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Civil justice, costs reforms and Jackson update

Costs budgeting – latest cases

In Rattan v UBS AG London Branch (2014) the Claimant agreed with the Defendant that they would exchange costs budgets by 28 February.  Having then filed their budget on 27 February, the Claimant attempted to argue that the Defendant was in default as they had filed their budget on 28 February, less than 7 days before the CMC and not in compliance with CPR r.3.13. Sitting in the High Court, Mr Justice Males regarded the Claimant’s submissions as “manifest nonsense” and ordered the Claimant to pay the costs of raising the point on the indemnity basis. Though in fact the Claimant’s position was legally correct, the parties had agreed to exchange costs budget 6 days before the CMC. The Claimant was guilty of “a misguided piece of optimism” in seeking to penalise the Defendant in these circumstances. In Greenwood & Ors v RBS & Ors (2014) the Claimant was punished for raising a premature application for costs budgeting in a case that was pleaded in excess of £2M.  Whilst the High Court accepted that there might be a need for costs budgeting at some point in the future, there were practical difficulties in doing so at this stage. In recognition of the fact that the Claimant’s application was not totally without merit and that costs budgeting might be appropriate at some stage, the court ordered the Claimant to only meet 50% of the Defendant’s costs.

Review of Jackson changes from the CJC conference

On 21.3.14 the Civil Justice Council hosted the most significant debate yet on where we now stand upon implementation of the Jackson changes 12 months on. The conference also showed where plans are up to with intentions to develop other areas of reform. We attended the conference alongside stakeholders from all interested bodies, as well as the judiciary, and it included presentations from both Lord Justice Jackson himself, and the Master of the Rolls Lord Dyson. The outcomes from the conference affect all claims types.

Mitchell and compliance

The strict approach to compliance with orders, seen to be needed from the Mitchell case, as expected is here to stay. Lord Dyson said he was “fairly unrepentant" about the decision, but accepted that more decisions were needed from the Court of Appeal to deal with further points arising out of cases, and that it would take another 12 months for the new approach to compliance to bed down. The fact that some district judges were though going too far with their harsh decisions was recognised, the remedy there is an appeal. The new system was, it was said, better than the old one under which deadlines were often ignored. Predictably, no change there then.

The issue of non-compliance due to delays by experts was recognised and remains an issue. To what extent should a party be penalised by the conduct of experts over which its control will be limited? This is likely to be an area which the Court of Appeal will have to consider soon. On the other hand, the risk is that experts may respond to the increased pressures by withdrawing from the work.

Buffer orders to be allowed – and other co-operation to be expected?

On buffer orders, as expected, the green light is expected to be given in the next couple of weeks. They are not to be seen as a watering down of the new strict approach – again as we had anticipated. Provision for buffer orders is in fact expected to be written into the CPR so they will be of equal application to all types of case without judicial intervention. They will enable parties to continue to co-operate with each other.

There was the idea of an agreement under which certain types of claim could be handled where the parties would agree not to take compliance points. This presumably would be more suitable to high value claims where building a co-operative approach in order to achieve the right end result could be blown off course by arguing whether or not a court direction had been met. This might reinforce existing practice in, for example, catastrophic claims.

Taking unfair advantage not allowed

As a further warning towards the right approach to litigation, there was a recognition that trivial or insignificant breaches should not be exploited by opponents, as was seen in the recent High Court decision in Summit Navigation & Anor v Generali Romania Asigurare Reasigurare (2014), in which the defendants tried to take what was seen to be a tactical advantage as a result of the claimant being late in complying with an order by one day, and where the defendants were therefore penalised in costs as a result.

Costs budgeting and management

On costs management, the conference heard that all involved, judges and lawyers, were on a learning curve, that time to bed in was again needed, and while it hardly needed saying, the changes were here to stay.

Claims volumes

On access to justice and the related question of claims volumes, there was no consensus. While APIL had referred to its members anticipating a 30% drop in claims numbers, there was some acceptance that no clear conclusions could be drawn from the Portal Company data, and there was also reference to MOJ stats showing no reduction of either new claims notified or new claims issued since the reforms were introduced. More time was needed to tell.

The future?

As to the future, these areas were highlighted.

  • A full review of the changes introduced last year is planned for 2016-18. Any sooner is thought to be too early to assess this area.

