Annex: Background to the current reforms
Reforms to the personal injury claims process
1)Over the past few years, several measures have been introduced to contain the costs of PI claims and to regulate the PI claims market, particularly RTA claims involving soft tissue injuries, or “whiplash”. Most of these reforms have focused on the activities of claimant representatives.
2)The so-called Jackson reforms to civil litigation costs were brought into effect by Part 2 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012. Proposed by Lord Justice Jackson in his review of civil litigation costs, with effect from 1 April 2013 these reforms abolished the successful claimant’s right to recover so called “after the event” (ATE) insurance premiums and success fees payable to the claimant’s lawyer under a conditional fee agreement (CFA);246 these costs had previously been paid by the losing defendant in addition to damages due under the claim itself.
3)To offset the impact of the additional costs to claimants arising from these reforms, simultaneous changes to the Civil Procedure rules introduced qualified one-way costs shifting (QOCS) for PI cases. Under QOCS, an unsuccessful PI claimant generally does not have to pay the defendant’s legal costs, thus reducing the need for ATE insurance. From the same date, the courts introduced a 10% increase in general damages for non-pecuniary loss—that is, pain and suffering, loss of amenity, physical inconvenience or distress.247
4)Part 2 of LASPO also introduced a ban on the common practice of solicitors paying referral fees to third parties—primarily claims management companies—in exchange for personal injury claims referred to them. The ban is enforced by regulators, including the Solicitors Regulation Authority, the Financial Conduct Authority and the Claims Management Regulator.
5)In 2010, a fixed recoverable costs regime was introduced for RTA PI claims up to the value of £10,000, together with a requirement for documents relating to such claims to be transferred between the parties by means of a secure electronic portal which is available only to registered users—that is, insurance companies and claimant representatives. As part of the Jackson reforms, the Civil Procedure Rules were amended to bring RTA claims up to the value of £25,000 notified on or after 31 July 2013 within the portal regime, along with employer’s liability (EL) or public liability (PL) claims up to this value. At the same time, there was a corresponding extension of the fixed recoverable costs regime.
6)Section 57 of the Criminal Justice and Courts Act 2015, which took effect on 13 April 2015, requires a court to dismiss the whole of a personal injury claim if it is satisfied, on the balance of probabilities, that the claimant has been “fundamentally dishonest” in relation to the primary claim or a related claim—unless the claimant would suffer substantial injustice if the claim were dismissed. “Fundamental dishonesty” is not defined by the legislation, but one example might be significant misrepresentation of the extent of medical symptoms.
7)From 6 April 2015, amendments to the Pre-Action Protocol for low value PI claims in RTA cases required soft tissue injury claims to be supported by a fixed cost medical report commissioned via the MedCo Portal from one of a randomly generated list of medical experts or medical reporting organisations. The Protocol contains the following definition of soft tissue injury:
…a claim brought by an occupant of a motor vehicle where the significant physical injury caused is a soft tissue injury and includes claims where there is a minor psychological injury secondary in significance to the physical injury.
The MedCo portal was introduced to remove the possibility of any financial link between those making a claim and those supporting it. MedCo—an industry-owned not for profit company—operates an accreditation scheme for medical experts and medical reporting organisations as well as operating the MedCo portal.
8)A further amendment to the Pre-Action Protocol provides for solicitors’ firms, with client consent, to check their client’s records held on what is known as the askCUE PI database. These records relate to personal injury/industrial illness incidents reported to insurance companies in the past five years, whether or not giving rise to a PI claim, which are held on the insurance industry’s Claims and Underwriting Exchange (CUE), a central database. Claims notified through the RTA portal from 1 June 2015 must contain a search reference number generated by the askCUE PI service.
The Small Claims track
9)Under the Civil Procedure Rules, all defended civil claims are allocated to one of three tracks: the Multi-track, the Fast track or the Small Claims track. When allocating a claim to a particular track, the court can take into account factors such as the views of the parties and the nature and complexity of the claim. Generally, however, the court distinguishes between cases on the basis of monetary value.
10)In general, cases allocated to the Small Claims track are those with a financial value of no more than £10,000. For personal injury (PI), there is a lower small claims limit of £1,000 that applies to damages for pain, suffering and loss of amenity (PSLA); additional damages may be recovered, such as for loss of earnings, damage to property and medical expenses, although to remain on the Small Claims track the total value of the whole claim must not exceed £10,000.248 Claims allocated to the Fast track are generally those with a value over the small claims limit but no more than £25,000. The Multi-track is predominantly for claims exceeding £25,000.249
11)The Small Claims procedure is designed to provide an informal environment for the resolution of straightforward, low value disputes, where strict rules of evidence do not apply; cases are often resolved without a hearing, on the papers alone. In contrast to the costs rules in Fast track and Multi-track cases, which generally allow the successful party to recover their costs (including costs of legal representation) from the losing party, the Small Claims track restricts the costs that can be recovered to the following:
- fixed costs involved in issuing the claim
- loss of earnings and travel costs of the party or witnesses attending the hearing (up to a limit of £95 per day)
- expert’s fees (up to £750 per expert)
- court fees.250
History of the small claims limit
12)The small claims procedure was introduced in 1973. The limit for small claims was set at £1,000 in 1991; in 1996, for most small claims251 the limit was raised to £3,000 although for PI it remained at £1,000. When the general small claims limit was again increased (to £5,000) in April 1999, a Government review of the limit for PI concluded that £1,000 should only apply to general damages for pain, suffering and loss of amenity (PSLA) rather than to the value of the entire claim, thus effectively raising the limit for claims involving special damages (that is, damages for financial loss). In July 2008, following a consultation by its predecessor department (the Department for Constitutional Affairs),252 the Ministry of Justice published a post-consultation report253 which noted the view of the majority of respondents that the Small Claims track limit for all categories of claim should remain unchanged.
