29 November 2013 Edition 27 BC DISEASE NEWS A WEEKLY DISEASE UPDATE

29 November 2013 Edition 27 BC DISEASE NEWS A WEEKLY DISEASE UPDATE

CONTENTS PAGE 2 Welcome PAGE 3 Strict approach to the EL/PL Protocol expected APIL president predicts catastrophic failures Date set for second reading of Mesothelioma Bill Welcome Welcome to this week s edition of BC Disease News. In the last week a date has been announced for the second reading of the Mesothelioma Bill in the House of Commons, and we have seen further consolidation in the PI market. This week we present a feature examining the Court of Appeal s decision in the plebgate appeal on the post-jackson approach to litigation. It confirms a strict approach to litigation is now appropriate. Any comments or feedback can be sent to Boris Cetnik or Charlotte Owen. As always, warmest regards to all. More PI closures PAGE 4 Further consolidation in the PI market Deafness claims the new whiplash? SRA to take action on referral fee ban avoidance PAGE 5 Feature: Settling Jackson: Court of Appeal endorses strict approach PAGE 2

Strict approach expected to the EL/PL Protocol expected A strict approach to the EL/PL Protocol is expected in the wake of a decision on the amended RTA Protocol. 1 In Davies and others v Greenway the claimants solicitors inadvertently sent the Claim Notification Form (CNF) to AXA in Ireland rather than England. When this was discovered AXA invited the claimants solicitors to resubmit the CNF to the correct insurer. It was prepared to admit liability. However, the claimants solicitors instead sought to enter discussions and subsequently issued proceedings. The claims settled and the consent order provided that costs would be dealt with on the standard basis to be assessed if not agreed. The claimants then sought a detailed assessment. The costs officer found he did not have the power to overturn the consent order and was going to deal with costs on a standard basis rather than the protocol fixed costs regime. On appeal, the defendants argued that the consent order did not oust the court s power under CPR 45.24 to award only fixed costs where the protocol was wrongly not used. Master Simons disagreed. He held the wording of the rule confined the power to restrict costs to the time when judgment is given. Accordingly, the defendant should have raised the issue when costs were negotiated for the purpose of the consent order. In any event, the power was discretionary and not mandatory. However, the court could still consider the claimants unreasonable behaviour. The costs sought were disproportionate and had the claimants complied with the RTA Protocol this would have prevented disproportionate costs being unreasonably and unnecessarily incurred. Had they acted reasonably they would have only recovered the RTA fixed costs, therefore they were awarded only these. This case offers two lessons to defendant PAGE 3 disease practitioners using the EL/PL Protocol. Firstly, it directs practitioners to pursue a costs issue when the claimant has wrongly not used or exited the claim from the Protocol, as the courts are likely to take a strict approach. Secondly it directs them that CPR 45.25 must be raised at the time when judgment is given or when costs are being negotiated for the purposes of settlement. This ensures that the rule is engaged for potential application by the courts. APIL president predicts catastrophic failures The president of the Association of Personal Injury Lawyers (APIL) has predicted catastrophic failures of PI law firms over the next 12 months. 2 Matthew Stockwell predicts there will be some very big, catastrophic failures of law firms over the next year. He said [w]e will see some massive interventions and horrible messes, like other parts of the financial services sector. He added that he was also concerned about the lack of resources available to the SRA to monitor conflicts of interest within ABSs and a lack of transparency for clients. He asked if the emergence of these conflicts will be seen before it is too late to stop people being affected. Stockwell said the nature of the environment was such that personal injury practices now need to be run with a much more commercial focus. Nevertheless, there is an irreducible minimum of legal expertise you need if you market yourself first and foremost as lawyers. These comments correspond with out prediction that the claimant personal injury market will contract in the wake of the Jackson reforms. Date set for second reading of Mesothelioma Bill A date has now been set for the second reading of the Mesothelioma Bill in the House of Commons. 3 The second reading is to take place on 2 December 2013. It will be the first opportunity for Members of Parliament to debate the general principles in the Bill. Debate is expected to focus on three areas: the level of payments under the diffuse mesothelioma scheme, the diseases to which the scheme will apply, and the date from which the scheme will apply. After the second reading the Bill will proceed to the committee stage for line by line examination. Our most recent update on the amendments so far made to the Bill can be found here. We will continue to update on the progress of the Bill. More PI closures Further closures of PI departments have been announced in the wake of the Jackson reforms. 1 Yorkshire firm Walker Morris is to close its entire personal injury department. It leaves 48 people at the risk of redundancy. The firm said that it had taken the decision to close the department as a result of the Jackson reforms and continuing turmoil in the personal injury sector. There are four solicitors amongst the 48 staff. The firm had sought in the past year to refocus its PI department by investing in a direct to market approach under the brand Distinctly Legal. However, this was not effective and the firm acknowledged that a volume-driven approach did not fit with its long term strategy. Meanwhile, the alternative business structure Co-Operative Legal Services (CLS) has announced it will be making 60

