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Westminster Hall
Thursday 30 March 2006
[Mr. David Marshall in the Chair]
Small Claims (Courts)
[Relevant documents: First Report from the Constitutional Affairs Committee, Session 2005–06, HC 519, and the Government's response thereto, Cm 6754.]
Motion made, and Question proposed, That the sitting be now adjourned.—[Kevin Brennan.]
2.30 pm
Mr. Alan Beith (Berwick-upon-Tweed) (LD): I glad that you, Mr. Marshall, and a significant number of hon. Members, as well as the Minister, who has taken on new responsibilities, have stayed behind on the last day before the Easter recess to discuss the small claims track, which is important to many of our constituents.
The report produced by my Committee gives a general commendation to the work done on the small claims track of the county court. It provides a genuine and valued service to large numbers of people with minimal effort, cost and complication and it is genuinely appreciated. We said in our report that the system
"generally works well in providing a low cost, good quality procedure for large numbers of litigants. The procedure is informal and quicker than ordinary proceedings. It assists litigants to appear in person by providing greater judicial intervention and support and enables people to avoid incurring substantial legal costs in order to pursue small monetary claims."
We went on to say that we identified some problems, and I will refer to those in my speech.
We visited county courts in various parts of the country individually, in places that were convenient to us. We talked to district court judges, who also gave evidence. We listened to cases from start to finish and took evidence from judges, personal injury lawyers, Citizens Advice, the Law Society and Ministers.
We identified four issues. The first was the information technology situation in the county courts, particularly as it affects the small claims track. When we visited the county courts, we found the IT systems in a dreadful state. Judges admitted that they were using their computers merely as word processors. Even more concerning was the fact that we were informed that new software was performing poorly. The listing software, which could be accessed by the clerks and administrative staff, could not be accessed by the judges because of compatibility problems.
We concluded that the Department must place greater priority on providing adequate IT facilities to the county courts. Although the provision of IT equipment and electronic document management software might be expensive in the short term, there would be scope for greater efficiencies if the current paper-based system were at least partially replaced, and the service to the public would be improved.
The Government response includes the interesting phrase:
a strange mixed metaphor. It continued:
"current investment in improved infrastructure, electronic scheduling, centralised data and future plans to develop electronic service channels will provide us with the opportunity to streamline the process further."
Wonderful weasel words. The Government are saying not that they are actually going to do it, but that once they have done all that—even that is in doubt—they will have the opportunity to do more. The response said, of course, that financial constraints dictate the speed of progress, and that a
should have been completed by today—the end of March 2006. It continued:
Keith Vaz (Leicester, East) (Lab): As the right hon. Gentleman knows, the Select Committee discovered that the Department for Constitutional Affairs spent £9 million on consultants last year. I recently received a reply to a question on where that money was spent. Some was spent on IT consultants. Does he agree that it would be useful to know exactly what those IT consultants did for the large amount of money that the Department spent?
Mr. Beith : Indeed it would. I expect that a further letter in amplification of the hon. Gentleman's persistent and necessary questioning on the subject might follow from the Department. Were the consultants on whom so much money was spent involved in trying to sort out the county court IT provision? If so, that does not seem to have produced the results that we need. It is clearly an issue for the Department and it should show more urgency, we felt, than it has.
The second problem area, which is reflected in the experience of hon. Members when trying to help their constituents, is in the enforcement of judgments. If someone gets a judgment in the small claims court and comes out thinking that they have recognition that wrong was done and will be compensated, and then find that they cannot enforce it, that is extremely frustrating. It is such a common experience that, in its literature, the Department advises people how to find out whether the person against whom they have a claim already has undischarged county court judgments, as it might not be worth pursuing another claim against that person. It is a counsel of defeat: do not bother taking a case against that defendant, because his record of paying is so bad that it is not worth while.
David Taylor (North-West Leicestershire) (Lab/Co-op): In the parable of the good Samaritan, the victim fell amongst thieves. I am an accountant who has fallen amongst lawyers, by the look of things.
As an accountant, I found that the small claims court, or the small claims track as it is now called, worked in terms of clarity, speed and helpfulness, as the right hon. Gentleman said, but it hit the buffers when it came to enforcement. The measures suggested by the report are good, but I am not sure that they will have any impact
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on the "won't pays", the people who move around and are not in settled employment. That is where I encountered the most persistent problems when I tried to claim to assist clients.
Mr. Beith : I am not a lawyer, although there are quite a few around. Having an accountant present encourages me to invite him and his colleagues to come up with some more ideas as to how we can improve the enforcement process. The Government have some good ideas that they want to carry forward, and we commend them in the report. However, we are worried about the time that it will take to achieve such things.
The Department has laid out a number of proposals, including widening access to charging orders, fixing tables on attachment of earnings orders and information sharing with other Departments, but many of those require legislation. Despite our recommendation that the new powers should be introduced expeditiously, the Department has suggested that they are likely to feature in the draft courts and tribunals Bill, which we will consider later this year. There may be measures in that Bill that ought to go through the draft process, but we have been discussing these powers for a long time. I would rather have seen them in the current legislative timetable than put off for another Session. An awful lot of people will not get help to have their county court judgments enforced if we have to wait that long. That is a worry.
The third issue, which is not a problem about the small claims track but an issue for the future, is the limits on claims for personal injury and housing disrepair. There is a lower limit of £1,000 on the value of claims for personal injury and housing disrepair that go through the small claims track, which has been in force for a long time. We felt, as did the Better Regulation Task Force, that the limit needed to be reviewed and raised to £2,500.
In preface, perhaps I should say that virtually all our witnesses agreed that the most important issue was that the parties had proper information and advice before they came to court, rather than when they were represented at court, so that they knew whether it would be appropriate for their case to go through the small claims track, or whether they ought to be properly represented and not go through that track. Of course, one can be represented legally in the small claims track, but the cost structure does not make that an attractive or appropriate option for many people who might want to pursue claims. A more complex case should not go through that process. However, claims for personal injuries at the lower level could certainly be considered under the small claims system without unduly disadvantaging claimants.
The same issue could be raised about housing disrepair cases. It is important that vulnerable tenants, for example, have access to advice to find out whether their case can reasonably be resolved in the small claims process. It might be a lot easier for them if it is dealt with in that way, but it could be more complicated to do so.
Mr. Philip Hollobone (Kettering) (Con): The National Accident Helpline is based in Kettering, in my constituency. It has written to me to say that, on its estimate, at least 30 per cent. of total personal injury
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claims would be included in a £1,000 to £2,500 bracket. It cites evidence from the Association of District Judges, which acknowledges that
"lay people would be disadvantaged if they had to arrange for investigation of the medical aspects of their claim, in all but the smallest cases, without the assistance of legal representation."
Mr. Beith : The hon. Gentleman mentions the essential qualification—
In a moment, I shall come to medical reports as they relate to personal injury claims and I hope to deal then with the concern that he expressed.
Mr. Michael Wills (North Swindon) (Lab): Before the right hon. Gentleman moves on, I would like to clarify something. I take his point that all claimants should have proper advice before going to court, but does he recognise that there are concerns about the disproportionate benefits enjoyed by defendants, who will almost always be legally represented throughout the process, whereas many claimants will not be represented in court, particularly if the limits are raised? The defendant therefore enjoys a disproportionate advantage. Does the right hon. Gentleman recognise those concerns?
Mr. Beith : That is a very proper concern in more complex cases. When I say more complex, I have in mind the complexity involved in dealing with an injury with a high prospect of recurrence, not the massive complexity that one might normally associate with a legal argument. In the case of such injuries, someone should be represented.
However, the hon. Gentleman's argument neglects the judges' active role in a small claims court and the pains to which they go to ensure that unrepresented claimants are not put at a disadvantage. Indeed, if a district court judge thought that that were going to happen, he would not want the case to go down the small claims track at all. It can happen that one side is represented and one is not, but the judges who deal with such claims—we have observed this in action—are very experienced, have often practised in this area and are at particular pains to ensure that any inequality of arms is not reflected in the way in which the matter is handled. That is because of the more interventionist way in which they can proceed.
Keith Vaz : As a member of the right hon. Gentleman's Committee and someone who signed the report, I say this in no way to sound disloyal, but we may have made a mistake in recommending that the limit be raised to £2,500. Since the report was published, I have had representations from many groups, saying that we got things wrong and that raising the limit, as the hon. Member for North Swindon (Mr. Wills) suggested, is much more unfair to unrepresented litigants. Has the right hon. Gentleman had the postbag that I have had on that issue?
Mr. Beith : I have indeed, but mainly because my hon. Friends and other hon. Members have passed letters from personal injury lawyers in their constituencies on to me. One or two personal injury lawyers in each constituency have dutifully written to their Members of
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Parliament, as they are quite entitled to do, to express their view and to advance their arguments. The Government must now consider the various cases that have been put to them about whether, and if so by how much, the limit should be increased, and they will obviously want to take account of those representations.
A curious feature of several of those representations, however, was that they appeared to be based on the principle that £1,000 was the appropriate limit in personal injury cases for all time. One or two bodies, including the Association of Personal Injury Lawyers, conceded that, in its view, no personal injury cases should ever go down the small claims track, or should ever have done so. We should bear it in mind that we are talking about a limit over which cases have drifted during the period in which it has been in force. We had better come clean about whether we believe that no personal injuries should be dealt with using the small claims track, or that there is a limit, which must be set at an appropriate level, and I shall come to some of the arguments about that.
Before I go much further on that, however, let me highlight the testimony from the Association of District Judges. Its view is that parties would not be unduly disadvantaged if the limit were raised to £2,500. Such judges are often solicitors who may have practised in this area of law and who are in a good position to judge how litigants would cope with the support that judges gave them. They have had plenty of opportunity to observe represented and unrepresented claimants.
In its report, the Committee referred to the potential complexities faced by claimants who need to obtain medical reports—a point that was raised earlier. We made it plain that it may be proper to draw a distinction between more complex injury claims, which require a medical report, and those in which injuries clear up within months, in which the only available evidence is likely to be from the general practitioner or physiotherapist, and in which there is no continuing problem with the injury. In the latter circumstances, it would be more sensible for the GP's letter to be adduced in evidence, avoiding the cost of medical reports and lawyers to interpret them.
Our subsequent inquiry looked into whether there was a compensation culture. Incidentally, for the benefit of those who wrote to us suggesting that we thought that there was a compensation culture, let me say that we said precisely the opposite in our subsequent report. In our inquiry, insurers told us that they would be prepared to accept reports from GPs in such small cases. The current process can lead to cases in which the legal costs and disbursements involved in bringing a claim exceed the damages that the claimant receives, fuelling the impression of compensation culture.
One should recognise that some minor injuries and effects are well out of the way by the time people get to the small claims court. Such injuries and effects fall well within what judges refer to as the green book limits, which are in the £1,000 to £2,500 range, or at some other suitable level around there. I have in mind the minor injuries, the trips and the slips, the broken finger or the very minor scarring. If one looks at the green book and at the injuries that fall within that range, one sees that compensation for the loss of, or damage to one front tooth falls in the £1,250 to £2,150 range. Compensation
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for work-related upper limb disorders, which relate mainly to tendons and where there is complete recovery in a short period, are in the £1,250 to £1,900 range. Compensation for trivial thumb injuries that have caused severe pain for a short time, but which have been resolved is in the region of £1,250. Compensation for all those things is just over the present limit.
Mr. Andrew Dismore (Hendon) (Lab): I hope to catch your eye later, Mr. Marshall, but I am extremely concerned about some of the right hon. Gentleman's examples. Has he ever tried to fight an upper limb disorder case? They are incredibly difficult on liability, never mind quantum. One of my concerns about his recommendation is that it assumes that insurers will automatically admit liability in every case, but work-related upper limb disorder cases are incredibly difficult and complex to fight.
Mr. Beith : The hon. Gentleman is a very experienced personal injury lawyer who has fought many such cases, but I am not. I am focusing on the fact that several injuries fall within the small range that I mentioned. If, at the end of the day, the claimant gets £1,250, one wonders why he has to go through the much more elaborate procedure. The hon. Gentleman, I am sure, fears that the injury will be more complex and cause recurrent problems and will therefore deserve much higher compensation. In that case, it clearly should not be in the small claims track.
