AN ARM AND A LEG: COSTS IN LOW VALUE PI. 1. This talk will give an overview of costs in low value PI, including:

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1 AN ARM AND A LEG: COSTS IN LOW VALUE PI Lucy McCormick 13 King s Bench Walk March This talk will give an overview of costs in low value PI, including: 1.1. The Small Claims track; 1.2. The Fast Track; 1.3. Part 45 II: Road Traffic Accidents Fixed Recoverable Costs; 1.4. Part 45 VI: The Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents ( the RTA Protocol ); and 1.5. Infant approvals THE SMALL CLAIMS TRACK 2. The small claims track is the usual track where total damages are less than 5,000 and any PI is less than 1,000. An allegation of fraud is likely to bump a claim up to the fast track regardless of value. 3. Costs on the small claims track are strictly limited by CPR In the vast majority of cases, a successful Claimant can only recover: 3.1. Court fees: Issue fee Allocation fee. It is worth noting that whether or not an allocation questionnaire is actually filed, the fee is only payable where the case is worth over 1, Hearing fee The precise figures change regularly, and can be found on Form EX50: Fixed costs (See Table 1 of CPR Part 45) 4. There is no provision for the award of fixed costs to a successful Part 20 Claimant. See Hibbert v Bates [2002] 3 C.L A successful party may also request witness expenses, namely: 1 Cited in the commentary in the White Book. See also Shah v Oliver [2005] C.L.Y. 364, headnote available on Westlaw. 1

2 5.1. Travel expenses. This can include the reasonable cost of train fares, flights, petrol, parking and hotels. The mileage allowance has crept up from 40p/mile to 45p/mile in light of the increase in HMRC s Approved Mileage Allowance Payments in April Loss of earnings (or loss of leave). This is currently capped at 90 per person per day. The witness should be told to bring documentary evidence of the above, although if the sum is unexceptional there is a good chance that a judge will simply accept the oral evidence of the witness on the day. 6. The only way of recovering more than the above costs is to establish that the other party has behaved unreasonably under CPR 27.14(2)(g). 7. CPR 27.14(3) specifically provides that a party s rejection of an offer in settlement will not of itself constitute unreasonable behaviour under paragraph 2(g) but the court may take it into consideration when it is applying the reasonableness test. 8. Beyond this, there is no definition or guidance in the CPR and whether behaviour is unreasonable is very much left to the discretion of the particular judge. 9. However, here are some classic scenarios: 9.1. A party does not turn up. Costs are usually readily awarded in this situation. See, for example, Nasair v Hill (Stourbridge County Court 20 May 2002) 2 and Ilyas v Walker (Birmingham County Court 2 July 2002) A party does not respond to an offer. As set out in Abedin v Karim (County Court 25 June 2001): That parties should be encouraged to make offers was part of the fundamental principles of the Rules. When offers were made it was reasonable to expect parties to respond. Part 27 r.27.2(1)(g), which provided that Part 36 did not apply to small claims, merely intended to make clear that the automatic costs consequences and formality of Part 36 should be disregarded A witness statement does not match the oral evidence. This requires something more than the usual run of typos and miscommunication. For example, in Owen v Burnham (Bradford County Court 12 March 2001), a credit hire case, the lay client had signed a statement which stated that she was aware that the hire company can recover the hire charges from me at any time, yet her oral evidence was that she had been assured by her insurance The headnote for this, and all other cases in this section, are available on Westlaw. They are also 2 reported in Current Law. 2

