties, representatives of interest persons who cannot be ascertained,

representatives of those deceased and derivative claims. A trustee in bankruptcy who is

acting as such is not a nominal claimant. However, a claimant who pursues an action for the

benefit of another, for example, because he has assigned the benefit of the action, may well

be.

17. The final condition is where the respondent has taken steps that would make it difficult to

enforce an order for costs. These steps may include dissipation of assets, transfer of assets

overseas, or transfer of assets into the names of others, or their concealment. The applicant

is not required to show that the steps that are demonstrated were taken specifically with the

intention of defeating enforcement - Aoun v Bahri [2002] EWHC 29 (Comm) or that the

steps were taken during the litigation or in contemplation of it - Harris v Wallis [2006]

EWHC 630 (Ch). However, if such an intention can be shown, it may well increase the

likelihood of the order being made.

18. Rule 25.13(1)(b)(ii) provides for further gateway conditions under specific enactments, in

addition to those contained within Rule 25.13(2). Legislation in specific areas may enable

the Court to grant security for costs in specified circumstances, for example in relation to

arbitration (Arbitration Act 1990), or where a trustee in bankruptcy elects to continue a claim

previously brought by the bankrupt (County Courts Act 984, section 49).

15

19. So, at this point, if we are to pursue an application for security for costs, we will have

demonstrated that we are a defendant to a claim and that we can establish one of the

necessary (but not sufficient) conditions in Rule 25.13(2) or another enactment.

20. Without being able to demonstrate one or more of the threshold conditions (either under rule

25.13(2) or some other enactment), the Court will not be able to make an order for security

for costs under Part 25. However, once we have arrived at this point, the Court is now able

to consider whether to make such an order.

The Discretion

21. Once we have reached this stage, the Court will consider whether to exercise its discretion

to order security for costs. The test that is to be applied is whether, having regard to all the

circumstances of the case, it is just to make such an order.

22. In essence, the question here is one of balancing the aim of preventing injustice to the

applicant in relation to costs against preventing injustice to a respondent who may have a

meritorious claim that would be prevented from pursuing it if required to provide security.

23. It must be borne in mind that ordering a litigant to pay sums by way of security for costs in

circumstances where that litigant lacks the ability to pay could amount to a breach of the

right to access to a court under Article 6(1) of the European Convention on Human Rights.

This consideration should not be taken lightly. Potential applicants may wish to consider

whether possibilities can be suggested as to where the sums sought by way of security

might be obtained. Respondents should consider whether it can be argued that an order for

security would prevent the respondent from having proper access to a court.

24. The merits of the respondent’s case may be relevant, particularly in the context of the

human rights considerations above. However, the exercise of the discretion should not be

taken as an opportunity to go into a detailed examination of the merits - essentially, the court

should look only generally at the merits, unless there is a high degree of probability of

success or failure.

25. Where a respondent has legal expenses insurance, then an application for security may be

refused on the ground that the insurance provides sufficient protection. However, this will

depend upon the terms of that insurance to demonstrate that the applicant is indeed

protected. In Al-Koronky v Time Life Entertainment Group Ltd [2006] EWCA Civ 1123,

the claim involved a defamation claim and a defence of justification. Hence, the outcome of

16

the case essentially depended upon which side was telling the truth. The terms of the

respondent’s policy permitted the insurers to avoid liability for the applicant’s costs which

was consequent upon their not having been told the truth. Consequently, an order for

security was upheld.

26. Where there are both claims and counterclaims, particular issues relevant to the exercise of

the discretion will arise. Where there is a counterclaim, the defendant will be a defendant to

the claim made by the claimant. The claimant will be a defendant to the counterclaim made

by the defendant. The threshold criteria for the making of an order may be made out in

respect of both or either of these parties. However, if the claim and the counterclaim

concern the same facts and security is ordered to be paid by one party but not the other,

then there is a risk that one of the claims would be struck out, yet the issues litigated and

determined anyway in relation to the other.

27. There is no strict rule that security will be refused where both claims and counterclaims are

raised. Security may be ordered in respect of one party, both, or neither. However, clearly

the interrelation between the facts and issues involved in the claim and the counterclaim will

be relevant to the exercise of the discretion.

28. The purpose of giving security for costs is to give some costs protection to a party who is

forced into litigation through someone else’s choice rather than his own. Whilst a defendant

may counterclaim as a result of a claim made against him, he may satisfy the Court that he

would not himself have commenced litigation against the claimant. In such circumstances, it

may not be appropriate for that counterclaiming defendant to be ordered to give security -

Hutchinson Telephone (UK) Ltd v Ultimate Response Ltd [1993] BCLC 307 - or for him

to be deprived of an order for security against the claimant if he remains in essence, a

defendant - Autoweld Systems Ltd v Kito Enterprises LLC [2010] EWCA Civ 1469.

29. In addition to the particular circumstances of the case and the claim and counterclaim in

question, one of the principal questions to be addressed is whether there are really two

separate claims being litigated at the same time, or one interlinked series of claims and

counterclaims. In other words, has the counterclaim gone beyond self-defence and into the

realm of its having an independent vitality of its own, moving across the boundary which

divides an aggressive defence from an independent counterclaim (See Bingham LJ in

Hutchinson).

17

30. An application for security for costs can be made at any time. However when considering

the exercise of the discretion, the Court will consider, together with any explanation, any

delay that has occurred between the applicant’s knowledge of the facts that are said to

justify the application and the making of the application itself. This factor encourages that

making of an application promptly upon those facts becoming known.

31. Where the applicant relies upon the jurisdiction threshold condition, the Court will seek to

identify objectively justified grounds relating to obstacles to or the burden of enforcement in

the context of the particular foreign claimant or country concerned. Therefore an applicant

relying upon the jurisdiction threshold criteria should identify some real prospect of a

difficulty manifesting itself which goes further than the difficulty which might be encountered

were an attempt being made to enforce an order for costs in England & Wales or other

states with which there are reciprocal arrangements (per Tomlinson LJ in Star Reefers Pool

Inc v JFC Group [2011] EWCA Civ 1065, applying Nasser v the United Bank of Kuwait

[2002] 1 WLR 1868).

32. Where the applicant relies upon the threshold condition in relation to companies in respect

of whom there is reason to believe will be unable to satisfy a costs order made against

them, there are particular considerations:

a. Whether the applicant’s claim is bona fide and not a sham;

b. Whether there is an admission by the respondent in their defence or elsewhere that

money is due;

c. Whether there is a substantial payment into court or an “open offer” of a substantial

amount;

d. Whether the application was being used oppressively, e.g. so as to stifle a genuine claim;

e. Whether the applicant’s want of means has been brought about by any conduct by the

respondent, such as delay in payment or in doing their part of any work;

f. Whether the application is made at a late stage in the proceedings.

(Per Denning MR in Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609).

33. As mentioned above in the context of human rights considerations, a key consideration is

whether the litigant can pay any sum ordered in relation to security. In relation to companies,

the Court will look to the respondent company to demonstrate by evidence, if it is relied

upon, that, separately from whether the company’s own means are such that it can meet an

order for security, whether there will be a prospect of funds being forthcoming from another

source.

18

Procedure

34. The procedure for an application is as normal for an interim application, namely an

application notice supported by evidence in the application notice, or more usually, witness

statements exhibiting all of the evidence to be relied upon.

35. These witness statements and evidence will need to deal with the matters discussed above,

but particularly will need to demonstrate that the applicant is a defendant to a claim, that one

of the threshold conditions is satisfied and the reasons why the Court should exercise its

discretion to grant an order for security for costs.

36. It is likely that the applicant will have already provided the respondent with an opportunity to

provide security voluntarily in inter-partes correspondence. If the application is proceeding in

a contested manner, it is also likely that the respondent will have given at least some of the

reasons that will be relied upon in seeking to oppose the order in response to that request.

These can of course be considered in the evidence in support of the application if

appropriate.

37. The evidence in support of the application will need to set out the amount of security that is

sought and demonstrate why this is the appropriate level of security to award.

38. As noted above, delay in making the application is one of the matters that the court may rely

upon when considering whether to exercise its discretion to grant security. Whilst an

application can be made at any time, the application should generally be made promptly as

soon as the facts that are to be relied upon as justifying the making of the order are known.

39. As to the procedure for Respondents, clearly the merits of the application will have to be

considered when the application is intimated. If the application is to be contested, then a

view will have to be taken as to whether the threshold criteria relied upon by the applicant

can realistically be opposed. If they can, then this can prevent the Court ever reaching the

stage of the discretion. In the case of a company for example, can it be shown that the

applicant has not demonstrated that there is reason to believe that the company will be

unable to meet a costs award made against it? Evidence of the company’s financial position

in both liquid and illiquid assets may be relevant.

