CASE TRACK LIMITS AND THE CLAIMS PROCESS FOR PERSONAL INJURY CLAIMS

CASE TRACK LIMITS AND THE CLAIMS PROCESS FOR PERSONAL INJURY CLAIMS A consultation paper produced by the Department for Constitutional Affairs RESPONSE BY THE LAW SOCIETY OF ENGLAND AND WALES July 2007 C:\Documents and Settings\aulon\Local Settings\Temporary Internet Files\OLK2B\Final response Case Track Limits July 20071.doc

CASE TRACK LIMITS AND THE CLAIMS PROCESS FOR PERSONAL INJURY CLAIMS INTRODUCTION The Law Society has always recognised the importance of ensuring that claims, especially lower value claims, are handled in the most efficient manner, protecting the claimants rights while ensuring costs are proportionate. However, we have lobbied consistently and extensively against any increase to the small claims limits for personal injury and housing disrepair claims, believing this would leave many people handling complex or higher value claims without legal advice or may deter them from pursuing claims. In May 2004, the Better Regulation Task Force ( BRTF ) released its report Better Routes to Redress which examined the compensation culture in the United Kingdom. The report examined the causes of the perception of a compensation culture ; how that perception is fuelled and the damage that the perception will do for the prosperity and well-being of the country. The report concluded that the compensation culture is a myth. However, the BRTF highlighted concerns about proportionality in lower value cases and one of their recommendations was for the Government to consider an increase to the small claims limit. In November 2004, the Government provided its response and largely accepted those recommendations. In the shadow of these potential reforms, representatives from the ABI, the Law Society, APIL and MASS met to discuss whether there was a better way forward. The Civil Justice Council facilitated the discussions. A number of key principles emerged: Insurers having the opportunity to make fair compensation payments to victims with lower value claims without unnecessary legal costs being incurred. Lawyers being involved in the process prior to a claim being made and throughout to support the claimant. Claimants being referred for rehabilitation at the earliest possible stage. A protocol lite to streamline the process and reduce transactional costs in these cases.

Obtaining a medical report from the least expensive level of expert with the appropriate expertise. For lower value claims this could be a GP or other suitably qualified medical professional. In September 2006 the Law Society published Compensation - Fast and Fair. This publication urged the government to look at ways to improve efficiency of the claims process as an alternative to increasing the small claims limit and contained the Society s proposals for a streamlined process. The Claims process consultation recommends no increase to the small claims limits for personal injury and housing disrepair claims and proposes a streamlined process for dealing with fast track personal injury claims. These proposals represent significant and fundamental changes for personal injury solicitors.

THE LAW SOCIETY S RESPONSE This response has been prepared by the Law Society, the representative body for over 100,000 solicitors in England and Wales. The Society negotiates on behalf of the profession and lobbies regulators, government and others. We welcome the opportunity to respond to this consultation on the personal injury claims process. In preparing this response the Law Society has consulted directly with members. It also organised a discussion forum during the course of which solicitors who act predominantly for claimants discussed the proposals and shared views with their professional colleagues who act predominantly for insurers. Generally speaking their views were very similar. CASE TRACK LIMITS The Law Society has lobbied against any increase to the small claims limit for personal injury and housing disrepair cases and we therefore fully support the proposals that the small claims track financial limits should not be increased. Question 1 Do you agree that the small claims limit for personal injuries should remain at 1000 in view of the proposals to improve the claims process? If not, please set out your reasons why and state what you consider the appropriate level would be. The Society fully supports this proposal. We oppose any change that will deprive people of or limit their access to independent legal advice in personal injury claims and believe that concerns about cost should result in the introduction of greater efficiencies, not penalties for the consumer. The intention of the small claims track was to provide a system which was a simplified version of the standard court process that people could use for small claims. The rules contain no provision for a successful claimant to recover solicitors costs because it was intended that people would represent themselves. Personal injury cases are still too complex for most people to handle themselves without help from a solicitor. Research published by the Law Society s Strategic Research Unit in November 2006 showed that:-

The majority of respondents (83.2%) felt that having a solicitor s advice on the value of their claim had been very important. For over one half of respondents (51.3%) the level of compensation they had received was deemed to have been higher for having had a solicitor s help. The presence of a solicitor was also considered, by two thirds of all respondents (66.4%), to have resulted in their being treated more fairly by third parties. At 79.3%, over three quarters of respondents did not feel confident at the thought of bringing their own case, which more than one respondent attributed to a lack of legal knowledge. 76.7% of respondents reported that they intended to use the same solicitor for any future claims. We attach a copy of that research at appendix A. Question 2 Do you agree that the small claims limit for housing disrepair should remain at 1000 for disrepair and 1000 for damages? If not, please set out your reasons why and state what you consider the appropriate level would be. The Society fully supports this proposal. Unlike personal injury cases outstanding disrepair claims involve resolving an outstanding state of affairs i.e. ensuring that repairs are carried out. Outstanding disrepair claims are therefore essentially different from personal injury claims in that the claimant is claiming compensation but also seeks an order for specific performance. Emergency cases often result from serious disrepair which has been outstanding for a short period. For example, a central heating system breaking down in the middle of winter. It is usual for such cases to require expert evidence from a surveyor or environmental health officer and also medical evidence to establish the injury or risk of injury to health caused by the breach of the repairing covenant. This means that these cases are particularly vulnerable to an increase in the small claims threshold as, although the importance of obtaining an order for the works to be carried out is very high, the compensation available is relatively low.

