At what cost?

The predictable costs regime should reduce costs. It covers claims of up to £10,000 arising out of road traffic accidents that settle before proceedings are issued. However, there is concern that some solicitors aretrying to escape these costs restrictions.

There are various practices that defendants are seeking to challenge. One is when a claimant's solicitors issue proceedings prematurely. A justification is usually given, such as the inability to reach agreement as to quantum. Then, once the claim is settled after the issue of proceedings, the claimant's solicitors try to obtain their full costs.

• Has the claimant suggested that it wants costs beyond those permitted by the predictable costs regime?
• Has the defendant made a Part 36 offer and asked the claimant to respond?
• Has the claimant issued proceedings without appearing to consider the offer, replying to the offer or attempting to negotiate?

Civil Procedure Rules

CPR 45(7) concerns the predictable costs regime:

Scope and interpretation

45(7)

(2) This section applies where '“

(a) the dispute arises from a road traffic accident;

(b) the agreed damages include damages in respect of personal injury, damage to property, or both;

(c) the total value of the agreed damages does not exceed £10,000; and

(d) 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.

Amount of fixed recoverable costs

45.9

(1) Subject to paragraphs (2) and (3), the amount of fixed recoverable costs is the total of '“

(a) £800;

(b) 20 per cent of the damages agreed up to £5,000; and

(c) 15 per cent of the damages agreed between £5,000 and £10,000.

Disbursements

45.10

(1) The court'“

(a) may allow a claim for a disbursement of a type mentioned in para (2); but

(b) must not allow a claim for any other type of disbursement.

(2) The disbursements referred to in

para (1) are-

(a) the cost of obtaining '“

(i) medical records;

(ii) a medical report;

(iii) a police report;

(iv) an engineer's report; or

(v) a search of the records of the Driver

Vehicle Licensing Authority;

(b) the amount of an insurance premium or, where a membership organisation undertakes to meet liabilities incurred to pay the costs of other parties to proceedings, a sum not exceeding such additional amount of costs as would be allowed under s 30 in respect of provision made against the risk of having to meet such liabilities;

Brief facts

The defendant suggested that just this happened in the case of Farmer v Dix (2006), claim no 5RG08511, a first instance, unreported decision. The claimant was involved in a road traffic accident on 6 July 2005. The claimant sustained an injury with whiplash symptoms for just over four months. Within four weeks, the defendant conceded liability. In September 2005, the defendant agreed special damages in the sum of £289.98.

Then, on 8 November 2005, the claimant, through their solicitor, made a Part 36 offer to the defendant in respect of general damages. The injury, as already stated, was a four- to five-month whiplash injury. The offer was for £2,467. It was noteworthy that the wording of the letter was: 'We confirm that we have instructions to offer the sum of £2,467.00 together with our reasonable costs and disbursements on the standard basis in full settlement of our client's claim' [emphasis added].

The defendant replied eight days later. They rejected the claimant's offer, but put forward a counter offer of £1,100. The letter ended with the sentence: 'We trust you will take your client's instructions and look forward to hearing from you.' [emphasis added]

The claimant's solicitors made no reply. Instead, on 5 December 2005, it sent a letter to the defendant's insurers informing them that they had, that day, issued proceedings against the defendant. In fact, the claimant's solicitors had posted the claim form, which was issued two days later, on 7 December 2005.

In April 2006, after a date had been set for a disposal hearing, the amount of general damages was settled for £1,500. Adding this to the special damages that were already agreed, the entire claim was settled for £1,789.98.

The claim having been settled after proceedings were issued, the claimant's solicitors sought to have their costs assessed summarily. They refused to agree for the disposal hearing to be vacated and/or for the costs to be considered at a detailed assessment hearing. The defendant's solicitors wrote to them to suggest that costs be calculated according to the predictable costs regime. The claimant's solicitors disagreed. In correspondence, they stated that the claim for general damages was settled at £1,500 '“ 37 per cent more than the £1,100 that the defendant had offered. Therefore, they maintained, negotiations would not have resolved without the need for proceedings.

Why were the offers rejected?

