RTA Claims Process - Simple as ABC

Further to our recent look at the new Ministry of Justice claims process for road traffic accidents, I have another puzzler for you.  Again, I am grateful to Keith Hayward at Victory Legal Costs Solicitors for this one.  The next time the Civil Procedure Rules Committee decides to put together a new set of costs rules they might like to consult with Keith first.

Claimant requests an interim payment in the interim settlement pack of, say, £5,000, but Defendant only pays £1,000. So Claimant commences Part 7 proceedings but forgets to give notice that the claim will no longer continue under the Protocol or doesn’t give notice within 10 days, as required by Protocol 7.23.

Having issued the Part 7 proceedings the Claimant issues an application for an interim payment, and after a fully fought hearing the Court orders an interim payment of £5,000.  What happens now?  Protocol 7.23 makes it clear that unless the Claimant gives notice within 10 days the claim will stay in the Protocol.  So:

a.   What costs can be ordered at the end of this contested interim payment hearing if the case is still in the Protocol?

b.   What happens to the Part 7 proceedings? Are they stayed until the Claimant is ready to serve the settlement pack?

c.   If agreement is not reached at the end of Stage 2 what next?  Does the Claimant now continue with the Part 7 proceedings outside of the scheme, or must the Claimant issue Part 8 proceedings?  Surely we can’t have duplication of proceedings, so how do we continue with Stage 3?

I'll leave you all to have a good think about that; although afterwards you may want to have a quiet lie down in a dark room.

Remember the kind of people who are generally going to be handling this type of claim.

RTA Claims Process - Another fine mess

For some bizarre reason it appears that readers are still struggling with my previous question concerning the “simple” new road traffic accident scheme.  It’s almost as though I had asked a question that was impossible to answer.

Let me give you another question but, this time, also suggest the answer.  I am grateful to Keith Hayward at Victory Legal Costs Solicitors for this one.

Proceedings are issued under Part 8 under the new Practice Direction 8B paragraph 1.1(1)(3) because of limitation.  The case is then stayed in accordance with paragraph 16 to enable the claim to proceed under the new RTA claim process.  The claim then falls out of the process, for example, because of an argument over contributory negligence (Protocol 6.15(1)).  The claim is then settled amicably without the need for the stay to be lifted.

What costs apply?

Don’t just read on. 

Lazy.

Go and read the rules and see if you can work out the answer first.

The answer seems to be governed by the new CPR 44.12C process:

             (1)       This rule sets out the procedure where—

(a)        the parties to a dispute have reached an agreement on all issues (including which party is to pay the costs) which is made or confirmed in writing; but

(b)        they have failed to agree the amount of those costs; and

(c)        proceedings have been started under Part 8 in accordance with Practice Direction 8B.

The example seems to be caught by subparagraph (c).

The defendant can, and it will only be the defendant who wants to do this, apply under CPR 44.12C:

(2)        Either party may make an application for the court to determine the costs.

And what costs are then payable?  CPR 44.12C states:

(3)        Where an application is made under this rule the court will assess the costs in accordance with rule 45.34 or rule 45.37.

Note the use of the word “will”, not “may”.  The court has no discretion.  Rule 45.34 and 45.37 allow for costs in accordance with the new fixed costs for the new RTA process.  So, despite the matter not proceeding in the process, the process costs still apply.

This was obviously not intended but is another example of sloppily drafted rules.  If any serious attempt had been made at trying to produce simple rules then there would have been a greater likelihood that this type of error would have been avoided.  The Ministry of Justice is simply wrong to claim that the simpler the system, the more detailed the rules need to be.  The courts are going to be swamped with fresh satellite litigation trying to unravel this botched job. 

Of course, another reading of the rules might be possible and readers are welcome to suggest why the above analysis is wrong.  However, the point is that the rules should be crystal clear on a straightforward issue such as this.

It’s not too late for the Ministry of Justice to pull the plug and I’m not just talking about the new IT system.  

"Quick and simple" road traffic accident scheme

The Ministry of Justice issued a press release on Monday announcing a "quick and simple compensation scheme for road traffic accidents".  Do any readers have any further information about this scheme as it clearly can't be referring to the new claims process for RTA claims.  Whether that scheme will be "quick" remains to be seen but I think we can all agree that the extra 80 pages of rules are anything but simple.  If they were then we would have had a winner for that bottle of champagne by now.

