PART 8 PROCEDURE USED FOR CLAIM FOR £2.6 MILLION: THE CLAIMANT COMES TO GRIEF – IS ANYONE SURPRISED?

A common practice has occurred of issuing Part 8 proceedings under the MOJ Protocol and “parking” cases there for an extended period.  This is an extremely dangerous practice.  It is even more dangerous if the case that has been parked never came within the Protocol at all. I am grateful to barrister Richard Whitehall for sending me a copy of the Decision of HHJ Wood in Cable -v- Liverpool Victoria Insurance Company Ltd (County Court at Liverpool, 5th July 2019).  It involves a claimant issuing Part 8 proceedings in a case that was said (by the claimant) to have a value of £2.6 million.  A District Judge refused to lift the stay on the Part 8 proceedings, this decision was upheld by the Circuit Judge. (A copy of the judgment is available here  Cable v LV Cable v LV) 

 

“… in a case that never, ever at the time they issued the claim form could it be said would have a value of £25,000 or less. That to me is an abuse of process and the abuse comes from using the procedure that is available to portal claims in a case that could not be said, on any stretch of the imagination, to be a portal claim….”

THE CASE

The claimant was injured in a road traffic accident in September 2014. The claimant’s solicitor notified the defendant of the claim on the MOJ Portal.  Initially the claim was said to be low value. However a medical report indicated that he was absent from work.   The defendant sought further information but received little by way of response, the claimant engaged in what the District Judge called “radio silence”.

ISSUING THE PART 8 CLAIM

In July 2017 the claimant’s solicitors issued a Part 8 claim form.  A stay was granted until August 2018, the court also ordered that a copy of the order be sent to the defendant by August 2017. The order was not, in fact sent, until February 2018.

In August 2018 the claimant’s solicitors informed the defendant that the case was a substantial one, the claimant having lost his £130,000 per year job.   Medical reports that showed substantial injuries were disclosed.

LIFTING THE STAY

The claimant then made an application to lift the stay and for the matter to proceed on a Part 7 basis. This was granted on a without notice.  The defendant then applied to set aside the without notice order.

THE HEARING BEFORE THE DISTRICT JUDGE

The District Judge set aside the without notice order and refused permission for the matter to proceed by way of Part 7.

