Friday, 19 February 2016

Whittling at the spearhead of justice.

The torrent of legal reform in personal injury rages on, seemingly never able to rest even for a moment.  Now, the way for the reform that many lawyers feared most has been prepared. Chancellor George Osborne announced late last year that the small claims limit for personal injury would increase from £1,000 to £5,000.  Although no date has been set, it cannot be long until this comes to pass. Yet the Chancellor did not stop there as he went onto announce another, unheralded and more novel alteration to personal injury law.  He proposes that claims for general damages (that is pain, suffering and loss of amenity) are to be abolished for people with minor soft tissue injuries.

Both these changes are very significant for injured people. By and large, if a personal injury claim is in the small claims track of the County Court, the rules are that the Claimant will not be awarded their Solicitors’ fees even if they are successful against the Defendant (and vice versa).  Normally if you win a case at Court, your opponent must pay your lawyer’s fees but these cases are deemed to be too small to warrant the use of a Solicitor.  As using a Solicitor would be considered disproportionate to the size of the case, you cannot normally claim your Solicitor’s fees.

For example, in a debt case of say £2,000, if you win your case a Judge will not normally award you your lawyer’s fees in addition to the claim for £2,000.  This acts as a practical restraint on people obtaining legal advice from Solicitors.  If you cannot claim your Solicitor’s fees even if you win, it does n’t make sense to spend lots on legal advice and assistance as you won’t be able to recover it.  Clients often seek a limited amount of advice in such cases if they are unsure of the merits of their case or the procedure involved and may be happy to risk say £100 or so for some limited advice.

In cases without a personal injury element, the limit for small claims at the County Court was changed in April 2013 from £5,000 to £10,000.  This means that in debt cases, contract claims and so forth, if the amount you seek to recover is less than £10,000 it is very likely your case will be assigned to the small claims track.  As a result claims of less than £10,000 are now less likely to involve legal advice and assistance from a Solicitor.  Many people and businesses may consider that claims between £5,000 to £10,000 are sufficiently serious and complex enough to warrant obtaining legal advice but the law now does not allow them to claim the fees if they are successful from the opposing party.

In the run up to these changes in April 2013 it was widely speculated that the government would change the small claims limits as they applied to personal injury claims as well.  After backing away from this change in April 2013, the government has signalled that this change is now definitely going to take place. It is just a question of when.

The limit for these cases has for a long time been £1,000 for the injury claim. In a personal injury claim, a value known as general damages is given to the injury element; the more serious the injury, the higher the amount.  These rules mean that if the injury element of a personal injury claim is valued at £1,000 or less than your claim is in the small claims track and, as above, you will not recover any money spent on Solicitors from your opponent if your case is successful.  Again the idea is that these cases are too small to warrant the involvement of a Solicitor.

A claim of £1,000 for personal injury normally involves, for example, a claim for a whiplash injury that lasts around a week or so.  It could also be a very minor case of scarring that clears up completely in a short time, damage to a single tooth or injuries or wounds of a similar nature. No one who suffers an injury, particularly due to the negligence of someone else, ought to be belittled. Anyone who suffers in this way goes through a terrible time with all sorts of pain, frustration, distress and inconvenience.  Yet setting the small claims limit for personal injury claims at this level seems to be intuitively right.

The reforms proposed by Osborne increase this limit fivefold and this changes the range of injuries that will fall into the small claims track dramatically.  An injury valued at £5,000 can be very serious and many people suffering in this way would find it a traumatic experience.  The severity of such injuries means that they are likely to be cases involving substantial claims for loss of earnings, medical expenses or care (that is assistance from someone during recovery).

Injuries at £5,000 or so can involve fractures of an arm or leg, or a fractured jaw or clavicle (that is a bone in the shoulder).  It might also be the loss of your two front teeth.  It might involve a significant scar to the hand or back. In cases involve a whiplash injury suffered in a road traffic accident, it can include cases of suffering that last for a prolonged period of up to two years.  The point is that increasing the small claims limit to £5,000 suddenly includes injuries that are clearly not trivial, transient or minor.

