Tag: notice of funding

Relief from sanctions granted despite 6-year delay in giving notice of funding

Robert PattersonLeave a comment

Prior to 1 April 2013, a party wishing to recover an additional liability from a paying party was required to comply with paragraph 9.3 of the practice direction on pre-action protocol, which provided:

“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 seven 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.”

Failure to comply with the practice direction led to the imposition of the sanction in CPR rule 44.3B(1); the disallowance of any additional liability for the period of default.

Many parties innocently interpreted the practice direction to mean that notification of a funding arrangement could be delayed until a letter before claim was served without incurring a sanction. Indeed, that interpretation was supported by the authors of The White Book at the time.

That interpretation was however rejected by Court of Appeal in Springer v University Hospitals of Leicester NHS Trust [2018] EWCA Civ 436, which clarified that notification had to be given ‘as soon as possible’. A party that fails to comply with the practice direction is required to seek relief from sanctions, where the approach will be the familiar three stage Denton test.

Springer was a case where the paying party was simply unaware of the existence of any additional liabilities for several years until notice was given in a letter before action. The breach was serious and significant and there was no good reason for it. Central to the decision to refuse relief from sanctions was the prejudice to the paying party in a lost opportunity to act in a different way, which it may have done had it been aware of the existence of the additional liabilities.

The receiving party in EXN v East Lancashire Hospitals NHS Trust & Anor [2022] EWHC 872 (QB) ended up in a similar situation; no notification of the additional liabilities was given until the letter before action was served some 6 years after the funding arrangement had been entered into. Like Springer, the breach was serious and significant and there was no good reason for it. However, where this decision can be distinguished from Springer was in the lack of prejudice to the paying party.

In EXN, the paying party had enquired about the method of funding the claim following a request for disclosure of medical records, and they were informed that the claim was being funded by a conditional fee agreement. Although that statement was insufficient notification because it failed to mention the existence of a success fee, in granting relief from sanctions the Court found that the only reason for the original enquiry about funding was to assess a vulnerability to paying a success fee. The paying party did not seek to clarify whether the funding arrangement provided for a success fee, and it did not file any evidence alleging that it had suffered any prejudice.

Although it has been 9 years since recoverable additional liabilities were abolished for most claims, some serious personal injury and clinical negligence claims can take many years to resolve and it might be that a paying party will be silent on any breach until there is a costs assessment; in EXN the funding arrangement was entered into in 2012, but the application for relief from sanctions was not heard July 2021 – some 7 months after the damages were agreed. This decision also demonstrates that even a clear breach of the practice direction may not be enough to deprive a receiving party of additional liabilities, if the paying party fails to demonstrate that they have suffered any prejudice.

Given that in both Springer and EXN, the reason for the breach was an innocent and common misinterpretation of a practice direction, there will no doubt still be many claims where this issue could arise.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Relief from Sanctions

Joanne ChaseLeave a comment

The case of Antonio Caliendo & Barnaby Holdings LLC and Mishcon De Reya (A Firm) & Mishcon De Reya LLP [2014] EWHC 3414 (Ch) relates to the Court’s interpretation and detailed consideration of the three principles laid out in the Denton case upon an Application for relief from sanctions.

Background

The Claimant sought relief from sanctions resulting from their failure to file and serve the required notice of the existence of a Conditional Fee Agreement and an ATE policy.

CPR rule 44.15(2) states that:

“A party who seeks to recover an additional liability must provide information about the funding arrangement to the Court and to other parties as required by a rule, practice direction or court order”.

Paragraph 9.3 of the Practice Direction (Pre-Action Conduct) provides that this must be “as soon as possible and in any event 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.”

The Application

As the Claimant had failed to notify the Defendant and the Court within the 7-day period (and actually some 3 ½ months late) the automatic sanctions were imposed and the requirement for an Application for Relief from Sanctions was required.

The Claimant maintained that the failure was simply an oversight and that human error had been the cause. However, as determined by Master Rowley in Long –v- Value Properties & Anor, this alone would not be sufficient to justify relief.

The Claimant went on to say that the oversight had only been discovered when the pleadings were being prepared for issue. Upon preparing the Notice of Funding, the fee earner had noticed that no notification of the funding arrangement had been given, and accordingly the application had been made immediately upon this realisation.

Under CPR 44.3(B), the receiving party may not recover any additional liability during a period where the paying party were not on notice of said funding arrangement. In addition, the ATE premium was at risk.

Hearing of the Application

The hearing of the Claimant’s Application was adjourned on 11th October 2013, given the upcoming decision in the case of Mitchell v News Group Newspapers Ltd. As the Court’s judgement was not finalised, the parties’ written submissions were invited.

Following consideration of these submissions, and the outcome of the Denton case, Mr Justice Hildyard considered the three elements of CPR 3.9(1):

  1. The Court must identify the failure to comply with any rule, practice direction or court order;
  2. The Court must consider all the circumstances so as to deal justly with the application;
  3. The Court must ensure that consideration of the efficient conduct of the case and the litigation in general.

Consideration of the Elements

The first element was satisfied immediately as the Court could readily ascertain that the sanction was brought about by the failure to comply with CPR 44.15(2) and the Practice Direction. In the present case, as it related to the second element, the Court considered the circumstances; the reason for the breach. The Claimant could offer no good explanation, other than human error. This was accepted by the Claimant as insufficient to be granted relief on those grounds.

In relation to the third element, it was contended by the Claimant that the breach should be regarded as trivial as there had been no impact of the conduct of the litigation, and no disruption to the court timetable. They averred that the breach had occurred pre-action and that the first opportunity to make the application had been upon issue of proceedings. They also pointed out that no prejudice had been caused to the Defendant due to the late notice, however the Defendants countered this by stating that the entire dynamic of the claim from the Defendants standpoint can be affected depending on the nature of the funding arrangement. This was accepted by the Court but were advised that they had failed to provide any evidence that, had they been served with the details of the funding arrangement earlier, they would have conducted the claim differently and as such could not show material prejudice.

Mr Justice Hildyard went on to say that this was not a case like Mitchell. The circumstances were very different, and did not centre around the effect on the litigation process (and subsequently affecting other Court users’ cases). He also stated that the judgement in Mitchell was “very tough” and that orders such as that were not required in every case where breaches occur. Accordingly, it was determined that it would be unjust to deny relief on the basis that it affected the efficient conduct of the litigation (factor a).

In relation to the litigation in general, it was noted that the Claimant had not acted in breach of any other order or rule, and that – should the sanction remain in place – the Claimant would cause substantial prejudice.

On consideration of the circumstances of the case, the reasons for the breach and also despite the need to encourage compliance, the Court allowed relief.

In summary, as long as the breach is identified swiftly, and an Application made immediately upon discovery of the breach, the Court will find it more difficult to deny the relief from sanctions.

Of course, there will always be a paying party that will try to aver that they would suffer prejudice if relief is granted; they would argue that the Claimant would have a claim against their Solicitor which would be impossible to counter. But this would undoubtedly lead to satellite litigation that would deter from the culture change that is required post-Mitchell.

If you have any questions or queries in relation to this blog please contact Simon Sharpe (simon.sharpe@clarionsolicitors.com and 0113 3363430) or the Clarion Costs Team on 0113 2460622.