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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: political challenges ahead to Jackson/LASPO changes? Costs management/budgeting, extended Portal update, small claims limit update, referral fees and our whiplash - update

Costs management/budgeting – early signs

Early signs of a robust approach

The Law Society has been receiving reports that the courts have been imposing severe sanctions for failure to comply with case and costs management directions. To assist parties in avoiding many of the pitfalls, His Honour Judge Simon Brown QC has made his Case Management Conference notice and checklist available to Law Society members. While this document is primarily for use in the Mercantile Court in Birmingham, it is widely expected that it will be adapted for use in other courts and in the meantime should serve as a useful guide (Download available at the bottom of the Law Society Civil Justice Reforms web page).

It is certainly worth repeating a warning given by FOIL following attendance at its regular meeting with the Association of Her Majesty's District Judges, where it became clear that there were still many practitioners, both claimant and defendant, who had not taken on board the transitional provisions brought in by the amendments to CPR 3.9. If a party is in breach of an order which imposes sanctions then the only two options available are either to agree with the other side to vary the order by consent (insofar as they are able to do so) or to apply for relief from sanctions. If a party has not applied for relief from sanctions prior to the time limit expiring, it is likely to be in serious difficulty. This applies to all cases, not just those issued post 1 April 2013.

One particular area where difficulties are often encountered is in exchanging experts' reports on time. A party‟s experts need to understand that the rules have changed and simply failing to deliver the report within the agreed timescale is no longer acceptable. The courts will be taking decisive action against poor conduct and non-compliance on both sides.

Messages from the courts

An early indication that the judiciary are willing to exert their new powers to ensure that defaulting parties are left in no doubt as to the consequences has come in the High Court decision of Murray v Neil Dowlman Architecture Limited (2013) (TCC). The claimant’s budget, prepared under the pilot scheme in the TCC prior to 1 April, did not include a success fee or ATE premium. Although the defendant was always aware that these additional liabilities would be sought, and therefore was not prejudiced by the omission, it indicated that it would seek to hold the claimant to the original budget. The claimant applied for relief from sanctions under CPR 3.9.

Coulson J decided that the application was not, in fact, for relief from sanctions, but was an application to amend the budget. Noting that there was very little authority on the appropriate approach to amendment he quoted comments in Henry v NGN and Fred Perry (Holdings) Ltd v Brands Trading Plaza Ltd, indicating that a tough approach could be expected. Coulson J accepted the defendant’s argument that if amendments to budgets could be made because of “mistakes or self-induced inadequacies” then the “purpose and effect of the new costs management regime may be thwarted”. In his view it will be “extremely difficult” to persuade a court to amend a budget on the basis of a mistake: “the court will expect parties to undertake the costs budget exercise properly first time around”.

The judge was unwilling to accept that a lack of prejudice to the defendant was sufficient to justify amendment. However, he did allow rectification but only on the basis that on the form used for the pilot, boxes could have been ticked to indicate that the budget did not include the success fee and premium, and he was unwilling to see the claimant penalised merely for failure to tick a box. Precedent H, the current version of the budgeting form, is different, stating that the budget excludes any success fee and premium.

Also, this month in the High Court case, Fons HF v Corporal Ltd (2013), the court considered whether to extend the time for filling witness statements in accordance with the overriding objective, as defined in the new CPR provisions which took effect on 1 April 2013. The parties failed to exchange witness statements in accordance with the initial order for directions. A further order, made on 26 November 2012 (second order), required the parties to serve witness statements by 6 April 2013. The parties agreed extensions to 18 April 2013. The claimant was ready to exchange, but the second defendant (the only active defendant) was not, and sought an extension of time. The court granted an extension until 4 pm the following day. The judge stated that he had "come very close" to refusing the extension. The amended CPR require the court to pay close attention to a party's failure to comply with rules, directions and orders, which is itself a clear breach of the overriding objective. Such breach is likely to result in severe sanctions. The judge was only persuaded to extend time because the hearing took place very soon after the CPR amendments, and because the period since the extension in the second order had expired was relatively short. He emphasised, however, that "all parties and the wider litigation world should be aware that all courts at all levels are now required to take a very much stricter view of the failure ... to comply with directions" particularly where it is likely to lead to a waste of court resources. The judge also observed that, because the second order did not provide for mutual exchange, but simply for service of witness statements on the other parties, both parties were in breach. The claimant should, at the very least, have lodged the statements at court, and either offered them for exchange or provided them to the defendant in escrow in a sealed envelope, explaining to the court what steps had been taken.

