Personal Injury Update – July 2014

Published: 01/07/2014 | Newsletters, Personal Injury


Contents

  • News
  • Periodical Payment Orders: 10 Years On
  • Stealthy Changes In Civil Procedure
  • Case Law Update

News

Nigel LeyBy Nigel Spencer Ley

In the seven months since the judgment in Mitchell was handed down, we have seen an end to sensible co-operation between litigators, a huge rise in satellite litigation (unnecessary applications to court and appeals from draconian orders), and the creation of a constant atmosphere of mistrust and anxiety. It now turns that the decision in Mitchell was entirely correct, but has been misunderstood by “hard-pressed first instance judges”.

The Court of Appeal said in Mitchell that the two factors set out in rule 3.9 (to be considered on an application for relief against sanction i.e. the need to litigation to be conducted efficiently, and the need to enforce compliance with rules and directions) were of “paramount importance”. How foolish of those hard-pressed first instance judges, and all the rest of us, to think that paramount meant … well paramount (i.e. trumping all other factors). It now transpires that the court can and should in addition consider all the circumstances of the case (i.e. doing justice on the merits of the actual dispute between the parties).

While it would be churlish not to welcome the Court of Appeal’s decision in Denton (see Case Law Update) it is galling to see a U-turn dressed up as clarification, particularly when it is combined with a sanctimonious telling off for litigators who have merely tried to apply the Court’s original decision in their clients’ best interests.

In this month’s Newsletter Andrew Wille undertakes a comprehensive review of Periodical Payments. Matt Kerruish-Jones alerts us to some important changes to the way in which the civil courts will organized, which many of us (myself included) may have missed. The Case Law Update was prepared by Freddy Lyon.

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Periodical Payment Orders: 10 Years On

Andrew WilleBy Andrew Wille

It may be hard to credit but we are now into the 10th year of practice since the Damages Act 1996 was amended (SI 2005/547) so as to enable courts to make Periodical Payments Orders (“PPOs”).

The legislative and regulatory framswork for PPOs is set out in:

  • Damages Act 1996 s.2, s.2A, s.2B, s.4
  • Damages (Variation of Periodical Payments) Order 2005
  • CPR r.41 Part II: from r.41.4 to r.41.10
  • Practice Direction 41B – Periodical Payments under Damages Act 1996

This paper does not offer a guided tour of the above framework – the outlines of which will already be familiar to those who have worked in high value claims teams – but instead focuses on the ways in which PPOs are being used in practice, how various controversies have been resolved by the courts and how parties are adopting creative solutions to problems thrown up in their cases.

Are PPOs Always A Good Thing?

The first point to note is that, in contrast to the structured settlements which preceded them, PPOs have flourished. They have been widely adopted and are routinely agreed to at JSMs by defendant insurers in the larger cases. The NHSLA and the MIB positively embrace PPOs. Others have recognised, pragmatically, that the court will often order one even if the defendant objects.

The key to the popularity of PPOs is the limitations of the system of lump sum compensation they replace or supplement. The cornerstone of the law of damages is the principle of full compensation. But the award of a lump sum to compensate for future loss (the traditional multiplier/multiplicand approach) is bound to result in either under-compensation or over-compensation in circumstances where:

  • Life expectancy is uncertain and the court’s assessment of it will almost always be wrong: Claimants who have exceeded their life expectancy may well exhaust their damages in old age. By contrast, where claimants have died sooner than expected, estates have received unwarranted windfalls at the expense of insurers. The more uncertain the life expectation of a claimant, the more attractive the PPO option becomes for all parties.
  • The rate of return on monies invested cannot be accurately predicted: the statutory discount rate of 2.5% presumes a net rate of return (over and above inflation) that for years now has not been achievable in risk-free deposit accounts. The cost of obtaining investment advice to devise other investment strategies is not recoverable.
  • Inflation on carers’ wages has historically been far higher than the Retail Prices Index (RPI) thereby requiring an even better investment return in order for a lump sum to meet outgoings without being used up.

Of course, not all claimants can be persuaded that locking up their millions in an insurance-administered annuity is a good thing. Clearly claimants lose flexibility and independence in so doing.

Cases where PPOs are conventionally eschewed are those where:

  • Future need is too variable and hard to predict,
  • Liability has been apportioned, or
  • There is too little money at stake.