If you ever wondered how such a convoluted scheme managed to come into existence you can visit an open meeting of the Civil Procedure Rule Committee taking place in Central London on 14 May 2010 and observe the process.  Spaces are limited and you need to complete a short application form.  I'm not sure that will keep the pitchfork and flaming torch wielding mob out.   

New RTA scheme rules and win a bottle of champagne

A reader helpfully posted a comment on an earlier post mentioning the fact that the New RTA Claims Process start date as been put back to 30 April 2010.  I have received the same information from a number of other reliable sources.  The postponement appears to be due to problems with the electronic portal.  The MoJ website did not, at the time of writing, have any announcement on the subject.  The RTA PI Claims Process portal site has quietly changed the start date but made no specific mention of the change.  This is no doubt due to the ironic fact that the tag line at the top of the web page has the words: "Will your business be ready to meet the deadline...".  The ticking clock has also been wound back.  Oh, the irony.

Now, when the new scheme does finally start, it will be largely run by junior claims handlers at the defendant end and paralegals at the claimant end.  This is meant to be a simple scheme for low value RTA claims.  The new rules are therefore no doubt designed to be easy to understand.  If you have not seen them yet the draft rules can be viewed here: new rules for the RTA Claims Process.

Allowing for how simple these rules are meant to be, I'm going to pose a simple question.  If the claimant is a child, damages are not agreed, the matter proceeds to a Stage 3 hearing and the claimant has beaten the defendant's offer, the costs recoverable by the claimant are governed by the new CPR 45.34.  So the question is: what costs are payable, and by virtue of which draft rule, to a claimant child where damages are not agreed, the matter proceeds to a Stage 3 hearing and obtains judgment for an amount equal to or less than the defendant's offer?

First correct answer wins a bottle of champagne (but you won't be able to win if you post anonymously).  Remember, this is a very simple scheme and I'll be very disappointed not to have a correct answer within 30 minutes of posting.

Costs rules for new RTA Claims Process

I've been busy over the last few days trying to digest the new rules for the new Claims Process for Low Value RTA Claims.  Although low value RTA claims is not an area I particularly specialise in, I am due to talk on the costs aspect of this scheme on 12th March 2010 at the CLT Conference on the subject (view brochure).  As I mentioned in an earlier post, the new rules for the RTA Claims Process are anything but simple.  CLT wanted speakers to produce their notes by 22nd February.  Given the Ministry of Justice only started to circulate the draft rules on 17th February, this was rather an optimistic deadline.  I just pity those who are expected to have mastered the new rules in time for the implementation date.

Costs draftsmen's late Christmas present

A number of readers no doubt work in the area of RTA claims.  Some at the front-end of the claims process dealing with the substantive claim, others at the tail-end of the costs side.  Hopefully, those readers will therefore be aware that we have a new claims process for low value RTAs starting on 6 April 2010 (and if they didn't know they are in real trouble).

What some of the more observant may have noticed is that despite being only a few weeks away from the start date we still have no published rules as to how the scheme will work.  Quite how this shocking state of affairs arose is a mystery.  However, finally, some progress is being made.  The Ministry of Justice has written to a number of specific bodies:

"The Civil Procedure Rule Committee approved the drafts of the documents listed below on the 12^th February 2010.  These documents are in draft form until: 

(1) the Statutory Instrument has been signed by the Civil Procedure Rule Committee and the Minister and then laid before Parliament, and

(2) the practice direction making document has been signed by the Minister and the Master of the Rolls.   

It is expected that the Statutory Instrument will be laid before Parliament by the beginning of March.  In view of the familiarisation, training and system adjustments that practitioners will need to undertake in order to be compliant with the new process we have decided [how gracious of the powers that be] to circulate these rules etc in draft form.  Please circulate to your members as appropriate."

In case these haven't yet made their way to you, the Legal Costs Blog and Gibbs Wyatt Stone have provided a link to all the draft documents here: RTA Claims Process.  Read them and weep.  No surprise that the final report in the Jackson Costs Review commented on the new process in this way: "I have two concerns about the new process in its present form.  My first concern is the sheer complexity of the process.  Over 80 pages of new material will be added to the rule book, in order to deal with the simplest category of litigation which exists, namely low value RTA claims where liability is admitted.  I fear that collectively these procedures might possibly open up a new theatre for the costs war."

