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Civil justice: Costs reforms, Jackson/LASPO update

Whiplash & small claims track limit

News on the keenly awaited response from the Government on the MoJ consultation on whiplash claims and the related issue of the level of the small claims track limit came last week from Chris Grayling, the Justice Secretary.

Whiplash & small claims track limit

News on the keenly awaited response from the Government on the MoJ consultation on whiplash claims and the related issue of the level of the small claims track limit came last week from Chris Grayling, the Justice Secretary.

In summary, the Government is focusing on the concern about whiplash fraud by putting in place independent medical panels from which doctors will be used to consider claimants who report whiplash injuries, with a view to making the assessment process more scientific, and to increase the prospects of detecting fraudulent claims.

However, of interest to insurers handling all types of injury claim will be the decision by Mr Grayling not to do what he had been threatening all along, that is to increase the small claims track limit for injury claims which instead will stay at £1,000. The reason given for the decision is that the Government have accepted the argument that it is too soon to make any increase, while the recent Jackson inspired reforms are given time to bed down. Mr Grayling says he will keep the SCT limit under review, and does not rule out a change in the future.

This decision not to raise the SCT limit, while taken in the context of whiplash claims, is effectively ruling out any increase across the entire injury spectrum for now. With the next General Election coming in May 2015, this decision may well have ruled out any increase before then.

In reaching these decisions, Mr Grayling has referred to the progress he sees in the reductions in motor premiums so far, and in the number of registered claims management companies. He sees the Government already “turning the tide on the compensation culture”. The implication is that against that improving background, he feels less need to reach for a more revolutionary cure for the problem.

The new whiplash medical panels are expected to be up and running during 2014. The system will involve accrediting the doctors, enhancing the reporting process, improving the information for the assessments themselves, and auditing reports.

The news has been broadly welcomed by Louise Ellman MP, chair of the Transport Select Committee, whose July report reached similar conclusions, and which may have had a key influence on the Government reaching the conclusions announced.

Government proposal at a glance

Better medical evidence:

  • An accreditation scheme to be established for experts – details still to be developed.
  • Key features likely to be included: accreditation to be open to all practitioners and not limited to doctors; scheme to include an element of random peer review, but no further details given; updated guidance on current best practice on examinations to be provided; specific standardised form is favoured; reports to be available to all parties and the courts; same system to apply to whiplash and to “similar RTA soft tissue injuries such as those to the back and neck”.
  • Scheme to be funded by experts or by a levy on insurers.
  • Only evidence from accredited experts to be accepted.
  • The Government has welcomed the joint initiative between the ABI, FOIL, AMRO and MASS to develop a consensus model for whiplash medical reporting. The Government intends to work with the industry to discuss the proposed model.

No increase in small claims track limit for RTA related personal injury “at this stage” 

However, The Government remains of the view that extending the Small Claims Track would be beneficial as it believes it could result in considerable savings, making it easier to challenge exaggerated claims and would enable it to maintain the momentum on insurers to reduce the cost of motor insurance. The issue of an increase will be “kept under consideration for implementation when appropriate”.

An end to practices which encourage fraud and exaggeration

  • The Government is “attracted” to introducing a rule to ensure that a medical examination and report is completed before a claim can proceed, bringing an end to pre-medical offers.
  • Greater focus on action by claimant lawyers verifying claims.
  • Baseline data to be gathered on whiplash and soft tissue injuries, to lead to identifying and classifying fraudulent and exaggerated claims.
  • Consideration of a ban on law firms offering inducements to bring a claim - a ban is already in existence with regard to CMCs.
  • Proposals on Young Drivers to be announced in a Green Paper to be published later this year.
  • Support for vehicle manufacturers to develop and encourage the use of advanced emergency braking systems.

No reduction in the limitation period for whiplash

The Government is concerned that reducing the period for bringing a claim would increase claims in the short-term, increase costs through front-loading and make it harder to reject calls for a change in other specialist areas.

Whiplash and data sharing

The Government believes that the provision of robust data by insurers on case volumes, case injury types, initial claims values and final case settlements would be beneficial, together with information on suspected fraudulent and exaggerated claims. The Government does not intend to adopt a formal regulatory or legal information gathering power with regard to this information but instead invites the insurance industry and its representative bodies to collect this information and publish it.

Item 2

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Ongoing Jackson implementation - update

As far as the new litigation processes are concerned, Mr Justice Ramsey, the judge in charge of implementation of the Jackson Reforms, says that he and a small group are reviewing areas of Jackson not yet implemented, and it is worthy of note that they have identified the issue of costs management prior to the commencement of proceedings as an area of focus. From the viewpoint of insurers, this is a worthwhile area for scrutiny, but careful thought will be needed as to how to achieve progress where the court supervisory process does not generally extend into this type of area pre-litigation.

