Russell Jinks, a senior solicitor with south Oxfordshire firm Slade Legal, has reservations about the Government’s intervention into the area of personal injury claims

If you read the newspapers you could be forgiven for thinking Britain is plagued with a compensation culture, fuelled by ambulance chasing lawyers. The Government, through Justice Secretary Ken Clarke, has now decided to step in. He plans to overhaul the ‘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 per cent of damages.

In return, the claimant will receive a ten per cent 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 obtain 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. But 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. But there are concerns. At least with ATE cover the claimant had certainty. The new regime offers anything but that.

What is ‘reasonable’ and 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 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 online through a process driven procedure. The Government is considering similar fixed fee arrangements for claims of up to £50,000 and extending this to clinical negligence, employers’ and public liability personal injury claims.

Up to 90 per cent 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 of 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 personal injury claim conveyor belt which may be tempted to accept the first offer and not, as good lawyers now do, the best.

n Contact: Russell Jinks, Slade Legal, 01235 521920.

Web: www.slade-legal.co.uk