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Personal injury costs reform continues apace
Monday 25 June 2012 by Rachel Rothwell
Behind-the-scenes work on the implementation of Lord Justice Jackson’s reform of personal injury costs has stepped up a gear or three in the past few weeks. The government intends to make a ministerial statement on qualified one-way costs shifting (QOCS) on 19 July, which has injected some urgency into the issue.
At the end of May, the Ministry of Justice revealed some of the decisions it has already taken on QOCS (for the uninitiated, QOCS is Jackson’s way of getting rid of after-the-event insurance in personal injury - the cost of which is currently recoverable from defendants - by removing claimants’ obligation to pay a defendant’s costs if they lose.) A commissioning note published by the MoJ revealed - among other things - that claimants had lost their battle for QOCS to take precedence over the part 36 regime. That means that where claimants fail to beat a defendant’s part 36 offer, they will lose QOCS protection for the costs incurred after the offer was rejected; something the claimant lobby had vehemently opposed.
But while some issues have now been decided, there is still plenty for the claimant and defendant interests to fight over before the rules are set. Last week, at the MoJ’s behest, the Civil Justice Council held a meeting of experts to examine some of the tricky decisions still up for grabs. Whereas previous meetings on this topic organised by the CJC have been more confrontational, it seems that last week’s saw the experts from both sides of the claimant/defendant divide reaching a fair degree of consensus.
So what did the experts manage to agree about?
One topic they were asked to consider was whether claimants should be required to make a ‘minimum payment’ to bring a claim. From what I’ve been told, it seems that even the defendant lobby agreed that there would be little benefit to this. If a payment were too low, it would be ineffective in discouraging claims and therefore pointless, but if it were pitched too high it would form a barrier to access to justice for poorer claimants. It seems there was consensus that the government should drop any plans to introduce a minimum payment (as indeed it has already ditched plans for a means test to qualify for QOCS).
One of the more difficult issues is the question of what behaviour by claimants should cause the QOCS shield to fall. It is generally accepted that a claimant should not benefit from costs protection where there has been a court finding of fraud or abuse of process. But the MoJ has indicated that it is also very keen to tackle ‘exaggerated’ claims. That is a difficult area; after all, one man’s exaggeration is what another would consider simply putting in a claim at its highest level, as indeed insurers may seek to downplay a claim.
The key question will be whether a court’s assessment that a claim was exaggerated should be enough to cause QOCS to be lost. Claimants argue that it should not, because defendants already have two effective ways of dealing with an exaggerated claim. Either they can plead that it is fraud, or they can submit a part 36 offer reflecting what they believe is the true value of the claim. If the court finds fraud, the claimant’s QOCS protection will disappear in a puff of smoke. If the court finds the sought amount exaggerated and awards only a lower level of compensation, that means the part 36 offer will probably not have been beaten, and QOCS will be lost from the point where that offer was rejected.
I am told that the MoJ appeared reasonably relaxed at last week’s meeting about adopting this approach. But a Supreme Court judgment due out this week could throw a spanner in the works from the claimants’ perspective. In Summers v Fairclough Homes, the court will rule on whether exaggeration should lead to a claim being struck out.
Under current law, exaggeration is penalised through the costs regime, but does not deprive the claimant of damages where the claim itself is genuine, even though it may be dishonestly exaggerated. If the court finds that damages should be reduced or a claim struck out where there has been exaggeration, the knock-on effect may be that the MoJ will decide that exaggeration should also cause the loss of QOCS.
There is one other aspect of QOCS that is exercising defendants in particular; how it should operate in credit hire claims. Defendants are very unhappy indeed that QOCS should apply to the credit hire aspects of a personal injury claim. While they might accept that, for example, claims for loss of earnings do stem directly from the personal injury itself, they argue that the credit hire element stems from the car accident rather than the injury, and want a distinction to be drawn. Defendant insurers are seeking a carve-out whereby QOCS will not apply to the credit hire part of a personal injury claim. Given the recent proliferation of headlines about credit hire claims, the government may well be inclined to oblige.
The experts’ group will meet once more before the CJC submits its recommendations to government on some of these key aspects of QOCS. But while it is positive that the two sides seem to have reached consensus on many of the issues, that is no guarantee that the MoJ will actually heed their advice; a lesson learned by the CJC’s previous experts’ group on proportionality.
Whether the MoJ will pay attention to the findings of the latest CJC group may become apparent on 19 July.
Rachel Rothwell is editor of Litigation Funding magazine, providing in-depth coverage on costs and the financing of litigation.
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