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Civil justice: Costs reforms and Jackson/LASPO update

DWF’s monthly round up of progress with the Jackson and associated civil justice reforms including updates this month on costs budgeting, portal company statistics released, market developments, whiplash and Jackson in action.

Costs budgeting – latest

The Jackson reforms are going to be tough on default, the Court of Appeal decided in their judgment on 27 November, though not absurdly so. Having heard the appeal on behalf of Andrew Mitchell MP in his libel action against News Group Newspapers arising out of the Plebgate debacle as recently as 7 November, the Court was clearly keen to release quickly its wider guidance on how default would be treated in the new regime. While this is unlikely to be the last word from the Court of Appeal on this area as other marginal issues on default are still likely to be taken up to that judicial level, we do now have some guidance that will resolve problems across a range of scenarios, and will allow insurers to know where they stand on the issue generally.

The Mitchell appeal

The court predictably rejected the Mitchell appeal, upholding as they did so the order of Master McCloud that as Mitchell’s solicitors were late in filing their costs budget, the costs that they can recover on behalf of their client if the case succeeds should be limited to the court fees payable. This of course is a token sum in any claim and hardly worth having at all, but that is what CPR rule 3.14 specifically provides as a sanction.

There is indeed to be a culture less tolerant of delay, with relief from sanctions being granted less frequently than pre Jackson. The Court of Appeal expects that once that culture becomes accepted, there should be less default, and fewer applications for relief. They want a clear message to be sent out to that end, and recognise that had they allowed the appeal these aims would have had a major setback. All of this is why the appeal was always very likely to be rejected.

The problem of default

Most defaults within litigation are not in fact set against the background of costs budgeting with its specific default provision at rule 3.14, but can be of many different types, such as failing to serve proceedings in time, being late with disclosure of documents, witness statements or expert evidence, omitting to start detailed assessment proceedings in time – the list is almost endless. Many of these examples are ones where either party can be in default, but in fact the majority of non-compliance tends to be on the part of claimants as more frequently the burden is on them to take a specific step by a certain date. The robust decision we now have from the Court of Appeal is therefore primarily a threat to claimants, or at least those who do not operate an efficient operation. They must be able to pick up important dates, diarise them, and ensure compliance, and if the worst happens and there is going to be delay, know how to proceed, quickly and decisively.

It is rule 3.9 that is key here as it sets out the basis under which applications for relief from sanctions are dealt with. In Mitchell the Court of Appeal has stressed the importance of the rule having been rewritten in April. It has reaffirmed the importance of the new two key factors to a relief application which were added to the rule at that time, that is to ensure “litigation is conducted efficiently and at proportionate cost”, and “to enforce compliance with rules, practice directions and orders”. Yes, the court said today, it is also relevant that the same rule says that on a relief application the court has to “consider all the circumstances of the case”, which includes the factors that were removed from the former rule 3.9 in April, but these were now only subsidiary factors and the key points of importance now are efficient conduct of litigation/compliance with rules and orders/proportionality. Doing justice in the case is now effectively redefined and no longer means allowing cases to proceed with merely a sanction in costs for default, but instead involves seeing justice as compliance with the CPR and court orders – we now have official confirmation of that.

Guidance offered

Guidance was given covering these situations:

  • The starting point is that any sanction is properly imposed.

  • Trivial breaches will usually get relief, such as narrowly missing a deadline.

  • Non-trivial breaches will require a good reason to get relief, such as the delay being caused unavoidably by illness, accident or an unexpected development.

  • Administrative issues within the lawyer’s office (as in Mitchell) are unlikely to be a good reason.

  • Relief applications need to be made promptly.

In Mitchell, the breach was held to be non-trivial, and as there was no good reason (admin issues not being a good reason), the sanction stood and the appeal failed.

