Legal Watch:Property Risks & CoverageFebruary 2015Issue 002

In This Issue:

• Increase in court fees

• Liability of sewerage undertaker

• Service by email was not effective service

• Insurance Bill

Contact UsIf you would like any further information on the cases or articles featured in this issue, please contact:

Alison HeardT: 0207 469 6236E: arh@greenwoods-solicitors.com

Andrew RaofT: 0844 245 4278E: axr@greenwoods-solicitors.com

Marise GellertT: 0207 469 6249E: msg@greenwoods-solicitors.com

IntroductionThis month has seen the announcement that there is to be a substantial increase in court fees, as part of the drive by the government to increase income to the courts from fees. The decision has been widely criticised and even senior judges have expressed “deep concern”. We consider this issue in more detail below.

The Insurance Bill is now speeding its way through Parliament and it does not look like it will be long before it receives Royal Assent, with the knock-on effect that the Third Parties (Rights Against Insurers) Act 2010 will finally be brought into force.

Thanks this month go to Alison Heard, for her article on Nicholson v Thames Water Utilities Ltd & MTS Cleansing Services Ltd and to Andrew Raof for his article on Dunbar Assets v BCP Premier Ltd.

01

Increase in court feesFollowing a consultation in December 2013, notwithstanding the wide disagreement with its proposal, the Government has now decided to proceed broadly as set out in the consultation, to increase the fee to issue proceedings for the recovery of money for all claims over £10,000.

Many critics see the move as a cynical attempt to cross-subsidise other parts of the court service, on the basis that, in many instances, the fees will substantially exceed the actual cost to the court user. There is also a concern that there may be an increase in the number of litigants in person, as litigants spend the money on fee that they would otherwise have spent on legal representation.

“...in many instances, the fees will substantially exceed the actual cost to the court user”The fee will now be 5% of the value of the claim on issue, subject to a cap of £10,000. This applies both to specified and unspecified money claims and the change will take effect in April 2015 (the exact date is still to be confirmed).

What it means is that, for example:

• A claim for £15,000 will now incur a fee of £750 (previously £455)

• A claim for £50,000 will now incur a fee of £2,500 (previously £610)

• A claim for £100,000 will now incur a fee of £5,000 (previously £910)

• A claim for £200,000 will now incur a fee of £10,000 (previously £1,315)

It is not yet clear how this will be applied in practical terms, to the extent that it is not always possible to quantify a claim down to the last penny at the time of issue but it is presumed that the existing 14 fee bands will no longer apply.

The same fee structure will apply to all counterclaims.

Discounts of 10% will apply if the claim is initiated electronically using the Secure Data Transfer (SDT) or Money Claims Online (MCOL) and whilst that may not be suitable for many claims (and can only be used for claims up to £99,999.99), the incentive of a 10% discount on a fee of £10,000 is likely to encourage the increased use of SDT/MCOL. It remains to be seen whether this will, in turn, lead to yet further delays in papers being processed by the court.

It will also be interesting to see whether there is an increase in applications for fee remissions, where claimants alleging they cannot afford the court fee may be able to obtain a remission in full or in part.

As is currently the case, the fee paid will be based on an estimate of the value of the case provided by the claimant. Where the claim (or counterclaim) is amended, the party making the change must pay any difference between the fee paid and the fee due.

In response to the consultation, the senior judiciary pointed out that in some cases, the claimant may not succeed on the whole of his claim and may only be awarded judgment for part of it. They argued that if the enhanced fees are introduced, the amount of the fee recoverable from the losing opponent should be limited to the fee that would have been payable on the successful part of the claim, rather than the fee actually paid (assuming it was different). The government has indicated that it believes there is “some merit” in this but is currently considering “all of the potential impacts and consequences before deciding what action to take”. What that means is that for the time being at least, you should assume that if the claimant succeeds, the entire fee will be recoverable.

02

In light of the figures involved, it may not be too long before we see satellite litigation on this point.

There is a further consultation, which closes on 27 February 2015, which will consider the fees for general applications in civil proceedings.

The current fee for an application by consent is £50 and the proposal is to increase that to £100. The current fee for a contested application, on notice, is £155 and the proposal is to increase that to £255.

The full government response to the consultation, with details on how to respond to the further consultation on application fees can be found at:

https://consult.justice.gov.uk/digital-communications/court-fees-proposals-for-reform/results/enhanced-court-fees-consultation-response.pdf

We will keep you advised of further developments.

