The claimant in a pre-April 2013 case who failed to notify the defendant about his conditional fee agreement (CFA) and after-the-event (ATE) insurance within seven days has lost a second appeal against a refusal of relief from sanction.
In Springer v University Hospitals of Leicester NHS Trust [2018] EWCA Civ 436, the claimant initially signed a CFA in June 2010 with Kirwans and then, when the fee-earner moved, with fellow Liverpool DHF Solicitors in March 2012.
A letter before claim sent in September 2012 told the defendant of the existence of the second CFA and ATE. Proceedings were eventually issued in November 2012 and served in February 2013. The first CFA was only notified with the bill of costs, but during the proceedings they were treated as one agreement.
The case settled for £20,000 in July 2014, with DHF claiming costs of £119,000. The £61,000 of that made up of the success fees of the two CFAs and the ATE premium were disputed due to the failure to notify the defendant of the funding arrangement within seven days of entering into it.
The claimant applied for relief from sanctions, which was rejected at first instance by Deputy District Judge Elmer. She was unimpressed with the claimant’s argument that it had been unable to identify the right defendant – saying it could have been done in 2010 – and found no satisfactory explanation for the default. She also found that the trust had been prejudiced by it. On appeal, Her Honour Judge Hampton upheld the decision.
On second appeal, the Court of Appeal first considered the true construction of the pre-April 2013 paragraph 9.3 of CPR Practice Direction – Pre-Action Conduct, which stated: “Where a party enters into a funding arrangement within the meaning of rule 43.2(1)(k), that party must inform the other parties about this arrangement as soon as possible and in any event either within 7 days of entering into the funding arrangement concerned or, where a claimant enters into a funding arrangement before sending a letter before claim, in the letter before claim.”
Despite the efforts of Roger Mallalieu, counsel for the claimant, to suggest otherwise, Lord Justice Hickinbottom said the meaning of this was “unambiguous”.
He explained: “I am far from persuaded that adopting a literal construction of paragraph 9.3 of PD PAC results in any procedural absurdity, requiring the adoption of an alternative construction, which would not simply be strained but not in accordance with the words used. In my view, there is no objective basis for departing from the position that ‘as soon as possible’ means what it says.
“Of course, at the time a CFA is entered into, it may not be possible to identify all (or, perhaps, any) proposed defendants. In those circumstances, it will not be possible to notify defendants who are not known; and the obligation to notify them under paragraph 9.3 will not arise until they are identified.
“I accept that that may give rise to hard cases; but, in my view, only rarely; and, on the evidence, this is not one of them. From the moment of first instruction, certainly in respect of most personal injury actions, the identity of the defendant will usually be obvious.”
The court then upheld the DDJ’s decision on relief from sanction. Her key finding, Hickinbottom LJ said, was the prejudice the NHS trust had suffered by not having the opportunity to investigate and resolve the potential claim for two and a half years.
“In my view, the judges below were entitled to take the view of prejudice that they did. Mr Mallalieu’s submission that there is no evidence that the NHS trust would have acted differently had they received notice of the funding arrangement in mid-2010, with respect, misses the point that the prejudice identified by the judges below, quite properly, lay in the NHS trust’s loss of opportunity of acting in a different and pro-active way.”
In fact, the trust settled the case within a fortnight of serving its defence, he noted. Further, the only reason for the delay put forward the claimant was “patently bad”.
Hickinbottom LJ added a postscript to his ruling, noting that this was “something of a test case” given the number of cases still subject to the pre-April 2013 rules.
He said: “Although, of course, the objective construction of paragraph 9.3 is not dependent upon the facts of any case, I stress that the application of the principles for relief from sanction are necessarily fact-sensitive.
“In any other case in which a party has failed to give notification of a funding arrangement in accordance with the rules and practice directions, he will have to make an application for relief from sanction. The evidence submitted in support of the application is likely to be crucial, as it was in this case in which the evidence submitted by the claimant, particularly in relation to the reason for the breach, was uncompelling.
“If it is contended that it was impossible to give notification of a funding arrangement immediately that arrangement was made (e.g. because the particular defendant could not be identified), then that contention will need to be made expressly and supported by evidence. Any respondent to such an application will also need to lodge evidence to support any case that he has suffered particular prejudice as a result of the breach.
“Nothing in this judgment should be taken as being in any sense determinative of such applications. Judges will need to consider each application on the usual principles set out in Denton, and on the basis of the evidence and submissions submitted in respect of that particular case.”
Roger Mallalieu (instructed by DHF Solicitors) represented the claimant/appellant, with Alexander Hutton QC (instructed by Acumension Limited) for the defendant/respondent.