The court recognised that their view as to administrative problems usually being insufficient reason could be seen as harsh to solicitors who might already be experiencing financial issues, as of course some claimant operations will be during this period of transition, but saw that had to be the interpretation of the rule nevertheless. There is a warning here for claimant firms as they adjust to keep pace with the new landscape of extended portals and more fixed fees, as well as any transition in their own operational set-up as a result, that they cannot take their eye off the ball as to the timetabling of their litigation. The challenge for insurers and their lawyers is to ensure that their houses are in order and that compliance happens on their side. There is confirmed now to be no future in tactical non-compliance with a timetable to allow other steps such as surveillance to be undertaken in the meantime, instead tactics will need to be formulated around court directions so as to ensure compliance happens. If insurers’ position is protected in this way, then advantage can be taken of default by opponents.

Costs management

Finally, it is worth noting that the judgment shows support for costs management by the court. This after all was the background to the case. It’s clear from the judgment that this is seen as an important exercise, and that budgets need to be put in in time so costs management can happen. It would be ironic indeed if this judgment was given against a background of certain judges (hopefully diminishing in number) remaining averse to exercising their powers of costs management when the budgets are before them. We expect more news from the Civil Procedure Rule Committee in support of costs management from their response to their consultation on that subject shortly.

Market developments

Businesses getting bigger

Nothing stands still in the move from traditional claimant firms towards larger, leaner models. The biggest news was the confirmation from Slater and Gordon that they intend to purchase the personal injury and other consumer operations of Pannone and Partners. S&G say that when the deal completes in February they will have over 5% of the claimant injury market in the UK. Their revenues will rise to £89m and they will have 1200 UK staff.

Others are not standing still either. Quindell have raised a war chest of £200m through a share placement to fund their proposed growth next year. While Minster Law have opened in London, some distance from their Yorkshire roots, and want to become known for multi-track and catastrophic claims as well as being handlers of large volumes at the lower end of the market.

Other market developments – a firm pulling out

The decision by Walker Morris (previously W M Claims) to withdraw from the injury market gives a good insight of what other similar firms will be considering. They spoke of “uncertainty” in the claimant injury market, and saw that the work needed “a more process, volume driven approach” which they clearly saw was not for them. They referred to “significant structural changes in the market”, and also interestingly to “those changes which (they) believe will happen in the future”. No names were given to those potential future changes, but were they perhaps referring to their view that the small claims track limit is going to rise at some point by more than just inflation?

All of these developments will continue during 2014. Looking ahead, next year will be a time to adapt to the new post extended portal, post Jackson landscape. The new big players on the claimant side will be working hard to generate claims and to see that as the statistics suggest there will be no falling off of claims volumes in the medium term.

Whiplash claims

It has been a busy few months for everyone concerned with the future of motor bodily injury claims handling.  The MoJ responded to its whiplash consultation, the Transport Select Committee (TSC) challenged that response and made a further request for evidence (which the government has recently answered), and there was a parliamentary debate in Westminster Hall.  

The key issues currently being addressed are:

  • The introduction of independent medical panels,

  • A phasing out of pre-med offers,

  • The retention of the existing small claims track limit, and

  • The steps to be taken against fraudulent claims.

For the full discussion see Nigel Teasdale’s update.

The TSC signalled its intention to continue to pressurise the government for reform of whiplash claims by launching a fresh whiplash inquiry.  The committee invited comment on the government’s command paper and on any other steps the government should be taking to combat whiplash.  DWF responded to that request.  On 12 December the government responded to the committee’s request for further evidence.  Amongst the evidence provided was motor claims injury data stretching back to 2008/9.  The data, supplied by the CRU, provides the number of motor injury compensation claims in four groups: back, neck, other and “whiplash”.  The data suggests that the number of injury claims fell slightly between 2011/12 and 2012/13, with claims for whiplash falling from 543,849 to 477,257.

As if to further bolster the argument that reform in this area is needed, The Institute and Faculty of Actuaries released a report following a review of 2012 claims data that reveals the average legal costs of dealing with claims up to £10k is now £2,500 per claim, an increase of 15% since 2010.   One of the authors of the report, David Brown, states “It now costs insurers more than £10,000 to settle small whiplash-like claims, a year-on-year increase of 26%”.  It is however important to bear in mind that the IFoA’s report was compiled before the vertical increase in the claims portal and before the reduction in the level of portal costs and the introduction of portal costs to cases worth between £15k to £25k.  Read the full press release.

