Stage 1 Costs Do Not Need To Be Repaid – JC and A Solicitors v Iqbal (1) EUI (2) [2017] EWCA Civ 355

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By Colin Richmond

 

 

The Court of Appeal has today handed down judgment in the JC and A Solicitors v Iqbal [2017] EWCA Civ 355.

The Issue

This case concerned the issue of whether or not claimants (or their solicitors) should be obliged to repay Stage 1 costs of £400 + VAT (under the “old” Portal rules) in claims which did not then proceed to Stage 2.

Under those rules, the Stage 1 costs payment was triggered by an admission of liability. It had been suggested by some defendants that some claimant firms submitted Claim Notification Forms on cases which, for whatever reason, were never likely to proceed to Stage 2 once the liability admission had been received.

Such cases became known colloquially as “the £400 club,” those being cases where the claimants, via their solicitors, received the £400 costs payment at the end of Stage 1, only for the claims never to be heard of again.

EUI Ltd issued three cases for recovery of Stage 1 costs that they had paid in cases that did not proceed. The judge at first instance ordered repayment of those costs. The claimants appealed.

The Judgment

The Court of Appeal held that the Stage 1 costs do not need to be repaid, with Briggs LJ stating:

Looking at the matter more generally, I consider that there are powerful reasons for concluding, contrary to the reasoning of the judge, that no obligation to repay Stage 1 costs once received is imposed by the RTA Protocol or by the CPR upon Protocol Claimants merely because, after the conclusion of Stage 1, they take no steps to pursue their claim under Stage 2.

First and foremost, the RTA Protocol is a clear, detailed and precise code, negotiated between sophisticated stakeholder groups under the auspices of the Civil Justice Council, into which the court should be slow to imply terms, all the more so where, as here, the drafters have demonstrated an awareness of the concept of interim payments on account of entitlement to damages, and made no similar provision about interim payments on account of an entitlement to costs.

Secondly, it is an express aim of the RTA Protocol, reflected in paragraph 3.1(3), that the claimant’s legal representative should receive the relevant fixed costs at the end of each stage, i.e. regardless of what, if anything, happens at a later stage. That aim will be achieved only if the solicitors are able to contract with their clients for a right, as against them, to receive the Stage 1 costs at the end of Stage 1. In practice that is a term of the typical retainer and that is why the Stage 1 costs are paid directly by the insurers to the Protocol Claimant’s solicitors.

In that context I accept the Law Society’s submission that the underlying objective is to ensure that those who provide legal assistance to RTA claimants receive payment for the work done during each stage, at the end of that stage, rather than at the end of the claim. Furthermore a Stage 1 costs entitlement will only arise once there has been an admission of liability on behalf of the defendant, so that something solid will have been achieved for the Protocol Claimant by the time when the Stage 1 payment becomes due.

The judge appears to have considered that £400 was a rather generous payment for the work typically done at Stage 1. It was, in 2013, later reduced to £200. But a fixed costs regime inevitably involves what are generally called swings and roundabouts, in which the benefits of certainty are perceived usually to outweigh the disadvantages and disproportionality inherent in having costs payable for such work assessed, either summarily or in detail. Furthermore, and not least because of the requirement for a statement of truth on the CNF, a Protocol Claimant’s solicitors may have to do considerably more than merely complete and submit the CNF. They may need to enquire of their client sufficient information about the circumstances of the accident in order to identify the appropriate defendant, to ascertain whether there is a sufficient prospect that the defendant was at fault, and that the Protocol Claimant suffered some significant injury sufficient to justify proceeding under the RTA Protocol, rather than merely in the Small Claims Track.

Thirdly, it is very difficult to understand how a Stage 1 costs payment can sensibly be regarded as an interim payment on account, or as a conditional payment, in any relevant sense. Stages 1 and 2 of the RTA Protocol are pursued in advance of the institution of any court proceedings which might give rise to a power or discretion in the court to assess costs, or even to decide whether fixed costs should or should not be paid. The main purpose of the RTA Protocol is to resolve such claims without them coming to court at all. Even when such claims do come to court, save in the tiny minority which proceed in the multi-track, they will generally be subject to a fixed costs jurisdiction, whether they proceed under Part 8, at Stage 3 of the RTA Protocol, or in the fast-track, which was during the relevant period the normal track for personal injury claims between £1,000 and £10,000 where liability was in dispute.

Fourthly, there are a raft of reasons why, after the conclusion of Stage 1, a claim may not continue under the RTA Protocol, without necessarily becoming the subject of subsequent court proceedings. The claimant may recover more quickly than expected from a perceived injury. They may decide to devote their time and energies elsewhere than in the pursuit of a claim. They may conclude Stage 1 (at least before 2013) and receive Stage 1 costs before receiving a medical report which casts real doubt on their own perception of their injury. They may receive sufficient compensation from another source, such as their own insurers or from another person alleged also to be liable. Claims may therefore be discontinued for good reasons or bad reasons, and it would be contrary to the overall purpose of the RTA Protocol to construe it in a way which encouraged the parties to come to court to resolve a dispute as to the continued entitlement to a sum as small as £400, in circumstances where the court would not otherwise be troubled with the claim at all.

Fifthly, I consider that the reliance by the judge upon the general rule about costs in what is now CPR rule 44.2 is misplaced, as is Mr Browne’s reliance upon the rules about discontinuance of claims. Stage 1 and, for that matter, Stage 2 of the RTA Protocol operate prior to, and with a view to the avoidance of, proceedings in court at a time when there are not litigation winners or losers, still less a pending claim which is then discontinued. Rather, the parties are seeking to resolve their dispute by a process designed to avoid court proceedings altogether.

In relation to “the £400 club”, he went on to say:

I must deal briefly with what has come to be called the “400 Club” point. It is suggested that a construction of the pre 2013 RTA Protocol which treated Stage 1 costs as an entitlement regardless whether the claim was thereafter pursued might encourage unscrupulous lawyers to seek authority from claimants to commence a Protocol claim simply for the purpose of obtaining £400 + VAT, without any genuine intention of advancing to Stage 2, even in the event of an admission by the defendant’s insurers. This theoretical opportunity has been closed off since the 2013 amendments, since Stage 1 costs are only payable after the submission by the claimant (where liability is admitted) of a Stage 2 Settlement Pack including a medical report. It may be that the perceived risk of the abusive practice which I have described played a part in the negotiation of that amendment. But there is no evidence that any such practice did develop and it is not suggested that JC&A were guilty of any such practice in any of the cases under appeal. There is now no risk that such a practice might develop and it would be wrong to construe the plain words of the RTA Protocol by reference to a purely theoretical risk of abuse.

The full judgment is available here:

http://www.bailii.org/ew/cases/EWCA/Civ/2017/355.html

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