Thursday, 6 December 2012

A Response to the extension of the RTA PI Scheme and the proposals on Fixed Recoverable Costs

We believe that the proposed extension of the Portal and the new portal fees and Fixed Recoverable Costs put forward by the Ministry of Justice will lead to injustice for injured people. The practical effect of the proposals is that the victims of accidents will not receive the full compensation that they are entitled to under the law and many claimants will find it more challenging to obtain legal assistance with their case.

The significant reduction in the fees means that claims will, by necessity, be dealt with by less experienced and trained staff. In particular we note with considerable concern that claims involving victims of road traffic accidents seeking to recover up to £25,000 in compensation would under the proposed new portal fees be awarded legal costs of only £800 plus VAT.

A claim of between £10,000 to £25,000 will often require a great deal of work in analysing and advising upon medical evidence and in investigating and calculating claims for losses and expenses. A fee of £800 for all the work involved would simply be disproportionately low compared to the amount of work involved. An injured person would be unlikely to have a properly experienced and trained lawyer dealing with their case. As a result there would be a serious danger of their claim being undervalued and the claimant ending up with less compensation than they are entitled to. The higher end of cases up to £25,000 includes substantial cases that can involve complex issues. The inexperienced and untrained lawyers that would be dealing with these cases at the fees suggested would simply be unsuited to dealing with them. In these circumstances we believe there is a very real danger claims will be settled for less than they should.

In this regard, inexperienced claims handlers are far more likely to be negligent leading to additional difficulties and stress for injured people. By contrast, we are a firm employing qualified solicitors who can expertly deal with cases to ensure clients receive professional assistance and that their claims are examined thoroughly.

When the fees for cases progressed through the portal were originally set at £1,200 for cases concluding at the end of stage 2, they were done so without reference to referral fees. These fees were arrived at mathematically and accounted for the time required to undertake the work needed to progress the claim, supervision of the work involved and a certain amount for profit at a reasonable level. It should be noted that the recovery of the success fee did not form part of the profit as the concept of the success fee recovered from the Defendant was supposed to cover the costs of cases that were taken on and lost at a later date.

It is surprising then that the proposed new fees were, according to the Parliament Under-Secretary of State for Justice’s letter of 19th November 2012, reduced throughout by an amount intended to reflect the forthcoming ban on referral fees. If the fees are set at the low level presented in the letter for this reason this is clearly an error. The current portal fees were not set with reference to referral fees so any reduction based on suggested amounts cannot be logical. No indication has been given on how the new fees have been calculated. There is no evidence that they have actually been compared to the likely legal costs in pursuing a claim in practice.

The alteration of the fee for road traffic accident claims through the portal from £1,200 to £500 is a significant reduction. If the basis of this reduction is to remove the referral fee, this is based on the erroneous assumption that all claimant lawyers pay referral fees and that the referral fee is always £700. It is on our view only a small proportion of claimant lawyers who pay a referral fee as high as that for these sorts of cases. Of those lawyers who pay referral fees, not all pay the same amount and some pay less than this figure.

With regard to the Fixed Recoverable Costs, the fees proposed appear to presume that all claims are straightforward. This is not the case. Many of them involve issues of liability which can entail an investigation of the facts involved and obtaining evidence. In particular, with smaller road traffic claims the third party insurers regularly raise the issue of low velocity impact and suggest the injured party is being fraudulent or dishonest in presenting a claim. These issues can involve a lot of additional work in investigating, analysing and advising upon.

As the new fees, both under the portal system and the Fixed Recoverable Costs, are a significant reduction in legal costs, we believe lawyers are unlikely to be able to help an injured person if their case looks risky or complex. This will be especially bad news for people who have serious injuries as the upper threshold of £25,000 includes cases of a substantial nature. The nature of their accident may cause grave difficulties for them but properly trained lawyers will not be in a position to help. In addition if there is any complexity including of a medical nature which will entail a lot of additional work, the injured person will find it challenging to obtain the services of a lawyer to deal with their claim due to the extra work that will be required.

In conclusion, we believe the new portal fees and the Fixed Recoverable Costs will create difficulties for injured people in obtaining legal representation to help claim the compensation they are rightfully entitled too and to other claimants receiving less than proper compensation. We believe the next step should be to put their implementation on hold until proper consultation can be carried out on the appropriate level of fees to ensure that access to justice is not endangered in this way.

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