Insurers denied right to repayment of Stage 1 Fixed Costs – J C and A Solicitors Ltd v Andeen Iqbal

Court of Appeal rules Claimants entitled to Protocol Stage 1 Fixed Costs

Ever since the introduction of the RTA protocol and Stage 1 fixed costs, there has been dispute between insurers and claimant’s solicitors as to whether or not, in matters where claims did not continued beyond Stage 1, there was any right for the claimant to retain the fixed costs of £400 (as they were before July 2013). Insurers expressed their concerns that this would give rise to a “400 club” whereby claims could be brought within the protocol with the aim of simply obtaining Stage 1 costs, but without any intention of advancing the claim further, and contended that in circumstances where the matter did not proceed beyond that stage, it was more appropriate that the costs should be repaid.

District Judge Phillips, sitting in the County Court at Cardiff in 3 identical road traffic accident claims in which liability had been admitted and Stage 1 costs had been paid, had ruled earlier in favour of the insurers, however the claimant’s appealed on grounds that, inter alia, there was no express provision within the rules for repayment of Stage 1 costs where a matter did not proceed beyond that stage, nor could any right be implied into the rules and, further, that there was no obligation on the solicitors, having received costs under their retainer, to repay those costs.

The appeal to the Court of Appeal, in the matter of J C and A Solicitors Ltd v Andeen Iqbal & Another, in which both the Law Society and APIL intervened, was heard before McFarlane, Flaux & Briggs LLJ, with Briggs LJ providing the judgment overturning the County Court ruling and finding that there was no authority for the contention that the Stage 1 costs should be returned in matters which did not proceed beyond that stage.

Indeed, in finding that the rules “implicitly” entitled claimants under the protocol to such costs, Briggs LJ noted

“The RTA Protocol is a clear, detailed and precise code, negotiated between sophisticated stakeholder groups under the auspices of the Civil Justice Council, into which the court should be slow to imply terms, all the more so where, as here, the drafters have demonstrated an awareness of the concept of interim payments on account of entitlement to damages, and made no similar provision about interim payments on account of an entitlement to costs.”

also finding, in concurrence with the Law Society’s view, that it was an “…express aim…” of the protocol that the fixed costs relevant to any given stage were paid at the end of each relevant stage, irrespective of whether the matter proceeded beyond or not, adding that

“…a Stage 1 costs entitlement will only arise once there has been an admission of liability on behalf of the defendant, so that something solid will have been achieved for the protocol claimant by the time when the Stage 1 payment becomes due.”

Addressing the insurer’s concerns with regard to purported abuse of the scheme, Briggs LJ noted

“…[dealing]…briefly with what has come to be called the “400 Club” point. It is suggested that a construction of the pre 2013 RTA Protocol which treated Stage 1 costs as an entitlement regardless whether the claim was thereafter pursued might encourage unscrupulous lawyers to seek authority from claimants to commence a Protocol claim simply for the purpose of obtaining £400 + VAT, without any genuine intention of advancing to Stage 2, even in the event of an admission by the defendant’s insurers. This theoretical opportunity has been closed off since the 2013 amendments, since Stage 1 costs are only payable after the submission by the claimant (where liability is admitted) of a Stage 2 Settlement Pack including a medical report. It may be that the perceived risk of the abusive practice which I have described played a part in the negotiation of that amendment. But there is no evidence that any such practice did develop and it is not suggested that JC&A were guilty of any such practice in any of the cases under appeal. There is now no risk that such a practice might develop and it would be wrong to construe the plain words of the RTA Protocol by reference to a purely theoretical risk of abuse.”

Through this judgement, Briggs LJ has provided very clear guidance as to the status of Stage 1 costs in pre-2013 RTA protocol matters and further clarified that the reforms to the rules since have, hopefully, resolve this issue once and for all.