Ongoing Jackson implementation - update

Another area not yet picked up by the law makers from the Jackson review is a move towards the fixing of claimant costs outside of the injury arena, and this again may be an area of focus over the next couple of years. Jackson himself argues that this should happen, writing in his preface to a special supplement of the 2013 edition of Civil Procedure that the recommended costs figures given in his Final Report for fast track non injury claims would be worth referring to when the question of what costs are proportionate is looked at.

Whilst the direction of change cannot always be anticipated, it is clear that the pace of change is going to continue to be fast.

Portal company statistics released

The Portal Company have just released the latest outstanding MI showing new RTA, EL and PL portal claims for July and August which the industry has been waiting, for some time. It is therefore another opportunity to look at trends in relation to the number of new claims, in this case through new CNFs submitted to the portal.

Portal company statistics released

The Portal Company have just released the latest outstanding MI showing new RTA, EL and PL portal claims for July and August which the industry has been waiting, for some time. It is therefore another opportunity to look at trends in relation to the number of new claims, in this case through new CNFs submitted to the portal.

As expected, it can now be confirmed that the Portal Company will be keeping separate statistics for the different types of portal claim. The existing stats which were for RTA claims only will continue, and there will be new stats for each of the new types of portal claim, that is EL accident, EL disease, and PL. There is only a limited amount of significance in the data for the three new types of claim so far, as of course they are based on only one month of new claims since the horizontal extension to include them was introduced for new EL and PL accidents occurring after 30 July, or for EL notifications sent after that date.

RTA

The number for July was 72,500. It should be remembered that these are all £1-10k claims as that month predates the vertical extension of the RTA portal to £25k. This of course was always going to be a relatively high month for new claims, as claimant lawyers will have wanted to lodge claims before 31 July if they could, so as to avoid the new fixed recoverable costs regime which would otherwise have applied if the claim later dropped out of the portal. At 72,500, the number is as high as February’s number, back in the period of significant activity for claimant representatives when new claims were being signed up onto CFAs before success fees became irrecoverable from defendants for new retainers entered into after the end of March. 72,500 is not though as high as the following month of March when the highest number for new CNFs yet recorded was reached at 91,000, caused by the rash of new retainers, nor April’s number of 79,000 caused by the advantage to claimants of submitting new claims that month so as to avoid the reduction in stage 1 and 2 costs which applied afterwards.

The RTA new CNF number for August was down to 57,500. No surprise in that low number post the July peak, and similar to the numbers we saw in May and June, after the March/April peak.

The two most important questions remain:

Will the number of new RTA claims seen here as being submitted to the portal return to their previous levels?

Since October last year the picture has been confused (as well as demanding for insurers having to respond to an unequal flow of claims) as we have seen peaks caused by claimants submitting CNFs in advance of system changes, and then the troughs which come as a knock-on effect in the following months. Before last October, we were seeing an average of about 70,000 portal claims a month – will we get to that level again?

In our view this is likely, one of the reasons being that £10-25k RTA claims will also be included in these stats so that factor will inevitably increase the number. But of course this will only be for accidents after 30 July in that higher value band, so it will be quite a few months before £10-25k RTA claims start impacting significantly on the figures. The more relevant question would be whether the number of £1-10k RTA claims will return to the previous level seen, but that would require the Portal Company to keep separate stats for the two value bands, and it does not seem as though they are going to do that. However, because the number of new post 30 July £10-25k RTA claims will not be significant in number for say the next six months, the data up until then will essentially be for £1-10k claims only. The likelihood in our view nevertheless is that numbers submitted to the RTA portal will increase back up to 70,000 per month before long and so will be back up to previous levels.

When will that increased number of RTA CNFs be?

What seems clear from the history of peaks and troughs is that this may take a few months yet. So on balance we are likely to be back up to 70,000 plus, by the end of this year or early next. There are no forthcoming drastic regime changes coming in at least over the next few months, so while the CNF stats have been untypical now for the last 12 months, we should be heading towards a period of greater stability.

EL accident, EL disease and PL

By comparison, the number of new EL accident, EL disease and PL CNFs are infinitesimally smaller. The new stats for the first month that those new portals have been open show 200 new EL accident claims of which only 78 are still in the portal, 143 new EL disease claims (it will be recalled that many claimants preferred to send letters of claim before 31 July to avoid the portal) of which 105 are still in the portal, and 375 new PL claims of which 245 are still in the portal. Not much analysis of those low numbers is possible, but we expect the number of new PL claims to continue to be higher than new EL claims, and are capable of rising over the winter ahead if the weather proves to be bad.