40. Once this has been properly analysed and if appropriate addressed in the evidence, the

issue of the discretion will have to be addressed, considering the various aspects above, for

example, the merits of the respondent’s position (in general terms only, unless there is a

19

demonstrably high probability of success), and how an order if made might affect the

progress of the claim.

41. As to the amount of any security ordered, this is as much in the discretion of the Court as

the order itself. Applying the wording of Rule 25.13, the Court will look to order the amount

that in all the circumstances appears to be just. This is very unlikely to be more than the

applicant in fact expects the litigation as a whole to cost, therefore evidence in relation to the

security sought should be provided if not already available.

42. There are two elements to fixing the amount of the security. The first is the amount incurred

and to be incurred by the applicant. This could fix the security by reference to the whole of

the applicant’s costs, just the applicant’s costs going forward from the order (perhaps if there

has been delay in making the application) or only costs relating to the extra burden of

enforcing orders for costs.

43. Once this is determined, there are then factors relating to the respondent. If the Court

determines that the respondent could raise more than the sums determined in the first

stage, then this will have little relevance. However, bearing in mind the human rights

considerations, the court may limit the security to be paid to that which can reasonably be

raised by the respondent.

44. It will be clear from the above that in many cases an order for security for costs is unlikely to

provide the applicant will full security for the total amount of his costs.

45. The order for security will need to specify the time within which the security must be given

and the manner in which it is to be given. Usually this is for a specified sum to be paid into

court by a specified date. The standard order provides that if the security is not given in the

manner and by the time provided, then the respondent’s claim will be struck out without

further order.

46. If the applicant succeeds at trial, then the costs in respect of which the security was granted

may obtain payment out of the sum paid into court.

47. However, if a party is ordered to give security and later succeeds at trial, then the sum paid

in should usually be returned. If the (now unsuccessful) applicant seeks to appeal, then

generally this should not prevent the sum paid in from being returned. However, the Court

has a discretion to order a stay depending upon the particular facts of the case. Whether

20

and how the successful party might fund its response to the appeal will clearly be of

relevance to the exercise of this discretion.

Special cases

48. As well as obtaining an order under Part 25 of the CPR, it is worth remembering that an

order for security for costs may also be made Rules 3.1(3) & (5) and as a result of an

application for summary judgment where the party against whom the application is made is

allowed to continue, but they are advancing a case which is improbable (Olatawura v

Abiloye [2002] EWCA Civ 998).

49. Rule 25.14 provides that a party other than a claimant may be ordered to pay security. Here

we are not so much concerned with a defendant who brings a counterclaim, but with other

persons. Rule 25.14 provides as follows:

“25.14

(1) The defendant may seek an order against someone other than the claimant, and the court may

make an order for security for costs against that person if –

(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an

order; and

(b) one or more of the conditions in paragraph (2) applies.

(2) The conditions are that the person –

(a) has assigned the right to the claim to the claimant with a view to avoiding the possibility of a costs

order being made against him; or

(b) has contributed or agreed to contribute to the claimant’s costs in return for a share of any money

or property which the claimant may recover in the proceedings; and

is a person against whom a costs order may be made.”

50. The discretion is expressed in similar terms as in Rule 25.13 and one of the two conditions

in rule 25.14(2) must be satisfied.

51. In addition, the person against whom the order is sought must be someone against whom a

costs order can be made. This arises from section 51 of the Senior Courts Act 1981, which

is wide enough to permit costs being ordered against persons who are not parties. CPR

Rule 48.2 provides that where the Court is considering whether to make a costs order

against a person who is not a party to proceedings, that person must be added to the

proceedings for the purposes of costs only and must be given a reasonable opportunity to

attend a hearing at which the court will consider the matter further.

21

52. There is no particular provision for what the consequences in the event of default upon the

making of such an order should be. It would seem unlikely that the Court would order that

the claim be struck out in the event of default as that would cause the current claimant

would be struck out based upon the actions of others.

53. Finally, Rule 25.15 provides that the Court may order security for the costs of an appeal on

the same grounds as elsewhere under Part 25. The applicant (here being a respondent to

an appeal or an appellant where the respondent has also appealed) will therefore need to

demonstrate one or more of the threshold conditions and persuade the Court to exercise its

discretion.

Conclusions

54. An application for security for costs involves a careful balancing of the competing aims of

providing some protection for defendants in respect of their costs but not preventing

claimants with meritorious claims from pursuing them. There is clearly a tension between the

inability of the claimant to raise any funds being both the reason for the application by the

applicant and potentially a basis for resisting the application on the part of the respondent.

55. However, hopefully this talk with have assisted in guiding delegates through the principles

that are applied on such applications with a view to assessing when such applications are

appropriate.

© MARC BROWN

JANUARY 2012

ST PHILIPS CHAMBERS

55 TEMPLE ROW

BIRMINGHAM B2 5LS

mbrown@st‐philips.com


23

WITHOUT PREJUDICE PRIVILEGE PRINCIPLES,

PRACTICALITIES AND PROBLEMS

__________________________________

Robert Mundy

St Philips Chambers

The scope of the without prejudice rule

1. The without prejudice rule is the rule a communication made in a genuine attempt to settle a

legal dispute is not admissible in evidence. Oliver LJ has said:

“That the rule rests, at least in part, upon public policy is clear from many authorities, and the

convenient starting point of the inquiry is the nature of the underlying policy. It is that parties

should be encouraged so far as possible to settle their disputes without resort to litigation and

should not be discouraged by the knowledge that anything that is said in the course of such

negotiations (and that includes, of course, as much the failure to reply to an offer as an actual

reply) may be used to their prejudice in the course of the proceedings.”1

2. The rule applies to all negotiations genuinely aimed at compromising a dispute between the

parties.2 The rule applies to both written and oral communications. It applies to written

documents, whether or not marked “without prejudice”3; the use of the term is merely indicative

of the parties' intentions.4 It applies to mediations (a form of assisted without prejudice

negotiation); there is no separate 'mediation privilege'.5

3. The rule bites whether or not an agreement was reached6. It does not merely apply to

admissions or offers, but to wider discussions7.

1 Cutts v Head [1984] Ch 290, 306. 2 A party who seeks to adduce potentially privileged correspondence cannot rely on an argument that privately he did not genuinely intend to

compromise proceedings but was attempting to gather evidence for trial, so long as the other party genuinely intended to negotiate: Fazl-

Alizadeh v Nikbin (Court of Appeal, unreported, 25 February 1993). 3 Equally, a document marked “without prejudice” may, on its true analysis, not attract the privilege, such as a letter written not in an effort to

negotiate but rather merely as an assertion of a party's rights: Buckinghamshire County Council v Moran [1989] 2 All ER 225. 4 Barnetson v Framlington Group Ltd [2007] 1 WLR 2443, CA, Para 22. 5 Brown v Rice [2008] FSR 3. 6 Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2011] 1 AC 662, SC, para 21 7 Ibid, Para 25. It has “wide and compelling effect”: Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2436, 2443, per Robert Walker

LJ, and is not “mechanistic” but “generous” in its application: Ofulue v Bossert [2009] 1 AC 990, Para 12, per Lord Hope.

24

4. It applies not only between the parties to the negotiation but also in proceedings involving third

parties.8 Subjection to the exceptions set out below, it applies on the issue of costs.9

5. Not all negotiations are covered by the privilege: there must be a genuine intention to settle a

legal dispute. The question is whether

“in the course of negotiations the parties contemplated or might reasonably have contemplated

litigation if they could not agree”10.

There does not have to have been the threat of litigation for bona fide negotiations to be

covered by the rule.

Waiver of privilege

6. Without prejudice privilege is a joint privilege and can be waived only be the agreement of both

(or all of) the parties to the negotiation.

7. However,

“no party which has taken part in without prejudice discussions should be entitled to use them to his

advantage on the merits of the case in one context, but then assert a right to prevent its opponent from

doing so on the merits at the trial”:

Somatra Ltd v Sinclaire Roche & Temperley [2000] 1 WLR 253, 2465, per Clarke LJ.

