Date 18 December 2008
Welcome to the December issue of Stay Alert.
In this edition, we bring you up to date on recent developments in Commercial Litigation and cover the following articles:
1. Civil Reform in the pipeline following the Queen’s speech
On the 4th December the Queen’s speech outlined a proposal for a Civil Reform Bill with the aim being to simplify the civil law and bring it in line with modern times.
2. No award for costs despite being successful
Despite coming out at the other end as the winning party, a party may be left to foot a large legal bill if it raised immaterial issues, as the recent case of Peer International Corporation v Editora Musical de Cuba [2008] EWCA Civ 1260 shows.
3. A hike in court fees?
The Ministry of Justice is currently consulting on increasing court fees.
4. Ignore the new possession protocol at your peril
A new pre-action protocol came into force on 19 November 2008 with the aim of resolving disputes over mortgage payments and arrears, without the need for litigation. It sets out a series of hoops that lenders are expected to jump through before commencing possession claims.
5. Christmas Court Closures
Court closure dates.
6. Paying for Santa?
Mr Justice Morgan held that Christmas decorations and the grotto were facilities of the Trafford Centre and not promotions, leaving the retail giant Boots to pay for Santa.
We hope that you find this edition of Stay Alert useful and interesting. We value your opinions and always welcome any comments you may have. If you have any feedback on this edition or any suggestions regarding what you would like us to cover in future, please email Clare Mackay – clare.mackay@salaw.com. We look forward to hearing from you.
1. Civil Reform in the pipeline following the Queen’s speech
On 4 December the Queen’s speech outlined a proposal for a Civil Reform Bill (the “Bill”) with its core aim being to simplify the civil law and bring it in line with modern times.
The Office of the Leader of House of Commons stated that the “civil law affects everyone. Keeping it up to date is essential if the law is to remain fair and people are to understand their rights and responsibilities”.
The draft Bill is due to be published in 2009 and the exact content is therefore not confirmed yet. However, the Bill is likely to cover the following areas:
Reform of the Limitation Act 1980
The Limitation Act 1980 sets out limitation periods, i.e. the timeframes within which a claimant must start a court action. As is apparent in our article of Limitation period in professional negligence claims in the November issue of Stay Alert!, it is often difficult to establish when the limitation period expires for certain types of claim.
The Law Commission published a Draft Limitation Bill which can be accessed here using the following link: Draft Limitation Bill. Essentially there is a proposal for a single limitation rule which will apply to all claims. This would consist of a limitation period of three years from the date on which the claimant knows (or ought reasonably to know):
i. The facts which gave rise to the cause of action;
ii. The identity of the defendant, and
iii. If the claimant suffered injury, loss or damage or the defendant receives a benefit, the injury, loss or damage or benefit was significant.
Reform of the law in relation to Pre-judgment interest
“Pre-judgment interest” is the interest awarded from the day when payment fell due until the earliest of either when judgment is entered or payment made. There are recommendations to give the Lord Chancellor the power to specify a pre-judgment interest rate as well as the power to award compound interest if appropriate.
The Law Commission’s report dated 23 February 2004 can be accessed using the following link: Law Commission report, and the Government’s response dated 16 September 2008 can be accessed using the following link: Government's response.
Reform of the law relating to damages
A consultation undertaken by the Government in relation to the law of damages in personal injury cases closed in July 2007. A response has not been published yet but we do know that the reform will aim to create a more fair and modern approach to damages.
Reform of the law relating to the rule of forfeiture and the law of succession
Following a Law Commission Report there is a proposal that heirs of a murderer (who are currently disinherited under the forfeiture rule) would be able to inherit.
2. No award for costs despite being successful
The general rule in relation to costs is that the unsuccessful party will be ordered (by the court) to pay the successful party’s costs. However, the court may make a different order with regard to all the circumstances, including: the conduct of all the parties, whether it was reasonable for a party to pursue a particular issue and the manner in which a party has pursued or defended his case. This is dealt with in the Civil Procedures Rules, Part 44.3.
In the recent case of Peer International Corporation v Editora Musical de Cuba [2008] EWCA Civ 1260 the defendant, Editora, won the case but was not awarded its costs.
Peer lost its claim in seeking a declaration that the copyright in 14 songs belonged to it. Although Editora won, Lindsay J made no order as to costs based on the number of issues which Editora pursued and consequently failed on, some of which Editora did not have the standing to raise.
Editora appealed the costs order and Lord Justice Lloyd agreed that “it is unusual to deny a successful party the recovery of the whole of its costs of a trial” but did not accept that Lindsay J’s order “manifestly produces an injustice, so that it must have been the product of an erroneous approach”. He also said that he did not consider that any of the points argued in support of the appeal showed any error of law on Lindsay J’s part. The appeal was therefore dismissed and Lord Justice Moore-Bick and Lady Justice Arden agreed.
This case is a reminder that parties to proceedings must not pursue vexatious points or raise immaterial issues, otherwise, despite coming out at the other end as the winning party, a party may be left to foot a large legal bill.