Mr. Dismore : The right hon. Gentleman is missing the point. The difficulty with the recommendation is not the value of the claim, but the complexity of establishing liability in the first place. Insurers will deny liability, and the victim of the injury will not be able to obtain justice as a result of this recommendation, because specialist legal knowledge is required to fight them.
Mr. Beith : If the hon. Gentleman is arguing that all the cases that have hitherto gone down the small claims track should not have been dealt with in that way, he should have been arguing for a long time to remove them entirely. What we actually have is an argument about the right level.
Mr. Dismore : I am sorry, but the short answer is that I resisted the introduction of personal injury claims in the small claims track in the first place. My basic position is that they should not be there, but as they are, they should stay where they are.
Mr. Beith : At least we now have the cards on the table. The hon. Gentleman should be arguing for all small cases to be taken out, but that is unreasonable in terms both of the perception of what judges will do in the small claims court and of the treatment of those whose injuries have undoubtedly been dealt with and who would quite like to go through a fairly simple procedure, rather than the lengthier one. However, the Government are listening to the arguments and will make the decision; we are simply contributing to the debate. That brings clearly out into the open the fact that most of those who argue that the limits should not be raised at all appear to believe, as the hon. Gentleman did in previous years, that none of these cases should ever go down the small claims track.
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Of course, one could advance the same argument about much of what goes on in the small claims court. One could say that consumers are not in a position to understand the complexities of tort or contract law, yet the limit for such claims is set at £5,000, without obvious difficulties. If complex medical reports are eliminated from the equation, it is not easy to identify why claimants should not be able to set out the basic facts before a judge about how they came to be injured.
The European small claims procedure became a live matter while we were examining the issue. We concluded that it could be of real benefit in cross-border cases, but we were concerned that the claiming of disproportionate legal costs and the unrealistically low limit of £2,000 could undermine its value. We saw no reason to extend the European small claims procedure to wholly domestic cases, where the existing system is available with lower cost risk and has been shown to work relatively well. We were quite worried that people might mistakenly suppose the European small claims procedure to have something to do with European human rights and therefore believe that they would be better off using it. However, doing so might prove to be a more expensive and time-consuming way of dealing with their case. We saw the attractions of the European procedure in cross-border cases, which are increasingly common as people travel more widely and buy things on the internet from sources abroad. The complexities of modern life make it highly desirable to get such a system up and running effectively.
The Government's response said:
"The Government, during its presidency of the European Council obtained agreement on the need for proportionate costs and to limit the procedure to cross-border cases."
The issue is apparently still under discussion in the European Council's working group. I am not sure that the limit is absolutely firm, so it would be helpful if the Minister could let us know. The response continued:
"The Government will continue to press for a procedure which is practical, straightforward, fast and effective."
In the meantime, the House of Lords European Union Committee has published a report on the European small claims procedure welcoming the initiative, particularly in respect of cross-border cases.
Members of our Committee found it rewarding to look closely at the small claims track and at the grass roots of consumer disputes, housing issues, and minor accidents and personal injuries. I still treasure the image of a district court judge arranging dinky toys on the court desk while the parties, both of whom were represented, explained precisely where the cars and the bus were at a crucial moment. I asked the judge in one case how long she thought it would have taken if the parties had not been represented. She said about half the time. Judges operating in district courts have a pretty good and shrewd way of ensuring that unrepresented defendants have their cases properly dealt with.
All human life was there. We saw the emotions and cross-currents that run through the often hotly contested disputes between private individuals. I watched an argument about a fireplace that had been removed, with the judge attempting to resolve the difficult situation and the husband and wife parties not
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agreeing on how it should be resolved—one was prepared to pay and the other was not. Many of the cases operate at the level where personal difficulty and emotion complicate arguments about relatively small sums of money. However, those sums are significant to those who have had to bear the burden of the cost of a repair, consumer mistreatment or whatever.
The system is a credit to our judiciary, but it is capable of significant improvement, particularly in enforcement, and there probably needs to be some adjustment of the limits in personal injury and housing cases—we wait to hear what the Government think appropriate in that respect. It is a system that should be valued.
2.54 pm
Mr. Andrew Dismore (Hendon) (Lab): I wish to raise only one aspect of the report and that is paragraph 54, which contains the recommendation on limits for small claims in personal injury cases.
Before doing so, I declare an interest. Prior to the general election in 1997, I practised as a personal injury lawyer for almost 20 years, mainly working with trade unions. I remain a consultant with my law firm, which is listed in the Register of Members' Interests, but I have not handled any cases since being elected, as I do not think that I could do that and work as an MP.
I have kept in close contact with the personal injury world. I am a founder member of the Association of Personal Injury Lawyers and a former member of its executive committee, and I handled its damages special interest group from its foundation until my election. I was also appointed by the Law Society as an accreditation assessor for its panel of specialist personal injury lawyers, and have sat on appeals against refusals of accreditation. Although I say so myself, in the Legal 500, the peer-group review, I was rated in the top five personal injury lawyers in London for three years running, until I was elected to this place. I have handled many thousands of personal injury cases in my career: high-value cases, complex cases in the House of Lords and many cases of lesser value—the sort of cases that we are talking about today. It is fair to say, although I say so myself, that I know a little about the subject.
Today, however, I hold no brief for the legal profession; I hold a brief for my constituents who may be the subject of personal injuries. Having said that, I recognise that no law firm will become particularly rich dealing with relatively low-value cases, as they do not make a lot of money, despite what the insurance company might say. My job is to stand up for victims.
The basic error into which the Select Committee has fallen is to suggest that personal injury cases are somehow on a par with consumer cases. There is a real difference. If someone's washing machine does not work, they know how much it cost to buy and how much it costs to repair. They have a good idea of how much money they are looking for. Similarly, if a garage has not repaired a car properly, the owner knows how much is involved. However, the average person in the street has no idea what a personal injury claim is worth. I am amazed that the Committee even suggested that the comparison should be considered. That reveals the power of the insurance industry lobby today—it has the ear of the Government and the ear of the Committee, too.
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Despite the Committee's previous findings on compensation culture and all the statistics showing otherwise, the same compensation culture arguments are still trotted out all the time. The Committee's report came to a different conclusion, which I welcome, but the tabloid press churns out such arguments, which, despite the facts, nevertheless chime with the judiciary and the powers that be.
Mr. Beith : I hope that the hon. Gentleman will think again if he is suggesting that the Committee came to its conclusion because of the lobbying power of the insurance industry. If any group of people influenced the Committee significantly, it was probably the judges themselves, explaining what they believed their courts could cope with. I hope that the hon. Gentleman will withdraw the unworthy suggestion that the lobbying power of the insurance industry—whatever it may be—is any more significant than the obviously quite notable lobbying power of the Association of Personal Injury Lawyers.
Mr. Dismore : I am afraid that I have to disagree. I am not casting aspersions on the right hon. Gentleman, but having seen the amount of time, effort and money that the insurance company lobby spent on trying to reduce the value of personal injury claims and take money away from accident victims, as compared to the resources available to the APIL, I can say that the two do not bear any comparison whatever.
I am concerned that as a result of the lobbying we are seeing an assault on the rights of personal injury victims, and I am not talking about cost regimes. For example, there is the disgrace of clause 1 of the compensation Bill, which will come before the House soon. It is an unworthy Bill that will do significant damage to the rights of accident victims. We have seen an attack from the Home Office on the criminal injuries compensation scheme. In fact, one of my last big cases was in the House of Lords against the then Home Secretary, the right hon. and learned Member for Folkestone and Hythe (Mr. Howard), when he tried to implement similar reforms. Now we see from the right hon. Member for Berwick-upon-Tweed (Mr. Beith) a suggestion over small claims. Even worse, the judiciary is in on the act too, with some disgraceful recent decisions in the Court of Appeal, such as in the pleural plaques cases, which take away the rights and compensation for injured and deserving workers.
To return to small claims, we hear the arguments advanced for an increase. The Committee says £2,500, the Better Regulation Taskforce said £5,000 and the insurance industry says £5,000. Interestingly, however, the Civil Justice Council, the trade unions and the consumer groups say that there should be no increase whatever. One argument that has been prayed in aid concerns inflation. If inflation were the test, the level would go up to £1,500—if the retail prices index was applied, it would be £1,480. However, that assumes that personal injury damages have in fact kept pace with inflation, yet they have significantly failed to do so since the 1960s. There is not a great deal in that argument.
Mr. David Jones (Clwyd, West) (Con): Does it not matter from what date one applies the start of the
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inflationary period? The small claims track was looked at in 1998, only eight years ago, so the inflationary increase is probably even less than that.
Mr. Dismore : The hon. Gentleman is right. When I was writing a paper for the Law Commission in the early 1990s, I undertook an analysis, based on the retail prices index, of personal injury damages going back to the 1960s. The sums being awarded in the 1990s were only a third of what they should have been had inflation been properly applied since the 1960s. It may be a matter for the Minister on another day, and another campaign, but not today. However, there is a strong case for saying that damages are too low.
I put that to one side, however, and turn to what is happening in Europe. Strong discussions are taking place on a European procedure for small claims. A limit of €2,000, or £1,300, has been suggested, with the safeguard of free legal advice to consumers who use the system. The Committee talks glibly about £2,500, but it does not realise that that is a lot of money to many people—especially to those who are the victims of accidents. For those on the minimum wage, that sum represents a quarter of their annual income. It is a significant amount of money. Although it may be a flea bite to the insurance company, it can make a significant difference to those who have been injured on the roads or through consumer products.
If the reform were to go ahead it would deprive victims of the right to legal advice, assistance and—I disagree with the right hon. Member for Berwick-upon-Tweed on this point—representation in court. We already know that only one third of valid personal injuries result in a claim. Many more will be deterred from seeking access to justice. That may result in an infringement of article 6 of the European convention on human rights, which provides the right to a fair trial, because injured people faced with the barrage put up by the insurance companies will not get a fair trial.
Mr. Beith : Is the hon. Gentleman saying that the existing £1,000 limit in all cases is at risk of being regarded as an infringement of article 6?
Mr. Dismore : One could argue to that effect, but I am not making that argument today. I am not arguing for the removal of the small claims limit for small cases. As I said when I intervened on the right hon. Gentleman, I campaigned against it, but it is a fact of life. Many people lost out as a result of that change. Many injured people do not bother to claim because they do not know how to do so. I shall advance that argument in more detail shortly.
Mr. Hollobone : The national accident helpline, which is based in Kettering in my constituency, did some quantitative research with 182 individuals who were pursuing claims through the fast track claims process. It found that 91 per cent. of people did not know what their personal injury claim was worth; that 96 per cent. did not know how to pursue their claim without legal help; and that 73 per cent. did not know how to get an independent medical report.
Mr. Dismore : I am grateful to the hon. Gentleman for those figures. They do not surprise me. They are slightly
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higher than figures that I found elsewhere, but I am grateful for the intervention, as it reflects the reality of what happens in the outside world rather than in the hallowed corridors of the Palace of Westminster.
The argument advanced by the insurers is one of disproportionate cost. According to the Committee's report, they claim that the costs are equivalent to 65 per cent. of the value of claims and some 40 per cent. of the total pay out. The question is why those costs are so high. It is because the insurance companies fight claims tooth and nail. They hope to deter claimants from bringing cases to court. They deny liability when they should not, they make silly offers, and they take cases too far along the track and then to court when they should have paid up earlier and properly. If they did so, the costs would not be so high. The cost of bringing claims is high because that is what it takes to make the insurance companies pay out. If the insurance companies want to limit their costs, they should accept liability and pay up early.
There are other solutions. The Law Society's briefing for today's debate makes it clear that discussions are ongoing to try to simplify procedures. We have already seen the introduction of various protocols and more can be done in that direction to try to reduce legal costs. For example, we have seen fixed costs in road traffic cases. That is another way to reduce costs.
In the end, not all legal costs will be eliminated, not even in the small claims court. A medical report will be needed—one from a GP may be satisfactory—as will a police report. All that will cost money, and that will have to be factored into the insurance companies' equation come what may. The insurance companies are not going to pay out on a road traffic case without a police report, and the cost of that now runs into three figures. To suggest that it is all down to thieving lawyers is a misrepresentation of how legal costs accrue.
