The other fixed costs regime
Paul Jones highlights technical challenges to the MoJ scheme that will face an uphill struggle:
As the debate surrounding reform to the legal costs system continues, fixed costs are often held out as a solution to many of the woes of the existing system and, in the area of Road Traffic Accidents, we have seen not one but two fixed costs regimes in the last ten years. RTA Predictable costs (CPR 45 Part II) has seen its fair share of case law but the MoJ Fixed Costs regime (CPR 45 VI) has seen very little in the way of reported case law – possibly indicative that all is working just fine. However, the recent case of Patel v Fortis Insurance  may give some idea of the arguments going on behind the scenes.
The case arose from a straightforward RTA. The claimant was a passenger in a vehicle that was struck from behind by another vehicle driven by a Ms Daudia. The defendants were the insurers of Ms Daudia. The claimant suffered minor whiplash injuries and consulted Your Lawyers solicitors who entered into a conditional fee agreement (CFA) with the claimant and obtained an after the event (ATE) insurance premium.
The value of the claim was self-evidently no more than £10,000 and, therefore, the claim fell, prima facie, to be dealt with under the pre-action protocol for low value personal injury claims (the protocol). To this end, the claimant solicitors completed a claim notification form (CNF) and sent this via the MoJ claims portal at 5.16pm on 12 October 2010. At 5.15pm, The MoJ Portal automatically generated a standard message that the CNF had been received by the defendant’s computer system, a message that was accessible to the claimant solicitors, but the defendant did not actually respond to the CNF directly. At 9.53 on 14 October 2010, the defendant completed and sent the CNF response to the claimant, pursuant to para 6.11 of the protocol, confirming that breach of duty and causation of some loss (but not the extent of the same) was admitted.
On 18 October 2010, the defendant received a letter from the claimant solicitors, dated 14 October 2010, advising that the defendant had failed to comply with para 6.10 of the protocol, namely:
The defendant must send to the claimant an electronic acknowledgement the next day after receipt of the CNF.
Therefore, the claimant said that the case had automatically exited from the MoJ portal and would proceed accordingly. The defendant, surprisingly, did not respond to this letter and the claimant then proceeded to obtain a medical report and, on 30 March 2011, disclosed the same to the defendant together with an offer to settle the claim that was open for acceptance for 21 days after which proceedings would be issued. The defendant responded, by telephone, on 28 April, the medical report should have been submitted via the MoJ portal to which the claimant replied that this was not the case as the claim had excited the MoJ portal as per their letter of 14 October 2010. The defendant then wrote to the claimant solicitors that this was not accepted arguing that their computer system did not allow an individual acknowledgement of a CNF to be sent and, therefore, they were not in breach of the protocol and, therefore, the claim remained within the MoJ portal. The claimant’s response was to issue part 7 proceedings on 11 May 2011, with the value of the claim limited £3,000 (therefore clearly within the ambit the MoJ portal). The defendant served a defence admitting liability and raising the alleged breach of the protocol and the matter was allocated to the fast track. On 3 October 2011, the defendant made a Part 36 offer of £2,300, but on 5 October 2011 this offer was withdrawn and re-stated as a Calderbank offer (presumably to avoid the costs consequences of acceptance of a Part 36 offer in CPR 36.10). the claimant made a non-Part 36 offer of £2,950 on 11 October 2011 and, on 30 November 2011, quantum was agreed at £2.500 with the parties agreeing that costs should be determined by the court. The matter therefore came before the court to determine three issues:
- Did the defendant breach the protocol in failing to send an acknowledgement of the CNF?
- If so, did this cause the claim to exit the MoJ portal, either automatically or at the claimant’s election?
- In light of the above, what orders should be made for the claimant’s and defendant’s costs.
The first issue to be determined was whether the defendant’s response to the CNF – sent on 14 October 2010 – was done ‘the next day after receipt of the CNF’ (as required by Para 6.10 of the protocol). The court held that as the CNF was received on 12 October 2010 (albeit after 5pm), the acknowledgement had to be sent by the close of 13 October and, as it was not sent until 14 October, this was out of time and was, therefore, a breach of the protocol by the defendant.
On the basis that the defendant had failed to comply with para 6.10 of the protocol, the next question was the effect of this non-compliance. The claimant argued that as the provision of para 6.10 was expressed in mandatory terms, then any failure automatically exited the claim from the MoJ portal or, in the alternative, gave the claimant the unfetted option to choose to exit the claim. The defendant, by contrast, argued that the protocol did not expressly provide for this outcome and it would depend on all the circumstances as to whether a breach of para 6.10 would result in the claim exiting the MoJ portal.
The court held that, absent an express provision dealing with a failure to comply with para 6.10, there was no automatic exiting of the MoJ portal where there was non-compliance. Furthermore, a failure to comply did not, in itself, give the claimant the right to elect to exit the MoJ portal. Therefore, the claimant solicitors had not been entitled by the protocol to exit the claim from the MoJ portal as a result of the defendant’s breach of para 6.10.
As to the consequences of the decision, CPR 45.36 provides:
- This rule applies where the claimant:
(a) Does not comply with the process set out in the RTA protocol; or
(b) Elects not to continue with that process, and starts proceedings under part 7 2)
- Where a judgement is given in favour of the claimant but
(b) The court considers that the claimant acted unreasonably –
(i) By discounting the process set out in the RTA protocol and starting proceedings under Part 7.
The court may order the defendant to pay no more than the fixed costs in rule 45.29 together with the disbursements allowed in accordance with rule 45.31 (3)
While, technically the claimant did not obtain judgement, the court dealt with the matter in the same manner and, therefore, had to consider whether the claimant had acted unreasonably. In this regard, the court firmly held that the claimant had acted unreasonably in that they acted with undue haste in seeking to exit the claim from the MoJ portal on the basis of a mere technicality (per Recorder Morgan at para 59):
The inference that I draw is that the claimant… was playing a tactical game with the aim of trying to get out of the restrictive fixed costs regime and into the more generous costs regime under Part 7. Whilst such conduct may be understandable from a commercial perspective, it runs directly contrary to the letter and spirit of the protocol and in my judgement is exactly the sort of conduct that should be classified as unreasonable.
Having reached that conclusion, the court undertook a hypothetical analysis of which stage the case would have settled at if the case had proceeded under the protocol. On the basis that there were some extended negotiations following disclosure of the medical report, it was held that the case would probably have reached stage 3 but not a final hearing. Therefore, the claimant was awarded stage 1 and 2 fixed costs together with Type A stage 3 Fixed Costs together with disbursements, CPR 45.30, and a success fee of 12.5%, CPR 45.31 (6) and CPR 45.37(2)(d). The defendant also sought their costs of the matter, but the court declined to make any award save for 50% of the costs of the costs hearing itself. This is a valuable case on the application of the MoJ portal fixed cots regime. It illustrates the interplay between the protocol and the CPR and also shows how the courts will seek to intercept the rules to give effect to the unwritten purpose of the scheme. The courts will not, in general, be impressed by attempts to circumvent the application of the scheme by virtue of technical argument and this is a cautionary tale in this regard. However, it does also show that any fixed costs regime is open to interpretation and argument if fixed costs does become more widespread across a greater range of cases it is surely inevitable that cases such as this will continue to come before the courts.