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Civil justice: Costs reforms, Jackson/LASPO update

Our monthly round up of progress with the Jackson and associated civil justice reforms including updates this month on: J Day and beyond, procedural developments, portal extension and fixed recoverable costs, whiplash, compensation culture, referral fee ban and more reform?

J Day and beyond

All of the Jackson reforms, with the exception of the portal changes, were implemented on 1 April 2013. It is important though to continue to bear in mind that while the implementation date has passed, the actual dates on which insurers will begin to see the changes in practice will vary with the nature of the reform, and the time lag in each case between implementation (which will usually be upon claimants‟ existing practices) and when the new claims subject to the change work through the system.

Examples of reforms with immediate effect are those in relation to claimants‟ Part 36 offers which apply to any offers made after 1 April.

Those that will take longer to manifest themselves include the 10% increase on PSLA (which will only arise when the claims not taken onto CFA or CCFA arrangement involving success fees before 1 April start emerging), and the new QOCS protection for claimants (that will only come into play where insurers start dealing with claimants who do not have that same type of CFA/CCFA entered into before 1 April, but also do not have an ATE policy taken out before 1 April or a membership organisation premium equivalent arising from an undertaking given before the same date.)

Procedural developments

Amendments to the rules

The reforms have been implemented to date within the 60th, 61st and 62nd Updates to the Civil Procedure Rules. All of these updates can be found on the Civil Procedure Rules homepage on the MoJ website. Unfortunately however, the MoJ has not yet properly updated the rules online to incorporate the amendments.

Of those Updates, the 61st and 62nd have been published since our last Insurance Brief. They cover the following issues:

  • The widening of the exemption from automatic costs budgeting to include not only cases in the Admiralty and Commercial Courts but also cases worth over £2 million in the Chancery Division, TCC and Mercantile Court.
  • Amendments to the transitional arrangements for the new rule on proportionality so that it will not apply to past or future work in claims commenced before 1 April 2013, or to work done before that date in claims which have not in fact been commenced.

There remains a question mark over the meaning of “cases commenced before 1 April 2013” and whether it refers to the date of commencement of proceedings or the date of the letter of claim. We expect it to be a reference to the date of commencement of proceedings but further clarification is awaited.

  • The 62nd Update brings into force the reduced stage 1 & 2 portal costs for RTA claims between £1,000 and £10,000 where the Claims Notification Form (CNF) is sent on or after 30 April 2013.

New court forms and multi-track standard directions

The new and revised court forms accompanying the changes and in force from 1 April 2013 are available from the HMCTS Form finder website. These include an interactive precedent H for costs budgeting and a template (N263) for the new requirement for a disclosure report in non-injury multi-track claims.

The new standard directions for multi-track cases, which under CPR 29.2 parties are to use as a starting point when drafting directions came into force on 1 April 2013 and are available on the Justice website Justice: Standard directions.

Revised court guides – Admiralty & Commercial, and Chancery

Revised guides have been produced for both the Admiralty & Commercial Courts and the Chancery Division.

This revised Admiralty & Commercial Courts Guide largely reflects suggestions for improvement made by users since the publication of the 2009 edition but it does also take into account the Jackson reforms, for example reflecting the new disclosure regime and the new requirement for an estimate of expert's costs.

The Chancery Guide however has not been amended to reflect these changes, although it does note that these "important procedural changes will affect the practice and work of the Division in the foreseeable future" and a "thorough review" of current practice and procedure will be undertaken this year.

The Chancery Guide 2013 (word doc)

Case management

A strong message has been sent out from a number of quarters that disregard for the procedure rules will no longer be tolerated. The Master of the Rolls warned in a speech to District Judges, that parties who choose not to comply with the CPR can no longer expect leniency. He noted that courts at all levels – including the Court of Appeal – have focused too much on securing justice in individual cases without considering the wider impact on the system of non-compliance.