What will be the effect of the increase? If it were to go up to £5,000, 75 per cent. of personal injury claimants would be deprived of legal advice and assistance. If it were to go up to £2,500, as the report proposes, 52 per cent. would be deprived of that right. It would pose a far greater risk of injustice for the ordinary man or woman in the street than to the mighty insurance companies if the latter had to pay costs in cases that, by definition, they would lose and on which they should have paid up earlier.
Mr. David Anderson (Blaydon) (Lab): Is my hon. Friend aware that, in a survey carried out by Unison last year, 63 per cent. of people who were supported through the legal system said that if they had not been represented they would not have gone forward with their case as they would not have felt confident in representing themselves before a judge?
Mr. Dismore : My hon. Friend makes an entirely apposite point. I was about to deal with it, but I did not have those figures, and I am grateful to hear about the Unison survey. That is undoubtedly a deterrent to claims being brought in the first place, which is illustrated in a vast quantity of research.
The Association of Personal Injury Lawyers conducted a poll—it was done through MORI, so that it was properly validated—showing that about two
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thirds of those who suffered injury would not pursue their cases through the small claims court without the help of an independent solicitor. If 64 per cent. of people will not bring a claim without independent legal help, it means that two thirds will fail to get justice.
Those who decide to go to claims farmers could lose a third or more of their claim through contingency fees for representation that is at best second rate, but without proceedings there is less leverage for getting better compensation out of insurance companies. That underestimates the real fear that the average person has of the legal system. The man and woman in the street are terrified of going to court. People, particularly professionals, lawyers and others who are used to dealing with bureaucracy and that sort of environment, or used to the environment in the Palace of Westminster, can underestimate the fear that the average person has of dealing with such a situation.
I welcome the more interventionist approach of district judges, but unfortunately most cases would not get anywhere near a district judge because they would not get to court. When I did assessments for the specialist panel of the Law Society, not many district judges held that qualification. Not many of them are experts in that field. Some may go to a citizens advice bureau, but it is not properly equipped to advise people. People come to my surgery from time to time for advice, which I give for free. I advise people of the basics of making a small claim, but I am not sure how many follow it, even though the advice is probably worth rather a lot of money. The fact remains, however, that I would not be able to represent people in court because of other demands.
The difficulty is that we end up with a lack of equality. People are unlucky to have an injury; they are even more unlucky to have a claim and no lawyer to present it. For most, an accident is a one-off event. Most people never have accidents, but some do. However, the insurance claims assessors, whose job it is to minimise claims, are answerable to their bosses and shareholders, have no duty to the victim or the court—unlike solicitors, who have a duty to both the court and the victim—and deal with dozens of such cases day in, day out. In my early days as an articled clerk—I think that they are now called trainee solicitors—I remember having to meet claims assessors from the Municipal Mutual Insurance, Zurich Insurance, and other particularly bad companies, who tried to put one over on me in my naivety as a trainee. They were tricky individuals. If they try it on in that environment, I wonder what they do when dealing with the cases of ordinary, unrepresented people.
This is not just a question of quantum—the value of the claim—it is also about liability. Perhaps I can illustrate this with some hypothetical cases that are typical of the cases that I dealt with. Let us consider Mrs. Patel, a pensioner, who trips on a broken pavement, falls over and breaks her cheekbone, or Mr. Smith, who has impaired sight, falls on a bus that pulls away from the bus stop too quickly and breaks his nose, or take Mr. Jones, who is clipped by a car when running across the road when the green man is flashing. What would those people do? It would be difficult to prove liability in those cases, which are not worth a lot of money—certainly less than £2,500—but which have a value. Where would those people get legal advice? How
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would they know who to claim against? Most people do not know how to track down the claims department in their local council or bus company, and do not have the wherewithal to take down the car number plate, if they have been hit, and track down the insurance company. Even when people make a claim, insurance companies often do not bother to reply; they hope that claimants will go away. How should such people write to them or find them? What about the language barrier for a pensioner like Mrs. Patel, who probably does not speak English or does not speak it well. Would the CAB be able to help them? That is unlikely.
What about collecting evidence to support such cases? Most people who trip on a pavement might think about taking a photo of it, but how many people know that a photo is no good if it has nothing in it to show the scale, such as a matchbox, coin or ruler, to prove how big the trip is? That is the sort of basic advice that a person needs at the beginning of their case if they are to pursue successfully a personal injury claim for tripping on a pavement. There is some more free legal advice for those who might need it. How many people know how to keep track of witnesses, how to get witness statements for their claims and to keep in contact with those witnesses?
Mr. Beith : The hon. Gentleman has to answer his own question. If someone who lacks all that essential evidence goes to a local solicitor and says, "Will you take my case?", he then has to deal with solicitors, but they are now managing risk in terms of the likelihood of winning cases.
Mr. Dismore : Those three cases are of the sort that I handled and won compensation for the victims.
Mr. Beith : But the hon. Gentleman is not there any more.
Mr. Dismore : I am not there any more, but there are many other good personal injury lawyers—members of APIL, for example—who are and will take on such cases on a conditional fee basis at no cost to the claimant.
What happens if the insurer—if the claimant has managed to track them down—writes back denying liability? How is such a person to assess whether they even have a claim if they do not know the basic principles of the laws of negligence or statutory duty? What if the insurer alleges contributory negligence? Does everybody know what that is and how to assess the percentage that someone might be to blame for tripping up if they were not looking where they were going? In such circumstances, the claimant would drop the case.
When I was in practice, there was an empirical rule of thumb—a sort of four-thirds rule: only a third of cases came anywhere near us in the first place, a third of which had no hope and should not be brought, a third of which were pretty certain to succeed, and a third of which needed work to build up the case, find the evidence and establish liability. The average person in the street is not able to do that. It goes on. Let us assume that the case finally gets to court. The claimant has to fill in the forms and find the medical evidence—the hon. Member for Kettering (Mr. Hollobone) mentioned that. Would they know how to do that? Suppose that they managed to get a case under way and the insurer says,
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"Okay, we'll give you 500 quid"? How would they know whether that is enough, particularly if there is an allegation of contributory negligence?
The public's view of damages bears no relationship to reality. When I was doing some research for a Law Commission paper, we did some focus group work, which was very popular in the 1990s, and found that the average person in the street thought that the value of the injury, excluding any financial loss, was three times what they would actually get from a court. Therefore, people might take cases further and pursue them for longer because they are not told that they are not worth as much as they think. That is very counterintuitive, from the insurers' point of view, if the case were to get that far.
Frankly, from the Committee's report, it seems that it has no idea of the value of claims either. The right hon. Member for Berwick-upon-Tweed referred to paragraph 52 of the report, but someone who is off work with injuries for months would claim more than £2,500 anyway. It is suggested that such a case should go ahead on the basis of a report from a GP or physiotherapist; one would not get on the personal injury panel of the Law Society with that sort of assessment of a case. That is not how they would be fought. They would potentially be worth rather more than that.
APIL's MORI research showed that 80 per cent. of people felt that they would not be offered enough by an insurance company, so even if the insurer offered the right value in those sorts of cases, the offer would not be accepted because people think that cases are worth more than they are. We have the Judicial Studies Board guidelines, which give brackets and ranges for personal injury damages. Most people think that their case should be in a higher bracket than it is, and that it is worth the top of the range in that bracket, which it will not be.
It is not just a matter of the injury itself; another consideration is the special damages—the financial losses. Who advises on whether one can recover for damages to one's clothing and if so how to assess the amount? Who advises how to get money for broken spectacles and how to assess the amount? It is not the replacement value. Who advises a pensioner who is incapacitated from doing household chores and needs extra help about the home that if they hire a home help for a week or two, they can recover that cost? The insurance company certainly will not tell them that.
People have an utter fear of courts, which I mentioned earlier. Even when they are represented, they are terrified of court. I have taken many clients to court and one of the first things that I always do is take them into the courtroom before the judge gets there to show them where everybody sits. I try to put them at ease. People are like a cat on a hot tin roof when they think that they will have to give evidence in court, even in the relatively informal circumstances of a small claims court. Even lawyers get nervous about representing people before a judge.
How would Mrs. Patel cope if her case got that far? Would she know how to find an interpreter? Would she really be able to put her case against a seasoned insurance company representative? Would Mr. Smith, with his visual impairment, or Mr. Jones, an ordinary person who has been clipped by a car, be able to put their cases? Such cases are everyday occurrences for
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insurance claims assessors. They are trained on processes, evidence, how to cross-examine and evaluations. An interventionist judge is not the answer.
We also have to bear in mind that the outcome of one of these cases is in full and final settlement. What happens if the claimant turns out to be more injured than they thought and did not realise that they could consider that particular aspect? A lawyer would make sure that the medical evidence was right and would look at the long-term consequences.
I have been speaking for far too long on this issue, but I feel passionately about it. I believe that the recommendation will victimise people thrice over: first as victims of the injury, secondly as victims of the insurance industry, and thirdly, and perhaps most seriously, as victims of a legal system that will manifestly fail to give them justice. If we must have a small claims limit for personal injury cases, it should stay where it is.
3.18 pm
Mr. David Jones (Clwyd, West) (Con): My remarks will also be confined to the limits in personal injury cases, and much of what I say will echo the comments of the hon. Member for Hendon (Mr. Dismore).
I must declare an interest, as revealed in the Register of Members' Interests. I am a member of the Law Society, but have not practised as a personal injury lawyer for many years, although there was a time when I did a considerable amount of PI work—much of it for trade unions. Therefore, I have a certain degree of knowledge on this matter.
As the hon. Gentleman said, the small claims level for personal injury cases was instituted for a good reason: the nature of personal injury cases is very different from other small claims court cases. I have no doubt that small claims courts have been a highly desirable development and have had a significant beneficial effect in promoting access to justice. A large percentage of the cases that come before those courts involve the recovery of small personal debts, or consumer claims.
The small claims procedure is well suited to such cases. The evidence required in them is not normally so complex that most claimants would feel uncomfortable in pursuing their claims themselves. Frequently, that consists simply of producing the relevant documentation—or in many cases explaining the lack of documentation—and telling the claimant's side of the story. The interventionist approach adopted by the courts, to which witnesses who came to the Committee referred, means that any small procedural lapses can be quickly and easily attended to. Frankly, they are not normally of great moment in any event.
Personal injury cases are very different. In such cases, it is frequently difficult and complex to demonstrate the negligence of the other party. As the hon. Gentleman said, a number of factors need to be considered. There is the evidence. Frequently, the degree of liability of both sides has to be considered. There is the question of quantum, and the production of the medical evidence, which can in itself be a major part of the exercise. My concern is that a large number of such potentially complex matters will be a significant disincentive to
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people to run a case. To raise the small claims limit significantly would, in effect, deprive injured people of the benefit of legal advice and therefore access to justice.
Mr. Hollobone : Given my hon. Friend's strong trade union links, I am sure that he will be interested in the statistic that the TUC uses, which is that 30 to 50 per cent. of all personal injury claims are in the £1,000 to £2,500 bracket.
Mr. Jones : I am sure that that is correct. Again, as the hon. Member for Hendon stated, damages for personal injuries have not increased significantly over the years, so in many respects the question of inflation is not relevant.
The position would be exacerbated substantially if the small claims limit were significantly increased, because most injury cases arise from motor accidents. The motor insurance industry has effective, and frequently very aggressive, in-house negotiators operating on its behalf. Such people know exactly what their job is, and frequently it is to intimidate the claimant into not pursuing his claim. It is very difficult for a claimant facing such an aggressive negotiator to take his courage in both hands, go before the court and argue his case himself.
The report refers to evidence from District Judge Walker on the level of damages that are awarded in straightforward injury cases. He talks about damages in the region of £1,000 to £2,500. However, cases are not always so straightforward, and some much more complex injuries result in relatively small damages. The Law Society has pointed out that a whiplash injury giving rise to pain for many years can result in an award of only £2,000 or £3,000. Anyone who has been involved in personal injury cases knows that whiplash injuries are frequently extremely difficult to prove, but can be very painful for the unfortunate claimant.
