AVOIDING THE TERMS OF A CONSENT ORDER: A CASE THAT HAS A LOT OF LESSONS FOR SOLICITORS: WHY A CONSENT ORDER MAY NOT BE WORTH THE PAPER ITS WRITTEN ON
The judgment in Riordan & Ors v Moon Beevor Solicitors (a firm)  EWHC 1452 (QB) gives an interesting insight into the fallout from litigation – where the disgruntled client blames the solicitors. There are important lessons here about the drafting of consent orders. The consent order in this case was, as it transpires, worthless. The facts of the case also illustrate the wisdom of the old solicitor’s adage of having funds on account…
I have to say that this is a decision that makes me uncomfortable. An experienced litigant:
- Issues proceedings at the end of a relevant period.
- Does nothing for an extended period until the claim is struck out.
- Applies for relief from sanctions, but avoids that application by entering into a consent order.
- Then manages to persuade the court that the consent order is, to all intents and purposes, ineffective and need not be complied with.
- In the process of making the application fails to tell a Master a highly relevant fact.
- So the claimant has bypassed the striking out, the relief from sanctions application, not disclosed a key fact and obtained an open-ended extension of time.
One clear message it sends out is that parties to consent orders should not leave anything “executory”. If anything is left to be determined by the court the entire consent order can be rendered nugatory.
The action is in the aftermath of the Supreme Court decision in Thevarajah -v- Riordan  UKSC 78. The Supreme Court upheld a decision refusing to grant relief from sanctions. “The net effect of that litigation was that the Claimants were liable to Mr Thevarajah in respect of the judgment he obtained (a little over £2.2 million) and costs (including enforcement costs) in the sum of nearly £3.5 million”.
THE CLAIMANT IN THE CURRENT ACTION
The claimant in the current action blamed their former solicitors for the overall outcome of the litigation where they were debarred. The wished to bring an action against the firm alleging:
“that negligently it failed to appeal against the imposition of the debarring order and/or to apply to vary or revoke it, but issued the second application for relief from sanctions without the relevant evidence in support. They propose to assert that, but for this negligence, there would have been a good chance that the debarring order of 9 August 2013 would have been reversed on appeal and/or would have been varied or revoked if such an application had been made supported by the relevant evidence. It is to be alleged that various direct losses totalling “at least £5,500,000″ have been incurred.”
THE DEFENDANT SOLICITOR’S COSTS: IF EVER THERE WAS A LESSON TO TAKE FUNDS ON ACCOUNT OF COSTS…
“It is necessary to retrace the history after the Defendant terminated its retainer on 30 March 2015. On 31 March 2015 the Defendant rendered a bill to the Claimants for just over £1.2 million for the work it had done. On 1 April 2015 it came off the record. No payment against that bill was made and the Defendant has accounted for VAT of over £200,000 and there is a little over £582,000 (plus VAT) owing to Counsel.”
The claimant client issued proceedings for the assessment of those costs just at the end of the 12 month period.
No evidence was filed or served and the court struck out the application of its own motion because the claimant had failed to comply with court orders.
THE CONSENT ORDER
The claimant applied for relief from sanctions (something it is familiar with). The parties entered into a consent order.
“IT IS ORDERED BY CONSENT:
1. The Strike Out Order is set aside.
2. There be a detailed assessment of the Bill, provided that the Claimants do pay the sum of £650,000 in cleared funds without set-off or deduction, on account of the Bill by 4.00pm on 02 February 2018.
3. In the event that the payment provided for in the previous paragraph is not made, this claim shall be dismissed with costs to be subject to detailed assessment if not agreed without further order.
4. In the event that the Claimants comply with the proviso in paragraph 2 … the directions in CPR 46.10 shall be modified [in the respects indicated].
6. Save as provided for above, the claim is dismissed.
7. Permission to apply in respect of the date in paragraph 2 above but such application must be on notice to the [Defendant] and served on them and a copy of the application and evidence in support sent by email to [a named partner in the Defendant] by 4pm on 5 January 2018, unless the parties reach agreement in that respect. Such hearing shall not be listed for hearing on or between 5 January and 12 January 2018.
