Bar Focus | Simmons creates confusion and uncertainty for claimants

In springtime 2013 sweeping reforms to civil litigation costs will be implemented. Those of us who represent clients in the civil litigation system would like to plan for the reforms confident in our knowledge of what lies ahead. We cannot do so. Important points of detail, rules and regulations are yet to emerge and few of ?us have a clear idea of how qualified one-way costs shifting, DBAs and costs management will work in practice. Nor, it seems, are we alone. Even the Court of Appeal seems to be struggling to prepare for the changes to come.

Having compromised their appeal, the parties in Simmons v Castle [2012] EWCA Civ 1039 may have been surprised to find their case listed in open court before the Lord Chief Justice, the Master of the Rolls and the Vice President of the Court of Appeal. The reason for this august gathering was that the Court wished to use the “opportunity to declare that with effect from 1 April 2013 the proper level of general damages for (i) pain, suffering and loss of amenity in respect of personal injury, (ii) nuisance, (iii) defamation and (iv) all other torts which cause suffering, inconvenience and distress to individuals, will be 10 per cent higher than previously”.

The rationale behind this declaration was to fit an important piece into the Jackson reforms jigsaw, which will come into force on 1 April 2013, The Court of Appeal referred to the civil litigation costs reforms as a coherent package. As the purpose of the 10 per cent increase was to provide claimants with some compensation for having to pay their lawyers’ success fees, it would be unjust to have the other reforms without the 10 per cent increase. The reforms were instigated by a member ?of the judiciary and it would be an act of bad faith if the judiciary didn’t play its ?part in implementing them.

The penny and the bun

The Court recognised that its declaration would not achieve perfect justice in every case but said that it would provide “simplicity and clarity”. That proved to be too optimistic. On application by the Association of British Insurers the appeal was re-opened with representations being heard from APIL and PIBA as well as the ABI. On 10 October the Court of Appeal gave its second judgment in the case, and qualified its original decision. It was brought to the Court’s attention that even after 1 April 2013, success fees and ATE premiums due under existing conditional-fee agreements (CFA) will remain recoverable from defendants. Unless the Court changed its original decision, from that date some claimants would be having “the penny and the bun” – they would have the benefit of the 10 per cent increase while also recovering success fees and costs insurance premiums. Defendants would be paying twice over.

The Court agreed to remedy that perceived unfairness. It also accepted that the 10 per cent uplift ought to apply to a wider range of damages than it had allowed for in its original judgment. It held that from the 1 April 2013 “the proper level of general damages in all civil claims for (i) pain and suffering, (ii) loss of amenity, (iii) physical inconvenience and discomfort, (iv) social discredit, (v) mental distress, or (vi) loss of society of relatives, will be 10 per cent higher than previously, unless the claimant falls within section 44(6) of LASPO. It therefore follows that, if the action now under appeal had been the subject of a judgment after 1 April 2013, then (unless the claimant had entered into a CFA before that date) the proper award of general damages would be 10 per cent higher than that agreed in this case, namely £22,000 rather than £20,000”.

The Court recognised that there is likely to be future litigation in relation to the range of general damages awards to which the uplift applies: does it apply to claims for loss of leisure, loss of enjoyment of a holiday, non-pecuniary damages under the Human Rights Act, or loss of use of a vehicle for instance?

The road ahead

While the Court of Appeal has now ironed out one wrinkle arising from the 10 per cent uplift, several others remain. In the most part, I believe, they flow from the regrettable entanglement of damages for injury with the payment of costs. That part of the forthcoming civil costs reforms is liable to distort the compensatory principle behind awards of damages for tort.

It is evident that many claimants will continue to have the penny and the bun. Damages for pain, suffering and loss of amenity (PSLA) are payable to every successful injured claimant no matter how they fund their litigation. Even those claimants who are not liable to pay a success fee will have the benefit of the 10 per cent uplift, including self-represented claimants and those few remaining claimants who are publicly funded. Indeed many observers believe that the market will drive out success fees so that the majority of personal injury claimants will have no liability to pay success fees. Defendants will be asking what the justification for making them pay those claimants the additional 10 per cent is.

If the 10 per cent uplift is linked to claimants’ costs liabilities then in principle it ought to be reviewed in the future whenever there are relevant changes to costs legislation. Suppose a future government allows the recovery of success fees of 50 per cent of damages, rather than the anticipated 25 per cent cap? Will the Court of Appeal then declare that there should be a further uplift to damages for PSLA? Conversely if the recovery of success fees is abolished altogether, will damages for PSLA have to be reduced by the Court of Appeal?

It is not clear whether the 10 per cent increase will be added immediately on 1 April next year and then be regarded as a historical, one-off increase, or whether, for the foreseeable future, the courts will assess general damages on present principles and then add 10 per cent as the costs element. We have had a one-off increase in general damages for PSLA before, following the judgment of Heil v Rankin [2000] 2WLR 1173. Over time, as damages gradually increase in any event, the impact of a one-off increase becomes diluted and then disappears. It is gradually absorbed within the range of reasonable awards that might be made in any one case. Most personal injury claims resolve before trial and most reported quantum cases these days are reports of out of court compromises. Negotiating parties know that there is always a range of possible damages awards for injuries or other non-pecuniary losses. It would be a brave lawyer who advises a client that they can be sure within a 10 per cent margin what award the court will make, particularly when the reforms are likely to introduce significant financial consequences for the litigant if the advice turns out to be wrong. The JSB guidelines are highly influential but they are intended to reflect reported cases and the very recently published latest edition pre-dated the Simmons decision.

Finally, what about the impact of the Simmons decision on Part 36 offers? A defendant might ‘correctly’ reject a claimant’s offer prior to the uplift and ?then find that the claimant recovers the ?sum offered, or more, for no other reason than that their damages are assessed after the 10 per cent uplift. Would that be an outcome more advantageous to a claimant in which case penalties on the defendant would apply?

Separating general damages

Some of these difficulties might be mitigated if the Simmons 10 per cent uplift is treated separately from the assessment of the general damages to which it applies. That practice would also protect the compensatory principle which ought to determine any award of damages in tort. As such, a court assessing damages should determine the appropriate figure and then add 10 per cent. It should do that on 2 April 2013 and it should do it on 2 April 2023. If a whiplash injury is assessed in 2013 at £2,000, the uplift is £200. If, in 2023, the same injury is to be assessed at £5,000 then the uplift should be £500. Schedules and counter schedules should have separate headings for damages for the injury and the 10 per cent uplift. Parties making Part 36 offers before 1 April 2013 will have to check the claimant’s funding arrangements and, if the 10 per cent uplift is applicable, could express the offer as being for £2,000 for the injury and £200 for the Simmons uplift. If offers have already been made then a further ‘Simmons offer’ could be made, adding 10 per cent to the existing offer.

The other advantage of the courts and litigants keeping the Simmons 10 per cent uplift separate from the assessment of general damages is that it would be easier ?to reverse or amend the uplift when the ?next wholesale change to civil litigation costs is implemented.

At least the Court of Appeal has sought to announce this particular part of the costs reforms well in advance of ?April 2013. Its apparent difficulty in doing so with “simplicity and clarity” might demonstrate why other important parts of the reform package are yet to be brought out into the light.