Multi-track allocation ends application of fixed costs

17 Nov 2016

Qader v Esure Services Ltd [2016] EWCA Civ 1109

In a controversial decision handed down on 16 November 2016, the Court of Appeal has held that the fixed cost regime for low-value personal injury claims (up to £25,000) started under the RTA Protocol ceases to apply where a claim has exited the Portal, litigated and been allocated to the multi-track. In order to arrive at this decision, the court was required to insert words into the Civil Procedure Rules (CPR), to correct what it considered was an obvious drafting error that failed to convey the intentions of the legislators.

The decision applies equally to low value injury claims begun under the EL/PL Protocol, apart from disease claims, which are currently outside the fixed costs regime following Portal drop out.
 

The facts

The claims, on behalf of a driver and two passengers for damages for personal injury as a result of a road traffic accident in October 2013, were valued at between £5000 and £15000. They were allocated to the multi-track as a result of allegations of fraud: that the claimant driver had deliberately induced a rear end shunt by braking unnecessarily, and that all consequent claims were fraudulent. At the first court management hearing following allocation it was ordered that fixed costs applied, with the determining factor being value not track. The claimants appealed that decision.
 

The appeal to the Queen’s Bench Division

In October 2015, the appeal was dismissed. HHJ Grant upheld the district judge’s original decision that fixed costs applied. He determined that the rules were clear. CPR rule 45.29A applies in that claims started under the RTA Protocol or the EL/PL Protocol (excluding disease claims) but, pursuant to CPR rule 45.29B or C, which no longer continue under the relevant Protocol or the Stage 3 Procedure, having exited the Protocol and litigated by the issue of a CPR Part 7 claim form are subject to CPR section IIIA and fixed recoverable costs. CPR rule 3.12 deals with the costs management of all Part 7 multi-track cases but excludes, as an exception, proceedings which are subject to fixed costs. CPR rule 45.29C determines the amount of fixed costs under the RTA Protocol and sets them with reference to Table 6B which specifically prescribes fixed costs where a claim no longer continues under the RTA Protocol and where proceedings are issued under Part 7 but settle at different stages before trial or at trial itself. The claimants appealed again to the Court of Appeal.
 

The Court of Appeal decision

In a judgment handed down following the hearing on 25 October, the Court of Appeal allowed the claimants’ appeal, deciding that the standard costs regime, including costs budgeting, applicable to other multi track cases, should apply rather than fixed recoverable costs.

Lord Justice Briggs confirmed that the rules and specifically CPR rule 45.29B required amendment to specifically exclude such cases to effect this change on the basis that this was an omission by the Rules Committee in drafting, given that it had never been the intention that multi-track cases should be subject to fixed costs. Otherwise, it was acknowledged that the rules, without this amendment, unambiguously applied fixed costs to such cases. The exception in CPR rule 45.29J giving relief in exceptional circumstances at the end of any matter was not sufficient. He invited the Rules Committee to devise a further amendment to address an anomaly in the rules, namely, the £25,000 apparent damages ceiling for cases that settle before proceedings are issued (Part A of Table 6B in relation to RTA costs, but with equal application in EL/PL claims).
 

What this means for you

This decision applies to all claims started within the RTA and EL/PL Protocols, excluding disease claims. In relation to those claims, the Court of Appeal identified three key types of claims particularly affected by this issue:

  1. Cases where a claim originally thought to be worth no more than £25,000 is re-valued at a substantially higher level;
     
  2. Cases where because of the exclusion of vehicle related damages from the valuation of a claim for the application of the RTA Protocol, a claim is properly started within that Protocol, but is then issued under Part 7, where it may then include a claim for vehicle related damages,  including in particular credit hire damages, which take the claim well above the £25,000 damages ceiling for a “normal” fast track claim; and
     
  3. Cases where a claim is properly started in the RTA Protocol but is met by a fraud allegation within the defence.

Alleging, and pleading fraud, can often result in allocation to the multi-track. In fact, the courts have previously given practical guidance that in RTA low velocity impact exaggeration claims, allocation ought to be to the multi-track. This decision means that such cases, irrespective of where they started, will be subject to the usual costs assessment on the standard basis, once they are allocated. We are advising our customers to revisit their reserves on any suspected fraud cases that are litigated in addition to those cases already on the multi-track.

There is unfortunately some uncertainty in relation to claims falling into the above categories that settle prior to the issue of proceedings or after litigation, but before allocation. Lord Justice Briggs made it clear that he did not consider that the Rules Committee would have carried back to a pre-allocation stage a policy to dis-apply fixed costs, merely because a claim started within the Protocols had grown in value beyond £25,000, or had become the subject of a pleaded defence of fraud. He said that it by no means followed that every such case would be inappropriate to the fast track. He considered the apparent £25,000 ceiling of damages referred to within the fixed costs tables for cases setting pre-litigation to be an anomaly and a further drafting error.

As a result, if any case started under the Protocols is settled before allocation to the multi-track actually occurs, then the starting point is that fixed costs will apply and the claimant will have to persuade a court that there are exceptional circumstances to justify awarding more than fixed costs. “Exceptional circumstances” are not defined and this will likely give rise to satellite litigation.  Poor conduct and intimations of fraud have been found sufficient in relation a similar provision of the CPR (see Udogaranya v Kenneth NWAGW [2010] EWHC 90188(Costs)).

However, it is far from certain whether settlement at £30,000 damages would be exceptional or say £40,000. A claimant will also need to beat the fixed costs by 20% or more pursuant to CPR 45.29K, or will be limited to the lower of the fixed costs or assessed amount.
 

Example

In an EL claim started within the Protocol but settled for £30,000 pre-litigation, the fixed costs will be the total of £2,500 plus 10% of the damages over £10,000. It is clear that Lord Justice Briggs considered the reference to a cap of £25,000 damages to be an anomaly and therefore the 10% would be applied in this example to £20,000 (being the additional damages over £10,000). The fixed costs would therefore be £4,500 (£2,500 plus £2,000). A claimant would need to persuade a court that there were exceptional circumstances to allow more and if that was accepted, would need to persuade the court to allow £5,400 or more in costs on an assessed basis. In light of the removal of recoverability of additional liabilities and the increasingly firm approach to proportionality, it will be far from certain that higher costs would be awarded in such a case settled at an early stage.

The decision will be seen as somewhat controversial in the Court of Appeal exercising its powers to put right drafting errors within statutory provisions, pursuant to the jurisdiction explained in Inco Europe Limited v First Choice Distribution [2000] 1 WLR 586. The willingness to consider material including the 2009 reports of Lord Justice Jackson seems somewhat at odds with the lack of similar enthusiasm to considering the same source material when it came to interpreting whether the fixed costs stages were intended to be sequential in a judgment given only a week earlier (Bird v Acorn Group).

The result is also surprising given Lord Justice Jackson’s public view that fixed costs should be extended further and apply at least to lower value multi track cases, and possibly up to a value of £250,000. It remains to be seen what he concludes from his review to be completed by the end of July 2017.

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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