If you read the papers you could believe that Britain is plagued with a compensation culture, fuelled by ambulance chasing lawyers. Someone reportedly sued the V&A because their soup was too hot. He is said to have received £400 for scalding his thumb. How true or accurate this report is is not known but it doesn’t stop stories like these being continually reported.
The Government through Ken Clarke has now decided to step in. He plans to overhaul the dreaded conditional fee - “No Win No Fee” system where lawyers only recover costs from the Defendant or their insurer if they win. One of the aims of the new proposals is to attack those circumstances where the fees received exceed the damages paid to the Claimant.
This does happen, but not as often as claimed. One reason for this is the impact of the “success fee”. Current rules allow lawyers to recover from the losing party a percentage uplift on their normal fees determined by the complexity or difficulty of the case. This can lead to large awards but in return the lawyer has risked receiving nothing if claims are lost or abandoned.
Under the proposals Claimants rather than Defendants will have to pay any success fee from their damages and any such fees will be capped at 25% of damages.
In return the Claimant will receive a 10% increase on any award.
There are problems with this. The purpose of the success fee was to persuade lawyers to take on cases they would normally shy away from because they were too risky. The bigger the risk the bigger the reward. Lawyers will now think twice before taking on difficult or complex cases because the reward no longer reflects the risk.
Clients will also think twice. If they manage to find a lawyer to take on their claim they will have to enter into arrangements that will cost them a chunk of any potential winnings.
There is more. Claimants can get insurance to protect them from paying the Defendants’ legal bill should they lose. This is known as after the event insurance (“ATE”). Under current rules the one off insurance premium due for such cover is paid for by the Defendants if they lose. However under the new rules the cost would be the Claimant’s.
The Government justifies this decision by planning to change the rules on costs recovery. The basic principle of litigation is that the loser pays the winner’s costs. The Government plans to change this with what is called “qualified one way costs shifting”. The proposal is that even if they lose the Claimant will not be expected to pay the Defendants’ legal costs unless they have acted “unreasonably” or are “very wealthy”.
At first glance this seems reasonable. However there are concerns. At least with ATE cover the Claimant got certainty. The new regime offers anything but that. What is “reasonable” what is “wealthy”? The concern is that insurers will aggressively attack any failed claim as “unreasonable” and seek a costs order. This is a growing trend in the Employment Tribunals. The absence of certainty and the threat of a costs claim will again put some genuine claimants off.
There is also the proposal to extend fixed fee arrangements. At present lawyers can only claim fixed fees of no more than £1,700 for Road Traffic related Personal Injury Claims of less than £10,000. These claims are now conducted on line through a process driven procedure.
The Government is considering similar fixed fee arrangements for claims up to £50,000 and extending this to clinical negligence, employers’ and public liability personal injury claims. Some 90% of all personal injury claims would then be subject to fixed fee arrangements. There is no question that if this comes about the legal bill will fall drastically. But what else will happen?
Many lawyers will take a long hard commercial view at their work. Unless they decide to develop “low cost claim shops” (where service will inevitably be affected) they will simply move into different areas.
What about the client? If they suffer some trauma or injury who will help them? They can always pay privately but what if they do not have the funds? The concern is the claimant will have to take on the insurance giants themselves or join a PI claim conveyor belt who one fears may be tempted to accept the first offer and not, as the good lawyers now do the best.
Russell Jinks is a senior solicitor with Slade legal. He is a Claimant PI specialist with over 25 years experience