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Justice Committee hearing shows the way forward for reform of the Small Claims Track for RTA and casualty claims

Yesterday's appearance before the House of Commons Justice Committee of key witnesses including DWF Partner Nigel Teasdale allows us the chance of reviewing where the government's planned changes to the level of the Small Claims Track alongside reform of damages for cases of minor whiplash injuries are up to. The current focus is on the processes which would surround the reform which are important to it being able to go ahead.

Summary

The MoJ have set up 5 working groups to take forward the task of designing new processes which can support the handling of claims including by claimants acting for themselves under an increased Small Claims Track limit of £2,000 for EL and PL claims and £5,000 for RTA claims: their work continues while the Civil Liability Bill needed to introduce the proposed whiplash tariff is awaited.

In the meantime, the Justice Committee invited witnesses to attend before it as part of its re-activated inquiry into the effects of the SCT rises including on CMCs and the BTE market.

The appearance of the MoJ minister Lord Keen made clear the government's intentions to proceed with the reform remained in place: the ban on cold calling would not be enough by itself. He considered that the BTE market would cope with the change, while what he described as "good CMCs" could also be part of the solution.

The committee heard from two judges who had initially been dismayed by the fear of having to deal with high numbers of self-representing claimants on the SCT. Their concerns had reduced as they were able to accept that a new portal providing access to claimants themselves alongside the new Online Court could provide an alternative solution.

The committee also heard from interested parties, and while witnesses from a trade union and a BTE provider understandably argued in favour of the status quo, FOIL presented a vision of the reforms being supported by a new portal and Online Court access which would give a platform for dealing with low value claims in a modern, streamlined way.

The original view of the judges

The judges before the committee were High Court judge Mrs Justice Simler together with Judge Bird from Manchester County Court. Both had the background of being involved in the judiciary's Civil Executive Team while Judge Bird has also had involvement as part of Lord Briggs' Working Group which had set out a vision for the Online Court.

The judges' earlier attitude towards the reform had not been one which had looked promising. While not seeing it appropriate to comment on the government's policy aims, they had indicated a "serious level of dismay" as to the effects of the proposed reforms.

Their concerns had been centred around their fear that 90% of the types of claim affected by the reform would move out of the portal and into the Small Claims Track, so imposing a much greater burden on the courts in dealing with many unrepresented claimants, with an SCT trial involving that type of litigant taking between double and 4 times as long as a Fast Track trial with legally represented parties.

SCT trials, said Judge Bird, were a real burden on the judges who either heard them or appeals arising out of them, as well as on the court staff working in support.

The latest developments towards reform

While of course the Civil Liability Bill to deal with the introduction of the tariff for minor whiplash continues to be awaited, the MoJ's written response to the Justice Committee before yesterday's hearing gave detail of the key background work being undertaken in the meantime.

The MoJ explained the 5 working groups which they had set up, focusing on these areas:

  • Overall strategic direction

  • Guidance and support for court users

  • Legal issues including developing the new rules and supporting documents

  • Liability (processes for settling liability disputes)

  • IT systems and processes

They also made clear that they had discussed the reform proposals and their links with the Online Court with Lord Briggs and the senior judiciary.

Judges on the way to being won over?

It was clear from what was said at yesterday's hearing that as part of the CET, both judges had had involvement with the MoJ's preparatory work which seemed to have helped them to know about what was going on and likely eventual outcomes.

Mrs Justice Simler referred to the proposal for a new redesigned portal capable of being accessed by individual claimants direct. If, she said, that was capable of being achieved, so as to absorb cases which the judiciary feared going into the SCT, then while it remained "a very big if", it "would go a long way to dealing with our concerns".

Judge Bird, in view of his past involvement in that project, understandably answered the same question by reference to the Online Court. The starting point was that that court had been designed to meet access to justice needs, a subject dear to the heart of judges, rather than to meet the need presented by these reforms.

However, while "at the moment personal injury claims would not be a terribly easy fit" into the Online Court, and while it was difficult to say for sure at present as the court remained at a developmental stage, he accepted that there was a potential for it to play a role post-reform.

Fitting injury claims into the Online Court

Online guidance for injury claims would be required. For RTA claims this would be easier to achieve as the cases were relatively straightforward, though EL/PL would give rise to more pronounced challenges, said Judge Bird.

