Notification of funding - The Old Rules

The old Practice Direction - Protocols (PDP), at paragraph 4, stated:

"A.1 Where a person enters into a funding arrangement within the meaning of rule 43.2(1)(k) he should inform other potential parties to the claim that he has done so.

A.2 Paragraph 4A.1 applies to all proceedings whether proceedings to which a pre action protocol applies or otherwise.

(CPR rule 44.3B(1)(c) provides that a party may not recover any additional liability for any period in the proceedings during which he failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order.)"

On 9^th April 2009 this was replaced with the Practice Direction – Pre-Action Protocols.  The relevant section, at 9.3, is substantially the same:

“Where a party enters into a funding arrangement within the meaning of rule 43.2(1)(k), that party should inform the other parties about this arrangement as soon as possible.

(CPR rule 44.3B(1)(c) provides that a party may not recover certain additional costs where information about a funding arrangement was not provided.)”

These sections have, surprisingly, caused problems. This has been due to a conflicting interpretation as to how the word "should" ought to be understood. Is it meant to be a mandatory provision or simply a "recommendation"?

Master Campbell, in Metcalfe v Clipston [2004] EWHC 9005 (Costs), adopted the latter interpretation:

"For [the paying party] to succeed, I consider the obligation on the receiving party to give notification of funding pre issue must be absolute but in my judgment, the word ‘should’ in the PDP does not impose such an obligation. On the contrary, I would construe ‘should’ as meaning ‘ought to’ which is not the same as ‘has to’ or ‘must’. Likewise I consider that a step that is ‘recommended’ under the CPD does not involve any element of compulsion but instead means ‘favoured’. It follows that I find against [the paying party]. In my judgment, pre issue, all the CPD does is to recommend that information is provided and although Section 19.2(5) states that notification may be required by a pre-action protocol, there is nothing in the clinical dispute protocol requiring service of any information. The PDP at paragraph 4.A.1 is of no assistance either because the requirement to provide information is optional not compulsory. Nor does paragraph 4A.2 PDP assist because ‘proceedings’ means the issue of court process and not prospective proceedings."

Master Campbell reached the same decision again in Cullen v Chopra [2007] EWHC 90093 (Costs).

I have never found this reasoning remotely persuasive for a number of reasons:

1. The word "must" is hardly ever used in the Pre-Action Protocols. The word "should" is usually used. For example: "Some solicitors choose to obtain medical reports through medical agencies, rather than directly from a specific doctor or hospital. The defendant’s prior consent to the action should be sought and, if the defendant so requests, the agency should be asked to provide in advance the names of the doctor(s) whom they are considering instructing"; "The parties should consider whether some form of alternative dispute resolution procedure would be more suitable than litigation"; "The defendant should reply within 21 calendar days of the date of posting of the letter identifying the insurer". I would suggest that it would be absurd if a party failed to comply with any of these steps but could then claim to have complied 100% with the relevant Protocol on the basis that these were meant to be no more than "recommended" steps.

2. In the case of Crosbie v Munroe [2003] EWCA Civ 350 the Court of Appeal went out of there way to explain their interpretation of the PDP and whether the notification requirement applied pre-proceedings:

"After completing this judgment, it came to my attention that lower courts are encountering similar difficulties over the meaning of the word ‘proceedings’ as used in paragraph 4A.2 of the Practice Direction: Protocols. Although we have of course not heard argument on this point, it appears to me that this word clearly needs to be interpreted along the lines indicated in paragraph 34 of this judgment. In other words, for instance, the dealings between the parties which lead up to the disposal of a clinical negligence claim are to be treated as ‘proceedings’ for the purposes of that paragraph even if the dispute is settled without the need to issue a claim form."

Although these comments were clearly obiter, it would be extremely strange for the Court of Appeal to go out of its way to comment on the interpretation of a Practice Direction if failure to follow that Practice Direction had no consequences.  If there were no consequences, what were the "difficulties" that the Court of Appeal was referring to?

3.      Immediately after 4A.2 PDP is the following wording: "CPR rule 44.3B(1)(c) provides that a party may not recover any additional liability for any period in the proceedings during which he failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order" (similar wording appears after 9.3 of Practice Direction – Pre-Action Protocols). The Court of Appeal, in Garbutt v Edwards [2005] EWCA Civ 1206, had this to say when trying to interpret the word “shall”:

"In particular, Rule 15 begins by providing that a solicitor ‘shall’ provide costs information. But, while the word ‘shall’ is often mandatory, particularly when used in legislation, it has, depending on the context, been interpreted on occasion as directory or exhortatory only: see for example R v Secretary of State for the Home Department ex parte Jeyeanthan [2000] 1 WLR 354. In Rule 15, for the reasons given below, the word ‘shall’ is not in my judgment mandatory in the sense that non-compliance with the Code will always result in a breach of Rule 15. Rule 15 must be interpreted with the Notes that appear immediately following it."

Applying this reasoning, the note immediately following the section details a specific sanction and the word "should" is therefore surely intended to be mandatory on this occasion with the consequences of non-compliance being spelt out. The alternative interpretation produces the bizarre outcome that the PDP details a sanction that only applies to a breach of a totally different rule and not anything contained within the PDP itself. If this were correct, it would be unique within the PDP or Pre Action Protocols for a sanction to be listed totally detached from the relevant rule.

Any confusion that existed under the previous rules has now been removed by the latest update to the Civil Procedure Rules.  I'll be posting details of these changes in the next few days on the Legal Costs Blog.