R Association of Personal Injury Lawyers and Another v Secretary of State for Justice Association of British Insurers and Others (Interested Parties)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Elias,Mr Justice Cranston |
| Judgment Date | 01 March 2013 |
| Neutral Citation | [2013] EWHC 1358 (Admin) |
| Docket Number | CO/904/2013 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 01 March 2013 |
[2013] EWHC 1358 (Admin)
Lord Justice Elias
Mr Justice Cranston
CO/904/2013
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Royal Courts of Justice
Strand
London WC2A 2LL
Mr P Nicholls QC (instructed by Kingsley Napley) appeared on behalf of the Claimants
Mr J Eadie QC and Mr M Chamberlain (instructed by the Treasury Solicitor) appeared on behalf of the Respondent
Mr C Béar QC and Mr James McClelland (instructed by DAC Beachcroft) appeared on behalf of the First Interested Party
Mr B Hooper (instructed by the Law Society) appeared on behalf of the Second Interested Party
Mr C Wynter QC (instructed by Unite) appeared on behalf of the Third Interested Party
Hearing date: 1 March 2013
(As Approved)
The claimants in this action are two lawyers' associations, APIL and MASS. They seek to challenge a decision to reduce the fixed recoverable costs payable in personal injury claims covered by the pre-action protocol for low value personal injury claims in road traffic accidents ("the protocol"). The effect of these changes, potentially, is significantly to reduce the fees which solicitors representing such claimants will be entitled to recover.
The claimants contend that the decision was taken on 14 February 2012 following a meeting where the Government discussed the proposal with one interest group, namely insurers and those who pay insurance premiums, but not others. It is not suggested that there is any general obligation on the Secretary of State to consult before making this decision, but the claimants say that the Government had embarked upon consultation and, having done so, they could not do it in a partial and unfair way.
The claimants are deeply concerned about the effect that a reduction in fees is likely to cause. They contend that it will affect the ability of solicitors to continue to practise in this area; that it may lead to a lack of representation for personal injury claimants, or at least a lack of quality representation; and many injured persons may find that they have to act for themselves, and may be tempted to accept lower settlements than would otherwise be their due.
They are supported in this contention by three of the interested parties before us, namely The Law Society, UNITE, and Thompsons Solicitors.
The court is not concerned with whether or not those submissions are correct — and the Secretary of State and the Association of British Insurers (another interested party who represent some 90 per cent of motor insurers) do not accept that they are — but the claimants submit that it is observations of this nature which they may have wished to make to Government in the course of consultations had they had the opportunity to do so.
The Secretary of State submits that the application should be dismissed for a variety of reasons, and is supported in this by the Association of British Insurers.
First, as a matter of principle the case is misconceived: there was no consultation exercise. It is entirely a matter for Government with whom it will discuss proposals before introducing changes of policy. The imposition of a duty of equitable dealing with competing interest groups would seriously hamper the working of Government and is rooted in neither principle nor authority.
Second, as a matter of fact the Secretary of State contends that the decision was taken well before the critical meeting on 14 February, and accordingly the factual premise of the claim is misconceived.
Third, he contends that there has been gross and inexplicable delay in bringing the matter to court. The claimants did not issue their claim until 21 January 2013, almost a year after the decision was allegedly taken.
Fourth, the Secretary of State says that in any event relief should be refused, both because it would now be detrimental to good administration and also for the distinct reason that the matters which the claimants contend that they would want the Secretary of State to consider have in fact been fully considered by him, both before he took the decision and indeed during subsequent consultations which took place over the amount by which the fees should be reduced. In these circumstances, the Secretary of State contends that it is fanciful to think that any arguments now which might be advanced by the claimants could affect the decision in principle to reduce fees, even if they might have a bearing on the extent of any reduction.
The background
The Ministry of Justice has been concerned for some time about what it considers to be excessive costs in low value personal injury litigation. In April 2007 it proposed developing a new claims process for personal injury claims up to £25,000 in value. In fact, when the scheme was introduced in April 2010 following consultation, it was limited to claims up to £10,000. This still covers something in excess of half a million road traffic accident claims per year.
There are three stages to that process. The first involves completion of a claim notification form, which is submitted to the defendant and its insurer, and will lead to the admission or denial of liability. The second stage involves a provision of medical reports, consideration of interim payments and the formulation and consideration of settlement offers. The objective is that the parties should agree terms to settle by the end of this stage. The third stage is court resolution where matters have not been settled at stage 2.
At the end each of stages 1 and 2, the claimant's representative is entitled to payment of fixed costs or fees. The amount of those costs is set out in Table 1 in CPR 45.29. It currently provides for costs of £400 at stage 1 and £800 at stage 2. The amount of those costs was determined following consultation with lawyers' representatives on the one hand and representatives of the insurance industry on the other, and their negotiated agreement was confirmed by ministers. The fixed fees are set out in the CPR and the level of fees must, at least at the first stage, be determined by the Civil Procedure Rules Committee (CPRC), the body charged with making and amending the CPR (see Civil Procedure Rules Act 1997, section 2). The Secretary of State may, if he considers it expedient for the CPR to include the provision that would achieve a specified purpose, give the CPRC written notice to that effect (see section 3A(1). If the Lord Chancellor gives such a notice, the CPRC must make such rules as it considers necessary to achieve the specified purpose (see section 3A(3)). A notification was given to the CPRC in this case. Moreover, by section 3(3), the Lord Chancellor has a power of veto. He may allow, disallow or amend the rules as he thinks fit.
In January 2010, Sir Rupert Jackson's Final Report on his Review of Civil Litigation Costs was published. It has recommended a whole raft of reforms in relation to costs in civil cases. One of his proposals was that there should be a ban on the payment by solicitors to claims management companies, insurers and others of fees for the referral of personal injury claims (known as "referral fees"). At paragraph 2.5 of his Report, Sir Rupert explained this practice:
"It is a regrettably common feature of civil litigation, in particular personal injuries litigation, that solicitors pay referral fees to claims management companies, before-the-event ('BTE') insurers and other organisations to 'buy' cases. Referral fees add to the costs of litigation, without adding any real value to it. I recommend that lawyers should not be permitted to pay referral fees in respect of personal injury cases."
Sir Rupert, later in his Report, dealt with observations which had been made to him to the effect that referral fees tended to reduce or replace marketing costs in a solicitor's firm. He accepted that this point had some merit, but only to a limited extent:
"I accept that solicitors will still pay marketing costs if referral fees were banned, but those marketing costs would no longer be driven upwards by the ratcheting effect of referral fees. I see considerable force in the arguments advanced during Phase 2 that referral fees have driven up normal marketing costs."
There were two extensive consultations on aspects of Sir Rupert's proposals. One of these consultation papers, published in March 2011, proposed amongst other things the extension of the protocol to claims up to £25,000 in value. It did not, at that stage, address referral fees or the question of costs.
In September 2010, the Legal Services Board ("LSB") had published a discussion document on the regulatory treatment of referral fees. It cited research commissioned by the Board from the independent consultancy Charles Rivers Associates, which amongst other matters disputed the findings of Sir Rupert Jackson and claimed that there was "no evidence that increases in referral fees led to an increase in the price of legal services". The LSB was not in favour of the outright ban on referral fees, although it did accept that they needed to be subject to greater regulation.
The Government considered the conflicting representations and on 9 September 2011 announced that they did intend to ban referral fees. They considered that they added to the high costs and volume of personal injury...
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