Injured people making claims for compensation of this sort may be reluctant to obtain legal advice as they are unlikely to recover these fees from the opponent and so any fees they pay will effectively be a deduction from their compensation.  As a result, they are likely to deal with the case themselves and will to some extent be reliant upon the opponent, who is almost always represented by an insurance company, being fair with them.

Is that likely, given that the motivation for all these reforms comes from the insurance companies and their long term quest to cut down the legal fees and compensation they have to pay for claims?

The majority of personal injury claims involve injuries of less than £5,000 and so these reforms will be of great significance to many people and how they claim compensation in the future.

The insurance companies are often quoted as saying how outrageous it is that on average, the premium for every motor insurance policy includes £90 to go towards the expense of paying whiplash claims. This begs the question of what, exactly, is the point of motor insurance if it is not to pay people when they have suffered loss or damage.

The other even more dramatic reform is to abolish claims for general damages involving minor soft tissue injuries.  If you suffer one of these through someone else’s negligence you will simply not be able to claim compensation for your injury.  No further refinement of what is meant by a minor soft tissue injury has been provided. Guidance can however be obtained from a publication called, “Guidelines for the Assessment of General Damages” from the Judicial Studies Board. This is an important reference for personal injury lawyers in valuing claims.

Interestingly, the Guidelines refer to cases of whiplash involving neck and back injuries as being “minor soft tissue” or “soft tissue injuries” and this includes cases where the injured person has suffered up to two years after the accident.  At a stroke, the Chancellor wishes to prevent people suffering these potentially very serious injuries from claiming compensation for the injury, a potent weapon in his armoury of legal reforms to assist the insurance industry.

It is all too easy to be sceptical about lawyers and their interests when legal reforms are mooted.  Are we only thinking of ourselves and our ability to earn an income? I wonder how teachers, the clergy, Doctors or indeed anyone else would respond to such large scale changes in how their professions or businesses operate.  Given a government presumably philosophically attached to free market principles, it is odd that there have been such regulatory intermeddling.

Many people maybe tired of endless adverts on day time television for no win no fee injury lawyers.  Maybe there are fraudulent claims; but then it is the job of the insurance industry and its highly talented legal advisers to spot them. Yet these changes surely go beyond mere lawyers’ self interest.  They go too far.  Abolishing a large category of claimants as these reforms propose is a huge change and is not proportionate to the problems presented.

Whittle the spearhead of justice too far and you blunt the rule of law.

Wednesday, 4 February 2015

Court fees reforms - what do we pay our taxes for?

The Ministry of Justice has been inviting responses to proposed changes to the fees in civil and family litigation.  This consultation has already been ongoing for sometime and the Ministry has already released its response to Part 2 of the consultation and provided further proposals for reforms.

The new issue fee

The changes to the issue fee for claims worth over £10,000, especially if they are also over £20,000 or so, are eye watering.

This is, I understand, expected to come in for 2015/2016. The government has decided to press ahead with this and no more consultation is needed on these changes.

Claims worth less than £10,000 will remain unchanged.  At £10,000 or more a new way of calculating the fee is to be introduced. In these cases, the fee is going to be 5% of the size of the claim, up to a top limit of a fee of £10,000.

To get a feel for the new issue fees, I looked at a range of five cases from £11,000 in size to £180,000.  At around £20,000 the new issue fee really starts accelerating away from the values we have at present on the scale set down by HMCTS.

Amount of claim   Issue fee now   Issue fee now online    New issue fee

11,000                     455                    410                               550

17,500                     610                    550                               875

40,000                     610                    550                               2,000

75,000                     910                    815                               3,750

180,000                  1,315                  N/A                               9,000

For a claim of £180,000 the new fee is nearly SEVEN times the value at present!

The maximum fee at present is £1,920 for a claim of £300,000 or more.  Under the new system, the fee for a claim this size is £10,000 - that is more than five times as much.

Under the new system, the maximum fee is £10,000 and this is reached at a claim of £200,000 or more.