We will continue to monitor and analyse the Portal Company stats for any key messages.

The claims marketplace: a market snapshot

The pace of change in the claims marketplace continues to be swift. This month, the Law Society's Director of Legal Policy expressed his organisation's public view that within three years, after more consolidation, there could be five or six giant claimant personal injury firms dominating the market. We would agree with him that signs are continuing to point that way. The Law Society go on to claim that they think there will be every incentive for those firms and their supporting organisations to increase the number of claims made, and with the backing of the substantial capital that they will have available, there will be the means to achieve this. It should be recognised that the Law Society's relationship with insurers is currently strained after the Society's "Don't Get Mugged by an Insurer" campaign, and against that background it is difficult to give credence to the Law Society's claim that the introduction of QOCS removes a major disincentive to prevent claims. After all, under the pre 1 April processes, surely the vast majority of injury claimants were already protected against adverse costs orders by ATE policies that they did not have to pay the cost of?

The claims marketplace: a market snapshot

Judged by the money being spent on claims advertising, confidence in some parts of the claimant injury sector remains strong. The claims management company First4lawyers representing thirty personal injury firms including SGI Legal are spending £10million on a year long advertising campaign based on the feelgood factor of a claimant receiving a damages cheque. Slater & Gordon are launching their own TV advertising campaign in a bid to become a household name, investing £1million in the initial phase.

Whilst Slater & Gordon's proposed acquisition of Simpson Millar has been deferred until 2014, Simpson Millar themselves have entered a joint venture with Neil Hudgell (of webuyanyfiles.com fame) to acquire existing case loads of solicitors leaving the market, and SGI Legal continue to be keen to buy existing case loads, encouraging potential sellers to do so by the end of this year to get best value for their cases. While on the subject of Slater & Gordon, it is reported in the legal press that they have started the process of purchasing the personal injury part of the well-known Manchester firm, Pannone, with an announcement due on that soon.

While the large firms with capital continue to invest in the injury claims market, those at the opposite end of the scale face a very different future. The latest research is by Begbies Traynor, which reveals that of small to medium sized law firms, nearly one quarter of them are now in financial distress, one in eight of them have stopped trading during the last 12 months, whilst the Solicitors Regulation Authority have 1,200 firms on its financial stability watch list. In all of this news, there is strong evidence of the movement away from small claimant operations to much larger ones with money to spend, and while judgment must still be reserved on future claims numbers, there continue to be clear signs that the new emerging operations will be chasing claims hard in order to make their business models work.

Jackson in action

A case law round up

Jackson in action – judicial approach

Relief from sanctions/failure to file costs budget in time: Last month we reported in detail on Mitchell v News Group Newspapers Ltd (2013) in which a party had failed to file a costs budget within seven days prior to the date of the first hearing and the High Court held that the new rules provided a mandatory sanction that the party would be deemed to have filed a budget limited to the court fees only. Recognising the severe nature of the sanction, and due to the absence of specific authority on how strict the courts should be, Master McCloud granted permission to appeal of her own motion, under CPR 52.3(6) (b) and the highly anticipated hearing will take place on 7 November.

Relief from sanctions/unless order: In Michael & Anor v Middleton & Anor (2013) the Claimants had their claim struck out as their solicitors had failed to comply with an unless order concerning witness statements and disclosure. Even though the default had occurred because of the poor conduct of the claim by their former solicitors, the court were not prepared to grant the Claimants relief from that sanction and the Claimants were unsuccessful in their appeal. The default had meant that the original trial date could not be met; granting relief after the trial date had passed would give the impression that failure to comply with a timetable could be overcome simply by setting a new timetable.

Relief from sanctions/unless order: In Biffa Waste Services Ltd v Ali Dinler & Ors (2013) the Claimant had failed to comply with a number of the orders of the court and on the morning of the trial, the Claimant had to apply to extend the time for payment of court fees. The court had initially refused the Defendant’s application to strike out, expressing the view that justice was best served by ordering the Claimant to pay the Defendant’s costs. Hearing the Defendant’s appeal, Swift J disagreed, stating that the Claimant’s breaches were “flagrant” and that the claim should stand struck out – the Jackson reforms involved a significant change in the court's attitude to non-compliance with court orders and required greater weight to be given to enforcement of orders.

Relief from sanctions/leave to serve medical report late: A different approach was taken in Johnson v Berkshire Healthcare NHS Foundation Trust & Anor (2013). The Defendant applied for leave to serve a medical report late, together with statements from two witnesses. The court granted relief, a decision upheld on appeal, the court observing that the granting of relief did not threaten the trial date.

