Caught out by the court fee: a forewarning on issuing claims protectively

News | Mon 1st Feb, 2016

Facts

The case of Richard Lewis & Others v Ward Hadaway [2015] EWHC 3503 (Ch) concerned 31 professional negligence claims brought against a firm of solicitors relating to conveyancing transactions.

In the pre-action correspondence, the individual claims were each valued in the hundreds of thousands with a collective worth of £9 million. However, when the Claimants’ solicitors filled in the claim forms, the anticipated value for each case was considerably understated. Each claim form was then amended prior to service to reflect its true worth and the balance of the appropriate fee was paid. All the claims were sent to the court very near to the end of the limitation period, eleven of which being delivered to the court before, but not issued by the court until after, the expiry of the limitation period. 

The Defendant’s alleged that this system was an abuse of process and sought to strike out the claims. In the alternative, the Defendants sought summary judgment on the eleven claims issued after expiry of limitation alleging that they were statute barred.  On 21 December 2015 Mr John Male QC, sitting as Deputy High Court Judge in the case, delivered judgment.

Judgment

With regards to the strike out application, Judge Male opined that intentionally issuing a claim form lower than its true value amounted to an abuse of process. He added that such practices materially affect the court system’s cash-flow and that it would not be in the public interest to condone such behaviour. His reasoning was supported by the fact that the Claimants’ solicitors had previously been critiqued in several other cases for employing such a scheme. 

Interestingly, he did not go on to strike out the claims. Following Zahoor v Masood [2009] EWCA Civ 650 he held that allowing the Claimants to continue with their claims in light of the abuse of process would not be “an affront to the court”, paragraph [84]. His decision was based on the following findings: the prejudice that would result to the Claimants was substantial, the abuse of process did not go to the root of the claim, the potential worth of the claims was high and the Defendant would still able to argue limitation in some of the cases.

He then went on to consider the application for summary judgment in respect of eleven of the claims. After considering the relevant CPR, statutory provisions and case-law he concluded that the claims were statute barred. His reasoning was that for a claim to be brought for the purposes of the Limitation Act 1980, the Claimant must have done “all that was in their power to do to set the wheels of justice in motion”, Aly v Aly (1984), paragraph [105]. He held that this had not been done for the eleven claims as the Claimants could have paid the appropriate issue fee.

Comment

Whilst it is important to appreciate that Lewis v Hadaway is a High Court decision and is subject to review by the appellate courts, the potential ramifications of this judgment are far reaching. The decision is likely to result in a flurry of interlocutory applications brought by Defendants to extinguish claims where the claim form is issued and the court fee is increased after issue. In turn, this is likely to generate satellite litigation against solicitors, particularly in the professional negligence sphere where there is no recourse for claimants to a discretionary extension of the limitation period.

The ruling also raises pertinent questions about access to justice. Last year court fees were significantly increased with a 5% levy on all claims over £10, 000. It is questionable where the dual effect of this judgment and the increases leave a Claimant who is impecunious but the potential recipient of a high-value claim. Judge Man alluded to this situation and held that for “a financially strapped litigant…[i]t may well be that, in that sort of case, there would be no abuse of process”, however, he went on to say that this would only be the case where there was “complete transparency” between the parties as to the undervaluing of the claim forms, paragraph [58]. It is difficult to see why the Defendant’s solicitors would permit such course of action when they can simply have the claim struck out.

Some consolation comes from the court fee remission system which is open to Claimants who have a small amount of savings and receive certain benefits or are on a low income. However, whilst this may assist those at the lowest end of the spectrum it fails to address the plethora of Claimants who do not fulfil this criterion.

The judicial reasoning is also worthy of analysis. Judge Male’s s ruling on summary judgment was a technical one; if the issue fee is not correctly paid and the claim form is issued by the court outside the limitation period then the action will be statute barred. It is interesting to compare this to an identical scenario but where the claim form is issued by the court before expiry, the only difference being when the court issues the claim form.

Given that the intention of the parties is the same and that the issuing of the claim form by the court is down to administrative chance, is there really any difference between these two cases? Either the Claimants in both scenarios did everything in their power to set the wheels of justice in motion, or, if it is deemed they did not because the correct fee was not paid then surely both claims should be summarily dismissed?

A strict application of Judge Male’s ratio will cause arbitrary distinctions between cases and one is left wondering whether focusing on abuse of the process would have been a more pragmatic approach.