redundancies in its personal department, halving the workforce. Staff were told the redundancies were the result of CLS losing a large source of personal injury work in the last year. These closures continue the predicted trend of consolidation in the PI sector. It is expected to continue as the Jackson reforms take full effect. Further consolidation in the PI market There has been further consolidation in the PI market with Pannone announcing substantial parts of its business are to be acquired by Slater and Gordon. 5 In a statement released on Thursday, Pannone confirmed the majority of its consumer facing teams, including personal injury and clinical negligence, would be transferred to the Australian firm. The deal is 33 million in total and expected to be completed in February 2014. Slater and Gordon managing director Andrew Grech said: Pannone Solicitors gives us the scale we believe is necessary to operate in the UK market Postcompletion, Slater and Gordon will hold the number one or two market-share position in most consumer practice areas. Our brand strength in the UK will continue to grow, benefiting from increasing marketing and business development capacity and the strong regional brand delivered by the acquisition. This acquisition continues the predicted trend of consolidation in the PI market. Meanwhile, there is the possibility of further consolidation, with Blake Lapthorn confirming that it has held talks with Morgan Cole and Boyes Turner about possible mergers. In addition, claimant firm Asons Solicitors has announced significant growth plans with the intention of being the last man standing after the Jackson reforms. We consider this further next week. PAGE 4 Deafness claims the new whiplash? It has been reported in the Post magazine that deafness claims may become the new whiplash. 6 In the last two years insurers have noted a steep rise in the number of new NIHL claims. Some have reported a 50% rise. Indeed, in 2010 claims numbers were in the region of 25,000. By the end of 2012 total claims numbers had risen to over 50,000. 7 The greatest spike was observed, unsurprisingly, in the months leading up to 1 April this year, just before the Jackson reforms introduced a less favourable costs regime. Evidence suggests that claims management companies (CMCs) have now become wise to the fact that deafness is a lucrative area where they can still command hourly fees, unlike their traditional territory of whiplash claims. Indeed claims teams have reported increased notifications and increased frequency from claims farming. Moreover there are more claimant solicitors dealing with deafness work. 8 The increasing number of claims has coincided with the introduction of the EL/PL Protocol and the Claims Portal, which introduce less favourable fixed fees for claimants. Deafness claims are likely to continue to be targeted, along with disease claims in general, because it has been estimated that many claims are unsuitable for the Portal. Research by Cunningham Lindsey suggests that in the region of 90% of NIHL cases are inappropriate for the Portal. They are therefore especially attractive, since the recoverable costs are not limited. Simon Gallimore of AIG suggests that many deafness claims appear to be speculative, that would not have been made in a different economic climate. Consequently, he points out the rate of rejected claims is on the rise: We have a denial rate of 50% at the moment. It s very high. He notes it is important to deal with each claim scrupulously and defend robustly where necessary. Economic settlements merely encourage further claims. This accords entirely with our own view. SRA to take action on referral fee ban avoidance The Solicitors Regulations Authority (SRA) has announced it has commissioned 10 forensic investigations into personal injury firms to determine their compliance with the referral fee ban. SRA chief executive Antony Townsend has said the regulator is increasing its efforts to enforce the Ban. The ban was introduced in the Legal Aid, Sentencing and Punishment of Offenders Act 2012. It came into force on 1 April 2013. Townsend s report shows that 900 firms who rely on personal injury work for at least 50% of their income were contacted throughout September and October to remind them of the need to comply with the legislation. Subsequently, the SRA has been in further contact with 45 firms and directly visited 25 firms to assess how they approaching the ban and whether they are complying with its terms. It is now going to have 10 firms rigorously analysed. This approach comes after the SRA admitted that enforcement was lower down its list of priorities, although it was keen to stress that it would take appropriate action if necessary. Arguably there is little value in the SRA s approach because a variety of methods have been developed that allow claimant firms to legitimately flout the ban. Without being extended to cover these methods, there is a danger than the ban will be ineffective.