03

Liability of sewerage undertakerWhat is the extent of the liability of a water utility company to a customer whose property is damaged by the escape of sewage from a main sewer? That was the question considered in Nicholson and Thames Water Utilities Limited and MTS Cleansing Services Limited [2014] EWHC 4249.

BackgroundIn April 2010 raw sewage escaped from a main sewer into Ms Nicholson’s garden and into her house through the airbricks. It was discovered that tree roots had grown into the sewer, blocking it and causing an obstruction. There was a second escape but this did not make any difference to the clean up required because once the liquid had got through the airbricks, that part of the damage was done. The overall result was that Ms Nicholson ended up moving out of the house for a while and she became ill. Ms Nicholson brought a claim against Thames Water, the relevant sewerage undertaker for her area, who in turn joined MTS as a third party, as MTS was engaged by Thames Water to attend on the escapes.

The litigationThis decision deals with the question of liability only, the court having directed that causation and quantum be tried separately should Ms Nicholson succeed on liability. A number of possible routes for Ms Nicholson to be successful were considered:

1. Water Industry Act 1991

Section 94(1) of the Act provides that “it is the duty of every sewerage undertaker to provide, improve and extend such a system of public sewers and so to cleanse and maintain those sewers as to ensure that its area is and continues to be effectually drained.”

Thames Water did not have any details of the construction of the sewer, nor any records of any inspections prior to the incident. Its evidence was summarised by Mr Justice Knowles:

“Thames Water does not have any programme to check for tree roots or other problems with sewers in its area, not even a gradual or targeted one. Instead it waits until defects have been reported by others, including the public, and then it acts.”

Therefore, if a defect had been found and reported, this escape might have been avoided. The court noted that whether a reactive system was good enough was not a question for the court but the court looked to Marcic v Thames Water Utilities Limited [2003] UKHL 66 for some important points concerning the Act. In particular, sections 18-22 of the Act which make provision for enforcement orders to enforce the obligations of the sewerage undertaker where statutory requirements are being contravened. The effect of an enforcement order is found in section 22 of the Act, namely that a company’s “obligation to comply with an enforcement order is a duty owed to any person who may be affected by a contravention of the order”. Therefore, a breach of this duty which causes loss or damage to the person to whom the duty is owed is actionable. In short, someone in Ms Nicholson’s position can bring proceedings against a sewerage undertaker in respect of its failure to comply with an enforcement order if such an order has been made. In this case, there was no enforcement order.

2. Claim in nuisance

Marcic shows why and where no claim in nuisance could exist at common law in light of the statutory scheme.

3. Claim in negligence

The court noted that on the face of it, the reasoning that led to the conclusion in Marcic would argue powerfully for the same conclusion in relation to a claim in negligence and indeed in his closing submissions, counsel for Ms Nicholson said that the allegations concerning the care with which the sewer was maintained were not allegations on which Ms Nicholson could succeed. Instead, he focussed on the clean-up after the escape and what was described

04

as “advice” tendered in the course of that process. In particular, it was argued that in this case Thames Water did a number of things that led to it assuming responsibility as a foundation of a claim in negligence and that there was nothing in the Act which prevented Thames Water from assuming responsibility in a particular case. The matters relied upon by Ms Nicholson included:

• A Thames Water guideline leaflet entitled ‘Household Customer Wastewater Flooding Guidelines’

• The fact that Thames Water attended the scene after the escape

• The fact that Thames Water was prepared to pay for external cleaning

• The provision of a telephone number for Thames Water, staffed by Thames Water, for use where there was an escape of water

• The engagement by Thames Water of another contractor (in this case MTS) to attend and assist

The key points of evidence given by Thames Water’s engineer were that:

• He attended the scene because the escape had flooded the outside of the house and he authorised cleaning of that, and

• Where sewage has entered a house, the position Thames Water always takes is that the customer should call their household insurers, rather than that Thames Water should itself act

In his judgment, Mr Justice Knowles said he was “quite clear that Thames Water did nothing that led to its assuming responsibility to Ms Nicholson so as to lay a foundation of a claim in negligence.”

The claim in negligence therefore failed.