And that, of course, it the late Christmas present for costs draftsmen.  Jackson LJ may be intent on killing off the volume costs work but the Ministry of Justice, and those involved in formulating the new rules, have given it a massive boost.  

Time allowing, I'll have plenty more to say about this new RTA claims process.   

Have defendants been stitched up?

Before defendants get too excited about the positive recommendations that appear in Lord Justice Jackson's final report on his Review of Civil Litigation Costs it is time for a reality check.  The first point to note is that we do not know which, if any, of the proposals in the report will be implemented or when this might happen.

Secondly, we do know that the new claims process for low value RTAs is due to be launched in April. Now at the time of writing, unless I have missed something, the actual rules have yet to be published.  This is worrying with the start date so close.  Jackson LJ clearly has doubts about the scheme which he expressed in his report: "I have two concerns about the new process in its present form. My first concern is the sheer complexity of the process. Over 80 pages of new material will be added to the rule book, in order to deal with the simplest category of litigation which exists, namely low value RTA claims where liability is admitted. I fear that collectively these procedures might possibly open up a new theatre for the costs war."

Much has been made of the fact that the level of fixed fee is set below the average amounts recovered by claimant lawyers under the current rules.  Good news for defendants.  But, and it may be premature to start looking for problems before we have seen the final rules, one issue looks likely to cause defendants problems unless expressly dealt with in the small print of the new rules.

Under the current predictable costs regime, recovery of costs is governed by the level of damages actually agreed.  If a case settles at a level within the small claims track the predictable costs scheme does not apply.  However, under the new claims process the fixed fee of £400 for stage one, providing notification of the claim to the defendant, is payable at the point when liability is admitted.  At this point there will be no medical evidence.  The scheme is only meant to apply where the personal injury element of the claim is at least £1,000.  The Ministry of Justice's report recognises that some claims may be valued at the outset as having "reasonable prospects" of exceeding £1,000 but it later becoming clear that they do not.  At that stage the claim will leave the process.  However, I can see no mention of defendants getting their £400 back.  Am I being incredibly cynical in thinking that there will be a very high number of claims that claimant lawyers value as having reasonable prospects of recovering over £1,000 only for these claims to undergo a surprising downwards revaluation or even disappear entirely after the £400 has been paid?  There is no time limit under the scheme for obtaining a medical report and defendants may only discover several years down the road that they have been stitched-up in tens of thousands of claims.
 

Legal costs news update

Post Magazine has reported that a delay to the approval of the draft rules for the new RTA claims process means that the previous April 2010 implementation date will be postponed by at least a month.  Hopefully the rules will be published long before that because I am meant to be speaking at a Central Law Training conference on this process on 12th March 2010.  It will be an interesting day if the rules aren't out by then.

More bad news on the fixed costs front comes from the Gazette that reports the failure of agreement in relation to talks aimed at fixing costs for all fast track claims.  These talks were instigated by Lord Justice Jackson as fixed fees for fast track cases are likely to form a central part of his final report.  The failure of the talks is no great surprise given the Association of Personal Injury Lawyers is so strongly opposed to an extension of fixed fees and even walked out of the talks at one stage.  As I suggested in a previous post, before they rejoined the talks: "If they simply wished to scupper the mediation, it would have made more sense to continue to play along and undermine the process from within".  APIL will now no doubt claim that the failure of the mediation is evidence that, despite their best efforts, an extension of fixed costs is a bad idea.

Cheaper personal injury claims?

Recent articles in the Law Gazette have expressed concern about the practice of “third-party capture” where insurers approach accident victims directly in an attempt to agree damages without the involvement of claimant solicitors. Claimant lawyers argue that insurers try to settle these claims below their true value and that without their involvement justice will not be done.

On a related issue, I recently came across an article by David Marshall that produced a number of statistics in support of the view that an increase in the small claims track limit would be a bad thing as less people would be willing to bring claims without legal assistance. One of those statistics was from a MORI poll that produced the finding that “73% of respondents said that they would be unlikely to be able to value a personal injury claim without a solicitor”. What jumped out at me from that poll was not the fact that 73% of the public thought they would not be able to value an injury but that presumably 27% of the public thought they would. One in four members of the public think they are a walking Kemp & Kemp! Even I would have to concede there may be a certain amount of naivety here, but I may be underestimating the intellect of the great British public.

