I'm interested in…

  • Strategy & Procedure
  • Motor
  • Fraud
  • Disease
  • Catastrophic Injury
  • Commercial Insurance
  • Costs
  • Liability
  • Local Authority
  • Professional Indemnity
  • Scotland

No right to repayment of costs paid at Stage 1 of Portal process

Insurers are unable to recover the costs that they had paid on cases that were submitted to the Portal, but did not go any further than Stage 1. Delivering the judgment of the Court of Appeal in J C & A Solicitors v Iqbal & EUI Ltd (2017), Lord Justice Briggs held that the Pre-Action Protocol made it clear that costs would be paid at the end of each stage, irrespective of what happened next so that solicitors could be paid for the work that they had done. The rules made no express provision for repayment of the costs and none should be conferred by the Court.

Nigel Teasdale looks at what is the fifth judgment that Briggs LJ has delivered in 18 months on the operation of the Portal and the fixed recoverable costs regime. He held that the Protocol was a "precise code negotiated by sophisticated stakeholders" and consequently the courts should be slow to imply terms. In any event, in return for the £400 payment an admission of liability had been obtained.

Background

The claimants, who in this appeal were all represented by JC&A solicitors, had all submitted CNFs to the Portal in respect of road traffic accidents. Upon receipt of the CNFs, the insurers had then admitted liability and paid Stage 1 costs in the sum of £400, in accordance with paragraph 6.18 of the Pre-Action Protocol for Personal Injury Claims, which at the time said this:

 “Except where the claimant is a child, the defendant must pay the Stage 1 fixed costs in Rule 45.18 (before 2013 Rule 45.29) where –

(1)  liability is admitted; or

(2)  liability is admitted and contributory negligence is alleged only in relation to the claimant’s admitted failure to wear a seat belt,

within 10 days after sending the CNF response to the claimant as provided in paragraph 6.11 or 6.13.”

Changes were made to the Protocol in April 2013 which meant that Stage 1 costs were only paid on submission of the Stage 2 settlement pack.

Having made the Stage 1 payment, the claims then went no further. The insurers, EUI Ltd, a subsidiary of Admiral, who were represented by Horwich Farrelly, argued that they were entitled to repayment of the Stage 1 costs on the basis that the claims had not proceeded to Stage 2 and brought proceedings against the claimants' solicitors. They did not raise any suggestion of wrongdoing on the part of the claimants' solicitors.

At first instance, District Judge Phillips agreed that the insurers should be entitled to recovery of the Stage 1 costs, on the basis that there was an expectation that claims would move from Stage 1 to Stage 2. The Judge in arriving at that conclusion also drew some support from the fact that the Protocol was amended in 2013. The claimants' solicitors appealed, with the Law Society and APIL also providing written submissions.

The parties' positions

In the Court of Appeal, the appellants argued that there was nothing in the Protocol to suggest that the Stage 1 costs could be repaid and no right should be implied and that the Stage 1 costs were paid in return for the work that the claimants' solicitors would have done up to that point pursuant to the retainer that they would have had with their client.

In support of their arguments that DJ Phillips was correct in arriving at the conclusion that he did and that the court should imply that a right of repayment existed, the respondents relied upon paragraph 5.9 of the Protocol and Rule 45.40 of the CPR:

Paragraph 5.9 of the Pre-Action Protocol:

"Where the claimant reasonably believes that the claim is valued at between £1,000 and £10,000 but it subsequently becomes apparent that the value of the claim is less than £1,000, the claimant is entitled to the Stage 1 and (where relevant) the Stage 2 fixed costs."

CPR r.45.40:

"Where a claim no longer continues under the RTA Protocol the court will, when making any order as to costs including an order for fixed recoverable costs under Section II of this Part, take into account the Stage 1 fixed costs together with any success fee on those costs that have been paid by the defendant."

They suggested that r.45.40 was proof that there was no reason why solicitors acting for a portal claimant should assume that they always had a right to keep the costs paid at Stage 1.

Held

Lord Justice Briggs giving the lead judgment, with which Flaux LJ and McFarlane LJ agreed, held that the Protocol was a:

"…detailed and precise code, negotiated between sophisticated stakeholder groups under the auspices of the Civil Justice Council, into which the court should be slow to imply terms, all the more so where, as here, the drafters have demonstrated an awareness of the concept of interim payments on account of entitlement to damages, and made no similar provision about interim payments on account of an entitlement to costs."

