The Court of Appeal has ruled claimant solicitors are entitled to the £400 Stage 1 fee in pre-2013 cases where the case did not progress any further. Accordingly defendants do not have a right to repayment of these fixed costs.
The court stated the protocol's aim was to ensure claimant solicitors receive payment for the work undertaken during each stage, at the end of each Stage, regardless of whether the case goes to Stage 2.
The phrase '£400 club' was coined for the practice whereby claimant solicitors would issue claims in the RTA portal, acquiring the £400 Stage 1 fee and then not progress the case any further. A number of claimant solicitors contended they were entitled to keep the Stage 1 fee, even if the claim was not taken any further. Unsurprisingly, there was concern that many of these abandoned claims were speculative or even fraudulent and there was a call to change the pre-action protocol to close the loophole. The Protocol was amended in 2013, which put an end to this practice. Stage 1 costs are now only recoverable upon receipt of the Stage 2 settlement pack, including evidence of injuries and losses.
However, despite the wording of the Protocol at the time, District Judge Philips in Cardiff County Court stated the whole system was based upon the premise that claims would proceed to Stage 2; a conclusion which was reinforced by the 2013 Protocol amendment and therefore ordered the reimbursement of the Stage 1 costs.
Leave to appeal was granted to the Claimant's solicitors and the Court of Appeal overturned the judgment of DJ Philips. The appeal judges stated the protocol and the CPR do not contain any express provisions for a right to repayment, nor do they imply a right to repayment.
The decision comes as a blow to insurers as a decision upholding the county court ruling would have allowed insurers to pursue recovery of these costs where the claim was abandoned.
Although £400 may seem like a relatively meagre amount, the high number of claims that would have potentially been implicated may have resulted in a substantial amount of money being owed to motor insurers.
In fact, over 2.3m claims notification forms were submitted during 2010-2013, with 20% of the related claims not having been settled or moved out of the Portal process. A figure of at least £10m has been reported, but this has been suggested to be conservative and the true figure may have run to tens of millions of pounds.