PPOs are rarely adopted where liability has been apportioned[1]. The reasoning usually adopted is that an 80% award could not be used to finance a 100% PPO for care without borrowing too heavily from other heads of claim. This may be sensible, particularly where the claimant already needs to dip into the residual award in order to finance a property purchase.

This avoidance of PPOs in cases of liability apportionment should not, however, be automatic. A PPO is an attractive investment vehicle regardless of the completeness of the compensation award. Many financial advisers would welcome the inclusion in their clients’ portfolios of a risk-free, inflation-proofed source of annual income. A PPO can be made to work in circumstances where:

  • The annual cost of care can be cut (after judgment) to fit the cloth by, for instance, doing without two daytime carers, or by the spouse undertaking some of the care gratuitously, or by opting for a live-in carer;
  • A full, ongoing care package is essential, in which case one might consider converting other heads of loss into a PPO so that 100% of the funding will still be in place for care.

How low can you go? Although there is no formal threshold below which a PPO should not be considered, an equivalent lump sum value of £1m+ is probably the minimum (say approximately £20k pa). Below this the administrative cost of setting up and running a PPO would make it unattractive as an option for insurers to agree to, although it might still be ordered[2].

Heads Of Claim: are PPOs ever used other than for care and case management?

Very occasionally. The vast majority of PPOs are confined to the future cost of care and case management. This makes sense in circumstances where:

  • Care is often the biggest annual outlay
  • Care needs are reasonably predictable and stable
  • The cost of care can be conveniently index linked to ASHE 6115
  • A residual lump sum is required to give a claimant flexibility, so that there is a reasonable reluctance to commit any other heads of claim to a PPO that would otherwisw be available as cash.

Loss of earnings: Rarely incorporated into a PPO for the above reasons, and also because most claimants expect to survive to retirement age and so the financial bonus of outliving their expected lifespan does not apply.

There may, however, be circumstances where it would be sensible for future loss of earnings to be the subject of a PPO[3]. Such a case might be where:

  • The claimant does not need a large lump sum to buy accommodation (his home is already suitable or he has already moved or he is in residential care);
  • The claimant is particularly concerned that his family should continue to benefit from his earnings up to his notional retirement, without having to worry about investment return;
  • The claimant’s career was in a sector which can be conveniently linked to an ASHE index (especially if it is a sector which it is suspected will outperform RPI – web design? plastic surgery? not self employment)

An underused facility is the ‘lost years’ PPO, see CPR r.41.8(2). A claimant can seek to recover his loss of earnings on a PPO and, on the basis that he is expected to die early as a result of the negligence of the defendant, a lost years PPO for the benefit of his estate up to his ordinary retirement age (together with a PPO for lost pension thereafter if applicable).

Court of Protection: Where a claimant lacks capacity and will not regain it, a PPO for the annual deputy costs makes perfect sense (stripping out court fees and statutory will costs to be awarded as a lump sum). The cost is annual, stable and lifelong. A PPO has the advantage of securing a deputy’s fees and avoiding the prospect of a dispute arising between the deputy and the family in respect of this outlay.

Where capacity is controversial, an insurer may well not be prepared to contemplate a PPO. In those circumstances, if the claimant is reasonably confident, it may progress matters to insist upon a trial of capacity as a discrete issue.

Where the experts (or some of them) say that there is a prospect of capacity being regained at an uncertain point in the future, an insurer is very unlikely to agree to a PPO and/or may insist on a provision that the PPO be terminable on the restoration of capacity (subject to a resumption if capacity was again lost).

This is difficult territory. Notwithstanding a combined approach by the parties in AA v (1) CC (2) MIB [2013] EWHC 3679 (QB), Swift J refused to make a PPO in such terms on the basis that she did not have the power to do so. When it was suggested to her that the parties enshrine such terms in a Tomlin order attached as a schedule to the order, rather than in the order itself, she indicated that she would in principle be prepared to approve such an order. This is an example of a case where greater flexibility can be achieved via a Tomlin order than can be achieved via a direct court order.

Careful thought would need to be given to the terms of such a Tomlin order. How would the regaining of capacity be determined? By which experts? At whose expense? With what right of redress if the determination was challenged? What of the costs of assisting a claimant in the management of his financial affairs if he can only regain capacity if supported in his decision-making by professional advisers?

Prosthetics: This is another head of claim that, on the face of it, is well suited to a PPO, with significant, regular outlay over the course of a lifetime in the context of an indispensible aid. Proper indexation is, however, an unresolved problem (see below).