Another matter was touched on by the hon. Member for Hendon. Although the claims in many of the cases that we are considering are small in absolute terms, they can be a significant matter for the claimant. The Law Society has pointed out that a personal injury claim for £2,500 represents 10 weeks' earnings for someone on the minimum wage. Although in absolute terms that is not a large sum of money, for the individual claimant, it is a matter of great importance.
The system of tracking is designed to ensure that litigants have their cases disposed of as efficiently, speedily and inexpensively as possible. There is no evidence that handling personal injury claims on the fast track does not work. Indeed, the fact that costs will potentially be awarded at the end of the day makes it, in my experience, all the more likely that the litigators on both sides will want to conclude the litigation as quickly as possible. The vast majority of cases under £5,000 are road traffic cases and they are usually settled without going to court at all.
What is required is to continue to encourage the efficient handling of small claims, which is not necessarily the same as saying that more cases should be allocated to the small claims track. What should be encouraged is the early settlement of disputes. For that purpose, in cases of personal injury, the intervention of lawyers at an early stage is important. If the limit is
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raised significantly, that will be a positive disincentive to claimants to take their cases to court, and justice will not be served. If that happens, it will reflect no credit on this House or on anyone else involved in the process.
3.26 pm
James Brokenshire (Hornchurch) (Con): First, I declare an interest as a solicitor and a member of the Law Society.
The debate has focused on the Select Committee's recommendations on the proposal to increase the limit in respect of personal injury claims and the small claims track. Before coming to that, however, I should like to talk about a couple of other issues that were dealt with in the Committee's report.
The first issue is, on the face of it, relatively minor. It is the administration and operation of the small claims court and, in particular, the customer-facing side of that. Having practised law but not in the county court or small claims court, I found it extremely informative, as part of the Committee's work, to see and appreciate the operation of that court and the way in which it deals with people. One debate that we had was on the manner in which cases are disposed of. I am referring to the way in which people are dealt with when they turn up at court. There was debate on whether there was a need for people to have fixed times for attending court to have their case disposed of. On balance, the Committee felt that that was not appropriate. That view is borne out by my own experience of attending court, and observing the work of a deputy district judge in the context of the small claims procedure and the way in which cases are dealt with at court.
A number of claimants and defendants arrive at the same time at an appointed hour in the morning, and the role of the clerk to the court is pivotal. I did not fully appreciate that until I was there. I am talking about the way in which the clerk to the court handles the people arriving there, assessing the complexity of cases in conjunction with the deputy district judge to try to ensure that the time allowed for cases is such that they run smoothly. There is an assessment of how much time will be needed for evidence to be given to the court and for a matter to be disposed of. It may seem as though there is a lot of hanging around for the people involved, but normally the clerks intervene quite early and agree with the deputy district judge or the district judge the order in which cases will be taken, depending on the availability of witnesses and other parties and how long a case is likely to take. I found it informative and interesting to see how well that system can work on the basis of a good clerk.
What would be helpful before people come to court is information and notice of how things will proceed, but from what I have seen so far—this view was shared by other members of the Committee—I do not think that there is a feeling that individual appointments should be booked for individual claimants or individual cases. It is a question of ensuring that the court's time is used efficiently and effectively. On balance, the current system works, albeit that there is a need for greater investment in IT and to ensure that claimants and defendants are well aware of what will happen when they get to court and the way in which the case will be dealt with. It was interesting to see how that is still working in practice.
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The right hon. Member for Berwick-upon-Tweed (Mr. Beith) highlighted the point about enforceability. This debate has centred around limits, but for me the most fundamental and pressing issue is enforceability. We have heard a lot about access to justice during the debate, but if someone goes through the court process, has their day in court, obtains a judgment in their favour but finds that the judgment cannot be enforced, the system falls. It fails and the litigant does not get justice. The strongest point that came out of the inquiry for me was people's sheer frustration and exasperation when they obtained a judgment that told them that they were right and entitled to compensation, but were unable to execute that judgment.
The problem has existed for some time. In the Department's evidence to the Committee, it noted that the problem has existed since 1998, when the review of civil enforcement was embarked on. Recommendations came forward in July 2000 on the steps that might be taken. The civil procedure rules came into effect in March 2002 and dealt with secondary legislation on the implementation of some of those recommendations, but we are still without the primary legislation to give teeth to additional enforcement powers such as charging orders, attachment of earnings orders and, most interestingly, data disclosure orders, which are essential to give people the information and ammunition to be able to track people down and to get the court to follow things through. I am sure that many hon. Members feel that frustration when constituents come to them and say, "I cannot track this person down, so I cannot physically enforce the order and I cannot get the court to do it either."
Justice and ensuring that people are given direct access to it is about legal advice and the ability to argue a case in court, but it is also about ensuring that a court judgment is followed through and that justice is not only done but is actively seen to be done. That is not happening at the moment and will not happen until we have the primary legislation to give effect to the important recommendations that have already been made. The Department for Constitutional Affairs stated in the report:
I am sure that the Minister wishes that that were the case, but she is not the custodian of parliamentary time and how legislation comes through in this House. However, the strong message that needs to come from this debate, as came from the Select Committee's recommendations, is that the matter must be prioritised. We must put the enforcement powers properly on the statute book as soon as we can to ensure that those rights are properly put into place and that people are not disadvantaged and fed up because the system lets them down and court judgments are not put into effect.
We have had a good debate on the suggested increases in the small claims limit in personal injury cases, which in many ways has highlighted the various arguments. As the hon. Member for Hendon (Mr. Dismore) said forcefully, the insurers will always seek to increase the limit as much as possible as a means of blocking justice. The Association of British Insurers stated:
"Due to the financial constraints to lawyers and because the limit has never been changed very few cases are assigned to the small claims track."
It would say that, wouldn't it? The legal side could also say, "Well, it is too high already." The hon. Gentleman and my hon. Friend the Member for Kettering (Mr. Hollobone) argued eloquently that justice would be denied if any changes were made. It is interesting that many of the points that have been made this afternoon apply equally to the present limit. The hon. Gentleman rightly gave his objections to any limit and I understand the purity of his argument.
We need a debate on the matter. My hon. Friend the Member for Kettering referred to the National Accident Helpline and some of the points that it made. It recognised in its report that there is a case for raising the limit to £1,500, but that any further increase must be part of a wider review of the claims process. It also recognised the express concerns of genuine claimants who are currently seeking redress.
That shows that a review is needed and I am pleased that the Select Committee report has sparked discussion of whether there is a need to look at the limit and to increase it. We may have differences of opinion with regard to inflation, but the NAH came up with a figure of £1,500 and the Association of Personal Injury Lawyers came up with the same figure. The limit was set in the early 1990s and it should be reviewed to see whether it remains fit for purpose and whether it should change. The Better Regulation Task Force has, to use the words of the hon. Member for Hendon, been even more in the pocket of the insurance industry in recommending £5,000.
Mr. Dismore : The hon. Gentleman referred to inflation, but he has not responded to my main point: whether, irrespective of the retail prices index, damages have kept pace with inflation. They have manifestly failed to do so for decades. Just looking at the RPI is too simplistic.
James Brokenshire : That is a fair point in terms of the number of cases disposed of and the value of damages awarded. I am saying that we need to look at the limit and whether there is justification for increasing it, considering where we were in the early 1990s when the £1,000 limit was set. We should look at inflation, what damages have been during that time and whether it is appropriate to increase the limit.
The Association of District Judges said in its evidence:
"Since the £1,000 limit has been in place for over 14 years, the Association does consider that there may be a case for increasing the £1,000 exception in personal injury cases slightly, perhaps to £2,000 or £2,500."
It recognised that the matter is not cut and dried and that there are legitimate arguments and concerns, as we have heard during this debate. I do not deny that. Indeed, any proposal to increase the limit would need to be closely linked with a proper review of the procedures and the way in which cases are dealt with in court. Much of that goes to the evidence and the way in which matters such as medical issues are dealt with.
Another piece of evidence to the Committee was given by Professor John Baldwin, head of law at Birmingham university, who has undertaken research into the small claims court for years, going back to the 1990s. It was interesting that he highlighted medical reports and said:
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"In my interviews with district judges, many have told me that they feel the financial limit for PI claims should be raised well beyond £1,000 and that large numbers of PI cases could easily be treated as small claims. Having a medical report available to the court is critical in resolving PI cases: as one experienced district judge told me, 'Once you've got this, most cases resolve themselves.'"
I appreciate that that may be anecdotal and simplistic, but perhaps we should be looking at those issues and assessing the evidence that is presented to the court, to ensure that justice is done more speedily and effectively in such cases.
Mr. Hollobone : I am grateful for my hon. Friend's reference to the National Accident Helpline, which has written to me to say that it would be happy with a limit of £1,500—he was quite right—and that it uses the inflation tables in Kemp and Kemp. That probably means more to other people in this Room than it does to me, but apparently it is an authoritative journal. According to those tables, the level would be £1,433 in 2006. The NAH cites evidence from the Judicial Studies Board publication, "Guidelines for the Assessment of General Damages in Personal Injury Cases", which also demonstrates the effect of inflation on that level. Those guidelines are widely used by judges when assessing damages.
James Brokenshire : I am grateful to my hon. Friend for highlighting that information from the NAH. I am not a personal injury lawyer—I am sure that my learned hon. Friends in this Room will quickly pick me up on this—but my understanding of Kemp and Kemp is that it is part of a guide that measures the award of damages that may be available. In some ways, it would deal with the point that the hon. Member for Hendon made. I see that he wishes to rise, and I am sure that he will correct me immediately.
Mr. Dismore : Having written a chapter of Kemp and Kemp, I would simply say to the hon. Gentleman that it is written for lawyers, not lay people.
James Brokenshire : The hon. Gentleman is absolutely right. Having met some of the NAH's representatives since our inquiry, I know that they are knowledgeable and learned in such matters and use the publication as an authoritative text to come up with their assessment of a reasonable increase in allowances under the small claims track.
It is good that we are having this debate and airing some of these issues. The small claims court has existed for many years, and it is important that we have an opportunity to consider how the justice and service that it offers can be improved. It is, and should be, the direct link that most of our constituents have with the courts when they need small claims dealt with effectively and appropriately.
Our report made recommendations on the advice that might be given. The Department for Constitutional Affairs says that it is piloting a scheme to try to give more advice, and to increase understanding of how the court operates and of the papers that need to be prepared in advance of any hearing. That is essential.
Another thing that struck me and, I am sure, all hon. Members who have been to the small claims court and seen it in operation, is the fact that many people are not
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informed. As the hon. Member for Hendon rightly said, they do not necessarily even know which papers they must produce to support their case. Because of the inquisitorial nature of the court, the role of the district judge is essential once one gets to court—I welcome that and believe that it needs to be strengthened—but it is important at the outset that, as much as possible, assistance and guidance through helplines and so on are given to ensure that people know which documents they need to produce, whether they be contracts, letters or other information that support their case and give them the best opportunity to explain to the district judge what their case is about and whether it is made out on the facts and the evidence.
Our report provoked some strong views and interests, and I welcome that. I also welcome this debate and the focus that we have had on the small claims court. I look forward to the Department's taking forward the issue of enforcement, focusing on the valuable and important work that the small claims court does and ensuring that we support the small claims track, so that it can continue to provide real justice for our constituents who have small claims. We must ensure not only that justice is done but that it is seen to be done.
3.44 pm
Simon Hughes (North Southwark and Bermondsey) (LD): I welcome the opportunity to speak in this debate. I apologise to you, Mr. Marshall, and to my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) for being delayed by a constituency engagement.
As this is the first time that I have taken part in a debate on a Constitutional Affairs Committee report since I took up my present responsibilities, may I pay tribute to the Government for their restructuring of the Departments? We now have at least a stepping stone towards a department of justice, and I hope that before too long we will have the department of justice for which many of us have pressed for a long time. I also pay tribute to my right hon. Friend and his Committee for their diligent work on this and other issues, and for regularly producing significant reports on what he described to me as a range of initiatives from the Department. This is an important report among them.
