John Schmitt on Recent judgment on the operation and interpretation of the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents

Articles | Mon 4th Apr, 2016

Do offers made by the defendant at Stage 2 take effect as “admissions” and as such are they binding on the defendant and the court?

If a Defendant does not raise a particular issue at Stage 2, can it be raised at a Part 8 hearing?

Over 800,000 claims each year are started in the Road Traffic Accident Portal which is used for Protocol cases. The Protocol applies to cases where General Damages are valued between £1,000 and £25,000. But for the Protocol, by virtue of CPR 26.6(4)(b), such claims would be allocated to the Fast Track. The Protocol encourages cooperation between the parties in order to achieve a sensible and a prompt settlement. This means the Protocol plays an essential role in the early resolution of a vast number of low value claims with recovery of costs designed to be proportionate to their low value

In Mulholland v Hughes (18th September 2015) HHJ Freedman heard four conjoined appeals all of which raised issues regarding the impact of statements made in the Protocol on subsequent Part 8 proceedings.

1. Do offers made by the defendant at Stage 2 take effect as “admissions” and as such are they binding on the defendant and the court?

In three of the appeals, the court had awarded the Claimant at a Stage 3 hearing a sum that was lower than the sum which had been offered by the Defendant at Stage 2 pursuant to the protocol. The Claimant sought to argue that the Defendant’s Stage 2 offer amounted to an admission. In addition, the Claimant argued that at Stage 3 the Protocol’s intention was for the court only to be concerned with the difference between the respective parties’ positions, rather than considering damages afresh.

However, it was held that it was impossible to construe the words “offer” and “counter-offer” in the Protocol as amounting to admissions. It was trite law that an offer remained an offer unless and until it was accepted, when it then became binding. The judged noted that the word “offer” was used throughout the Protocol in relation to individual offers, open offers at the end of Stage 2, and final offers at the end of Stage 2. The judge’s reasoning followed that it was impermissible to construe the final offer to be a formal offer, but to interpret the word “offer” used in other contexts as being an “admission”. Furthermore, the provisions in CPR r.14.1B relating to the withdrawal of admissions made under the protocol would make no sense if they applied also to offers. Accordingly, at no time was a Defendant bound by any offer or counter-offer made, unless accompanied by words such as “agreed”.

Therefore, the judge held that a court at Stage 3 was not in any way bound by offers made by the Defendant at the end of Stage 2. A court had to make its own assessment and could, if appropriate, make an award which was less than an offer made by the defendant at the end of Stage 2.

Accordingly, solicitors should take note that open offers made in relation to each head of damage at Stage 2 do not set the boundaries for the assessment of quantum. The judge can depart radically from the figures put forward by each party prior to assessment. This is a useful reminder of the unpredictability of Stage 3 assessment.

2. If a Defendant does not raise a particular issue at Stage 2, can it be raised at a Part 8 hearing?

Further, two of the cases involved claims for hire charges where, although an offer had been made by the Defendants in relation to hire charges, the court disallowed the claims in their entirety because there was no evidence from the Claimants of a need to hire an alternative vehicle. The issue of need had not been raised by the Defendants at Stage 2 of the protocol: it had been raised for the first time at the Part 8 hearing.

It is the law that the Claimant must prove that a replacement car was reasonably necessary. However, although such need was not self-proving, the judge held that it was the intention of the Protocol that if a defendant wished to raise an issue such as the need for hire, he should do so at Stage 2. If the Defendant was allowed to raise this issue of need at Stage 3 for the first time, it would run entirely contrary to the notion that at the end of Stage 2 the parties should have clarity as to what remained in dispute. It would also be inequitable and unfair to allow the Defendant to do so. The judge regarded it as “trial by ambush” and considered that the Defendant was estopped from raising need at this very late stage.

Further, requiring the Claimant to prove need in every case, even when it was not raised by the defendant, did not sit easily with paragraph 7.11 of the protocol, which stated that in most cases witness statements would not be required. Accordingly, the judge held that not challenging the Claimant’s need at Stage 2 was equivalent to saying that the claimant did not need formally to prove need. The judge drew a parallel in this respect with CPR 16.5(5) where a Defendant who fails to deal with an allegation in its Defence, shall be taken to admit that allegation. The judge also considered paragraph 7.41 of the Protocol to be instructive:

“The defendant must also explain in the counter-offer why a particular head of damage has been reduced. The explanation will assist the claimant when negotiating a settlement and will allow both parties to focus on those areas of the claim that remain in dispute.”

Solicitors should take note that if they wish to raise an issue such as need, the appropriate time to do so is at the making of a counter offer. This will formally raise the issue, and will require the Claimant to prepare a witness statement (as allowed under paragraph 7.11 when reasonably required to value the claim). Raising any such issue for the first time at Stage 3 is likely to be regarded as an “ambush” and to be rejected by the court. Alternatively, the hearing could be adjourned so that the Claimant can file evidence as to need, with the Defendant likely to pay the costs of such an adjournment. Hence the Defendant should ensure its response to the Stage 2 Settlement Pack explains clearly and precisely any matters in dispute, as well as explaining why any head of damage is being reduced. Likewise, the Claimant should be ready to suppress any attempt by the Defendant to raise new issues at Stage 3.

Finally, it followed logically in HHJ Freedman’s judgment that if the Claimant chose to go to a Stage 3 hearing, he had to accept the risk that the court might award less than the non-settlement payment and that as a result it would be necessary to refund the difference. The non-settlement payments should be treated as interim payments, governed by CPR Part 25, and accordingly must be repaid in the scenario where the court awards a lesser amount at assessment.

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