On 20 January 2015, the Motor Accidents Authority (MAA) released a Consultation Draft of the government’s proposed Motor Accidents Compensation Regulation 2015, which includes a proposed new costs regime.
The following are the key features of the proposed cost regime:
Application – The costs regime represents the ‘maximum costs’ which may be charged by a legal practitioner ‘to a claimant or to an insurer’ in a motor accident claim – cl 6(1).
Contracting out – A legal practitioner may however, contract out from the costs regime provided s/he enters into a costs agreement, advises the client that s/he may be liable to pay costs which exceed the amount allowed by the regulations and provides a ‘costs breakdown’ to the MAA – cl 8
Costs breakdown – A ‘costs breakdown’ is defined to mean a document (which will be approved by the MAA) which ‘sets out the total amount paid by an insurer in finalising a claim in a motor accident matter, all deductions (including all legal costs and disbursements) in the matter and the final amount paid to the claimant’ – cl 3(1)
Failure to provide costs breakdown – A fine of five penalty units ($550) is payable where a claimant’s solicitor fails to provide a ‘costs breakdown’ to the MAA ‘as soon as practicable’ after the settlement monies are paid to the claimant – cl 23(2)
Scheme efficiency – The Minister may use the information provided by claimant law firms in their costs breakdown sheets to assess the ‘efficiency and effectiveness’ of the CTP Scheme and may forward the information to the Legal Services Commissioner if overcharging is identified in a particular matter – cl 23
Excluded matters – The costs regime does not apply to matters which are exempt from assessment by the Claims Assessment and Resolution Service (CARS) and it follows that, the obligation to provide a costs breakdown to the MAA also does not apply to exempted matters – cl 7
Unregulated costs – The new costs regime does not regulate accident investigation reports, accident reconstruction reports, accountant reports, health care professional (other than medical) reports, architect reports, interpreter fees, court fees, travel costs in attending CARS and witness expenses – cl 4
Costs where insurer rejects CARS assessment – Where the insurer ‘does not accept the amount of damages in settlement of the claim within 21 days’ the insurer must pay the claimant’s costs after the CARS Assessment on an indemnity basis unless the court damages are:
o In a claim where CARS assessed less than $10K – at least $2K less than CARS awarded
o In a claim where CARS assessed between $10K and $1 million – at least 20% less than CARS awarded
o In a claim where CARS assessed more than $1 million – at least $200,000 less than CARS awarded – cl 15
Regulated costs in litigated matters – Costs remain regulated in litigated claims where the claimant rejects the CARS assessment or where the insurer rejects the assessment but achieves an outcome more favourable than the defined outcomes in clause 15
Unregulated costs in litigated matters – The claimant’s cost are unregulated where an Exemption Certificate has been issued under s 92 of the Motor Accidents Compensation Act 1999 (the Act).
The costs regime in Schedule 1 features the following structure which is similar to, but somewhat different from, the existing costs regime:
Accident Notification Form – No costs are recoverable from the insurer for filling out an Accident Notification Form (stage one)
No front end loading – The total costs which may be recovered from the insurer from the time the Claim Form is served to ‘the preparation and service of a response to’ the insurer’s section 82 offer are $724 (stages two and three). As such, the proposal to allow greater costs for the work performed in the pre-CARS phase – and to encourage early resolution – has not occurred
Increase in regulated allowances – The ‘base allowances’ for stages two, three and four have been increased by 8% from the existing costs regime. The amounts payable by the insurer for stage five (CARS Assessment) and stage six (court proceedings) remain at 2% of the sum awarded
Allowances where insurer has ‘denied liability – Where the insurer has denied liability for the claim, the ‘base allowances’ for stages two, three and four have also increased by 8% from the existing allowances. Note, however, that the greater sum is now payable by the insurer where the insurer has ‘denied liability for the claim’ as opposed to ‘alleged contributory negligence’.
The following significant changes are proposed with regard to disbursements:
|Disbursement||Existing regulation||Proposed regulation|
|Medical Assessment Service (MAS) disputes||$670 per dispute||$1,000 per dispute|
|MAS further and review disputes||N/A||$1,000 per dispute|
|MAS maximum per claim||$1,600 per claim||$2,500 per claim|
|Special assessment||$800 per claim||$1,200 per dispute$2,500 per claim|
|Interlocutory court proceedings||N/A||$800|
|Counsel at CARS||$520 plus $170 per hour after two hours||$1,250 plus $300 per hour after two hours|
|Senior Counsel at court||$2,950 per day||$3,550 per day|
|Junior Counsel at court||$2,110 per day||$2,550 per day|
|Conferences||$170 per hour||$300 per hour|
|GP reports||$130 (no exam)$195 (with exam)||$250 (no exam)$330 (with exam)|
|Specialist reports||$260 (no exam)$350 (with exam)||$660 (no exam)$990 (with exam)|
|Medico–legal reports||$435 (no exam)$720 (with exam)||$660 (no exam)$990 (with exam)|
|Joint medico–legal reports||N/A||$960 (no exam)$1,595 (with exam)|
We identify the following issues with the regulations:
The obligation to provide a ‘costs breakdown’ to the MAA – setting out how the settlement monies were disbursed – only applies where the claimant’s solicitor proposes charging the claimant a sum greater than the sum which can be recovered from the insurer in a matter where costs are regulated. There is therefore, no obligation to provide a ‘costs breakdown’ where the lawyer proposes charging regulated costs or where the matter is exempted from assessment by CARS and costs are unregulated. The latter situation is important because this is where abuses have previously occurred.
The dividing line between stage three and four of the costs regime is defined to be ‘the preparation and service of a response to the insurer’s offer of settlement under section 82 of the Act’. Yet, the Act does not require the claimant to provide such a response unless ‘the response’ is assumed to be attendance at a section 89A Conference.
The increased base allowance for stages two, three and four apply to claims where the insurer has ‘denied liability’. The higher base allowance would apply therefore, where the insurer has admitted fault but denied causation, but would arguably not apply where the insurer has admitted fault but alleged contributory negligence.