Employment Tribunal Fees are unlawful, Supreme Court rules

In one of the most striking decisions concerning employment law for some time, the Supreme Court has ruled that the government was acting unlawfully and unconstitutionally when it introduced tribunal fees in July 2013.

Employment Tribunals deal with a broad range of claims, including those for unfair dismissal and discrimination. Prior to the introduction of fees, the criticism had been that there was little stopping claimants bringing claims that were groundless or malicious in intent, with a view perhaps to obtaining a payment from a former employer to stop the case going ahead. The introduction of fees was, in part, a means to prevent these types of vexatious and baseless claims from going ahead.

Yet the introduction of fees, especially at the rates laid down by the rules, was controversial right from the start. The fees are payable at different stages of the case and can be up to £1,200 if a matter proceeds all the way to a hearing. Exemptions from paying fees are available, but as with the Legal Aid, these are restrictive in nature and are not applicable to most claimants.

Those seeking justice through the Employment Tribunal are often in a difficult position financially, especially if they have recently lost their job. This is especially so when the time period to bring an employment claim is so short. Gambling such fees, which to most of us are significant sums of money, will put many people off.

I know from personal experience of people with good cases, where the injustice is there for all to see, who have not gone ahead after deciding they are not in a position to pay the fees involved. Fees have, in short, lead to a substantial decline in the number of people exercising their rights. If this is so, the next question has to be, are the rights worth having in the first place if people are unable in practice to access them?

Interestingly, even the Confederation of British Industry (CBI) voiced its concerns about the high level of fees. Rob Wall, the CBI’s head of employment policy, has stated that while supporting the principle of fees to prevent vexatious claims, “we have never called for the level of fees the Government has introduced.” If even an organisation representing employers takes this position, something must be seriously wrong.

The decision of the Supreme Court has lead to the government stating it will immediately cease requiring the payment of fees and will go further and refund the payment of fees to those who have paid them previously. We will see if the number of claims at the Employment Tribunal recovers and yet there are two rather interesting points that follow. Firstly, there will have been many people who have been denied justice since July 2013 following the requirement to pay a fee to bring a claim. Secondly, it is notable that the government managed to take this unlawful decision despite all the criticism and controversy at the time. Perhaps this case will dissuade the government from continuing its apparent campaign to increase Court and tribunal fees whenever possible, especially as it has been demonstrated that unlawfully introducing or increasing them directly impedes the pursuit of justice.

The full Judgement can be found here: https://www.supremecourt.uk/cases/docs/uksc-2015-0233-judgment.pdf

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.

The Road to no more Recoverable Costs

Please note the purpose of this article is to explore and discuss the changes in personal injury law that have been suggested in recent times. This is not legal advice and must not be taken as such by anyone. If you require legal advice please contact a solicitor.  It is an exploration of a particular point that may be of the greatest importance to personal injury lawyers and the way they operate.  Personal injury lawyers are by and large passionate about working in the interests of justice  and the pursuit of their client's cases.  This article seeks to examine how some changes may directly impact on the way claimant lawyer's are paid for doing their work. I welcome wholeheartedly any comments or corrections as part of this ongoing discussion and exploration.

The speculation about a possible increase in the small claims limit for personal injury has not ceased.  The government’s consultation on the subject has closed and we await the Ministry Of Justice’s announcement which is expected in May or June.  Of course, the small claims limit for financial claims has already increased rather drastically from £5,000 to £10,000 on 1st April 2013.  To most private individuals and most businesses, a sum of between £5,000 to £10,000 is far from small and with a sizeable proportion of the population being one month’s pay away from homelessness the importance of such a claim is clear.

This applies to many personal injury claims of around this size as well.  An injury claim valued at around £5,000 will typically involve a serious and potentially long lasting injury with a prolonged period of pain and discomfort.  Claims with injuries valued at between £1,000 and £5,000 can involve serious consequences for victims of accidents including loss of earnings.

The government’s consultation on increasing the small claims personal injury limit looked at three scenarios all involving an increase from £1,000 to £5,000. The most general was an increase for all personal injury claims, the second was an increase just for road traffic accidents and the final one was restricted to just road traffic accidents involving whiplash claims.