I appear to be in a minority among those who have spoken so far, as I do not have a registrable interest to declare. That may or may not give me more credibility in arguing the case. However, just so that nobody can say that I am concealing something that may be relevant, I should say that in my earlier life I used to deal as a member of the Bar with cases such as those we are considering today, as have others in their legal professions. Although recently I have not been in and out of the courts as frequently as I used to be, I believe that I know the subject area relatively well.
The issue that has engendered the most interest in this debate has been the threshold for claims, particularly personal injury claims. I shall come back to that in a moment after making some preliminary points.
First, I was slightly troubled to hear the hon. Member for Hendon (Mr. Dismore) imply that people would not get good advice if they knocked on the door of their local citizens advice bureau. The Minister and I share the same borough. I do not know of her experience as a
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constituency MP, but mine is that the CAB is an excellent front door for accessing services. It points people in the right direction, even if it does not directly give advice itself. Various agencies in our borough are extremely helpful in ensuring that people go to the right place to get good advice.
Mr. Dismore : Perhaps I could clarify what I said. First, the citizens advice bureaux are horrendously overworked already and therefore do not have the capacity to take on this work. Secondly, they do not have the expert knowledge that they would need effectively to advise people on such subjects. Indeed, my local CAB tends to send people to my surgery.
Simon Hughes : I do not want the CAB, which I love dearly, to knock on my door to say that I have sent it twice as much work as it already has. My point was that citizen advice bureaux are extremely competent. They do not do the detailed work themselves for the reasons that the hon. Gentleman gave, but they point people in the right direction. The experience in my borough is a good one, and other advice centres and agencies also do well in pointing people in the right direction.
The second point is that even further down the scale than the small claims system is mediation, of which I am a great fan. I believe that people should first go to mediation, whenever possible. There is an extremely reputable mediation service in Southwark. It principally does other things, but, in terms of access to justice at the lower level of the court system, the more that people can have matters mediated to a conclusion, the better. [Interruption.] I do not know whether the hon. Gentleman wants to intervene, but he appears to be unsympathetic towards the mediation service.
Mr. Dismore : Certainly not. The trouble is that insurers are not usually interested in it.
Simon Hughes : The hon. Gentleman is right about that, but I am trying to describe the justice pyramid. The more that people can avoid courts and lawyers, the better. Yes, insurance companies often are resistant.
A third general point is that finding lawyers who are able, willing and not too overworked to deal with such cases is difficult. There are reputable lawyers and law firms that are very good about taking up cases on behalf of ordinary citizens in my borough, but my experience over years of referring people for personal injury matters is that they are very overworked. A general weakness of the system and one of the difficulties of the world we live in—a world in which the compensation culture is growing—is that the number of requests for help from the legal system is growing, so we are at risk of requiring more and more legal firms. The proportion of people in our society and in the world at large who are going to end up as lawyers seems to be growing all the time. I do not see that as a healthy sign. It appears to be inevitable that we are going down that road, but I wish that it was not.
Mr. Dismore : I have two points. First, people do have access to personal injury lawyers: a wide range of firms do such work quite effectively and competently. People need only consult the Law Society directory or the Association of Personal Injury Lawyers if they want to
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see an expert. Secondly, and more importantly, the hon. Gentleman trotted out the myth of compensation culture yet again. If he had been here earlier he would have heard the comments of the right hon. Member for Berwick-upon-Tweed, whose Committee has denounced the compensation culture as a myth. All the statistics show that it is a myth and that the number of claims is going down, which goes completely against what the hon. Gentleman said. He has fallen for the tabloid press again.
Simon Hughes : That is not my experience, and I can speak only from my experience and the general experience. I shall deal with both of the hon. Gentleman's points. I know where to look for the list of those lawyers who hold themselves out to do personal injury work, and I have made the case that there are some good and competent ones, but when as a London MP I send people to seek assistance from local personal injury lawyers, or they visit themselves, they are often told that the firm is too busy to take on their case. The pressures on those good practitioners is extreme.
There are also practitioners doing that work who are no good, and in my career I have never been able to say that the substantial number of solicitors or solicitors' firms approved by the Law Society do not include a significant number who are not up to the job and who do it poorly. One of the great failures of the past 25 years has been that there have been many poor lawyers, or people who purport to be lawyers but turn out not to be when one investigates further, because they are simply individuals who work for a law firm in which there may be only one lawyer. The representation across the board is not very good, and in some areas it is worse than others. The complaints system has been significantly inadequate over the years in dealing with complaints about when people go to the lawyers in the first place.
Mr. Dismore : I am sorry to keep intervening on the hon. Gentleman but he is trotting out wide assertions that bear no relationship to reality. The fact is that in the old days, personal injury law used to practised by people on the high street who dabbled in it but did not know what they were doing. The Law Society introduced the accreditation panel, on which I was an assessor, as I mentioned. We now have the College of Personal Injury Law and standards have risen dramatically. Indeed, if work is not done well and effectively under the new costs regime through conditional fees, firms simply cannot do it. They have to know what they are doing to make any money out of it. The hon. Gentleman's experience is way out of date.
Simon Hughes : Again, I am sorry, but I have been an MP for an unbroken period far longer than the hon. Gentleman. I can tell him that things have improved, but if he believes that all is right in the garden of solicitors he is severely misguided.
Mr. Beith : Another aspect of the problem my hon. Friend describes is that, in the world of contingency fees, an increasing number of solicitors have to make difficult
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judgments to turn down cases where the evidence is weak and the case has reached the margin of sustainability, because they have to make ends meet.
Simon Hughes : There is a set of issues, and I appreciate that this is not a debate about the profession of solicitors. Perhaps we could have that debate, which I would welcome, because although things have improved, the insistence of the Law Society on self-regulation and so on has not been in the public interest. Things have got better, including in the field of personal injury. However for the reasons given by my right hon. Friend and others, all I can report is that, because of the demand on those who are good, it is still sometimes difficult for people to get the advice they require, when and where they need it, at no cost if they cannot afford it or at a cost they can afford. I do not know about other hon. Members, but I select from my own experience—and what other people retail to me—those solicitors whom I recommend because they have done a good job and done so competently, but I do not include every person who holds themselves out to do such work. That is a difficulty and a weakness.
Those were meant to be entirely introductory, foothill-type, points, but they have clearly engaged the hon. Member for Hendon and there is further debate to be had. In response to his intervention, I say that I understand the debate about whether the compensation culture is overstated and about the number of people involved. The reason why a lot of people do not go down the road of taking action is that they find it too difficult, or are thwarted as they go. However, there is still a culture—one has only to look at commercial advertising on television—of encouraging people to make complaints and to think that everything ought to be risk-free, whether it is the local children's playground, a swimming pool or whatever else. Yesterday, the hon. Member for Wakefield (Mary Creagh) suggested, in a controversial move, legislation for regulating the temperature of baths, which I thought was on the wrong side of the argument.
Mr. Dismore : The hon. Gentleman obviously has not read the evidence or seen the material produced by my hon. Friend with which she made an extremely cogent case. The day before, a 10-year-old child received severe burns all down her leg and will suffer terrible consequences for the rest of her life. It is the old McDonald's coffee case argument. If people knew the facts of the McDonald's coffee case, they would know that McDonald's had superheated the coffee to such a degree that it caused third-degree burns. Most people do not know the facts.
Simon Hughes : I have heard and read the record of the short debate on the subject yesterday, but I was not persuaded by the hon. Lady's arguments. I think that we legislate far too much and we ask for legislation far too much. If we were much more cautious about thinking and holding out the idea that this place is the answer to everyone's problems, we would provide a far better service. In fact, if we legislated for only one year in two, we might do the public a much better service. It is normally administration, not legislation, that we need. I have a strong view about the belief that the law is the answer to everybody's problems. We should encourage
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people in society to take more responsibility. People can take risks, and if things go wrong, take the consequences.
I reinforce the first of the four points made by my right hon. Friend the Member for Berwick-upon-Tweed, which concerned the failure of IT. Friends and colleagues of mine who do this sort of work tell me that the system is entirely inefficient. There are basically two IT systems that are not joined up, and until they are, the system will not work well. I have a note from a friend of mine, who does such work on a regular basis. She says:
"The small claims track is particularly inefficient regarding listings. . .If time is money, it's often a costly method of organising the case load. Also, it can be costly in terms of justice."
That leads into a separate but linked point:
"Some, not all, District Judges are so stressed out by having, for example six cases in their list that morning. . .they don't pay attention to points that are properly being made to them."
She goes on to make the wider and very valid point that if judges are stressed and the system is not sustainable, people do not get justice, because the judges are impatient, particularly with litigants in person. Litigants in person tend to test the patience of judges much more than those representing the insurance companies.
It is true that there are some excellent district judges, but there are some who are less good. Their general reputation around the courts is one of a very variable service. I am sure that those responsible for the appointment, supervision and management of district judges are alert to that. It is a difficult task: I have been in enough courts to see how difficult litigants in person can be, and how the imbalance of justice does not work to their advantage. However, we still need to make progress on efficiency and the quality of judges.
My right hon. Friend's second point, which he made the burden of his speech, was about enforcement. The system is of little use unless we can enforce the judgment. If one goes to court for £500 or £1,000 and nothing happens, or it takes months, the system is inefficient. The Government have said that they will respond, and it would be helpful if the Minister indicated how soon that will be.
I note what the report says, and we must be able to enforce the judgment, in effect, immediately. The inquisition about enforcement ought to be concluded there and then, at court, as the Minister and I know from our constituency experience. That is one reason why I have always argued for a merger of the tax and benefit system, because in the debate about ability to pay, people can and do deceive courts regularly. There ought to be before the judge adequate and integrated information about what people can pay. The simple proposition is that there should be a fixture no later than one month after a judgment in which enforcement is worked out, and people should be expected to attend.
That is why I have a very big stick to wave over the corporate sector—the defendants who are liable to pay. They should be required to turn up with the money in court one month later. If they do not, a very large penalty could be imposed so that it was not in their commercial interest not to turn up. We must find a way in which enforcement takes place more quickly and more effectively.
We ought to raise limits logically and gradually at least to keep pace with inflation. I shall not extend that debate at length. I take a technical view: it is probably
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wise to raise the limit, but only to one in line with inflation, which is about £1,500. It may be only lawyers who read Kemp and Kemp, but it would be foolish to go beyond that limit without consensus. There may have been much lobbying on both sides in the evidence given to the Committee —insurance companies and personal injury lawyers—but the insurance industry is clearly reluctant to help in many cases. I understand why personal injury lawyers want to ensure that justice is done. When the insurance companies pitch up with their lawyers and the individual has no representation, it is often easy for the company to win the day. Observations from colleagues throughout the country suggest that parity is often not achieved, because an individual against an insurance company often produces an inequitable result, in which the company is significantly advantaged.
I support the Committee's proposal for the European procedure. Cross-border cases are the only logical circumstances in which it should be used.
May I flag up the question about the cost of medical reports and the difficulty of getting them? I think I am right in saying that doctors invariably charge for medical reports.
Mr. Dismore : They have always done so.
Simon Hughes : No, they have not always done so. GPs did not always charge for medical reports. [Interruption.] The hon. Gentleman keeps saying that they did, but GPs did not always charge for medical reports. GPs are now considerably better paid, but they charge and charge more. I guess that we are bound to go that way, and it is reasonable that they are paid. However, if one asks one's GP for a medical report, it is important that they be obliged to provide it within a limited time. They do not always do so; it often takes a long time to receive a medical report. It would be helpful if they were provided quickly.
I want to reinforce a point made throughout the debate. For the considerable numbers of people who go into the legal system, these sums of money are significant. People can become obsessed about small sums, but they are significant. In relation to an injury or another matter, people can, rightfully, become upset. When Mr. and Mrs. Citizen take on a big—sometimes not so big—company, they feel that they are entitled to their argument, to be treated decently and quickly, and to receive the remedy quickly. The fast-track small claims system is unarguably a good idea. It is better we have that than the old rigmarole of people going through the procedures with lawyers on both sides.