Claimant solicitors naturally try to paint this as all an or nothing issue. Either a solicitor is involved in the claims process from start to finish, in which case the client can expect to receive proper compensation, or the poor client is left entirely to the merciless clutches of the evil insurer who will under-settle the claim.  

Third-party capture cases are, by their nature, cases where liability is not in dispute and the insurer wants to settle as cheaply as possible (at least so far as the legal costs side is concerned). Let's assume in this situation that a medical report is obtained from an independent medical expert (at the insurer's expense). The Claimant completes a standardised form containing information of any financial losses and produces evidence in support. Assuming the medical expert does not recommend further investigation, at that stage the insurer makes an offer in settlement. The Claimant then takes the evidence gathered to date to a solicitor and asks whether the offer made is reasonable. No more than a very short written advice would be needed. If an insurer has offered £2,000, a Claimant will not want to know more than whether this falls within a reasonable range of what might be allowed at court. A client will not require a detailed “legal” advice quoting numerous authorities in support. How much would this cost? £100? £150? If solicitors did not think they could provide a short advice for that price I am sure the junior Bar would.

If the advice is that the offer is too low then the Claimant can be told what an appropriate settlement range would be an go back to the insurer with a counter-offer. If agreement cannot be reached then it would be reasonable at that stage for solicitors to become fully involved. Obviously, serious injuries would have to be dealt with in a different way, but the idea that the current system is the only way that claimants can recover an appropriate level of damages in low-value claims, where there is no dispute as to liability, is simply untrue.  (Even under the new claims process for low-value RTAs, solicitors will still recover costs of £1,200 for cases where there is no liability dispute and quantum is agreed without a hearing.) 

You're unlikely to hear APIL making similar proposals for reducing legal costs.

One-way costs shifting - The sting in the tail

I recently received an email from someone who is writing an article for their university newsletter and wanted my views on the potential impact of the Civil Litigation Costs Review on defendant panel solicitors.  This is an interesting issue and one that, to be honest, I had not previously given much thought to.  Much of the Jackson Review, at least so far as it covers the type of work undertaken by defendant panel solicitors, is focused on controlling the costs that claimant lawyers incur, rather than those of defendants.  My previous posts on the subject have therefore focused on that aspect, rather than the impact on defendant firms.

Lord Justice Jackson’s Preliminary Report has, so far as is relevant, two main proposals.  These are the ones most likely to find there way into the final report. 

The first of these is extending fixed costs to all stages of the fast-track.  Although the Preliminary Report, so far as I can see, does not spell this out, it seems clear that it is intended that fixed costs would apply to claimant solicitors but not defendant ones.  If anyone is able to point me to something that suggests this view is mistaken, then please let me know.  This proposal would not, in itself, have any direct impact on defendant solicitors.  If my reading of the proposal is correct, and if only this change was made, it might lead to the strange outcome that defendant solicitors were able to recover more in costs than claimant solicitors.  That would be a first.

The more interesting issue is whether the extension of fixed costs would have an impact on claims behaviour which would, in turn, impact on defendant firms.  It is generally accepted that the introduction of the predictable costs regime encouraged some claimant firms to issue proceedings at the first opportunity to escape the fixed costs scheme (see page 126 of the Preliminary Report).  On the one hand, an extension of fixed costs might encourage some claimant firms to settle cases as quickly as possible, doing as little work as possible in the process, to maximise their profit margins.  This might reduce the number of issued cases and therefore have an adverse impact on the volume of cases being handled by defendant firms.  Conversely, some claimant firms might be encouraged to push cases to the next stages of the claims process to secure the fixed fees applicable to those stages.  This might, in turn, increase the volume of cases being dealt with by defendant firms.  Time will tell. 

If the claims process does become less adversarial, and claims settle more quickly and with less work, this may impact on what insurers are willing to pay defendant firms (much of the volume work currently being done under fixed fees agreements).  This may be of particular relevance for firms that offer claims management services for pre-litigation work.

