Market round up: September 2023

It is now six years since Sir Rupert Jackson published his report recommending the extension of fixed recoverable costs (FRC) and it is now being implemented pretty much how he intended, and even using the figures he proposed (albeit uprated given the passage of time).

Unsurprisingly, however, uncertainties remain and in July the Ministry of Justice (MoJ) issued a surprise consultation on changes to the regime that it has identified since publishing the final rules in the spring, such as introducing a £500 cap on the costs of any costs assessments. It is also increasing the FRC levels to take account of the high rate of inflation. But none of these changes will take effect until next April.

Meanwhile, the Association of Personal Injury Lawyers (APIL) launched a judicial review over the new rules on four grounds. APIL is unhappy with the alleged failure to consult properly, and a lack of clarity, on how the extension relates to clinical negligence claims. The second ground concerns the provisions that mean solicitors will have to cover part of the additional costs incurred when representing vulnerable people. The third relates to the alleged unlawful exclusion from the new regime representation at inquests and for restoring companies to the Companies Register.

Finally, APIL has challenged “an apparent reversal of Court of Appeal case law, without consultation, which allows parties to contract out of fixed costs when there is a dispute in settlement agreements, in favour of agreeing that costs will be subject to detailed assessment”.

The MoJ consultation cuts across some of these points and, as a result, the JR will be stayed until three weeks after the government responds to the consultation. It therefore seems likely that, even if APIL succeeds, still nothing will change until next April.

The Master of the Rolls weighed in on FRC during an appearance before the justice select committee in June, telling MPs that the extension is “a good thing” and “I hope it works”. So that’s all fine, then.

Sir Geoffrey Vos said he did not think the extension to FRCs would reduce access to justice, “provided it is properly used and there are proper safeguards in place, as I expect there will be”. He said his experience was that if lawyers were told a case “has to be done for a certain amount of money, it normally gets done for that amount of money”.

The MoJ has confirmed it is to introduce compulsory mediation for small claims valued up to £10,000, starting with specified money claims. These cover 80% of small claims, with PI and unspecified money claims added to the scheme at a later date. It also ruled out any exemptions.

The move marks a radical expansion on the Civil Justice Council’s recommendation in 2022 for compulsory mediation for claims worth up to £500; last year’s MoJ consultation also outlined an ambition to extend it to all county court claims.

Smaller claims, so long the bread and butter of civil litigation departments, will not be for much longer.

To market movements, where consolidation continues (particularly on the part of Express Solicitors) and IRN’s annual Personal Injury Market Report, which said there were “little signs” of recovery (as opposed to “little sign”), with some – mainly larger – firms posting good results and having expansion strategies.

IRN estimated that the PI market registered a small revenue increase of 3.5% in 2022 to £4.1bn but said this hid wide variations in the performances of law firms and claims companies, “with many still facing an uncertain future”. It went on: “Many of those working on serious injury and complex cases are registering the best performance and there are signs that those firms that have invested significantly in IT solutions are beginning to see the benefits.”

IRN’s analysis showed a continuing decline in the number of law firms active in the PI market, alongside the fall in claims. Over the last decade, claims registered at the Compensation Recovery Unit have fallen by more than half from over 1.1m in 2013/14 to just 484,300 in 2022/23.

The volume of PI claims going to court also fell for the fifth year running.

Separately adding to the gloom, figures from APIL showed that while, in the second quarter of 2023, motor injury claims were 45% below pre-pandemic levels, traffic volumes were 3% higher, creating what it called “a very clear justice gap”. The Association of Consumers Support Organisations, meanwhile, said the second quarter of 2023 was the lowest second quarter of the year on record for motor claims – 89,361 – and the second-lowest quarter ever after the last quarter of 2022, when there were 84,257.

But some of them are still bogus, according to defendant firm Kennedys, which said the cost-of-living crisis was encouraging “opportunistic” PI fraud. It said that while the extension of FRC would “in theory” reduce costs, it could also lead to “the inflation of claim values”.

A report said: “We have seen a rise of non-tariff injuries and professional enablers in the design of cynical ‘conveyor belt’ processes to maximise entirely fabricated injuries or exaggerated injuries.”

While accident management companies and claims farmers retained a “vested interest in the exaggeration of genuine claims”, non-injury motor claims were also “fertile ground for fraud enablers with bent metal experts exploiting vulnerabilities caused by vehicles now being awash with new technology”.

Since the launch of the OIC, the report said, some “legal representatives” had “migrated away from motor lines of business towards liability claims, often taking bad practices with them which, in turn, have led to increasing findings of fundamental dishonesty”.

When it came to genuine cases, there was evidence of “claims creep”, with claims “inflated with exaggerated psychological injuries”.

Kennedys said increased legal costs, boosted by the updating of guideline hourly rates in 2021, would continue to be a “key driver” of claims inflation. “Claimant tactics continue to evolve to avoid the strictures of the current fixed costs and budgeting regimes, with increased frontloading of costs and seeking escape from the low value claims portals.” Worse still, there was “an apparent unwillingness by the courts to crack down on such behaviour”.

But as usual, there were ups as well as downs for claimant lawyers, with the Court of Appeal providing a double boost. In Menzies v Oakwood Solicitors Ltd [2023] EWCA Civ 844, it held that the time for a client to challenge a solicitor’s deduction from their damages runs from when the deduction is made, without the client having to agree the specific amount. The court also reiterated the call it made last year in Belsner for the costs provisions of the Solicitors Act 1974 to be updated.

Then, in Santiago v MIB [2023] EWCA Civ 838, the court ruled that interpreters’ fees are recoverable as a disbursement in PI fixed costs cases, without which solicitors may not take on cases for clients who cannot speak English.

Saying that a claimant needing an interpreter to take part in a trial met the test of vulnerability now in the CPR, Lord Justice Stuart-Smith said many cases had been stayed pending the ruling.

Few areas of legal practice go through the convulsions of PI and that’s why I love to keep writing about it.


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