My Protection Guru Limited v Lifesearch Partners Limited

The Defendant (‘LifeSearch’) is an insurance broker. Between 2017 and 2022, the Claimant (‘MPG’) acted as LifeSearch’s appointed representative under three successive written agreements entered into in 2017, 2018 and 2020 respectively (‘the Agreements’). Under the Agreements, LifeSearch provided ‘leads’ to MPG. MPG’s job was to follow those leads up with a view to selling life insurance products. For each product sold, the relevant insurer paid a fee to LifeSearch and LifeSearch paid a commission to MPG.

Each of the Agreements was on materially identical terms. The 2020 Agreement defined Confidential Information as follows:

Clause 9. 3 imposed the following obligation on MPG.

Clause 18.5 of the 2020 Agreement also contained a confidentiality clause in the following terms:

MPG and LifeSearch worked together relatively successfully under the Agreements for five years until early 2022. They then began to have a series of disputes. Both parties alleged repudiatory breach by the other of the 2020 Agreement. Both have purported to accept the other’s repudiation. Furthermore, LifeSearch alleges it gave valid 6 months’ notice of termination of the 2020 Agreement in May 2022. One way or another therefore the relationship and the 2020 Agreement came to an end at some time between September and November 2022.

MPG claims approximately £2.3 million in unpaid commission. It also claims damages for a variety of breaches of 2020 Agreement (including the final repudiatory breach). LifeSearch alleges that the agreements were varied in two crucial respects relating to the payment of commission but also counterclaims £4.5 million in the event that neither variation is found to have been valid. LifeSearch also has a separate counterclaim for damages of £347,978 in relation to MPG’s alleged repudiatory breach.

At a case and costs management conference held on 11 October 2023, a number of applications were made and decided. This judgment is concerned with just two of them, both of which applications are by LifeSearch:

Mr McPherson seeks a grand total of £37,105.50 in costs associated with an order made by Andrew Baker J. on 14 February 2023. He submits that the costs reserved by consent in that order go back in part to a failure by MPG to act reasonably before the issuing the claim. Mr Cameron denies that MPG behaved unreasonably in the pre-issue phase and says that Michelmores failed to raise the issue of confidentiality pre-issue on at least two occasions when they could easily have done so. He submits that no costs should be awarded because the order ultimately obtained by consent was for the benefit of LifeSearch.

By a five page ‘letter of claim’ sent in April 2022, Milners set out the history and nature of the relationship between MPG and LifeSearch, outlined four alleged breaches of contract and described the loss and damage as being in the region of £1.5 – 2 million. The letter also outlined the remedies MPG was seeking, enclosed the agreements referred to and some commission calculations and referred to potential expert evidence and ADR. Finally, it referred expressly to the pre-action protocol and sought a full response within 28 days.

In their response of 29 April 2022, on behalf of LifeSearch, Michlemores complained that the Letter of Claim lacked sufficient detail of the allegations of breach or the loss and damage. Nevertheless, the five-page letter responded to the substance of the claim and outlined what subsequently became LifeSearch’s variation case. The letter ended by inviting MPG to withdraw its claim.

Milners responded on 4 May 2022. They rejected the suggestion that the letter of claim was inadequate and threatened an application for pre-action disclosure.

Michelmores re-iterated their position on 6 May 2022 that the letter of claim was inadequate and refused to supply any pre-action disclosure.

On 26 August 2022, Milners sent to LifeSearch a further detailed letter containing a list of further breaches and re-iterating that it was MPG’s intention to seek damages and other remedies.

By a further letter dated 30 August 2022, Milners said “Our client intends to seek damages and other remedies from you.” A copy of the letter was emailed to Michelmores the following day and Michelmores were asked if they were instructed to accept service on behalf of LifeSearch.

By 1 September 2022 at the latest, it ought to have been clear to Michelmores that MPG considered that they had a claim for unpaid commission and damages which they were preparing to issue and serve.