The second major suggestion in the Preliminary Report is a move to one-way costs shifting (see previous post).  If Jackson LJ’s current thinking on this issue is correct (and this is a big “if”) this should be largely costs neutral from insurers’ perspective.  However, it might have an unintended consequence for defendant firms.  Traditionally, due to the downward pressure brought by insurers, defendant solicitors have charged ridiculously low hourly rates (I should know as this, in turn, impacts on what I can charge for defendant costs work).  In the past, defendant solicitors have therefore been able to only recover low hourly rates from their opponent when they secure a costs order.  However, in recent years there has been a growing trend for defendant firms to enter into discounted CCFAs.  Where the claim is not successfully defended the insurer will pay the typical low hourly rates (as before).  When a costs order is made in the defendant’s favour, the defendant firm can now (under the terms of the CCFA) recover costs from the opponent at the normal hourly rates appropriate for the case (usually Guideline Hourly Rates).  This has helped defendant firms in recent years to increase their profits.

However, if one-way costs shifting is introduced, defendant firms will be back to the position of only being able to recover the lower rates that insurers are prepared to pay (because there will be nobody else to pay).  Admittedly, it is only in a minority of cases that positive costs orders are secured by defendants, but defendant firms are likely to notice the difference when it comes to their bottom line.

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APIL does the Hokey Cokey on fixed fees

I previously reported (see post) on the Association of Personal Injury Lawyers (APIL) walking out of talks on extending fixed costs in personal injury cases.  The latest news is that APIL is now back in.  APIL has explained its decision to rejoin the talks being due to the fact that the Civil Justice Council agreed to discuss matters of process, and not just the level of fixed fee, and that it had been offered the opportunity to make a final written submission on this issue to Lord Justice Jackson.  Nevertheless, APIL maintains it still has “profound skepticism” about the need to extend fixed costs.

In a further boost to Jackson LJ, the new Lord Chief Justice, in a recent interview with the BBC, expressed the hope that the cost of civil litigation would be "properly examined" following the publication of Jackson LJ's report.  There is building up a virtually unstoppable momentum behind the idea that radical changes need to be made to control legal costs.  Whichever party comes to power after the next election (and at this stage it might be either the Conservative party or the Tory party) there is not going to be an injection of fresh public money to pay for the costs the current system creates.  Any change is going to be focused on limiting the costs that are incurred during the process or the costs that are recoverable at the end.

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Not enough personal injuries occuring

The following letter was published in the latest edition of the Law Gazette:

"Rhonwen Barraclough's letter (8 October) complained about Lord Justice Jackson's recent suggestion of increasing the small claims limit if a deal cannot be done on fixing legal costs in fast-track claims.  Among the various reasons put forward as to why this was a bad thing, the most desperate was:

'There is also the prospect of losing even more high street practices, given the constant onslaught from professional indemnity insurance and farcical legal aid rates. Like it or not, personal injury is big business, with the majority of fee income going back into the economy in the form of taxes, VAT, wages and to other associated businesses. Has the practical impact of the reforms been considered in that context at all? Can the government really afford to lose the revenues generated by PI?'

Criminal behaviour is big business, keeping employed criminal lawyers, police, prison offices, security firms and so on, and generating various taxes as a result.  However, one would have to be going it some to argue that the government should be very cautious about trying to reduce crime.

What next?  The Association of Personal Injury Lawyers campaigning for more dangerous driving, unsafe work practices and more potholes in an effort to bail the government out of its current financial difficulties?

Forget high street practices, what about your average poor costs consultant if fixed fees are introduced? Now that is serious.

Simon Gibbs, Partner, Gibbs Wyatt Stone (defendant costs consultants), London"

Jackson Costs Review facing first hurdle

The Gazette (click link) reports that the Association of Personal Injury Lawyers (APIL) has walked out of talks on extending fixed costs in personal injury cases. This mediation was put together at the request of Lord Justice Jackson as part of his Costs Review. It seems inevitable that his final report will include a recommendation that fixed fees are introduced for all stages of the fast-track in personal injury claims and this mediation was intended to lead to an agreement as to the appropriate figures.

It is somewhat hard to interpret this new development. It may simply be initial posturing on the part of APIL. It is no secret that APIL opposes the extension of fixed fees; they said as much in their response to the Jackson Preliminary Report. If they simply wished to scupper the mediation, it would have made more sense to continue to play along and undermine the process from within. Without APIL's involvement what will happen? It seems very unlikely that Jackson LJ will abandon this central part of his reform program simply because one interest group does not want to cooperate. On the other hand, will any figures now produced lack credibility? APIL runs the risk that the process will move forward regardless but they will lose the opportunity to influence the final figures.