  • Fixed costs for all fast track cases and not just for RTA, EL accident and PL injury claims submitted to the portal and then dropping out was seen as a target. Indeed the quantum band under which fees were fixed could then increase above £25,000.

  • It is still expected that the only exclusions from costs budgeting will be cases worth over £10m, in whatever court they are issued, though Part 8 claims will also be excluded.

  • QOCS may well be extended from covering only injury claims to other types of case. Claims against the police were mentioned as one suitable type of claim for QOCS. This of course would mean that while the costs of ATE premiums could not be recovered by claimants in those cases, it would become much more difficult for defendants who successfully defend those claims to recover costs from the claimant.

  • Control of costs by costs budgeting pre-litigation was of course recommended by Jackson in his final report. This is still seen as an area of focus, but it looks as though this is a medium term project, and that post-ligation costs budgeting will have to be allowed to get itself up and running first.

  • On the use of DBAs, there was pressure from the conference for action from the MOJ. Key voices were heard both in favour of allowing hybrid DBAs so that lawyers could be paid both an hourly rate for their work as well as a contingency fee out of damages for a successful result, and also of freeing DBAs from the indemnity principle (which of course would mean that insurers would retain no interest in the amount of the contingency fee payable).

In conclusion

The Jackson bandwagon continues to run. While Lord Justice Jackson is not one of the six Court of Appeal judges who hear appeals on points in relation to the reforms, there remains strong judicial support for the package of measures brought in last year. The new Mitchell strict approach to compliance is here to stay, but buffer orders are coming in to help by providing a degree of flexibility, so that co-operation between the parties should not be seen as a thing of the past. It seems to be accepted that it is too early to say how successful the reforms have been in meeting their goals, and that it is now expected that a full review of them is another two to four years ahead. We would continue to expect to see progress on some of the areas for development mentioned above in the meantime.

Latest pointers on claims volumes and claims inflation

While we waited for the release of this month’s Portal Company statistics no-one could say that it was easy to make predictions as to what they would show. We now have the figures for February.

In general terms, a clear but over simplified message is that all four portals show a lower number of claims received than in January.  But we need to bear in mind two things when making that comparison. Firstly remember that January is always a high month for numbers of new claims so that a more accurate comparison for the new stats would be with an average for the lower month of December plus the higher month of January – and on that score a different picture may emerge as we see when looking at the specific portals below. And secondly, February is a month with fewer working days than most, with only 20 days compared to the 22 in hard-working January.

The RTA portal

We look first to this portal both for the picture in motor, and also for the overall market position because of the maturity of the data. In February, there were 67,500 new claims. This is a very similar level to that at which the portal was operating last October and November, when we returned to a more stable level after the last process reforms had happened. Indeed if you average the December/January figures they too reach a similar monthly claims figure. So you could say that there is some evidence here over the last five months of a new average monthly figure for RTA claims being achieved of between 65,000 and 70,000, probably at around 67,500. The trends can be seen from the graph below.

Latest claims volumes March 2014

There was a need to see whether this number would manage to get up to a monthly average of 70,000. While the January figure did breach that level, the combined December/January average figure was below it, and now so is February’s. Taking into account the fact that a small, albeit slowly increasing proportion of the post August 2013 new RTA notifications will include £10-25k claims which are new to the portal, there is no evidence here of increasing claims numbers. While we need some more months’ statistics as we move forward in 2014, there may instead be pointers here towards a small drop in claims volumes.

The number of court packs prepared at stage 3 remains high, though not quite as high as last month. However the PSLA figures continue to increase, now up to £2,455. That figure represents a significant 18% rise over the last 12 months.

The casualty portals

All three of these portals show a slight but probably not statistically significant drop in the number of new claims lodged, no doubt in part for the reasons identified at the start of this message. For EL accident, there were 3,211 new claims (3,220 in January), for EL disease there were 1,031 (1,080 in January) and for PL 5,186 (as compared to 5,277 before). However, factor in as a comparison not solely January’s figure but an average of the December/January figures and there continues to be a month-on-month increase of new claims into these portals. This graph combines the numbers into the three casualty portals. The slight fall in February is too small to pick up on the graph so that instead levels of new claims appear stable.

