FIXED COSTS APPLY TO APPLICATIONS FOR PRE-ACTION DISCLOSURE: COURT OF APPEAL DECISION TODAY

The claimant was successful in an application for pre-action disclosure (“PAD”) against the defendant. The District Judge ordered that the defendant pay costs assessed at £1,250.00. On appeal the Circuit Judge held that the fixed costs regime applied to PAD orders and the costs payable were reduced to £305.00.

THE JUDGMENT

Lord Justice Briggs considered the regulations dealing with the portal in detail. He then considered the practical position in relation to PADs.

“ Before leaving the facts and proceedings, it is to be noted that PAD applications by claimants in personal injuries cases arising from failures by defendants to provide pre-action disclosure as required by the Personal Injury Protocol appear to be relatively common. That this is so appears from the unreported judgment of District Judge Ellington in Kirton v Asda Stores Limited, also in the County Court at Wakefield in February 2015, in which he said this:

“9. PAD applications are commonplace. In this court they are listed in blocks of twenty to twenty-five at a time in a 30 minute listing slot. Of those twenty or so cases, agreed draft orders will be filed in all but four or five. Without exception, the agreed orders will have provision for the Defendant to pay the Claimant’s costs, whether it is a case of disclosure having already been made, agreed disclosure to be made by an agreed later date, or acknowledgement.

10. Of the remaining four or five, one or two will be wholly inactive, one or two may attend for an unopposed order and the remainder will have a dispute which will require an adjudication. Those with a dispute are adjourned to be heard in a 30 minute telephone conference at a later date. Almost without exception, the dispute is over costs and not the principle of disclosure.

11. It is apparent that these cases, dealt with in such numbers and in such general manner, are those in which Defendants have breached the protocol and recognise the inevitability of a costs order against them. Bearing in mind that the costs awarded to Claimants in these applications tend to be of the order of £400 or £500 in an agreed case and around £800 to £1200 in those where there has been an adjudication, the cost of extended opposition is unlikely to be economic.

12. This has been the manner in which such applications have been considered in recent years. The change which brings about the consideration today is the extension of the scheme for dealing with low value road traffic cases to include employers liability and public liability cases and the alterations to the costs rules which went with that. The changes have been in effect since July 2013.”

It is evident from paragraph 11 of District Judge Ellington’s judgment that he habitually assessed costs of such PAD applications on the basis that he was not constrained by the fixed costs regime, although it is not clear whether he was just describing a period prior to the coming into force of that regime in July 2013. As he says, costs orders are made in favour of the claimants in such personal injury PAD applications because, in general, the applications are made following a breach by the relevant defendants of their disclosure obligations under the Personal Injury Protocol.

Analysis

In his excellent and well-focussed submissions for the appellant, Mr Alexander Hutton QC, supported by Mr Ian Pennock, made the following main points:

a) Although the relevant Protocols and Rules recognise as a “claim” the pursuit of a cause of action for damages for personal injuries prior to the issue of legal proceedings, a PAD application is not part of such a claim. Rather, it is, and has always been treated as, a separate and self-contained application, with its own separate jurisdiction, procedural rules and costs regime.

b) Although a PAD application is described in CPR Part 25 as one of a number of applications for interim remedies, it is not to be regarded as an “interim application” within the meaning of Part 45.29H, because it is not made “in a case to which this Section applies” within the meaning of sub-paragraph (1). Rather it is separate from any such case.

c) The regime for defendants’ fixed recoverable costs under Part 45.29F is incompatible with the general rule for the costs of PAD applications under Part 46.1, which includes provision not merely for the defendant’s costs of the application, but for its costs of complying with any order for disclosure.

d) Since, in the personal injury context, a claimant’s PAD application is generally made for the purpose of remedying the defendant’s breach of its disclosure obligations under the Personal Injuries Protocol, to confine the claimant to the fixed recoverable costs would be an inadequate sanction for widespread procedural misconduct by defendants.