These new fees are massively higher than the fees at present. It is true that most claims are less than £10,000. It is also true that generally all claims, no matter what size, are important to Claimants (otherwise why bring them) and to Defendants, who find themselves having to fight them.  

Yet claims of £10,000 or more are to most people involved very significant legal challenges or even battles.  If it's a personal injury claim, a case of this size may involve a very serious injury or a substantial loss of earnings or both.  In commercial litigation, to many businesses a claim of £10,000 represents a serious threat to their livelihoods and continued existence, whichever side they are on. 

These greatly increased fees, following a whole series of previous reforms to legal costs, are another deterrent to people who might otherwise have recourse to our legal system to settle their disputes.

Points for consultation

The Ministry of Justice wishes to consult on changes to the issue fees for possession cases, the consent order fee and application fees. Unsurprisingly all of these involve increases to the existing fees.

The government proposes increases the fee for possessions claims by £75.  In the County Court the current fee is £280 so this will increase to £355.  At £355 this becomes a rather substantial amount of money to a landlord who may well already be out of pocket from a defaulting tenant who is failing to pay their rent properly. It must make it more tempting to landlords to try alternative, unlawful means to rid themselves of defaulting tenants.

Applications by consent are due to increase from £50 to £100, obviously a doubling of the existing fee.  This is not just an increase - it is akin to fining parties who have the temerity to reach a settlement.

The fee for making most applications to Court used to be £80 for a long time. It was then increased to £155 and the government is now proposing to increase it to £255.  To my mind, £255 is a very large sum for an application at Court.  £80 is a sensible value in my view; big enough to make you think seriously before applying but not so big as to put you off making an application when you need to just because of the size of a Court fee.  The figure of £255 is more than the issue fee for claims less than £5,000.

It's worth remembering that this will apply to cases of all sizes, even in the lower end of the personal injury claims, say £3,000 or so.  In those cases, a figure of £255 looks very high when compared to the fixed inter-partes costs a successful party can recover from the opponent at the end of the case.

These reforms are a further erosion of people’s ability to stand up for themselves using our legal system.  The senior judiciary have produced a response to the reforms that sets out in beautifully precise language the full ramifications of the government's approach to this issue and this is available here:

The rule of law on which a democratic society is founded rests on citizens having access to the courts.  A Court system has to be a service provided by the state in a democracy and this is not reliant on the costs involved.  The reforms undermine that in a practical sense and, which is more worrying,  the government's philosophy that has lead them to this position is an attack on the nature of our democracy.

Wednesday, 3 December 2014

The Law Society's President at St Mary's Stadium

Hampshire Incorporated Law Society (HILS) held its Annual General Meeting last night at the hallowed grounds of Southampton Football Club at St Mary's Stadium and I was delighted to be invited to attend.  As someone who is Southampton born and raised and a Saints fan, albeit in  completely armchair and ignorant fashion, it was a thrill to be there.

One of the guests at the meeting was Andrew Caplen and I remembered Andrew from a previous AGM for the Hampshire local law society I had attended in 2000 when he had been elected as their President.  Time of course has moved on and earlier this year, Andrew was elected as President of the national law society.  At HILS, we are naturally very proud that a Hampshire solicitor is the head of the Law Society and so it was a rather special meeting as a result.

Inside St Mary's stadium

It was fascinating to hear the very varied range of events and activities Andrew has been involved with already during his term as President. He explained that one of the first points he had dealt with was the controversy concerning the loan company Wonga. It had been reported that Wonga had been writing to some customers using the guise of entirely bogus legal firms and the Law Society had stepped in and requested that the Metropolitan Police investigate this activity.  Almost before he had a chance to sit down in his new role, Andrew appeared on Newsnight being interviewed by none other than Jeremy Paxman on the debacle. Fortunately, Paxman was rather on Andrew's side in the discussion.

Andrew recalled he had been questioned about the European Arrest Warrant particularly when it became clear that Judges, as is often the case, were not very keen to be interviewed personally about such pressing matters.  He had also been involved in discussions about sovereign debt restructuring which, he commented, was thankfully less intimidating than it might sound.