 Latest claims volumes 2 March 2014

The broader picture showing an increase over the past few months comes as no surprise; we expect the number of new CNFs into all three casualty portals to continue to show a general pattern of rising numbers as we move through 2014. This will be so even for EL disease claims – though the process is currently generally unsuitable, the position is that unless the new disease claim falls into an excluded category of claim, then the claim must start off with a CNF into that portal, even if it is later to drop out.

More casualty claims are moving into the later stages of the process. The first two court packs have been seen in EL accident claims. There remain none in EL disease, but the number of packs has increased in PL and now stands at six.

The value of PSLA settlements is also increasing. While the same factors that may operate to explain an increase in the RTA context (including the additional costs payable as success fees paid by claimants out of damages to their solicitors and assessed by reference to the extent of the damages recovered) also exist for the casualty portals, the main reason for the increased value of the settlements in this type of claim remains that the claims volumes are limited, and that the early settlements were in the smaller claims.

The average PSLA figure in EL accident claims has risen now to £2,444 and is only £1 less than the motor average. Expect the EL average to increase past the RTA figure in the months ahead. The PL average has also risen to £2,475, but we would not expect it to remain above the EL average for long. The EL disease average PSLA amount is higher, at £5,378.

By the end of 2014, sufficient casualty claims should have passed through the process for insurers to start to be able to use these average PSLA figures as a guide towards assessing any inflation in quantum in this type of claim.


Jackson in action – case law

Relief from sanctions/late service of particulars of claim: In Associated Electrical Industries Ltd v Alstom UK (A Private Unlimited Company) (2014) the High Court paid deference to the emphasis that the Court of Appeal had given to enforcement of the CPR in order to encourage procedural discipline and which drove the Judge to strike out the case, even though the Claimant had only served the particulars of claim 20 days late.

Relief from sanctions/non-compliance with unless order: In Singh v Singh (2013) the High Court considered an appeal against a decision to debar the Defendant from defending and whether relief from sanctions should be granted. Whilst the Defendant had filed an amended defence in time, the order required service of a defence that complied with the relevant procedural rules and practice directions. The defence lacked clarity and was deficient. Relief from sanctions would not be granted.

Relief from sanctions/good reason for non-compliance: In Summit Asset Management Ltd v Coates (2013) the High Court felt it appropriate to grant relief from sanctions for failure to file a defence within the time limit set out in an unless order. There had been procedural unfairness which was not the Defendant's fault. Through an oversight of the court, the Defendant was left with three days (instead of two weeks) to comply with the order.

Relief from sanctions/good reason for non-compliance: In Nelson & Ors v Circle Thirty Three Housing Trust (2014) the Court of Appeal set aside a possession order and reinstated the Appellants' defence where the judge who allowed an unless order to take effect and made the possession order had been given a false impression by their legal representative.  With the fresh evidence before it, relief would be granted.

Relief from sanctions/extension of time: In McTear & Anor v Englehard & Ors (2014) the High Court considered Mitchell and subsequent case law and refused retrospective time extensions for disclosure, service of witness statements along with relief from sanctions and permission to re-amend the defence. Whilst the court considered that it would be disproportionate to strike out the original defence, the defendant would now proceed at a significant disadvantage.

The following are cases which did not concern application under CPR r.3.9 but where the court had regard to the robust test now being applied under that rule:

Relief from sanctions regime/setting aside default judgment: In Samara v MBI Partners UK Ltd & Anor (2014) an appeal in the High Court against a master's refusal to set aside judgment in default, Silber J held that the new stricter compliance regime applied to applications under CPR 13.3 because of the revisions to the overriding objective raising the importance of compliance, albeit that he would have come to the same conclusion before April 2013. The application to set judgment aside was made 16 months after judgment was entered and only then after the claimant had taken enforcement action. Judgment would stand.

Relief from sanctions regime/application for permission to appeal: In Emakpose-Patrick v Lowell Portfolio Ltd (2014) an application in the Chancery Division for an extension of time for seeking permission to appeal a bankruptcy order was refused. The Applicant's conduct had caused the costs of the proceedings to be disproportionate to the amount the Respondent claimed, and the Applicant had failed to engage with the case against her. The relief from sanctions provisions under CPR r.3.9 should be applied by analogy and the new change in culture meant that the rules had to be complied with. 

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.