Indexation & Percentiles

The court can, and usually does, depart from the RPI in favour of inflation indices that are more sensitive to the price fluctuations in the area of expenditure relevant to the PPO. Wage inflation is the main driver of care costs, not retail prices, and therefore reference to the Annual Survey of Hours and Earnings (ASHE) is fair and appropriate, Flora v Wakom (Heathrow) Ltd [2007] 1 W.L.R. 482, Thompstone v Tameside & Glossop NHS Trust [2008] EWCA Civ 5.

Most commonly, care costs are index-linked to ASHE 6115 (care assistants and home carers)[4]. Case management is almost always lumped in with care costs and also linked to ASHE 6115. This is illogical but convenient. Case managers command a significantly higher hourly rate (c.£95/hr) than, say, support workers (c.£12/hr), but there is not an ASHE pigeonhole into which they can be conveniently slotted.

[4] The ONS carried out its ten yearly revision of categories in 2010 and decided to sub-divide ASHE 6115 into 2 sub-categories, creating ASHE 6145 (care workers and home carers) and ASHE 6146 (senior care workers). In recognition of the importance of ASHE 6115 to PPOs, the ONS continues to publish ASHE 6115, albeit that the methodology has changed. The above required the NHSLA to return to court to seek a revision of its model order, which nettle was grasped by Swift J in RH (A Child) v University Hospitals Bristol NHS Foundation Trust [2013] EWHC 299 (QB).

Court of Protection: Likely reference points would be either ASHE 2413 (the index for solicitors) or ASHE 241 (the index for legal professionals).

Prosthetics: Some insurers are amenable to offering a PPO in respect of prosthetic costs. But what should prosthetics be index-linked to? There is no obvious reference point. They are predominantly products rather than services, albeit that much expertise goes into their design and fitting. The case for linking them to wages seems week. Yet linking them to the RPI (which some insurers offer) also seems inadequate as it seems certain that prosthetic costs will soar with technological advances. A suggested solution such as RPI + 2% seems arbitrary.

It may be that a partial solution can be provided outside of the PPO, by claiming an additional contingency as a lump sum to reflect the estimated increased prosthetic costs that will come with medical advances. You will have to invite your prosthetics expert to gaze into a crystal ball.

What percentile?: A PPO will need to specify not only the relevant ASHE category – e.g. ASHE 6115 – but also the applicable percentile. This should be the percentile of earners that most closely approximates to the hourly rate awarded by the court or agreed by the parties. For care workers under ASHE 6115 it is customary now to agree to apply the 75th or 80th percentile.

There will, however, be cases where the higher 90th percentile is justified. This depends upon the ‘weighted average hour rate’ (WAHR) for the care package in question. See Swift J’s judgment in Thompstone [2006] EWHC 2904 (QB).

In a case where the expensive case management component is relatively high and the actual hands-on care is relatively low (for example a modest brain injury case) then the WAHR will be high and the 90th percentile is justified.

Victoria Wass’ website has some helpful information on calculation of the WAHR.

Step Changes & Variation

Staged increases or decreases that can be predicted to take place at a certain date can be built into the original PPO, CPR r.41.8(3). The Practice Direction (41PD 2.2) gives as examples:

A determination that the claimant’s condition will change leading to an increase or reduction in his or her need to incur care, medical or other recurring or capital costs;

  • Gratuitous carers no longer continuing to provide care;
  • The claimant’s educational circumstances changing;
  • Promotional increases in pay;
  • Retirement.

It is for the court making the PPO to determine when the key event will likely take place. If the happening of the event is wholly uncertain, and incapable of being predicted, then it is beyond the powers of the court to incorporate such uncertainties into a PPO. See the reasoning of Swift J in AA v (1) CC (2) MIB [2013] EWHC 3679 (QB) where the uncertain event was the claimant regaining capacity.

In those circumstances, faced with a judge anxious not to overstep his or her powers but nonetheless keen to assist, parties may wish to consider the pragmatic solution identified in that case, namely putting the same terms into a Tomlin order which can then be approved.

In practice parties have been incorporating inherently uncertain events into PPOs and these have been approved by other judges. For example:

  • A stepped increase in care if and when a marriage fails;
  • A commencement of payments if and when a PCT lawfully ceases to fund a claimant’s care, accommodation and therapies.

