Date:

10% increase in general damages - revised guidance from the Court of Appeal

Simmons v Castle - 10.10.12

The Court of Appeal has revised its guidance issued back in July inSimmons v Castle [2012] concerning the implementation of the 10% increase in general damages, part of the interlocking package of reforms recommended by Lord Justice Jackson.

The Court had originally stated that the 10% increase should apply in all tort cases where judgment is given after the expected implementation of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), on 1 April 2013.

The Court has now broadly accepted the ABI’s submissions and held that that the 10% increase in all cases where judgment is given after 1 April 2013, should not apply to claimants who fall within the ambit of section 44(6) of LASPO i.e. claimants who have already entered into a CFA or CCFA before 1 April 2013 who will therefore be able to take advantage of the current system of being able to recover a success fee from the defendants.

Amendment to the original judgment

The Court of Appeal has in effect deleted para 19 from its earlier judgment, and replaced para 20 with the following paragraph:

“20. Accordingly, we take this opportunity to declare that, with effect from 1 April 2013, the proper level of general damages in all civil claims for (i) pain and suffering, (ii) loss of amenity, (iii) physical inconvenience and discomfort, (iv) social discredit, (v) mental distress, or (vi) loss of society of relatives, will be 10% higher than previously, unless the claimant falls within section 44(6) of LASPO. It therefore follows that, if the action now under appeal had been the subject of a judgment after 1 April 2013, then (unless the claimant had entered into a CFA before that date) the proper award of general damages would be 10% higher than that agreed in this case, namely £22,000 rather than £20,000”.

What effect does the judgment have?

CFA and CCFA claimants - will not receive the 10% increase in general damages, unless they have entered into a CFA or had their case taken onto a CCFA after s. 44(6) LASPO 2012 comes into force on 1 April 2013.

"Conventional claimants" - (non CFA/CCFA claimants who have funded their claims in the conventional way, including litigants in person) will receive the 10% uplift on all judgments given after 1 April 2013.

Contract and tort - the scope of the original judgment has been widened from just tort claims to all civil claims. The Court agreed with the Personal Injuries Bar Association (PIBA) that it would be “inconsistent and unfair” to limit the 10% increase to claims in tort, so that it did not apply, for example, to claims in contract. There is much overlap between tort and contract cases, both in the sense of parallel claims under each head, each based on essentially the same facts (e.g. many professional negligence claims) and in the sense of similar claims (e.g. disappointing holiday claims in contract).

Definition of general damages - the type of damages to which the increase will now apply has been clarified i.e. (i) pain and suffering, (ii) loss of amenity, (iii) physical inconvenience and discomfort, (iv) social discredit, (v) mental distress, and (vi) loss of society of relatives.

Other key points to note

Quid pro quo - in giving their revised judgment, the Court accepted that the 10% increase was intended as a “quid pro quo” for successful CFA and CCFA claimants in return for depriving them of the right to recover the success fee part of their costs. It would be wrong to allow CFA/CCFA claimants who are entitled to recover the success fee to benefit from the 10% increase. Such claims would have “the penny and the bun”.

Satellite litigation - in answer to APIL’s argument that satellite litigation would ensue, the Court was of the view that the amendment would be likely to lead to fewer procedural problems than if it was rejected.

The link to s.44 (6) – s.44(6) preserves recoverable success fees under CFAs, and for cases signed up to a CCFA, in both cases before 1 April 2013. Linking the exclusion to s.44(6) means that there will be a “guaranteed identity between those successful claimants who are statutorily entitled to recover their success fees from defendants and those successful claimants who are disentitled from enjoying the 10% increase in general damages”. In so far as there is any risk in satellite litigation, it will be limited to one formulation, that set out in s.44(6).

The windfall argument - the Court also declined to consider any representations from APIL that levels of damages generally were too low. Any previous comments made by Lord Justice Jackson about damages being too low were simply to meet the windfall argument in relation to conventional claimants and had been taken out of context by APIL.

Definition of general damages - the Court noted that the best guidance as to the types of damages covered can be found at chapter 3 of McGregor on Damages (18th ed.) covering "Non-Pecuniary Losses".

Comment

In essence:

  • Where a Claimant has entered into a CFA or had their case taken onto a CCFA before 1st April 2013, he will be entitled to recover a success fee from the losing party but will not receive a 10% uplift on general damages.
  • Where a Claimant has entered into a CFA or had their case taken onto a CCFA on or after 1st April 2013, he will not be entitled to recover a success fee from the losing party but will receive a 10% uplift on general damages.

This is a welcome judgment for insurers from the Court of Appeal. It is difficult to resist the thought that a similar result might have prevailed first time round had the Court instead of acting of its own volition availed itself of the opportunity of hearing representations from the parties most affected by the change.

This decision gives relative certainty going forward, and parties can now proceed in the knowledge that all existing CFA/CCFA cases, as well as new ones taken onto a CFA or CCFA before the end of March 2013, will not be subject to the 10% uplift on PSLA. Some claimants have since the Court's earlier judgment been inviting insurers to increase PSLA offers by 10% on the basis that those claims would be worth that uplift if concluded after 1 April 2013. That argument no longer exists after this judgment in CFA/CCFA claims.

The decision also assists in avoiding in most cases the complex Part 36 arguments that would otherwise have arisen. How, it was said, should the court assess the successful party in a situation where a Part 36 offer made before the end of March 2013 was only beaten because of the 10% uplift on PSLA? However, that argument will remain in the limited number of non CFA/CCFA cases, as all of those claims that have not settled before the end of March 2013 will be worth an extra 10% on PSLA on 1 April 2013. No guidance was offered by the Court of Appeal on this point.

It should be recognised too, that under the Court's judgment, non CFA/CCFA claimants will get the uplift on PSLA even though they are not giving up recoverable success fees and ATE premiums. That seems to be the price that needs to be paid to achieve what on balance is a much improved judgment from the Court of Appeal.

Clearly though, there is a now a more obvious link than ever before between costs and damages as insurers will have to scrutinise the Claimant’s funding arrangements before considering how to approach the valuation of the Claimant’s damages.

Click here for a link to the revised judgment.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Simon Denyer

Partner

I am the Strategic Legal Development Partner within the Insurance team.

Sectors

Nigel Teasdale

Partner - Head of Motor, Fraud, Costs and Claimant Teams

I am Head of the Motor, Fraud, Costs and Claimant teams at DWF and am responsible for the operational delivery of those teams. My background is in dealing with motor claims, particularly large loss.

Sectors