Exceptions to the without prejudice rule

8. While the courts have been jealous to guard the boundaries of the rule from erosion, a number

of exceptions to the rule have now been established, and the door is not shut to the creation of

new categories.11

Agreements

9. Without prejudice communications are admissible:

(a) as to the issue of whether such communications resulted in a concluded compromise

agreement,

(b) as to the issue of whether a compromise agreement should be set arise on grounds of

misrepresentation, fraud or undue influence,

(c) on the question of whether a settlement agreement should be rectified12,

(d) on the question of the interpretation of a contract, where, but for the without prejudice rule,

8 Ibid, Para 22. 9 Most recently, Reed Executive plc v Reed Business Information Ltd [2004] 1 WLR 3026. 10 Barnetson v Framlington Group Ltd [2007] 1 WLR 2443, CA. 11 For example, in Rush & Tompkins Ltd v Greater London Council [1989] AC 1280, Lord Griffiths said, “resort may be had to the 'without

prejudice' material when the justice of the case requires it”. 12 Oceanbulk, para 33.

25

the negotiations would be admissible13, and

(e) on the issue of whether an unambiguous statement was made and that that statement

was reasonably relied upon, such as to found an estoppel14.

Abuse

10. Without prejudice communications may be admitted in the clearest cases of abuse of privilege,

such as blackmail or other 'unambiguous impropriety'. The Court of Appeal has repeatedly

emphasised the narrowness of this exception.

11. Hoffmann LJ has said:

“These are clear cases of improper threats, but the value of the without prejudice rule would be

seriously impaired if its protection could be removed from anything less than unambiguous

impropriety. The rule is designed to encourage parties to express themselves freely and without

inhibition. I think it is quite wrong for the tape recorded words of a layman, who has used colourful

or even exaggerated language, to be picked over in order to support an argument that he intends

to raise defences which he does not really believe to be true.”15

12. It is appears that there must be abuse of the privileged occasion itself. It is not sufficient that

something said in a without prejudice meeting is evidence of impropriety outside of the

settlement meeting.16 An admission to the effect that extant proceedings are dishonest is not,

in and of itself, an abuse of a privileged occasion, but a threat to continue dishonest

proceedings is blackmail and admissible.17

Explaining delay or acquiescence

13. Without prejudice material is admissible in order to explain delay or to rebut a charge of

acquiescence.18

Mitigation

14. Muller v Linsley [1996] 1 PLNR 74, the Court of Appeal held that without prejudice

negotiations between A and B were admissible in litigation between A and C on the question of

whether A had mitigated his loss by the conducting of the first set of proceedings. Hoffmann

LJ reasoned on public policy grounds, in particular that the question of reasonableness of

mitigation would, in effect, not be justifiable without sight of without prejudice material.

Swinton Thomas and Leggatt LJJ agreed, but added that A had waived its right to privilege by

putting the reasonableness of its conduct in the earlier proceedings in issue. This point is

difficult to square with the principle that without prejudice privilege is a joint privilege.

13 Oceanbulk. 14 Hodgkinson & Corby Ltd v Wards Mobility Services [1997] FSR 178, 1981, per Neuberger J, a decision which was reversed on other

grounds in the Court of Appeal. 15 Forster v Friedland (Court of Appeal, unreported, 10 November 1992) 16 Savings and Investment Bank v Fincken [2004] 1 All ER 1125. 17 Ibid, para 57.

18 See Family Housing Association (Manchester) Ltd. v Michael Hyde and Partners [1993] 1 WLR 354.

26

15. Muller was distinguished by Her Honour Judge Kirkham, sitting as a deputy high court judge,

in Cumbria Waste Management Ltd v Baines Wilson [2008] EWHC 786 (QB). Again, the

question of disclosure of a compromise of litigation between A and B was considered in

litigation between A and C. The learned judge held that Muller was distinguishable on the

grounds that:

(a) The objection was from B, not A. The material might prejudice B in other negotiations.

(b) There was an express agreement between A and B that the negotiations (which took

place during a mediation) would remain confidential.

(c) The evidence might be used to establish the truth or falsity of things said at the

mediation.

Full and Frank Disclosure

16. This is discussed below.

Miscellany

17. Without prejudice communications have been admitted for a variety of other reasons,

including: statements which are acts of bankruptcy, to sever a joint tenancy, to trigger a rent

review clause, and proving a signature.19

Alternative dispute resolution

General principle

18. The court may encourage mediation or other forms of alternative dispute resolution, but may

not order the parties to engage in ADR:

“It is one thing to encourage the parties to agree to mediation, even to encourage them in the strongest

terms. It is another to order them to do so. It seems to us that to oblige truly unwilling parties to refer

their disputes to mediation would be to impose an unacceptable obstruction on their right of access to

the court.

… [I]t seems to us likely that compulsion of ADR would be regarded as an unacceptable constraint on

the right of access to the court, and, therefore, a violation of article 6.”20

“The hallmark of ADR procedures, and perhaps the key to their effectiveness... is that they are

processes voluntarily entered into by the parties in dispute with outcomes, if the parties so wish, which

are non-binding. Consequently the court cannot direct that such methods be used but may merely

encourage and facilitate.”21

19 See Matthews et al, Disclosure, 3rd ed, para 11.128.

20 Per Dyson LJ in Halsey v Milton Keynes Health Authority [2004] 1 WLR 3002. 21 Civil Procedure, 2003, cited with approval by Dyson LJ in Halsey.

27

19. Appendix 7 to the Commercial Court Guide provides an example of strong encouragement.

Costs

20. An unreasonable refusal to participate in ADR (assuming that the offer is expressed to be open

or without prejudice save as to costs) may result in an adverse costs order.22 There is no

presumption that a refusal to engage is unreasonable, since

“mediation and other ADR processes do not offer a panacea, and can have disadvantages as well as

advantages: they are not appropriate for every case”.23

21. In determining whether a refusal to engage in ADR is unreasonable, the court will take into

account (inter alia):

(a) the nature of the dispute,

(b) the merits of the case,

(c) the extent to which other settlement methods have been attempted,

(d) whether the costs of ADR would be disproportionately high,

(e) whether any delay in setting up ADR would have been prejudicial,

(f) whether ADR had any reasonable prospect of success.24

22. The fact that a party believes he has a watertight case is, of itself, no justification for refusing

mediation; however, the fact that a party reasonably believes he has a watertight case may be

sufficient justification. The courts should be astute to the risk that claimants with unmeritorious

cases will use the threat of costs sanctions in an attempt to extract a settlement.25

23. If a party is to refuse an offer of mediation, there is much to be said for setting out the party's

reasons in detail, using as headings the factors identified by the Court of Appeal in Halsey.26

24. During ADR, parties are entitled to adopt whatever position they wish.27

Practicalities

Correspondence

25. When writing letters, it is important to consider at the outset whether the letter is intended to

be:

(a) open,

(b) without prejudice,

22 Halsey. 23 Halsey, para 16. 24 Ibid. 25 Halsey, para 18-19. 26 This was the course taken by the Claimant's solicitors in McLaren v B Elliott Group plc [2005] EWHC 2045 (QB), which

appears to have commented itself to Walker J: see para 58. 27 Halsey, para 14.

28

(c) without prejudice save as to costs, or

(d) under Part 3628.

26. This should be made clear on the face of the document. An otherwise perfectly drafted

Calderbank letter might lose all of its teeth if the words “save as to costs” were admitted.

27. onversely, when weighing the impact of an incoming offer, it is important to consider whether it

is admissible on the question of costs.

Sight of without prejudice correspondence

28. If a judge does see without prejudice correspondence, he is not automatically bound to recuse

himself. The situation is different from that of bias. He should consider, subjectively, whether

he considered that the knowledge disabled him from fairly trying the case, or, whether

objectively a fair-minded and objective observer would consider that there was a real

possibility that there would not be a fair trial: Berg v IML London Ltd [2002] 1 WLR 3271. In

doing so, the judge should take into account:

(a) the facts of the case;

(b) the issues in the case;

(c) the contents of the privileged material (an offer to pay a small sum is likely to have a less

prejudicial effect than an offer to pay the entire sum in dispute in instalments), and

(d) whether he has seen the privileged material, and if so, the extent of his recollection of it.

29. If such an argument arises, and time has passed since the judge saw the inadmissible

material, his memory should not be refreshed by the written or oral arguments on the point:

Berg.

30. The issue of an adjudicator's sight of without prejudice material was seen as an issue of

potential bias in Ellis Building Contractors v Goldstein Ltd v Goldstein [2011] EWHC 269

(TCC), in which the Court considered that an adjudicator's award should not be defeated on

the ground that there was a legitimate fear that the adjudicator might not have been impartial.

However, the case does illustrate the risk that the disclosure of without prejudice material to an

adjudicator might undermine the validity of a beneficial award.

