The shadow of Cassandra

Last year, I wrote a post on the fixed costs regime and how in my opinion as far as claimants were concerned, they were an optional choice on the Fast Track.

The original blog post is here: http://costsbarrister.co.uk/uncategorized/are-fixed-costs-optional-on-the-fast-track.

This week, I was proved right in the decision handed down by the Court of Appeal in Broadhurst v Tan and another [2016] EWCA Civ 94, a copy of which can be found here: Broadhurst v Tan and another.

At this point I should declare an interest, having argued the first appeal unsuccessfully before HH Judge Robinson on behalf of the claimant.

Like Cassandra, I prophesised but was not believed.

Undoubtedly the decision of the Court of Appeal is correct: as soon as the Explanatory Memorandum was brought to the Court’s attention, the game would have been up as far as the defendant was concerned.

Moreover, one can see the clear public policy in ensuring that part 36 offers are taken seriously, and as many cases settle as possible. Should a defendant now take a case to trial and lose, they will now suffer what have been termed penal consequences.

The real question which must now be addressed, is how each part of the personal injury industry, systematically addresses it’s use of part 36. For claimants and those representing them, the challenge is now to calculate and issue a part 36 offer as early as possible.

It will not be lost, that as part 36 offers can be made on liability only, a part 36 offer of 95% would be effective to set the ball rolling and place the defendant, minded to defend a claim on liability at risk.

The balancing act required a little later down the process, is that when a solicitor is instructed, there will often be a continuing loss accruing, such as hire charges in a credit hire claim. At this point more skill will have to be deployed, to judge when to make an offer, as well as what that offer should be.

For defendants, a different set of challenges arises.

It is well known that many insurance companies utilise software, to value claims, particularly of the bottom end of the scale, and often on the basis of a database which includes all data for settled cases, and skews the value of any part 36 offer downwards.

As a seasoned common law barrister observed to me many years ago, insurers like to pay 70 pence in the pound by way of settlement, judged against the true value of a claim.

The effect of the Broadhurst decision will be to alter the dynamics of that calculation and the variables used, when calculating a settlement offer. If a defendant’s part 36 offer is beaten and the claimants part 36 offer exceeded at a hearing, then the cost of losing the claim will now increase dramatically. Instead of fixed costs, proper costs will be awarded on the “full fat” indemnity basis to which the principle of proportionality will not apply, and of course with the further uplift on damages to boot.

Thus in my view, Broadhurst will have a double impact in terms of the inflation of claims: first the cost of losing an individual claim at trial will now be higher and secondly across the board, insurers when looking at the book of claims which constitute their exposure, will have to adjust their overall offers upwards, if claimants’ solicitors start systematically making well pitched and early part 36 offers.

The decision may also throw into reverse a trend that I have noticed over the last year and a half, confirmed anecdotally by colleagues at the Bar, that more cases, particularly at the bottom end are going to trial, a trend traceable to the low exposure to costs that insurers face, should they fight a case subject to fixed costs and lose.

In the longer term, given that fixed costs for NIHL and clinical negligence costs are on the horizon, there may well be scope for the impact of those regimes to be blunted.

If for example, every time a solicitor is instructed in a clinical negligence case, it is open to them to make a part 36 offer on liability, to the tune of 95%, then straightaway the defendant is on the horns of a dilemma, with its fixed costs protection at risk.

There is of course still nothing to read, in terms of detailed proposals for fixed costs in NIHL and clinical negligence cases. Instead the legal world’s attention has been diverted by the recent lecture given by Jackson LJ, where fixed costs for cases worth up to £250,000 are mooted.

Those proposals have been described by virtually every legal commentator as unworkable: and in our current system of litigation, with the current levels of remuneration for lawyers, particularly in the personal injury sector that would be right.

If however, there is an agenda is to drive down the rates that solicitors bringing personal injury claims and clinical negligence cases against insurance companies or emanations of that state, recover in respect of their costs, to levels akin to those paid in Legal Aid cases and to ensure that a QC earns no more than a consultant does from his NHS salary, then the reasoning behind the proposals is logical.

Given that the fixed fees applicable to RTA Portal claims, were influenced by the Legal Aid rates, that may indeed be part of the agenda at work and so the consultation documents on NIHL and clinical negligence are ones that I look forward to reading with considerable interest.

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