The Committee addresses several significant measures that will improve the system. The Minister, with her commitment to access to justice, will I hope ensure that the Government respond as quickly as possible. We have not got the system right, and there are good suggestions about how we can make it better. We can do other things, and I hope that by the end of this decade we shall have better access to civil justice than we have ever had. If we do, I hope that the ordinary citizen will feel that getting justice does not involve such a ridiculously difficult system as they often feel it does at the moment.
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4.6 pm
Mr. Jonathan Djanogly (Huntingdon) (Con): I start by declaring my interests as they appear in the Register of Members' Interests, but I state that I have never undertaken personal injury work as a practising solicitor.
The report has provided a useful and insightful analysis of the small claims system. I welcome its overall findings and congratulate the Constitutional Affairs Committee on its work. We have had a good debate and we have heard some valuable contributions. As the right hon. Member for Berwick-upon-Tweed (Mr. Beith) said, the small claims system is a low-cost, speedy and informal way of allowing litigants to bring claims for small monetary amounts. The system provides greater access to justice, as people are encouraged to bring their claims by the speed and informality of the small claims track. Many claims have been successfully pursued, when, without the small claims system, claimants may not have deemed it worth while resorting to legal action for such a minor amount of money.
The report, however, highlights certain problems with the small claims system which require rectification. First, the report raises the issue of the current claim limits for personal injury cases and housing cases involving a landlord's failure to repair the property. There are clear justifications for increasing the maximum amount for which such claims may be brought in the small claims system. The current figure of £1,000 was introduced in 1991, and after a 15-year period, it is outdated. As a consequence of inflation, very few personal injury claims can now be brought in the small claims system.
As the report states, within the Judicial Studies Board tariff guidance there are only five types of injury for which damages start at under £1,000. Claims for several minor injuries, which by right should be brought in the small claims track, are now being brought in alternative tracks. That means that the small claims system is not used frequently enough for personal injury cases.
Mr. Dismore : The hon. Gentleman talks about the Judicial Studies Board guidelines. Would he care to tell me how much a broken thumb is worth?
Mr. Djanogly : I cannot tell the hon. Gentleman what a broken thumb is worth. If he will let me continue, he will hear that I found much of what he had to say to be of value. It is not a straightforward issue of right or wrong; it is more complicated than he made out, in his valuable contribution.
Mr. Dismore : To finish my point: if the hon. Gentleman cannot tell me the answer to that question, how does he expect the man in the street to be able to do so?
Mr. Djanogly : By looking it up in a book. It is not the hardest thing to find. If the hon. Gentleman wants to run through every claim, I will not be able to give him the answer.
As I said, the situation means that the small claims system is not used frequently enough for personal injury cases. It has resulted in the needless clogging up of the court's fast-track system, and the expense of bringing a
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claim is now often disproportionate to the amount of the claim. As figures provided to the Committee by Norwich Union highlighted, in personal injury cases in which damages are more than £1,000, costs represent 65 per cent. of the damages paid—or 40 per cent. of the total sum when damages and costs are paid. That situation needs to be addressed, and the Conservative party supports the Committee's proposal to raise the small claims limit.
There is also a problem of a compensation culture, and it is not the role of the state to fuel that culture by subsidising litigation. The Government's compensation Bill recognises that there is a compensation culture, but does not even scratch the surface of the problem. We recognise, however, that the extent of the increase in the small claims limit is a valid subject for debate.
Raising the limit too much could have detrimental effects. One significant problem could be that claimants would not be legally represented. The small claims system actively discourages parties from being legally represented when they should be. There is a good reason for that policy: if litigants represent themselves, the cost of cases is reduced. The discouragement can be seen in the fact that the winning party in a small claims case is unlikely to be able to recover the costs of their legal representation. The no-win, no-fee offers, so well marketed by personal injury lawyers, are rarely an option for claimants in small claims cases; solicitors will rarely agree to enter conditional-fee arrangements if legal costs cannot be recovered from the other side. The provisions have resulted in most litigants not having legal representation in small claims cases.
The consequences of an increase in the small claims limit for legal representation would be clear: claimants in personal injury cases might find that obtaining legal representation was not viable. An increase of the limit to £5,000, as recommended by the Better Regulation Task Force, a Cabinet Office-sponsored organisation, would result in the allocation of most personal injury cases to the small claims track.
In written evidence to the Committee, the Law Society stated that most personal injury cases are for less than £5,000. Even if the limit were increased by £2,500, as the Committee recommends, that would, according to figures published by the TUC, result in 30 to 50 per cent. of personal injury cases being brought under the small claims system.
Will the discouragement to potential litigants from employing legal representatives result in their being denied access to justice? In some cases, it might. As has been said, if a potential claimant is unable to enter a no-win, no-fee arrangement or recover their legal costs if their claim is successful, they are more than likely not to instruct a solicitor.
Could the claimant not bring the claim as a litigant in person? Yes, sometimes; but in some cases that would not be feasible. As the hon. Member for Hendon (Mr. Dismore) and my hon. Friend the Member for Clwyd, West (Mr. Jones) said in their well considered speeches, the complex nature of many personal injury cases means that it is often inappropriate to expect litigants in person to deal with such cases. Tasks such as acquiring and understanding medical reports, assessing
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the actual value of a claim, determining liability and preparing an accurate claim can make cases difficult for them.
A MORI Omnibus poll on behalf of the Association of Personal Injury Lawyers indicates that 64 per cent. of people who suffer an injury through someone else's negligence would not pursue a claim through the small claims court without legal assistance from a legal representative. As has been recognised, given that defendants in personal injury cases are often insurers, which will almost certainly be legally represented, the disadvantages to litigants in person could be even greater. John Wells, president of the Institute of Legal Executives, sums up the problem. He has said that litigants in person
"are unlikely to know whether a settlement offer is a reasonable one and may feel obliged to accept an offer which is considerably lower than the value of their claim. This difficulty will be enhanced particularly in complex cases. There will be no equality of resources between the parties. Insurers would basically have carte blanche to settle claims for as little as they could possibly get away with."
The problems that claimants will face if they have to bring a claim without legal representation could discourage some from pursuing their claim. Thus, they could be denied access to justice, and that would be a direct contradiction of the Government's stated aim of guaranteeing all litigants continued fair and equal access to justice. That problem may have been the cause for the Government's relatively short response to the Committee's report. There seems to have been indecision on the Government's part, and some direction and leadership on the issue would be welcome. I look forward to the Minister's comments.
Given the strong arguments both for and against raising the small claims limit for personal injury and housing disrepair cases, we believe that a compromise solution can be found. It is clear that an increase of £1,000 to the limit is necessary, as the current figure is outdated and results in disproportionate expenses being incurred in claims for relatively minor amounts.
How can that increase be achieved without denying justice to certain people? Providing adequate and improved court advice could be decisive. As the evidence to the Committee provided by both the Law Society and Citizens Advice noted, and as my hon. Friend the Member for Hornchurch (James Brokenshire) made clear, the crucial factor in supporting parties to an action is providing them not so much with legal representation, but with adequate information and advice before they come to—and, I would add, while they are in—court.
Evidence indicates that the advice available to litigants in person is inadequate. Citizens Advice, which often advises litigants in person, has noted that clients frequently cannot fill in small claim forms and allocation questionnaires. Furthermore, court leaflets are often deemed difficult to understand. As the evidence given by Citizens Advice to the Committee noted, even in small claims cases
"claimants can be left in serious financial difficulty if they do not get appropriate help and advice in preparing their case".
If the claims limit is to be raised, and more claimants are to find themselves without legal representation, those problems must be remedied by better guidance. I note with interest the progress being made by the pilot
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small claims scheme at Reading county court. The scheme, designed to assist parties without legal representation, provides for a dedicated support officer to supply in-depth advice to both claimants and defendants. I should be grateful if the Minister commented on the success or otherwise of that scheme.
The courts will have the burden of being more proactive to ensure that potential claimants have all the information and can understand the information required to bring a claim. Likewise, unrepresented defendants must be suitably informed to enable them to defend the claim against them. Appropriate advice must be supplied on matters such as filling out forms, gathering together and interpreting medical reports and determining the liability and quantum of claims.
If quality and easy-to-understand advice can be provided, and district judges can continue their existing constructive interventionist approach to small claims cases, that, hopefully, will negate much of the harm caused to parties who under the present limit would instruct a legal representative, but would be forced by an increase in the small claims limit to represent themselves.
Despite a sharp increase in the quantity and quality of advice to litigants in person, they will often be in a weaker position without legal representation. For that reason, recommendations from some quarters to raise the limit to £5,000 may be inappropriate. The Conservative party supports a doubling of the limit from £1,000 to £2,000, which would take into account the rising levels of personal injuries damages inflation. That figure, the same as that recommended by Citizens Advice, should not result in people being denied access to justice. We would remain open to the debate on whether the limit should be up to £2,500, but do not feel that a higher limit than that is appropriate at the current time. Most complex personal injury cases, in which a claimant would struggle to bring a claim without legal representation, are for more than £2,000 and will therefore still be allocated to the fast-track system.
The report also raises a second issue of the possible introduction of a European small claims procedure. A proposed EC regulation will introduce the procedure, which will intend to simplify, speed up and reduce the costs of litigation for small claims across the EU. The Committee's report broadly welcomed the implementation of such a procedure, noting the benefits that will be provided to parties involved in cross-border cases. That point was reinforced by the words of the Committee Chairman, the right hon. Member for Berwick-upon-Tweed, this afternoon.
However, there were two significant reservations to that welcome. First, a successful party will be able to claim their legal costs from the losing party, which, as I said, is the exact opposite of the situation in the small claims system in England and Wales. It could mean that disproportionate costs could be incurred in order to claim a relatively small sum. A second problem noted by the Committee is that the procedure will be available only to claimants whose claims are for less than €2,000. In comparison with the levels used in England and Wales, that amount is low.
The benefits of introducing a European small claims procedure for cross-border cases are very much the same as those for domestic cases. The procedure will be
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particularly beneficial given the growing number of consumers choosing to shop abroad, and the increase in travel between member states. It may provide benefits through more choice and lower prices, but it could also lead to cross-border disputes. The quantity of such disputes is escalating rapidly. If consumers are to have the confidence to shop abroad, they need the assurance that if something goes wrong there is a viable means of redress.
There are various problems with pursuing a claim in a foreign country. Language difficulties, geographical distances, instructing two sets of lawyers, additional travel and communication costs, and a lack of information regarding local consumer rights and applicable laws all make it a difficult process to pursue. Potential claimants to actions for small amounts may think that they are better off cutting their losses and forgetting about pursuing legal action. Evidence provided by the Commission indicates that that is largely the case at the moment. To solve those problems, the introduction of a simplified and speedier system for contested small value claims is to be welcomed.
However, as the report noted, the ESCP has some problems in its current form. If the procedure is to have a limit of €2,000, which is roughly the equivalent of £1,400, many cases that could appropriately be dealt with under the system would be excluded. The figure that is set must be large enough to attract a sufficient amount of cases. As the Association of Chartered Certified Accountants has pointed out, few small or medium- sized UK-based enterprises will benefit from the procedure. That is due to the majority not being involved in cross-border trade, and of those who are, in a third trade principally outside the EU. The procedure appears therefore to be a mechanism for the benefit of individuals. If individuals are constrained in their ability to bring an action because its value must be below a €2,000 threshold, the number of cases expected to be brought under the procedure is relatively few.
Although the level is clearly too low, there is also a danger of setting it too high. That could have the effect that cases complex enough to warrant a full discussion or trial in a court of law will not receive that, as they will be capable of being brought under the accelerated small claims procedure. That problem needs to be addressed further.
A potential problem I have spotted with the proposed regulation is that the €2,000 limit applies only to the value of the original claim when the procedure is commenced, and not to the value of the final judgment awarded. The regulation is silent in the event that the claim later turns out to be for a much higher amount, for example, if the damage incurred by the claimant later turns out to be greater than originally believed. The lack of an automatic power granted to the national court to transfer such a case from the procedure to the national court system could lead to an injustice being committed against either party, or both.
In conclusion on this particular issue, the best course the Government could follow is to demand that the €2,000 limit be raised. I appreciate that the procedure must take into account the varying small claims limits and living standards in all the member states. To take account of those differences, an alternative solution
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might be to permit member states to set their own limits. That would allow the courts in England and Wales to set the limit at €7,000, equivalent to the £5,000 limit currently employed in our small claims system.
