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PERSONAL INJURY: An Introduction to London (Firms)

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In 2019 we should see at last some clarity as to the future of claimant personal injury work, concerning matters large and small. The Civil Liabilities Bill passed through the House of Lords on 27 June 2018, next stop the Commons. The Act, with provisions dealing with the discount rate affecting serious injury claims, and on whiplash and small claims reform for lower value cases, is likely to be on the statute book by April 2019. Alongside this, responses by government are expected to their consultation on the impact of Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPO’) and to Jackson’s proposals to extend fixed recoverable costs.

So far as the discount rate is concerned, the reduction from plus 2.5% to minus 0.75% in 2017 ended years of under-compensation of claimants. Notwithstanding the vocal protests from the defendant lobby, the world did not come to an end, and no insurance companies went bust. Indeed they have continued to post healthy profits. However, the government’s proposals in the Bill would change the mechanism for setting the rate and the imputed investment risk profile from ‘very low’ to ‘low’. The government has made a welcome commitment to the 100% compensation principle, with their intention that the changes ‘provide not less or more’ than this. The automatic review period will now be every five years, which is probably sensible to avoid game-playing that more frequent reviews might lead to, whilst maintaining the principle of regular review, unlike the current situation. One very important battle to come, either in Parliament or in the courts, will be to establish the right of the seriously injured claimant to be compensated for the cost of taking investment advice now that investment in very low risk gilts is not to be the basis for calculating the return. Eagle v Chambers [2004] EWCA Civ 1033 stands to be reconsidered given that the rationale - 'to order the defendant to pay the costs of taking the advice so as to enable the investment to be made more broadly so as to enable the claimant to recover more than that which he would have recovered if investments had been maintained in gilts is to make the defendant lose both on the swings and the roundabout' - clearly cannot stand in the new era.

The other pressing issue for serious injury claims is accommodation. Two High Court decisions in 2018 have confirmed that the court considers itself still bound by the Court of Appeal decision in Robert v Johnstone [1989] QB 878, even though with a minus 0.75% discount rate this leads to a zero award under this head. At least one of the decisions was to have been appealed, but was apparently compromised. Reimbursing the cost of an interest-only mortgage or rent for the claimant’s life is usually hugely more expensive than the capital cost and was rejected by the High Court. A separate discount rate for accommodation would need a Court of Appeal authority. More imaginative solutions such as charges in favour of the tortfeasor cannot be ordered by the court. A resolution is needed urgently.

With the continuing wider arguments nationally about varieties of ‘hard’ or ‘soft’ Brexit, it remains a serious concern that sensible solutions for post-Brexit litigation will be overlooked, causing confusion for foreign claims and those reliant on EU motor and health and safety directives.

2018 has seen ever increasing use of allegations of ‘fundamental dishonesty’ against claimants in the context of s57 Criminal Justice and Courts Act 2015 and to disapply Qualified One-way Costs Shifting. Fraudulent claims are to be condemned, but some clarity on the extent to which the sanction applies may be required soon. If claimant solicitors are to be expected to gamble all their fees not only on the merits of the legal claim, but also the slightest untruth by the client not being disclosed to them, then either success fees may have to rise to compensate for that additional risk to the detriment of honest claimants and/or potentially meritorious cases may not be pursued.

Sir Rupert Jackson delivered his supplemental report on Fixed Recoverable Costs on 31 July 2017 but there was no news from government on the way forward in 2018. It seems likely that this will accompany the government’s response to their own LASPO Part 2 consultation in 2019.

With regard to lower value claims, although the legislation is likely to pass in 2019, the Ministry of Justice has announced that implementation is not expected until 2020. Even that might still be optimistic. The government has accepted the offer of the insurance industry to redesign the IT infrastructure of the portal for litigants in person, but until that can be demonstrated to work, the risk of the court system being swamped by many thousands of small claims brought by litigants in person, perhaps assisted by claims management companies, is a very real one. The government’s concession that the new process will not apply to vulnerable road users is welcome. However, the direction of travel for drivers and passengers is now very clear and the industry has a window opportunity to plan how to respond. The expected ban on pre-med offers and the forthcoming regulation of claims management companies by the Financial Conduct Authority will be helpful, as would be a government acceptance of calls by claimant lobby groups and others for a total ban on cold-calling. Minister Lord Keen also publicly committed to holding the insurance industry to account in passing on their estimated savings of £30–£50 per policy directly to consumers.

In this period of flux for low-value motor claims, the re-emergence of a satellite costs industry making technical challenges to client retainers was an unwelcome development in 2018. The judiciary have been robust so far in dealing with fishing expeditions, and the number of client complaints to the Ombudsman about CFAs have so far been tiny, but the appeal from Herbert v HH Law [2018] EWHC 580 (QB) on success fees and after the event premiums in low-value claims is expected to be heard by the Court of Appeal in the spring. The Court will need to consider how far the complexities of the costs and funding regime can be applied and be explained transparently to consumers in a low-cost, high-volume market, without opening the floodgates to satellite litigation by successful claimants suffering buyer's remorse on paying the money out of damages that they had agreed at the outset. The government’s failure to properly regulate Damages Based Agreements to allow them to be safely and comprehensibly used in such cases is also contributory here, and will hopefully be remedied in its response to consultation on LASPO Part 2.