Feature: Settling Jackson: Court of Appeal endorses strict approach The Court of Appeal has finally ruled on the correct approach to non-compliance following the implementation of the Jackson reforms. The message is clear: parties must comply. Non-compliance will be dealt with strictly. In this article we examine the judgment in detail and assess its implications. Background Mitchell v News Group Newspapers Ltd concerns a claim by Andrew Mitchell MP over the plebgate affair. 9 He alleges defamation against the Sun Newspaper for its coverage of the story. The parties were both required to a file a costs budget 7 days before a case management conference under a pilot budgeting scheme. The rules were essentially the same to the new budgeting rules and the Court of Appeal was content to deal with the two regimes interchangeably. Mr Mitchell s legal team only filed their budget the day before the hearing. The defendant said there had been insufficient time for them to consider the budget. Consequently the hearing was abortive. Master McCloud imposed the sanction contained in CPR 3.14, which provides: Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees. The sanction in CPR 3.14 was not directly applicable, but it was imposed since Master McCloud considered that it was an indication of the appropriate sanction. Master McCloud subsequently heard an application for relief from sanctions. 10 This was decided under CPR 3.9(1) which provides: On an application for relief from PAGE 5 any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders. The application was refused essentially by reference to the new, stricter, Jacksonian approach. We dealt with this decision in edition 14 of Disease News. Mr Mitchell s legal team appealed, arguing that the sanction should not have been imposed in the first place and that relief should have been granted. In its unanimous judgment, the Court of Appeal was fully aware of the wider issue it was being asked to determine, noting at the start of its judgment that it was being asked how strictly should the courts now enforce compliance with rules, practice directions and court orders. 11 The Court of Appeal judgment could the sanction be imposed? On the issue of whether the sanction could have been imposed in the first place, Mr Mitchell s legal team made three arguments: firstly, that CPR 3.14 should not have been applied by analogy when it was not yet in force; secondly, that the Master was wrong to interpret CPR 3.14 as referring to a failure to file a budget within the prescribed time; and, finally, that the decision imposed a sanction that was disproportionate and contrary to the overriding objective. 12 The Court rejected all of these arguments. Dealing with the first argument, the Court held the Master was entitled to be guided by CPR 3.14 by analogy because it represented the considered view of the Civil Procedure Rules Committee as to what constituted a proportionate sanction for failure to file a costs budget in time unless the court otherwise ordered. 13 Authority did not compel a different decision. 14 On the second argument, it had been submitted that the wording of CPR 3.14 provided the sanction only applied where no budget had been filed at all, rather than apply where it was filed late. The Court held this was not a sensible interpretation and cannot have been intended because it would permit a budget to be filed just before the case management conference. This would defeat the mischief at which CPR 3.13 and CPR 3.14 were directed: namely preventing the last-minute filing of costs budgets. 15 In respect of the third argument, the Court noted that Mr Mitchell s team was not in a position at the initial hearing to ask for relief by invoke the saving provision in CPR 3.14 ( unless the court otherwise orders ) because it had not produced relevant evidence. Had evidence been produced then that decision making process would, the Court of Appeal said, have involved consideration of the same factors in CPR 3.9. 16 In the absence of being able to deal with relief at the hearing the Master was justified in making her decision because the claimant could subsequently apply for relief, where she would then be able to decide a response so as to give effect to the overriding objective. 