One of Andrew's themes in his discussion was looking forward to 2015 and the celebrations of the 800th anniversary of the sealing of Magna Carta.  In particular he will be a guest at the Global Law Summit and Andrew explained that one of the main points of discussion will be the importance of the rule of law.  Of course with all the current international instability it is perhaps unsurprising that this is the case.  Andrew's particular interest in the concept was how it related to access to justice, that is to say the rule of law could only be effective if citizens actually have access to justice and can exercise legal rights in a court of law.

The role of President of the Law Society clearly involved a lot of travel, both within the UK and abroad.  Rather movingly, Andrew told us how he had attended at an event in Japan and had been amazed to find himself one of a small group of people selected to meet the Emperor and Empress of Japan.  As well as making contact at this level he had also sought out a visit to a unit dedicated to tackling domestic violence in Japan to learn more about how different countries deal with this.

Throughout the evening, Andrew noted that the one person he couldn't seem to meet was the Lord Chancellor, Chris Grayling.  He had met him prior to becoming President and told an amusing story about correcting a speech that was connected to this yet he had not, despite trying, been able to see him after becoming elected as President.

Again and again Andrew returned to the problems facing legal aid and criminal law practitioners.  Despite extraordinary efforts, despite numerous presentations and proposals it seems the government are simply not listening.  Even more depressingly, Andrew suggested it seems that even if there were a change of government at the next election, it was unlikely that this would change greatly.

It had been an enjoyable evening, assisted with a delicious meal at St Mary's, and some very thought provoking talks were given.  Andrew Caplen is clearly enjoying being President, and quite rightly so, but this flows from his natural energy and passion for what he is achieving in the role. We at HILS continue to be very proud of our Hampshire President.

St. Mary's at night

Saturday, 28 September 2013

Surviving Jackson edited by Jeff Zindani and Professor Regan

A book review by Adam Manning

Claimant personal injury lawyers have been in a kind of “phoney war” since 1st April 2013.  In the build up to the implementation of Jackson, there was a flurry of announcements, proposals and consultations about the nature of the reforms.  Then there was the publication of the rules.  There was dismay, if not to say anger, when the implications for clients and solicitors were recognised.

Law firms have closed down, people have been made redundant, lives have been drastically changed.

Then there were the final weeks leading up to 1st April 2013 and reviewing all one's files to ensure they were as ready as possible for the reforms. Hard hats were put on, air raid shelters built.

Yet the 1st April 2013, part of the Easter weekend so long ago now, came and went.  The sky did not fall in on our heads, no blazing mad bombers set the night on fire.  Do not be deceived. It is just a temporary reprieve whilst the reforms start to bite.  It is, in the words of this book, a window of opportunity.  Here we are told that it maybe twelve to eighteen months before the changes really start to make a substantial difference and in my view we’ve now had six months of that window already.

We are lucky as a profession to have this book to bring us to task and robustly pull us up to look at what we are doing.  I was excited by its contents but also felt I was being slapped, or at least tapped, quite hard with the reality of what was happening to the profession I had been a happy part of.

The first section is a clear, concise setting out of the nature of the reforms.  It is a superb outline of the new rules and worth reading either as an introduction or a source of consolidation of previous knowledge.  Professor Regan makes some interesting remarks about the success fees that claimant lawyers are learning to charge their clients.  Many firms are now charging these and have been surprised by how acceptable they seem to clients, by and large. Professor Regan's comments about the precise percentages involved are at variance, I would suggest, with the way most firms are setting the success fee.

There is also a very clear examination of costs budgeting which will be of great use to anyone needing further guidance. In practice this might be one of the more difficult parts of the new regime for lawyers to become accustomed to and this part by well known barrister Dr Mark Friston is particularly welcome.

