LATE SERVICE OF NOTICE OF FUNDING AND RELIEF FROM SANCTIONS: THIS DOES NOT END WELL FOR THE CLAIMANT: COURT OF APPEAL DECISION
In the judgment today in Springer v University Hospitals of Leicester NHS Trust  EWCA Civ 436 the Court of Appeal upheld a decision that refused to give relief from sanctions following late service of notice of funding. The case shows the dangers of leaving notification of a claim to the last moment.
The claimant brought an action under the Fatal Accidents Act. It settled for £20,000. On the assessment of costs the defendant raised an issue as to whether the notice of funding was served promptly. The rules required it to be served “as soon as possible”. It was served with the letter of claim which, itself, was sent shortly before proceedings were issued. The claimant denied there was a breach, since notice was given with the letter of claim. The claimant also issued an application for relief from sanctions. Without relief the claimant could not claim success fee prior to service of the notice and the majority of the insurance premium claimed.
The Court of Appeal upheld the finding that there was a breach. The Practice Direction that governed the matter stated
“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.”
The Court of Appeal held that this was clear.
“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.”
This imposed a discrete obligation, entirely separate from writing the letter of claim. The claimant’s failure meant that relief from sanctions was required.
THE JUDGMENT ON THE APPEAL IN RELATION TO RELIEF FROM SANCTIONS
The District Judge had refused the claimant’s application for relief from sanctions. That decision was upheld by the Circuit Judge on appeal. The Court of Appeal also upheld the refusal.
“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  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.
THIS IS NOT A PRECEDENT
If anyone is involved in a similar case it is worthwhile reading the postscript to the judgment.
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.