 |  |
|
 |
 |
 |
 |
|  |
|  |
|
H2.1. Pre-action protocols and "front-end loading" of costs
| 200. | To return to the first of the caveats mentioned above, namely, the difficulty in determining if and to what extent reforms result in the saving of costs, one controversy which has arisen in assessments of Lord Woolf's reforms is instructive. This involves discussion of the costs consequences of pre-action protocols. |
| 201. | Pre-action protocols (discussed further below) are guidelines as to reasonable conduct by parties to a dispute before proceedings are commenced. They promote openness between the parties with a view to facilitating early settlement and, if no settlement occurs, making progress of the case in court more efficient and its case management more effective. Failure to observe pre-action protocols may lead to costs sanctions if the case subsequently goes to court. |
| 202. | A recurrent criticism of these measures is that they have resulted in a "front-end loading" of costs, that is, in the parties having to incur costs at an earlier stage of the proceedings. The complaint is that in the many cases which settle shortly after commencement of proceedings, the costs of observing pre-action protocols are unnecessarily incurred. This was one of Professor Zander QC's main objections to the reforms :- |
| "The single most important element of the Woolf reforms I suppose was to reduce the costs of litigation. One of my chief reasons for opposing the reforms was my belief that they will instead raise costs. The main reason is that the new rules require or encourage the parties to do more work earlier than before. The front-loading of costs bites on most cases - those that settle as much as those that go all the way to trial. It affects even cases where no legal proceedings are ever started." (Note 150) | ||
| 203. | After some experience of the CPR in operation, some practitioners have expressed the view that pre-action protocols have indeed led to a front-end loading of costs, although not necessarily to increased or wasted costs. This was, for instance, the view of the City solicitors' firm Freshfields, in their assessment of the first year of operation of the Woolf reforms :- |
| "In order to comply with the spirit of pre-action protocols and the accompanying practice direction, parties to a dispute must now cooperate with each other prior to the commencement of proceedings by providing sufficient information to enable a claim to be properly evaluated and for attempts to be made to resolve the dispute without recourse to proceedings. This will involve the parties in significant front-loading of costs and time spent on a dispute as parties are required to analyse and exchange information relating to the key issues in dispute at a much earlier stage." (Note 151) | ||
| 204. | After two years of the CPR in operation, Mr E P Greeno, a litigation partner of Herbert Smith, another City firm of solicitors, made a similar assessment in relation to pre-action protocols in the context of commercial litigation:- |
| "For commercial litigation there does not appear to have been a decrease in costs and even where claims are settled early, the significant front-loading of costs has, if anything, increased the costs of actions which settle. This front-loading is caused by the requirements of pre-action protocols, namely the obligations to plead cases more fully, which must be accurate as they are verified by a statement of truth; the need to plan and duties to search for disclosure; the need to spend more time considering one's own documents to be disclosed and to look for gaps in the disclosure of the other party...... " (Note 152) | ||
| 205. | On the other hand, Mr Greeno also points out that :- |
| "There is evidence of a reduction in the number of claims issued. This is perceived to be due to pre-action protocols and the increased use of pre-action disclosure." (Note 153) | ||
| 206. | The Lord Chancellor's Department has indeed confirmed that :- |
| * | There has been a fall in the number of cases commenced in the County Court with a lower overall trend (supported by legislation excluding claims from the High Court unless they exceed £15,000). (Note 154) | |
| * | There has been a similar reduction in cases commenced in the Queen's Bench Division of the High Court, with some evidential basis for suggesting that this is due to introduction of the CPR. (Note 155) | |
| The Department's assessment adds (in relation to personal injury cases) :- | |
| "Early indications show that the introduction of Pre-Action protocols has been key in encouraging a new settlement culture. A survey of their members by the Association of Personal Injury Lawyers showed that 48% of respondents felt that earlier settlement had been reached and 33% of cases avoided litigation." (Note 156) | ||
| 207. | Mr Geoffrey Reed, assessing the Woolf reforms from the viewpoint of a personal injury lawyer for defendants, was of a like opinion :- |
| "For years insurance companies have been trying to persuade claimants' solicitors to tell them at the earliest possible opportunity what claim they have to face, the allegations that are being made against their insured, what injuries and losses the claimant has suffered and what evidence they have to support that claim. An essential component of the new Rules is the protocol that requires the claimant to provide this information in good time before proceedings are commenced. The protocols are universally supported by the insurers. | ||