Problems

Privilege and the duty of full and frank disclosure

31. Recently the question has arisen as to the scope of the duty (and therefore entitlement) to

refer to without prejudice correspondence in an ex parte hearing in order to make full and frank

disclosure. In Linsen International Ltd v Humpuss Sea Transport Pte Ltd [2010] EWHC

28 Such a letter will be treated as being without prejudice save as to costs by virtue of CPR 36.13(1).

29

303 (Comm), Christopher Clarke J declined to decide upon the precise bounds of the test to

be applied, instead saying:

“It is sufficient to say that some disclosure of without prejudice communication will be

necessary if it is clear that without it the court may be misled.”

32. In doing so, his Lordship emphasised the reasons why a court should be reluctant to set aside

an order made ex parte on the basis of a failure to disclose without prejudice communications:

(a) First, decisions whether to disclose in these circumstances may be made in a short

timescale.

(b) Second and most importantly,

“there is a danger of defendants being disadvantaged by ex parte disclosure (which the

defendant is powerless to prevent) of such material by claimants on the basis that they are only

fulfilling a duty when the material consists of or amounts to admissions – the very risk that the

[without prejudice] principle seeks to avoid.”

(c) Third, this adverts the prospects of disputes as to whether the applicant put material

before the court only to fulfil a duty of disclosure (such that privilege is not waived)

or to further the applicant's own case (such that the defendant is entitled to adduce

that communication and others at trial).

33. Whether disclosure is necessary to avoid misleading the court will depend upon what else was

said at the hearing or in materials before the court:

“A claimant who makes a generalised or sweeping statement as to the evasiveness of his

opponent (or allows an impression of evasiveness to be created) may find himself with a

problem which he could readily have avoided by a less expansive statement; and compelled

to make disclosure which otherwise would not have been necessary...”

Privilege and discrimination

34. BNP Paribas v Mezzotero concerned the admissibility of a conversation between employer

and employee, said to be without prejudice, and which followed the raising of a grievance by

the employee against the employer. The claimant claimed that by seeking to terminate the

claimant's employment by mutual consent, the respondent had discriminated against her. The

respondent argued that the conversation was without prejudice and inadmissible. The

question of admissibility was decided on the grounds that no dispute had arisen: the grievance

process being an internal one, which may have led to a satisfactory conclusion. However, Cox

J said that evidence of the alleged conduct would in any event be admissible under the

30

unambiguous impropriety exception to the rule:

“What lies at the heart of the issue in this case is that this Applicant alleges direct sex

discrimination and victimisation against her employers in seeking to terminate her employment

after she had raised a grievance concerning discriminatory treatment following maternity leave.

The sex and race discrimination legislation seeks to eradicate what the Court of Appeal have

referred to as the "very great evil" of discrimination − see Jones −v Tower Boot [1997] IRLR 168,

and I consider that it is very much in the public interest that allegations of unlawful discrimination

in the workplace are heard and properly determined by the Employment Tribunal to whom

complaint is made, as the appropriate forum under the legislation. Further, it is widely recognised

that cases involving allegations of sex and race discrimination are peculiarly fact−sensitive and

can only properly be determined after full consideration of all the facts − see Anyanwu −v− South

Bank Students Union and South Bank University [2001] IRLR 305, and in particular the

speeches of Lord Hope and Lord Steyn.”

35. This decision is best seen as establishing that discriminatory conduct during the course of an

otherwise without prejudice negotiation is actionable under the unambiguous impropriety

exception, being an abuse of a privileged occasion. It does not establish that admissions of

discrimination, or anything less than unambiguous impropriety, at without prejudice meetings

will be admissible: Woodward v Santander UK plc (unreported, EAT, 25 May 2010).

© ROBERT MUNDY

JANUARY 2012

ST PHILIPS CHAMBERS

55 TEMPLE ROW

BIRMINGHAM B2 5LS

[email protected]


31

2012: A SEMINAL YEAR FOR PROCEDURAL LAW?

____________________________________

Ed Pepperall

St Philips Chambers

IMPLEMENTING JACKSON

1. The Legal Aid, Sentencing & Punishment of Offenders Bill has cleared the House of

Commons and is now at the committee stage in the Lords. The Bill appears on track to

become law by October 2012.

2. Once the primary legislation has been passed, the Rule Committee will begin work in

earnest on the necessary rule changes. While the main costs issues remain to be dealt

with pending passage of the Bill, the Committee has been busy for some months preparing

the way for other Jackson reforms. However, most of these rule changes are yet to be

implemented since the Committee has adopted a deliberate policy of holding back the work

that is being done in order to introduce all of the Jackson rule changes on one single

implementation date. “J day” is likely to be 1 October 2012 to coincide with the expected

implementation date of the Act.

THE DEMISE OF THE CFA?

3. In the commercial world, CFAs in their current form have not worked well. While the

original intention of allowing David a means to sue Goliath on a CFA might be laudable, too

often David has used the CFA to sue David – or, even worse, Goliath has entered into a

CFA to squash David.

4. CFAs are themselves responsible for a significant escalation of costs:

4.1 Firstly, where a litigant does not have a direct interest in the amount of his legal

fees, they inevitably tend to run out of control.

4.2 Secondly, if the claimant is successful, the defendant ends up paying around three

times the conventional cost (base costs, success fees and ATE premiums).

5. Following Lord Justice Jackson’s recommendations, the Bill proposes two critical reforms to

the current regime:

32

Clause 43: success fees

6. Success fees are no longer to be recoverable from the paying party. Although a matter for

secondary legislation, the Government has indicated its intention to implement Jackson’s

proposal to protect PI claimants by limiting the success fee to 25% of the damages

recovered (excluding damages for future losses). There is to be no such protection in

commercial cases.

Clause 45: ATE premiums

7. ATE premiums are no longer to be recoverable from the paying party.

8. The Government intends to ameliorate the effect of this reform in PI and clinical negligence

cases by implementing Lord Justice Jackson’s proposal to introduce qualified one-way cost

shifting (“QOCS”). However, this will be a matter for the Rule Committee rather than

primary legislation. QOCS will not affect commercial cases.

9. The Government also intends to introduce a limited exception to the general rule against

recovering ATE premiums in clinical negligence cases.

DAMAGES-BASED AGREEMENTS

10. At clause 44 of the Bill, the Government seeks to implement Lord Justice Jackson’s

recommendation that litigants should be allowed to enter into contingency fee agreements

(damages-based agreements). These are essentially no-win, no-fee agreements under

which lawyers are paid a percentage of the damages recovered by their clients.

11. DBAs are already lawful for solicitors conducting employment tribunal work. This reform

will open up the DBA market.

12. Under a DBA, a successful claimant will recover his usual base costs from the

unsuccessful defendant but be responsible for paying his lawyers the shortfall between the

costs recovered and the agreed percentage of damages recovered.

13. The percentage chargeable by lawyers acting under a DBA will be capped in PI cases

(again at 25% of damages recovered excluding future losses).

14. The Government is not persuaded that there should be a requirement for a claimant to

obtain independent legal advice in respect of a DBA. The agreements will, however, be

regulated.

15. DBAs (with or without ATE cover) may well be attractive in high value litigation but are

unlikely to plug the gap in smaller cases for the old-style CFA.

33

OTHER SOURCES OF FUNDING

16. Recognising that there will be no return to civil legal aid and that CFAs (at least in their

current form) are flawed, Lord Justice Jackson argued for three types of funding:

16.1 Before the Event (BTE) insurance cover: There is plainly scope for BTE to grow.

All are agreed that BTE cover should be encouraged.

16.2 Contingent Legal Aid Fund (CLAF): A self-financing not-for-profit fund which

grants funding to selected claimants on condition that, if successful, they pay a

percentage of their damages into the fund.

16.3 Supplementary Legal Aid Scheme (SLAS): Similar to a CLAF, a SLAS is self-

financing and requires successful claimants to pay a percentage of their damages

into the fund. However, it is operated by a legal aid body.

Contingent Legal Aid Fund

17. As Lord Justice Jackson makes clear, it is for the professions to make the running on

CLAFs. The idea of a CLAF dates back to 1978 but was more seriously mooted in the late

1990s in the run-up to the Access to Justice Act 1999. In 2009 the Bar published two

reports on the establishment of a CLAF.

18. On 21 June 2011 the Bar Council held a high-level seminar at UCL to discuss CLAFs.

Progress to date on the project suggested that it might prove viable and it was resolved to

continue work with the aim of setting up one or more CLAFs. Sir Rupert suggests that it is

an idea whose time has come.