Costs budgeting/winning party’s costs not limited to out-of-date approved budget: In National Museums and Galleries On Merseyside (Trustees of) v AEW Architects and Designers Ltd (2013), involving the TCC costs management pilot, the High Court rejected the Defendant’s attempt to limit the winning Claimant’s costs to a previously approved budget where a substantially revised one was seen by the court and other party but not dealt with at the pre-trial review (PTR). While leaving the detail for the costs judge to sort out, Mr Justice Akenhead said he would have approved at least a doubling of the Claimant’s £493,000 approved budget. The court had made a costs management order in February 2012 but by January 2013, the Claimant’s estimate had increased to £1.1m. It was contained in appropriate forms and lodged with the court for consideration at the PTR in March 2013. The intention was to review them, but this did not happen. Paragraph 6 of practice direction 51G – which governed the pilot – said that “a party whose cost budget is no longer accurate must file and serve a budget revision… The court may approve or disapprove such departures from the previous budget”. Paragraph 8 said the court would not depart from the receiving party’s last approved budget unless satisfied that there was good reason to do so.

The Defendant argued that, applying paragraph 8, the costs judge could not depart from the last formally approved budget, referring to Mr Justice Coulson’s recent ruling in Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd [2013], where he rejected the successful party’s bid to nearly double its approved costs budget after the case had concluded.

Akenhead J said he agreed with the principles in Elvanite but observed that para 6 “suggests that no formal application needs to be issued by the parties seeking a revision and that the court may of its own motion approve or disapprove the revision, albeit doubtless giving the parties the opportunity to be heard…There are, however, important differences between the Elvanite case and this, the most prominent being that here there was, simply, an oversight by both parties and, indeed, by the court at the PTR to get round to addressing the substantially increased costs budgets [of both parties]… So far as I can recall, this was because there was a lot of business to get through on what was a busy Friday in the TCC. There has been no hint or suggestion that either was challenging or would have challenged the other’s revised budget. Indeed, it is more probable than not that each would actually have agreed the others.

The judge listed “some very obvious reasons” why the budgets had substantially increased and said that as the trial judge and at this late stage, “it would not be appropriate as such to revise [the claimant’s] only formally approved budget. This is, however, a very obvious case, based on my knowledge of the case and the case management, for a substantial upward departure from the approved budget.” He said it is “more likely than not” that he would have approved a revised budget of at least £1m.

For further information on this particular case, please contact James Driver, Partner, Construction, Infrastructure & Projects who represented the successful Claimant, on 0161 603 5022 or at james.driver@dwf.co.uk

Costs budgeting/appropriateness of reducing budget:CRM Trading Ltd v Chubb Electronic Security Ltd (2013) dealt with the question of when to make an application to reduce another party’s costs budget if the nature of the case changes. The Defendant applied to reduce the Claimant’s costs budget. The High Court judge held that whilst it was rare for costs budgets to be contested, and although the court had to be cautious about altering budgets, it was appropriate to make some downward revisions to the Claimant's budget to reflect the realities of the case as it had developed. The court ordered the Claimant's trial preparation and ADR costs to be reduced. However, since it was still unclear whether the trial would last two or three days, it was not appropriate to interfere with the budget for trial costs.

Costs budgeting/ disproportionate and unreasonable costs: In Willis v MRJ Rundell & Associates Ltd & Anor (2013) the High Court (TCC) expressly declined to approve the costs budget of both sides of a construction dispute on the grounds that they were “disproportionate and unreasonable”. However, Mr Justice Coulson added: “Of course, my adverse comments on the amounts of both parties‟ costs budgets will become relevant at the end of the case when the issues as to the amount of any costs to be recovered by the successful party will have to be decided. In the light of the views expressed above, it must be likely that, at that stage, even the successful party will recover only some of its costs…However, I should add that, although I am aware that some have taken the view that the absence of an approved costs budget means that that party will recover no costs at all, I do not believe that such a draconian approach is in accordance with the letter or the spirit of the new costs rules or 51G PD…Just because an estimate of costs of £900,000 at this stage of the case appears disproportionate and unreasonable does not mean that a final recovery of, say, £450,000, by agreement or on assessment, would not be appropriate.”

Change at the MoJ

Change at the MoJ

The latest ministerial reshuffle has included one key new appointment in the Ministry of Justice - Shailesh Vara, the MP for the rural seat of North West Cambridgeshire, has replaced Helen Grant MP as the minister responsible for issues including civil justice. Mr Vara is a solicitor who says in his publicity that he worked at "City and West End of London firms", which apparently included CMS Cameron McKenna. He comes from a business background, so it might be thought he would be more sympathetic to reducing costs and administrative burdens to business than the last minister.

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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