Nick Jervis, of Samson Consulting, provides a section which optimistically sets out some ideas for marketing in our brave new world.  One of the themes implicit in the book is that the referral fee system has lead to lawyers being far too reliant on others to simply provide us with cases.  We must get back to marketing.  He provides a concentrated plan on how to do this and it is his focus on getting on with it and measuring the success or failure of different techniques that impressed me.

The current phoney war may lead to some of us thrusting our ostrich heads into the sand of a busy case load but Mr Zindani and his colleagues are keen to pull us up to smell the air and look ahead to the future out on the horizon.  Later sections look at business models and as the book suggests many, many lawyers will not be thinking about what plan their business follows or how they operate and what to do to adapt to the new world but will simply be trying to carry on regardless. 

A number of issues that any large change to the firm may raise are looked at. Some of the most important are the transition to the use of a (possibly new or updated) case management system and the personalities of the senior management of a law firm and how detrimental to the process of change in practice they can be.

The final section of this useful and timely book looks at how law firms are funded and the options available.  Stripping away some of the fantasies lawyers sometimes have about their businesses it was at this point that I had felt I had been slapped. Hard. With a large, cold fish.

Reviews shouldn’t, without any warning, provide spoilers and I will not do so.  Read this book and wake up from the phoney war and look ahead, with hope and clear guidance, to the challenges of the blitzkrieg heading our way.

Saturday, 10 August 2013

Home Truths from the Transport Select Committee

With all the procedural changes to personal injury law, it's been a difficult time for lawyers dealing with this field of work.  Indeed many have been made redundant as law firms scramble to keep pace with the rate of reforms and like nervous soothsayers guess what it all might mean for the future of their businesses.  The cascade of suggested further reforms follow on from the enactment of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and have been put forward by both government and the insurance industry.

At long last a voice has been heard setting out a different perspective; one in which individuals who have been injured and wish to claim compensation are not automatically considered liars and fraudsters and their lawyers not shysters only interested in milking the system and taking the cream off the top as well.   The Transport Select Committee launched an enquiry into road traffic accident claims and in particular claims for whiplash injuries, a hot topic both between the different groups of professionals involved and the media with its regular reports on how outrageous it is for people to try to claim compensation when they have been injured.  Indeed, so regular are these reports that we have become accustomed to seeing the same photographs being used to illustrate them over and over again. Their report was published at the end of July 2013.

In the consultation document on whiplash claims, Helen Grant MP boldly stated that, “Britain has become the whiplash capital of the world.”  The Transport committee examined this statement and came to the conclusion that there simply wasn’t the data to show whether this was correct or not.  So, a government creating policies and laws that have lead to people being made redundant and businesses being closed down has been shown not to have the data to justify these policies and laws.

One point that struck me in reading the report is that the committee was surprised that Defendant insurers will sometimes make offers to settle injury claims even before the medical evidence has been obtained.  This is a common tactic by insurers seeking to close down a case as economically as possible and is particularly cunning at a time of austerity when for many people money is in limited supply.  Lawyers acting for injured people often have a challenge in persuading clients to wait longer for their compensation so their cases can be investigated properly.  It’s not just the smaller cases where this tactic is applied. Insurers use it in bigger cases, often where some initial medical evidence is obtained indicating that the injured person has a substantial claim but where it is not yet the time to finalize the medical evidence. 

The report by the committee makes another interesting point about medical evidence. When instructing a medical expert to provide a report on an injured person’s condition, it makes sense to obtain their medical notes beforehand so that the expert has a full account of not only the claimant’s injuries from the accident but also their general medical background. In a whiplash claim especially it is clearly helpful for the expert to know if the claimant had a history of neck or back problems prior to the accident or had any previous accidents or anything else that might be relevant to the case.

Sensibly and unambiguously the committee’s report says that it is essential that the medical expert is provided with Claimant’s medical records.  The report states, “reports prepared without this information are likely to be of limited value”.  It is difficult to disagree with this in terms of the quality of the evidence of what is supposed to be a medico-legal report drawn up for the assistance of the Court.

