Lord Justice Hickinbottom :
Introduction
- The Appellant Claimant ("the Claimant") appeals against the order of Her Honour Judge Hampton dated 2 October 2015, in which she dismissed the appeal against the order of Deputy District Judge Elmer dated 18 July 2015 refusing the Claimant's application for relief against sanction in respect of a failure to serve a notice of funding in accordance with paragraph 9.3 of CPR Practice Direction – Pre-Action Conduct ("the PD PAC"). As a result of the refusal of the application, the sanction for failure to give notice under CPR rule 44.3B(1) applied; and the Appellant is unable to recover from the Respondent Defendant ("the NHS Trust"), as part of his costs, either (i) the success fee under the conditional fee arrangements ("CFAs") under which his solicitors had been working for the period until notice of the funding arrangement was eventually given or (ii) at least part of the premium for the after the event insurance ("ATE insurance") policy which had been taken out to protect him from any adverse costs order that might have been made against him.
- Before us, Roger Mallalieu of Counsel appeared for the Claimant, and Alexander Hutton QC for the NHS Trust; and I thank them both at the outset for their particularly helpful submissions.
The Law: The Procedural Requirements for Additional Liabilities
- With effect from 1 April 2000, section 27 of the Access to Justice Act 1999 amended the Courts and Legal Services Act 1990 by inserting new sections 58 and 58A authorising CFAs between litigants and their legal representatives which might include provision for a success fee. Section 58A(6) provided that rules of court might allow success fees to be recoverable as costs. Section 29 of the 1999 Act provided that, where ATE insurance was taken out against the risk of incurring liability for costs, rules of court might allow for the premium also to be recoverable as a cost.
- A new CPR Part 44 was duly made (Civil Procedure (Amendment No 3) Rules 2000 (SI 2000 No 1317)). Effective from 1 April 2000, it allowed both success fees and ATE insurance premiums to be included in the costs recoverable from another party: CPR rule 43.2(1)(k) defined "funding arrangement" to include an arrangement where a person has entered into a CFA or taken out an ATE insurance policy, CPR rule 43.2(i)(o) defined "additional liability" to include a percentage increase success fee due under a CFA and an ATE insurance premium, and paragraph 9 of CPR PD 44 ("the Costs Practice Direction", or "the CPD") provided that the sums payable under an order that one party pay the costs of another included any additional liability incurred under a funding arrangement.
- I should say that the provisions allowing for such recovery are to a large extent now of only historical interest, because they were generally prospectively revoked by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ("LAPSO"), and the Civil Procedure (Amendment) Rules 2013 (SI 2013 No 262) which substituted new Parts 43-48 of the CPR and a new CPD. From 1 April 2013, recovery of success fees and ATE insurance premiums as costs has not been allowed, save for ATE insurance premiums in respect of clinical negligence matters where recovery continues to be authorised (section 58A(6) and 58C(1) of the Courts and Legal Services Act 1990 as amended by sections 44(4) and 46(1) of LAPSO).
- However, importantly, new CPR rule 48.1(1) states that the provisions relating to funding arrangements in Parts 43-48 and the attendant provisions of the CPD as they were in force immediately prior to 1 April 2013 will continue to apply after that date in relation to a "pre-commencement funding arrangement" as defined in CPR rule 48.2(1), i.e. a funding arrangement falling within CPR rule 43.2(1)(k) entered into before 1 April 2013. The two CFAs and ATE insurance in this case all fell within rule 48.2(1)(k) and were entered into before 1 April 2013. As a result, the pre-April 2013 costs provisions apply to them; and references in this judgment are to those provisions.
- The CPR imposed notification requirements on any party who sought to recover an additional liability under a pre-April 2013 funding arrangement. CPR rule 44.15(1) provided 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."
A note to that paragraph confirms that: "Rule 44.3B sets out situations where a party will not recover a sum representing any additional liability". I shall return to rule 44.3B shortly (see paragraph 13 below).
- CPR rule 44.15 was supplemented by section 19 of the CPD, which dealt with the notification of a funding arrangement in the context of issued proceedings. Paragraph 19.4 set out the information of the arrangement that was to be provided in Form N251. Paragraph 19.2 required a claimant who had entered into a funding arrangement before starting proceedings to provide the information to the court when he issued the claim form (paragraph 19.2(2)(a)) and to every other party with service of the claim form (paragraph 19.2(2)(b); and, in all other circumstances (notably, when a funding arrangement was entered into after the commencement of proceedings), the notice was to be filed and served within seven days of entering into the funding arrangement concerned (paragraph 19.2(4)). However, paragraph 19.2 of the CPD had the following note attached:
"[The PD PAC] provides that a party must inform any other party as soon as possible about a funding arrangement entered into prior to the start of proceedings".
- The notification provisions in the PD PAC, and its predecessor (the Practice Direction on Protocols ("the PDP")), changed over time.
- Initially, paragraph 4A.1 of the PDP provided that:
"Where a party enters into a funding arrangement within the meaning of rule 43.2(1)(k) he should inform other potential parties to the claim that he has done so."
- From 1 April 2009, the PDP was replaced by the PD PAC; and paragraph 4A.1 of the PDP was replaced by paragraph 9.3 of the PD PAC in the following terms:
"Where a party enters into a funding arrangement within the meaning of rule 43.2(1)(k), that party should inform the other parties about this arrangement as soon as possible."
This therefore added the time by which notification had to be given, i.e. "as soon as possible".