Watch this space.

Changes to the assessment process

At the end of July I attended the last of Jackson LJ's Costs Review Seminars. This seminar focused on detailed assessments and explored various ways to try to improve the process. The majority of those attending were costs draftsmen, costs judges and other costs professionals.

What was interesting was the way that some of the ideas that emerged were met with virtually unanimous support from those present except for one or two individuals who clearly passionately believed that these very same proposals were either unworkable or entirely counter-productive.

One of the suggestions was that the current format for bills of costs was inappropriate and should be replaced with a new format. Rather than, as now, largely focusing on a list of chronological items of work, the bill should be more focused on providing an explanation as to why certain work was necessary or why this work was unusually time consuming. This proposal received virtually unanimous support and a costs judge and a regional costs judge have been tasked with producing a new model bill to incorporate this suggestion.

Although understanding the logic behind this proposal, I was one of the very few who strongly opposed this idea. Preambles to bills are already often unnecessarily long and self-serving, trying to justify the level of costs claimed by highlighting the supposed difficulties in the matter. My concern is that any formal requirement to explain and justify at the outset the costs claimed will turn bills into pages of lengthy prose that serve little purpose other than to drive up costs. Worse, much of this may prove to be entirely wasted. Time will be spent seeking to justify work that the paying party may have had no intention of disputing. Hopefully the model bill and any changes to the rules will overcome my concerns.

A second proposal was to introduce provisional assessments for lower value claims for costs. These would be conducted on paper with an option to proceed to a full detailed assessment if a party was unhappy with the provisional assessment, though possibly with strict costs penalties if a party failed to do better at the full assessment. I shared the majority view that this was a sensible proposal. There were only two dissenters and these were, interestingly enough, a regional costs judge and a costs officer. Their concern was that the provisional assessment option would be so attractive to parties that it would lead to a far higher number of cases reaching the courts than currently proceed to detailed assessment. This would lead to the courts being swamped with work they could not cope with. Of course, given any proposals emerging from the Jackson Review will almost certainly include fixed costs for fast-track claims this concern may be somewhat misplaced. Based on the figures being discussed at the seminar, for cases to be eligible for provisional assessment, most multi-track claims would be excluded. There would be relatively few claims likely to qualify once fast-track claims are removed from the process. Further, the workload of the courts should significantly decrease, in terms of costs disputes, as a result of fixed costs.

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Fixed legal costs for the fast-track

Any remaining doubt as to whether Jackson LJ's costs review will recommend fixed legal costs for all fast-track matters has been removed by the recent report in the Law Gazette that he has asked the Civil Justice Council to start work on setting the appropriate level of fees for this work. He has asked the Council to try to agree the figures by 12 November 2009 for inclusion in his final report.

At last week's Costs Review Seminar held by the Costs Practitioners Group, chaired by Jackson LJ, the discussions proceeded on the basis that it was a foregone conclusion that fixed costs for fast-track cases would form part of the final recommendations.

All the madder then that others are pressing ahead with the new Claims Process (see previous post) with its own fixed fee regime. A lot of time and effort is going to have been wasted by one group.

New Claims Process - Details emerging

Details are now starting to emerge as to the shape of the new Claims Process for RTA claims with a value of up to £10,000. Crucially, as reported in an article in the latest edition of New Law Journal, "three aspects remain confidential pending final consideration by stakeholders with the MoJ [including] the final cost matrix for the new work flow".

The article confirms that fixed costs will be payable at the end of each of the three stages of the process. Nice and simple then? Not quite. The article states: "New timelines for responses at each stage will govern the process. Failure to keep up with the timetable will result in the claim exiting from the fixed-cost process". Further: "Any other type of contributory negligence claim [except seatbelt issues] will be required to exit the system into the predictable costs regime". Yes, the predictable costs regime really has survived the new Claims Process.

So it now appears we will have three different costs regimes applying to low value RTAs: fixed fees for cases within the new Claims Process, different fixed fees (ie predictable costs) for cases that fall outside the Claims Process but settle pre-proceedings and standard basis costs (presumably covering those cases where liability is not agreed and proceedings are issued. Costs in low value RTA claims appear to be about to become more complex. How will these various regime's interrelate? (This is the question I raised in this post almost exactly one year ago.) We'll hopefully discover very shortly.