I referred to a second problem: the losing party having to pay the winning party's costs. The right will not apply in terms of a loser who is unrepresented having to pay the other side's legal fees; the wording used in the proposed regulation refers to the fact that a "natural person" who is not legally represented will not be obliged to "reimburse" the legal fees "of the other party". That could create an atmosphere of injustice, as parties will often not be on a level playing field. Furthermore, such a provision discriminates against companies bringing claims, as they cannot come within the definition of a "natural person", and against those individuals, for example minors or the mentally impaired, who would find it difficult, if not impossible, to bring a claim without being legally represented. If the procedure is to have such a costs rule, special provision must be made for those types of situation.
Many cases will involve both parties being legally represented, and therefore the general rule employed in the court system of England and Wales that the loser pays the winner's costs will apply. The provision will cause one of the problems which I have discussed in respect of why the limit for personal injury and housing repair cases in the small claims systems of England and Wales should be raised: disproportionate costs being incurred to claim back a small monetary amount.
Mr. Dismore : Does the hon. Gentleman accept that one of the problems about costs and disproportionality is the way in which the insurance companies defend the cases—by running up costs, taking cases far further than they should and not paying up? If the insurance companies admitted liability and paid up earlier—as by definition they should, because otherwise they would not be paying compensation in the first place—the costs would be nowhere near as high as they are.
Mr. Djanogly : The hon. Gentleman makes a fair point. I recognise his experience in this area. He made the point in his earlier remarks and he is defending the established system. There were interesting aspects to the sparring match that he had with the hon. Member for North Southwark and Bermondsey (Simon Hughes), who was at least saying that perhaps we should consider this matter in a slightly different way—he mentioned mediation. My hon. Friend the Member for Hornchurch (James Brokenshire) mentioned the courts giving further help. With respect, the attitude of the hon. Member for Hendon is a little one-sided—
Mr. Dismore : It is born of experience.
Mr. Djanogly : I understand the hon. Gentleman's experience, but we could slightly broaden our horizons on this matter.
If a claimant brings a claim for about €1,000, the legal costs for such a cross-border action, which would generally be higher than for a purely domestic case due to its international nature, could run into several thousands of euros. Claiming back that amount, which far exceeds the amount of the original claim, could be
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highly disproportionate, and unfair to the other party. That would defeat the entire object of having a small claims procedure: to provide a simplified and accelerated cross-border procedure, with lower costs. Potential claimants will know that they run the risk of having to pay the other party's costs in the event that they lose their case. That will discourage individuals from bringing a claim under the procedure, unless they are provided with certainty about the maximum amount they may have to pay.
Several reports, including those conducted by the EU, have noted that cost is the main reason why individuals choose not to pursue legal claims. I believe that during the UK presidency of the European Council the Government sought to rectify the problem by proposing that the ESCP should allow for the recovery of costs, including legal costs, even where the unsuccessful party is not legally represented—the benefit apparently being that costs could be claimed only if they were proportionate to the claim.
Although I welcome a proposition that costs should be proportionate, the Government's proposal could do more harm than good. Many potential claimants who may have contemplated bringing a small claim in another member state, and may have been willing, for the sake of saving costs, to represent themselves, will be reluctant to bring a claim if there is the potential for their having to pay any costs at all, even a proportionate amount.
A second problem with that proposal is that it could be unfair if an unsuccessful litigant in person would be just as liable for the legal costs of the other party as an unsuccessful party who had legal representation. One of the best features of our domestic small claims system is its rules on costs, which are the cornerstone of a simplified and speedy process. While a person bringing a small claim knows they may not get all their costs back, they also know that if unsuccessful, they will not be burdened with a large costs bill. Having to pay costs will act as a deterrent to people bringing small claims, so a costs rule that entitles a winning party to claim back only a fixed amount of costs may be beneficial, and that fixed amount should include only the costs of court fees and the loss of earnings to the party and witnesses. They are the exact costs that can be claimed back in the small claims system in England and Wales, regarded in the Government's response as
The introduction of a procedure that contains the two problems I have been discussing will not, in itself, be detrimental to the British people. However, it would be a missed opportunity to introduce a respected and useful cross-border small claims system. Too few people will seek to utilise the procedure due to the problems, so that its potential benefits will be severely constrained.
Having reviewed the proposed regulation, we think that a couple of points might have been overlooked by the Committee, and I would be grateful for the Minister's response on them. First, I note that the system is to be based on written procedure, which in the context of saving time and money, is to be commended. However, no account is made for those with low literacy skills. Although the regulation allows for an alternative procedure at the court's discretion, it may be preferable to allow parties automatically to
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request an alternative procedure, with a presumption that the request is to be accepted unless the court has good reason to refuse. There must however be some mechanism so that a party cannot for tactical reasons demand that an oral hearing take place, thereby potentially placing the other party at a financial disadvantage.
The regulation also states some of the alternative methods of taking evidence, which obviously must take into account the greater distances cross-border cases will entail for parties and witnesses when compared with national cases. The methods stated include telephone and e-mail conferences, and such methods raise serious security concerns for obvious reasons. I would be grateful if the Minister told us how that will be addressed.
I was disappointed in the Government's lacklustre response to the Committee's comments about the listing procedures. The fact that many litigants arrive in court to find that they may have to wait hours before their case is heard is unfair. The Committee noted that problem, and although it accepted that there were practical difficulties in listing cases for the convenience of both the judiciary and parties, it recommended that the interests of parties should not be overlooked. The Government's response explicitly ignored that recommendation, stating that, as the current system is supported by the Association of District Judges, it should remain in place.
Although I accept that the court's time should not be wasted, a more constructive compromise could be found. A system could be adopted that provides for shorter time slots—for example, two or three slots per day, in which parties would appear. Hopefully, that would mean that parties would not have to wait for too long. On the other hand, the amount of judges' time that is wasted should be kept to a minimum. If litigants or their witnesses do not show up or their case is settled, then there will still be other cases to fill up the court's time within the relevant slot.
On enforcement of judgments, it is shocking that up to a third of successful claimants in small claims cases never see a penny of the amount they have been awarded. That undermines the entire small claims system. I welcome the Government's good intentions in respect of their proposed legislation to solve that problem. Such measures as data disclosure orders and an attachment of earnings information gateway seem in principle to be good ideas to enforce judgments. However, it is a shame that it has taken so long for those measures to be proposed, and I am aware of no action having been taken to enact any of them.
The Government's response fails to set out even a rough timetable or estimate for the proposed legislation. I note that since the Government's response was published the Secretary of State for Constitutional Affairs has announced the Government's intention to create a national enforcement service, but from the research I have conducted it appears that that service will work primarily to enforce criminal judgments. I would be grateful if the Minister told me whether I am right about that.
It is unclear whether the service will be for the benefit of parties wishing to enforce a civil claim. It barely gets a mention in the Department for Constitutional Affairs
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press release, while Her Majesty's Courts Service website makes one reference. It states that the service will
It would seem to be a good idea for the national enforcement service to assist successful claimants to enforce judgments against defendants who are refusing to pay. From my knowledge of the service, that does not appear to be its priority, or even on its list of aims. I would be grateful if the Minister provided clarification on that. If I am correct, it would be a missed opportunity to rectify a serious problem in our small claims system, as my hon. Friend the Member for Hornchurch suggested.
Simon Hughes : It appears that we agree that this is a hugely important part of the system's current failures and that a remedy is needed. Has the hon. Gentleman considered a remedy such as the one I proposed, which is that the defendant—the person who then has to pay—is required to come back at a fixed time to show that they have paid, to pay then, or to give evidence of how they are going to pay? Once they are let out of the clutch of the court, chasing things up becomes far more expensive, far more long-winded and far less successful.
Mr. Djanogly : The hon. Gentleman's proposals deserve to be put into a pot for a broader debate. However, off the top of my head, I can think of other sides to the story: for example, if the judgment was for a significant sum and the company was small, having to pay it all at once might simply bust the company, so nothing would be payable.
Simon Hughes : These are small claims.
Mr. Djanogly : I appreciate that these are small claims, but, conceptually, these are issues that would have to be addressed, as would the impact on companies generally. However, the hon. Gentleman has a good point that should be looked into.
Simon Hughes : Often, one of the reasons why such sums are not paid is that the company—which may be a small company—that finds itself in difficulty has its own legal fees to pay as well as the judgment. When it pays its own legal fees is a matter for it to resolve later; the crucial thing is that it quickly pays the judgment sum to the person who deserves it. That should be the priority, and it should be done within a fixed period.
Mr. Djanogly : Yes, and we must recognise that there are existing execution methods, and as much as looking for new methods we would need to discuss the extent to which they are not adequately used. We should question the use of bailiffs and sheriffs and so forth, who have mixed effectiveness rates—that varies in different parts of the country. There is a great debate to be had on this issue. It is right to put the hon. Gentleman's point into the pot, and I would be grateful if the Minister addressed whether we can have such a debate, because it would be an important one.
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I apologise that my speech has taken so long, but these are important issues that deserve attention. Small claims are a valid, worthy and well-established part of our court system. Although I look forward to hearing the Minister's comments, so far I fail to see the evidence that the Government are giving this important area the attention it deserves. That is a shame—and possibly also a missed opportunity to extend access to justice.
4.35 pm
The Minister of State, Department for Constitutional Affairs (Ms Harriet Harman) : The small claims track is one of the cornerstones of civil justice, providing access to justice for both consumers and business that is simple and quick to use, and where liability for costs is limited. I thank the Constitutional Affairs Committee for selecting its report on small claims for debate. This is the second time a report of the Committee has been debated in this Chamber and, yet again, the discussion has been excellent and the attendance high, considering that this is the last day before a recess.
The Members who have spoken have different areas of expertise, but we all know—from constituents' visits to our surgeries, for example—that this is an important issue above all for people seeking access to justice. Members have made many insightful and important points, and I will try to respond to them.
Litigation should be used only as a last resort, but if somebody cannot get redress by other means, they must be able to make a claim. The vast majority of claims made end in a default judgment—the defendant has not acknowledged service of the claim or provided a defence—and then enforcement proceedings can begin. However, a relatively low-value defended claim will be allocated to the small claims track.
I thank the Chairman of the Committee, the right hon. Member for Berwick-upon-Tweed (Mr. Beith) for his recognition, which was echoed by other Members—possibly with the exception of the hon. Member for Huntingdon (Mr. Djanogly)—that the small claims track is well regarded, and I thank everyone who makes that the success that it is, including the district judges, the court staff and the advice sector.
Although the small claims track is well received, we are not complacent about it. For some, the courts will always be intimidating, as my hon. Friend the Member for Hendon (Mr. Dismore) rightly said. They will find filling forms a problem, the procedure daunting and knowing where to seek advice or assistance far from straightforward.
We recognise the problems and are continuing to look at ways of addressing them. We are not being complacent; we want to improve the existing provisions and to introduce new ones. The community legal service has worked with the Department to ensure that court staff can correctly identify sources of advice and refer people to them. We already provide information through leaflets at courts and via Her Majesty's Courts Service website for litigants, and provide assistance to litigants at courts. The hon. Member for Hornchurch (James Brokenshire) referred to that.
However, we can do more. We continually review the leaflets to see if they can be improved and we are looking at how we can change our website to make it more user-friendly. The small claims support service pilot in
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Reading will provide practical assistance to litigants in person in bringing or defending their claim. Our money claim online service has been a major initiative. It allows people to bring and defend claims online for up to £100,000.
We know that attending court can be difficult, time-consuming and costly, which is why we are expanding the types of hearing that can be dealt with by telephone. Those who do not know what to expect can contact their local court, not only for information and assistance, but also to see what is involved. Those with special needs can contact the court for help. This all indicates the thought and effort that is being put into the civil justice system to ensure that it continues to be highly regarded by the people who need to use it.
The Chairman of the Committee, the right hon. Member for Berwick-upon-Tweed, asked us to consider four points: IT enforcement, the level of payments for personal injury, housing and Europe. I will address them in the order in which he raised them.