The matter reached the district judge. The defendant submitted that the claim met the criteria set out the criteria for predictable costs as set out in CPR 45(7). These were:

• the claim arose out of a road traffic accident;
• the agreed damages were in respect of personal injury and damage to property;
• the total value of the claim did not exceed £10,000; and
• that the small claims track would not have been the appropriate track.

The defendant submitted that to paraphrase Butcher v Wolfe [1999] 1 FLR 334 at 342A, which was concerned with Part 36 offers, 'why were the offers rejected, why was this case fought?' Or rather, in the circumstances of the immediate claim, why was the defendant's offer rejected, and why did the claimant's solicitors choose to issue proceedings? The defendant made the following points:

• The reason the defendant's offer met with a blank refusal and/or no further discussion was not because the claimant felt the offer to be too low and that there was no possibility of further manoeuvre or compromise, but rather, the claimant's solicitors wished to build up further costs than the predicable costs regime would allow.
• That had the claimant been prepared to discuss the defendant's offer further, the defendant would have considered readily any further proposal. The defendant was prepared to increase the offer as was shown by the final sum agreed of £1,500.
• In reality, therefore, the claimant's solicitors obtained nothing from issuing proceedings that they could not equally have obtained by making a further offer in correspondence. In the event, the final agreed offer was only £400 greater than the defendant's original, first, offer on general damages.
• The claimant's solicitors made a grossly exaggerated Part 36 Offer relative to the value of this low-value case, just short of £1,000 more than the figure at which they settled, in order to provide a justification for rejecting the defendant's offer and then issuing proceedings. An offer is usually made for an amount of less than the full value of the claim. Therefore, an offer of £2,467 in reality meant that the claimant's solicitors valued a four- to five-month whiplash injury at almost £3,000.

In addition, the defendant drew the court's attention to para 2.13 of the personal injury protocol. This stated: 'Parties and their legal representatives are encouraged to enter into discussions and/or negotiations prior to starting proceedings. The protocol does not specify when or how this might be done, but parties should bear in mind that the courts increasingly take the view that litigation should be a last resort, and that claims should not be issued prematurely when a settlement is in reasonable prospect.' [emphasis added]

Courtesy is not an optional extra

The judge did not feel able to go as far as the defendant had invited him. He did not find that the claimant's solicitors had issued proceedings deliberately in order to be able to escape the predictable costs regime.

Nevertheless, he did note three matters:

• First, it appeared from the outset that the claimant's solicitors wanted all of their costs and not just those costs provided for by the predictable costs regime. Their letter making the Part 36 offer, and made before proceedings were issued, stated that they wanted their reasonable and costs and disbursements on the standard basis.
• Second, the defendant's counter-offer had ended with the statement that: 'We look forward to hearing from you.' This, the judge felt, placed a responsibility on the claimant's solicitors to respond. They should have replied stating if the offer was rejected and why. They might also have made a further counter-offer. It was not enough for the claimant's solicitors simply to allow the offer to expire and issue proceedings, especially when the defendants had made it clear that they were waiting to hear from them.
• Third, and finally, the final settlement was not that much more than the defendant's original offer. The judge was of the view that the appropriate level of general damages in any event would have been around £1,500. The claimant's offer had been too high. The defendant's offer had been too low. That was to be expected. It was also to be expected that further negotiations would result in the two parties meeting somewhere in the middle. The claimant's solicitors ought to have made a greater effort at negotiating an acceptable level of general damages before issuing proceedings. Their actions were not in accordance with the spirit of the personal injury protocol.

Therefore, the claimant's solicitors had acted unreasonably in issuing proceedings. The claimant would be entitled to recover costs according to the predictable costs calculations only. In addition, the defendant was to be awarded its costs for attending what was, in the event, an unnecessary assessment hearing.

Conclusion

Defendants may wish to challenge a claimant's attempt to recover their full costs in circumstances that are similar to these. Should they wish do so, they should challenge the reasons for which the claimant issued proceedings. The defendant should invite the court to ask itself why it was that offer/s were rejected, and why proceedings were issued.

Elliot Gold is a barrister practising from Bridewell Chambers, London, a current adviser at Stonewall Housing and a former adviser at the Bury Law Centre