Fixed costs: a minor issue

Imagine the following situation: A two-year-old child boarded a bus with his mother. The bus moved off with a jerk before the child was seated, causing him to fall over and lose two front teeth. The medical expert evidence before the court was that the extent of the loss attributable to the accident could not be determined until the child had his adult teeth. At the Infant Approval Hearing the matter was thus adjourned generally to await the growth of his adult teeth and further medical evidence. Is this kind of accident is a road traffic accident and if so, what is the correct costs regime: fixed costs or detailed assessment?

The fixed costs regime

The fixed costs regime contained in Part 45 II of the Civil Procedural Rules (CPR) applies to cases in which:

 costs only proceedings are brought under CPR 44.12(A) or proceedings for approval of a settlement or compromise are brought under rule 21.10(2);

 the dispute arises from a road traffic accident occurring after 6 October 2003;

 the agreed damages include damages for personal injury, or property or both;

 the total value of the damages does not exceed £10,000; and

 if a claim had been issued for the recovery of the agreed damages the small claims track would not have been the normal track for that claim (CPR 45.7(1) and (2)).

In these circumstances the fixed or 'predictable costs' recoverable are just £800, plus 20 per cent of the agreed damages up to £5,000 and 15 per cent above that. In addition there is a London mark-up of 12.5 per cent.

Road traffic accident?

The CPR defines a road traffic accident as 'an accident resulting in bodily injury to any person or damage to property caused by, or arising out of, the use of a motor vehicle on a road or other public place in England and Wales' (45.7(4)(a)).

This extremely wide definition has seen the applicability of the fixed costs regime stretched beyond belief.

It was recently held at first instance that an injury sustained from the use of a step placed on the ground of a car park by a coach driver to assist passengers in alighting from the coach arose out of the use of that coach in a public place, and was thus a road traffic accident within the meaning of CPR 45.7 (Betty Green v Kis Coaches and Taxis Limited (7 March 2008, unreported)).

The claimant had in fact advanced her claim against the coach company under s.2 of the Occupiers' Liability Act 1957, and thus sought to recover greater costs than those allowed under the fixed costs regime on the basis that this was not a road traffic accident. The defendant however relied on the decision of the Court of Appeal in Dunthorne v Bentley & Anor and Cornhill Insurance Plc (26 February 1996, unreported) in arguing that the accident arose out of the use of a motor vehicle.

The defendant driver in Dunthorne ran out of petrol and a colleague of hers stopped on the opposite side of the road to assist her. She left her car stationary with the hazard lights on and ran across the road, but was struck by the claimant's car and killed in doing so. The claimant sustained serious head injuries.

The injuries were held to have arisen out of the deceased's use of her car. Lord Justice Rose stated that the expression 'arising out of' contemplated a more remote consequence than if the words were 'caused by'.

The defence's argument in Betty Green v Kis Coaches, which the court agreed with, was that the accident thus came within the definition of a road traffic accident under CPR 45.7, and thus the fixed costs regime applied no matter what basis the claim was advanced on.

Referring to the facts of the example at the start of this article, it would thus seem highly likely that this will be held to be a road traffic accident at the costs stage, since the accident arose out of the use of a bus on a road. This is so regardless of its apparent appearance as a trip/slip case.

Minors

It is a readily accepted principle of civil law that the court must act to protect the interests of minors, which includes scrutinising settlements made on their behalf, and any award of costs payable to or by them.

However, CPR 21.10(3) incredibly extends the applicability of the fixed cost regime to road traffic accidents under Part 45 II where costs are payable to a child. Mr Justice Simon's comments in Mohammed Butt v Christi Nizami & Mohammed Butt v Cadhar Kamuluden [2006] EWHC 159 (QB) that the fixed cost scheme, in providing fixed levels of remuneration, which might over-reward in some cases and under-reward in others, but are regarded as fair when taken as a whole, highlight the mutual exclusivity of fixed costs for minors, and the court's role as protector of their interests.