In addition, the designated civil judges for Manchester and Birmingham have distributed a note to practitioners drawing attention to new rules 3.9 on obtaining relief from sanctions and demonstrating how the courts will be treating non-compliance with rules and court orders from now on. The case of Fred Perry v Brands Plaza [2012] EWCA Civ 224 is also frequently being cited as an early example of the new approach in which “robust but fair case management decisions” will be upheld.

Costs management

Messages however have been mixed on the issue of costs management. On the one hand Litigation Futures reported on a meeting between the Association of District Judges and the Law Society’s civil justice committee, where the judges said that they are being “urged to be strict on enforcing compliance with budgets; and that courts were unlikely to be concerned about client costs and would not interfere with budgets agreed between the two sides”.

However there is also a bandwagon starting to roll against costs management, with some members of the London-based judiciary in the driving seat. Master Roberts, one of two specialist High Court clinical negligence Masters issued a practice note which pointed to the perceived lack of resource on the part of the clinical negligence Masters to carry out costs management, and also that no pilot of costs management had been run in clinical negligence claims. If they had to do costs management, the clinical negligence Masters would be overloaded with work and this would lead to unacceptable delays, it was said. A direction has therefore been issued applying to all clinical negligence cases issued out of the RCJ, that costs management will not be used for the time being for the most serious cases involving cerebral palsy, moderately severe acquired brain injury claims, as well as paraplegic and tetraplegic cases. In all of those cases the Masters will consider not ordering the costs budgets now to be exchanged for at least six months. All of this is limited to the clinical negligence context.

The position was taken a stage further by the proposal from Master Whitaker who oversees mesothelioma claims in the RCJ, for a meeting to consider how to deal with costs management in those claims. Master Whitaker is already on record criticising the lack of judicial training on costs management and is likely to take a similar view to the clinical negligence Masters. This meeting may well be the start of a similar decision to try to avoid costs management in those cases too at least for now.

There must be a concern though that Masters dealing with other multi-track cases in the RCJ will join in what may then be regarded as a campaign, and even that it will spread beyond London. In February, under pressure from the judiciary, costs management was dropped from TCC, Mercantile and Chancery cases worth more than £2million. The reason for this was to be consistent with the Admiralty and Commercial Courts, from which costs management was already excluded in those types of claims, and because of potential overlap between these types of courts. The irony is that it is in fact in the larger claims that costs management is most needed, to avoid the higher risk of the level of costs becoming disproportionate.

In the last week, in the case of Murray & Anor v Neil Dowlman Architecture Ltd [2013] EWHC 872 (TCC) Coulson J has given guidance about the circumstances in which an approved costs budget can be subsequently revised or rectified. He allowed the claimants to revise their budget on the basis that there were special circumstances in this case. However, he held that it will normally be extremely difficult to persuade a court that inadequacies or mistakes in the preparation of a budget, which is then approved by the court, should be subsequently rectified. The courts will expect parties to undertake the budgeting exercise properly first time around, and will be slow to revise approved budgets. Any other approach could make a nonsense of the costs management regime.

Portal extension and fixed recoverable costs

The MoJ response on fixed recoverable costs (FRC) inside and outside the portal raised issues on timing and costs requiring amendments to the draft protocols for RTA and EL/PL claims and to the relevant sections of the CPR. We understand that the CPRC has held a number of meetings over the last few weeks to work on this and we would expect to see the results in May/June bearing in mind the majority of the Portal extension reforms are due to take effect from end July.

It is clearly a demanding task to fit together into a cogent plan how the incoming Portal changes should be brought in where part of the Portal is up and running already, and where there are various complicated aspects to these changes. We do not envy those who have the responsibility for this area in their task while they try to achieve fairness and clarity.

Whilst there is no definite word yet on the exact date for "end of July" it is now clear from The Civil Procedure (Amendment No.3) Rules 2013 that the first set of changes will occur on 30 April, and it may therefore follow that 31 July will be the key date for the second batch. Based on the information currently available, the following are our best estimates as to how the Portal and associated FRC changes will be implemented. Even now, what we are saying here may not be the final word as the formal rules are still awaited, but below we've set out what represents our best educated guess as to where this will end up.

