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15 June 2017
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Client wins costs appeal over application to set aside solicitors’ statutory demand

A client has succeeded in her appeal against an order refusing her the costs of her application to set aside a statutory demand served by her former solicitors.

According to a Lawtel report of Dunhill v Hughmans before Mr Justice Barling, the retainer was terminated due to the client’s belief that her solicitors had been negligent in relation to a dispute with her husband.

The solicitors claimed for their unpaid fees and summary judgment was entered for them. The client’s appeal was refused and an earlier stay of proceedings lifted. Although she sought permission to appeal, the solicitors served a statutory demand for the unpaid fees.

The appellant applied to the Court of Appeal for the stay to be re-imposed pending the oral renewal of her permission to appeal application and applied for the statutory demand to be set aside. Her application was granted, and the stay was re-imposed.

The appellant asked the solicitors to agree to set aside the statutory demand and to pay her costs of the set aside application. The solicitors offered to withdraw the statutory demand but refused to pay her costs. The chief registrar concluded that the solicitors had been entitled to serve the statutory demand since they had been awarded summary judgment and the initial stay had been removed; and that the appellant had been unreasonable to reject the solicitors' offer. He refused to award the appellant the costs of her application. Earlier this year, the Court of Appeal allowed the appellant's appeal against summary judgment.

The client contended that as the stay was in place and permission to appeal had been granted, the statutory demand should have been set aside under rule 6.5(4) of the Insolvency Rules 1986.

Barling J said the question was not whether the solicitors were entitled to serve the statutory demand – as the chief registrar had considered – but whether it was reasonable at that point. Lawtel said: “When the appellant put in her notice of appeal, it should have been clear to the solicitors that she would pursue her legal options exhaustively. There had been no need to serve a statutory demand before the outcome of a renewed oral application that the solicitors knew or should have known would be pursued.

“The solicitors must have appreciated that further costs would be incurred by their conduct; they had therefore acted unreasonably. In those circumstances the court was entitled to consider the question of costs and to exercise its discretion afresh. The appellant had not been unreasonable in refusing the solicitor's offer to withdraw the statutory demand but not pay her costs. Accordingly, the chief registrar had failed to place sufficient weight on the appellant's own offer which the solicitors had rejected.”

The judge found that the solicitors had acted unreasonably in not accepting the offer. The costs of the set aside application were awarded to the appellant.

The report added: “Had the withdrawal of the statutory demand not been agreed by concession, she probably would have succeeded on having it set aside under rule 6.5(4)(a). The court allowed an appeal on that issue. Although the solicitors had a costs application that had been stayed pending the outcome of the instant hearing, the court precluded an order being made for costs in their favour.”

 

 

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Comments

Sue Nash   25/09/2017 at 20:56

It appears that RNB is set for a HC appeal - watch this space! Meanwhile, RIP Solicitors Journal which - sadly - has just ceased publication after 180 years

News Flash   28/09/2017 at 12:18

Another pointless case, why resist a payment on account when your paying the opponents costs in the end anyway? these types of disputes should be a thing of the past!

MB   05/10/2017 at 13:18

Why has the focus returned to the SCCO "going completely digital". Was the electronic bill not extended to all Courts!

Dragon   12/10/2017 at 13:40

Well said Jim. Too often we see clinical negligence claims settle for say £2k only to be followed by a bill for say £50k. Thankfully there are some excellent costs lawyers out there who battle those costs down, but the situation remains outrageous.

Simon Mccarthy   13/10/2017 at 13:56

Dragon - your comment overlooks the fact that it is almost invariably your clients - the Defendants - who cause those scandalous costs by intransigently, and inexplicably, refusing to come to the negotiating table until too late, when the costs have already been racked up; it is their failure to take a realistic view to claims at the outset which necessitates the costs. This faux horror is therefore hard to stomach, especially when one considers the equivalent costs being incurred by government bodies (funded by us tax payers of course) often to the tune of 4-5 times the sums you mention, and the many Defendant costs draftsmen shelling peas for their piece of the pie. Sadly, it is the same old story of 'pay peanuts get monkeys' and, unless and until government wake up and start paying competent people to deal with claims pragmatically, the UK public purse will continue to haemorrhage billions of pounds that we can ill afford. Still, as long as it keeps Defendant costs draftsmen/lawyers in business?....

Northern Costs Monkey   13/10/2017 at 14:31

Just shows how ridiculous the whole budgeting process is. The reason firms generally don’t make applications to revise their budgets is because the bar set for varying them is absurdly high. No one even knows what a “significant development” is. A load of nonsense in my opinion. The situation we have now is that firms just don’t bother revising the budgets because in all likelihood it won’t be accepted. Meaning firms can be stuck with an “approved” budget that is a couple of years out of date, was drafted before the directions were even agreed, and is no longer fit for purpose. What should happen is that budgets should be drafted after the first CMC, and there should be a rule put in place that parties are able to freely revise a previously agreed or approved budget every six months, regardless of significant developments, with the updated budget to be considered at a costs management conference listed for a later date. That after all was the whole point of budgeting, was it not? Pragmatic costs management?

Simon   16/10/2017 at 16:47

I find this whole issue completely unnecessarily. Independent Midwives had commercial insurance suitable for their needs, however to try and save money they chose to try and become self-funding and cancelled their insurance without fully understanding the risks and exposures. I cannot see why it is in the public interest to bring a JR (and why the costs should be capped) when commercial solutions were available, however the issue is that as a group they didn't want to pay the costs of commercial insurance.

Dragon 2   18/10/2017 at 08:07

Great points Simon. Fully agree. Courts are fully aware of how these matters are conducted by those representing defendant. Surely though the money for damages and costs comes out of the medical suppliers' insurers' account, not tax pot nor nursing fund. Maybe that's why there is such a drive to extend the fixed costs regime to clin neg claims. Just a thought......

Mel B   19/10/2017 at 12:05

'Like' Simon McCarthy's comment

Cath Hart   21/10/2017 at 09:32

In reply to Simon's comment (which I thought at first meant this situation could be resolved) my understanding is that professional indemnity insurance for independent midwives has been withdrawn, but even if available the premium would be in the region of 20-30k annually (reference https://www.aims.org.uk/Submissions/nmc.htm) so I would disagree that it was cancelled to "save money" - these premiums exceed many of the midwives salaries so it was simply unworkable without government assistance. When professional indemnity insurance became mandatory under the EU directive in 2014 the independent midwives did appeal to the government for funding but this was rejected due to the low number of women involved so was not thought to represent value for money for the taxpayer. (reference: https://www.gov.uk/government/news/independent-midwives-insurance-options-outlined).

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