Narrowing access to justice

Legal representatives acting for minors inevitably end up putting in more time and effort than is required when acting on behalf of adults. Not only must solicitors spend additional time drafting documents for the Infant Approval Hearing, but in cases like this one, where the medical prognosis is uncertain due to the child's age, the solicitor must go to great lengths in obtaining medical evidence.

In the cited example the child's solicitor will have to instruct another expert once his adult teeth have developed, and will have to again prepare for another Infant Approval Hearing. Not only will this mean an increase in paper work, but will also involve further liaison with the client. If the award recovered is less than £10,000, as it is likely to be in the particular facts of this case, the solicitor will not be able to recover costs to reflect the additional work carried out.

The solicitor should succeed in recovering the fees of the expert and the application fees as disbursements, but in terms of their own work is likely to have run the case at a loss. Thus the ever-wide definition of a road traffic accident, combined with the precedence of the fixed costs regime over detailed assessment, is becoming a disincentive for acting for minors in cases with uncertain medical prognosis. As such is often the case with minors, given that the long-term effects of an accident can often not be determined until adulthood, then surely the inevitable effect of these developments is the narrowing of access to justice for minors.

Exceptional circumstances?

The court will in 'exceptional circumstances' consider a claim for costs greater than the fixed recoverable amount where it is appropriate to do so (CPR 45.12). There is as yet very little guidance on what amounts to 'exceptional circumstances' but one can guess that this would require something out of the ordinary to justify bringing the matter out of the normal costs rules. Guidance in the White Book suggests costs may be considered too low where it is a complex case, where there is more than one defendant, or a high degree of contributory negligence (paragraph C2A-007). In such circumstances the claimant can issue Part 8 costs proceedings. However, if the claimant is not then awarded more than 20 per cent above what the predictable costs would have been, he must pay the costs of the Part 8 proceedings.

While it would be possible to argue in our example that the uncertain medical prognosis amounts to exceptional circumstances because of the additional work it will have incurred for the child's legal representatives, this argument will only be made at the costs stage and with no guarantee it will succeed. Even in the event it does succeed, there is still the risk of having to cover the costs of the Part 8 proceedings, if the costs recovered are not more then 20 per cent above what the predictable costs would have been. It is thus of little assurance to the solicitor who is reluctant to act in such a matter in case he runs the case at a loss. Judicial guidance is thus

desperately needed to clarify what exactly amounts to 'exceptional circumstances,' and whether the uncertain medical prognosis in our example would be sufficient.

CFA insurance

The increasingly wide application of the fixed costs regime is likely to cause further problems with CFA insurance. If the claim is advanced on a basis other than that of a road traffic accident, then understandably the CFA insurance will most likely be taken out on a non-road traffic accident basis, thus incurring a higher premium.

This was the case in the example given, where the matter was treated as a trip/slip case. If the matter is then held to be a road traffic accident in cost proceedings, it is unlikely the claimant will be able to recover the higher premium, since the court will not allow costs which have been unreasonably incurred or are unreasonable in amount (CPR 44.4) and only a reasonable and proportionate insurance premium is recoverable (Royal and Sun Alliance (RSA) Pursuit Test Cases [2005] All ER (D) 88 Aug). This is likely to limit the claimant to recovering a proportion of the premium to represent what the premium would have been had the CFA insurance been taken out on a road traffic accident basis, thus placing a further limit on the amount of recoverable costs (Rogers v Merthyr Tydfil County BC [2007] 1 WLR 808).

The solicitor of the child in our example now faces uncertainty and doubt in knowing whether she will recover sufficient costs to reflect the additional time and effort required of her in this matter.

Surely the lesson here will be to think twice before acting for minors in matters that risk falling into the wide road traffic accident definition of CPR 45.7(4)(a). It is the words 'arising out of' in CPR 45.7(4)(a) that enable this ever-stretching definition and thus the increasing application of the fixed cost regime; a scheme which 'over-rewards' in some cases and 'under-rewards' in others.

Is a definition that increases the applicability of a costs scheme that is merely 'fair when taken as a whole' really compatible with the overriding objective of fairness and the court's role as protector of the interests of minors? Surely not, when the inevitable consequence is reluctance from solicitors to act for minors, and thus the narrowing of access to justice.