Whether by direct order, or by Tomlin order, these are creative solutions to the practical problems that such cases throw up, and which suit both sides.

Variation: An alternative power to apply to vary a PPO – akin to (but not to the exclusion of) a provisional damages power – is set out in the Damages (Variation of Periodical Payments) Order 2005:

If there is proved or admitted to be a chance that as some definite or indefinite time in the future the claimant will-

  • As a result of the act or omission which gave rise to the cause of action, develop some serious disease or suffer some serious deterioration, or
  • Enjoy some significant improvement, in his physical or mental condition, where that condition had been adversely affected as a result of that act or omission,

the court may, on the application of a party, with the agreement of all the parties, or of its own initiative, provide in an order for periodical payments that it may be varied.

It will readily be seen that this power:

  • is contingent upon it having been admitted or proved at trial that there is a chance of future deterioration/improvement at some time in the future;
  • operates both ways (improvement as well as deterioration) so that it is of potential interest to defendants as well as to claimants.

A typical example of a variation in operation would be a spinally injured claimant claiming for the chance of the development of syringomyelia.

The Small Print: Can You Agree To Disagree?

Yes and no. If there are fundamental disagreements as to the amount or timing of a PPO then there is clearly no agreement and the matter should be tried. In practice there have often been a number of more minor skirmishes between parties around the edges of a substantively agreed model order. In those circumstances the court has been prepared to resolve residual issues and the Court of Appeal has confirmed that it has jurisdiction to do so, Wallace v Follett [2013] EWCA Civ 146.

The model order approved in Thompstone has now been slightly revised by Swift J in RH v Bristol NHS [2013] EWHC 299 (QB) in response to methodological changes at the ONS. A template can be found at the end of Kemp Chapter 23.

There remain some skirmishes between claimants and insurers over the small print of the model order. It is advisable to try to iron out as many of these issues as possible at a JSM when (if) the spirit of goodwill and compromise is still in the air. Such disputes include:

  • Whether there should be a pro rata payment running from the day of the JSM or trial up to the first instalment of the PPO (usually 15th December, when the PPO customarily commences, and the anniversary for annual inflationary increases). There should be. Do not overlook this. Also, cater for the unfortunate possibility that the claimant may not survive until then. Should there be any repayment of the pro rata payment or does it form part of the claimant’s judgment sum? Clear wording can prevent a dispute arising at a time when the family will be grieving and will not want to be troubled.
  • Must the claimant be subjected to medicals in order for the insurer to revalue its reserve? Yes, upon reasonable notice, the cost of which is to be paid for by the insurer, with permission to the claimant to apply in the event of reasonable concern as to the nature or extent of such examinations, Wallace v Follett [2013] EWCA Civ 146.
  • In the year that the claimant dies, should the claimant’s estate repay the amount that relates to that portion of the year the claimant did not survive? Yes, subject to reasonable reductions for the cost of winding up the care package. Should interest be payable on any repayment owed? If so, at what rate? Yes. At the judgment debt rate (8%) according to Stuart-Smith J in Ali v (1) Caton (2) MIB (23rd July 2013).

[1] See, for example, Gillen J in Gilliland v McManus [2013] NIQB 127 where a 20-25% deduction for contributory negligence was regarded as having frustrated the prospect of a PPO.

[2] In Ali (a Protected Party) v (1) Caton (2) MIB [2013] EWHC 1730 (QB) the net annual payment for care for the opening years (when the claimant was expected to be still at home with his parents) was just £14,500.

[3] For a reported example see Whiten v St George’s Healthcare NHS Trust [2011] EWHC 2066 (QB) where the claimant’s predicted life expectancy was to age 35.

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Stealthy Changes In Civil Procedure

260115-farrars.0344 copyBy Matthew Kerruish-Jones

Amendments to Civil Procedure has been abundant in recent times especially with changes to the overriding objective and when seeking relief from sanctions. It is, perhaps, unsurprising that other aspects of procedural change pass by unnoticed.

In April 2014, the Civil Procedure (Amendment) Rules 2014 came into force which, amongst other things, herald the introduction of a single national court together with a variety of other measures. It would appear that the intention by government was to improve court services and procedure. A more cynical view may be that the Treasury is and was attempting to make savings where possible.