The Pre-Action Protocol and the CPR did not make provision for a right to ask for repayment of the Stage 1 costs in circumstances where the case did not proceed to Stage 2. The Protocol did make provision for a payment of costs to be made at the end of each stage, irrespective of what happens next and Briggs LJ agreed that the objective was that solicitors were able to receive payment for the work that they had done at the end of each stage. Something "solid" was achieved in return for the costs at the end of Stage 1, as the insurer would have had to have made an admission.

Briggs LJ concluded that both of the provisions relied upon by the insurers actually supported the claimants in their arguments and that from his interpretation of paragraph 5.9 of the Protocol it was clear, contrary to Horwich Farrelly's arguments, that a protocol claimant did not lose the Stage 1 costs if it subsequently transpired that the claim was not worth more than £1,000. CPR r.45.40 was there solely to ensure that double recovery did not take place in the event that proceedings were issued.

Whilst throughout the Protocol, provision was made for the receiving of damages by way of interim payment so that those payments could be repaid in the event that it was established that there had been overpayment, there was no provision within the Protocol or the Rules that the costs paid at the various stages could also be treated as interim payments.

The claimants' appeal was allowed.

Comment

The insurers' arguments received short shrift from the Court of Appeal, with Lord Justice Briggs referring to their contention as to the way the paragraph 5.9 of the Pre-Action Protocol should be viewed as "bizarre" and that he had difficulty understanding how payment of Stage 1 fixed costs "can sensibly regarded as an interim payment on account, or as a conditional payment, in any relevant sense".

The cases of Nizami v Butt (2006), Lamont v Burton (2007) and Kilby v Gawith (2009) were cited before the Court of Appeal and whilst Briggs LJ stated that they offered little assistance in deciding the appeal, he did say that the cases tended to support the view that FRC regimes are "designed to promote certainty and proportionality, if necessary at the expense of the occasionally rough justice inherent in the swings and roundabouts approach".

The Court of Appeal's judgment seems to have dealt definitively with the point which arose under the former Pre-Action Protocol and which therefore was only of relevance to certain historic claims which had entered the Portal but had not proceeded to Stage 2. The judgment does not affect current live Portal claims.

Whilst the creation of the Portal and the fixed costs regime were initially the brainchild of the MoJ, they were championed by Lord Justice Jackson in his Review of Civil Litigation Costs and extended, as was the FRC regime also. Since then, whenever a challenge has been made to the way that the Portal and the FRC regime have operated, the Court of Appeal, led by Lord Justice Briggs have delivered judgments that support a straightforward interpretation of the Protocol and the CPR and have been unwilling to entertain what might be regarded as "technical arguments".

The outcomes of the cases brought before the Court of Appeal thus far, can be summarised in this way:

  • Broadhurst v Tan - hourly rate costs apply post any successful Part 36 offer

  • Bird v Acorn - a disposal hearing constitutes a trial

  • Qader v Esure - FRC regime ceases to bite once allocated to the Multi Track

  • Sharp v Leeds CC - the costs of a PAD application falls within the FRC regime

 In summary, any attempt to "game" the Portal process or the FRC regime has failed, even to the extent that the Court of Appeal were prepared to rewrite the rules in order to protect the sanctity of the Portal and FRC regime, as they did in Qader.

The comments made by Lord Justice Briggs about the Portal being created by "sophisticated stakeholders" are interesting, especially in light of his role in the creation of the Online Court and also the fact that the similar stakeholders are likely to play a key role in the creation of the Protocols and Rules for the postponed whiplash reforms. It will be important it seems for the new Protocol and the new rules to be spelled out in clear terms.

Read our other updates on the cases referred to above here:

/news-updates/2016/02/latest-challenge-to-fixed-costs-advantages-from-the-court-of-appeal-may-suggest-better-options-are-available/

/news-updates/2016/11/the-application-and-limit-of-the-fixed-recoverable-costs-regime/

/news-updates/2017/02/fixed-costs-more-from-the-court-of-appeal-on-their-use-in-pre-action-disclosure-applications-as-well-as-a-forthcoming-change-to-the-rules-around-operation-of-the-regime/

The judgment in Iqbal v EUI can be accessed on BAILII here: http://www.bailii.org/ew/cases/EWCA/Civ/2017/355.html

Contact

For more information contact Nigel Teasdale, Partner on +44 (0)1772 554264 or email nigel.teasdale@dwf.co.uk

By Nigel Teasdale

Share your views

Please complete your details below to share your views. All comments are moderated and only your name and comment will be visible.

Your Comment

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.

Top