Question 3 Your views are sought on whether the process for dealing with housing disrepair cases can be improved and simplified, and if so, how this could be achieved. The Law Society does not have any proposals for improvement of the process for dealing with housing disrepair cases. The introduction of the housing disrepair pre-action protocol appears to have been successful in resolving the main issues in these types of cases and recent discussions with the Association of District Judges confirmed our view that most are now resolved without recourse to the courts. Question 4 Do you agree that the small claims limit for other claims should remain at 5000? If not, please set out your reasons why and state what you consider the appropriate level would be. The Law Society agrees that the small claims limit for other claims should remain at 5000. We are not aware that the current limit has given rise to any problems. Question 5 Do you agree that the fast track limit should be increased to 25,000? If not, please set out your reasons why and state what you consider the appropriate level would be. We note this proposal is not restricted to personal injury claims and will affect all civil disputes, whatever the subject matter, if they fall within the criteria set out in CPR 26.6. The Law Society supports increasing the fast track limit to 25,000, in principle, provided that there is more flexibility within the rules to transfer cases between 15,000 and 25,000 that are not suitable for the fast track process, in particular claims where complexity or length of hearing make them unsuitable. The rules on allocation need to be amended to provide for this flexibility so that a complex case or a case with a time estimate of more than 1 day will

be grounds for allocating cases exceeding 15,000 to the multi-track. In addition, higher fixed advocacy fees under CPR 46 will need to be provided for. Question 6 Are there any measures that would make the handling of intellectual property claims more efficient and effective? Is so please tell us what those measures are. Question 7 If the difficulty of dealing with intellectual property cases is not the court process, what are the difficulties and how could they be resolved? Question 8 You may consider that different measures would be appropriate for different kinds of intellectual property for instance because patent cases involve questions of technology. If you have a response directed to a particular kind of intellectual property only, please say so. to Questions 6, 7 and 8 In April 2006 the Law Society responded to the Gower Review on Intellectual Property and dealt extensively with a number of issues regarding actions of this nature, including the process, enforcement and costs. A copy of that response is attached to this paper at Appendix B. The Law Society reiterates the points it made in that response. Question 9 Do you agree that these proposals set out a procedure for dealing with claims which will provide fair compensation in a more timely and cost-effective way? If not please say why and set out any alternative proposals. The Law Society is fully supportive of the principle of streamlining the procedures involved in simple lower value personal injury claims in order to achieve faster and fairer settlement of claims and costs which are proportionate. In relation to the specific proposals made: The Society is concerned by the proposal to include claims up to a value of 25,000 within the streamlined process. We believe this is too high and would capture claims which may

be too complex for the type of simple procedures which are envisaged. The proposed process is also likely to encourage far less scrutiny of the merit of claims within the streamlined process. The moratorium on investigation by the claimant s lawyer means that the considerable vetting process that claimant lawyers currently undertake of potential claims will be impossible and with insurers encouraged to make early admissions on more straightforward claims, this may have an unintended consequence of encouraging the have a go culture that the Better Regulation Taskforce highlighted as a risk factor in the UK compensation system. The quid pro quo is that the system is likely to be fast, cost effective and fair for consumers. We believe, however, that for these reasons it should be confined to genuinely lower value claims, which represent in any case, the majority of claims and that the streamlined claims process should be restricted to claims which are unlikely to exceed 5,000 (representing more than 80% of all claims). The position with regard to admissions needs to be clarified. The Law Society considers that unless there is a full admission, or agreement between the parties on contributory negligence, the claim should fall outside the scope of the streamlined process. Contributory negligence is not just an argument about quantum; it is also an argument on the issue of liability. In relation to contributory negligence, we believe that where contributory negligence is disputed it should fall outside the streamlined process as the claimant solicitor will not have undertaken any investigation at this stage. However, if a defendant admits liability subject to an expressed percentage of contributory negligence the claimant should be given 5 working days to accept that percentage and thereby stay within the streamlined process. This will allow for straightforward CN issues to continue within the scheme. If the claimant rejects the offer then the claim should fall outside the scheme. Admissions should be binding as to liability and causation, for simplicity but also because any lack of clarity about admissions will prejudice the claimant in a process where the claimant is not conducting any separate investigation on liability. The exception to this should be cases where there is evidence of fraud. We believe that insurers are far more likely to make binding admissions on lower value claims and this supports the proposal to limit the process to claims under 5,000.

