High Court highly critical of claimant’s costs budget

The court has criticised the claimant’s costs budget in a construction claim as “unreliable, disproportionate and unreasonable” and has set new budget figures indicating the maximum the claimant should recover in relation to each stage of the litigation, taking into account both past and future costs: CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd & Ors [2015] EWHC 481 (TCC).

The decision is particularly interesting for the court’s approach to costs budgeting where it takes the view that the costs already incurred by a party are far too high. Costs budgeting is essentially a prospective exercise. Under the relevant practice direction, the court cannot approve costs incurred before the date of a budget but can record its comments on them and take them into account when considering the reasonableness and proportionality of the subsequent costs.

Here the court gets round this issue by setting what are, in effect, composite budget figures, made up of: (a) the figures which, in the court’s view, would be recoverable on assessment in respect of incurred costs for each phase of the litigation; and (b) the approved budget figures in respect of estimated costs for each phase. To the extent the claimant actually recovers more on assessment than the figures estimated in (a), the budgeted figures in (b) will fall to be reduced pound for pound.

A striking feature of this case is that the total budget figure set by the court is £4.28 million for both past and future expenditure, which is less than the costs the claimant has already incurred. The decision is also of interest in suggesting that:

  • the complexity of a case may, in some cases, be more important than its value in determining whether costs are disproportionate; and
  • a party may be criticised for seeking to include overly widespread assumptions and contingencies, if the court considers that this is an attempt to undermine the budgeting exercise and give the party room to manoeuvre at a later stage.

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Think carefully about how you serve proceedings if you may need to enforce abroad

The High Court has refused recognition / enforcement of a Belgian judgment where the proceedings were validly served under Belgian law but did not come to the attention of the defendants before judgment was entered: Reeve & Others v Plummer [2014] EWHC 4695.

Where it is proving difficult to serve proceedings on a defendant, it may be tempting to seek an order for alternative service or deemed service from the court. While this may solve the immediate problem for the claimant, it can cause delays at the enforcement stage, particularly where the proceedings are undefended and enforcement is required in another country. In those circumstances, the court is likely to consider whether the defendant had a proper opportunity to defend the proceedings.

In the EU context, the court can refuse recognition and enforcement of a judgment in default if the defendant was not served with the proceedings in sufficient time and in such a way as to enable him to arrange for his defence (unless the defendant failed to commence proceedings to challenge the judgment when it was possible for him to do so) (Brussels I Regulation, Article 34(2) or Recast Brussels Regulation, Article 45(1)(b)).

In Reeve, the High Court held that whether a defendant has been able to arrange for his defence is a question of substance, not form, so it is not enough to show that the method of service is in accordance with local law. Careful consideration therefore needs to be given to the manner of service in order to prevent problems arising on enforcement. Continue reading

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Proceedings can be served at UK establishment of overseas company despite claim not arising from that establishment

The Commercial Court has held that proceedings can be served on an overseas company at the registered address of its UK establishment, under section 1139 of the Companies Act or alternatively part 6 of the Civil Procedure Rules, regardless of whether the claim relates to the business of that establishment: Teekay Tankers Limited v STX Offshore & Shipping Co [2014] EWHC 3612 (Comm). Although a first instance decision, the Court of Appeal has refused leave to appeal.

This ruling is likely to lead to time and costs savings for parties wishing to serve proceedings on an overseas company which has registered a UK establishment, as it avoids the need to obtain leave to serve out of the jurisdiction (where it would otherwise be required) and comply with the necessary formalities for service in the relevant overseas jurisdiction. John Corrie and Maryam Oghanna outline the decision below. Continue reading

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Planned huge increases to court fees expected to come into effect next Monday

Following approval of the relevant draft legislation by the House of Lords this evening, it is expected that the government’s planned increases to civil court fees will take effect on Monday 9 March. As reported in our previous post, the new fees to issue money claims over £10,000 will be calculated as 5% of the claim value, subject to a cap of £10,000 – roughly a fivefold increase over current fee levels for claims over £300,000.

Because the new 5% issue fee is an “enhanced fee”, aimed at recovering more than the cost of the services to which it relates, it could not take effect until the relevant statutory instrument was approved by both Houses, as it now has been. Assuming the Civil Proceedings and Family Proceedings Fees (Amendment) Order 2015 is made this week, it will take effect from next Monday.

The planned increases have been widely criticised, with concerns expressed as to their potential impact on access to justice, particularly for individuals and small and medium-sized enterprises, as well as potential damage to London’s position as a centre for international dispute resolution. Such criticism was reflected in a number of speeches in the House of Lords debate this evening, and in a proposed “motion of regret” stating that the House “regrets that the draft Order unfairly and inappropriately increases fees for civil proceedings above costs and so damages access to justice”. Ultimately, however, the motion of regret was withdrawn and the draft Order approved.

The Law Society and other bodies have issued a pre-action protocol letter for judicial review to challenge the fee increases – for more information see this article on the Law Society website.

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Article published: Mediation for in-house lawyers

Alexander Oddy and Jan O’Neill of Herbert Smith Freehills’ London office have published an article in PLC Magazine: Mediation for In-house Lawyers – Preparing for Success.