| The protocols do, of course, also require the insurers to respond to the claim that has been presented to them. If they do not accept liability they must undertake proper investigations, obtaining material documents and witness statements at a very early stage. This has resulted in significant front end loading of costs but insurers can at least make an informed assessment before such enquiries are carried out whether the cost of an investigation is justified. If they decide that it is not they can make an admission and ensure that the claimant does not incur any further unnecessary costs in investigating an aspect of the case that is not worth arguing about. | ||
| Pre-action protocols really do appear to have had the desired effect particularly so far as the routine smaller claims are concerned. There has been a substantial reduction in the number of new proceedings being issued since April 26." (Note 157) | ||
| 208. | These differences of view illustrate the difficulty of assessing the costs impact of pre-action protocols. |
| 208.1 | Despite the "front-end loading", costs may be saved or at least no additional expense overall may be incurred if the case is in any event one not likely to settle shortly after the start of proceedings. |
| 208.2 | Many such cases can only be expected to settle after the issues are crystallized and the legal advisers have felt able to assess the strength of each others' cases, so that costs have to be incurred before that point is reached. The settlement may come only after the expense of pleadings, discovery and exchange of expert reports and witness statements. |
| 208.3 | The front-end loading of costs in such cases therefore does not mean additional costs but merely costs (in the same or a lesser amount) being incurred at an earlier stage. |
| 208.4 | If the reforms lead to an early settlement this may well mean that notwithstanding the costs incurred, savings in costs overall are achieved, although that would necessarily be conjecture to some extent since one cannot know for sure how much would have been spent if the case had gone on without adherence to the pre-action protocol. Even if the costs bill were to be the same, the parties would benefit from the earlier disposal of the dispute. The court too would benefit either from the dispute settling before action is brought or from early disposal of the action. |
| 209. | The debate also illustrates the fact that a particular reform may increase costs in some cases (those that would quickly have settled anyway) but may have reduced costs in other cases (where parties settle early or without starting proceedings). It follows that some may favour the reform as a cost-saver while others are critical of the additional expense. The net effect on costs from the system's overall point of view is hard to assess since it is hard to measure what costs would otherwise have had to be incurred. (Note 158) |
| 210. | Where the case does not settle but fights to the trial's conclusion, the early requirement of precision in the formulation of the parties' respective cases is likely to be beneficial and may save costs at the interlocutory stage. |
| 210.1 | Slack practices such as uninformative pleadings and unfocussed discovery are more likely to be avoided, reducing the number of false issues, the production of irrelevant documents, the need for requests for particulars and specific discovery, as well as interlocutory applications to enforce such requests. |
| 210.2 | With earlier crystallization of the issues, the case file is likely to be less cluttered with irrelevant materials making interlocutory steps and ultimately the trial more efficient and less costly. |
| 211. | The fact however remains that the overall impact of a complex set of reforms on litigation costs is difficult to assess and quantify. This has led The Lord Chancellor's Department in assessing of two years' performance of the reforms to state cautiously :- |
| "It is too early to provide a definitive view on costs. The picture is still unclear with statistics difficult to obtain and conflicting anecdotal evidence." (Note 159) |
Notes
| 150 | Michael Zander QC, "The State of Justice - The Hamlyn Lectures, 1999" (Sweet & Maxwell, London 2000), p 41. <back> |
| 151 | "The Civil Justice Reforms One Year On - Freshfields Assess their Progress" M Bramley & A Gouge (Butterworths, London 2000), p 10. <back> |
| 152 | Herbert Smith, Mr E P Greeno, Commerce And Industry Group Annual Legal Update: 15th March 2001. <back> |
| 153 | Ibid. <back> |
| 154 | EF, §3.3 and §3.4. <back> |
| 155 | EF, §§3.5 to 3.9. <back> |
| 156 | EF §3.15. Anecdotal evidence from solicitors firms such as Marineau Johnson and Lovells is also quoted to similar effect: EF, §3.10. <back> |
| 157 | Geoffrey Reed, "Review of the Civil Procedure Rules from the Perspective of a Defendant Personal Injury Lawyer" [2000] JPIL 13 at 14. <back> |
| 158 | Research into the effect of pre-action protocols in England and Wales has been commissioned by the Department through the Institute of Advanced Legal Studies and the University of Westminster: EF, §3.16. <back> |
| 159 | EF, Executive Summary. <back> |
|
 |
|