- From 1 October 2009, paragraph 9.3 of the PD PAC was replaced as follows:
"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.
(CPR rule 44.3B(1)(c) provides that a party may not recover certain additional costs where information about a funding arrangement was not provided.)"
References in this judgment to "paragraph 9.3" are to this version of paragraph 9.3 of the PD PAC, unless otherwise indicated. The new version involved two changes. First, "should" became "must". That change followed determinations by costs judges that, in the context of the paragraph, "should" did not impose an obligation but merely expressed an aspiration or recommendation (Metcalfe v Clipson [2004] EWHC 9005 (Costs) and Cullen v Chopra [2007] EWHC 90093 (Costs)). The change made the provision of information in accordance with the paragraph mandatory. Second, it added the words after "as soon as possible", which are central to this appeal and to which I shall return.
- CPR rule 44.3B(1) imposed a sanction on those who failed to provide funding information as required. For CFAs entered into on or after 1 October 2009, it provided, so far as material:
"Unless the court orders otherwise, a party may not recover as an additional liability –
…
(c) any additional liability for any period during which that party failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order;…".
- From 1 July 2000, as part of the changes arising from the new funding arrangements brought in in 2000, a new paragraph (e) was added by the Civil Procedure (Amendment No 3) Rules 2000 (SI 2000 No 1317), as follows:
"(e) any insurance premium where that party has failed to provide information about the insurance policy in question by the time required by a rule, practice direction or court order;…".
- Paragraphs (c) and (e) do not sit comfortably together, because "additional liability" was defined to include "insurance premium" (see paragraph 4 above). Furthermore, as Mr Mallalieu pointed out, it is arguable that paragraph (e) includes the whole premium of any ATE insurance policy in respect of which notice has not been given in accordance with the requirements of the rules, even where the premium is payable in tranches and notice is given before one or more tranches fall due. However, Mr Hutton conceded before us that recovery of the premium in this case that fell due on issue of proceedings, i.e. after notice of the ATE insurance policy was given to the NHS Trust on 28 September 2012 (see paragraph 22 below), was not irrecoverable by virtue of CPR rule 44.3B(1)(e), and therefore the true construction of that paragraph was not in issue nor was it fully argued before us; and Mr Hutton accepted that the question of whether at least the second tranche of the ATE insurance policy premium was reasonably and properly incurred and thus recoverable will be a matter for the costs assessment in due course. In the circumstances, it is unnecessary and would be inappropriate for me to comment further on any possible ambiguity in the construction of that paragraph.
The Law: Relief from Sanction
- The proper approach to relief from sanction, first set out in Mitchell v News Group Newspapers Limited [2013] EWCA Civ 1537; [2014] 1 WLR 795 and Denton v TH White Limited [2014] EWCA Civ 906; [2014] 1 WLR 3926, is now well-established and uncontroversial. It involves three stages.
i) The court must first identify and assess the seriousness and significance of the relevant failure to comply with any rule, practice direction or court order, taking into account the materiality of the breach including its effect on the conduct of the litigation and of litigation generally. If the breach is neither serious nor significant, then the court will likely grant relief.
ii) If it is serious and/or significant, then the court will consider why the default occurred. If good reason for the breach is shown, then again relief will usually be granted.
iii) Finally, the court will evaluate all the circumstances of the case, so as to enable it to deal justly with the application, giving particular (although not paramount) importance to the factors in CPR rule 3.9(1), i.e. the need (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders.
- CPR rule 3.9(2) requires an application for relief to be supported by evidence.
The Factual Background
- Wayne Springer ("Mr Springer") tragically died of heart failure on 9 October 2009, whilst undergoing treatment for a bowel disorder. There was reason to believe that his death resulted from negligent treatment in one of the hospitals for which the NHS Trust is responsible.
- His father, the Claimant, as representative of his estate, sought legal advice from Kirwans Solicitors; and, on 25 June 2010, entered into a CFA with that firm in respect of the claim, with a success fee of 100% of the basic charges ("the first CFA"). We do not have a copy of any CFA risk assessment prepared prior to the first CFA being made; but the practice of entering into a CFA on first instructions or shortly thereafter is one that is common, and uncontroversial. In this case, no ATE insurance was taken out at that stage. No notice of the CFA was sent to the NHS Trust.
- By November 2010, Kirwans had obtained Mr Springer's medical records, which, that month, they spent some time considering. In June 2011, they instructed an expert, Professor Derek Bell (Professor of Acute Medicine at Imperial College London); and he prepared a breach of duty report dated 10 November 2011.
- It seems from the documents that the solicitor who had been dealing with the case then moved from Kirwans to another firm, DHF Solicitors. In any event, the Claimant disinstructed Kirwans, and instructed DHF. On 15 March 2012, DHF completed a CFA risk assessment form, which responded positively to the question, "Can the defendant be easily identified?"; and negatively to the question, "Is there likely to be more than one defendant?". The solicitor who completed the form firmly identified the basis upon which the defendant would be liable (mismanagement and delay in treatment), and assessed the global damages figure as being in the range £50,000-£100,000. That day, the Claimant and DHF entered into a CFA, again with a success fee set at 100% of basic charges ("the second CFA"). On 24 March 2012, an ATE insurance policy was taken out, with a £100,000 indemnity limit, at a premium of £15,900 (£4,950 due immediately and £10,050 on issue of proceedings, together with 6% insurance tax). Still, no notice of any funding arrangement was sent to the NHS Trust.