The following paragraphs represent a short summary of some of the more notable changes:

Sections 17(1) and (2) of the Crime and Courts Act 2013 provide for the removal of jurisdictional geographical boundaries of county courts to allow for a single national county court. Such ‘national’ courts will, in practice, remain based in existing county courts and High Court. In effect, judges will no longer be bound by the old district boundaries and will be able to sit in any part of the country which should allow court resources to be best deployed.

As part of this implementation there has been a change in terminology. For example, references to a “county court” are now revised to “home court” in order to reflect the national jurisdiction with the address of the property or party being used to establish a local hearing centre. Further, “designated money claims” made under Part 7 of the CPR will now be processed at one of two business centres. Cases will no longer be judicially “transferred” but rather “sent between court offices” when moving between county courts.

Part 8 claims and possession claims that cannot be issued online may now be started at any County Court office and will be sent to the appropriate hearing centre by that office which, in theory, should provide court users with a choice of location when issuing a Part 8 claim.

In addition to the substantive changes brought about by the amendments it is worth pointing out some miscellaneous amendments of note. Firstly, there is an amendment to the High Court and County Court Jurisdiction Order which determines whether claims are issued in the County Court or High Court. In claims where a party expects to recover no more than £100,000 (excluding personal injury claims) must now be issued in the County Court rather than the High Court. The increase from £25,000 to £100,000 is intended to remove straightforward claims from the High Court to the County Court and to increase the judicial resources available with more complex cases (whilst seemingly clogging up the County Court with more case work).

A second change created by the amendments relates to the Small Claims mediation scheme currently operating as a pilot scheme. For those claims under £10,000 where all parties indicate they wish to mediate the claim will now be referred to HMCTS Small Claims Mediation Service. The advantage for court users here is that the scheme is free and there is no need for a formal court hearing should a settlement be reached although a claim can be restored if parties fail to comply with the agreement.

Thirdly, amendments are made to allow any person who, for the purposes of the Legal Services Act 2007, is an authorised person in relation to an activity which constitutes the conduct of litigation (within the meaning of the Act) to be entered on the court record. This has the practical effect of allowing legal executives, costs lawyers, patent attorneys, trade mark attorneys and barristers to conduct litigation from 2015.

In summary, it would appear that these changes could potentially change the familiar way in which many practitioners litigate, at least in theory. If judges are now unrestricted in where they sit it could mean that there is an increased likelihood of coming across less familiar faces. In addition, it will also mean that from next year litigation can be conducted by several different types of practitioners. More worryingly, it would seem the County Court is going to get busier, possibly in addition to the “rationalisation” of staff, as the High Court attempts to filter down all lower value multi track work.

On a more positive note, given recent experience, lawyers will probably get a lot busier given the changes.

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Case Law Update

180215-1.258 copyBy Frederick Lyon

(1) Charles Graham Denton (2) Mary Denton (3) Rodger Thomas Denton v (1) TH White Ltd (2) De Laval Ltd

Decadent Vapours Ltd v (1) Joseph Bevan (2) Jamie Salter (3) Celtic Vapours Ltd

Utilise TDS Ltd v (1) Neil Cranstoun Davies (2) Bolton Community College Group (3) Watertrain Ltd

[2014] EWCA Civ 906

(Lord Dyson (MR), Jackson LJ, Vos LJ)

Significance: The court clarified the proper approach to be taken when considering an application for relief from sanctions setting out a three stage approach. The court also warned that opportunism and unreasonably contested application made to attempt to capitalise on minor rectifiable mistakes would be punished by costs sanctions.

Facts: The court considered three conjoined appeals. In Denton a party failed to serve witness statements within the time set by the court at first instance. They served 6 further statements one month before trial, resulting in it being adjourned. The reason that was given was a material change in circumstances. Relief was originally granted. In Decadent relief was sought due to late payment of court fees. A cheque was sent a day late but never arrived, the fees were eventually paid three weeks late. Relief from sanctions was originally refused at first instance. In Utilise the Claimant was 45 minutes late in filing a costs budget and 13 days late in notifying the court of the outcome of negotiations. The court at first instance, considering both breaches together, refused relief from sanctions.

The Court of Appeal took the opportunity to offer guidance on the approach to relief from sanctions applications in practice.

