On 16 May 2017, in a judgment that had been eagerly awaited by personal injury lawyers, the Court of Appeal unanimously agreed that no obligation to repay Stage 1 fixed costs (£400 + VAT) 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.
The Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (“the RTA Protocol”) provides a scheme for the efficient resolution of personal injury claims arising out of road traffic accidents at proportionate cost and, at its early stages, using mainly electronic means of communication between the claimants’ solicitors and defendants’ insurers.
It came into effect in its original form on April 30 2010, and was substantially up-dated and revised with effect from 3l July 2013, in the light of the recommendations made by Jackson LJ in his Review of Civil Litigation Costs.
This appeal to the Court of Appeal concerned the RTA Protocol in its original form, which continues to apply to claims submitted between those two dates. All references in the judgment to the RTA Protocol are to the protocol in its original form. Similarly, references to provisions in the Civil Procedure Rules are to the rules in force in the same period.
The RTA Protocol seeks to resolve claims within its scope in three stages. Stage 1 is designed to ascertain whether, after notification of a claim, the defendant’s insurer admits liability. If it does, then Stage 2 is designed to facilitate a settlement of the claim by an agreement between the parties as to quantum. If no settlement is achieved, Stage 3 provides for the dispute as to quantum to be resolved by the court, by a speedy and cost-effective hearing under CPR Part 8.
All three stages of the scheme attract fixed costs, at rates prescribed in Part 45. At the relevant time the fixed costs payable in relation to Stage 1 under the RTA Protocol was £400 + VAT, although it has since been reduced to £200 + VAT.
The appeal in this case arose out of three materially identical RTA claims which began their short lives under the RTA Protocol. In each case, the defendant’s insurer admitted liability and paid the claimant the Stage 1 fixed costs. Thereafter, none of the three claimants took any further steps to advance their claims, in the manner prescribed for Stage 2 and they eventually became statute-barred.
In each case the defendant’s insurers then commenced proceedings in the Small Claims Track of the County Court for recovery of the Stage 1 fixed costs, both from the relevant claimant and from their solicitors, namely the appellant J C and A Solicitors Limited (“JC&A”). The insurers in each case were EUI Limited (“EUI”) trading under the Admiral name.
The three claims for repayment of the Stage 1 costs were heard together by District Judge Phillips, sitting in the County Court at Cardiff. Although, because of the changes to the RTA Protocol made in 2013, the issue as to recoverability of Stage 1 costs is largely historical, the judge was told that some four hundred or more cases raised the same issue. The judge was also told by counsel for EUI that the claim for repayment was not based upon any allegation of improper conduct by JC&A in initiating the relevant claims under the RTA Protocol, or indeed in abandoning those claims after the conclusion of Stage 1. The case for recovery was put purely on the basis that, in fact, none of the claims had been pursued in any way by the Protocol Claimants or by JC&A as their solicitors beyond the conclusion of Stage 1.
Before the judge, the claims were advanced primarily upon the basis that the RTA Protocol itself gave rise to an entitlement to repayment in those circumstances. The claims were put in the alternative on the basis of constructive trust, money had and received and unjust enrichment. The judge did not find it necessary to deal with those alternatives and none of them have been pursued by EUI on this appeal.
The judge found in favour of EUI’s claim for repayment on the basis that, upon its true construction, the RTA Protocol conferred a right of recovery of the Stage 1 fixed costs wherever, for whatever reason, the claim was not thereafter pursued by the claimant.
On appeal, Mr Richard Marven for JC&A challenged the judge’s analysis on two main grounds:
First he submitted that the judge was wrong on his construction of the RTA Protocol. There being no express provision for repayment of the Stage 1 costs in the relevant circumstances, he says that no such right could properly be implied.
Secondly he submitted that, in any event, there is no basis upon which an obligation to make repayment can be imposed on the Protocol Claimant’s solicitors, who will have received the Stage 1 costs pursuant to their contract of retainer with the Protocol Claimant, for work done on the case, the entitlement to Stage 1 costs under the RTA Protocol being that of the Protocol Claimant.
Mr Marven’s submissions for JC&A were broadly supported in brief by written submissions from the Law Society and from the Association of Personal Injury Lawyers (“APIL”).
Mr Simon Browne QC for EUI supported the judge’s analysis.
On the central question, namely the interpretation of the RTA Protocol, Lord Justice Briggs reached the opposite conclusion from the judge based upon the provisions of the RTA Protocol (in its 2010 form) which dealt most directly with the issue of construction, while recognising that the answer must of course depend upon a reading of the RTA Protocol as a whole, in its context.
At the relevant time CPR 45.40 made provision for taking into account Stage 1 fixed costs already paid, in cases coming to court after leaving the RTA Protocol, otherwise than in the Small Claims Track, in the following terms:
“Where a claim no longer continues under the RTA Protocol the court will, when making any order as to costs including an order for fixed recoverable costs under Section II of this Part, take into account the Stage 1 fixed costs together with any success fee on those costs that have been paid by the defendant.”
Lord Justice Briggs found that it was readily apparent from the relevant provisions that neither the Pre-Action Protocol nor the CPR make any express provision for a right to repayment of Stage 1 fixed costs in circumstances where the Protocol Claimant takes no further steps to pursue the claim after the conclusion of Stage 1. The question of whether there is such a right, conferred by the RTA Protocol or the CPR, would therefore depend upon whether such a right can be implied.
Briggs LJ considered that there were 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. Those reasons are set out in full in his judgment.
He also dealt briefly with what has come to be called the “400 Club” point. It was suggested that a construction of the pre 2013 RTA Protocol, which treated Stage 1 costs as an entitlement regardless of 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.
However, this theoretical opportunity had been closed off since the 2013 amendments, as Stage 1 costs are now only payable after the submission by the claimant (where liability is admitted) of a Stage 2 Settlement Pack including a medical report.
As a result, he found there to be no risk now 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 and therefore the Appeal was allowed.
Link to judgment: