RTA claims process savings

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So, has the new road traffic accident claims process been a success from a defendant perspective?

This month’s edition of Litigation Funding refers to figures from AXA showing they are admitting liability within 15 days in 61% of cases and costs have fallen by £200 a claim.

Admitting liability promptly is obviously a crucial aspect of the process. It is perhaps unfortunate that this coincides with news that “cash for crash” scams are at a record high (see link) -  There is an obvious tension between trying to admit liability early and weeding out fraudulent claims. It may be too early to conclude whether any perceived costs savings have outweighed any additional fraudulent claims that have slipped through.

A more obvious problem appears to be the fact that it is surely too early to know whether there really has been an average saving of £200 per case. The scheme only applies to those cases where the accident was on or after 30 April 2010. We are only four months into the scheme. No doubt those claims that have settled this quickly have had average costs come in at a lower level than those recoverable under the predictable costs scheme.

If any claims have already managed to proceed as far as a Stage 3 hearing, they must be few and far between. When a significant number of claims start to get that far there will be an obvious spike in the cost of the average claim.

This is before we begin to consider the extent to which claimant solicitors seek to avoid the scheme entirely. The predictable costs scheme revealed the willingness of some firms to seek to play the system and issue proceedings at the first opportunity. It could be a good two years before these claims have settled, and the detailed assessment proceedings arguing over the costs have been concluded, before we know what level of costs will be recovered. Only then can average costs really be determined.

Added to all this will be the resources needed to fight the costs battles ahead.

It is probably somewhat premature to conclude what costs savings, if any, this scheme will produce.

Referral fee debate

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Following on from the Legal Service Board’s recent report into referral fees, which concluded that there was no evidence that referral fees caused consumer detriment, is the Legal Services Consumer Panel’s report which called for greater disclosure of referral fees and better regulation, but found that the payments do have a place in the legal services market and should be allowed to continue. The full story can be read on the Legal Futures website.

So, is this all good news for claimant solicitors who favour referral fees and a kick in the teeth for Lord Justice Jackson who wanted a ban? Hardly.

The really interesting part of the report commissioned by the Legal Service Board is the conclusion that despite referral fees in RTA claims being typically around £800 (where the solicitors’ recoverable profit costs will often be in the region of only £1,200), there is “no evidence of any detrimental effect on the quality of service arising from the payment of referral fees”. Read that quote again. Solicitors are apparently able to run typical RTA claims for around £400, presumably make a profit and with no drop in the quality of service. It is hard to imagine a finding more likely to strengthen Jackson LJ’s attempt to reduce costs to something more proportionate.

The report also explained that typical referral fees in RTA claims have increased from around £200 in 2004 to £800 now. This has been a transfer of profit from solicitors to third parties.

One argument in support of the continuation of referral fees is that it generates increased claims, through increased marketing activities raising awareness amongst the public, and therefore promotes access to justice. The basis for this claim in the LSB report was the upturn in RTA claims in recent years, despite the reduction in RTA accidents. The overall drop over the same period in relation to EL claims is dismissed out-of-hand by the report on the basis that EL claims are unconnected to referral fee generated marketing. The report, conspicuously, fails to mention PL claims. I therefore did their work for them and went back to the CRU data so see what that shows. For those interested, it can be found at Appendix 25 of Jackson’s LJ’s preliminary report. This shows a significant drop in PL claims during this period (although an increased success rate). If claims management marketing has had such a positive impact on RTA claims why has it had no positive impact on PL claims? It seems unlikely that there has been a significant drop in actual accidents during this period. Whatever the explanation is for the increase in RTA claims, it is unlikely to be related to referral fees in my humble opinion.

The referral fee game has simply resulted in a transfer of profit away from solicitors to third parties. I have no big problem with that, but surely the better response is to reduce fixed fees and hourly rates. The increase in the level of referral fees has been driven by what the market can bear. Reduce the Stage 1 and 2 payments for the new RTA Protocol to £400 in total and referral fees will disappear on their own. There will be no money to pay them.  And, with no “detrimental effect on the quality of service”.

Jackson hung out to dry?

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I had prepared a detailed post advising readers of the Legal Costs Blog which party they should vote for in the General Election. Unfortunately, due to a technical problem, the post did not appear. Readers will now have to wait for the next election before discovering my political views.

Professor Dominic Regan, in his blog, the day before the Election, wrote:

“I had a thoughtful note from Dominic Grieve QC last night. A Conservative administration is committed to serious costs reform and is interested in but not committed to the Jackson report. The Conservatives would move quite quickly on this.

Whatever happens tomorrow the reform of costs will not go away.”