On IT, we recognise the need to invest in technology and modernisation to support effective delivery of justice, including in the small claims court. We have provided an additional £75 million for IT projects in the civil and family courts over the past three years. We have ring-fenced a further £25 million in funding for each year of the current spending round specifically for modernising IT in the civil and family courts.
Through the courts and tribunal modernisation programme, we have delivered a range of IT projects, including money claim online, an award-winning online claims service; the LINK project, which installed new IT infrastructure in larger county courts and the royal courts of justice; a new generation of laptop computers for all judges, including district judges and those sitting in the small claims courts; a pilot of an electronic appointments diary in the civil and family courts; and the online forms project, which makes 20 of the most popular civil court forms available for completion online. Also, a wide range of other IT projects are under consideration. All that is not enough; we have done quite a bit, but there is much further to go.
My hon. Friend the Member for Leicester, East (Keith Vaz) asked a question about consultants. The Department is doing a great amount on IT in the criminal courts, but we acknowledge that we need to do more in the civil courts, beyond the criminal justice system. One of the biggest issues is money. If anyone has any ideas about what else we could cut in order to put more into IT, or about ways in which we could do better with our IT, cheaply, we will definitely be interested to hear it.
Mr. Djanogly : I believe that the Department has just announced 8 per cent. cuts; will that impact on the IT spend?
Ms Harman : We have not announced an 8 per cent. cut.
The second subject raised by the right hon. Member for Berwick-upon-Tweed was enforcement. The hon. Member for Hornchurch rightly said that if court judgments are not enforced, it adds insult to injury. First, a person receives a wrong; then, they make the effort to go to court; and then the person who did the
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wrong cocks a snoop at the whole system and refuses to pay. That is a major problem. We ought to recognise that the problem is that many people think that they just do not have to pay. Many agencies and organisations have to spend time chasing people who think that even though they owe somebody something—because they owe them a debt or have done them a wrong—they can just walk away from it. We should all condemn those people who do a wrong to someone and think that they do not have to provide recompense.
Enforcement has a crucial role to play in the small claims system. There is no point obtaining a judgment if it is unenforceable. I realise that enforcement is not as effective as it might be; that is why we are considering further possibilities. We are currently drafting provisions for a Bill to improve enforcement. The intention is to legislate as soon as parliamentary time allows, and to allow the greatest possible scrutiny. I can only say that our debate on the subject will reinforce the recognition that we need to bring that legislation forward. It has been useful to have the opportunity to debate enforcement. There is much agreement about what needs to be done on the matter; we just need to get the parliamentary time to bring that legislation forward.
Simon Hughes : There is obviously consensus that enforcement is a big issue. Will the Minister consider talking to business managers about whether we might have a debate on the wider issue in Government time? If we do have such a debate, will she facilitate some correspondence before then about ways of securing enforcement that are much more practical than a long-winded, eight-stage regulatory process—which, to be honest, will cost a lot and may not deliver?
Ms Harman : I think that we have had a useful debate about enforcement here. Also, there was a lot of good debate throughout the Select Committee's inquiries on enforcement. I cannot offer to suggest to the business managers that we have another debate about enforcement. We know what the parameters are; what we need is to find parliamentary time actually to do something about enforcement.
Importantly, the Select Committee highlighted for debate the limits for payments in personal injury and housing disrepair cases, and it has ignited more discussion and consideration of the subject. The matter is not just about getting compensation for an individual who suffers a personal injury as a result of a negligent act or omission; it is also about having a deterrent, to make sure that there is accountability among people, including employers or local authorities. If there is accountability, it is a deterrent to people acting negligently in a way that results in others being injured. We should understand the public interest side of effective personal injury claims, as well as the point of view of the individual who needs compensation.
As hon. Members have said, the small claims limit of £1,000 for personal injury cases, established in 1991, was last reviewed in 1999, when it was decided that that limit should remain. We are currently reviewing all the case track limits, and we are considering the Select Committee's recommendations in the context of that work, which is being informed by information and representations from a range of sources. The Select Committee's report has generated many further
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representations from interested individuals and organisations. As we heard from my hon. Friend the Member for Leicester, East, the debate is still going on, even within the Select Committee. He said that at first he agreed with the limit, but he has since received so many further representations that he has changed his mind. That is an ongoing debate. As today's debate demonstrates, there are strong views against, as well as for, an increase in the limit for personal injury claims.
James Brokenshire : The Minister is highlighting the right points about our debate. She says that her Department is reviewing the matter and is taking on board the Select Committee's evidence, as well as subsequent evidence. Could she give any suggestion of the time scales to which the review is working?
Ms Harman : I cannot give an actual date, but I can say that the review is progressing with the appropriate speed. We are considering the matter and are talking to people about it. It is not that nothing is happening about the subject. It is not just sitting gathering dust on a shelf. We are actually looking into the matter. Many people are still making representations and further discussion is under way. Let me give some of the arguments as we see them so far.
We recognise that there are concerns about the lack of legal advice or representation if the limit is raised. Representations point to the fact that when people make a claim for personal injury, it is more than likely that they will be up against professionals—insurers, lawyers, claims managers, employers or local authorities. They will need to establish whether they have a valid claim; obtain and understand medical and other expert evidence; and then be able to prove their case. They will also have to assess the value of their claim. Those could all be difficult for a claimant without advice or representation, and lawyers say that offers made to non-represented defendants can increase by £1,000 or more once the services of a lawyer are engaged.
However, the insurers and local authorities have concerns that the costs of conducting lower-value cases have become disproportionately high. Costs often exceed the amount of compensation, sometimes by a considerable amount. They believe that that could be addressed by increasing the small claims limit so that legal costs are no longer recoverable, although my hon. Friend the Member for Hendon points out that the issue of those costs could be addressed by people settling earlier and not fighting claims that they are likely to lose.
The Government are considering all those arguments carefully. We are clear that claims must be settled in a way that is timely, proportionate and cost-effective. That is not always the case at present. However, an increase in the limit to £2,500 or even £5,000 would affect tens of thousands of cases, so before considering such an increase we must consider its impact fully and be sure that we are increasing, not reducing, access to justice. For example, conditional fee agreements have improved access to justice, and mean that more people can pursue their claims. An increase in the limit would affect the viability of conditional fee agreements. It might also open up the possibility of claimants having to
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pay for legal advice through a large fee being deducted from their compensation, as my hon. Friend the Member for Hendon said.
The Select Committee report comments on the importance of the availability of early advice. I have already set out some of the initiatives under way to provide assistance and better information. As part of our review of the personal injury limit, we need to establish whether the voluntary advice sector could cope with a large influx of new cases in an area of litigation that both involves a high level of expertise and hardly features in the current small claims regime at the moment.
Although, as the Select Committee rightly points out, district judges will help the claimant in person, many cases never reach a judge, as they are settled before litigation is commenced. Even where litigation is begun, most cases settle before they reach a trial, if we leave aside the point about settlement being at a lower level without the assistance of a lawyer for the claimant.
There is also the issue of what any increase should be. Obviously, all such limits are to some extent arbitrary. As others have pointed out, an increase in line with inflation would not take us above £1,500 and an increase to £2,500 or £5,000 would bring some injuries into the small claim track for the first time. We ought to consider whether such an increase can be justified on grounds other than inflation. I note the point made by the hon. Member for Huntingdon about splitting the difference.
So far as housing disrepair cases are concerned, as the Select Committee recognised and as the right hon. Member for Berwick-upon-Tweed mentioned, such cases nearly always involve some of the more vulnerable members of society. We are taking that into account in our review.
A numbers of hon. Members ventured into a discussion of small claims in the European context. That is quite a challenge. For many people, the idea of even getting to their local court, issuing a claim and making progress seems daunting enough; the idea that one should advance into Europe and litigate for a small amount is even more so. Europe is on to it; it is in hand.
With holidays, travel and buying abroad, including via the internet, on the increase the number of disputes will rise, as the hon. Member for Huntingdon said. Citizens Advice already does sterling work, acting as European consumer centres for the UK and helping to resolve cross-border disputes that arise in the EU. Sometimes disputes cannot be resolved so easily and, at present, litigating across borders can be costly, lengthy and time consuming. It is regarded by most people as downright impossible. We believe that the European small claims procedure will be a significant improvement, providing as it does a simple common procedure that does not involve a judgment having to be recognised in another member state before it can be enforced.
We are continuing to negotiate with our European colleagues to achieve the best possible outcome. Already, we have secured agreement over significant aspects of the procedure that it should apply to cross-border cases only. Obviously, that makes sense. It should normally be a written procedure. Perhaps most importantly, the cost of the procedure should not be disproportionate to the value of the claim.
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A number of hon. Members, including the hon. Member for Huntingdon, mentioned listing. Most public service organisations are moving away from block booking. Obviously, it is right that that is reflected on. We recognise the problems that block listing small claims can cause litigants. The reason for block booking is that it is regarded as the most efficient use of judicial and court resources. We have to strive to reach a better balance between the providers of the service and its users.
We are reducing the number of hearings in court wherever possible by extending the scope for telephone hearings. Hopefully, there will not be block booking of telephone hearings. That will save litigants not only waiting time but also time and money spent travelling to court. We will continue to discuss with HM Courts Service the points that have been made about block booking and listing.
As I have said, our small claims system is already well regarded. However, we are not complacent. It provides a low cost and generally effective system for a large number of litigants. There are still problems with IT. We have much further to go. Enforcement will never be an easy nut to crack, but we must do more about it and we must get parliamentary time for it. As far as raising the limits is concerned, the debate that has followed the report has shown that it is not straightforward by any means.
Mr. Djanogly : The Minister will appreciate that everyone here knows that that is not straightforward. That has been reflected in every speech. However, the issue has now come to a head, as shown by the letters that we have received. For the Minister to leave without some indication of where the Government are coming from, after having heard the figures that both Opposition parties are coming from, and for practitioners not to have some idea of where they are leading is not a good reflection on the Government. Can she give us some more idea of where we are headed? At what point in time will she give a decision so that there is certainty and people know what will happen?
Ms Harman : I have set out what I think the considerations are. I have explained that we are deliberating about the matter, that we are considering it and that we are receiving representations. The hon. Gentleman would not want us to act precipitately. It is important and in due course, as soon as we can, we will come forward sensibly and set out our proposals. We will continue to listen to hon. Members' comments
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about the day-by-day processes and where we can improve them, and to work harder to make a good system, run by dedicated people, even better.
4.55 pm
Mr. Beith : With the leave of the Chamber, I want to thank hon. Members who have taken part in the debate, especially the hon. Member for Hornchurch (James Brokenshire), who makes such a valuable contribution to the Committee, my hon. Friend the Member for North Southwark and Bermondsey (Simon Hughes), with his ideas on enforcement, which have been a valuable addition to our discussion today, the hon. Member for Huntingdon (Mr. Djanogly), who gave general support to the belief that we have to reconsider the limit and may need to raise it, although we must work out what would be a sensible increase, and the hon. Members for Clwyd, West (Mr. Jones) and for Hendon (Mr. Dismore) for their extremely eloquent defence of the views of many personal injury lawyers and some trade unions.
As I listened to the hon. Member for Hendon, there were moments when I feared that I might trap my finger on my way out of the Chamber. In such circumstances, it would clearly be essential that I obtained the services of the hon. Gentleman or of the small number of lawyers who are known by him to be up to his standard. I dare not read Kemp and Kemp, from which he is going to give me the chapter, because that was not written for people like me. There was a moment when he sounded a little like the lawyer in the Lady Chatterley case, challenging the jury to think whether this was a book that they would want their servants to read. I am sure that you will now scurry home to read it, Mr. Marshall.
I turn to the Minister's response. I shall want to pursue her on three unanswered questions. When will a fully-integrated IT system be in place in the county courts? How soon can we get effective action and enforcement? When, as the hon. Member for Huntingdon asked, will we get the difficult but necessary decision about the limits? It should not take too long now that all the arguments are out in the open.
I hope that the argument about the personal injury limit will not in any way detract from the importance of the other issues that we have talked about: the benefits and advantages of the small claims track, and the need to equip it adequately with IT and ensure that its judgments can be enforced.
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