STOP PRESS – 22 May – there has been a robust decision from the High Court in Venulum Property Investments Ltd v Space Architecture Ltd & Ors [2013] EWHC 1242 (TCC). The claimant applied to extend time for service of Particulars of Claim. The Claim Form was issued on 12 November 2012 and was served with effect from 12 March 2013, the last day for service permitted by CPR 7.5(1). However the claimant’s solicitors mistakenly thought they had a further 14 days in which to serve the Particulars of Claim.

When considering whether to exercise its discretionary power to extend time for serving Particulars of Claim, the Court should adopt the relief from sanctions framework set out in CPR 3.9. As the application was made before 1 April, the old regime applied, with the nine factors to be considered. However the parties acknowledged the new shift in approach, and the issue between them was the impact of the new approach on this particular application.

Edwards-Stuart J considered that the submissions made in relation to the 3.9 factors were finely balanced and if all other things were equal, he might not have had difficulty allowing the claimant a few days‟ delay. However, in this case, other things were not equal and the following factors were important:

  1. The claimant delayed five years before instructing solicitors and there was no explanation for the delay.
  2. The claim against the relevant defendants (there are other defendants in the case) was not strong.
  3. The claimant was seeking to advance a claim for bad faith with was pleaded in vague terms.

He concluded, “In my judgment, when the circumstances are considered as a whole, particularly in the light of the stricter approach that must now be taken by the courts towards those who fail to comply with rules following the new changes to the CPR, this is a case where the court should refuse permission to extend time. The Claimant has taken quite long enough to bring these proceedings and enough is now enough. I therefore refuse this application.” 

Judgement on Bailii

Costs management pilot

A final report on a costs management pilot, run in the Mercantile and Technology and Construction Courts from October 2011 to March 31, 2013, has revealed that judges took an average of 14 minutes at the first case management conference to approve the parties' budgets. The report's findings suggest that it is likely that the overall effect of costs management will be to bring down the total costs of the litigation, though the short length of time spent considering budgets, given that they are likely to form the basis of the costs order in place of a detailed assessment, will be of concern to practitioners.

Litigation Futures article (13.5.13)

Full report

Costs management exemption under review

Mr Justice Ramsey confirmed at the Association of Costs Lawyers‟ annual costs conference in London on 10th May, that the £2 million limit, above which automatic costs management does not apply in the Chancery Division, Technology and Construction Court (TCC) and Mercantile Court, is under review.

The exemption in the Chancery Division, TCC and Mercantile Court is for claims where, at the date of the first CMC, the sums in dispute exceed £2 million, excluding interest and costs, save where the court orders otherwise. The issue now under review is whether there will be any exemptions to costs management in the future, or whether judges should decide on a case by case basis whether any particular case should be excluded from the process.

Mr Justice Ramsey also confirmed:

  • Pre-action costs may fall within costs management in the future. This is on a list of "work still to be done" and would require primary legislation.
  • Work is being carried out on a new format for the bill of costs, to bring it in line with new Precedent H
  • A review of the Damages-based Agreements Regulations 2013 is welcome, in order to resolve the issue of whether partial or hybrid DBAs are permitted under the Regulations.

Useful resources

HHJ Simon Brown QC has drawn practitioners‟ attention to the following resource hosted by LexisNexis: a link to all of HHJ Brown’s articles on costs budgeting outlining the extensive changes to costs budgeting, case management, and proportionality.

Extended Portal – update

Implementation date

In a press release on 1.5.13, the MoJ issued a reminder that the latest stage of a series of reforms to “turn the tide on the growing compensation culture” had now taken effect. Within this announcement the precise date for extension of the portal was confirmed:

From Wednesday 31 July 2013 the Claims Portal, used by lawyers and insurers to settle payouts for road accidents quickly and simply, will be extended to also include claims for accidents at work and in public places. It will also start handling claims up to the value of £25,000 (the current maximum is £10,000).

Where the portal is being extended, that is to RTA claims worth between £10,000 and £25,000, and EL/PL claims worth £1,000 to £25,000, the portal process and the accompanying Fixed Recoverable Costs inside and outside the portal will apply where the accident happens on or after 31 July, or in EL disease cases where the letter of claim is sent on or after that date. Handlers of those claims should therefore expect some further time beyond the end of July before experience of the first claims is expected.

Portal website

The portal company has updated its website to make it more user friendly and the draft EL/PL A2A technical specifications are available.