4. Section 209(1) of the Act

The court was left to decide whether Ms Nicholson could succeed against Thames Water by relying on Section 209(1) of the Act which provides:

“Civil liability of undertakers for escapes of water etc.

(1) Where an escape of water, however caused, from a pipe vested in a water undertaker causes loss or damage, the undertake shall be liable, except as otherwise provided in this section, for the loss or damage.”

“...quite clear that Thames Water did nothing that led to its assuming responsibility to Ms Nicholson so as to lay a foundation of a claim in negligence.”Mr Justice Knowles noted that this section provides for a liability far stricter than under the rule in Rylands v Fletcher [1868] UKHL 1 and he could therefore see why counsel for Ms Nicholson wished it to be available. However, Mr Justice Knowles was not persuaded by the arguments presented because this section of the Act concerns an entity in its capacity as a water undertaker, not as a sewerage undertaker, and this case did not involve an escape from a pipe vested in Thames Water in its capacity as a water undertaker.

Conclusion Thames Water owed no duty in law to Ms Nicholson to take on the task of restoring her house to its previous state. As such, the claim against MTS fell away.

CommentThis decision is important for water utility companies/sewerage undertakers as it reinforces the strong position they can maintain in defending such claims.

05

Service by email was not effective serviceIn the case of Dunbar Assets plc v BCP Premier Ltd [2015] EWHC 10 (Ch), the Court of Appeal considered the validity of the claimant’s service of the claim form; the case itself being an appeal from a Deputy Master who had held that the claimant’s service was good service in accordance with rule 6.15 of the Civil Procedure Rules 1998 (CPR).

BackgroundIssues relating to the business arrangements between the parties became apparent in December 2013. Sensing further potential issues in respect of limitation, the claimant issued a claim form on 18 December 2013, for damages for breach of contract, breach of duty of care, misrepresentation and deceit, as well as interest. The value of the claim was in excess of £300,000.

On 3 March 2014, the claimant’s solicitors sent a copy of the sealed claim form and a notice of issue (dated 8 January 2014) to the defendant, by fax, and also requested certain other documents (first requested in a letter dated 25 February 2014) be provided within the next seven days. After an exchange of correspondence between the parties’ solicitors, the defendant’s solicitors noted that the claim form appeared to have been served, by fax, on 3 March, thereby requiring the particulars of claim to be served by 17 April 2014 (before the expiry of the four-month period from the issue of the claim form).

The claimant’s solicitors responded on 20 March 2014 that the claim form had not been served on 3 March and that the copy sent by fax was for information purposes only. They then requested an extension of time until 17 May 2014 to serve the claim form and particulars of claim. The defendant’s solicitors invited the claimant to draft an application to the court and propose a timetable for compliance with the pre-action protocol for construction and engineering disputes. An extension of time for service of the claim form was declined on the grounds that the claimant had provided no valid reason for not serving the claim form in accordance

with CPR 7.5(1), which required it to be served within four months of issue; however an extension for service of the particulars of claim was agreed until 5 September 2014 in order that the protocol could be adhered to. To that end, the claimant’s solicitors were advised to apply to the court for a consent order.

The claimant’s solicitors applied for the consent order on 1 April 2014, pursuant to which the claim form would be served upon the defendant by 4pm on 3 April 2014.

However, rather than serving it on 3 April 2014 in accordance with the rules, the claimant’s solicitors e-mailed a copy of the claim form to the defendant’s solicitors, who although having agreed to accept service, did not accept service by e-mail. A further hard copy was sent via document exchange.

Throughout April 2014, the claimant’s solicitors sought and chased for an extension of time to serve their pre-action protocol letter of claim; the defendant’s solicitors eventually responded, noting that the consent order had not been complied with, the claim form had been served out of time and the request for an extension of time to serve the letter of claim was redundant.

On 25 April 2014, the claimant made an application for an extension of time pursuant to CPR 7.6(3) to serve the claim form, as well as relief from sanctions pursuant to CPR 3.9.

Judgment on the AppealMr John Baldwin QC, sitting as Deputy Judge of the Chancery Division, acknowledged that the Deputy Master had:

“ 1. considered that it was plain that the Claimant’s solicitors were well aware, and if they were not they ought to have been well aware, that it was the actual Claim Form which should have been served

2. found as a fact that there was ample time on the 3rd April

06

after the contract embodied in the consent order had been entered into for the Claimant to effect proper service in accordance with CPR 7.5; and

3. found as a fact that there was no explanation as to why the Claimant’s solicitors did not serve the actual claim form properly by 4pm on the 3rd April.”

