Costs, unreasonableness and the RTA Protocol

Sometimes cases fall out of the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents, as they are withdrawn by claimants solicitors who contend that the insurers are raising complex issues of law and fact.

From what I have seen, these issues typically arise in the context of a claim for credit hire, where there is a substantial claim for “vehicle related” damages.  This raises in turn interesting questions as to whether credit hire claims should be pursued within the Portal or whether insurers can effectively ask for  them to be excluded, and then litigated on the Small Claims track. To what extent can a claim be divided in this way to facilitate costs saving on the part of the insurers?

When a claim is taken out of the Protocol, the insurers will usually contend that the claimant has acted unreasonably and that the costs of any part 7 proceedings should be irrecoverable and the claimant limited to those elements of costs prescribed by the Protocol. How does the court adjudicate on these competing arguments and with what criteria?

The relevant rule is 45.24 In essence the Appellant must be judged to have acted unreasonably in withdrawing the claim from the MOJ Portal. Reasonableness connotes a spectrum of conduct/available decisions open to a party. Provided the decision to withdraw the claim was within that spectrum, the decision will be reasonable.

The key to resolving this issue is to consider the scope of the Protocol and the sort of dispute that it envisages can be properly conducted within its constraints, both procedurally and in terms of costs.

As a general proposition a dispute which requires disclosure, cross examination, a forensic enquiry into the issues, and the expenditure of costs to properly investigate and litigate the case is a case which is suited for the part 7 procedure, rather than the part 8 procedure leading to a stage 3 hearing as contemplated by the Protocol.

Similarly a dispute which requires substantial work by solicitors to gather evidence or deal with disputes of fact or legal argument, and the expenditure of legal costs, in sums which exceed by some margin the limited costs contemplated by the Protocol would fall outside its scope.

Looking at the “old” Protocol, for simplicity’s sake, per paragraph 1.1(6) of the Protocol, vehicle related damages includes damages for PAV and hire. Per paragraph 4.3 of the Protocol:

A claim may include vehicle related damages but these are excluded for the purposes of valuing the claim under paragraph 4.1

See also paragraph 6.4: the claim for vehicle related damages may be dealt with by a third party, or it may be dealt with by the legal representative named in the CNF. It is important to note what are vehicle related damages: they include elements of credit hire damages.

The reference within the Protocol to industry agreements, is a reference to the ABI GTA initiative, where subscribing insurers and claims handling organisations (credit hire companies) have agreed a tariff for the settlement of claims: see more generally the ABI GENERAL TERMS OF AGREEMENT (GTA) BETWEEN SUBSCRIBING INSURERS (Insurers) AND CREDIT HIRE ORGANISATIONS (CHOs).

However, if the insurer in a case, or the credit hire company is not a party to this agreement, then the Agreement has no application. It is not the case that claims involving elements of credit hire are otherwise to be “hived off” from a claim on a general basis. The claimant is entitled to include such a head of loss within the CNF.

Paragraph 7.26 provides that a stage 2 settlement pack must be sent to the defendant’s insurer which includes evidence of pecuniary losses. There then follows scope for a series of offers/counter offers.

It is important to note that in context, this will include such things as receipts, invoices and similar “proof”. This is material that simply provides confirmation of loss and a basis for valuation of the claim.

It is not meant to encompass relevant material which might fall within the scope of standard disclosure, eg bank statements, or contentious witness statements which would form the basis for evidence in chief and cross examination at a contested trial. Had it been so contemplated then no doubt, that could have been included in this version of the Protocol.

Detailed issues of mitigation, and arguments on evidence for example are not contemplated in this procedure.

There is no scope for the insurer to serve evidence contra the claimant’s evidence. There is no provision for a forensic trial of strength at stage 3. As contemplated by the Protocol, stage 3 disputes can be “paper” exercises, where parties who disagree on a valuation, can seek the court’s judgment.

However the claim may leave the Portal, if the requirements of paragraph 7.67 are met:

Where the claimant gives notice to the defendant that the claim is unsuitable for this Protocol (for example, because there are complex issues of fact or law in relation to the vehicle related damages) then the claim will no longer continue under this Protocol. However, where the court considers that the claimant acted unreasonably in giving such notice it will award no more than the fixed costs in rule 45.29.

Complex is not an absolute term, but a relative concept. Some cases are more complex than others. The word “complex” must be read in context: complex must mean of sufficient complexity to make it unsuitable for resolution with the Protocol, if necessary by a stage 3 hearing. It does not require that a case break new ground or establish some new legal principle or require a 3 day time estimate, for it to fall without the quick and cheap Protocol process.

It is also noteworthy that the example given as to why a claim may exit the Protocol, is because of issues of fact or law arising from any vehicle related damages. Credit hire claims often require disclosure of a claimant’s financial circumstances, bank statements and the like, rates evidence and cross examination.

A severely restrictive approach is taken to evidence in Practice Direction 8B. See in particular 6.4, 7.1 and 8.2 and 11.3. In brief, an insurer cannot file evidence. If the claimant wishes to put in additional evidence per paragraph 7.2, the case will continue as a part 7 claim.

So the key in any case is whether the insurer has raised issues of fact or law of sufficient complexity to justify the case being taken out of the Protocol procedure.

In this context complexity of law and fact means a degree of complexity greater than that suitable for resolution within a stage 3 hearing. It is necessary to consider which issues are properly capable of resolution within stage 3 and which consequently are not.

Insurers benefit from the Protocol, as if they promptly admit liability and make sensible offers, even if the case goes to a stage 3 hearing, their liability for costs is capped at the fixed costs prescribed by part 45.

Equally, however, insurers are sometimes keen to investigate and defend claims, to challenge causation and quantum or to put forward alternative evidence: but in so doing they are taking the case beyond the very limited scope of the Protocol, and the scope of a stage 3 hearing. There is a plain tension between settling claims cheaply and speedily and embarking on a forensic investigation, at greater length and greater cost.

Accordingly, it is not possible for an insurer to have his cake and eat it: they can accept the evidence put forward in the Portal and then argue for a different valuation to that contended for by the claimant at a stage 3 hearing. If however they dispute the evidential foundation, raise issues of credibility or wish to rely on their own evidence, then the matter goes beyond the scope of stage 3. It should be noted that a claimant (or any potential witness) does not need to attend a stage 3 hearing.

What is not permissible, is to seek to enlarge the scope of the Protocol, so that disputes which are properly disputes apt to fall within part 7 are shoehorned into stage 3, so that the insurer can mount a forensic challenge risk free as to costs. In such a scenario, the exception of the Portal scheme subsumes the norm of county court proceedings and the insurer through its conduct will be able to practically mount the sort of defence best dealt with, in a part 7 claim at the claimant’s cost.

So insurers who serve part 18 requests, or ask for disclosure of bank statements or put forward alternative rates evidence within the Protocol, are  raising matters which cannot be dealt within the Protocol and which would justify a case being removed from it.

Accordingly, any case must be carefully evaluated to determine whether it should be quickly settled, or the risk taken that a forensic investigation will cause a case to exit the Portal with any potential savings on damages dwarfed by a bill for part 7 costs.

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