This article was first published in the April 2023 edition of the Law Society’s ‘Litigation Funding’ magazine
By Matthew Best, Director – ATE Partnerships, Head of Personal Injury & Clinical Negligence
(Estimated reading time: 4 minutes 18 seconds)
As you may have seen recently in the legal press, the civil procedure rules have been quietly amended to reverse the Court of Appeal’s decision in Cartwright v Venduct Engineering [2018] EWCA Civ 1654, [2018] 1 WLR 6137, as approved in Ho v Adelekun [2021] UKSC 43, [2021] Costs LR 927.
The Cartwright decision held that neither a sum paid in accordance with the terms of a Tomlin order, nor a payment of damages made pursuant to acceptance of a Part 36 offer was an “order for damages and interest made in favour of the Claimant” within the meaning of CPR 44.14(1) and thus was not a sum against which an order for costs in a Defendant’s favour could be enforced.
The changes also broaden the scope of the “pot” of money against which enforcement may be made from one that equates to the aggregate amount – in money terms, of damages and interest – to a larger ‘pot’. Namely one that also includes the value of the Claimant’s costs otherwise payable by the Defendant.
The principal effect of these changes will impact personal injury proceedings issued after 6th April 2023
This will no doubt have serious funding implications for law firms and their clients. It would be fair to say that some sceptics believe this Rule change seems to have come in via the backdoor. However, we do know that this was previously raised; and so isn’t perhaps a shock. What is ironic is that this change to QOCS is happening just as it reaches its 10th anniversary – and the implementation date is fast approaching.
It is clear the current position does favour Claimants, so there might be temptation to issue proceedings before 6th April 2023. However, Defendant’s will be closely monitoring for compliance with Pre–Action Protocols and will, for sure, scrutinise any case where proceedings might have been issued precipitously.
Changes to ATE?
It might be worth taking a step back first and working through a scenario in relation to proceedings commenced on or after 6th April 2023, just to see the implications.
If a matter goes to trial and the Claimant fails to obtain a judgment more advantageous than a Defendant’s Part 36 offer then the court must, unless it considers it unjust to do so, order that the Defendant is entitled to costs (including any recoverable pre-action costs) from the date on which the relevant period expired, plus interest on those costs. The Defendant will ordinarily be made liable for the Claimant’s costs up to the date on which the relevant period expired.
Take the following figures;
- The judgment sum for damages and interest awarded to the Claimant is £25,000, and
- The Claimant’s costs incurred up to the date on which the relevant period expired are £40,000, and
- The Defendant’s costs, with interest, incurred after the date on which the relevant period expired is £35,000, and
- The Claimant’s disbursements (such as experts’ attendance at trial) incurred after expiry of the relevant period are £5,000.
The Claimant’s maximum liability to the Defendant shall not exceed the aggregate amount of £25,000 + £40,000, namely £65,000 – but it is easily predicted that the defendants’ Part 36 offers will, in the future have ‘much more bite’.
Whilst many of you will still be considering the implications and consequences of the unexpected change to the QOCS regime – you might also wonder what, if any, changes there might be to ATE insurance policy terms, cover and premiums.
ATE insurers will be crunching the data to see how these new changes will increase the costs of claims. Quite significantly I would say, but they should also be looking at how frequently the policy must pay out as a result of not beating an offer. This goes back to the frequency–v-severity calculation.
An ATE insurer’s potential exposure will obviously increase to encompass the value of the Claimant’s costs’ entitlement. As well as the value of damages and interest recovered, the new regime will make it more important for the insurer to “get it right” when agreeing a decision not to accept a Defendant’s Part 36 offer where, of course, delegated authority does not apply.
Here at Temple Legal Protection the data we hold does not cause us immediate concern. Behaviours may change post 6th April 2023 and we will certainly be keeping an eye on that; but, for now, we do not feel any drastic changes are needed.
Changes in behaviour?
It is always difficult to predict behavioural changes by either Claimants or Defendants at this stage. Now that sums paid following late acceptance of a Defendant’s Part 36 offer will allow for the recovery by the Defendant of some or all of its costs incurred after the offer was made, this will likely incentivise Defendants to make what are effectively best-and-final Part 36 offers. You might say this is a positive behavioural change, one that might get rid of nuisance offers and get Defendants to the table and take things more seriously.
Is your law firm looking to partner with a reliable and fair ATE insurer? One to protect your clients; and navigate through what is going to be a very testing time? If yes, then please do get in touch with me on 01483 514804 or via email to matthew.best@temple-legal.co.uk.
Matthew Best Cert CII
Head of Personal Injury & Clinical Negligence
01483 514804
Matthew Best Cert CII
Matt has an insurance background and joined Temple in 2011 having worked for 4 years in a leading insurance company where he was dealing with personal injury work. Matthew was promoted to Underwriting Manager and subsequently Senior Underwriting Manager taking on overall responsibility for Temple’s personal injury and clinical negligence underwriting department.
In 2022 Matt joined the board of directors as Director of ATE Partnerships. Matthew has cultivated fantastic relationships with our business partners for many years. His ability to build a clear understanding of their requirements and more importantly what is required to fulfil such requirements means he is ideally placed to support the strategic direction of the company.
Matt remains the head of the personal injury and clinical negligence department and is committed to all Temple’s business partners in order to deliver the highest level of service they expect. He is also responsible in making sure that Temple’s ATE and disbursement funding products remain competitive, but most importantly that they are fit for purpose for solicitors and their clients.
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