Jackson in action – recent case law

In addition to the Mitchell case (see above) the following cases were reported and are significant.  All of the cases were decided before judgment was handed down in Mitchell:

Relief from sanctions/no unless order:  In an unreported case of Ozbay & Anor v Jack Richards Haulage (2013) (Bow County Court) the Defendant applied for an order to strike out the entirety of a £230,000 claim for hire charges, on the basis that the Claimant had repeatedly failed to comply with the court’s directions.  The court granted the Defendant’s application even though the court had not previously made an “unless order”.  The judge held that it was unnecessary for the Defendant to establish any specific prejudice.  The decision is being appealed.

Relief from sanctions/additional liabilities: In a further unreported case of Ibbertson v Black Horse Finance (2013), the court found that the claimant had not filed a form N251 in time and denied the Claimant the right to recover additional liabilities.  Prior to the Jackson reforms, courts were usually willing to allow claimants relief against this penalty. 

Relief from sanctions/unless order: In Thevarajah v Riordan & Ors (2013) it was appropriate for the court to grant relief from sanctions under CPR r.3.9 where the Defendants had complied with the terms of an unless order, albeit belatedly. The fact that the disclosure obligations were significant and wide-ranging, and there was no evidence that they had wilfully not complied, amounted to a material change in circumstances since the court had refused the initial application for relief. This case appears to have gone to the Court of Appeal last week for an expedited hearing and judgment has been reserved.

Relief from sanctions/effective service: In Kesabo & Ors v African Barrick Gold Plc & Anor (2013) Claimants in a group action who served their particulars of claim 16 hours after the deadline were granted relief from sanctions under CPR 3.9.   The judge had regard to a number of factors in reaching his judgment, including the error made by the Claimant’s solicitor in missing the deadline, and found the balance lay in favour of granting an extension of time for the service of particulars of claim.

Costs budgeting/disproportionate costs: In Finesse Group Ltd v Bryson Products & Anor (2013) the judge issued a warning to the parties, before he was due to deal with costs management at a subsequent hearing, that they needed to seek sensible and imaginative solutions, such as expert sharing to reduce their budgets so as not to render the case commercially unrealistic to pursue.  The sum in dispute was £170k and the parties’ budgets were £250k each.

The following cases were decided with Mitchell in mind:

Relief from sanctions/additional liabilities: The case of Forstater & Anor v Python (Monty) Pictures Ltd & Anor (2013) was handed down on the same day as the Mitchell judgment.  The trial judge confirmed that he had read that judgment and was not inclined to alter his judgment as a result.  The judge allowed the Claimant to recover the additional liabilities under a CFA, even though he had not served a notice of funding upon the Defendant.

Relief from sanctions/failure to comply with order:Romano v K Papers (Blackburn) Ltd (2013), an as yet unreported case, was decided post Mitchell and we thank Gordon Exall of Zenith Chambers for bringing it to our attention.  The Claimant was not granted relief from sanctions, even though his solicitors made an application a day after the case stood struck out.

Relief from sanctions/failure to serve particulars of claim: In Adlington & Ors v ELS International Lawyers (2013) a failure to serve 8 out of 134 particulars of claim in a professional negligence group action, due to the claimants being on holiday and unable to sign statements of truth, was viewed as trivial and relief was granted.

Relief from sanctions/failure to comply with unless order: In SC DG Petrol SLR v Vitol Broking Ltd & Anor (2013) relief was not granted against an unless order, striking out the claim. The Claimant had failed to comply with an order for security for costs.  The breach was not trivial.

Contact

For further information please contact:

Fiona James, Director, Professional Support Lawyer on 0191 233 5220

Marcus Davies, Professional Support Executive on 0161 603 5146

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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