The "£400 Club" and Recovery of Stage 1 fixed costs.

Background

It seems a long time ago now, but following the introduction of the RTA Claims Portal in 2010 there were reports of large numbers of injury claims being submitted to the portal which did not progress beyond Stage 1, even with an admission of liability being made.

At the end of Stage 1 and following the admission, fixed costs of £400 plus VAT became payable. But as such a large number of claims never progressed to Stage 2 the Defendants smelled a rat in this process and sought to obtain recovery of the Stage 1 costs in these cases, going so far as to suggest that these claims were not genuine.

They became known as the "£400 Club".

The Issues

These cases were first contested in the Cardiff County Court with the decision of District Judge Phillips going in favour of the Defendant insurer. Permission to Appeal was given and the claims were leapfrogged to the Court of Appeal for further consideration. Both the Law Society and Association of Personal Injury Lawyers intervened in favour of the claimant solicitors’ firm.

The rules were changed in 2013 so that Stage 1 fixed costs only became payable on receipt of the Stage 2 payment pack and medical report. 

But of those cases prior to that point, should the Stage 1 costs be repaid to the paying party when the claim did not progress beyond Stage 1?

Judgment

Overturning the judgment of District Judge Phillips in Cardiff, the Court of Appeal has ruled that Solicitors who received the £400 stage 1 fixed-costs payment do not have to repay the money even if that claim did not proceed beyond Stage 1 on the basis that there was nothing in the protocol or the CPR that provided “any express provision for a right to repayment”. There was also no implied right either.

Briggs LJ acknowledged that there were “a raft of reasons” why claims did not proceed after stage 1 and as to the suggestions from Defendant circles that that some unscrupulous solicitors commenced proceedings simply to obtain the £400, without any intention of advancing to stage 2 Briggs LJ said “there is no evidence that any such practice did develop”.

Comment

This loophole was of course closed in 2013, but not before tens of millions of pounds had been paid to Claimant solicitors.

These Claimant RTA firms will no doubt breath a sigh of relief and perhaps now this so called ‘£400 Club’ can be put to bed.

Full details can be found in the Judgment here

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