17 The Court of Appeal judgment should relief have been granted On the second issue, the Court generally discussed the proper approach to relief from sanctions under CPR 3.9 after the Jackson reforms at paragraphs [34] [51]. This is the most important part of the judgment. The Court noted that the explicit mention in the amended CPR 3.9 of the obligation to consider (i) the need for litigation to be conducted efficiently and at proportionate cost, and (ii) the need to enforce compliance with rules, practice directions and court orders signalled a deliberate shift of emphasis. 18 It held that these considerations should now be regarded as of paramount importance and be given great weight. Although all the circumstances of the case must be considered, other circumstances should be given less weight than the other two

specifically mentioned factors. 19 The Court endorsed the approach that the relationship between justice and procedure has changed through the Jackson reforms. It has not changed in that compliance has become an end in itself and superior to doing justice. Rather it has changed because individual justice in a case is not distinct from the overriding objective. Doing justice in each set of proceedings is to deal with them justly and at proportionate cost and not in ignorance of other cases in the justice system. 20 The courts must have regard to the needs and interests of all court users when managing in an individual case. 21 In applying this new approach, the Court held that it would be appropriate to start by considering the nature of the noncompliance. 22 Where the non-compliance was trivial the court would usually grant relief, providing the application was made promptly. 23 Accordingly, relief would usually be granted for no more than an insignificant failure to comply, such as where there had been a failure of form rather than substance, or where the defaulting party had narrowly missed a deadline, but had otherwise complied fully. 24 Where the non-compliance could not be characterised as trivial, however, the burden would be on the defaulting party to persuade the court to grant relief. If there was a good reason for it the court would be likely to grant relief. 25 Good reasons might include, for example, a document not being filed because the party or his solicitor suffered from a debilitating illness or was involved in an accident. Later developments in the course of litigation might also constitute a good reason if it could be shown the original period for compliance imposed was unreasonable, although it seemed reasonable at the time and could not realistically have been the subject of an appeal. 26 In short, good reasons were likely to arise from circumstances outside the control of the party in default. 27 However, merely overlooking a deadline, on account of overwork or otherwise, was unlikely to be a good reason. 28 In fact it would rarely be so. 29 Solicitors could not PAGE 6 take on too much work and expect the court to agree this was a good reason for non-compliance. The work should be delegated to others or not taken on at all. 30 Well intentioned incompetence, for which there was no good reason, would not usually attract relief unless the default was trivial. 31 Though this may have appeared harsh in view of the financial difficulties many practitioners faced, the need to comply with rules, practice directions and court orders [was] essential if litigation [was] to be conducted in an efficient manner. If departures [were] tolerated, then the relaxed approach to civil litigation which the Jackson reforms were intended to change [would] continue. 32 The Court held that the approach to be adopted would essentially match the strict approach adopted for extensions to the period of validity of the claim form under CPR 7.6. Indeed, it was held that approach should be adopted. 33 Accordingly, decisions from that area of law (which has been in operation for longer) will serve as a useful guide on the approach of the courts. The Court also held that applications for extensions of time made before time had expired would be looked on more favourably than applications for relief made after the event. 34 More generally, the Court held that an application for relief from sanctions presupposed the sanction had in principle been properly imposed, otherwise it would have been appealed or, exceptionally, the court could have been asked to vary or revoke the sanction under CPR 3.1(7). 35 Accordingly the starting point on such an application would be that the sanction had been properly imposed. 