horwich farrelly

Court of Appeal upholds status quo regarding ‘£400 Club’

May, 17, 2017

We reported last March of the success achieved in three conjoined hearings at Cardiff County Court[1] which potentially opened the door for the recovery of fixed costs paid by insurers on motor third party personal injury claims that never progressed to Stage 2 of the Portal process.   

In a judgment handed down yesterday the Court of Appeal has overturned the first instance decisions, effectively closing the door on recovery of the costs paid in such cases.

In reaching his decision in the original small claims hearings DJ Phillips focused on the fundamental principles of the Portal in allowing the claims for recovery. He made the point that, despite the wording of the Protocol at the time:

“The whole system [the Portal process] is based upon the premise that there will be a claim made for personal injury, and that any claim will proceed from Stage 1 to Stage 2. I also note that the Protocol has since been amended so that now Stage 1 costs are only paid when the settlement pack is submitted as part of Stage 2. This reinforces my conclusion that it was always the intention that Stage 1 costs would only be paid on the basis that the claim proceeded to Stage 2, the Claimant submitting his settlement pack including medical report and other documents as set out at paragraph 7.26.”

He went on to say that:

“In a case where for whatever reason, the claim is not proceeded with, then in my judgment any Stage 1 fixed costs must be repaid. “

The Appeal

In a unanimous decision, the three Court of Appeal judges, led by LJ Briggs, disagreed with the decision of DJ Philips. Analysing the CPR and Pre Action Protocol applicable at the time (particularly S6.18 of the PAP) they decided that:

“….neither the Pre-Action Protocol nor the CPR make any express provision for a right to repayment of Stage 1 fixed costs in circumstances where the Protocol Claimant takes no further steps to pursue the claim after the conclusion of Stage 1.”

Furthermore, the Court decided that, given the precise nature of the Rules and Protocol concerning Portal claims it would be wrong to imply such a provision, stating that “…there are powerful reasons for concluding, contrary to the reasoning of the judge, that no [implied] obligation to repay Stage 1 costs once received is imposed by the RTA Protocol or by the CPR upon Protocol Claimants merely because, after the conclusion of Stage 1, they take no steps to pursue their claim under Stage 2”. They also set out a number of reasons why “….the claimant’s legal representative should receive the relevant fixed costs at the end of each stage, i.e. regardless of what, if anything, happens at a later stage”

The judges also considered that there was no evidence for the “£400 Club” phenomenon, whereby claims would be pursued purely to obtain Stage 1 costs and that since the changes to the CPR and PAP in 2013 such a “theoretical opportunity” had, in any event, been closed off.

Comment

This is a highly disappointing result. In reaching their decision the Court of Appeal has stuck to a rigid analysis of the wording of the CPR and PAP applicable at the time. In doing so they have dismissed the intentions of the Portal process and some the behaviours seen in the insurance market in the period between 2010 and 2013, when the loophole was closed.

Recently the Court has seen fit to make adjustments to take account of the ‘spirit’ of the Rules, as the decision in Qader v esure demonstrated, and it is disappointing it would not do so here.

[1] Iqbal & EUI Ltd vs Leake & JC&A Solicitors; Smith & EUI Ltd  vs Naylor & JC&A Solicitors; Pitts 7 EUI Ltd vs Stock & JC&A Solicitors

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