The majority of personal injury claims are valued at below £5,000 and in addition a sizeable proportion of personal injury claims arise from road traffic accidents.  The consequences of these sorts of changes for personal injury lawyers is of course that if a claim lies in the small claims track of the County Court, normal legal costs (beyond certain types of disbursements) are not recoverable from the opponent (see Civil Procedure Rule 27).  As a result increasing the small claims personal injury limit to say £5,000 would be very serious for lawyers dealing with these sorts of cases.

The Lord Chancellor and Secretary of State for Justice, Mr Christopher Grayling, has also been reported as suggesting this limit could be increased to as much as £15,000.  Such an increase would include a very large proportion of injury claims.  For the purposes of the great majority of cases there would be no more recoverable costs.

Let us assume that the small claims personal injury limit is to be increased to say £5,000 and that this change will come into effect on 1^st October 2013.  The most likely way this will be achieved is to say that all cases issued on or after that date where general damages are less than or equal to £5,000 are to be, with all the usual exceptions, allocated to the small claims track. This will be effectively retrospective as you may have been dealing with a claim for a while before 1^st October 2013 in the belief that it was a fast track claim and therefore recoverable costs would apply but the change will  mean that, unless you settle prior to the 1^st October 2013, this will not be the case.  Rather unfair to claimants and their lawyers admittedly but this is the way similar changes have been enacted previously.

In this situation, if you deal with a claim where general damages are less than £5,000 you will not recover costs from the Defendant and must therefore look to the client to pay your fees (unless you are prepared to act for free).  In this scenario the currently much maligned Damage Based Agreements may come into play. 

As matters stand, the maximum percentage you will be able to deduct will be 25% of client’s damages, to include VAT and disbursements.  So let us say your case is worth £3,500 for general damages plus £500 for special damages. Total is £4,000 so the amount you can deduct under the DBA is 25%, that being £1,000 leaving your client with £3,000.  Fortunately you will be entitled to recover the medical report fees from the Defendant  and rather neatly the allowable recoverable fee for a medical report was recently increased under CPR 27 from £200 to £750. This is an amount that equates to a respectable total for a single medical report (perhaps even from an orthopaedic expert rather than GP).

Under the Ontario model any amounts you recover from the Defendant (including for disbursements) has to be repaid to the client. So let us say your medical report was £500 which are you are entitled to recover from the Defendant.  So in addition to £3,000 you have to give credit for the £500 to the client so in the end the client has £3,500.

You end up with the balance of £500 deducted from damages plus the £500 you recovered from the Defendant leaving you with £1,000.  You still have to pay for the medical report so after deducting the fee of £500 you are left with £500 for costs.  If VAT is 20% this means profit costs are £416.67.  For a case valued in total at £4,000. 

At this point it appears that the lawyer had been entitled to deal with the case under a proper contingency fee agreement with the client of say 25% of damages. If this had occurred, the lawyer could have recovered £1,000 for costs (inclusive of VAT) which would give the lawyer £833.33 of profit costs.  The lawyer would have recovered the £500 medical report fee from the Defendant.  As a result, a proper contingency fee agreement works better for the lawyer whilst a DBA works better for the client.

Now if liability is denied or you cannot agree quantum with the Defendant, you may seek to proceed to trial.  You issue your claim, have questionnaires and a pre-trial checklist and set down for trial. All these stages entail additional disbursements of (assuming they are not changed by the rules) of £120, £40 and £325 respectively (being £490 in total).

If you are successful you will be entitled to recover these from the Defendant. Again you have under a Damage Based Agreement to give credit to the client. If the medical report fee is still £500 this means the client walks away with £3,990 and so has almost recovered all her damages.  The lawyer ends up with the sum of £10 deducted from damages plus £990 recovered from the Defendant leaving him with the sum of £1,000. 

Remember though that the lawyer still has to account for the disbursements and so the lawyer has only £10 for costs in this scenario including VAT, leaving £8.33 for profit costs.  Effectively by taking the matter to trial all the profit costs have been swallowed up in crediting the client with disbursements recovered from the Defendant due to the Ontario model.

If legal proceedings are issued at the Court, it is not possible for a lawyer to deal with a matter under a contingency fee agreement as these are not allowed in contentious matters. Part of the definition of contentious matters is that this includes cases where proceedings have been issued at the County Court.

As a result you would have to enter into a Damage Based Agreement if you needed to issue the claim.  Doing so would be likely to seriously reduce the already low fees a lawyer ends up with for a claim of this size as we have seen.