13)Lord Justice Jackson’s comprehensive review of civil litigation costs concluded, in 2009, that the small claims limit for PI should stay at £1,000 “until such time as inflation warrants an increase to £1,500” to avoid potential confusion arising from a series of small increases.254 A further consultation by the Coalition Government led to the general small claims limit being increased from £5,000 to £10,000 from April 2013, but no changes were made to the £1,000 limits for PI and housing disrepair.255
14)Only a few months later, the Coalition Government again consulted on the small claims limit. In December 2012, it sought views on increasing it for RTA whiplash claims to £5,000,256 asserting that many small value whiplash claims were relatively straightforward and could be resolved within the Small Claims track. It also suggested that this change would provide a better framework for the challenge of fraudulent or exaggerated claims. However, the consultation document recognised potential risks arising from the proposal:
- Reduced access to justice resulting from injured parties either not claiming in the first place or not challenging the rejection of a valid claim; this could be an unintended consequence of claimants being less likely to obtain legal representation.
- Inequality of arms between self-represented claimants and professionally represented defendants, creating a risk that claims would not be presented with equal skill.
- An increased risk of unrepresented individuals with valid claims settling for less than the amount which would provide fair compensation for the injury they suffered.
15)In the event, the Coalition Government opted not to change the limit; its response257 took into account the consultation responses it received, together with the House of Commons Transport Committee’s report on its inquiry into the cost of motor insurance: whiplash.258 The Committee had expressed surprise about there being “no authoritative data publicly available about the prevalence of fraudulent or exaggerated claims for whiplash injuries and no consensus about what constitutes fraud”. In relation to raising the small claims limit, the Committee on balance had not supported the proposal, concluding that “access to justice is likely to be impaired, particularly for people who do not feel confident to represent themselves in what will seem to some to be a complex and intimidating process.”
16)The Transport Committee returned to this topic the following year in a further report259 which welcomed the Government’s willingness to change its position on the small claims limit in the light of the arguments put to it, and noted its intention to develop safeguards for genuine claimants. The Committee recommended that the Government “inform us of what work is underway or planned to develop adequate safeguards to protect claimants from adverse consequences of raising the threshold for using the small claims procedure for personal injury cases.”260
246 Conditional Fee Agreements (CFAs) are a form of “no win, no fee” agreement, which allow a solicitor to take a case on the understanding that if the case is lost the client will not be charged. However, if the case is successful, the solicitor can charge a success fee on top of the normal fee. CFAs were modified by the Access to Justice Act 1999 to allow the solicitor’s success fee to be recovered from the losing side. The same Act removed most personal injury cases from the scope of civil legal aid.
247 The Court of Appeal in Simmons v Castle [2012] EWCA Civ 1039 declared that: “…with effect from 1 April 2013, the proper level of general damages in all civil claims for (i) pain and suffering, (ii) loss of amenity, (iii) physical inconvenience and discomfort, (iv) social discredit, or (v) mental distress, will be 10% higher than previously…”
248 Housing disrepair cases are also allocated to the Small Claims track where the cost of works and the value of any damages claimed is not more than £1,000.
249 Rule 26 Civil Procedure Rules
250 Rule 27 Civil Procedure Rules - Small Claims track and Practice Direction 27 - Small Claims track
251 Apart from claims for housing disrepair - see footnote 248 above
252 Department for Constitutional Affairs: Case track limits and the claims process for personal injury claims [CP 8/07], April 2007
253 CP(R) 8/07
254 Review of Civil Litigation Costs: Final Report, December 2009. Paragraph 3.3
255 Solving disputes in the county courts: creating a simpler, quicker and more proportionate system A consultation on reforming civil justice in England and Wales: The Government Response. February 2012
256 Reducing the number and costs of whiplash claims: A consultation on arrangements concerning whiplash injuries in England and Wales, Ministry of Justice, December 2012
257 Reducing the number and costs of whiplash claims: A Government response to consultation on arrangements concerning whiplash injuries in England and Wales/Cost of motor insurance – whiplash: A Government response to the House of Commons Transport Committee. Ministry of Justice, October 2013
258 House of Commons Transport Committee: Cost of motor insurance: whiplash. Fourth Report of Session 2013–14, July 2013.
259 House of Commons Transport Committee: Driving premiums down: fraud and the cost of motor insurance. First Report of Session 2014–15, June 2014
260 Paragraph 11. The report’s other recommendations included a call for better data gathering/data sharing within the insurance sector; a ban on pre-medical offers; a robust accreditation system for medical reporting organisations; and clarification of the government’s plans for measures requiring the courts to throw out claims involving fundamental dishonesty.
Published: 17 May 2018