36 Specifically, on an application for relief from the sanction in CPR 3.14, it was not open to a party to complain that the sanction did not comply with the overriding objective or was otherwise unfair because the sanction was stated in the rule and the words unless the court orders otherwise were intended to ensure the sanction was imposed to give effect to the overriding objective. 37 The result of this more robust approach, the Court said, would be that relief from sanctions would now be granted more sparingly than previously; no lawyer should have been in any doubt as to what was coming. Although it accepted that changes in the litigation culture would not occur overnight, the Court felt that the wide publicity its judgment would receive would ensure the necessary changes [would] take place before long. 38 Moreover, once it was understood that the courts would adopt a firm line on enforcement, litigation would be conducted in a more disciplined way and there should be fewer applications under CPR 3.9. In other words, once the new culture became accepted, there should be less satellite litigation, not more. 39 Turning to the application of the principles in the present case, the Court started by noting that it would not lightly interfere with a case management decision. 40 Although the Master s decision could be criticised in part, this did not go to the heart of her reasoning. 41 Moreover, it would not have been appropriate to grant partial relief, such as limiting the claimant to half his budget. The merit of the rule was that it set out a stark and simple default sanction; that sanction would usually apply unless the default was trivial or there was a good reason. If those exceptions did not apply the two factors in CPR 3.9 would usually trump other circumstances. 42 Grants of partial relief would give rise to uncertainty and complexity and stimulate satellite litigation. 43 It was held: The defaults by the claimant's solicitors were not minor or trivial and there was no good excuse for them. They resulted in an abortive costs budgeting hearing and an adjournment which had serious consequences for other litigants. Although it seems harsh in the individual case of Mr Mitchell's claim, if we were to overturn the decision to refuse relief, it is inevitable that the attempt to achieve a change in culture would receive a major setback. 44 Finally the Court added: we hope that our decision will send out a clear message. If it does, we are confident that, in time, legal representatives will become more efficient and will routinely comply with rules, practice directions and orders. If this happens, then we would expect that satellite litigation of this kind, which is so

expensive and damaging to the civil justice system, will become a thing of the past. 45 Commentary There can be little doubt that the Court of Appeal has sent a clear message. It has affirmed categorically that the Jacksonian world is a strict one. What does this mean in practice? Nicholas Bacon QC, who represented the defendant, has said we are on a one-way ticket to Singapore (which enforces a strict approach to compliance following its own reforms). 46 He added that we should expect turbulence on the way There will be casualties in the short term. Solicitors will have to improve case management systems and up their game on meeting deadlines. After two to three years he predicted that practitioners could expect no further delays. application for relief from sanctions should be made promptly. If there is not a good reason then practitioners may still make an application but should be prepared to be sanctioned without relief. The new approach to be adopted in litigation can be simply stated: comply.. Practitioners will need to reassess their entire approach to litigation. Inefficiency will have to be expunged if perfectly reasonable deadlines are to be met. In the near future it is probable that a number of practitioners will fall foul of the new strict approach for no good reason. Consequently the number of professional negligence claims can be expected to rise before plateauing once the strict approach has established itself. What approach should practitioners adopt then? Defendant practitioners must be aware of non-compliance by claimant practitioners and strongly challenge applications for relief where defaults are not trivial