Let’s say the small claims personal injury limit is in fact increased to £15,000.  What then? Imagine a scenario where damages are agreed at £13,000 and the DBA is 25%.  Let’s say again, perhaps less probably in this scenario, that the only disbursement is a medical report of £500 which is recoverable from the Defendant in addition to damages.  Remember that the amount you can charge the 25% does not include future special damages and is net of any deduction for CRU. We will avoid any complications for appeals.

If you settle without issuing the amount to be deducted is 25% of £13,000 or £3,250.  This leaves the client with the balance of £9,750.  You recover the sum of £500 for the medical report which has to be credited to the client.  In total the client recovers the sum of £10,250.

The lawyer’s part is £3,250 as stated.  The amount of £500 for the lawyer’s fees is therefore £2,750 after the credit to the client is accounted for and after VAT this leaves profit costs of £2,291.67. If it had been dealt with under a straight contingency fee, the client would have £500 less and the lawyer’s fees (net of VAT) would increase by £416.67.

If the claim for £13,000 had to be issued and taken to trial, the disbursements would (assuming no change in the fees) total £1,100.  Under the DBA (remembering that a straight contingency fee is not possible as it is now contentious work) these have to be credited to the client once recovered from the Defendant.  So, here the client has £9,750 plus £1,100 being in total £10,850.  The lawyer has £3,250 less £1,100 being a balance of £2,150.  After deducting VAT this leaves the lawyer with £1,791.67 for profit costs. Simply by taking a matter to trial the lawyer’s fees have been reduced despite all the increased work entailed.  In reality a claim for £13,000 might well entail more than one medical report and possibly other disbursements especially if Counsel is used for the trial and so the amount available for costs reduces further.

Increasing the small claims limit to £5,000 would in conclusion mean a lot of the work that personal injury lawyers have been doing would be simply uneconomic and this becomes only more prevalent if it is increased to say £15,000.

There is currently no definite word from the Ministry Of Justice on the date for implementation of a this increase, whether it will actually happen or if so in what way.  Quite clearly as this article shows, it would be a change of the greatest importance to the personal injury profession.

The New Costs Regime - a ready reckoner..

This is a little cut out and keep ready reckoner for the forthcoming new costs regime.. you can print out on one side of A4 and copy the table of Fixed Recoverable Costs on the other side. This can be handed out to lawyers (sorry don't like the phrase fee earners) to keep so that they can have it to hand when working out recoverable costs at the end of a case.
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THE NEW COSTS REGIME - FOR RTA, EL AND PL CLAIMS

(Please note - figures for costs do not include VAT, disbursements and success fees)

If the CFA is dated 1^st April 2013 or after you cannot claim a success fee from the Defendant.

If the ATEI is dated 1^st April 2013 or after you cannot claim the ATEI premium from the Defendant.

If you are dealing with an RTA claim less than £10,000 and it goes on the portal on 30^th April 2013 or afterwards the profit costs at Stage 1 = £200 and at Stage 2 = £300. Total = £500.  The date of the accident does not matter.

If you are dealing with an RTA between £10,000 and £25,000 and the date of the accident is on or after 31^st July 2013 then it goes on the portal. Costs at Stage 1 = £200 and at Stage 2 = £600. Total = £800. 

If you are dealing with an EL/PL claim less than £25,000 and the date of the accident is on or after 31^st July 2013 then it has to go on the portal. 

If the EL/PL claim is on the portal and is less than £10,000 then costs at Stage 1 = £300 and at Stage 2 = £600. Total = £900

If the EL/PL claim is on the portal and is between £10,000 and £25,000 then costs at Stage 1 = £300 and at Stage 2 = £1,300. Total = £1,600

In addition to RTAs, EL and PL claims that go on the portal can proceed to Stage 3 with costs calculated in the same way as at present.

If a claim that is entered onto the portal on or after 31^st July 2013 then comes out of the portal the costs are calculated in accordance with the table overleaf.

Remember:  PL claims are basically claims that are not RTAs, EL or clinical negligence.

The value of the claim for these purposes is on a full liability basis so ignore any possible contributory negligence.

In all cases on the portal after 30^th April 2013 that are under £10,000 it will not be normal practise to obtain medical notes.

In cases on the portal over £10,000 you can request more than one interim.

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