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No relief from sanctions for a failure to serve a notice of funding

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The Court of Appeal dismissed the appeal against the Order of Deputy District Judge Elmer refusing the Claimant's application for relief from sanction in respect of a failure to serve a notice of funding, in the case of Neville Springer (personal representative of the estate of Wayne Anthony Springer (deceased)) v University Hospitals Leicester NHS Trust [2018] EWCA Civ 436.


The claim was a clinical negligence claim against the Defendant hospital. The Claimant alleged that Mr Springer's death was caused by negligent treatment by the Defendant hospital.  The claim eventually settled for £20,000 with costs being payable in addition to that sum. 

The claim was initially conducted by Kirwans Solicitors and a CFA was entered into with the Claimant on 25 June 2010; no notice of funding was served at this stage.  The instructed solicitor moved to another firm and the Claimant instructed the solicitor to carry on with the claim.  A new CFA was entered into on 15 March 2012 which again allowed for a 100% success fee.  A £15,900 insurance premium was also taken out.  Still, no notice of funding was served on the Defendant.

The Claimant's solicitor did, on 28 September 2012, send a letter to the Defendant which advised that the Claimant's claim was being funded by way of a CFA dated 15 March 2012 and that the CFA was backed by an ATE insurance policy dated 24 March 2012.  A notice of funding was sent to confirm at this stage.  However, the notice of funding did not give notice of the initial CFA dated 25 June 2010.

On 30 July 2014, the proceedings were compromised by way of a Tomlin Order, under which the Defendant was to pay costs to be assessed if not agreed.  Costs were not agreed and the Claimant submitted a draft bill of costs on 26 August 2014 which disclosed the existence of the first CFA.  On 18 November 2014, detailed assessment proceedings were commenced and the bill of costs was served in the sum of £115,880.74.   The bill included:-

  • A 100% success fee uplift on time costs under the first CFA (£7,832.50 plus VAT);
  • A 100% success fee uplift on time costs under the second CFA (£29,871.00  plus VAT);
  • The full ATE insurance premium (£15,900)

The Defendant raised the issue of whether the Claimant had been in default of giving notice of the funding arrangements in accordance with the CPR, notably Paragraph 9.3 of the Practice Direction - Pre-Action Conduct and Protocols (PD PAC).  Amongst many other things, the Defendant also requested clarification of the date on which notification of additional liabilities was provided within their Points of Dispute and pointed out that the CPR requires such notice to be given "as soon as possible".    The Defendant also stated:-

"CPR 19.2 makes clear that the notification should be provided within 7 days of entering into the funding arrangement and that a lack of a letter of claim is not relevant. The additional liabilities should not be recovered for the period of default."

In light of the above, the Claimant applied for relief from the sanction imposed by CPR44.3(B)(1), namely the inability to recover (i) the success fee for the period of default and (ii) the ATE premium.  The material in support of the application was not entirely consistent or coherent but focused on two matters:

  1. It was said that it was not possible to serve a notice of funding until the Defendant had been identified and, as soon as the Defendant had been identified, notification was given to the Defendant with the letter before claim on 28 September 2012.  
  2. It said: "[T]he technical breach occurred as a result of an unavoidable error on part of [the Claimant's] legal representative… in construction of the rule…".

The Deputy District Judge considered the construction of Paragraph 9.3 of the PD PAC and confirmed that it was unambiguously clear that ‘as soon as possible' could not be interpreted as anything other than 'as soon as possible’.  The Deputy District Judge did not accept that a notice could not have been served when the Claimant first instructed Kirwans Solicitors or at least very shortly after and it was therefore held that the breach was serious and significant.

All of the circumstances of the claim were considered and it was held that the Defendant had suffered prejudice as a result of the Claimant's breach because they had no opportunity to consider the matter or make attempts to negotiate settlement prior to the Claimant issuing the claim and thus avoid the substantial additional liabilities claimed by the Claimant. 

In light of the findings of the serious and significant breach by the Claimant and the prejudice suffered by the Defendant, the Deputy District Judge refused to allow relief from sanction.  The Claimant was therefore unable to recover any success fee on costs or ATE insurance premium incurred prior to the service of the notice of funding arrangement on 28 September 2012. 


The Claimant (Appellant) appealed and the appeal was heard by Her Honour Judge Hampton on 2 October 2015.  The appeal was dismissed and the appellant launched an appeal to the Court of Appeal accordingly.

It was necessary for the Court of Appeal to consider two issues:-

  • Issue 1 - the true construction of paragraph 9.3 of the PD PAC.
  • Issue 2 – the application for relief from sanction and whether Deputy District Judge Elmer erred in refusing to grant the Claimant relief from sanction.

The Court of Appeal agreed with the Deputy District Judge that the meaning of paragraph 9.3 of the PD PAC is unambiguous.  The Court of Appeal confirmed, however, that at the time a CFA is entered into, it may not be possible to identify all (or perhaps any) proposed Defendants and, in those circumstances, it will not be possible to notify defendants who are not known and therefore the obligation to notify them under paragraph 9.3 will not arise until they are identified. 

In relation to issue 2, the test for considering whether relief from sanction should be granted is the well established three stage test set out in Denton.  The Appellant argued that the judge failed to grapple the first and second test set out in Denton and when considering the third part of the Denton test, the judge failed to give any consideration to the fact that, once the Defendant had notice of the funding arrangement, the NHS Trust continued to dispute the claim and file a Defence and there was no evidence that, had there not been a breach, their conduct in the litigation would have been any different. 

The Court of Appeal considered and summarised their findings on the issues above but held that it was not considered that the Deputy District Judge erred in the manner in which she carried out the balancing exercise required by the three stages of the Denton test.

In light of the above, the Court of Appeal dismissed the appeal.  It is, however, clear from paragraph 77 of the judgment that every case will depend on specific facts and evidence. 


If you are conducting a claim where additional liabilities are still recoverable from the opponent, it is necessary to notify them as soon as possible of the funding agreement is in place.  This judgment suggests that such notification should be provided as soon as the opponent is identified, even if you are not notifying them of the full details of the claim.  Failure to do so may result in a breach requiring relief from sanctions.  Although the judgment states that every case will depend on specific facts and evidence. 

This case is a good example of the application of the three stage test set out in Denton for failing to serve a notice of funding on time or at all and confirms that any sign of prejudice to the paying party is likely to prevent relief from sanctions.  Furthermore, the case suggests that an opponent simply showing a "loss of opportunity" to act differently had they known about the additional liabilities will be sufficient evidence of prejudice.

Please do not hesitate to contact Paragon Costs should you have any queries in relation to funding arrangements or the recoverability of additional liabilities.