So, where does the coalition leave the future of the Jackson Costs Report? Has a hung parliament left Jackson hung out to dry?

On Saturday, Regan posted an update confirming his view:

“The 219 distinct recommendations made by Sir Rupert Jackson are not going to be ignored by the new administration. … Reform will come.”

The political element was always the great unknown in the Jackson Report. At the moment, all bets are off.

Oh, OK then. My current prediction is the fixed costs proposals for fast track matters will make it through but not an end to recovery of additional liabilities.

Portal of Doom runs into problems

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The Law Society Gazette has reported problems on the launch of the new RTA Claims Process portal.  If only there had been some way to predict this.

Exclusive RTA Protocol Article

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We are always looking for interesting content for our readers and the Legal Costs Blog is absolutely delighted to have obtained an exclusive article from specialist costs counsel Kevin Latham and Mark Friston of Kings Chambers.

This article covers the new Road Traffic Accident Protocol.

This is the most comprehensive review of the scheme we have seen (and it is clear from a number of readers’  comments how much assistance is urgently required on these muddled new rules). 

Not only does this provide an excellent run through of the new scheme, but it identifies a number of problem areas which are likely to form the basis for the next round of the Costs Wars.  For example:

"There is a risk that less scrupulous claimants will make offers which are unlikely to be accepted by defendants, only to withdraw them following the total consideration period and thus obtain costs assessed on the standard basis when Part 7 proceedings are issued. It seems that the new regime offers the defendant very little protection from this potential abuse. The point is re-enforced as the defendant’s offer in the S2SP would appear not to attract Part 36 status (as an RTA Protocol Offer) until proceedings are issued under PD 8B and offers made within the S2SP are unlikely to comply with the formal requirements of CPR 36.2. It would thus seem that the only way in which a defendant can protect himself against this unsatisfactory position, is to replicate every offer made within the S2SP and subsequent total consideration period in correspondence as a fully compliant Part 36 offer in the event that the claim falls outside the Protocol at some future point."

This is invaluable reading for those dealing with RTA claims.  Read and circulate: RTA Protocol Article

We’re all doomed

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I am going to do something that does not come naturally to me. I have going to admit I was wrong. Worse than that, I am going to have to admit to being wrong about three things. This whole process is so traumatic that I am going to have to stagger this over several days.

I was wrong when I predicted that the new RTA Claims Process would not happen (see post) either because agreement would not be reached in relation to the rules or because the Jackson Costs Review would torpedo it.

Yet, here we are with the process due to launch today.

There are those who are already taking bets on how quickly the new "portal of doom" will crash.

I’m sticking with my other prediction that the process will produce a flood of satellite litigation, a view shared by Master Hurst who said at the Association of Law Costs Draftsmen’s AGM that the process is so complicated it would generate satellite litigation for "the foreseeable future".  So good news for law costs draftsmen and other costs professionals at least.

RTA Claims Process – Simple as ABC

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Further to our recent look at the new Ministry of Justice claims process for road traffic accidents, I have another puzzler for you.  Again, I am grateful to Keith Hayward at Victory Legal Costs Solicitors for this one.  The next time the Civil Procedure Rules Committee decides to put together a new set of costs rules they might like to consult with Keith first.
Claimant requests an interim payment in the interim settlement pack of, say, £5,000, but Defendant only pays £1,000. So Claimant commences Part 7 proceedings but forgets to give notice that the claim will no longer continue under the Protocol or doesn’t give notice within 10 days, as required by Protocol 7.23.
Having issued the Part 7 proceedings the Claimant issues an application for an interim payment, and after a fully fought hearing the Court orders an interim payment of £5,000.  What happens now?  Protocol 7.23 makes it clear that unless the Claimant gives notice within 10 days the claim will stay in the Protocol.  So:

a.   What costs can be ordered at the end of this contested interim payment hearing if the case is still in the Protocol?

b.   What happens to the Part 7 proceedings? Are they stayed until the Claimant is ready to serve the settlement pack?

c.   If agreement is not reached at the end of Stage 2 what next?  Does the Claimant now continue with the Part 7 proceedings outside of the scheme, or must the Claimant issue Part 8 proceedings?  Surely we can’t have duplication of proceedings, so how do we continue with Stage 3?

I’ll leave you all to have a good think about that; although afterwards you may want to have a quiet lie down in a dark room.

Remember the kind of people who are generally going to be handling this type of claim.