- However, on 28 September 2012, DHF sent a letter before claim to the NHS Trust, which stated:
"Please be aware that our client's claim is funded by way of [CFA] dated 15 March 2012. Further, that [CFA] is backed by an [ATE insurance] policy dated 24 March 2012 in respect of our client's disbursements, the premium of which will be recoverable from you. We enclose herewith notice of funding, form N251 to confirm."
Except for a request for the Appellant's medical records (see paragraph 20 above), there had been no prior correspondence with the NHS Trust about the claim.
- Form N251 is a court form with a rubric making clear that it is designed to comply with the requirements of paragraph 19.2(2) of the CPD (see paragraph 8 above). The form served here gave notice of both the second CFA and the ATE insurance policy issued on 24 March 2012, but not of the first CFA.
- On the same day (28 September 2012), DHF sent proceedings to the county court for issue, with that same notice of funding; but, apparently due to some deficiency in the documents, they were returned, unissued. The proceedings were eventually issued on 29 November 2012.
- However, the proceedings were not served until 1 February 2013, when an application to extend time for service of the Particulars of Claim and supporting medical evidence was made. In the meantime, in March 2013, further medical records and the post-mortem report were obtained and passed on to Professor Bell with further instructions. He prepared a second report on 5 August 2013. Time for service of Particulars of Claim was extended, eventually until 30 August 2013, when they were served. A Defence was served on 19 February 2014.
- Two weeks later, on 3 March 2014, the NHS Trust made a without prejudice offer of £10,000, which provoked a counter-offer of £36,000. On 21 March 2014, the proceedings were stayed to enable the parties to attempt settlement. On 28 March 2014, the NHS Trust offered £20,000, which was eventually accepted. On 30 July 2014, the proceedings were formally compromised by way of a Tomlin Order, under which the NHS Trust paid £20,000 and costs to be assessed if not agreed, in full and final settlement.
- Costs, however, were not agreed. DHF sent the NHS Trust a draft detailed Bill of Costs on 26 August 2014, which disclosed the existence of the first CFA; and, on 18 November 2014, they commenced assessment proceedings and served a Bill of Costs in the sum of £115,880.74. That sum included (i) a 100% success fee uplift on time costs under the first CFA (£7,832.50 plus VAT); (ii) a 100% success fee uplift on time costs under the second CFA (£29,871 plus VAT); (iii) the full ATE insurance premium (£15,900), i.e. an aggregate of £61,050.89, the sum in issue in this appeal.
- In correspondence in October 2014, the NHS Trust had raised the issue of whether the Claimant had been in default of giving notice of his funding arrangements in accordance with the CPR, notably paragraph 9.3 of the PD PAC; and, amongst many other issues, the NHS Trust's Point of Dispute dated 12 December 2014 included, as point 2, a request for clarification of the date on which notification of additional liabilities (i.e. the success fees and ATE insurance premium) was provided, and the point taken that the CPR require such notice to be given "as soon as possible". It also said:
"CPR 19.2 makes clear that the notification should be provided within 7 days of entering into the funding arrangement and that a lack of a letter of claim is not relevant. The additional liabilities should not be recovered for the period of default."
- In their Reply, DHF said simply:
"The Claimant relies on the information included within the N244 application for relief from sanctions dated 30 March 2015";
and, indeed, that day, they issued an application under CPR rule 3.9 for relief from the sanction imposed by CPR rule 44.3B(1), namely an inability to recover (i) the success fee for the period of default and (ii) the ATE insurance premium.
- The material in support of the application was not entirely consistent or coherent; but focused on two matters.
i) It was said that it was not possible to provide notice of funding until such time as the defendant had been identified, and as soon as it was, notification had been given with the letter before claim on 28 September 2012. Therefore, there was no breach of paragraph 9.3.
ii) It said: "[T]he technical breach occurred as a result of an unavoidable error on part of [the Claimant's] legal representative… in construction of the rule…". This suggested that, if there had been a failure to give notice as soon as possible, then it had resulted from the misunderstanding of the rules by the solicitor in charge of the case. The nature of that misunderstanding was not clarified, but may have been that the solicitor had failed to appreciate that paragraph 9.3 required notification "as soon as possible", although (a) other than the rather cryptic remark to which I have referred, there was no evidence to that effect, and (b) it is unclear why such a mistake would have been "unavoidable".
Each of those points appeared to accept that paragraph 9.3 required notification of a funding arrangement to be given to another party "as soon as possible".
- In any event, it was said in the application that, in all the circumstances, to disallow the additional liabilities would be a disproportionate sanction, and the NHS Trust were attempting to benefit from a "technical" breach of the rules.
- The application came before Deputy District Judge Elmer on 3 July 2015. Although not presaged in the application itself, a preliminary issue was taken by counsel then acting for the Claimant – not Mr Mallalieu – namely that the Claimant had not breached the rules because, it was submitted, in paragraph 9.3, "as soon as possible" meant "as soon as possible in the context of the other obligations imposed by the PD PAC". The words after "in any event" in effect defined "as soon as possible", and so, where a claimant entered into a funding arrangement before sending a letter before claim and gave notice of the funding arrangement with that letter, that was sufficient to comply with the requirement in the paragraph.
- Deputy District Judge Elmer was unimpressed by that submission. She considered the meaning of the words used in paragraph 9.3 to be unambiguously clear. In a short judgment, given prior to proceeding immediately to hear arguments on the other issues arising on the application, she said that she was unable to interpret "as soon as possible" as meaning anything other than "as soon as possible" which, where the proposed defendant could be identified, could not extend to a period of possibly several years between the date the funding arrangement was put in place and the date upon which a letter before claim was served.
