THE DANGERS OF NOT USING PRE-ACTION PROTOCOLS & THE PRACTICE DIRECTION TO THE FULL: A WORKING EXAMPLE OF PROBLEMS CAUSED BY PREMATURE ISSUE
The next in the series was going to be a review of the rules and principles relating to pre-action conduct. However Kerry Underwood has written a post that deals with this issue comprehensively and I have nothing to add. Here we look at one example of problems caused by issuing without compliance.
KNOWLES –v- GOLDBORN
This is a case reported on Lawtel today, a decision of H.H. Judge Gregory in the Walsall County Court on the 6th January 2014. It was an appeal by the defendant against an order of a District Judge who had declined to strike out the action.
The defendant had settled a personal injury claim with the claimant without proceedings being issued. It was agreed that the defendant would pay the claimant’s costs.
The claimant sent a bill of costs to the defendant and the defendant asked for further information in relation to the status and identify of the fee earner doing the work. The defendant sent an offer, fully calculated, based upon a grade D hourly rate. The defendant stated that the offer would remain on a grade D basis until information as to the identity of the fee earners was provided.
The claimant issued Part 8 proceedings the day after this letter was received.
THE DUTY ON THE PARTIES
The judge considered the rules relating to pre-action conduct in Part 8 proceedings.
“14. The defendants say that the rules governing the issue of Part 8 proceedings require
that costs should not have been agreed before proceedings can be commenced. That
implies a proper attempt at negotiation before the position is reached where costs have
not been agreed. The rule that governs these procedures is rule 46.14(1). The
conditions that must be satisfied in order for the costs-only Part 8 procedure to be
available are as follows:
“(a) the parties to a dispute have reached an agreement on all issues
(including which party is to pay the costs) which is made or confirmed in
(b) they have failed to agree the amount of those costs; and
(c) no proceedings have been started.”
15. In this case, the defendants say that, in order to have failed to reached an agreement,
the parties must have tried to do so. This argument was presented to the district judge.
He appears to have accepted it, although he does not expressly say in his judgment
whether he did. In any event, as I understand the position, it is conceded for the
purposes of this appeal that that is a proper interpretation of the rules. Even if that
were not conceded, it is the view to which I would unhesitatingly come. It is a view
which has already been reached by Senior Costs Judge Hurst in Bensusan v Freedman
 EWHC 9001 (Costs). His view was that the parties must have made “a proper
attempt at agreement” before there can have been a failure to disagree.
16. That was also the view of District Judge Berry, sitting in Burnley County Court, in the
case of Talai v Tui, 28th June 2012. In giving the judgment in that case, he stated
“My understanding of the word failure is ‘not to succeed in the
attainment of an objective’. I respectfully opine that the use of the words
‘failure to agree’ must carry with it the plain implication that an attempt
has been made to agree.”
7. This approach is reflected in a document produced after this hearing by the Senior
Courts Costs Office Guide. It is included, from page 231 onwards, in the appeal
bundle. At paragraph 21.1(iii) of the introduction, this guidance is given:
“No proceedings must have been started and the parties, after a proper
attempt at agreement, must have failed to agree the amount of costs.”
18. This is a matter which plainly has to be viewed in the light of the overriding objective
which requires cases to be dealt with justly (that is, fairly to both parties),
expeditiously and as economically as possible. The courts, in particular the Court of
Appeal, have stated time and again that parties should seek to negotiate settlement of
disputes between them and not rush to litigation. In the case of Part 8 proceedings,
the claimant is given a powerful weapon to deal with costs and must use that weapon properly. The rules make it quite plain that costs-only litigation is to be pursued
where agreement has not been reached. That implies that there will be an attempt to
reach an agreement, which will be a bona fide attempt, so as to avoid litigation.”
THE CLAIMANT’S CONDUCT IN THE CURRENT CASE
The judge made a number of key findings:
1. The defendant had plainly shown itself open to negotiation. The substantive claim was settled without the need for proceedings and there had been a compromise within those proceedings with the defendant reducing an allegation of 25% contributory negligence to 10%.
2. When the bill of costs received the response was that the defendant wished to make an offer but sought more information before doing so.
3. The defendant was entitled to take reasonable steps to satisfy themselves as to the identity and grade of a fee earner.
4. There was nothing to suggest that the defendant was engaging in delaying tactics. Their requests were not unreasonable or obtuse.
5. The judge could not see what the claimant’s costs draftsman did to agree settlement. Proceedings were issued just over 3 weeks after the bill of costs had been sent.
6. “… simply to commence proceedings without establishing whether any offer was to be forthcoming and when it would be forthcoming, was, in my judgment, to embark upon proceedings with undue haste.”
OVERTURNING THE DECISION OF THE DISTRICT JUDGE
H.H. Judge Gregory held that the District Judge erred in failing to consider the fact that an offer had
been made the day before proceedings were issued.
THE CONCLUSIONS OF THE CIRCUIT JUDGE
“… simply to send a bill of costs and then three weeks later to
commence proceedings, when you know that the defendants are seeking to engage in
negotiations over costs, was, in my judgment, to commence proceedings without
making any real or genuine attempt to reach agreement.
27. That I regard as a plain and obvious conclusion to come to in the circumstances of this
case. The reasons given by the district judge for reaching an alternative view are, in
my view, inadequate and overlook the true chronology of this case. Therefore I am
satisfied that, in reaching the conclusion that he did, he was wrong. He should, in my
judgment, plainly have concluded that there had not been a proper attempt at reaching
agreement upon costs in this case. He should have concluded therefore that these
costs-only proceedings had been embarked upon far too hastily and without a proper
attempt to avoid engaging in this litigation.
28. I have come to the conclusion that the only proper response in those circumstances is
to grant permission to appeal upon the ground that there is a real prospect of success.
I allow the appeal upon the ground that the district judge was plainly wrong in the
conclusion to which he came. I set aside the order that he made. I take the view that
the order that he ought to have made was a straightforward one: he should simply
have dismissed these Part 8 proceedings as prematurely begun and therefore not
within the rules.
29. That is the order that I therefore make.”
THE CLAIMANT’S PART 8 ACTION WAS STRUCK OUT
The result was that the Part 8 action was struck out. The transcript is silent upon this issue, however it appears inevitable that the claimant will be paying the costs of the initial hearing and the appeal. Although not covered in the judgment there can be little doubt that the costs of the two hearings will be somewhat higher than any costs the claimant will recover in relation to the initial proceedings.
LESSONS TO BE LEARNT
- Read Kerry Underwood’s post on pre-action conduct.
- Do not issue Part 8 proceedings prematurely.
- Make sure that you follow pre-action protocols, and the pre-action Practice Directions, as closely as you reasonably can (and this applies to both claimants and defendants).