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What do latest signals from Jackson and Briggs on fixed costs and the Online Court mean for insurers?

25 May 2016

While news of the government’s appetite for change in these areas continues to be awaited, this week’s latest pointers from these two reforming Court of Appeal judges suggest that a more conservative line on new fixed costs may now be expected, and that a new Online Court when it is established remains likely to exclude the majority of claims faced by insurers, subject to needing to look at the position again when the consultation on the Autumn Statement reforms is released by the MoJ.

Fixed costs

Lord Justice Jackson’s speech in January in favour of fixing costs in all claims worth up to £250,000 received a good deal of attention (see previous update). His proposal then was to introduce a fixed costs matrix for all claims worth up to that level and he presented draft figures, saying that there should be a judge-led review of the project, with a view to concluding a detailed proposal by the end of this year, for implementation in 2017.

His speech this week to the Westminster Legal Policy Forum seemed to hit different notes. Still arguing strongly in favour of the need for more fixed costs, and while making no direct reference to a watered down approach, the notes he struck were towards less significant change, both in terms of the level of claim which are to be the subject of fixed costs, as well as the speed of implementation of those plans.

The theory behind more fixed costs

Jackson was unrepentant about the need to control costs, if anything going further than before. He referred to the main problem being a situation where you had the twin effect of both the loser paying the winner’s costs, and of those costs only being assessed at the end of the claim. Both factors tended to drive up costs.

He thought these factors created an environment where the lawyers who expected their client to win the claim had reason to “spend as much as they could” on pursuing the claim. Insurers will have enough experience of claims falling into that category.

The response therefore had to be, he said, to control costs in advance. This had to be done either by costs budgeting, or by using fixed costs. If costs could not be fixed, then costs management had to stay, he argued. It was almost as though he was using the dislike of costs budgeting on the part of some lawyers (those who expect to be acting for the winners of cases) to get their support in the move towards fixed costs.

Where to start?

Firstly, said Jackson, we had to sort out the “unfinished business” of fixing costs in the parts of the fast track where some claims worth up to £25,000 did not yet have their costs fixed. The omission from the fixed costs processes is currently of course both non-injury claims, as well as most disease claims. Fixed costs in all fast track cases needed to be established first, he thought, and “as soon as possible”.

EL disease cases

In his paper for this week’s speech he picked up the point he had previously overlooked that there was still the anomaly that costs were not fixed in EL disease claims outside the portal.

He explained how the work on calculating potential fixed costs for disease claims had been suspended at the time of the General Election of 2010, so that when government decided to introduce fixed costs in casualty claims in 2013 there were no figures available for disease cases though there were for EL and PL accident claims. While he did not go on to say directly, it was clearly this accident of history which has provided the fertile ground where the retention of hourly rate costs has allowed the recently seen explosion in the number of NIHL claims to take root.

The position at least for NIHL claims, which he noted made up the majority of fast track EL disease claims, should be dealt with by the CJC Working Group who was looking to develop a fixed costs grid, he said. It would follow that another process would be needed for non-injury claims, but gave no detail.

Beyond the fast track

After sorting out fixed costs in claims up to £25,000, Jackson’s recommendation was then at that stage to develop a fixed costs regime for “the lower regions of the multi-track”. The incremental nature of the reform strikes a different note from January.

As to his January matrix of fixed costs, these he said this week were only “a good starting point”. There needed to be “a programme of consultative meetings under the aegis of the CJC in order to discuss the figures”. Professor Rachael Mulheron of the CJC speaking at the same conference made it clear that the CJC were indeed willing to hold more “big tent” discussions of that type.

It was, said Jackson, the claims value which should be the primary factor in sorting out which layer of fixed costs should apply. But percentages could be added for particular claims which carried complexity, or were of a generally complex type (he gave clinical negligence as an example). Additional costs too could be allowed for unreasonable conduct from the opponent, and an escape clause might be needed to cover exceptional circumstances.

