The Court of Appeal rejected repayment of £400 Stage 1 fixed costs

 

J C and A Solicitors Ltd v Andeen Iqbal & Another [2017] EWCA Civ 355

 

The Court of Appeal has ruled that the Claimant’s Solicitors are entitled to the £400 Stage 1 fee in pre-2013 cases where the case did not progress any further. The Court unanimously agreed that “no obligation to repay Stage 1 fixed costs once received is imposed by the RTA Protocol or by the CPR upon Protocol Claimant merely because, after the conclusion of Stage 1, they take no steps to pursue their claim under stage 2”. Accordingly defendants do not have a right to repayment of these fixed costs.

This appeal arises out of three materially identical road traffic accident claims in which the Defendant’s Insurer admitted liability and paid the Claimant the Stage 1 fixed costs of £400 (as they were before July 2013). As the claimants took no further steps to advance their cases they eventually became statute-barred and therefore the Defendant’s Insurer sought to recover the costs.

Earlier the three claims for repayment of the Stage 1 costs were heard together by District Judge Phillips, sitting in the County Court at Cardiff. However the Court of Appeal overturned a decision by District Judge Phillips, where he had ruled that insurers could recover Stage 1 costs that had been paid when the protocol Claimants had subsequently failed to advance their claims in the prescribed Stage 2 manner.

The Court of Appeal found that there was no authority for the contention that the Stage 1 costs should be returned in matters which did not proceed beyond that stage.

Lord Justice Briggs noted that it could only be implied insurers had a right to repayment, but in fact the rules “implicitly” treated Stage 1 costs as costs to which the protocol claimant was entitled outright.

Further Lord Justice Briggs noted that “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.”

The case attracted interventions from both the Law Society and Association of Personal Injury Lawyers, which made submissions in favour of the Claimant’s Solicitors.

The Judge accepted the Law Society’s submission that the underlying objective was 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. He also noted that it was an “express aim” of the protocol “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”. He added that “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”.

Lord Justice Briggs also dealt briefly with what has come to be called the “400 Club” point. Addressing the insurer’s concerns with regard to purported abuse of the scheme, he said: –

“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 Court of Appeal allowed the appeal and, through this judgement, Lord Justice Briggs has provided very clear guidance as to the status of Stage 1 costs in pre-2013 road traffic accidents protocol matters and concluded that the reforms to the rules since have, hopefully, resolve this issue once and for all.

Tanya Bland