Question 10 Do you have any comments or suggested amendments in relation to the draft forms? The Law Society supports the proposal to introduce simple standard forms. We believe that currently the forms may be over complicated, especially for litigants in person. The mandatory information required could, we believe, be streamlined further. Also, the forms should be the subject of a separate consultation once the proposed streamlined procedure has been finalised. Question 11 Do you agree with the above time periods? If not please state why not and what they should be. The Law Society agrees with the time limits proposed in the consultation paper subject to the provisions made in the consultation paper for essential work to be undertaken by the claimant solicitor to preserve the claimant s position in urgent cases. When considering fixed fees some provision will need to be made for those exceptional circumstances where such work needs to be done. The period of 5 days for a solicitor to complete and send off a claim form should begin to run from the time when the client retainer arrangements are complete. The Law Society believes that longer time limits would prejudice the claimant if liability were subsequently denied. We believe that insurers are most likely to be able to achieve the time limits in claims under 5,000 and as these represent more than 80% of the claims market, the savings will be substantial. The Law Society believes that there should be no scope for extension to these time limits. The whole ethos of the streamlined fast track procedure should be simplicity and speed and with no scope for delaying the process. Requests for extensions of time could quickly become the norm in the majority of cases. As the claimant s solicitor will have conducted no investigation at this point, it will be difficult for a claimant to decide what constitutes a reasonable or unreasonable request. Continuing delay may mean a claimant ultimately is unable to gather evidence if a denial of liability is later received.

Clear time limits will also prevent any satellite litigation regarding such issues as to whether or not a claimant has acted unreasonably in failing to agree a request for an extension of time or a further extension. Question 12 Do you agree that where the amount of damages cannot be agreed there should be an application to the court through the simplest procedure possible? Please comment on what that procedure should cover. The Law Society agrees that there should be a simple process for quantum decisions. It should be possible, with certain safeguards, for the parties to agree for the hearing to be conducted in their absence. There should be a right of appeal of the quantum decision whether the parties have attended the hearing or not. We have proposed that the streamlined process be confined to case up to 5000 for reasons set out above. In those circumstances it is likely that there would be no necessity to have more than one type of procedure for quantum hearings. We have concerns that, for quantum hearings up to 2,500, it is proposed the claimant should beat their own offer in order to be able to recover hearing costs. We support provisions in the process to provide firm encouragement for both sides to make reasonable offers. We are concerned that this proposal provides no incentive for defendants to make sensible offers and may make claimant solicitors unduly cautious as to offers. The net effect of this is likely to be a reduction in damages for the injured person. Question13 Your views are sought on whether additional measures could be introduced that would help improve the process where liability is not admitted, or is denied.

Law Society members have frequently criticised the current disclosure requirements which add to the costs of dealing with a claim and a review of disclosure requirements may be helpful. Question 14 Do you agree with the proposals set out in Appendix 7? If not, please say why and set out any alternative proposals. The Law Society agrees that for the purposes of a streamlined claims procedure for lower value claims that the proposals as set out are acceptable. However, the figures should be subject to annual reviews as if there is no mechanism for review of the rates then more and more claimants each year will claim more than the standard amounts which will undermine the principle of streamlining. Question 15 Do you agree that regional hourly rates should be set and if so, how should they be set? The Law Society is of the view that as Regional differentials in hourly rates are slight it would not warrant the resources required for calculation of Regional care rates. An average U.K. care rate should be calculated and used initially but that rate must be reviewed on an annual basis. Question 16 Your views are sought on the development of an assessment tool for general damages. The Law Society does not support proposals for the development of an assessment database for general damages as we believe that this is unlikely to be in the best interests of Claimants. However, we do believe that it may be useful to consider the development of more sophisticated JSB guidelines.

Question 17 Do you agree that there is little scope for standardising contributory negligence? If not, please set out how it might be done. The Law Society agrees that contributory negligence should not be standardised. This should continue to be a matter for the courts to decide upon. In response to question 9 we put forward our view that unless there is a full admission, or agreement between the parties on contributory negligence, the claim should fall outside the scope of the streamlined process. Question 18 Do you agree with the proposals in relation to costs? If not, please give your reasons and set out any alternative proposals. The indemnity principle should not apply to fixed costs under the streamlined process. The Law Society believes that it is possible to disapply the indemnity principle quite simply. This has been the case with RTA fixed costs. In principle the Law Society supports a regime of fixed costs in appropriate cases but this view is subject to certain safeguards:- The amount of fixed costs should not be imposed arbitrarily. The amount of fixed costs must be proportionate but also reasonable so as to allow for commercial viability by reflecting the work which has to be done, usual overheads and allowing for a fee earner of appropriate experience to deal with a case. A reasonable fixed amount of costs in a streamlined process should not be initially calculated on the basis of building upwards. This should be done on the basis of taking an average amount of costs charged in the existing process for lower value personal injury claims ( A ) and then