In-house counsel can play a critical role in the preparation for a mediation – both in working with any external lawyers to shape the mediation process and in briefing and counselling the business representatives who will be attending as decision makers or to facilitate the negotiation.  The article highlights the key issues that in-house lawyers should consider when preparing to mediate a dispute, to remove potential obstacles to settlement and maximise the prospects of it achieving a satisfactory result aligned with the business’s legal and commercial strategy.

This article was first published in the March 2015 edition of PLC Magazine – click here for the PLC Magazine home page.

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Settlement held to release further phone hacking claims that were not known about at the time

The High Court has struck out claims for phone hacking on the basis that they were compromised by settlement agreements previously agreed between the claimants and the defendant newspaper group: Brazier v News Group Newspapers Limited & Leslie v News Group Newspapers Limited [2015] EWHC 125 (Ch)

Although the settlement agreements were drafted narrowly, by reference to specific claim numbers and with no mention of future claims, the fresh claims fell within their scope. The original pleadings had been drafted sufficiently broadly to cover the new allegations, even though those allegations were based on evidence that emerged only after the settlement.

The decision is a useful reminder that the construction of a settlement agreement, like any other agreement, will turn on the words used in the relevant context and against the relevant background facts. Even if a settlement agreement appears on its face to be drafted narrowly, by reference to a specific claim number, it may be found to have a broader effect, depending on the extent of the claims made in the original statements of case.

The judgment also illustrates the limits of the often cited “cautionary principle” that a court will be slow to find that a party intended to settle claims of which it was ignorant at the time of the settlement, in particular drawing an interesting distinction between “known unknowns” and “unknown unknowns”. The decision suggests that where at the time of settlement a claimant is aware that there may be further claims, but is ignorant of the detail, a court may be more likely to conclude that the settlement was intended to cover such claims than if the possibility of further claims was completely unknown. Sam Waudby considers the decision further below. Continue reading

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Herbert Smith Freehills fraud bulletin published

Our trusts, fraud and asset tracing group has published its bi-annual fraud update, which includes the following articles:

  • Freezing injunctions: whose assets are covered?
  • A view from Hong Kong: top court looks at attribution of knowledge of fraudulent acts by directors to a company
  • Supreme Court corrects “wrong turn” in English law, holding that bribes received by an agent are held on trust for the principal
  • Freezing injunctions: the cross-undertaking in damages
  • A new freezing injunction in the UK? The European Account Preservation Order
  • Court of Appeal confirms an account of profits is available as a remedy for dishonest assistance
  • High Court rules that an order for disclosure should include the interests of the Respondent under a discretionary trust

Click here to download a copy.

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Jackson reforms will not be extended to insolvency proceedings from this April as planned

The government has today announced that it is scrapping its plans to end the insolvency exception to the Jackson reforms from April this year (as we had reported here). This means that CFA success fees and ATE insurance premiums will continue to be recoverable in proceedings brought by liquidators, administrators, trustees in bankruptcy, and companies in liquidation or administration. Recoverability in most other claims was, of course, abolished from April 2013.

In a written statement to Parliament, the government said that the initial two-year delay for insolvency proceedings was to give insolvency practitioners and other interested parties time to prepare for and adapt to the changes. However, the government now agrees that more time is needed. The existing exception will therefore continue “for the time being”. The statement adds that the government will consider the appropriate way forward for insolvency proceedings and set out further details later in the year.


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Company ordered to disclose documents in the control of its controllers

The Commercial Court has ordered a company to disclose documents in the hands of third parties (an individual and another company in the same group) on the basis that those parties exercised control over the company for the purpose of all matters relating to the litigation: Suez Fortune Investments Ltd v Talbot Underwriting Ltd [2014] EWHC 2848.

The decision arguably continues the recent judicial trend towards a broad interpretation of control for disclosure purposes, in appropriate circumstances, as for example in North Shore Ventures Ltd v Anstead Holdings Inc & Ors [2012] EWCA Civ 11 (considered here). Although the Suez judgment dates from August last year, the transcript has only recently become available. Gareth Keillor considers the case below. Continue reading

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Establishing “good reason” for breach of order following change of solicitors may require waiver of privilege

The High Court has extended a witness statement deadline, where a party was in breach of the previous timetable, but refused to vacate the trial date to allow more time for statements to be prepared and served: Devon & Cornwall Autistic Community Trust v Cornwall Council [2015] EWHC 129 (QB).

The case is of interest both for its application of the Mitchell / Denton principles (as outlined in this post) and the court’s comments on the role of privilege where a party seeks to rely on the conduct of its lawyers to justify a failure to comply with court rules or orders. Although the decision is not binding (as a first instance decision) and is based on rather unusual facts, it suggests that:

  • a party will not generally be able to rely on the mere fact of a change of legal representation to justify a breach – even where it is the legal team that has terminated the retainer;
  • where a party wishes to rely on the conduct of its previous lawyers as good reason for a breach, the court may expect a full explanation with a waiver of privilege for that purpose.

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Filed under Evidence, Interim applications, Privilege