Harrison v Black Horse is regarded as being one of the most important cases relating to the mis-selling of Payment Protection Insurance (“PPI”), but the wranglings which have arisen during the course of the costs assessment proceedings means that it is a case that costs practitioners should also be keeping a close eye on.
The latest hearing in Harrison relates to an application for relief from sanctions.
Background
Mr & Mrs Harrison alleged that they had been mis-sold PPI by Black Horse. They brought an action against the Defendant in the County Court, which was unsuccessful. They were given permission to appeal to the High Court, but this appeal was unsuccessful. A further appeal to the Court of Appeal also proved fruitless for the Claimants.
Permission to appeal to the Supreme Court was granted but the parties reached a settlement before the final appeal was heard. This settlement included the Claimants obtaining redress of around £33,000 including interest and the Defendant agreeing to pay their legal costs.
The Claimants’ costs – which were incurred under CFAs in all Courts – totalled a rather astonishing £2.5m.
Failure to Serve Notices of Funding
The Defendant’s file of papers had no record of them having received Notices of Funding in respect of the High Court and Court of Appeal CFAs. As such, within the Points of Dispute which were served in February 2013, the Defendant argued that the Claimants were not entitled to recover a success fee on the High Court and Court of Appeal costs.
The effect of the Defendant’s argument was that around £700,000 of costs were not recoverable.
Previous Judicial Observations
Before the Points of Dispute were served, the Claimants made an application for an interim payment on account of costs. They sought £750,000.
The application was heard in March 2013. The Master ultimately concluded that he could not be certain that, on assessment, the Claimants would recover any more than £150,000 of the £2.5m claimed. This amount was awarded as an interim payment.
The Master went on to suggest to the Claimants that they may wish to make an application for relief from sanctions. If such an application was determined in their favour, they could then apply for an interim costs certificate in a higher amount.
Application for Relief from Sanctions
The Claimants did not immediately make an application for relief from sanctions. At a CMC an Order was made compelling them to do so by 30 August 2013. The application was issued on this date.
The result of this delay was that the application fell to be determined under the new stricter CPR 3.9 and, importantly, was heard just after the Court of Appeal handed down judgment in Mitchell v News Group Newspapers.
The hearing lasted a full day and incorporated extensive cross examination of the Claimants’ former solicitor who had day to day conduct of the case on behalf of the Claimants.
The Claimants conceded at the outset of the hearing that no Notice of Funding had been served in relation to the High Court CFA.
The Claimants’ former solicitor provided evidence of her standard practice for sending documents in the DX. However, she was unable to provide specific evidence that the Court of Appeal Notice of Funding had actually been placed in the DX. Accordingly, the Master concluded that service could not be deemed under CPR 6.26.
Further, as there was no evidence that the Defendant received the Notice of Funding, the Master could not conclude that service had taken place.
As such, the appropriate sanction was that the Claimants were not entitled to recover a success fee on their High Court or Court of Appeal costs.
Having heard arguments from the parties as to whether relief from this sanction should be granted, the Master determined that:
We do not know why the documents did not get to the Defendant's solicitors. There may have been an error on the part of the Claimants' solicitors, or an error on the part of the DX service provider, or possibly even an error on the part of the Defendant's solicitors.
But the burden is on the Claimants. Their evidence stops at the point when the letter and notice of funding left Miss Taylor's hand. They have failed to produce any evidence of the reason why the documents did not reach the Defendant's solicitors or evidence to show that, whatever the reason, it was outside of their control.
He concluded that the failure to serve a Notice of Funding was not trivial and held that there should be no relief from sanctions.
A Harsh Decision?
The Master acknowledged that:
This may seem harsh, particularly given my view that the failure was not intentional. But the Claimants' solicitors should have known of the change that was coming. The amendment of CPR 3.9 was recommended by Lord Justice Jackson in his final report published in December 2009. The change of approach and the "Singapore experience" were emphasised by him in the 5th implementation lecture on 22nd November 2011. The new, tougher approach to relief from sanctions was again emphasised by the Master of the Rolls in the 18th implementation lecture on 22nd March 2013.
The Defendant had served its points of dispute in February. There is no reason why the Claimants could not have issued their application for relief well before 1st April 2013. The application might have been heard before then. It would certainly have been heard before the decision in Mitchell was handed down.
The implication that, by delaying in making their application, the Claimants were the authors of their own misfortune is clear.
Lessons For The Future
John M Hayes has been involved in a number of recent decisions in which Courts have refused to grant relief from sanctions to parties who failed to serve Notices of Funding. The recent decision in Mitchell means that such refusals are likely to become more prevalent.
In pre-Jackson litigation, it was something of an inevitability that relief from sanctions would be granted where a party failed to serve a Notice of Funding. This is no longer the case.
The fact that the Defendant has escaped a liability for almost three-quarters of a million pounds simply by identifying a procedural failing on behalf of the Claimants demonstrates how important it is for such failings to be spotted and to be properly argued within Points of Dispute.