8. The Claimants do pay the Defendant’s costs of the Application, agreed in the sum of £2,600.”
THE CLAIMANT’S APPLICATION FOR AN EXTENSION OF TIME
The claimant applied for an extension of time to comply with paragraph 2.
The day before the hearing the claimant issued an application to vary or revoke the consent order pending the application of the claimant’s professional negligence action against the defendant.
THE MASTER’S ORDER
The Master held that although there was an effective consent order in existence, paragraph 7 was still executory – still awaiting the court’s determination of when the relevant sum should be paid.
The Master stayed the proceedings for a detailed assessment pending the outcome of the professional negligence action. He held that the existence of the potential professional negligence action represented a material change in circumstances.
THE MASTER’S MISTAKEN BELIEF
The Master had been (inadvertently) misled to the view that the proposed professional negligence action was a “new” development.
I think Mr Munro was justified in saying that the Master would have been under the impression that a potential professional negligence action against the Defendant was a new feature in the landscape of the litigation and, accordingly, represented a “material change in circumstances” from the time the consent order was agreed. However, it emerged after the hearing before the Master that the Claimants had, by their then solicitors (YVA Solicitors), sent a letter to the Defendant dated 9 October 2015 making a very broad allegation of negligence. The relevant paragraph of the letter read as follows:
“We are instructed that our clients consulted you in relation to the proceedings issued by Thavatheva Thevarajah following our clients being debarred from defending the proceedings. Our clients proceeded to issue two applications seeking relief from the sanction being debarred based on your advice that our client’s (sic) had good grounds for making such applications. Though it is fair to say that at the hearing before [the Deputy High Court Judge] our clients were granted relief, that decision was reversed by the Court of Appeal. Given the decision of the Court of Appeal it is clear that the advice given was both wrong and negligent.”
THE JUDGE’S VIEW ON APPEAL
Mr Justice Foskett upheld the Master’s decision.
The Master, who is very experienced in these matters, was of the clear view that, given the assertion of this professional negligence case, it would not be appropriate at this stage to shut out a detailed assessment of the Defendant’s bill of costs: it is possible that the issues raised in the forthcoming litigation may have a bearing on the detailed assessment in due course. In my view, it was not strictly necessary to look for a “material change in circumstances” since the consent order was made to justify such a decision. It was sufficient to say that the order should not be implemented in the situation prevailing at the time the court was invited to consider the issue. However, if it was necessary to look for a “material change in circumstances”, on the material before him, the Master was certainly entitled to come to that decision. He did not have the letter of 9 October 2015 before him and so it is impossible to know what influence that might have had on his decision. For my part, had I been considering the issue, I might have been less persuaded that there was such a change of circumstances (in the sense of a supervening event) for the reasons mentioned by Mr Munro, although, at the end of the day, the difference between the position taken in the 9 October 2015 letter and the most recent letter is stark: in the former, there is a wholly unspecific and general allegation of negligence; in the latter there is a fully particularised case. That could well be seen as a significantly changed position.
THE LEGAL PRINCIPLES
I might just add one matter in passing. The case of Thwaite v Thwaite  Fam 1, a decision of the Court of Appeal in a matrimonial finance case, was not referred to in Safin. It is authority for the proposition (see pp. 8-9) that where an order, even made by consent, is still executory “and one of the parties applies to the court to enforce the order, the court may refuse if, in the circumstances prevailing at the time of the application, it would be inequitable to do so”. Reliance for this proposition was placed upon Mullins v Howell (1879) 11 Ch D 763 and Purcell v F C Trigell Ltd 1 QB 358, 366-367. These cases were, of course, all pre-CPR, but the approach may still have a role to play now. If so, it would, in my view, have been a jurisdiction that could have been invoked in this case (see paragraph 14 above).
The Master’s order was for an indefinite stay “pending resolution of the Claimants’ proposed claim for professional negligence against the Defendant” subject to the right to apply to the court in relation to this provision. Given the history, I would myself have been strongly minded to impose a time limit on the stay by reference to an appropriate date for the commencement of the proposed action. However, as Mr Mallalieu has reminded me, this did not form the subject of the appeal and, in any event, should be seen as a case-management decision which could not said to be wrong. With some reluctance, I accept those contentions. The Defendants’ protection in this regard must come from the “liberty to apply” provision.