More Fixed Costs?

In the news this week are reports that the Association of British Travel Agents (ABTA) is urging people to lobby their MP’s for costs reform in holiday sickness claims. Apparently there has been a 500% increase in compensation claims for holiday sickness since 2013 and this is going to lead to restricted holiday choices, including Brits being banned from holidays in Spain and Turkey! Won’t somebody think of the children!?

ABTA currently operates a non-mandatory ADR scheme to deal with holiday sickness claims. The scheme has previously been subject to case law. In TUI UK LTD v TICKELL & ORS [2016] EWHC 2741 (QB) there were 205 claimants who had travelled on the company’s cruise ship. Their claims fell into three groups: “quality only” claims, minor illness claims, and serious illness claims. Certain costs decisions of Master Howarth were appealed to the High Court including whether the Claimants should be penalised in costs for failing to use the ABTA mediation scheme. Mrs Justice Elisabeth Laing DBE found that “on the facts of this case, I consider that it would not have been open to the Master to hold (had he entertained the argument) that the quality only Claimants should, either, recover no costs at all, or be restricted to the costs of using the ABTA scheme. I consider that if a Defendant wishes to rely, at the stage of a detailed assessment, on the availability of an industry-specific ADR scheme, which is referred to in the relevant contract, but it is not binding, and is not expressed to oust the jurisdiction of the courts, the Defendant must make that clear in its pre-action protocol response. The Defendant did not do so here. The Defendant did not admit liability. The claims were robustly contested. Moreover, the Defendant did not respond to the Claimants’ offer of ADR. Had the Master concluded in this case that the Claimants should get no costs, or only recover the costs of using the ABTA scheme, such a conclusion, on these facts, would have been plainly wrong.”

The ABTA scheme was again considered by Singh J in the High Court appeal of BRIGGS & 598 ORS v FIRST CHOICE HOLIDAYS & FLIGHTS LTD QBD (Singh J) 08/02/2017 (as yet unreported). The costs judge had found that the Claimants’ were not entitled in principle to recover litigation costs because it was not reasonable or proportionate for them to eschew the ABTA mediation. On appeal, Singh J found that this decision went too far and the costs judge had erred as it was not inherently unreasonable to enter into a CFA rather than a voluntary mediation scheme.

So despite these very recent High Court judgments, the chief executive of ABTA is quoted as saying that “the legal loophole that is allowing firms to unduly profit from these claims must be closed. This would allow people with genuine claims access to justice but make this area less attractive to claims firms.”

As is usual with insurer backed costs reforms, there appears to be little actual data in support of the proposals. The courts have already found that a CFA is not inherently unreasonable, so it follows that a CFA is not a “legal loophole”. There are allegations of fraudulent claims but no clear information regarding the alleged fraud. Any fraudulent claims should of course be defended and fraud should be prosecuted however it is unclear how this relates to the proposals for fixed costs.

It’s almost as if insurers have a financial interest in trying to limit access to justice. The insurance industry successfully lobbied for fixed costs in other areas of personal injury using the same allegations of “increased fraudulent claims” and “increased costs to consumers” so time will tell if this new round of lobbying will be successful. The priority should be access to justice not savings for insurers.