Held: While it was considered that Mitchell v News Group Newspapers [2013] EWCA Civ 1537, [2014] 1 WLR 795 remains good law the way in which it had been applied was not always consistent. The court laid down a three stage approach. Firstly the court must consider if the breach was serious or significant (note this would appear to be a different and lower hurdle than the test laid down in Mitchell that the breach must be non-trivial). The court was at pains to state that while relief would usually be granted in cases where breaches were not serious or significant the judge should at least consider all three stages. Secondly the court will look at the reasons for the breach, the court referred back to the guidance in Mitchell as to what constitutes a good reason. Thirdly and finally, even if both of the first two tests have been failed, the court may still grant relief from sanctions where the court, considering all the circumstances of the case, considers it necessary to deal with the matter justly and proportionately. In considering the circumstances of the case the two factors listed in CPR r.3.9 should be given greater weight although they should not be treated as paramount (LJ Jackson dissenting, considered that the factors should always be considered but not be given precedence over other factors). In assessing the way that a court should approach the three stage exercise it is useful to note that the judges commented that in Decadent and Utilise the court at first instance had been too draconian, while in Denton the court had been too lax.

The Court then went on to state obiter that it would be inappropriate for parties to make applications in order to capitalise on small mistakes and that such applications should incur cost sanctions. It advised parties to bear in mind the importance of cooperation between the parties and their legal representatives and suggested that cost sanctions should act as a disincentive to satellite litigation.

Pervez Akhtar v Jordan Boland

[2014] EWCA Civ 872

(Gloster LJ, Floyd LJ , Sir Stanley Burnton)

Significance: Any sum accepted in a defence can be treated as an admission. This can have the effect of reducing the amount in dispute in the claim which can, in turn, be reflected in the track allocation decision.

Facts: The claim arose out of a road traffic accident. The appellant (A) claimed damages totalling £6392.80 (prior to the raise in the small claims limit to £10,000) from the respondent (B) in his particulars of claim. In his defence B admitted damages amounting to £2496. The judge gave judgment for the admitted £2496 and allocated the claim to the small claims track. A appealed the allocation decision contending that the mention of £2496 in the particulars only amounted to an offer and not a full admission. He did not apply to set the judgment aside but appealed firstly unsuccessfully and again to the Court of Appeal.

Held: As there had been no application to set aside the judgment the judge was entitled to consider CPR pt. 26 to determine how to allocate the claim. Under r.26.8(1)(a) the financial value of the claim was to be determined disregarding any sum not in dispute. In this case the only sum in dispute was the balance of the claim which was below the small claims track limit. If followed that where a pre-allocation admission was made by a defendant that reduced the value of a claim to below £10,000 the normal track for allocation would be the small claims track.

George Collins v (1) Secretary of State for Business Innovation & Skills (2) Stena Line Irish Sea Ferries Ltd

[2014] EWCA Civ 717

(Jackson LJ, Lewison LJ, Macur LJ)

Significance: A judge is entitled to consider all the circumstances of a case, including pre-limitation effluxion of time, when deciding whether to disapply the limitation period under s.33(3) of the Limitation Act 1980. Although, such a factor is to be given less weight than those specifically set down in s.33(3)(a)–(f).

Facts: The claimant (C) had been a dockworker between 1947 and 1967 for the edecessors of the respondents (S). During his employment he had unloaded asbestos. In 2002 he was diagnosed with inoperable lung cancer. His doctor (P) examined him numerous times between 2002 and 2008. C instructed solicitors in 2009. It was accepted that this was the date of actual knowledge of his possible entitlement to claim. It was held that C had constructive knowledge for the purposes of s.14(3) by 2003 as it would have been reasonable for him to have questioned the cause of his condition and P would have informed him that exposure to asbestos in his working life was one possible cause. C’s claim form was issued in 2012. The judge held that, by virtue of C’s constructive knowledge, limitation had run out in mid-2006, The judge found that, having considered the factors laid down in s.33(3)(a)-(f) and the considerable time that had elapsed between S’s alleged breach of duty and the time when limitation started to run, that it was inequitable for the limitation period to be disapplied under s.33. C appealed both the finding of constructive knowledge and the decision not to disapply the limitation period.

Held: (1) In the circumstances the judge was correct to find that C had constructive knowledge in 2003. A reasonable person in C’s position would have asked about the possible causes of lung cancer. Had C asked P would have informed him that asbestos exposure was one such possible cause.