calculating what work will not be necessary under a streamlined process ( B ). The costs of that work should then be deducted from the current average (i.e. A B ) leaving C which should form the basis of the fixed costs payable in the streamlined process. Research into how this could best be achieved should be undertaken. The Law Society considers this could be done by Messrs. Fenn and Rickman who have had previous experience in dealing with fixed costs in RTA cases. If solicitors are to support the extension of a regime of fixed costs then there must be a mechanism for annual reviews of those costs. Such reviews should at the very least be based upon the average earnings index. If there is to be a differential in the costs of a quantum hearing then this should be based upon claim value and length of hearing. The Law Society urges the Court Service to engage in the spirit of process streamlining in order to reduce costs and delay by:- Ensuring that the courts fees payable for a quantum hearing are proportionate and reflecting the fact that the Court will be dealing with simple lower value claims. ensuring that hearings take place within a reasonable time and are not subject to delays and postponement due to the unavailability of, for example, judicial resources or court facilities. The Law Society is also concerned that, subject to the streamlined process reducing the amount of litigated claims, as is presumed will be the case; the Court Service will seek to sustain its income by increasing court fees in other matters. The Government s policy of full costs recovery for the court service results in cross subsidy of other civil courts, particularly the Supreme Court, by County Court fees. For example, in 2004/5 the County Court

recovered 118% of its operating costs through fee income whereas the Supreme Court only recovered 29% 1 The consultation paper appears to imply that referral fees paid by solicitors are recoverable from an unsuccessful defendant. This is not the case. Referral fees are paid by solicitors out of their own profit costs and are not charged to a paying party or a client. Most solicitors who pay referral fees do so as a method of marketing their business. All businesses, including insurers, use a proportion of their income for marketing purposes and solicitors are no exception. If the legal profession is to have confidence in and give support to the expansion of the fixed costs regime, those costs must include a profit element for marketing purposes. Question 19 Do you agree that ATE insurance cannot be justified in the circumstances set out above? If not, please give your reasons, identifying the risk that is being insured, and set out any alternative proposals. The Law Society considers that only where a claimant has no risk as to costs would it not be necessary to obtain ATE insurance. However, at the outset of the proposed claims process we believe the position with regard to risk may be less straightforward then is implied and this needs to be given careful consideration. Question 20 What would be the impact on the ATE market of these proposals? We are very concerned that ATE premiums, which are high already, will become disproportionately higher if these proposals are introduced. We also have serious concerns about the impact of taking the vast majority of claims out of the market on the ability of insurers to provide adequate cover for remaining cases. Should ATE insurance become less widely available, this will seriously affect the ability of claimants to proceed with their claim under a Conditional Fee Agreement and thereby access to justice will be prejudiced in the absence of the availability of public funding for 1 HMCS Annual Report and Accounts 2004/5

personal injury claims. If the Government believes there is the slightest risk of this, careful thought needs to be given to how access to justice will be protected in the absence of ATE insurance. The Society believes that the ATE market would be more stable if there was certainty in the recoverability of premiums from unsuccessful defendants. For some time now the ATE market has been plagued with satellite litigation concerning the recoverability of premiums and this problem must be resolved in order to produce certainty for claimants, their legal representatives and ATE insurers. Question 21 Do you agree that the new claims process should apply to all claims for personal injury, except clinical negligence, with a value of less than the fast track limit? If not, please give your reasons and identify which cases should use the proposed system. The Law Society believes that the streamlined process should be introduced, particularly initially, for claims up to 5,000 because: These claims tend to be more straightforward Proportionality is more of an issue in relation to these claims They are more amenable to fixed costs The absence of vetting of claims, inherent in the new process, is likely to be less damaging for genuinely lower value claims In addition, we consider that in addition to clinical negligence matters, disease claims should also be excluded from the streamlined process. They are generally more complex and there can be many occasions when causation is an issue. They should not, therefore, form part of a simplified and streamlined claims process. In relation to claims involving a minor or a patient, there is always a need for a court hearing as in all such cases the court has to approve the settlement. In these cases, solicitors are under a duty to take extra care to protect claimants who are not, by law, able to deal with their own legal affairs and in order to ensure adequate protection from, in rare cases, unscrupulous parents/guardians. For these cases, quantum hearings will be more complicated because of the necessity for the court to protect the minor or patient and

consider appropriate investment of the funds. The cost of attending the hearing in such cases should be recoverable regardless of the level of fee earner who attends.