A further oddity is that "when estimating the value of a claim no account is to be taken of credit hire or vehicle damage costs". No doubt very sensible and this is clearly designed to avoid some of the excessive fees currently generated by "bent metal" claims. However, the predictable fee regime survives where these factors can be taken into account when valuing a claim. So credit hire and vehicle damage will count for one scheme but not the other. Are you keeping up so far?

To add to the fun we are told that "new Pt 36 sanctions are still being considered".

Existing methods of funding the claim such as BTE, CFA and ATE will continue to be available.

The new Claims Process contains a streamlined court assessment of damages and the presumption is that this will be a paper hearing. To "preserve the claimant's human rights" they can opt for an oral hearing. "Separate fixed costs have been agreed between stakeholders for either the paper or oral hearing". If the costs for the oral hearing have been fixed sufficiently high to cover the additional work that is required can we expect to see a surprising number of claimants opting for the oral hearing?

My prediction based on the information available to date: two years of costs chaos.

I'll comment further once more details become available.

Jackson Costs Review – Part 6 – The Political Element

Lord Justice Jackson's Civil Litigation Costs Review (see previous posts) raises the possibility of radical changes to the current system. However, how likely is it that his eventual proposals will ever see the light of day?

One of the most likely proposals he will put forward is a fixed fee regime for all stages of fast track cases. This, of course, is something very similar to the Ministry of Justice’s previous proposals, in the consultation paper Case track limits and the claims process for personal injury claims, to introduce a new claims process for all personal injury claims, except clinical negligence, and introduce a fixed costs regime to cover such cases. In the event, that was largely abandoned with no more than a limited new scheme for lower value RTA claims proposed.

Why did the Ministry of Justice back-down on its own initial recommendations? At the time, Stephen Haddrill, the Association of British Insurer's Director General, commented: “And the exclusion of workplace-related claims, which take on average three years to settle, is illogical and bizarre. Trade union pressure must not be allowed to block change.” What is the interrelationship between trade unions and government policy? One theory is that the introduction of fixed fees to a wider category of claim and, in particular, EL claims would have had a downward impact on the fees that claimant solicitors were able to recover. If one accepts that a large proportion of trade union backed cases are “bought” by trade union panel solicitors, through referral fees paid to the trade union, any reduction in fee income would reduce the amount that solicitors could pay in referral fees. The trade union income generated by referral fees, and there is no reason to suppose this is not significant, enables trade unions to make political donations. These have traditionally been to the Labour Party. The (conspiracy) theory is that trade union pressure on the Government led to the change in policy. It would have been suggested that a move to fixed fees for EL cases would lead, indirectly, to a reduction in political donations to the Labour Party. The Legal Costs Blog is unable to comment on whether there is any truth in these allegations.

Is there any reason to suppose that the Ministry of Justice will change its mind, again, if Jackson LJ comes out firmly in favour of fixed fees for fast track claims when he publishes his final report in December? It seems unlikely. However, matters do not stop there. Jackson LJ’s final report is likely to be published shortly before the next general election. All the signs are that the new government will be a Conservative one. How willing will the Conservatives be to implement fixed fees?

There are three possible factors that will be at work. Firstly, a Conservative government is unlikely to have any reservations about introducing changes that might reduce a source of income to the Labour Party. Quite the reverse. Secondly, a Conservative government is likely to have some sympathy for insurers, and businesses that pay insurance premiums, who have previously been faced with disproportionate legal costs. Thirdly, any new government is going to face a serious public sector deficit and be looking for any areas where savings can be made. Any fixed fee regime is likely to reduce the total amounts paid out in terms of legal costs. This would have a positive impact on the budgets of the NHSLA, government departments and local authorities, all of which are funded directly or indirectly by the public purse. Jackson LJ’s final proposals, assuming they do include fixed fees, are likely to have a number of attractions to a new Conservative administration. The timing of the final report may be fortuitous for Jackson LJ.