RTA Claims

Cases submitted to the current £1-10k Portal pre 30 April will continue under the current Portal protocol and current FRC regime (i.e. excluding the reductions to FRC recently announced) whether they remain in the Portal or subsequently drop out of the Portal before at least 31 July. It may however be that the rules when drafted will provide that if these claims drop out of the Portal after 31 July then this will be into the new FRC regime whether settled pre proceedings or after proceedings.

Cases submitted to the current £1-10k Portal on or after 30 April but before 31 July will be subject to the current Portal protocol (including therefore the current rules as to timing of the stage 1 costs payment), but also to the new FRC regime with its reduced costs while those claims remain in the Portal (so the amount of both the stage 1 and 2 costs will fall).

However, if these cases drop out of the Portal before 31 July then this will be into the current costs regime, including ordinary standard basis costs which are calculated using hourly rates for litigated cases on the fast track. The differential as to costs in these cases as between reduced FRC in the Portal, and ordinary standard basis costs for litigated costs on the fast track, will have increased, so there will be extra incentive for claimant lawyers to try where they can take advantage of the wording of the current Portal protocol to take these cases out of the Portal before 31 July, in which case the lawyers will presumably move them towards litigation.

If they drop out of the Portal after 31 July then we expect that this will be into the new FRC regime with its reduced fees whether settled pre proceedings or after proceedings. Claimant lawyers therefore will be looking to submit new claims to the Portal as soon as they can to maximise the opportunities to be able to take claims out of the Portal, and will then be looking for reasons to actually take those claims out of the Portal before 31 July or and probably into litigation. Insurers should anticipate those behaviours and be in a position to respond to them.

Cases submitted to the expanded £10-25k Portal after 31 July will be subject to the new Portal protocol and the new FRC regime both inside the Portal and where they fall out of it. There will still be an incentive when comparing the level of FRC inside the Portal, to those FRC payable outside the Portal, to have claims drop out of the Portal.

EL/PL Claims

The new Portal protocol process will only apply to new accidents occurring after 31 July (in disease claims where the letter of claim is sent after that date). This is the same principle used when the RTA Portal was first introduced.

The new FRC regime will only apply to those same accidents, so covering those cases when they enter and remain in the Portal, but those cases will also be subject to FRC if they drop out of the Portal.

It will therefore be some time yet while existing claims and new claims in respect of accidents happening before 31 July work their way through the current system under the pre-action protocol for personal injury claims or litigation without of course any fixed costs applying, before the benefit to insurers can be had from the shift to the new expanded Portal but more significantly to FRC both inside the Portal and for claims dropping out.

In the EL context it’s worth bearing in mind that while disease claims entering the Portal after 31 July and settling in the portal will be subject to the new FRC, those disease claims entering the Portal after 31 July but which then drop out of it will not be subject to the new FRC and therefore for the time being will drop into the current system of ordinary standard basis costs which are calculated using hourly rates, while the MoJ consider this area further.

In the meantime, the Claims Portal Company has set out an indication of their timescales for the software developments: Claims Portal extension and expansion draft timelines.

What other current issues should insurers be looking at?

The limited number of claimants in personal injury claims who do not have either a pre-1 April CFA/CCFA with a success fee, nor an ATE policy taken out pre 1 April, nor a membership organisation premium equivalent, will have QOCS protection from 1 April against liability for defence costs, and insurers will need to know in which cases this position has arisen. QOCS protection is not provided to claimants who do have pre 1 April CFA/CCFAs with success fees or ATE policies or union undertakings, but those claimants are likely to be able to rely on the ATE indemnity as such a policy is in reality likely to have been taken out, or will rely on the union undertaking.

The increased penalties for defendants failing to beat claimants' Part 36 offers came in on 1 April in relation to all existing cases. These of course include the extra reward to the claimant calculated on the basis of a percentage of damages starting with a payment of 10% on damages up to £500k with an overall cap of £75k. Expect many more claimant Part 36 offers including the possibility of claimants withdrawing existing offers at the same time.