LifeSearch responded to Milners’ letter of 30 August 2022 on 21 September 2022. Michelmores disputed that any of the alleged breaches were repudiatory and instead accepting the 30 August letter 2022 as indicating an intention no longer to be bound and terminating the 2020 Agreement with immediate effect.

Before the letter dated 21 September was received, Milners had in fact issued the claim form on 16 September 2022. The claim form was accompanied by the Particulars of Claim.

It is not clear when the issued claim form and Particulars of Claim was served on LifeSearch but Michelmores acknowledged service on 10 October 2022.

In a covering letter to the court sent on 10 October 2022, Michelmores made an informal application under CPR 5.4C(4) for an order that no non-party be permitted to inspect or obtain copies of the Particulars of Claim, its appendices, the acknowledgement of service and their application letter. The letter said this:

Milners’ response was to ask the Court by letter to reject what it referred to as a “quasi application”. The letter said that MPG were concerned that LifeSearch was “attempting to hide the [commission] dispute and the allegations against them”. They suggested that they would respond further if a ‘proper’ application was made. In fact, by proceeding as they did, Michelmores were correctly following the guidance given by Collins J in R(On the application of Corner House Research) v BAE Systems Plc [2008] EWHC 246 (Admin); [2008] C.P. Rep. 20.

Milners’ response was copied to Michelmores but I have not seen any further correspondence before an email was sent on 8 November 2022 by HHJ Pelling KC in the following terms:

An order was drawn up on the terms directed.

On 15 November 2022, Milners applied to set aside the order made by HHJ Pelling KC.

I have not seen the evidence filed in response to that application by LifeSearch but on 10 February 2023, Michelmores filed its own application. In that application, Michelmores informed the court that the parties had agreed a form of order by consent in the following terms:

The witness statement filed in support of the application stated that:

Mr Justice Andrew Baker made an order on the agreed terms on 14 February 2023 (‘the February Consent Order’):

Mr McPherson bases his application for costs on the words “costs reserved” in paragraph 5 of the February Consent Order. The total sum of £37,105.50 claimed as per a costs schedule dated 9 October 2023 is broken down into three parts:

The first issue is the construction of the February Consent Order. Mr McPherson submits that the only costs excluded from the “costs reserved” provision in paragraph 5 are MPG’s costs of its application to set aside and that paragraph 5 of the order reserved all other costs, including the costs of what in substance amounted to the joint application of 10 February by the parties for a consent order.

In my judgment, Mr McPherson’s interpretation of the consent order is strained and rather artificial. It involves reading paragraph 1 very narrowly and paragraph 5 very widely. What he is contending for is a reading of paragraph 1 under which ‘no order as to costs’ means no order as to costs of MPG’s own costs of making the application with all other costs reserved including all LifeSearch’s costs of dealing with MPG’s application. However, I read the no order as to costs provision in paragraph 1 as extending beyond the costs incurred by the Claimant in making its application to the costs of LifeSearch in responding to that application. I would also read it as including the application for the consent order which compromised the original set aside application. In other words, MPG’s application was discontinued on the terms of the later joint application with no order as to costs of or occasioned by it. I would read the main target of the ‘costs reserved’ wording to be the costs of carrying out the redaction procedure in paragraph 4.

Although I have not seen all the correspondence between the parties since the lodging of MPG’s application to set aside, I cannot see there was any need for LifeSearch to issue their own application to inform the court that MPG’s earlier application to set aside the order had been compromised. The information contained in the 10 February 2023 application notice and the witness statement of Emily Edwards could just as easily have been set out in a letter to the court informing the court that the parties had reached a compromise under which rather than being completely set aside, the order would be varied to allow third parties to access the statements of case albeit in redacted form.

In substance, both parties had therefore succeeded to some extent and MPG’s application to set aside was withdrawn on the basis of there being no order to costs (as I read it) for either side in relation to that application as compromised. The result of that reading is that the only costs reserved by paragraph 5 are: the costs involved in carrying out the process set out in paragraph 4. It would be natural to reserve those to the CCMC. The process of agreeing what redactions were really necessary may have become a matter of dispute and carrying out redactions to all the statements of case would itself take some time, all of which time had to be accounted for.