19. Further work is continuing to establish the viability of one or more CLAFs. It is likely that

CLAFs will start off on a fairly small scale and in closely defined categories of work. There

are a number of different potential models:

19.1 The CLAF could cover both disbursements and costs (like the Hong Kong SLAS).

19.2 Or costs but not disbursements (as in Ontario).

19.3 Or disbursements but not costs (as in Victoria).

19.4 They may or may not accept liability for adverse costs orders.

20. There is concern that the project may not prove viable if stronger claims are funded by

DBAs leaving only claimants with more doubtful cases to apply to a CLAF for funding.

However, speaking in October 2011 to the Professional Negligence Bar Association Sir

Rupert observed:

“As members of the PNBA, all of you are regularly conducting or defending professional liability

claims. I suspect that many claimants in such cases would be perfectly willing to accept a deduction

34

from damages in order to gain the financial backing of a CLAF. Some of those cases may have

excellent prospects of success and attract high awards of damages. If third party funders, who are

most certainly not charitable bodies, can prosper in the way they do, it would be somewhat strange if

a non-profit making CLAF is unable to stay afloat.”

Supplementary Legal Aid Scheme

21. It is for Government to introduce a SLAS. On 21 June 2011 the Ministry of Justice

announced:

“We will introduce a Supplementary Legal Aid Scheme, under which a fixed percentage of 25% the

client’s damages (but excluding damages for future care and loss) awarded in the legally aided

proceedings (including proceedings funded under the exceptional funding mechanism) is repaid to

the legal aid fund.”

22. While welcoming this announcement, Sir Rupert expressed concern at the flat rate

deduction of 25%:

22.1 This is apparently to be the flat rate deduction in every case rather than, as in PI

cases, the maximum level of deduction which lawyers can charge.

22.2 The full 25% deduction appears to be proposed even if the case settles early at

very little cost to the SLAS.

22.3 A sliding scale (such as that operated in Hong Kong) would create additional

incentives for claimants to accept reasonable settlement offers.

PART 36 REFORM

Reversal of Carver

23. In Carver v. BAA plc [2008] EWCA Civ 412, [2009] 1 WLR 113 the Court of Appeal upheld

the trial judge’s ruling that a claimant who had recovered £51 more than the sum offered

under Part 36 had not achieved a judgment “more advantageous” than the offer. Lord

Justice Ward observed that this was an “open-textured phrase” and that it permitted a wide-

ranging review of all the facts and circumstances:

“Litigation is time consuming and it comes at a cost, emotional as well as financial. Those are,

therefore, appropriate factors to take into account in deciding whether the battle was worth it. Money

is not the sole governing factor.”

24. Lords Justice Rix and Keene LJ agreed. The decision has been heavily criticised for

introducing an unnecessary element of uncertainty and promoting satellite litigation. Sir

Rupert recommended change and the majority of those responding to his reports strongly

agreed.

25. Carver was reversed by a rule change with effect from 1 October 2011. The new rule

36.14(1A) provides:

35

“For the purposes of paragraph (1), in relation to any money claim or money element of a claim,

“more advantageous” means better in money terms by any amount, however small, and “at least as

advantageous” shall be construed accordingly.”

Balancing the Part 36 sanctions

26. When a claimant obtains a judgment at least as favourable as his Part 36 offer, the

defendant can be ordered [CPR 36.14]:

26.1 to pay additional interest (at up to 10% over base);

26.2 indemnity costs; and

26.3 interest (again at up to 10% over base) on such costs.

27. It is generally thought that these sanctions are inadequate when compared to the sanctions

imposed on claimants who fail to beat a Part 36 offer. Sir Rupert therefore recommended

that defendants who fail to beat a claimant’s Part 36 offer should have to pay additional

damages of 10%. He suggested that consideration should be given to scaling down the

sanction where the judgment exceeds £500,000.

28. The Government agrees. Clause 53 of the Bill will allow the necessary rule changes.

29. The Government is also seeking to explore additional sanctions for non-monetary claims;

probably linked to the costs recovered. Again the detail will come in the rules and not the

Act.

30. I agree that there is a need to rebalance Part 36. However, before doing so, it is necessary

to consider how the current regime for claimants’ Part 36 offers works.

The Part 36 sub-committee

31. Before seeking to implement the Jackson agenda, the Rule Committee has decided to

review Part 36 more generally. A sub-committee has been set up and is currently

considering a number of problems.

Non-monetary claims

32. CPR 36.14(1A) now clarifies how to determine whether a judgment is more than / at least

as advantageous as a Part 36 offer. Both the sub-committee and the full Rule Committee

have considered whether further guidance can be given in cases where the relief sought is

non-monetary or where mixed relief is sought. Our view is that it cannot and that the judge

will simply have to grapple with whether the relief achieved after trial is more than / at least

as advantageous as that offered.

A complete procedural code

33. In Gibbon v. Manchester City Council [2010] EWCA Civ 726, [2010] 1 WLR 2081 the

Court of Appeal held that Part 36 was a self-contained code and that it had to be

36

interpreted as such without importing the formal rules of offer and acceptance from general

contract law. It is likely that Part 36 will be amended expressly to make this point.

Withdrawal of offers

34. Gibbon (supra) clarified that a Part 36 offer remains available for acceptance unless

withdrawn and that it is not treated as revoked by a subsequent offer or counter-offer.

Again Part 36 is likely to be amended to state this expressly.

35. In C v. D [2011] EWCA Civ 646 the Court of Appeal held that a Part 36 offer cannot state

that it will be treated as withdrawn, if not accepted, at the end of the relevant period. Any

offer so stating is not a Part 36 offer. The sub-committee regard this result to be unduly

technical and somewhat illogical given that a party is in fact free to withdraw an offer after

that time [CPR 36.3(6)]. We will recommend expressly allowing a party to state that the

offer is to be treated as withdrawn if not accepted.

The effects of non-payment

36. In the old days money was paid into court and there was no real issue as to payment. Of

course it is now possible to accept an offer and then find that it is not paid.

37. The sub-committee has debated whether the acceptance of the offer should be regarded

as conditional on payment so that the unpaid claimant would have the option of continuing

his claim. However, our view is that the case should be regarded as settled and that the

claimant should be able to enter judgment and pursue the money by way of the usual

enforcement procedures.

Cynical claimants

38. There is, in my view, a particular problem with the current operation of CPR 36.14. Canny

claimants are abusing Part 36 by pitching their offers at 95% to 100% of the full liability

value of their claims knowing full well that in anything other than the most open-and-shut

case, such offer will never be accepted. Such offers are rarely intended to be a serious

attempt to settle a case but a cynical attempt to put pressure on a defendant and obtain

Part 36 “consequences.”

39. There will be greater incentive to adopt this tactic (and, in my view, greater potential for

injustice) if there is a significant increase in the sanctions imposed on losing defendants.

40. What, then, of the 100% “offer?” Has not the claimant, on winning his action, achieved a

judgment “at least as advantageous” as his offer? Henderson J answered this in AB v. CD

[2011] EWHC 602 (Ch) at para 22:

“I think it clear, however, that a request to a defendant to submit to judgment for the entirety of the

relief sought by the claimant cannot be an ‘offer to settle’ within the meaning of Part 36. If it were

37

otherwise, any claimant could obtain the favourable consequences of a successful Part 36 offer,

including the award of indemnity costs, by the simple expedient of making an ‘offer’ which required

total capitulation by the defendant. In my judgment the offer must contain some genuine element of

concession on the part of the claimant, to which a significant value can be attached in the context of

the litigation ….

“The concept of a settlement must, by its very nature, involve some element of give and take. A so-

called ‘settlement’ which was all take and no give would in my view be a contradiction in terms.”

41. Arguably this solution to the problem has been removed by the recent amendment to CPR

36.14(1A) and the reversal of Carver.

42. However, assuming AB v. CD to be right, how much discount needs to be given? In Huck

v. Robson [2003] 2 WLR 1340 C made a Part 36 offer to accept 95% of her running down

claim. C was wholly successful at trial but the judge refused to order Part 36 consequences.

The discount offered had been “derisory” and the offer was “inevitably rejected.” The Court of

Appeal allowed C’s appeal (Jonathan Parker LJ dissenting).

43. In Cavendish Corporate Finance v. GIL Investments [2009] EWCA Civ 368 C made a Part

36 offer at 98.5% of the claimed invoice value in an “all-or-nothing” contract case. C was

successful at first instance & obtained a Part 36 costs order. Leave was refused to appeal

the costs order although the appeal was ultimately successful on the substantive decision.

44. Rule 36.14(3) entitles a Judge to refuse to order Part 36 consequences where “it considers

it unjust to do so.” Rule 36.14(4) gives guidance as the matters which need to be taken

into account.

45. In my view there is nothing wrong with the rules but with their application. Following Huck,

it is now scarcely arguable that a very modest discount will justify a Judge in departing from

the norm.