Yet the government’s reforms prevent this from happening in just those cases where it would be most useful in preventing fraud.  The new rules state that for cases under £10,000 in value (which would in reality include most whiplash claims) it is expected that the medical expert will not need to see any medical records (see paragraph 7.5 of the new pre-action protocol for low value personal injury claims in road traffic accidents and the equivalent protocol for employment and public liability claims).  This will mean for instance that if you are dealing with a claim less than £10,000 in value and you obtain the GP and hospital notes to send to the medical expert, you are unlikely to be able to recover the disbursements involved.  As a result, solicitors will not get the notes despite the obvious utility in doing so.  These rules are presumably due to the insurance industry’s clamour for the costs of claims to be cut down.

Yet on the other hand the insurance industry has long complained about the allegedly high number of fraudulent whiplash claims being made.  If you deal with a case in which an insurer suspect fraud, one of the first points they will make is the importance of scrutinising the claimant’s medical notes. As already noted, they can provide very useful information on the claimant’s background and so it is entirely right that they be obtained. 

So, on the one hand the insurance industry wants less fraud and requires the obtaining of medical records to combat this, just as the Transport Select Committee recommends.  On the other hand, the government (as enacted in the rules) and the self same insurance industry don’t want lawyers to obtain medical notes so that the costs of a claim are reduced. It can’t work both ways.

One of the major points of concern for personal injury solicitors is whether the small claims personal injury limit will be increased.  At present this is £1,000 and the government’s consultation on road traffic claims sought views on this issue.  Three proposed changes were suggested; increasing it for all claims, just for road traffic accident claims or just for whiplash claims (which might be a definitional challenge).  Generally this is regarded as involving an increase to £5,000, although Professor Regan reports that Lord Jackson himself thought a seemingly inflation-derived increase to £1,750 was appropriate.

Any increase to £5,000 would in one move drastically alter the claimant personal injury profession as in the majority of claims the injury is valued at less than this amount. Solicitors would simply not be able to deal with them as it would be uneconomic.  The current rate of firms closing down and redundancies might become a flood. There is no doubt that the insurance industry would welcome such a dramatic reform and the Lord Chancellor has even suggested the small claims limit could be increased to £15,000

The Committee’s conclusion on this important point is admirably clear: they did not support increasing the small claims personal injury limit.  Without the assistance of solicitors, claimants will be on their own. They expressed concern that claimants will find making a personal injury claim a complex and intimidating process.  Insurers, they say, will use legal professionals to contest claims which will add to the problem.  APIL, MASS and others have been saying just this thing for a long time.  Justice could be impaired if the small claims limit is increased to £5,000. 

They go onto say that solicitors will not be able to help with these cases if the small claims limit increases as they simply will not be able to earn a living from them.  Instead, cases of this size, the most common sort and often of great importance to claimants, will be run by claims management companies.  It is the CMCs that have been the focus of much public opprobrium, linked as they are in the press with non-step text messages and cold calling.  All of this will only get worse if the small claims limit is lifted.

In one particularly interesting section, the report notes that the committee was disappointed to hear from witnesses from the legal profession that they had not been invited to the Prime Minister's summit on insurance and nor were they aware of any substantive contact with Department for Transport ministers. This, the report says, is particularly surprising given that legal reforms were clearly under discussion. This has long been a point of contention and the Committee was clearly concerned about the government’s apparent reluctance to act on the views of anyone apart from the insurance industry about these issues.

The report from the Transport Select Committee is a welcome rebuttal of many of the proposals advanced by the insurance industry. Genuine claimants, to use the report’s own words, should not be demonised. The onus is very much back on the government and insurers and they will have to work harder to justify any further reforms especially an increase in the small claims personal injury limit.  The lack of quality data about these issues has been exposed and so any further bold statements about Britain being the capital of the world are going to look even more outrageous.

For a long time an increase in the small claims personal injury limit has seemed all but inevitable.  The government of course may simply disregard the report as it did the Civil Justice Council’s review of the roadtraffic accident portal in January 2013.  The government has said it will make its announcement in the autumn which now of course is approaching quickly.  With such a powerful committee coming out against such a decision, it will be interesting to see how the government justifies any change.