(2) The time that elapsed between the alleged breach of duty and the point at which limitation started to run was considerable. The judge was entitled to have regard to it as one of the ‘circumstances of the case’. The primary factors that the court was to have regard to were set out in s.33(3)(a)-(f) and these were to be given more weight. That said there was nothing to prevent the judge having regard to the pre-limitation period effluxion of time as one of the relevant factors. In this case the judge had not attached undue weight to that factor.

Andrew Groarke v Cecil Fontaine

[2014] EWHC 1676 (QB)

(Sir David Eady)

Significance: Where there is no prejudice suffered by a Claimant as a result of a late amendment of a personal injury defence, that amendment ought to be permitted when the only result of a refusal would be prejudice to the defendant, a waste of court resources or inconvenience to other court users. While the court was encouraged to make robust case management decisions under the new regime these decisions could none the less be wrong. Helen Hobhouse appeared for the applicant/defendant.

Facts: The defendant (F) appealed against a decision by a district judge refusing him permission to amend his defence in a personal injury claim brought by the claimant (G) in order to plead contributory negligence by G.

F’s defence denied liability and contained the words “the Claimant caused the collision”. It did not include an explicit claim for contributory negligence, although it was obvious that the defence was critical of G’s driving, referring to his losing control because of travelling too fast. Counsel for F instructed just before trial advised a plea of contributory negligence by way of amendment and F applied to do so at the beginning of the trial, but permission was refused. Judgment was entered against F on a full liability basis. The district judge refused the application to amend on the grounds that it should have been made in writing and supported by evidence. Following the trial the judge remarked, obiter, that F’s liability would have been reduced by one-third had contributory negligence been pleaded.

F appealed the decision.

Held: Despite the general drive for case management decisions to be more robust, discipline should not be imposed for its own sake. Counsel for F had informed the judge why the application was being made late and there would have been nothing added by having the same confirmed in a witness statement. The amendment was consistent with the case as pleaded. In attending to the detail of the recent authorities on the issue the judge had failed to see the overall picture. Justice required that the amendment be allowed so as to allow the real issue between the parties to be adjudicated Cobbold v Greenwich LBC followed. There was no prejudice to G in allowing the amendment. Indeed the judge was able to make a finding apportioning liability at the end of the case (albeit that this was obiter). In the circumstances the only result of a refusal would be that G would receive a windfall and accordingly the amendment should have been allowed.

Scotbert Gordon v Osra Fraser (No1)

Ch D (N Strauss QC) 16/06/2014

Significance: While the approach demanded of the courts by Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 W.L.R. 795 is robust and unforgiving there it also incorporates a degree of flexibility in order to satisfy the overriding objective. It may be relevant to consider the prospect of further satellite litigation in considering whether an order would be proportionate and fair.

Facts: The Claimant (G) alleged that the Defendant (F) had improperly withdrawn money from a bank account. G sought to call evidence from the branch manager of the bank. After a series of extensions of time a date for the exchange of witness statements was agreed. F missed this deadline by approximately 3 months. He was unable to provide a good reason for this. F sought the court’s permission to call the bank manager under CPR r.32.10.

Held: As the application had been made after the time for service had expired, it was governed by the principles relating to relief from sanctions in Mitchell v News Group Newspapers Ltd which contained a strict approach to default, and stipulated that its unforgiving doctrine be robustly applied. F’s breach was not trivial and was not explicable by any good reason. Ordinarily, therefore, Mitchell would not support relief from sanctions because there were no compelling circumstances. However, Mitchell was not entirely inflexible; the court still had to give effect to the overriding objective and ensure that its response to default was proportionate and fair, Associated Electrical Industries Ltd v Alstom UK [2014] EWHC 430 (Comm), [2014] 3 Costs L.R. 415 applied and Chartwell Estate Agents Ltd v Fergies Properties SA [2014] EWCA Civ 506, [2014] 3 Costs L.R. 588 followed. There was little guidance as yet as to the circumstances in which it would be appropriate to depart from the usual rule and, more particularly, as to the weight to be attached to the prospect of satellite litigation. The practical effect of refusing relief from sanctions varied considerably in different contexts. Where, for example, refusing an application for relief from sanction would lead to a negligence action against solicitors, issues for determination would be not only whether the solicitors’ default had been negligent, but also what loss had been caused. That would depend on what the outcome of the original action would have been, which might not be easy to decide. A different deterrent, such as allowing the case to proceed while imposing a wasted costs order, might be more effective. The extent to which the court had to take account of the likelihood of substantial satellite litigation resulting from a refusal of relief from sanctions was unclear, but a refusal of relief might be seriously counterproductive to efficiency and cost. It was also relevant that the basic aim of a trial was to correctly decide a party’s rights. The exclusion of relevant evidence risked imperilling the integrity of the judicial process, Durrant v Chief Constable of Avon and Somerset [2013] EWCA Civ 1624, [2014] 2 All E.R. 757 considered (see paras 2, 9-22 of judgment). In the instant case it was appropriate to allow F’s application. While her default was not trivial, it was not high on the scale of seriousness. To have tried the case without the only available independent evidence would have been very undesirable, and would have given rise to a serious risk of injustice and to the possibility of an inaccurate finding that F was a thief. As F’s default had not created a need for an adjournment, and had caused no prejudice to anyone, promoting rigorous compliance with court rules was neither proportionate nor justifiable (paras 3, 22-26).