46. Certainty is of course desirable and critics could argue that any amendment would be to

reintroduce the uncertainty which has just been removed by the amendment to CPR

36.14(1A). However, this is not a variant of the Carver problem:

46.1 Unless one is to accept the nonsense of 100% offers, then some discount must be

offered by a claimant before he can hope to get Part 36 consequences.

46.2 Unless one is to accept that such discount could be as derisory as a penny, some

qualitative assessment of the discount offered in these cases is essential.

46.3 There is no need to revisit the Carver point provided in these cases it is recognised

that C has achieved a judgment at least as advantageous as his offer and the

enquiry moves to the next stage of whether it is just to order additional interest,

indemnity costs etc.

38

46.4 As already drafted the rules provide that there is an additional stage.

46.5 Indeed even Huck stops short of saying that beating the offer by a penny is

enough: Tuckey LJ at para 71.

47. Therefore there can be no clear line in the sand on this. I have proposed to the sub-

committee that a clear departure from Huck should be signposted by adding to rule

36.14(4) a requirement that the Court must consider whether the offer was a genuine

attempt to settle the case.

Split trials

48. Part 36 does not work well after a split trial. Henderson J also had to consider the problem

in AB v. CD (supra).

49. A number of questions arise:

49.1 Can the Court consider a Part 36 offer at all after the preliminary issue trial? [Rule

36.13(2): Bars the judge seeing the offer “until the case has been decided.” Cf. the

wording of the old rule 36.19 as interpreted in HSS Group plc v. BMB Ltd [2005]

EWCA Civ 626, [2005] 1 WLR 3158.]

49.2 If so, how is the Court to deal with a Part 36 offer which is not expressly made by

reference to the preliminary issues?

49.3 While it is desirable to award the costs of the first trial, why shouldn’t a party be

able to protect himself in costs by making a good global offer to settle the case?

49.4 Can a wily party bar the preliminary trial judge from trying the balance of the case?

50. In AB v. CD the first issue was resolved by the parties’ written agreement that the judge

should be told about the offers. However, as Henderson J observed, at paragraph 18:

“It seems to me that there is a real problem here. If the existence of a Part 36 offer cannot be

disclosed, except where the parties agree, until the conclusion of the second stage of a split trial,

such agreement is unlikely to be forthcoming in any case where the disclosure might prejudice the

position on costs of either the offeror or the offeree at the conclusion of the liability stage. It would

then seem to follow that in nearly all split trial cases where a Part 36 offer has been made all

questions of costs would have to be reserved to the conclusion of the second stage …”

51. It may well be (as Henderson J suggests) that the case should be regarded, for the

purposes of Part 36, as having concluded once the preliminary issues have been resolved.

My own preference is to amend the rules to allow disclosure to the judge without the

parties’ consent, at least in a case in which the Part 36 offer was directly referable to the

findings in the preliminary trial (eg. an offer on liability). Of course disclosure of any other

offer might require a different judge to determine issues of quantum.

39

52. Furthermore what is the position immediately after judgment is handed down in the split

trial? Can the quick-witted claimant who succeeded in part but who has lost on some

issues nevertheless accept an offer which has not been expressly withdrawn?

Analogous offers

53. In F&C Alternative Investment (Holdings) Ltd v. Barthelemy & Culligan [2011] EWHC

2807 (Ch) the defendants’ counterclaim was in substance the real dispute. But for the fact

that F&C had issued first, Messrs Barthelemy & Culligan ought to have been the claimants.

Furthermore they successfully petitioned for unfair prejudice in allied proceedings. In the

Part 7 claim, B & C made an offer expressly outside Part 36 because the effect of rule

36.10 would have been to entitle F&C to a costs order on accepting a Part 36 offer. The

offer carefully explained why it was not being made under Part 36 and that B & C would

contend that it should have all the effects of a Part 36 offer as if such offer was capable of

being made without accepting a liability to F&C’s costs.

54. Sales J said:

“I accept Mr Thompson’s submission that there was a good and legitimate reason why the

Defendants should not have been expected to make a formal CPR Part 36 offer in the context of this

case. I also accept his submission that, where that is the case and where a party makes an offer of

settlement which seeks to comply with the requirements of CPR Part 36 while adjusting for the

infelicity in the wording of CPR Part 36.10, while explaining why the offer is made outside CPR Part

36 and that the court will be invited to exercise its discretion on costs by analogy with CPR Part 36, it

may often be appropriate for the court to do just that.”

55. I am tabling this case for discussion at the next sub-committee meeting in order to consider

whether we should leave litigants to fashion their own analogous Part 36 offers or whether

they can be assisted.

RULE 3.9: RELIEF FROM SANCTIONS

56. Sir Rupert considered that the Courts were too ready to overlook litigants’ failures to

comply with the rules and court orders. He therefore recommended, and the MOJ and

Committee accepted, that there should be a change of culture.

57. The new culture is to be indicated by totally rewriting rule 3.9. At the moment the rule

contains a prescriptive checklist of nine factors which a judge must take into account. The

rule has led to satellite litigation where judges making perfectly sensible orders have

nevertheless failed sufficiently to refer to rule 3.9. Furthermore it has fostered a climate in

which default is perhaps too easily excused.

58. The new slim line rule 3.9(1) will read:

40

“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 it 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.”

RULE 44.3(8): PAYMENT ON ACCOUNT OF COSTS

59. The Committee has approved an amendment requiring judges to regard such orders on

account to be the default position:

“Where, following a hearing, the court orders a party to pay costs subject to detailed assessment, it

shall order that party to pay a reasonable sum on account of costs, unless there is good reason not

to do so.”

RULE 31.5: MENU-BASED DISCLOSURE

60. Sir Rupert expressed concern that judges too readily order standard disclosure on all

issues without properly considering the likely costs or tailoring their order to the needs of

the case.

61. He therefore recommended setting out a menu of options. His original recommendation

was that this new menu-based approach should apply in heavy commercial claims worth,

say, over £1 million. However, the Committee felt that it was often in smaller cases that the

costs of disclosure are most disproportionate.

62. In November 2011 the Committee approved the following rewriting of CPR 31.5 in order to

implement the amended proposal:

“(1) In all claims to which rule 31.5(2) does not apply:

(a) An order to give disclosure is an order to give standard disclosure unless the court

directs otherwise.

(b) The court may dispense with or limit standard disclosure.

(c) The parties may agree in writing to dispense with or to limit standard disclosure.

(2) Unless the court otherwise orders, the rules at (3)-(6) below apply to all multi track claims,

other than those which include a claim for personal injuries.

(3)

(a) Not less than 14 days before the first case management conference each party must

file and serve a report verified by a statement of truth, which:

(i) describes briefly what documents exist or may exist that are or may be

relevant to the matters in issue in the case;

(ii) describes where and with whom those documents are or may be located

(and in the case of electronic documents how the same are stored; in cases

where the Electronic Documents Questionnaire has been exchanged, the

Questionnaire should be filed with the report);

41

(iii) estimates the broad range of costs that could be involved in giving standard

disclosure in the case, including the costs of searching for and disclosing

any electronically stored documents;

(iv) states which of the directions under (4) or (5) below are to be sought.

The solicitor or other person who will have conduct of giving disclosure for a party

should be present at the first case management conference.

(b) Not less than 7 days before the first case management conference, and on any

other occasion as the court may direct, the parties must, at a meeting or by

telephone, discuss and seek to agree a proposal in relation to disclosure that meets

the overriding objective.

(c) If –

(i) the parties agree proposals for the scope of disclosure; and

(ii) the court considers that the proposals are appropriate in all the

circumstances;

the court may approve them without a hearing and give directions in the terms

proposed.

(4) At the first or any subsequent case management conference, the court shall decide, having

regard to the overriding objective and the need to limit disclosure to that which is necessary

to deal with the case justly, which of the following orders to make in relation to disclosure:

(a) an order dispensing with disclosure;

(b) an order that a party disclose the documents on which it relies, and at the same time

request any specific disclosure it requires from any other party;

(c) an order that directs, where practicable, the disclosure to be given by each party on

an issue by issue basis;

(d) an order that each party disclose any documents which it is reasonable to suppose

may contain information which enables that party to advance their own case or to

damage that of any other party, or which leads to an enquiry which has either of

those consequences;

(e) an order that a party give standard disclosure;

(f) any other order in relation to disclosure that the court considers appropriate.