THE DISTRICT JUDGE’S JUDGMENT

HHJ Wood summarised the decision of District Judge Campbell

25. I propose to summarise the salient features of the judgment, noting at the outset that the learned district judge had been referred to two recent and relevant decisions decided in a similar context, regarding the decision of His Honour Judge Pearce in Lyle v Allianz Insurance PLC [2017] (unreported) as particularly persuasive.
26. After she had summarised the factual and procedural background, DJ Campbell went on to make several pertinent observations. First of all, there had been early consultation of solicitors, with submission of the CNF form, and an appropriate early admission of liability at a time when the claim was said to be limited to £10,000. She noted that at the time of the first medical examination by Dr Saeed that the medical picture was becoming complicated by the need for a neurological discipline with a potential ongoing loss of earnings claim. She described there being “absolutely no substantive response” to any correspondence or chaser emails within the primary limitation period. Following the obtaining of the two reports from Dr Kidd, the noting the deterioration, the learned district judge observes at paragraph 29:
“all of that would make a Claimant solicitor think about the value of this case.”
27. At paragraph 33 she noted that there had been no compliance with the initial order of DJ Baker and it was not until February 2018 that the Defendant had any idea that proceedings had been issued. When in February 2018 the file was finally transferred to a member of the multitrack team, the district judge observed that this would have been the time that the Claimant solicitor’s finally believed the case could no longer remain in the MOJ portal and that an application would be required to lift the stay, although she notes that nothing was done at that time. Paragraph 39 is significant:
“It was not until late September 2018 that the Defendant’s insurers learn that this case now has a potential value of £2.6 million. Up until the application to lift the stay and transfer to Part 7, they must have been working under the notion that this was a portal case, i.e. a value not exceeding £25,000. That is quite astonishing, and I am not surprised that that has taken the Defendant’s insurers by surprise [sic]”
28. She continues at paragraph 41
“There has never been any earlier indication from the Claimant’s solicitor as to the value of this case. I have already said in my judgment that they could, and should, have appreciated at a much earlier stage that this case was not suitable for the portal. But no draft schedule was proposed, or prepared, or filed, or served until late September 2018.”
29. There is little doubt that the judge is being highly critical of the Claimant’s solicitors’ conduct in terms of valuing the claim, although the question of any abuse is not addressed at that stage. At paragraph 44 and following the learned district judge went on to consider the applicable law and the discretionary power available to the court under CPR 8.1 (3). She made reference to the associated practice direction and in particular paragraph 16.7. When addressing the power of the court to strike out, the learned district judge referred to the editorial note in the White Book at paragraph 3.4.3 which was concerned with the striking out of a statement of case which was an abuse of the court’s process, and in particular where it was stressed that in a strike out application proportionality was very much in issue, and it should only be a last resort. The judge described herself as “wholly agreeing” with that position. (In this respect, it should be noted, it is said by the Claimant that the judge has gone wrong in her approach, because she has adopted principles applying to a pure striking out for abuse of process application where the proportionality of the sanction (i.e. the loss of the claim) was central and yet has failed to address that in the latter part of her judgment.) She acknowledged in paragraph 51 that abuse alone was not sufficient to lead to the striking out of the case, unless it was egregious.
30. Because of the submission by the Defendant that it had been prejudiced by the way the litigation had been conducted, the learned district judge went on to consider issues of prejudice in paragraph 53 and following of her judgment.
31. Apart from the insurer having no knowledge that this was a high-value claim for over four years from its inception, she made reference at paragraphs 54 and 55 to the inability of the insurer to set a reserve for damages and costs. At paragraphs 57 and 58 the learned district judge referred to the Defendant’s disadvantage in not being able to participate in the early stages of the litigation because the personal injury protocol had been bypassed. This was relevant to issues such as the selection of medical experts, having their own examination, and encouraging rehabilitation under the rehabilitation code. Such participation could have led to a recovery and possible return to work, would also have been welcomed by the Claimant, and impacted “enormously” on the loss of earningd claim.