- Having made that determination on the proper construction of paragraph 9.3, she proceeded to hear argument on the two matters raised in the application form.
- First, there was the assertion that the Claimant was unable to identify the correct defendant until very shortly before the letter before claim was sent on 28 September 2012, and therefore the notice of funding arrangements served with that letter was sent "as soon as possible". It was not possible to give notice to the NHS Trust before it had been identified as a proper defendant of the claim.
- However, on the evidence, the Deputy District Judge was no more impressed by that submission. She pointed out that, in March 2012, the risk assessment for the second CFA confirmed that, by then, the defendant could easily be identified. It was for the Claimant to satisfy her that he had served notice as soon as possible. The only submission that had been made was that the defendant could not be identified until September 2012, or at least before appropriate medical evidence had been obtained; but, she said, there was simply no evidence in support of that proposition. Indeed, although the medical evidence was not before the Deputy District Judge, I note that it appears to have been accepted by counsel for the Claimant in the course of argument that the defendant to any claim was identified no later than the breach of duty report (i.e. 10 November 2011: see paragraph 20 above), and that "not a great deal" of costs were expended before then (see page 15D-G of the transcript). In any event, the Deputy District Judge concluded that the Claimant had failed to satisfy her that the notice was sent as soon as possible. Indeed, it is clear from her judgment that she was unpersuaded that a notice could not have been served at the time of first instruction of Kirwans in June 2010, or at least very shortly thereafter.
- Finally, on the basis that she was satisfied that there had been a breach of the requirement to serve parties with notice of funding arrangements as soon as possible under paragraph 9.3, the Deputy District Judge heard submissions on whether relief from sanction should be afforded to the Claimant. She identified the correct approach by reference to the relevant notes in Civil Procedure (the White Book), i.e. the three-stage approach referred to above (see paragraph 16). She said (at [4] of her judgment):
"I have already found that the notice was not given as soon as possible, and that no satisfactory explanation has been given to me today as to why the defendant could not be identified at an earlier stage. There simply has not been any real explanation at all about that, simply to say that the defendant could not be identified until the point when proceedings were issued. Accordingly, it seems to me that this is a serious and significant breach. Furthermore, no satisfactory explanation has been given in respect of the default."
- The Deputy District Judge went on to consider all the circumstances of the case. She was impressed by the submission made on behalf of the NHS Trust that they had suffered prejudice as a result of the Claimant's breach, because they did not know that proceedings were going to be brought until almost the date on which they were issued, and they had therefore had no opportunity to consider the matter or make attempts to negotiate a settlement and thus avoid the substantial additional liabilities for costs in the form of the percentage success fee and ATE insurance premium. In the light of the fact that there had been a clear breach in respect of which the NHS Trust had suffered that prejudice, she refused to allow relief from sanction; so that the Claimant could not recover any success fee on costs or ATE insurance premium incurred prior to the service of the notice of funding arrangement on 28 September 2012.
- The Claimant appealed, and the appeal was heard by Her Honour Judge Hampton on 2 October 2015. The judge appears to have accepted that there might have been a contradiction, or at least tension, between paragraph 9.3 of the PD PAC and paragraph 19.2 of the CPD; but, applying a purposive approach, she considered the construction favoured by the Deputy District Judge was to be preferred. The CPR required a "cards on the table approach"; and in a case such as this, where additional liabilities in the period between the funding arrangement and notice being given amounted to far more than the modest value for which the claim was settled, the NHS Trust was prejudiced by being unable to take any steps to limit its potential liability for costs, e.g. by inviting the Claimant to take steps that might lead to a conclusion satisfactory to both parties at proportionate cost. In addition, she considered that paragraph 19.2(4) of the CPD, as well as the final part of paragraph 9.3 of the PD PAC, required the Claimant to notify the NHS Trust of the funding arrangements within seven days of making them. She dismissed the appeal.
- The Claimant launched an appeal to this court. Jackson LJ refused permission on the papers; but granted permission at an oral hearing on 14 June 2016. Thus, the substantive appeal is before us.
The Issues
- There are two issues for this court. First, there is the proper construction of paragraph 9.3 of the PD PAC; and whether, on the facts as I have outlined them, the Claimant breached the requirement to give notification of the funding arrangement to the NHS Trust. Mr Mallalieu for the Claimant contends that there was no breach. However, if breach there was, then there is a second issue, namely whether Deputy District Judge Elmer erred in refusing to grant the Claimant relief from the sanction for that breach imposed by CPR rule 44.3B(1), namely that the success fee and ATE insurance premium are irrecoverable from the NHS Trust. Mr Mallalieu submits that she did.
- I will deal with those issues in turn.
Issue 1: The True Construction of Paragraph 9.3 of the PD PCA
- The version of paragraph 9.3 of the PD PAC with which we are concerned read as follows:
"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."
- As to its proper construction, Mr Hutton's submission was simple. The Deputy District Judge was right: the phrase "as soon as possible" is unambiguously clear, and means "as soon as possible" or "as soon as you can". The following phrase is equally clear. Whether notice was given "as soon as possible" requires some evaluative assessment. The words "… and in any event…" equally mean what they say, i.e. they introduce a second set of criteria, involving no evaluation, with which the party also has to comply. However, as those criteria can only be met when the party is a position to give notification, in practice they act as long-stop criteria, which, if not satisfied, preclude the party from contending that he has given notice "as soon as possible".
- Mr Mallalieu accepted that the usual and ordinary meaning of "as soon as possible" was as Mr Hutton contended and the courts below found. However, he submitted that the words could not be read in that way in the context of paragraph 9.3, because the result would be absurd. It would require a party to give notice of a funding arrangement (and thus the claim which it supported) at a time when it had no obligation to give any details of the potential claim and almost certainly would be unable to give all details necessary to enable an opponent properly to assess the claim and take an informed view as to how to respond to it. The rules provided a scheme whereby that information was to be provided for the first time in a letter before claim: that is clear, not only from the provisions of the PD PAC itself which in paragraph 7.1 and Annex A set out the requirements for exchanging information before starting proceedings in the form of a letter before claim in claims to which a case specific protocol does not apply, but also in the requirements of those case specific protocols which generally require the provision of similar information in similar form (see, e.g., paragraph 3 of and Annex A to the Pre-Action Protocol for Personal Injury Claims, and paragraph 6 of and Annex B to the Pre-Action Protocol for Disease and Illness Claims). Those protocols require the provision of information about funding arrangements in the letter before claim, and indicate that, in respect of the provision of pre-action information, a letter in the form annexed is likely to satisfy the court in most circumstances (see paragraph 2.5(1) of the PD PAC). It is not until the letter before claim is sent that a potential defendant is in a position sensibly to respond to the claim. By adopting the construction favoured in this case by the NHS Trust and the judges below, a party would be required effectively to give notice of a claim in circumstances in which a potential opponent would have no sensible means of responding to it. That would be absurd, and could not have been intended.
- Picking up the argument deployed on behalf of the Claimant before the Deputy District Judge, Mr Mallalieu submitted that, on its true construction, the words following "… and in any event…" defined "as soon as possible", so that, where notification of a funding arrangement entered into beforehand was given in the letter before claim, that satisfied the requirement. That is an alternative construction that avoided the absurdity of the construction adopted below. It was in tune both with the general purpose of the PD PAC to encourage parties to act reasonably with a view to avoiding litigation, and exchange information to enable each of them to arrive to an early but informed view as to how to deal with it, efficiently and proportionately (see, e.g., paragraph 1.2(1) of the PD PAC); and it was in tune with paragraph 19.2 of the CPD, with which the construction of paragraph 9.3 of the PD PAC adopted below was inconsistent.
- Mr Mallalieu made those submissions with considerable skill and tenacity; but I am unable to accept them. In my view, in paragraph 9.3 of the PD PAC, "as soon as possible" unambiguously means "as soon as possible", no more and no less. In coming to that conclusion, I have taken into account particularly the following.
- In considering legislation, including subordinate legislation such as the CPR, the court seeks to give effect to the intention of the legislator as expressed in the instrument as objectively construed (Black-Clawson International Limited v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591, R v Secretary of State for the Environment, Transport and the Regions ex parte Spath Holme Limited [2001] 2 AC 349 especially at pages 396F-399E per Lord Nicholls, and Bogdanic v Secretary of State for the Home Department [2014] EWHC 2872 (QBD) at [37] and following per Sales J as he then was).
- In this context, primacy is ordinarily given to the language used in an instrument as an indicator of the draftsman's intention. However, where the draftsman has obviously slipped up, so the instrument has a clear, objectively assessed meaning but that is contrary to the meaning of the literal text of the instrument, the court may rectify the instrument – or, more accurately, make a declaration as to the true meaning of the instrument – for example, by reading in or omitting words (Inco Europe Limited v First Choice [2000] 1 WLR 586 especially at pages 592A-593A per Lord Nicholls as applied to subordinate legislation in R (Confederation of Passenger Transport UK) v Humber Bridge Board [2003] EWCA Civ 842; [2004] QB 310 at [33]-[36] per Clarke LJ; and Bogdanic at [42]).
- In this case, Mr Mallalieu submitted that the words "… as soon and 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" should be interpreted as meaning "as soon as possible in the context of the other obligations imposed by the PD PAC", i.e. as effectively subject or restricted to those other obligations. On this basis, the phrase introduced by "in any event…" was definitional of "as soon as possible", so that, where a funding arrangement was entered into prior to a letter before claim and notice of that arrangement was given with that letter, that satisfied the requirements of paragraph 9.3. Thus, as he accepted, the words "… as soon as possible and in any event…" in paragraph 9.3 are otiose and redundant. They should be read out.
- However, paragraph 9.3 imposed a discrete obligation on a party to litigation who had the benefit of a funding arrangement, entirely separate from the obligations to provide information found elsewhere in the scheme, e.g. elsewhere in the PD PAC and case specific protocols. I do not accept Mr Mallalieu's submission that, where there is a funding arrangement in place prior to a letter before claim, it should be regarded as doing no more than repeating the requirement that funding information be included in such a letter.