(5) The court may at any point give directions as to how disclosure is to be given, and in

particular:

42

(a) what searches are to be undertaken, of where, for what, in respect of which time

periods and by whom and the extent of any search for electronically stored

documents;

(b) whether lists of documents are required;

(c) how and when the disclosure statement is to be given;

(d) in what format documents are to be disclosed (and whether any identification is

required);

(e) what is required in relation to documents that once existed but no longer exist; and

(f) whether (under rule 31.13) disclosure shall take place in stages.

(6) To the extent that the documents to be disclosed are electronic, the provisions of PD 31B

will apply in addition to rules (3) – (5) above

SMALL CLAIMS TRACK

63. The Committee is currently considering the Government’s request to extend the small

claims limit to £10,000. We are seeking proper statistical data to support the increase in

order better to understand the impact of such change. However, some increase is likely.

STANDARD DIRECTIONS

64. The Committee is working on implementing Sir Rupert’s recommendation for a standard set

of directions in smaller cases. Variations in local practice are to be discouraged.

SCHEDULED RULES

65. It is something of an embarrassment that in 2012 there are still a few Rules of the Supreme

Court and County Court Rules languishing in the schedules to the CPR. The original Woolf

committee simply ran out of time to incorporate these into the CPR. Over the years some

of the original “Scheduled Rules” have been moved into the body of the CPR but several

still remain; principally enforcement, contempt & interpleader.

66. Work on the enforcement rules was put on hold some years ago because the law was to be

changed by Parts 4 & 5 of the Tribunals, Courts & Enforcement Act 2007. However,

these provisions have still not been implemented. The Committee recently turned its

attention to this matter again but the Ministry of Justice has suggested that we await further

clarification as to the Government’s intentions.

67. A sub-committee is working on contempt of Court. Separately we are looking to rationalise

the rules on interpleader. These areas might well be properly incorporated into the CPR by

this time next year; leaving just enforcement.

43

PART 52: APPEAL COSTS

68. Amendment will be made to CPR 52 to introduce a new rule 52.9B in order to allow an

appeal court to control the costs of an appeal from a court (eg. the Patents County Court,

fast track) or tribunal (eg. the Employment Appeal Tribunal) in which there are special rules

limiting the recovery of costs:

“(1) In any proceedings in which costs recovery is normally limited or excluded at first instance,

an appeal court may make an order that the recoverable costs of an appeal shall be limited

to the extent which the court specifies.

(2) In making such an order the court will have regard to:

(a) the means of both parties,

(b) all the circumstances of the case; and

(c) the need to facilitate access to justice.

If the appeal raises an issue of principle or practice upon which substantial sums may turn, it

is not normally appropriate to limit the extent of recoverable costs.

(3) An application for such an order shall be made as soon as practicable and will be determined

without a hearing unless the court orders otherwise.”

PD52: APPEALS TO THE COURT OF APPEAL

69. Work is at an advanced stage on rewriting and simplifying the Appeals Practice Direction

under Part 52.

ALLOCATION QUESTIONNAIRES

70. The Committee has agreed in principle a proposal to abolish allocation questionnaires.

Instead claimants would be asked to tick a box on form N1 (the Part 7 claim form)

indicating their preferred track. There would then be a more focused and useful Directions

Questionnaire.

COUNTY COURT MONEY CLAIM CENTRE

71. In order to streamline its service, HMCTS has established the County Court Money Claim

Centre in Salford. Essentially simple county court money claims will be processed at the

centre up until the point when they need judicial involvement. This will allow the money

claim centre:

71.1 to receive the form N1;

71.2 serve the claim form;

71.3 receive the acknowledgment of service, defence and any counterclaim or Part 20

claim;

71.4 send out and receive AQs;

71.5 enter judgments in default or upon admission; and

44

71.6 issue warrants where the judgment remains at the centre.

72. District judges will be available at the centre to deal with paperwork. However, the cases

will be transferred back out to a real county court as soon as case management directions

or a hearing are required.

73. Form N1 will be amended to show the claimant’s preferred court; that is the court to which

the claimant wants the case transferred should that be necessary.

74. Litigants will be required to issue in the Northampton County Court by sending their

completed claim form to the Salford Business Centre. However:

74.1 The Committee has been assured that claim forms will still be accepted at county

court counters in the usual way. This is important in order to retain the service

provided by having a local court. It will, however, be discouraged and litigants are

likely to be given addressed envelopes to post their forms to Salford.

74.2 In particular where there is a limitation issue, one can still issue locally and stop the

clock running.

74.3 Cases involving an immediate application for an injunction will not be processed

through the centre.

74.4 High Court and specialist jurisdiction work will also be excluded.

© ED PEPPERALL

JANUARY 2012

ST PHILIPS CHAMBERS

55 TEMPLE ROW

BIRMINGHAM B2 5LS

[email protected]


Edward Pepperall [email protected] Call: 1989 Education: Birmingham University; QEH School, Bristol Appointments: Recorder Crown Court (2009) , Recorder County Court (2010), Member of the Civil Procedure Rule Committee (2010), Bar representative on Working Party on Cost Management (2010 – 11)

Introduction

Ed is recommended as "excellent" for commercial litigation by Chambers and Partners. He is said to "display

an aptitude in difficult matters which is little short of prodigious". The 2009 Guide comments that "his

no-nonsense attitude and diligent, thorough approach ensure that he remains a favourite".

Ed understands the flexibility required to handle urgent and high value work. He is regularly instructed in

multi-million pound commercial litigation and has particular experience of advising upon international supply

contracts. He recently acted in a £70m fraud claim for the UK’s five largest brewers. Previously, he has acted

in a US$100 million commercial arbitration and advised upon claims worth £350 million and US$12 million.

Ed also acts in respect of multi-million pound share sale agreements and warranty claims.

The combination of Ed's commercial and employment law experience makes him an ideal choice for High

Court employment disputes involving restrictive covenants, breach of confidence and wrongful dismissal.

Ed is ranked by Chambers UK 2011 under commercial dispute resolution, employment and restructuring and

insolvency . He is praised for being "incredibly quick on his feet" and that his "relaxed and calm approach

instils confidence." He is described as being a "fast-thinking commercial litigator who is

exceptional on his feet" and is "very affable and easy to get on with".

One Solicitor remarked “I have never seen him not catch a curve ball from a judge.”

Areas of expertise • Commercial • Alternative Dispute Resolution • Employment

Memberships • COMBAR • Midland Chancery & Commercial Bar

Association

High value commercial litigation

Ed has substantial experience of high value commercial litigation. As a senior junior he is comfortable

appearing alone against leading counsel. Alternatively, in the most valuable cases, he acts alongside

leading counsel. Ed is dedicated and hard-working and understands the flexibility required to litigate big

cases. He works well in a multidisciplinary team. He is numerate and is particularly comfortable working

with forensic accountants on complex valuation evidence. Recent cases include:

• acting with John Randall QC in a US$100 million international commercial arbitration in respect of a

multi-national marketing agreement for a pharmaceutical device

• advising in respect of a US$12 million international supply contract for the supply of security

equipment to the Ministry of the Interior in Iraq

• acting in respect of a claim arising out of Baugur's £55 million acquisition of Mk-One

• acting alone against a silk in £2 million claim for breach of an international distribution agreement for

white goods against the Italian subsidiary of a Chinese multi-national

• advising in respect of the common law and contractual duty of confidence in respect of a £350 million

international dispute

Professional negligence

Ed regularly acts in professional negligence cases involving solicitors, accountants, surveyors, architects

and insurance brokers. He is also experienced and is willing to act in cases brought against barristers.

Recent cases include:

• £7 million claim against insurance brokers

• £2 million claim against an individual insurance broker, which involved consideration as to whether

the broker (rather than his insolvent employer) owed a duty of care

• £2 million claim against a solicitor for a lost cause of action

• a claim against a barrister for a negligent "door of court" settlement

• two claims against barristers for the negligent conduct of litigation

• a claim against an accountant for negligent tax advice

Employment In The High Court

Ed is an acknowledged expert upon restrictive covenant and breach of confidentiality cases, on which

subjects he frequently lectures. Chambers and Partners comments that his advice is "always spot on". Ed

has also acted in disputes concerning PHI schemes, to the Court of Appeal, pension entitlements,

parachute payments and wrongful dismissal. Ed has recently advised a former employee in respect of a

confidentiality covenant in connection with a £350 million commercial dispute. In addition to his litigious

work, Ed is experienced in reviewing and drafting restrictive covenants.

Insolvency

Ed's insolvency practice complements his commercial and company work. In this area he is again

recommended by Chambers UK as "highly experienced". Ed is regularly instructed in unfair prejudice and

just and equitable petitions as well as applications to set-aside statutory demands or restrain petitions.