Whiplash

Last month, the Transport Committee made a call for evidence on reducing the number and costs of whiplash claims, following up its recent inquiries into the cost of motor insurance. The Committee intends to hear oral evidence later in the year on the MoJ paper „Reducing the number and costs of Whiplash Claims'. Committee chair Louise Ellman MP, said: "… We want to hear the arguments on these points and will publish a report in the summer about the best way forward on this difficult issue."

As anticipated, responses to the MoJ Consultation on whiplash which closed on 8 March have been polarised. Claimant lawyers have criticised the proposals to increase the small claims track limit either for all road traffic personal injury claims, or for whiplash claims, arguing that the extent of fraud is exaggerated and that adopting proposals for the benefit of insurers will lead to injustices. Plans to raise the small claims limit are condemned on the ground that victims who choose to represent themselves are being unfairly treated as they will be faced by highly experienced opponents. The ABI has called for anyone claiming whiplash injury to undergo examination by an accredited medical expert. It has also supported the proposed rise of the small claims threshold from £1000 to £5000 for all road traffic personal injury claims and said there should be a prescribed level of damage awards for whiplash, at an independently set level. The CJC has also published its response, recommending an evidence based review before any decisions are taken on increasing the personal injury threshold although they agree that independent medical panels would be beneficial.

Links to response documents:

APIL: APIL consultation response (pdf)

Civil Justice Council: CJC Whiplash response 8 March 2013 (pdf)

Compensation culture

On a similar theme, in March the Master of the Rolls gave an interesting speech to Birmingham University’s Holdsworth Club on compensation culture stating that the courts are “very aware” of the dangers of feeding media perceptions of a compensation culture. Lord Dyson argued that the Jackson reforms and ADR will go a “significant way” towards removing improper incentives to bring meritless claims. See MR’s speech Compensation culture: Fact or fantasy?

Referral fee ban

SRA Guidance - guidance and support have been made available by the Solicitors Regulation Authority (SRA) for those still needing advice on the introduction of the ban on the payment of referral fees in personal injury cases.

  • From April 1 2013, personal injury firms are expected to retain records and management information to prove that payments for cases do not fall within the referral fee ban.
  • The 7th version of the SRA Handbook is now in force. Changes for Version 7 include the Outcomes that deal with the ban on referral fees in personal injury cases and the removal of rules put forward in the first phase of the Red Tape Initiative.
  • The SRA has warned firms there will be „no transitional period‟ after the referral fee ban comes into force.

See SRA website: Referral fee ban home page

Claims management businesses - this Ministry of Justice guidance sets out advice regarding the referral fee ban, implemented on April 1 2013, for claims management businesses operating in the personal injury sector. Claims Management Regulation - The Referral Fee Ban

More reform?

The Lord Chancellor has signalled changes to the way the courts are funded and organised, by starting “to explore proposals for the reform of the resourcing and administration of our courts and tribunals.” He received broad support from the judiciary and legal profession for the comments he made in a written ministerial statement including:

“This country is a major centre for legal services and dispute resolution. I want to explore how we can further enhance the position of the UK at the centre of the international legal market and the revenue it can generate. I also want to ensure that those who litigate in our courts pay their fair share, and that it is possible to raise the revenue and investment necessary to modernise the infrastructure and deliver a better and more flexible service to court users.”

In addition the Bar Council has set out its proposals for further change in a discussion document, “Reforming Civil Litigation”.

The proposals which have been sent to the senior judiciary include:

  • The allocation of a judge to each case so that the same judge is responsible for case management and trying the case;
  • Ensuring case-management conferences, conducted by the trial judge, take place no later than the close of pleadings, at which point the parties should be required to identify the issues to be decided and the evidence required;
  • The abolition of pre-action protocols.
  • The abolition of the Civil Procedure Rules for witness statements, to be replaced with rules for witness summaries, subject to the judge's discretion to exclude oral evidence or direct witness statements, and
  • The introduction of a single, electronic case-management administration system throughout the courts in the Rolls Building.

For further information please contact Simon Denyer, Partner Simon Denyer Partner on 0161 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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