Simon Patterson (Trustee in Bankruptcy of George Spencer) v George Spencer & 5 Ors

[2014] EWHC 1878 (Ch)

(Judge Carr QC)

Significance: When considering an application for relief from sanctions a court is entitled to have regard to the course of behaviour of the applicant, so far as it is relevant, at least, to the default in question.

Facts: The respondent (P) was a trustee in bankruptcy. P obtained an order debarring the applicant (B) from defending the action against her because of her breach of a court order. The applicant (B) applied for relief from sanctions. B made an application to set aside the debarring order which was refused. B filed an appellants notice seeking to appeal that order. The court ordered an appeal bundle to be filed including a transcript of earlier proceedings. This was not done. The court made an unless order to the effect that; if the transcript was not filed by a certain date, then the appeal would be struck out. B failed to comply and the appeal was struck out. B sought further relief from sanctions.

Held: The specific considerations referred to in CPR r.3.9 were of paramount importance and had to be given great weight. B’s default could not be viewed in isolation, it was part of a course of conduct. The court had granted her numerous indulgences which had resulted in adjourned hearings, wasted court time, delay and increased cost to P. B had demonstrated a persistent failure to comply with the rules and orders of the court and had prevented the litigation from being conducted efficiently and at proportionate cost. She appeared to regard delay as an end in itself. In all the circumstances it was not unjust to deny B relief from sanctions.

Americhem Europe Ltd (Claimant) v Rakem Ltd (Defendant/Part 20 Claimant) & George Walker Transport Ltd (Third Party)

[2014] EWHC 1881 (TCC)

(Stuart-Smith J)

Significance: A costs budget that is not signed by a senior legal representative but by a costs draftsman is not a nullity. Such a document can only be described as suffering from an irregularity and CPR r.3.14 (failure to file a costs budget) is not applicable. Howard Cohen appeared for the successful defendant.

Facts: The Defendant (‘R’)’s costs budget was in the form of Precedent H annexed to CPR PD 3E. While compliant in every other respect, it was signed by a costs draughtsman. He was included in the budget as a fee earner, but he had no involvement in the case other than the preparation of the costs budget. The third party (‘T’) submitted that the signatory was not a senior legal representative of R and that therefore the effect of the budget being signed by him was that it was a nullity. It argued that the consequence of that was that r.3.14 was applicable and R was to be treated as having filed a budget comprising only the applicable court fees.

Held: While there was no definition of a ‘senior legal representative’ a costs draftsman was unlikely to be regarded as a ‘legal representative’ for the purposes of CPR r.2.3(1) as they did not give legal advice or representation. In any event such a person could not be regarded as senior in this case as, among other reasons, his fees were lower than other fee earners working on the case. However, the irregularity did not render the costs budget a nullity. The document was in a form which stated that it was R’s costs budget and was immediately recognised as such. To hold that it was not would lack any form of reality or justification. In the circumstances, there was no need for relief from sanctions. The proportionate and just response, given that no-one had been significantly disadvantaged by the irregularity, was to require it to be remedied at R’s cost and to compensate T for the modest cost involved in bringing the matter to the attention of the court (see paras 9-14 of judgment).

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Author: Matthew Kerruish-Jones Farrars (chambers@farrarsbuilding.co.uk)


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Author: Frederick Lyon Farrars (flyon@farrarsbuilding.co.uk)


Author: Nigel Spencer Ley Farrars (nsley@farrarsbuilding.co.uk)