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:  http://www.judiciary.gov.uk/wp-content/uploads/JCO/Documents/Consultations/senior-judiciary-response-court-fees-proposals-for-reform.pdf.

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.

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.