- In paragraph 9.3 of the PD PAC, the phrase "as soon as possible" is not used as a term of art. Its usual and ordinary meaning is "as soon as you can". Similarly, the phrase "… and in any event…", which, in its usual and ordinary meaning, adds to (rather than defines or gives an alternative to) what it follows. For example, by CPR rule 54.5(1), a claim for judicial must be filed "(a) promptly; and (b) in any event not later than 3 months after the grounds to make the claim first arose". It is well-settled that a claimant must make a claim both promptly and within three months, so a claim will be out of time if (i) it is filed within three months, but nevertheless not promptly (R (Berky) v Newport City Council [2012] EWCA Civ 378; [2012] Env LR 35); or (ii) outside three months, even if it was prompt in the sense that the claim was filed immediately after the claimant became aware that grounds to make the claim had arisen (R v Secretary of State for Transport ex parte Presvac Engineering Limited (1992) 4 Admin LR 121 at pages 133-4, recently confirmed in R (Crompton) v Police and Crime Commissioner for South Yorkshire [2017] EWHC 1349 (Admin); [2018] 1 WLR 131 at [103]). Therefore, in respect of that time limit, no doubt because of the importance of the principle of finality in respect of at least some administrative decisions, a claimant may be out of time even if it would have been impossible for him to have made a claim in time; although, of course, the fact that a claimant was unaware that he had a claim until after the time limit had elapsed may be powerful evidence in relation to the separate question of whether an extension of the time limit should be granted.
- As I understood his submissions, Mr Mallalieu did not suggest that the usual and natural meaning of "… as soon as possible and in any event…" was anything other than this. However, he submitted that, to give effect to the true objectively determined intention of the draftsman, paragraph 9.3 should be construed as if those words were omitted. The question therefore arises as to whether the draftsman's deliberate inclusion of the words "and in any event…" after the words "as soon as possible" (see paragraph 12 above) was an obvious drafting error. I am unable to accept that it was.
- Mr Mallalieu put forward several submissions in support of the proposition he sought to promote. He made lengthy submissions on the history of the paragraph, which I have briefly summarised above. I accept that such archaeological investigations might, in some cases, show that an obvious drafting error has been made, e.g. where now redundant words have accidentally been left in, or where it is clear that a change of words in a consolidating instrument marked (or, in other cases, were not intended to mark) a change in legislative intent. However, in this case, a historical excursion does not assist Mr Mallalieu's cause. As I have described, the relevant provision has seen changes to insert a time limit for the provision of information concerning funding arrangements where none had previously existed, i.e. "as soon as possible", which clearly could not have intended to mean anything but what it said; later followed by the addition of a clause beginning "… and in any event…". That last addition could not have intended to make "as soon as possible" otiose. If it was intended to replace "as soon as possible" with the time limits incorporated after the phrase "… in any event…", then that could – and, in my view, would – have been done in a far simpler and clearer way.
- Mr Mallalieu further submitted that the construction for which he pressed was consistent with other provisions within the scheme, e.g. those that required information about funding arrangements to be included in a letter before claim. I accept that, at least at first sight, there would appear to be some incongruity, or at least unnecessary duplication, between the requirement in paragraph 9.3 of the PD PAC that notice of a funding arrangement be served as soon as possible, and the requirement in paragraph 7.1 of and Annex A to the same Practice Direction (and their equivalents in the case specific protocols) that the same information is served in the letter before claim. I accept that, for these purposes, the information of the funding arrangement which has to be provided is substantially the same. But I do not accept that such provisions, standing together, result in a procedural absurdity. I do not accept that there could be no possible point in requiring notification of a funding arrangement (and, therefore, a potential claim) at a time when there is neither an obligation, nor probably the ability, to provide details of the claim, as Mr Mallalieu submits.
- Leaving aside the usual correspondence between potential parties to a claim prior to the formal letter before claim, as Mr Hutton pointed out, in respect of a clinical negligence case such as this, the Pre-Action Protocol for the Resolution of Clinical Disputes applies. The likely sequence of events in such a claim is set out in Annex A. A first step is to obtain the potential claimant's hospital medical records, by request in the form of Annex B. That request requires the claimant to disclose whether the application for records is made because the patient is considering a claim against that hospital, or someone else. If that hospital is a potential target, then it requires details of (i) the likely nature of the claim, (b) grounds for the claim and (c) approximate dates of the events involved. If the potential defendant is someone else, then it requires details of the names of the proposed defendants, and details of any proceedings if they have begun. This protocol was an early one: it was put in place in April 1999, at the time of the introduction of the CPR, and before the advent of CFAs etc. However, it remains in place, and it shows that those involved in drafting the CPR are not in principle averse to requiring potential claimants to give early notice of a potential claim to a potential defendant, even at a time when details sufficient for a letter before claim are not available. Of course, as paragraph 3.11 of the protocol accepts, it will not be practicable for healthcare providers to investigate every case when medical records are requested; but the protocol encourages them to adopt a policy to investigate cases at that early stage when they can. The protocol itself does not require information of funding arrangements to be given in the letter before claim; although, of course, as was common ground before us, paragraph 9.3 of the PD PAC applies to such claims.
- I should add that, on the evidence, it is unclear whether Kirwans did notify the NHS Trust of the potential claim when medical records were sought in 2010. There does not appear to be any evidence that they did; but, in any event, that would not have notified them that a CFA had been entered into in relation to the potential claim. As I have indicated (paragraph 27 above), notification of the first CFA was not given to the NHS Trust until the draft Bill of Costs was sent to the NHS Trust in August 2014, after the substantive claim had been settled.
- In some circumstances, early notification of a potential claim may be of assistance to the potential defendant, who may be in a position to make some investigation (and, e.g., ensure that evidence is obtained and retained) before receiving any letter before claim. Clinical negligence is an obvious case in point. I do not see why a potential claim in which the potential defendant faces enhanced costs liabilities should not be sensibly regarded as another circumstance in which that defendant should have early warning.