I would therefore dismiss parts 2 and 3 of LifeSearch’s application for costs because the costs of considering and responding to MPG’s application and of informing the court of the agreed compromise are, in my judgment, as a matter of construction encompassed within the ‘no order’ provision in paragraph 1 of the February Consent Order. I will return to the pre-application costs below.

However, if I were wrong about that and paragraph 5 was intended to keep alive all costs other than those incurred by MPG in respect of their own application, I would in any event reach the same result as to costs as a matter of discretion, for the following reasons:

That leaves the costs claimed in Part 1 of the schedule of costs. These fall outside the purview of the consent order because they predate the Claimant’s application of 15 November. Mr McPherson’s main submission is that the costs of considering and preparing the application to court on 11 October were caused by an unreasonable failure by MPG to comply with the pre-action protocol rules.

I am not persuaded that MPG were at fault or acted unreasonably for the following reasons:

For all those reasons, the costs for considering and preparing the application are in my judgment for LifeSearch alone to bear. So, the appropriate order for this part of the costs is also ‘no order’.

LifeSearch applied for security for costs by a notice of application dated 9 February 2023. The application was supported by a witness statement by Charles Courtenay of the same date.

The witness statement stated that:

The application was listed to be heard on 19 May 2023.

The response of MPG to this application was to file an application seeking an adjournment of the application to the first costs and case management conference. Four days before the hearing of the application for security, MPG filed a witness statement of David Richardson. In that witness statement he accepted that the MPG is “not in a healthy financial position” but submitted that:

At the hearing on 19 May 2023, according to the note of the hearing which I have seen which has not been challenged:

HHJ Pelling KC dismissed the application to adjourn. MPG was ordered to pay £25,438.75 into court by 9 June 2023. The purpose of this order was to give LifeSearch security for the costs of preparing for the costs and case management conference. HHJ Pelling KC also gave both parties permission to serve any further evidence in relation to the security for costs application. The order did not make any express provision for ATE insurance to be provided in lieu of further security. The order was complied with by MPG.

Following the hearing. MPG filed a further witness statement by Mr Richardson on 16 June 2023. In that statement, Mr Richardson stated that MPG is “in the process and indeed close to obtaining an ATE insurance policy, with applicable anti-avoidance provision”. Mr Richardson repeated the assertion that if an order were granted for the sort of sum sought by LifeSearch the claim would be stifled and that LifeSearch’s costs estimates were excessive.

LifeSearch served a witness statement in response by Mr Roberts on 13 July 2023. In response to the allegation of stifling, he said this at paragraph 15:

Although the order of HHJ Pelling KC had not made provision for any further statement in response from MPG, a further witness statement was in fact served on 4 October. In this witness statement, Mr Richardson did not say any more about any ATE insurance policy, or MPG’s ability or otherwise to fund the litigation or satisfy any further order for security for costs. Instead, he chose to make a number of critical comments about LifeSearch’s counterclaim.

In his skeleton argument lodged on 9 October 2023, Mr Cameron for MPG accepted that:

Mr Cameron accordingly accepted that the Court had a discretion as to whether or not to order further security but ought not to so because of two main reasons:

Mr Cameron’s skeleton also stated that MPG had now been offered an appropriate ATE policy. However, the skeleton asserted that the policy involves “a substantial premium to be paid as a single lump sum” and that MPG “still hopes to secure a policy with better terms”. No further details were provided and the assertions were not supported by any evidence.

In his skeleton, Mr McPherson set out the following seven points of principle, none of which were challenged by Mr Cameron in his oral submissions and which I accept:

On the evidence, Mr McPherson’s principal submission was that nothing has changed since the hearing of 19 May. In particular, he submitted that no further details have been forthcoming as to why the claim would be stifled, still less full and frank evidence on that point. On the contrary, the order had been complied with on time albeit without the source of the money paid into court being revealed.