Jackson Costs Review – Part 5 – Small Claims Limit

Lord Justice Jackson's Preliminary Report on Civil Litigation Costs revisits the thorny issue of whether the small claims track limit for personal injury claims should be raised from £1,000 to £5,000 (or somewhere in between). APIL, not surprisingly, expressed concern to Jackson LJ if this was introduced: “APIL’s membership survey suggests that almost 70% of all personal injury work consist of claims with general damages of less than £5,000. Solicitors firms that currently specialise in low value personal injury claims (i.e. below £5,000) would face a significant loss of business if the upper limit for small claims was increased. APIL suggests that the effect of the increase in the small claims limit in terms of lost business would be particularly acute in firms that specialise in Road Traffic Accident claims. APIL maintains that such firms would be ‘decimated due to the loss of a significant amount of business’. The reduction in the number of personal injury firms would create access to justice problems”.

FOIL were reported as believing that the small claims limit for personal injury claims should be raised to about £2,500, so long as there is an overhaul of the fixed fees that go with the present regime.

The Ministry of Justice only very recently reviewed this same issue and decided against changing the limit. It is therefore fascinating that Jackson LJ is willing to reopen this can of worms. He is clearly prepared to consider all options, regardless of who he upsets in the process.

Jackson Costs Review – Part 2 – Fixed Fees

Lord Justice Jackson's Preliminary Report on Civil Litigation Costs is, in general, careful to avoid reaching any final conclusions or making any firm recommendations (see Part 1). However, even from a cursory reading, it seems all but inevitable that the final report will recommend the introduction of fixed fees to all stages of fast track claims.

Jackson LJ writes: “I have canvassed views from my panel of assessors and it is our unanimous view that we should take forward this work and try to achieve a fixed costs system in fast track cases”. This is as I previously predicted (see previous post). Further, it is suggested that: “There appears to be a strong case for some method of applying fixed costs in fast track cases at all stages” and not just pre-issue as in the current low-value RTA scheme. This is supported by FOIL who the Report states: “believe that there should be fixed costs for all cases within the fast track”. The conclusion reached is that: “It should be possible to devise a fair system of fixed costs for all cases within the new fast track limit”. To avoid one of the perceived problems with the current fixed fee regime, he writes: “I would propose an annual review mechanism to be included in any such fixed costs regime”.

Unlike other elements of his Report, he appears to have reached a clear view already on this issue. Good luck to those who try to persuade him to change his mind.

Of course, the idea of extending fixed costs in fast track cases is not exactly new. That is what was proposed in the Ministry of Justice’s consultation paper: Case track limits and the claims process for personal injury claims. Those proposals were largely abandoned when the new claims process was announced. It remains to be seen whether the final report carries sufficient weight to persuade a (new) government to resurrect this idea. However, at the very least, this Preliminary Report does seem to finally kill off the new claims process. Or, more accurately, delay any implementation of the new claims process pending a decision being taken as to Jackson LJ’s final proposals. The Report states: “It may therefore be sensible to dovetail in the development of the new claims process with whatever implementation programme may be put in place following completion of the 2009 Costs Review. The introduction of two different packages of reforms addressing the same subject matter may be unsettling for both practitioners and court users”. I have previously reported on the problems the new claims process has been facing. The sooner an announcement is made to, at least, put into hibernation the introduction of the new claims process the better. To see how bizarre the whole issue has become read this article on the RTA claims process (external link) from Anthony Hughes, President of the Forum of Insurance Lawyers.

What impact would Jackson LJ’s proposals have if fixed fees are rolled out to all stages of fast track cases? The new fast track limit is £25,000. The Report gives details of “a substantial firm of claimant personal injury solicitors” who informed Jackson LJ that 92% of all personal injury cases which they undertake fell within the bracket £1,000 to £25,000. This would therefore catch the vast majority of such personal injury claims. In addition to impacting on the revenue of claimant solicitors (for better or worse) it would wipe out a large proportion of costs draftsmen and other costs professionals. This proposal has massive implications.

New claims process stumbles

As anticipated, the new RTA claims process will not be ready by the original date of October 2009 due to problems agreeing how the scheme will work. A new date of April 2010 has now been set. (Read more.)

This latest news coincides with Lord Justice Jackson's recent comments commending the German costs recovery model. With his preliminary report on the future of legal costs about to be published it seems increasingly likely that some form of extended fixed fees will be recommended. That, in turn, is likely to have an impact of the new claims process. (Read more.)

Expect further delay and uncertainty.

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