- Paragraph 9.3 of the PD PAC requires notification of a funding arrangement to be given as soon as possible. That, of course, is not the same as notification of a claim, although a funding arrangement suggests that a claim against someone is being contemplated and investigated. Although the claimant is not required to give any details of the claim, the potential defendant will know that he stands to be liable for enhanced costs in the form of an up to 100% uplift on fees and any ATE insurance premium. That may alter his approach to the potential claim, particularly if it is likely to be relatively low value and he is in a position to take a view on the claim at an early stage (e.g. if the potential defendant is a hospital, and it has access to both medical records and medics involved). The potential defendant may be in a position to make his own preliminary investigations; and, in any event, early notice of a potential claim may result in that person taking a pro-active approach to the potential claim. For example, he may suggest appointing joint experts, or other steps whereby the parties might cooperate at a very early stage, with a view to agreeing a compromise perhaps on a purely commercial basis. Therefore, in some (I accept, not all) cases, such early notice of a potential liability for enhanced costs may be of benefit to the potential defendant, and may assist in the earlier resolution of the claim. An impetus behind such pro-activity on the part of the potential defendant is knowing that he is potentially liable for the claimant's costs, enhanced by additional liabilities such as success fee and/or ATE insurance premium.
- Mr Mallalieu submitted that the general requirement of paragraph 2.2(6) of the PD PAC to provide information of funding arrangements in a letter before claim would be unnecessary if there was already a requirement to notify as soon as possible after the funding arrangement is made. Again, there appears at first sight to be some force in that argument. However:
i) Paragraph 19.2 of the CPD requires notice of a funding arrangement to be given at the time of service of proceedings, even when notice has been given in a letter before claim; and so the rules show that there is no aversion in principle to requiring multiple notifications of the same information.
ii) There may be some considerable time delay between the notification of a funding arrangement under paragraph 9.3 and the letter before claim, particularly where the claimant is (e.g.) a minor.
iii) In circumstances in which notice of a funding arrangement has in fact already been given, where a party then fails to give notice in some particular form, although the alternative notification will not avoid a breach of the rules, the opponent will not usually have suffered any possible prejudice and relief from sanction is very likely to be straightforward if not automatic (see, e.g., Forstater v Monty Python Pictures Limited [2013] EWHC 3759 (Ch); [2014] 1 Costs LR 36).
- Finally, Mr Mallalieu relied upon paragraph C1A-014 of the notes to paragraph 9.3 of PD PCA found in the White Book 2013, which does not refer to a requirement to inform another party of a funding arrangement "as soon as possible", merely stating:
"From October 2009 a party conducting litigation under a funding arrangement (a [CFA]) must inform the other party within seven days of entering into the arrangement or, where the claimant has entered into an arrangement before sending a letter of claim, so inform the defendant on the letter of claim. Previously para 9.3 said 'should' notify, rather than 'must'. If a party fails to comply and wishes to recover any [ATE insurance] and success fee in the litigation they must apply for relief from sanctions under CPR rule 3.9."
That, he submits, is consistent with his interpretation of paragraph 9.3. I agree; but the view of the learned authors of the White Book cannot affect the objective interpretation of paragraph 9.3, which is the task of the court. I do not find that note of any greater assistance than the note from paragraph 6.9 of Blackstone's Civil Justice Practice 2013, which states that:
"From October 2009, a potential party to proceedings who, before proceedings are issued, enters into a CFA that provides for a success fee must inform the other parties as soon as possible (PD Pre-Action Conduct, para 9.3). The intending claimant must give notice in the letter before claim or, if that has already been sent, within seven days of entering into the CFA."
- For those reasons, I consider the meaning of paragraph 9.3 of the PD PAC to be unambiguous. 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.
- Given my view that the meaning of paragraph 9.3 is unambiguously clear, whilst for the reasons I have given I do not consider that early notification of funding arrangements results in an absurdity, with respect to Judge Hampton, I do not consider it is necessary or appropriate to adopt a purposive approach to the construction of paragraph 9.3 of the PD PAC. Nor do I consider that her reliance upon paragraph 19.2(4) of the CPD (which, by its reference to "… must file and serve notice…" can only be applicable where proceedings have been commenced) to have been apt, or necessary. If I might respectfully say so, I am in full agreement with the Deputy District Judge, who said, in shorter but no less compelling terms than mine, that "as soon as possible" unambiguously means "as soon as possible".
- For those reasons, the first ground fails.
Issue 2: The Application for Relief from Sanctions
- As I have described (see paragraph 16 above), the correct approach to relief from sanction in the event of a breach of the rules is well-established – it is the three-stage approach adopted in Denton – and the Deputy District Judge clearly had that approach well in mind. It is also uncontroversial that, in exercising its discretion in the sense of making the assessment as to whether in all the circumstances relief should be allowed, the court has a generous margin of judgment. However, Mr Mallalieu submitted that the Deputy District Judge exceeded that ambit.
- He relied upon three sub-grounds.
i) The judge failed properly to grapple with the issue of whether the breach was serious or significant. In [4] of her judgment (quoted at paragraph 37 above), she appears to have considered the fact that there was a breach, for which there was no explanation, as sufficient to conclude that the first part of the Denton test had been satisfied.
ii) Nor, it is submitted, did the judge properly grapple with the second part of the Denton test. Over and above eliding the first and second parts in the passage to which I have referred, she failed to take into account the fact that paragraph 9.3 of the PD PAC is (at best) ambiguous, and the Claimant's legal advisers clearly complied with the requirement as they understood it to be.
iii) In considering the third part of the Denton test, the judge failed to give any consideration to the fact that, once they had notice of the funding arrangement, the NHS Trust continued to dispute the claim and file a Defence. There is no evidence that, had there not been a breach, their conduct of the litigation would have been any different; and, therefore, the judge's finding that they had suffered prejudice (to which she attached considerable weight) was wrong. Had she considered the matter properly, she could only have concluded that relief should be granted.