3 company and an agent for the hire company that she would not have to pay any hire charges Where it should have been clear from the outset that the claim would fail. For example, see Clohessy v Homes (Bristol County Court 10 July 2003) and Barron v Lawler (Liverpool County Court 4 April 2001), in which the photographic evidence of the accident site and the documentary evidence of the level of damage to the vehicle was such that a reasonable solicitor who had taken sufficient and full instructions would have stopped the case prior to trial because it was clear from the evidence that the matter had no reasonable prospect of success. Clearly, these cases could be cited by the successful party in almost every case, but the judge will be looking for something well beyond the norm. 10.Of course, none of the county court cases cited above are binding authority. However, they can be invaluable in convincing a wavering Judge, particularly a less experienced DDJ who has not yet got a feel for where unreasonable conduct begins. 11. Typically, the type of conduct which merits unreasonable costs arises at the last minute. Counsel is highly unlikely to have a pre-prepared Schedule, and it would be a waste of resources to send Counsel off with a Schedule to every hearing just in case. Obviously, Counsel can always ask the court for his brief fee. 12.At a more rough and ready level, here are a few other tips: 12.1.It does not hurt to include on Counsel s standard instructions a statement that At Slippe, Falle & Sioux LLP, the costs of running a small claim RTA to trial are typically in the region of XXX+VAT. If the Judge is irate enough to really want to give the other side a bashing, this can be sufficient It is possible, though an uphill struggle, to gain unreasonable conduct costs even when the losing party Even where the other side s behaviour has not directly caused additional expenditure, it can still be worth having a punt for costs. I have occasionally had success with the argument that CPR 27.14(g) is not necessarily compensatory and can function simply as a way for a court to show its displeasure. 13.Whether or not the case is formally allocated to a track, it is difficult to wrench a very low value claim out of the small claims cost regime In the absence of any specific factors suggesting otherwise, in a case where an allocation to the small claims track would normally have been made, the normal rule should be that the small claims costs 3

4 regime should apply: Voice & Script International Ltd v Alfhafar [2003] EWCA Civ Even in a case where the parties had attempted to contract out of the small claims costs regime by a consent order providing for reasonable costs and disbursements on the standard basis, the Court of Appeal held that small claims costs were still the starting point. Although it was not open for the DJ to assess purely by reference to the small claims track, it was quite legitimate to give the schedule anxious scrutiny to see whether the costs were necessarily and reasonably incurred, and thus whether it was reasonable for the paying party to pay more than would have been recoverable in a case that should have been allocated to the small claims track: O Beirne v Hudson [2010] EWCA Civ Appeals from a small claims judgment are also bound by small claims costs, usually rendering them uneconomic. THE FAST TRACK 15.Where a low value PI claim exceeds 1,000, it will usually be dealt with either on the generic Fast Track or on one of the two specialist low value RTA schemes. 16.By way of reminder, the Fast Track is the usual track where total damages are between 5,000 and 25,000 (or PI is over 1,000) and the hearing is not expected to last longer than one day. 17.The solicitor s costs will be assessed summarily on the standard basis. 18.The advocate s trial costs are fixed on a sliding scale from 485 to 1,650 (CPR 46.2). The court may not award any more or less than this amount except in limited circumstances, including: 18.1.Where the court considers that it was necessary for a solicitor to attend to assist the advocate, an additional 345 may be awarded for the solicitor s attendance (CPR 46.3). Travelling time is not separately recoverable To award a success fee under a funding arrangement 18.3.Where one of the parties has behaved unreasonably or improperly during the trial. This is in respect of the behaviour of the party only, and not of their legal representative, and in practice arises rarely. 19.I do not propose to deal with the fast track in any detail, save to comment that Low Value PI claims are particularly prone to costs substantially exceeding the amount at stake. In assessing costs, the court is to have regard to all the circumstances, including the value of the claim (CPR 44.5). While it is not unusual for costs to exceed the amount in issue, when this occurs the courts are usually concerned about proportionality, 4