Jackson made it clear that he thought the data gained from 3 years of costs budgeting would assist the task of deciding at what figures costs should be fixed. While the relevance of data from that source could in theory be established, the inconsistency in the way the exercise is tackled in practice suggests to us that its use may be limited.

At what level of claim should costs be fixed?

As to what he meant by “the lower regions of the multi-track”, Jackson said there was room to debate the question, but this week’s speech was not the time for that discussion. But perhaps significantly, there was no mention of a continuing proposal from him that the right level remained £250,000. He may be taking a cautious view in order to build a consensus.

Not Jackson himself, but another conference speaker, Nick Bacon QC, costs barrister and until recently a member of the Rule Committee, clearly also taking a cautious approach, proposed fixing costs in all claims up to £25,000, seeing how that worked first, but that beyond that level seeing £50,000 as the maximum level.

Other views

The latest released minutes from the Rule Committee show support from senior judges for the principle that fixed costs should not just be about clinical negligence cases as the Department of Health had suggested, but should affect all cases. They too thought this should happen in the fast track and “the lower reaches on the multi-track”, which as we have seen is a position that Jackson now agrees with.

The government position

We still wait to see what that is. The long-awaited consultation from the DH is still awaited, and is now likely to come in the 4 week window after the EU referendum between 27 June and the parliamentary summer recess starting on 21 July, as is the other long-awaited consultation on the Autumn Statement reform package.

The government will ultimately call the tune as to whether we should have fixed costs across the board, for what quantum bands of claim, and how the actual fixed costs figures should be worked out. We would continue to expect an across-the-board approach to be taken involving all claims types, that a form of consultative process will be carried out on the detail of the fixed costs amounts under the CJC, and that the key question of the level of claim affected will probably be at least £50,000, but will fall short of the £250,000 which the DH have more recently proposed.

It is the fixed costs figures themselves which for insurers will be key if the exercise is to prove a worthwhile one and they will wish to contribute to that debate. The moves in this direction should at least narrow the room for argument on costs, though heat will no doubt still be generated around the margins, with the new battle ground being the circumstances in which new rules allow partial release from the rigours of the fixed costs process.

Insurers and the Online Court

In addition to his own speech to the Westminster Legal Policy Forum this week, Lord Justice Briggs also met with FOIL representatives last week as he continues his consultation process prior to July when he submits his report as to what an Online Court might look like. We reviewed his interim report and how it seemed that that court might impact on claimed faced by insurers when it was released in January (see previous update).

Briggs says that his current position remains that his new court would not be needed to deal with injury claims, at least taking into account the current system pre the Autumn Statement reforms being implemented. This is because he continues to see the portals as doing an appropriate job in terms of providing access to justice at proportionate cost.

He did though refer this time to having concerns around stage 3, where he saw the costs of both sides potentially being disproportionate to the sums at stake.

Briggs and the Autumn Statement

But he accepts the need for him to look at the issue again when the Autumn Statement consultation is published when the outline of a new system will be available. As this may happen only shortly before his report is due, it seems to us that this aspect may have to be left over for further thought as the Autumn Statement reforms move forwards.

Understandably, without seeing those proposals, he seems in two minds as to whether the Online Court may have a role to play in claims affected by those expected reforms. He is keen to see whether the new court can play a role in providing the best economically based solution for those affected claims, either as an alternative to the portal, or in some type of mixed process where an element of the portal is retained.

These are clearly difficult issues and will overlap we assume with thought currently being given within the MoJ itself as to how to devise the most suitable claims handling processes which will be needed in the types of claim affected by the Autumn Statement reforms.

And if the Online Court is ultimately found to have a role to play in relation to injury claims, how would it deal with contested claims where there is a liability dispute, or which are potentially fraudulent? A physical trial is likely to form part of the solution but careful thought in this area will also be needed.

We await further news in all of these areas, starting with the busy period from 27 June onwards when both the fixed costs and the Autumn Statement consultations are expected to be published by the MoJ.

Contact

For more information please contact Simon Denyer, Partner on +44 (0)161 604 1551 or email simon.denyer@dwf.co.uk

By Simon Denyer

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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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