- I pause there to note that, before both judges below, the parties treated the CFA as a single arrangement, although there were two distinct CFAs for which notice was given at different time: notification of the second CFA was given with the letter before claim on 28 September 2012, but notification of the first CFA was not given until the draft Bill of Costs was sent to the NHS Trust in August 2014. Given that no notification of any change in the funding arrangement was given – and no notification of any funding arrangement was given until September 2012 – it is perhaps understandable that the CFAs were treated as they were; and no point was taken before us, by either party, in respect of that.
- In my view, in considering whether relief from sanction should be allowed, the key finding of the Deputy District Judge was that the NHS Trust had suffered significant prejudice as a result of the breach. The Claimant relied upon the proposition that he could not have given notice of the funding arrangement to the NHS Trust any earlier than 28 September 2012 because it was not until that date that the defendant had been identified. Judge Hampton referred to that explanation as "nonsensical", because the CFA risk assessment completed in March 2012 had noted that the defendant was easily identifiable. The Deputy District Judge also noted that; but she also found that there was no evidence adduced by the Claimant that the NHS Trust could not have been identified as soon as the first CFA had been made in 2010. As I have described, it appears to have been conceded that it was known by November 2011. There was no evidenced reason why the Claimant could not have notified the NHS Trust of the funding arrangement at the time of Professor Bell's November 2011 report; or, indeed, at or shortly after the time of the first instructions received by Kirwans in June 2010. The Deputy District Judge was entitled to proceed on the basis that the Claimant had breached paragraph 9.3 from 25 June 2010 or very shortly thereafter.
- The Deputy District Judge found that the NHS Trust had suffered prejudice because, in respect of the funding arrangements, it was not told in June 2010 – and, indeed, not until September 2012 – that any was in place. The NHS Trust had therefore lost the opportunity of taking pro-active steps towards investigating and resolving this potential claim over a two and a half year period, during which additional liabilities of over the amount for which the Claimant was prepared to settle (and double the amount for which the claim was eventually settled) were incurred. The Claimant's position in respect of exercise of discretion was the weaker because, knowing the identity of the defendant and having received a breach report by November 2011, a letter before claim (which would have informed the NHS Trust of the details of the claim) was not served until September 2012, on the day that it was intended to issue proceedings. Judge Hampton took a similar view of prejudice.
- 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. As Mr Hutton submitted, had they relied upon a statement from an NHS Trust employee saying that they would have acted differently, that would inevitably have been the subject of scepticism from the Claimant's advisers as being self-serving; and, in fact, once the NHS Trust had the opportunity to investigate matters, the claim was resolved fairly quickly, albeit after a Defence had been filed. However, a realistic offer was made by the NHS Trust within two weeks of the filing of the Defence; and the success fee for the period after the issue of proceedings is not, in any event, in issue.
- I accept that [4] of Deputy District Judge Elmer's judgment could have been better expressed. However, it was an ex tempore judgment – the third such judgment she had delivered on this matter that day – and it is clear from what she said later in her judgment that she considered the breach serious and significant because of the time over which it stretched and the prejudice suffered by the NHS Trust over that period as I have described.
- In terms of the explanation for that breach, in my view the Deputy District Judge cannot be faulted. The only reason for the delay put forward on behalf of the Claimant was that his legal advisers could not identify the defendant earlier. On the evidence, that reason was patently bad. Although there was the cryptic reference in the application to "the technical breach occurred as a result of an unavoidable error on part of [the Claimant's] legal representative… in construction of the rule…" (see paragraph 30(ii) above), there was no evidence that the Claimant's solicitors had considered the issue of when the notification should be made and had misconstrued paragraph 9.3 of the PD PAC (without with or consideration of the White Book). The Deputy District Judge cannot be faulted in proceeding on the basis that there was no evidenced good reason for the breach.
- Nor do I consider the Deputy District Judge erred in the manner in which she carried out the balancing exercise required by the third stage of the Denton test. Mr Mallalieu's complaint is again focused on the absence of prejudice, which I have already dealt with. On the evidence before her, the judge was entitled to conclude that there was here an unexplained delay in complying with the obligation to notify the NHS Trust of the relevant funding arrangements of more than two years, during which the NHS Trust had no opportunity to take steps to protect its position against liability for the substantial enhanced costs incurred during the period; and that, consequently, relief against sanction should not be allowed. Judge Hampton did not arguably err in dismissing the appeal based upon the proposition that the Deputy District Judge was wrong in the manner in which she exercised her discretion to refuse relief.
Conclusion
- For those reasons, I do not consider that Deputy District Judge Elmer (or, in her turn, Judge Hampton) was wrong to dismiss the application for relief from sanction as she did. I would dismiss this appeal.
Post-script
- Although paragraph 9.3 of the PD PAC no longer applies to new cases, it continues to apply to cases where the funding arrangements were in place before April 2013. We were told that, because of the longevity of some personal injury cases, there are likely to be a considerable number of claims that are still subject to the pre-April 2013 rules. This case is therefore something of a test case. Indeed, that is one reason why Jackson LJ considered that permission to appeal should be given.
- However, 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.
Lord Justice Moylan:
- I agree.
Lord Justice Lindblom:
- I also agree.