RTA Claims Process – Another fine mess

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For some bizarre reason it appears that readers are still struggling with my previous question concerning the “simple” new road traffic accident scheme.  It’s almost as though I had asked a question that was impossible to answer.
Let me give you another question but, this time, also suggest the answer.  I am grateful to Keith Hayward at Victory Legal Costs Solicitors for this one.
Proceedings are issued under Part 8 under the new Practice Direction 8B paragraph 1.1(1)(3) because of limitation.  The case is then stayed in accordance with paragraph 16 to enable the claim to proceed under the new RTA claim process.  The claim then falls out of the process, for example, because of an argument over contributory negligence (Protocol 6.15(1)).  The claim is then settled amicably without the need for the stay to be lifted.
What costs apply?
Don’t just read on. 
Go and read the rules and see if you can work out the answer first.
The answer seems to be governed by the new CPR 44.12C process:
             (1)       This rule sets out the procedure where—
(a)        the parties to a dispute have reached an agreement on all issues (including which party is to pay the costs) which is made or confirmed in writing; but
(b)        they have failed to agree the amount of those costs; and
(c)        proceedings have been started under Part 8 in accordance with Practice Direction 8B.
The example seems to be caught by subparagraph (c).
The defendant can, and it will only be the defendant who wants to do this, apply under CPR 44.12C:
(2)        Either party may make an application for the court to determine the costs.
And what costs are then payable?  CPR 44.12C states:
(3)        Where an application is made under this rule the court will assess the costs in accordance with rule 45.34 or rule 45.37.
Note the use of the word “will”, not “may”.  The court has no discretion.  Rule 45.34 and 45.37 allow for costs in accordance with the new fixed costs for the new RTA process.  So, despite the matter not proceeding in the process, the process costs still apply.
This was obviously not intended but is another example of sloppily drafted rules.  If any serious attempt had been made at trying to produce simple rules then there would have been a greater likelihood that this type of error would have been avoided.  The Ministry of Justice is simply wrong to claim that the simpler the system, the more detailed the rules need to be.  The courts are going to be swamped with fresh satellite litigation trying to unravel this botched job. 
Of course, another reading of the rules might be possible and readers are welcome to suggest why the above analysis is wrong.  However, the point is that the rules should be crystal clear on a straightforward issue such as this.
It’s not too late for the Ministry of Justice to pull the plug and I’m not just talking about the new IT system.  

"Quick and simple" road traffic accident scheme

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The Ministry of Justice issued a press release on Monday announcing a "quick and simple compensation scheme for road traffic accidents".  Do any readers have any further information about this scheme as it clearly can’t be referring to the new claims process for RTA claims.  Whether that scheme will be "quick" remains to be seen but I think we can all agree that the extra 80 pages of rules are anything but simple.  If they were then we would have had a winner for that bottle of champagne by now.

If you ever wondered how such a convoluted scheme managed to come into existence you can visit an open meeting of the Civil Procedure Rule Committee taking place in Central London on 14 May 2010 and observe the process.  Spaces are limited and you need to complete a short application form.  I’m not sure that will keep the pitchfork and flaming torch wielding mob out.   

New RTA scheme rules and win a bottle of champagne

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A reader helpfully posted a comment on an earlier post mentioning the fact that the New RTA Claims Process start date as been put back to 30 April 2010.  I have received the same information from a number of other reliable sources.  The postponement appears to be due to problems with the electronic portal.  The MoJ website did not, at the time of writing, have any announcement on the subject.  The RTA PI Claims Process portal site has quietly changed the start date but made no specific mention of the change.  This is no doubt due to the ironic fact that the tag line at the top of the web page has the words: "Will your business be ready to meet the deadline…".  The ticking clock has also been wound back.  Oh, the irony.

Now, when the new scheme does finally start, it will be largely run by junior claims handlers at the defendant end and paralegals at the claimant end.  This is meant to be a simple scheme for low value RTA claims.  The new rules are therefore no doubt designed to be easy to understand.  If you have not seen them yet the draft rules can be viewed here: new rules for the RTA Claims Process.

Allowing for how simple these rules are meant to be, I’m going to pose a simple question.  If the claimant is a child, damages are not agreed, the matter proceeds to a Stage 3 hearing and the claimant has beaten the defendant’s offer, the costs recoverable by the claimant are governed by the new CPR 45.34.  So the question is: what costs are payable, and by virtue of which draft rule, to a claimant child where damages are not agreed, the matter proceeds to a Stage 3 hearing and obtains judgment for an amount equal to or less than the defendant’s offer?

First correct answer wins a bottle of champagne (but you won’t be able to win if you post anonymously).  Remember, this is a very simple scheme and I’ll be very disappointed not to have a correct answer within 30 minutes of posting.