and there is no good reason for the default. In terms of their own behaviour, defendant practitioners must always consider if they will be able to comply with rules, practice directions and court orders. If there is a reasonably foreseeable risk of non-compliance they should seek to agree an extension of time with the claimant where that is allowed under the rules, 47 or, failing that, make an application to the court for an extension of time. In the event of trivial default an application for relief from sanctions should be made promptly. In the event of more than trivial default, practitioners must consider if there is a good reason for the default. If there is a good reason then an PAGE 7

References 1 Claimants Pay the Price for Issuing Instead of Using RTA Portal (Litigation Futures, 20 November 2013) <http://www.litigationfutures.com/news/clai mants-pay-price-issuing-instead-using-rtaportal> accessed 23 November 2013. 2 Very Big, Catastrophic Failures Over Next 12 Months, APIL President Predicts (Solicitors Journal, 20 November 2013) <http://www.solicitorsjournal.com/news/litig ation/costs/%e2%80%98very-bigcatastrophic-failures%e2%80%99-overnext-12-months-apil-president-predicts> accessed 23 November 2013. 3 Mesothelioma Bill [HL] 2013-14 (UK Parliament) <http://services.parliament.uk/bills/2013-14/mesothelioma.html> accessed 25 November 2013. 4 John Hyde, Yorkshire Firm Pulls Out of PI Market (Law Society Gazette, 21 November 2013) <http://www.lawgazette.co.uk/practice/york shire-firm-pulls-out-of-pimarket/5038888.article> accessed 25 November 2013. 5 John Hyde, Slater & Gordon Snaps Up Pannone in 33m Deal (Law Society Gazette, 28 November 2013) <http://www.lawgazette.co.uk/practice/slat er-and-gordon-snaps-up-pannone-in-33mdeal/5038978.article> accessed 28 November 2013. 6 Francesca Nyman, Industrial Deafness: The New Whiplash? (POST, 19 November 2013) <http://www.postonline.co.uk/post/analysis /2307104/industrial-deafness-the-newwhiplash> accessed 26 November 2013. 7 UK Deafness Working Party Update 2013 at 43. 8 ibid 41. 11 [2013] EWCA Civ 1537 [1]. 12 ibid [26]. 13 ibid [27]. 14 ibid [29]. 15 ibid [30]. 16 ibid [32]. 17 ibid [33]. 18 ibid [36]. 19 ibid [37]. 20 ibid [38]-[39]. 21 ibid [39]. 22 ibid [40]. 23 ibid. The court did note that what could be regarded as trivial might generate satellite litigation: [40]. 24 ibid. 25 ibid [41]. 26 ibid. 27 ibid [43] 28 ibid [41]. 29 ibid. 30 ibid. 31 ibid [48]. 32 ibid [41]. 33 ibid [42]-[43]. 34 ibid [41]. 35 ibid [44]. 43 ibid. 44 ibid [59]. 45 ibid [60]. 46 Neil Rose, Mitchell Costs Ruling The Reaction (Litigation Futures, 28 November 2013) <http://www.litigationfutures.com/news/mit chell-costs-ruling-reaction> accessed 28 November 2013. 47 CPR 2.11 provides that the parties may agree to vary time limits except where the rules provide otherwise. For example, agreement could be sought to extend the period of time for acknowledging service of a claims or for filing a defence (subject to CPR 15.5), or to vary directions (subject to CPR 28.4 in fast track cases and subject to CPR 29.5 in multi track cases). 9 [2013] EWCA Civ 1537 <http://www.bailii.org/ew/cases/ewca/civ/ 2013/1537.html> accessed 27 November 2013. 10 [2013] EWHC 2355 (QB) <http://www.bailii.org/cgibin/markup.cgi?doc=/ew/cases/ewhc/qb/ 2013/2355.html&query=master+and+mccl oud&method=boolean> accessed 27 November 2013. PAGE 8 36 ibid [45]. 37 ibid. 38 ibid [46]. 39 ibid [48]. 40 ibid [52]. 41 ibid [56]-[57]. 42 ibid [58].

Disclaimer This newsletter does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to provide an update on issues that may be of interest to those handling occupational disease claims. Specialist legal advice should always be sought in any particular case. BC Legal LLP 2013. BC Legal is a Limited Liability Partnership registered in England and Wales under number OC379945. We are authorised and regulated by the Solicitors Regulation Authority. The registered office is 1 Nelson Mews, Southend-on-Sea, SS1 1AL. The partners are Boris Cetnik and Charlotte Owen. More details on the firm can be found at www.bc-legal.co.uk PAGE 9

PAGE 10 Partners: B. Cetnik, C. Owen Registered Office: 1 Nelson Mews, Southend-On-Sea, SS1 1AL BC Legal LLP is a Limited Lability Partnership registered in England and Wales Registered No: OC379945 We are Authorised and Regulated by the Solicitors Regulations Authority (SRA No 590579)