Mr Hutton’s submissions were all the more effective because of his readiness to make sensible concessions. These included the following:

a) That a claim for damages for personal injuries could, from the moment of the loading of the claimant’s CNF on to the Portal, properly be regarded as a pending claim, even though no proceedings had yet been issued.

b) That a PAD application by a claimant in a claim to which the Personal Injuries Protocol applied could properly and generally be regarded as a response to a default by the defendant in the conduct of its response to that claim.

c) That such a PAD application could properly be described as being in furtherance of that claim.

d) That the court’s order for disclosure pursuant to the PAD application could properly be described as designed to put the claimant into the same position in relation to that claim as if the defendant had complied with its obligations under the Personal Injury Protocol.

I regard those concessions as sensibly made, and inevitable.

In my judgment the fixed costs regime plainly applies to the costs of a PAD application made by a claimant who is pursuing a claim for damages for personal injuries which began with the issue of a CNF in the Portal pursuant to the EL/PL Protocol but which, at the time of the PAD application, is no longer continuing under that Protocol. My reasons follow.

The starting point is that the plain object and intent of the fixed costs regime in relation to claims of this kind is that, from the moment of entry into the Portal pursuant to the EL/PL Protocol (and, for that matter, the RTA Protocol as well) recovery of the costs of pursuing or defending that claim at all subsequent stages is intended to be limited to the fixed rates of recoverable costs, subject only to a very small category of clearly stated exceptions. To recognise implied exceptions in relation to such claim-related activity and expenditure would be destructive of the clear purpose of the fixed costs regime, which is to pursue the elusive objective of proportionality in the conduct of the small or relatively modest types of claim to which that regime currently applies.

That conclusion is, in my view, expressly prescribed by the clear words of Part 45.29A(1) and 45.29D. In particular, paragraph D provides that the fixed costs and disbursements prescribed by the regime (in paragraphs 29E and I respectively) are “the only costs allowed”. Although this is subject to paragraphs F, H and J, they are each part of the fixed costs regime, even though they permit different or enlarged recovery in certain precisely defined circumstances.

That this is what Section IIIA of Part 45 is clearly designed to achieve is powerfully reinforced by its context, namely those other provisions in Part 45 (already described) which ensure that a case which starts under the EL/PL Protocol and continues within it to settlement or Stage 3 determination is also subject to the fixed costs regime throughout, as I have described. Furthermore, the fixed costs regime plainly applies to cases which no longer continue under the EL/PL Protocol but which never reach the stage when court proceedings are issued. This is what is provided by Part 45.29E and Part A of Table 6C in particular. The same applies to RTA Protocol cases: see Part 45.29C, and Part A of Table 6B.

I agree with Mr Hutton that a PAD application is, in certain respects, both self-contained and separate from the claim (whether or not for personal injury) to which it relates. But in the personal injury context, or at least that part of it to which the EL/PL Protocol and the Personal Injuries Protocol both apply, the connections between the PAD application and the claim for personal injury damages to which it relates are particularly close, as is reflected in Mr Hutton’s sensible concessions. The PAD application both responds to a defendant’s default in compliance with its disclosure obligations under the Personal Injury Protocol and operates in furtherance of the damages claim by assisting the claimant in its preparation. It also operates as a means whereby the procedural advantages intended to be conferred on claimants by the Personal Injury Protocol are made good by the court. Above all, the provision of pre-action disclosure powerfully contributes to early settlement, before the issue of proceedings, which is a stated aim of the Protocol.

For those reasons it seems to me entirely apposite for a PAD application to fall within the description of interim applications in Part 45.29H, as being “an interim application … in a case to which this Section applies”. The “case” in which the application is made is, in my view, the claim for damages for personal injury, during and in the pursuit of which the PAD application is made. It is plainly an application for an interim remedy within the meaning of Part 25, and it is in my view “interim” in the fullest sense, because it follows the institution of the “claim” by the uploading of a CNF on the Portal, even though no proceedings under Part 7 have yet been issued, and precedes the resolution of the claim by settlement or final judgment.