Mr Baldwin QC, however, concluded that the claimant’s solicitors had in fact fallen foul of CPR 6.15 in relation to service of a claim form by alternative method or at an alternative place. Essentially the language of CPR 6.15 was that service by an alternative method would have been good service if the court deemed there to be good reason to authorise service by that alternative method and had exercised its discretion in favour of permitting this, as concluded by the judge in the case of Brown v Innovatorone plc [2009] EWHC 1376 (and subsequently upheld by the Court of Appeal in Power v Meloy Whittle Robinson [2014] EWCA Civ 898), who held that the courts should take a rigorous approach and not over-readily exercise their discretion, in the interests of certainty.

There was clearly the need for ‘a sufficiently compelling case’, something the Deputy Master had not taken into account in not querying why the order was being sought. Mr Baldwin QC highlighted that had the Deputy Master done so, he would have acknowledged that there had been no explanation provided by the claimant for not properly serving the claim form in accordance with the rules. There had been ample opportunity to arrange for and agree to this in the consent order.

...there had been no explanation provided by the claimant for not properly serving the claim form in accordance with the rules.

Mr Baldwin QC further rejected the suggestion by the claimant’s counsel that this had been the result of simple human error, stating that:

‘I do not think that is good enough in a case where a claimant seeks the indulgence of the court and where his solicitor has an opportunity to explain why the relevant circumstance has come about but has chosen not to do so’

The claimant was also unable to argue that it fell within the remit of CPR 6.15 in the interests of creating certainty, as prejudice would have been caused to the defendant in not being able to raise a limitation defence and the certainty that proper service would have created did not arise.

In light of this, discretion was not exercised and the appeal was allowed.

CommentThis case illustrates that there remains a reluctance to leniently exercise discretion with regard to CPR 6.15, where there have been clear failures in attempts to serve the claim form by normal methods. The judgment here upholds previous reasoned judgments that sought to create consistency and work in the public interest whilst ensuring litigants do not attempt to interpret the CPR as they see fit. As reflected here, a series of errors, no valid reason for non-compliance with the consent order and any appropriate timescales, followed by a failure to provide a good explanation as to why service was not or could not be effected by normal methods, were rejected outright.

It will not have helped the claimant’s case that the consent order effectively foreshortened the period for service of the claim form, so that sending the hard copy in the DX did not save them as it arrived after the 3 April deadline had expired.

www.plexuslaw.co.ukwww.greenwoods-solicitors.com

The information and opinions contained in this document are not intended to be a comprehensive study, nor to provide legal advice, and should not be relied on or treated as a substitute for specific advice concerning individual situations. This document speaks as of its date and does not reflect any changes in law or practice after that date. Plexus Law and Greenwoods Solicitors are trading names of Parabis Law LLP, a Limited Liability Partnership incorporated in England & Wales. Reg No: OC315763. Registered office: 12 Dingwall Road, Croydon, Surrey CR0 2NA. Parabis Law LLP is authorised and regulated by the SRA.

PublicationsIf you would like to receive any of the below, please email indicating which you would like to receive.

Weekly:

• Legal Watch: Personal Injury

Monthly:

• Legal Watch: Property Risks & Coverage

Quarterly:

• Legal Watch: Counter Fraud

• Legal Watch: Health & Safety

• Legal Watch: Professional Indemnity

• Legal Watch: Disease

Contact UsFor information on articles and cases featured in other editions of Property Risks and Coverage Newsletters, please contact:

Marise GellertPartnerT: 020 7469 6249E: msg@greenwoods-solicitors.com

Insurance BillThe Bill appears to be very much on the fast track now, having completed its House of Lords stages on 15 January 2015. It was presented to the House of Commons on 16 January 2015 for the first reading. There was no debate on the Bill at that stage.

The Bill was referred to a second reading committee for its second reading debate. This took place on Monday 26 January 2015. The Bill passed second reading on Tuesday 27 January 2015.

The Bill was considered in a committee of the whole House of Commons on 3 February 2015. The House of Commons debated the report stage and the third reading of the Bill took place.

It was passed with no amendments and is now ready to receive Royal Assent.

We will let you know when a commencement date is announced.