Court of Appeal holds that insurers cannot recover fixed costs under the old RTA Protocol where claimant does not advance the claim at Stage 2

The Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents ("the RTA Protocol") provides a scheme for settling such claims. It came into effect on 30 April 2010 and was amended with effect from 31 July 2013. This appeal concerns the RTA Protocol in its original form. It is estimated that there are over 400 pending cases which raise the same issue as in this case.

The defendant's insurer admitted liability at Stage 1 and paid the claimant the Stage 1 fixed costs. Stage 2 is designed to facilitate settlement. However, the claimant failed to advance his claim in the manner prescribed for Stage 2 and it eventually became time-barred. The insurer then sought recovery of the Stage 1 costs. It won at first instance but that decision has now been overturned by the Court of Appeal.

There is no express provision in either the RTA Protocol or the CPR regarding a right to repayment of Stage 1 costs where the claimant does not pursue the claim after the conclusion of Stage 1. The Court of Appeal held that no such right could be implied either. In reaching that decision, it dismissed fears about what came to be called the "400 Club" point. It was argued that if insurers could not claim repayment, this "might encourage unscrupulous lawyers to seek authority from claimants to commence a Protocol claim simply for the purpose of obtaining £400 + VAT, without any genuine intention of advancing to Stage 2, even in the event of an admission by the defendant's insurers". The Court of Appeal held that there was no evidence that this practice had developed in the past and, since the 2013 amendments, Stage 1 costs are now only payable after the submission by the claimant (where liability is admitted) of a Stage 2 Settlement Pack including a medical report.