Insurers can now register with the portal for EL/PL claims, or for RTA as well as EL/PL claims, or existing registrations for RTA claims can be expanded to include EL/PL claims. Well worth doing. When doing so you will need to sign up to the General Conditions of Use for Portal Users. Watch out that these are being updated, and only the old version is currently available on the website, and will be sent to you if you register now, but the new conditions will we understand be available shortly.

We are told by the Portal Company that further changes to the website should be expected at the end of this month. These improvements are likely to be that the promised walkthrough training to which there is a link on the website will become operational, and that should prove worthwhile. Also at around the same time, you should be able to set up training accounts within the EL/PL portal as have been available with the RTA portal for quite some time now, so that once registered to the EL/PL portal, use of the training facility in the EL/PL part of the expanded portal should be useful in taking forward preparations for the autumn.

New draft protocols available

The MoJ has now put the latest drafts of the protocols for low value RTA and for EL/PL claims up on their website, as well as the relevant forms to be used in the process, including the Claims Notification Forms (CNFs).

These are the first official sightings of those new CNFs for EL, PL and EL disease. The MoJ say the protocols and forms are there for all to preview, but are "still subject to final approval by the Civil Procedure Rule Committee and might be subject to minor change".

We have checked out the latest drafts of the protocols and compared them to the previous drafts. There are very few changes;

  • The main change is the insertion into both of the fact that the new protocols will apply to accidents occurring (or in EL disease cases to letters of claim sent) "on or after 31 July 2013". Slightly illogical that, as it might make more sense for the change to impact on new accidents from immediately after midnight on the night of 31 July/1 August, rather than for the change to strike 24 hours earlier. However this was the way that the portal costs changes were introduced at the end of April into the existing RTA portal, i.e. for claims lodged into that portal "on or after 30 April".

  • There is though a new note introduced into the EL/PL portal under paragraph 6.15 which deals with the fact that as with the RTA version, where a claim exits the portal process, it will drop into the relevant existing pre action protocol (PAP), in a way that the CNF can stand as the letter of claim for the purposes of the PAP, except where the reason for the claim dropping out was the lack of compulsory information within the CNF. The PAP for personal injury claims has already been amended to cover this point, and it is now clear that to cover the position of EL disease claims dropping out, the PAP for disease and illness claims will be amended in the future in the same way by the introduction of new paragraph 6.10A saying just that.

  • The new CNFs for EL, PL and EL disease contain no surprises, and follow as far as appropriate the old RTA1 form. Handlers of these new types of claim entering the portal for the first time will though want to check them out through the link above. Note that most of the questions on the CNF remain compulsory, only a few are marked as optional.

Small claims limit – update

Justice Minister Helen Grant stated at the beginning of May that a government decision on the limit of the size of claims handled by the small claims court would not be made until the autumn. The Ministry of Justice’s response to a public consultation, which closed in March, and proposed raising the small-claims court threshold from £1,000 to £5,000, is currently being considered. A decision had been expected this summer but has been put back until the House of Commons Transport Committee finishes its inquiry into whiplash claims (see below Whiplash update).

Referral fees – still being paid?

The Law Society Gazette has reported (15.5.13) that personal injury law firms are continuing to pay referral fees for cases weeks after the ban came into force.

Whiplash - update

Ministerial statement – delay in consultation response confirmed

Following publication of the government’s consultation „Reducing the Number and Costs of Whiplash Claims‟ at the end of last year, the government were to publish a response by spring 2013. However, in March the Transport Committee announced an inquiry into whiplash, which includes an examination of the government’s consultation proposals.

On 16.5.13 a written ministerial statement from the Justice Minister Helen Grant confirmed that prior to taking any final decisions on whiplash reform, the government will first:

  • give due consideration to the views of the Transport Committee and
  • assess the impact of its recent civil reform programme on the price of motor insurance premiums.

Publication of its formal response to the consultation is therefore deferred “until after the Transport Committee has reported”.

For further information contact Simon Denyer, Partner on 0161 604 1551 or email simon.denyer@dwf.co.uk

Bearing in mind that the first TC oral session was last week with the next one scheduled for 17th June, it is probably unlikely that the TC will be reporting back before the summer recess. This also ties in with the Justice Minister‟s statement on 1st May that a government decision on the limit of the size of claims handled by the small-claims court will not be made until “the autumn”, again to allow for the TC to complete its inquiry into whiplash claims.

By Simon Denyer

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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