Thursday, 11 July 2013

An Overriding Amendment

Notes from a seminar with Professor Dominc Regan

Your hard working correspondent attended a dynamic presentation by Professor Dominic Regan in the grand setting of the Grange City Hotel in London earlier today and came away with a vivid insight into the up to the minute state of the Jackson reforms. 

For those living in Plato’s cave for the last demi-decade, the Jackson reforms have been a maelstrom of change for civil litigation lawyers, especially in the personal injury arena.   Thankfully with guiding lights such as the wise Professor, those of us hammering away at the coal face of justice have someone showing the way in all this turbulence.

Hard working lawyer left, glamorous Professor right
I won’t go into the detail of the Professor’s news and views; if you want that, go to one of his energising lectures. Instead some of his broader themes are worth mentioning.  One of the most profound reforms was the modification of the overriding objective of Rule 1 of the Civil Procedure Rules.  Like constitutional lawyers, we have long enjoyed righteously reminding Courts that cases must be decided justly, as if justice might proceed in any other way.  As a trainee solicitor long ago in the summer of 1999 I proudly heard myself make this very point to a patient District Judge who kindly and gently assured me that Courts had always striven to make decisions justly long before the implementation of the Civil Procedure Rules. 

But the reforms implemented on 1st April 2013 have now added a slightly sinister sounding refinement to this golden axiom.  From then on, cases must not only be decided justly but also “at proportionate cost” and these words have influenced judicial decision making even rather more markedly than expected since their enactment.  This has been working in tandem with the new stricter approach to relief from sanction under CPR 3.9. Providing stark reminders of just what can go wrong, Professor Regan highlighted how serious the adherence to deadlines is now. Parties cannot seek to buy their way out of trouble by offering to pay adverse costs as they once might have done. This may be a shock to some firms and the way they operate their case loads.

As a consequence there is a focus on a newer concept of proportionality as the measure of costs. Yet this new measure has yet to be given any specifics of scale or measurement and it is feared much case law will have to be developed to arrive at the right meter.  The simple logic that if costs were reasonable and necessarily incurred they were therefore proportionate is the language of an earlier age. (Footnote: fear not too much, Home Office v Lownds still, according to Dominic, applies if a case is issued prior to 1st April 2013 throughout the life of the case).

Other startling pointers were the suggestion of fixed costs on the multi-track. As well as a flight to clinical negligence work, catastrophic claims are also considered something of a refuge for claimant lawyers as they are currently free of the shackles of fixed costs. It will be interesting to see how multi-track fixed costs would compare to current costs levels, just as it is illuminating to compare the new fixed recoverable costs on the fast track to those costs claimant lawyers have been seeking to recover.  The use of costs budgets for the big commercial cases, even the heady heights of two million pound and up which currently avoid them, was mooted as well.

There is as yet no more news on the consultation on the discount rate from the Ministry of Justice and any possible changes to this important point are still awaited.

There is much more that could be said. Professor Regan is a natural orator and, in the eyes of this fan, a Cicero of our world of civil litigation. See and hear him and learn much.  He has a blog at which should be subscribed to. Not only are their legal insights but also much wisdom on wine and champagne.

Friday, 3 May 2013

The new lower RTA portal costs

This article is a discussion of developments in the law as it relates to personal injury claims and in particular how lawyers are paid for dealing with them. Nothing on this blog should be taken as legal advice for anyone pursuing a claim and if you need legal advice you should contact a solicitor. This article concerns costs for typical RTA cases that make up a significant proportion of all the personal injury claims that are pursued.

On 30th April 2013, the new lower costs came into existence for road traffic accidents with a value under £10,000 that are pursued through the RTA portal.  At Stage 1 the fees are now £200 plus VAT and at Stage 2 they are £300 plus VAT for a total of £500 plus VAT. That's right, £500 plus VAT for dealing with a case that could be anywhere up to £10,000 in value.