I agree with Mr Hutton that it would be hard to fit the provision in Part 46.1 whereby the court may award the respondent to a PAD application its costs of complying with an order made pursuant to it, within the straitjacket of Part 45.29F and H. Nonetheless a defendant (in the Personal Injury Protocol context) which successfully resisted a PAD application would stand to recover fixed costs under Part 45.29F, albeit no doubt in most cases in an amount very much less than the expenditure actually incurred.

Furthermore, Mr Hutton’s point about a supposed incompatibility between Part 46.1 and the fixed costs regime is in my view a double-edged sword. If there is such an incompatibility, it is of no account because, if the fixed costs regime applies, then provisions elsewhere in the CPR for more generous costs recovery, including but not limited to Part 46.1, are simply displaced. Furthermore, in the context of the Personal Injury Protocol, it is hard to conceive of a case in which the court would make an order for disclosure on a PAD application for compliance with which the defendant ought to be paid its costs. District Judge Ellington could not, in Kirton v Asda, remember a single PAD application in which the defendant, rather than the claimant, obtained its costs. Those PAD applications were cases arising from the defendants’ breach of their protocol disclosure obligations. It follows that Mr Hutton’s supposed incompatibility is more apparent than real, in the personal injury context.

There is, by contrast, some real force in Mr Hutton’s submission that limiting costs recovery to claimants who succeed in PAD applications in the context of the Personal Injury Protocol to the fixed costs regime will largely deprive such applications of their value as a spur to proper compliance by insurance-backed defendants with their protocol disclosure obligations. It is plain that the fixed costs recovery will refund only a small part of the likely outlay to be incurred by those acting for the claimant in making a PAD application. They are self-contained applications, requiring it to be demonstrated that the defendant both has, and has failed to produce, relevant documents, and requiring a sufficient explanation of the nature and merits of the claimant’s case, in the absence of existing pleadings, to which reference might otherwise conveniently be made. Furthermore, although in an opposed PAD application a defendant might be put to trouble and expense beyond the very limited costs liability provided for by the fixed costs regime, there would be nothing to prevent recalcitrant defendants from simply failing in their disclosure obligations, waiting to see if the claimant was prepared to incur the uneconomic expense of a PAD application, and then simply complying with any order made by doing precisely that which, under the Protocols, the defendant ought to have done in the first place.

But in my judgment the answer to this submission lies not in subjecting the fixed costs regime to an implied exception for PAD applications which exposed recalcitrant defendants to an altogether higher but variable level of recoverable costs liability, to be determined by assessment. Rather, the answer lies in the availability of an application under Part 45.29J, if exceptional circumstances can be shown or, for the future, in a recognition by the Rule Committee that the fixed costs regime needs to be kept under review, and defects in it remedied by adjustment of the fixed allowances where that can be shown to be justified.

It may well be that the frequency with which defendants fail to comply with their Protocol disclosure obligations may make it difficult to pass the exceptional circumstances hurdle in Part 45.29J, although I would not regard deliberate disregard of those obligations as unexceptional merely because it was frequently encountered. It may be that the very limited recovery of expenditure on a PAD application under the fixed costs regime means that such applications are not as effective as a means of sanctioning breach of Protocol disclosure obligations as they should be. If that is made good by appropriate evidence, then it seems to me that some consideration by way of review to the establishment of a more generous, but still fixed, recovery of costs of such applications would be justified.

By contrast, to throw open PAD applications generally to the recovery of assessed costs would in my view be to risk giving rise to an undesirable form of satellite litigation in which there would be likely to be incentives for the incurring of disproportionate expense, which is precisely what the fixed costs regime, viewed as a whole, is designed to avoid. The fixed costs regime inevitably contains swings and roundabouts, and lawyers who assist claimants by participating in it are accustomed to taking the rough with the smooth, in pursuing legal business which is profitable overall….

The result of this necessarily detailed analysis is that, notwithstanding Mr Hutton’s well-crafted submissions, Judge Saffman was right in his overall conclusion, and I would therefore dismiss this appeal.”