5 and this is something judges are particularly alive to in the current political climate. 20.Where this occurs, a solicitor s input before the hearing can make a substantial difference in helping Counsel to justify the sum. A few of my Instructing Solicitors are in the habit of producing an annotated Schedule for the use of Counsel, providing additional background as to how the sums were incurred, guideline rates and so on. I cannot praise this practice highly enough. Part 45 II: Road Traffic Accidents Fixed Recoverable Costs 21.Many claims which historically would have fallen under this scheme would now come under the new Part 45 VI ( the RTA Protocol ). 22.Part 45 II applies to: 22.1.Costs-only proceedings 22.2.Infant settlements WHERE 22.3.The dispute arises from a road traffic accident 22.4.The damages includes PI or property damage 22.5.The claim is between 1,000 and 10, Costs are limited to : 23.1.Fixed costs under [If applicable, London weighting of 12.5% of fixed costs on top] 23.3.Disbursements under [If applicable, Success fee under CPR 45.11, being 12.5% of the fixed costs - before any London weighting is added] 24.The amount of fixed costs recoverable is calculated by totalling the following: 24.1.The sum of % of the agreed damages up to 5, % of the agreed damages between 5,000 and 10,000 For example, agreed damages of 7,523 would result in recoverable costs of 2, i.e (20% of 5,000) + (15% of 2,523) 25.The court will entertain a claim for an amount greater than the fixed costs in exceptional circumstances. But there is a risk: on assessment the Claimant must achieve at least 20% more than fixed costs, or else costs remain limited to fixed costs and the Claimant must pay the Defendant s costs of the costs dispute. 5

6 Part 45 VI: The Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents ( the RTA Protocol ) 26.The RTA Protocol is a relatively new scheme, which applies to accidents which occurred on or after 30 April It is unusual in that: 26.1.It is administered entirely through an electronic Portal 26.2.It makes provisions for costs at the pre-action stage, not merely after proceedings have been issued Costs are to be paid as you go along rather than at the end of the process. 27.The RTA Protocol currently applies to RTA PI claims worth between 1,000 and 10,000, although the government is considering extending the Protocol to cover claims up to the value of 25,000 and to include employers' and public liability accident claims. This would capture about 90% of RTA claims. 28.For the avoidance of doubt, the value of the claim is based on the level of general damages and special damages, excluding vehicle related damages (i.e. PAV, repair costs, excess, or hire). It also takes into account any deduction for failure to wear a seat belt, but not other forms of contributory negligence. 29.A claim cannot be begun under the Protocol if it possesses any of the following complicating factors: 29.1.the claim is in respect of a breach of duty owed to a road user by a person who is not a road user; 29.2.a claim has been made to the MIB 29.3.either party is deceased; 29.4.either party is a protected party ; 29.5.where the Claimant is bankrupt; or 29.6.where the Defendant s vehicle is registered outside the UK. 30.Claims can also subsequently drop out of the Protocol in several circumstances, including: 30.1.Where the Claimant gives notice that the claim is unsuitable for the Protocol (for example, because there are complex issues of fact or law in relation to the vehicle related damages) (see Protocol 7.67) 30.2.The Defendant gives notice that it considers that the small claims track would be the normal track; 30.3.The Claimant gives notice that the claim has been re-valued as more than the upper limit; 30.4.Either party fails to comply with the Protocol; or 30.5.Where an admission of liability or offer is withdrawn. 6