This change applies to all cases entered onto the RTA portal on or after 30th April 2013 regardless of the date of the actual accident. The potentially retrospective nature of this alteration is of course unfair and has been dubbed the "portal portcullis" by well known personal injury lawyer David Bott as a result.

Prior to this change, the fixed fee for this category was in total £1,200. The lower fee is a reduction of approximately 58% of the amount lawyers charge the defendant (or rather their insurance company) for dealing with a case of this type.  A huge drop.  How would doctors, teachers or accountants respond if the government decreed that the income from a sizeable proportion of their work was going to be cut down in this way?

A lot of these claims are pursued under a Conditional Fee Agreement and so a success fee may also apply. If the CFA was entered into prior to 1st April 2013 a success fee could be claimed from the Defendant.  In an RTA claim that was settled prior to trial, the normal percentage applied was 12.5%. So, on a fee of £1,200 plus VAT the additional amount was £150 plus VAT for a grand total of £1,350 plus VAT.

From 1st April 2013 success fees are no longer claimable from the Defendant.  Instead many lawyers are getting used to the previous practise of charging clients a success fee in accordance with the earlier, original incarnation of the Conditional Fee Agreement.

If the previous model of a 12.5% success fee is used and this is simply based on recoverable costs, under the new lower costs this amounts to £62.50 plus VAT. In total then the new costs here would be £500 plus £62.50 or £562.50 plus of course VAT on top.  This would still be a reduction of 58%.

Some lawyers are taking the approach of charging a 100% success fee (the maximum the rules allow) and basing this not on the fixed recoverable costs in the portal but on the solicitor-client costs calculated in accordance with an hourly chargeable rate.

Personal injury lawyers may need reminding of course that recoverable costs (or as I still like to say inter-partes costs) are not the same as solicitor-client costs, something that to most other civil litigators will be entirely obvious.  The days of guaranteeing the client 100% recoverability have perhaps obscured this for accident lawyers.  Indeed one of the rites of passage when initially advising clients on a piece of civil litigation is to point out that it is likely the total bill for the work done is unlikely to be recoverable and that there will be a shortfall.

The maximum deduction that can be made from compensation under the rules for the success fee is 25% of damages (not including future losses and any deductions for CRU purposes).  A typical RTA case through the portal might be worth £2,000 in damages but let's be optimistic and consider a case worth £3,000. After all, cases where a success fee or ATEI is not recoverable from the Defendant are entitled to a 10% uplift on general damages.

Where damages are £3,000 and assuming there is no element that is future losses or CRU, the maximum success fee chargeable to the client is £750.  This will include VAT and so the profit costs element is £625 plus VAT. Using this example the costs recovered by the lawyer is £500 plus £625 being in total £1,125 plus of course VAT on top.  This assumes of course that the solicitor-client costs incurred in pursuing the claim is at least £625.

This amount of £1,125 is still a 17% reduction of the previous fees on a CFA and requires the client to accept a 25% deduction to their compensation.

Of course, claims will still exit the portal and some will go onto be issued and potentially even go to trial.  Until 31st July 2013 when the new fixed recoverable costs system comes into effect, such cases will be dealt with under the predictive costs regime and, if issued, normally a chargeable hourly basis.  But these figures give an idea of the implications of the new lower portal costs.

In light of the recent government consultation on increasing the small claims personal injury limit to £5,000 its interesting to speculate that the change to the fees and the possible charging of the success fee to clients is part of a broader strategy to move the whole system away from recoverable costs completely.  The ultimate destination would be a contingency fee system where the only fees lawyers recover would be by way of deductions from client's compensation.  Please see my previous article entitled The new portal fees - the warm up to increasing the small claims limit?

Yet the government's announcement about the reduction in fees does not help support this theory.  It says quite specifically that the lower lawyer fees will make no difference to the amount of compensation for genuine claimants.  The whole tenor of this press release bespeaks the government's attitude to personal injury lawyers as a profession.  Helen Grant MP's view is that any decision about an increase in the small claims personal injury limit will not be made until the autumn - a long time to wait for a decision that may have huge implications for lawyers and their clients.