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.

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 1^st 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 1^st 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 1^st 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.

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.

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 1^st 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 1^st 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 http://profdominicregan.blogspot.co.uk/ which should be subscribed to. Not only are their legal insights but also much wisdom on wine and champagne.

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.
________________________

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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