7 Claims cannot subsequently re-enter the process. 31.If the Court considers that the Claimant acted inappropriately in not complying with or electing out of the process, then the court may order that the Claimant is limited to the RTA Protocol fixed costs in any event (CPR 45.36) 32.The Protocol divides the litigation process into three stages, and applies a fixed fee at each stage Stage 1: The Claimant completes the detailed Claims Notification Form (effectively an electronic Letter of Claim). The Defendant insurer must send an electronic acknowledgement the day after receipt. The Defendant insurer must complete the CNF Response (effectively an electronic Response on Liability) within 15 days. Where liability is admitted, the Defendant insurer must pay the Stage 1 fixed costs within 10 days. The Stage 1 costs are 400. Where liability is not admitted, the claim drops out of the RTA Protocol Stage 2: The Claimant submits a Stage 2 Settlement Pack including the prescribed form, medical report and evidence of pecuniary losses and disbursements. The parties attempt to agree quantum. If quantum is agreed, the Defendants must pay the Stage 2 costs of 800 within a matter of days. Even if the parties are unable to agree quantum, the Defendants must still pay the Claimant their final offer along with Stage 2 fixed costs and any non-disputed disbursements at this stage Stage 3: If quantum cannot be agreed, the claim proceeds to Stage 3. The Stage 3 procedure also applies where liability has been admitted but the Claimant is a child and so the court s approval of quantum is necessary. It may be helpful to think of Stage 3 as the disposal hearing/infant approval stage. It is only now that a claim is actually issued, in accordance with PD 8B. The costs are as follows: Type A costs (i.e. Solicitors costs) of Type B costs (i.e. the advocate s costs) of and, where the Claimant is a child, Type C costs (i.e. Counsel s advice on quantum) of Beyond these Stage 1, 2 and 3 fixed costs, only disbursements (See CPR 45.30) and a success fee (See CPR 45.31) may be recovered. 34.If the Claimant reasonably believed that the claim was valued at more than the small claims track limit and so initiated his claim under the RTA Protocol, but it subsequently becomes apparent that the value of the claim is less than 1,000, the party remains entitled to Stage I (and potentially even Stage II) costs. 7

8 Infant approvals 35.There has long been controversy over the position on costs for these hearings, and practice has varied from court to court. 36.Many of you will be aware that last month the Court of Appeal finally stepped in, in Dockerill v Tullett [2012] EWCA Civ 184 and the linked appeals of Macefield and Tubridy. 37.Dockerill and Macefield concerned claims under 1,000. The principal issue was whether costs should be calculated under the fixed costs regime under CPR 45 Part II or by detailed assessment in accordance with CPR CPR 45 Part II only applies where: if a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim. On one view, the claim is the Part 8 proceedings, which are automatically treated as being allocated to the multitrack. On the other, the claim is the claim that would have been issued but for the compromise i.e. less than 1,000. Patten LJ found that the latter was clearly right and so the costs fell for detailed assessment. 38.This raised a further question how to carry out a detailed assessment where the underlying claim would have been a small claim. Patten LJ found that although the Court should not simply impose small claims track costs, a judge ought to ask whether the damages claim and therefore its compromise was sufficiently complex as to have justified the engagement of solicitors beyond the production of a report on the merits of the settlement or in respect of any other step in the proceedings and to have scrutinised the bill on that basis. This is a strong pointer that litigation friends will be expected to conduct their own and costs recovery will now be generally limited to the costs of the advice on quantum. 39.Tubridy concerned an award over 1,000, and addressed the question of whether the cost of Counsel s attendance at the hearing is recoverable. Under CPR 45.10(2)(c), disbursements are recoverable provided that the fees were necessarily incurred by reason of one or more of the Claimants being a child or protected party. At county court level, many judges were in the habit of holding that the simple fact that the litigant was a child automatically justified Counsel s fees. LJ Patten took the view that this was not enough and for counsel's fees for attending a hearing to be recoverable there must, I think, be some complexity in the case. 40.In summary, the position now appears to be: 40.1.Award under 1,000 Costs technically subject to detailed assessment but generally limited to advice on quantum Award over 1,000 Costs on fixed costs regime. If under CPR 45 Part II, attendance by Counsel only recoverable where there is some 8

9 complexity in the case. If under RTA Protocol, 250 for Counsel s attendance. 41.It should be emphasised that these decisions do not have any effect on the ongoing necessity to obtain Counsel s opinion for the Court. 42.In practice, these decisions remove the financial incentive to take child cases under 1,000, and substantially reduce the incentive to take the remainder. Patterson LJ was plainly aware of the potential problems, and has commented If this produces a difficulty in practice then it will be for the Rules Committee to think again. One suspects this will occur sooner rather than later. 43.This talk is intended to give general information and does not constitute legal advice. Should you require legal advice please contact 9

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