Notwithstanding the criticisms made by Mr Richardson in his 4 October witness statement about LifeSearch’s counterclaim, Mr Cameron did not seek to persuade me that the merits were so clear on either the claim or the counterclaim that this should have any bearing on the application. He was correct in my judgment to take this course.

Mr Cameron otherwise sought the dismissal of the application or that it be adjourned to allow an ATE insurance policy to be entered into for the reasons given in his skeleton. His main submission was that the claim would be stifled. In support of his submission seeking an adjournment of the application, he submitted orally that it was only once the costs budget had been finalised that MPG would be in a better position to go into the ATE market with a firm figure for the potential costs exposure.

In my judgment, MPG’s evidence fell woefully short of the full and frank evidence essentially for the same reasons as given by Males LJ in Gama Aviation (UK) Ltd v Talaveras Petroleum Trading DMCC [2019] EWCA Civ 119 [62]-[63]. Despite being given an opportunity to do so by HHJ Pelling KC, no attempt was made by MPG to address by evidence a stifling case. They therefore failed to meet the following test: (with emphasis added): “The claimant will need to show that it cannot provide security and cannot obtain appropriate assistance to do so .” per Lord Wilson in Goldtrail Travel Ltd v Aydin [2017] UKSC 57. I was provided with no information about the financial state of MPG’s shareholders or directors.

Far from being satisfied that the effect of an order of security for costs would on the balance of probabilities prevent the claim continuing, by the conclusion of the hearing I was left with the firm impression to the opposite effect for the following reasons:

I am also not convinced that this is a case where no order should be made because it is the conduct of the Defendant which has created the impecuniosity. LifeSearch’s position is that has paid all of the commission which is due to MPG. MPG says it has been underpaid. The merits or otherwise of those two contentions is not sufficiently clear in either direction (as Mr Cameron accepted) that it should have any bearing on the exercise of the court’s discretion.

In summary, I therefore accept Mr McPherson’s principal submission that in relation to stifling the court is in essentially the same position as the court was in on 19 May, save for the assertion that an ATE policy is now available if MPG wants it. In my judgment therefore, in all the circumstances, ot is an appropriate case to make a further order. This will put MPG to its election of whether to pay money into court or to enter into a suitable ATE policy.

The total figure which I consider appropriate to take for the purpose of giving security is £575,147. This is arrived at by taking: (a) 50% of LifeSearch’s incurred costs and (b) 90% of LifeSearch’s budgeted costs as per the costs set out in the updated Precedent H dated 13 October 2023. In light of MPG’s precarious financial position, it is in my judgment appropriate to stage the payments as follows:

As to the form of the order, I am not persuaded that there is any reason to depart from the form of order used by HHJ Pelling KC previously in this case. Mr McPherson sought an order that any third party paying any tranche of the security order be obliged to identify itself. Whilst I accept that the court has an inherent power to order a party to proceedings or the solicitors on the record to disclose the names of any third party financing litigation – see Abraham v Thomson [1997] 4 All ER 362 and Raiffeisen Zentralbank Osterreich AG v Crosseas Shipping Ltd [2003] EWHC 1381 (Comm), that power is only usually exercisable only at a later stage when unsecured costs have in fact been incurred (most commonly after trial) when a defendant wishes to make an application for a third party costs order.

Special rules apply if there is an assignment or litigation funding agreement in existence – see Reeves v Sprecher [2009] 1 Costs LR 1 and Wall v Royal Bank of Scotland [2016] EWHC 2460. But there is nothing to suggest that either exception applies here. I was not shown any authority suggesting that it was now standard practice to require identification as part and parcel of a standard security for costs order. If LifeSearch wish to pursue this point, they should do so in correspondence first and then by separate application.

I have asked the parties to draw up an order to reflect this judgment.