32. The third element of prejudice, according to the district judge, arose because of the inevitable delay which was caused by the need to case manage the claim, arrange for the exchange of expert witness evidence, schedules of loss and so on, and the clear knock-on effect which this would have on the trial date, likely to be delayed until some significant time in the future. Finally, by utilisation of the Part 8 process, the Defendant, she says, has been deprived of a limitation defence.
33. In relation to the obvious point which would arise from striking out, the Defendant has secured a windfall by avoiding a £2.6 million claim; however, the judge pointed out at paragraph 62 that the value of the claim in excess of the MOJ portal maximum had been known for some considerable time, and not recently before the application to utilise the stay procedure under the practice direction.
34. In paragraphs 63 and following the learned district judge provides her conclusions. It is plain that she is focusing on the Claimant’s solicitors conduct. At paragraph 64 she poses the question which she seeks to answer:
“64. Does the conduct get to be as serious as mischievous, deliberate, deliberate [sic] concealment? It is difficult for the court to say one way or another whether it is sheer incompetence or deliberate concealment. But what the court is extremely unhappy with is the suggestion that August 2018 is the first time anyone in this international personal injury law firm bothered to value this case. That is wholly out with all the obligations that the Claimant’s solicitors have to conduct litigation efficiently, at proportionate cost, to have parity between the parties under the overriding objective and to comply with rules, practice directions and orders, and to properly prosecute the client’s claim. I have not even mentioned to try and get Mr Barry Cable into a position where his life is beginning to improve because that does not seem to have been thought about at any stage by the Claimant’s solicitors at all.”
35. Because it is central to the Claimant’s case on this appeal that the learned district judge misunderstood the approach to an abuse of process application it is important to consider what she says about abuse of process at paragraph 65:
“… in a case that never, ever at the time they issued the claim form could it be said would have a value of £25,000 or less. That to me is an abuse of process and the abuse comes from using the procedure that is available to portal claims in a case that could not be said, on any stretch of the imagination, to be a portal claim….”
36. The learned judge expresses her conclusions strongly in paragraph 66:
C
“66. So when I look at the totality of what has gone on I find that this was an abuse of the court process. It is one thing to use the portal procedure and seek a stay and then sit on a case for a year, do nothing and ask for a further stay and delay and delay. Those sorts of cases come before this court regularly with Defendants arguing that they are an abuse, BUT I have never had an application before me where it is so obvious on the evidence that this was never a portal case and yet the Claimant’s solicitors have decided to use that procedure when it did not apply to this case and when it bought them a further 12 months. I cannot even see that during those 12 months they were doing anything constructive whatsoever, because I am told this afternoon that the first time anyone valued that case was August 2018 at the very end of that stay.”
“67. For those reasons I find that there is an abuse of process. On that basis, therefore, I am going to set aside district judge Doyle’s order……”
37. The learned district judge then addressed how she should exercise her discretion under CPR 8.1 (3) on the setting aside of the earlier order. Technically, of course, this was unnecessary as a mechanism for striking out, because a transfer to Part 7 would not have been possible if the stay remained. However, she was right to say that the claim remained in limbo. She was concerned that the sanction to address the abuse which she had found would result in a very serious consequence for the Claimant, but had “wracked her brains”, as she described it, to see if there was any lesser alternative, such as a penalty in costs. At this point reference was made to the decision of HH Judge Pearce in Lyle which purported to deal with exactly the same situation which had arisen in the present case, although the facts, according to DJ Campbell, were less serious and significant in that case. She noted that Turner J in the Atha case whilst finding an abuse of process had not regarded the value limitation imposed on the claim form to avoid a higher fee as sufficiently egregious to justify striking out. Her conclusion was that the claim would be struck out.
38. DJ Campbell went on to deal with the hypothetical question of relief from sanction, had she exercised a discretion in favour of the Claimant. Applying Denton principles she did not regard this as an appropriate case for relief from sanction. As I have indicated, that aspect is also the subject of an appeal challenge.