Recent cases include:

• an important case concerning the interplay between the CVA regime and s 203 of the Employment

Rights Act 1996 (which avoids contracts compromising statutory employment claims unless they

meet certain safeguards)

• a dispute as to the proper application of funds from a failed CVA

• cases concerning breach of the moratorium imposed by administration

Company

In respect of shareholder disputes, Ed regularly advises companies and shareholders. The combination of

his commercial and employment experience enables Ed to advise upon any shareholder claims or disputes

as to the appointment or removal of directors as well as issues of wrongful and unfair dismissal. Ed acts in

unfair prejudice and just and equitable winding up petitions.

Ed has particular experience of acting in cases concerning the disqualification of directors; both for the

Treasury Solicitor and individual directors.

Franchising

The combination of his contract commercial and employment expertise enables Ed to add extra value

when dealing with franchise disputes. He has particular experience of acting in injunction and damages

claims against franchisees. He is an acknowledged expert upon restrictive covenants and advises

authoritatively on the enforceability of restrictions placed upon the franchisees or their employees. He also

advises on TUPE and other employment issues following the termination of a franchise. In addition to his

litigation work, Ed has experience of reviewing franchisors' terms and conditions and recommending

appropriate amendments.

Employment

The majority of Ed's employment practice is at the High Court. However, he also has significant

experience of handling complex cases before the Tribunal, the EAT and Court of Appeal.

Ed has represented Birmingham City Council and central government departments in major and sensitive

employment cases for many years. He has particular experience of race, sex and disability discrimination

cases. Recent cases include:

• 32 day race discrimination case

• 4 week whistle-blowing case

• psychiatric injury disability discrimination case for the Court Service

Alternative dispute resolution

Ed has been trained in the art of mediation advocacy. He has represented clients in a number of high

value mediations. In particular he led the claimant's team in a 2 day mediation in respect of a US$100

million claim in the ICC International Court of Arbitration against a team from Herbert Smith. More recently

he led mediations in respect of a £7 million professional negligence claim and a £2 million commercial

dispute about an international supply contract. While high quality advocacy is an important component in

achieving a satisfactory settlement, Ed believes that mediation advocacy requires a different skill set from

that needed in the court room. Ed's relaxed but confident and authoritative manner enables him to work

well within a team in order to achieve the best possible outcome.

Interests

Ed is married with three children. He lives in rural Worcestershire and enjoys tennis and his parrots!

Practice Manager Justin Luckman T: 0121 246 7050 F: 0121 246 7001 E: [email protected]

St Philips Chambers

55 Temple Row Birmingham B2 5LS

Tel: 0121 246 7000 Fax: 0121 246 7001

www.st-philips.com

Marc Brown [email protected] Call: 2004 Education: Bachelor of Civil Laws (Vinerian Scholar) (2004 - 2005)

Inns of Court School of Law - Bar Vocational Course (2003 - 2004) BA (Hons) Jusrisprudence - Mansfield College, Oxford (2000 - 2003)

Introduction

Marc joined St-Philips Chambers in 2006 after having completed his 12 months pupillage where he was

primarily supervised by Ed Pepperall. He has a busy Chancery and Commercial practice, with a strong

emphasis in areas of Commercial and insolvency work.

Commercial

Marc undertakes work in all areas of commercial practice, regularly appearing in interim applications and

trials in relation to commercial matters. He is regularly instructed across the full range of commercial

disputes, including supply and sale of goods and services, contractual disputes, disputes regarding hire

purchase, lease purchase and other asset finance agreements and debt claims.

Banking

Marc has undertaken work on behalf of major banks in relation to the recovery of sums due, including the

defence of counterclaims raised in response. He also has experience of work involving the validity and

enforcement of guarantees and other security.

Areas of expertise • Commercial

Memberships

• MCCBA

Company

Marc has a keen interest in company law, related to his busy corporate insolvency practice and in this

regard has advised on and undertaken various applications to restore companies to the register and other

company law work.

Insolvency

Having studied corporate insolvency as part of his BCL, Marc took an early and strong interest in matters

of insolvency law which has resulted in his developing a strong and busy practice in the same. He has

advised on many aspects of insolvency practice, and has experience of being led in high value and

complex insolvency case.

Marc’s experience in court has taken him across the full range of insolvency matters, from regular routine

winding up petitions, to the House of Lords in a case involving the liability of invalidly appointed receivers.

Personal Insolvency

• advising and appearing on transactions at an undervalue and preference cases

• applications to set aside statutory demands

• appearing on bankruptcy petitions on behalf of creditors and debtors

• appearing on behalf of trustees in applications for possession and sale of property

Corporate Insolvency

• advising administrators and directors on transactions at an undervalue and preference (including

being led in high value cases)

• regularly appearing on behalf of companies, petitioning and supporting creditors on winding up

petitions

• applications to restrain presentation or advertisement of winding up petitions

• application by Liquidators for permission to bring proceedings prior to convening liquidation

committee

• liability of invalidly appointed receivers

St Philips Chambers 55 Temple Row Birmingham B2 5LS Tel: 0121 246 7000 Fax: 0121 246 7001www.st-philips.com

Practice Manager Justin Luckman T: 0121 246 7050 F: 0121 246 7001 E: [email protected]

Professional negligence

Marc acts for both claimants and defendant in relation to professionals (including solicitors, surveyors,

insolvency practitioners and others) and liability arising out of their services. This is assisted by his

background in a wide array of commercial and insolvency work.

He has dealt with a number of medium sized actions against solicitors, including the defence of an action

brought against solicitors at a multi-day trial.

Alternative Dispute Resolution (ADR)

Marc has been involved in mediations in commercial matters and brings a realistic and client-focused

attitude to such meetings.

Reported cases

• OBG v Allan [2007] UKHL 21; [2008] 1 A.C. 1 – the leading case on economic torts and the scope of

the tort of conversion, in the context of liability of invalidly appointed receivers.

Publications

Marc regularly delivers in-house seminars, both at St Philips chambers and at solicitors offices.

Interests

• Snowboarding

• Mountain Boarding

• Travel

• Food and drink

Robert Mundy

[email protected]

Call: 2008

Education: : First Class in Law with European Legal Studies, Trinity Hall, Cambridge.

Introduction

Rob joined St Philips Chambers in 2009 after successfully completing pupillage, supervised by Edward Pepperall. Rob

has a busy commercial and employment practice. He is equally happy drafting, advising and appearing in court.

Robert graduated from Trinity Hall, Cambridge with first class honours. As part of his degree, he spent one year

studying law at the University of Regensburg, Germany. He is a recipient of the Queen's Mother Scholarship, awarded

by Middle Temple.

Commercial

Rob appears regularly in commercial cases in the County Courts, both at interlocutory hearings and at trial.

Rob has a busy advisory practice covering a wide variety of commercial disputes. In recent cases he has advised on

matters as varied as trusts, guarantees, share sale and purchase agreements, promissory notes, arbitration

agreements, distribution agreements, consumer credit agreements, leases, witness immunity and professional

negligence.

Rob has an interest in cases with an insolvency or chancery overlap. He has recently advised on the creation and

interpretation of Quistclose trusts and the prospects of setting an inter vivos settlement aside as a transaction

defrauding creditors.

Areas of Expertise

• General Commercial

• Employment

• Housing and Homelessness

Insolvency

Rob practices both in personal and corporate insolvency law. He appears regularly in the county court in bankruptcy

and winding-up petitions, applications for the sale of property and an assortment of other hearings.

Rob has a growing advisory practice. Led by Lance Ashworth QC, he has advised administrators on the construction

of a Quistclose trust.

Employment

During pupillage Rob gained experience of complicated employment disputes, both in employment tribunals and

the High Court. He now appears regularly in employment tribunals, acting for both claimants and respondents, in

unfair dismissal, wrongful dismissal, discrimination and breach of contract cases.

Rob has advised on a number of employment disputes. He has a particular interest in cases where there is an

overlap between employment and commercial or company law.

In recent months, Rob has represented the respondent in an indirect religious discrimination claim involving expert

evidence on Islam. He has advised a local authority on claims brought for enhanced pensions based on the age

discrimination regulations. He has advised a bank director on the interpretation of restrictive covenants.

Crime

Rob prosecutes and defends in Magistrates’ and Crown Court cases.

Interests

Rob enjoys travel, mountaineering and triathlon

Practice Manager Details:

Stuart Smith

T: 0121 246 2065

F: 0121 246 7001

E: [email protected]

St Philips Chambers

55 Temple Row Birmingham B2 5LS

Tel: 0121 246 7000 Fax: 0121 246 7001

www.st-philips.com