3. A hike in court fees?
On 10 December 2008 the Ministry of Justice published a consultation paper on increasing court fees. The paper points out that “in 2007/2008, the cost of running the civil and family courts in England and Wales was £607m. Of this, almost 78% was funded through court fees worth around £472m.”
The aim is to set court fees at levels that reflect the full cost of the process involved and there is a strategy to increase civil and family fees. Enforcement processes are likely to be greatly impacted as the current fees do not represent the true cost of the process.
In the future, there exists a “possibility of daily hearing fees in large commercial cases”.
The consultation paper can be accessed by following this link: Consultation Paper. The consultation will end on 4 March 2009.
4. Ignore the new possession protocol at your peril
The Civil Justice Council’s Housing and Land committee drafted a new pre-action protocol with the aim of resolving disputes over mortgage payments and arrears, without the need to issue proceedings (“the Pre-action Protocol”). It came into force on 19 November 2008 and follows a series of nine pre-action protocols. The aim of such protocols is to encourage the exchange of information about a prospective claim early on, avoid litigation by way of settlement and if proceedings are unavoidable, to make those proceedings more efficient.
The full title of the pre-action protocol is the Pre-Action Protocol for Possession Claims based on Mortgage or Home Purchase Plan Arrears in Respect of Residential Property and can be accessed using the following link: Pre-action Protocol.
The main purpose of the Pre-action Protocol is to “ensure that a lender (….) and a borrower (….) act fairly and reasonably with each other in resolving any matter concerning mortgage (….) arrears”
Initial Contact and Provision of Information
Paragraph 5 of the Pre-action Protocol
- The lender should provide the borrower with “the required regulatory information sheet or the National Homelessness Advice Service booklet on mortgage arrears” and “the total amount of the arrears, the total outstanding of the mortgage” and confirm “whether interest or charges will be added, and if so and where appropriate, details or an estimate of the interest or charges that may be payable”
- Reasonable steps must be taken to discuss the cause of the arrears, the borrower’s financial circumstances and repayment proposals
- The lender should advise the borrower to contact the local housing authority or refer the borrower to sources of independent debt advice
- The lender “should consider a reasonable request to change the date of regular payment or the method by which payment is made”
- The lender “should respond promptly to any proposal for payment made by the borrower.”
- If a proposal for payment is submitted by the lender, the “borrower should be given a reasonable period of time” to consider it
- The lender must give the borrower 15 business days’ notice in writing before stating a possession claim if the borrower fails to comply with the agreement
Postponing the start of a possession claim
Paragraph 6 of the Pre-action Protocol
- A possession claim should not be started where the borrower can show that he has: submitted a claim under a mortgage payment protection policy, a reasonable expectation of eligibility for payment from the insurer and an ability to pay a mortgage instalment not covered by the insurer
- The lender should consider delaying a possession claim if the borrower can show that reasonable steps have been or will be taken to market the property
- Where the lender agrees to delaying a possession claim, the borrower should provide the lender with information about the sale
- If the lender decides not to delay a possession claim it should “inform the borrower of the reasons for this decision at least 5 business days before starting proceedings.”
Alternative dispute resolution
Paragraph 7 of the Pre-action Protocol
- Settlement discussions ought to be explored and might include options of extending the mortgage term, changing the mortgage type, deferring interest payments or capitalising the arrears.
Complaints to the Financial Ombudsman Service (“the FOS”)
Paragrah 8 of the Pre-action Protocol
- If the borrower has made a “genuine complaint to the FOS about the potential possession claim” the lender should consider postponing the possession claim. If not, the lender must give the borrower at least 5 business days notice of its intention to start a possession claim.
Conclusion
The Pre-action Protocol sets out clearly the hoops that lenders are expected to jump through before commencing possession claims. The court’s view is that “starting a possession claim is usually a last resort”. Importantly the lender must be able to explain the steps it took in order to comply with this protocol. The court has the power to impose severe cost sanctions against a party who does not comply with a pre-action protocol and only time will tell how non compliance of this new Pre-action Protocol will affect the court’s decision as to who should bear the biggest proportion of costs.
5. Christmas Court Closures
Generally the High Court, county courts and crown courts will close over 24 December 2008 – 26 December 2008 and 1 January 2008. However, some courts will operate on these dates and therefore please check with the relevant court to find out whether it is open on one of these dates. To find the contact details for the relevant court, use the following link to Her Majesty’s Court Service’s website: Court Finder.
All courts will reopen on 2 January 2008.
6. Paying for Santa?
Retail giant Boots’ claim for a reduction in the proportion of service charges it pays to its landlord at the Trafford Centre in Manchester was recently heard by Mr Justice Morgan.
Boots claimed that Christmas attractions were “promotions” and that the landlord should therefore pay half the bill under the tenancy agreement.
Mr Justice Morgan found in favour of the landlord and said that “Christmas decorations and the grotto” were facilities or amenities of the Trafford Centre and not promotions, quite literally leaving Boots to pay for Santa.
Service charge disputes are common and it is advisable to raise queries on charges and exactly what they cover before a lease is signed.
© SA Law 2008
Every care is taken in the preparation of our articles. However, no responsibility is accepted as being owed to any person or organisation who acts on the basis of information contained in them. You should obtain specific advice in respect of individual cases.