 

THE DECISION OF HHJ WOOD

HHJ Wood reviewed the rules and principles in detail, he upheld the decision of the District Judge.

Although there is no clear mechanism provided in the relevant rule or the practice direction as to what should happen if a stay imposed in accordance with 8BPD paragraph 16 is not lifted, the only logical conclusion is that the action cannot proceed by any process. Paragraph 16.7 does not allow Part 7 proceedings to be commenced whilst there is an extant part 8 claim which has been stayed. Whilst it has been described as being a claim “in limbo” and in so far as it is not disputed that a judge has a discretion in determining whether or not to lift the stay under this paragraph, it seems to me that there must be a power to strike out. In fact this is not really challenged by either counsel. It would be a concomitant part of the process involved, when the judge exercises such a discretion. For this reason it seems to me that a judge is entitled to take into account any question of abuse of process without the need for a formal application to that effect. The discretion is clearly a broad one which will require consideration of a number of factors, and I do not believe that it is necessary for the court to follow the stepped approach which might arise if there had been a challenge made under CPR 3.4. Accordingly, the judge cannot be criticised for seeking to determine whether or not the claimant’s solicitors had abused the process of court as one the relevant factors.
71. Categories of abuse of process, which are not defined anywhere within the rules, are many and various and not closed. Whilst the reference to “obstruction of the just disposal of the proceedings” provides some pointer within CPR 3.4, in my judgment the essential question is whether or not the party which has been accused of the “abusive” conduct has acted in a way which is unfair to the other party. District Judge Campbell may not have sought to grapple with a precise definition, but it is plain to me that on several occasions throughout her judgment she has considered the effect which the claimant’s conduct of the litigation has had in securing an advantage for the pursuit of his claim, and in particular had disadvantaged the defendant. It is not simply a question of prejudice, which implies a negative effect on another party, but also the way in which the claimant’s advisers have been able to bypass the requirements of the PI protocol, which clearly applied, and of course to avoid the operation of the Limitation Act.
72. Insofar as the claimant seeks to argue that the learned judge’s conclusion that this was a deliberate stringing out of the limitation period was inconsistent with her findings as to the Claimant’s solicitors motives, in my judgment a finding of concealment or underhand conduct could never be a prerequisite for a conclusion that the courts’ procedures are being abused. The question here was as much about effect as it was about motive – the latter perhaps being more relevant to the question of professional misconduct. The judge was entitled to find that this was a case where the Claimant’s solicitors through incompetence or poor organisation found themselves in a position where the limitation period was approaching and little or no effort had been made to value the claim and consider whether it was capable of remaining in the portal so as to justify a Part 8 paragraph 16 stay application. It was clear that she regarded their handling of the claim as having been compounded by a failure at any time in the previous two and a half years to acknowledge that the damages should be valued easily in excess of £25,000. In my judgment the learned judge was correct to approach the conduct of the solicitor in a highly critical manner, especially when it is clear that there were a number of duties imposed if the correct procedure had been followed, including cooperation with and involvement of the defendant’s solicitors at an early stage. In paragraph 66 of her judgment the learned judge provides an assessment of the entire approach of the solicitors to the litigation which it seems to me is unimpeachable.
73. As far as the question of prejudice is concerned, I find myself unable to accept the general submission advanced on behalf of the claimant that the judge found prejudice where there was none. Prejudice in this context involved, as I have indicated, a consideration of the effect of the manner in which the court’s process has been abused. It is important that a balancing exercise is undertaken in this regard. In his submissions Mr James provides an analysis of the several factors identified by Judge Campbell and seeks to break them down on an individual basis, suggesting that none would be capable of supporting a finding of abuse of process. However, this fails to acknowledge that in exercising a discretion the learned judge was entitled to consider the cumulative effect of the various factors, which included the overall delay, the loss of any opportunity for input on rehabilitation, the inability of the defendant’s solicitors to participate in the case management process, including the identification of their own experts, depriving the insurer of an opportunity to set a reserve, deliberately (if not contumeliously) misusing the portal process to secure a stay and thus obtain a limitation extension, and the wholesale failure to address the value of the claim at any stage before the early part of 2018, or to inform the Defendant until later in 2018 that this was a high value claim.
74. Whilst it may be correct that taken individually no single factor (save perhaps for the last two) would be sufficiently serious to justify the sanction of striking out by itself, it seems to me that whilst not specifically spelling this out, the learned judge was clearly addressing the overall effect of the Claimant’s solicitors conduct on the fairness of the process. Further, in the exercise of her discretion I do not accept that she has ignored the prejudice that striking out would have on the Claimant and the loss of a claim which could only be pursued through a professional negligence action. On several occasions the learned judge has referred to the draconian nature of a sanction of striking out, and to wracking her brains to consider an alternative which would mark the manner in which the process had been abused, and the defendant had been prejudiced. This implies to me an awareness on her part that the claimant was losing the direct and obvious route to compensation for his injuries as a result of his solicitors’ failures. Invariably when a claim is struck out in such circumstances a claimant has the additional burden of pursuing a professional negligence action; he is not shut out of damages altogether. I do not believe in the circumstances it was necessary for the learned judge to analyse difficulties which the Claimant would face in any subsequent professional negligence proceedings.
75. In summary, I am satisfied that the learned judge not only applied the correct test to determine whether or not the Claimant should be entitled to proceed with his claim notwithstanding the abuse of process attributable to his solicitors, but also came to a conclusion which was within the reasonable and generous ambit of her discretion. In fact, it is difficult to contemplate any other outcome in the circumstances with which she was faced. I agree entirely with the conclusion that the Claimant’s solicitors’ conduct was more significant and serious than that which was considered by His Honour Judge Pearce in the Lyle case. In any event, it does not seem to me that the learned judge regarded herself as bound by that decision, but considered it persuasive.