The link between the new portal and the Online Court was mentioned as needing thought: one issue was when a claim left the portal and entered the court, at which stage of the court's processes would this be? Would it be at the initial triage stage – stage 1, or would it be at the final adjudication stage – stage 3?

Judge Bird mentioned also that some costs recovery was anticipated in the Online Court, such as for legal help with either an early advice on merits, or with trial advocacy. This might indeed fit with the government's aims with its reforms in both assisting claimants to recognise if their claims were unlikely to succeed, as well as enabling them to recover costs for using lawyers at certain key stages if their claims succeeded.

Bringing forward the awaited Courts Bill which is planned to provide the legislative framework for the development of the Online Court would assist in clearing some of the current blockages, said Judge Bird.

Lord Keen's appearance

Lord Keen as the minister currently progressing these reforms would presumably have expected at least some of the committee members to have remained hostile to the proposed reforms, and so it proved with Labour MP David Hanson in particular with whom he had some testing exchanges. Nevertheless, the government intention to proceed with the reform remained clear from his appearance before the committee yesterday.

Beyond those skirmishes, Lord Keen referred to the work in progress of the 5 working groups and said that he would be happy to report back to the committee once their work was completed. He saw this work as addressing the initial concerns of the judiciary to what lay ahead.

The government was looking to achieve a simplified claims process in which as far as the litigation side was concerned, judges might need to take a more pro-active role.

He saw the SCT increase as appropriate as it had remained at £1,000 since 1991, that injury claims underneath it had proceeded "without obvious difficulty", and that complex claims could be allocated instead to the fast track due to that complexity even if of value within the SCT.

The government had calculated that with inflation the value of the £1,000 level when set was now around £2,000, and while others calculated the comparative figure at around £1,700, £2,000 was appropriate now and for the period ahead.

Claimants acting in person needing advice could turn to their union or to the Citizens' Advice Bureau for example, he said. Or they could involve one of those "good CMCs who looked after their customers".  Lawyers were not necessarily the "gatekeepers to settlement": this role was carried out by the Pre-Action Protocols.

He did not accept a major disruption in the BTE market because of the extremely flexible claims environment, but if good CMCs replaced BTE insurance that was not equivalent to a bad thing. Again, the market was so flexible that it would adapt.

Use of paid McKenzie Friends was agreed by Lord Keen to leave room for abuse, as they could effectively do the work of a CMC but without regulation. The judiciary were looking at the issue and the MoJ would listen to their views but were alive to the risk.

The proposed ban on cold calling would proceed but would not present a complete answer due to the international element of the calls, so more was needed.

Lord Keen added that whether to extend the cap on CMC charges in injury claims to 20% would be a matter for the FCA following the change in regulator next year, but from the MoJ's perspective they would want to see first how the changes bedded in before deciding whether to encourage the FCA to act on the power.

The need for reform as seen by Lord Keen

One factor he identified was the high number of claims – he referred to 780,000-800,000 RTA claims per year currently. Despite, he said, increased vehicle safety and a fall in the number of accidents, the number of claims had not decreased at all, and remained dramatically higher than historically and in other countries.

In addition his qualitative view was that many of those claims were either fraudulent, exaggerated or "set up". He referred to "macro evidence of a claims culture".

Aviva and LV had said they would reflect savings in their premiums, and in a highly competitive environment, others would follow, he was prepared to accept.

The panel of witnesses from interested parties

Nigel Teasdale, DWF Head of Motor & Fraud and FOIL Immediate Past President was amongst those giving evidence to the committee who also included FOIL's Technical Director as well as the perspective of a trade union and a BTE provider.

The primary issue for the panel of witnesses concerning claims affected by the reforms was the process through which those claims would be brought in the future. While vested interests were keen to identify obstacles to prevent the reforms going through, the FOIL view was that post-reform a combination of use of the portal and the Online Court, accompanied by new technology, would provide a platform on which access to justice could be delivered for low value claims in a modern, streamlined way.

BTE insurers claimed that they saw themselves with a strategic business decision as to whether to continue to fund legal assistance for the claims in question, but if they decided to do so feared costs which they said were now £25-30 per policy becoming prohibitive. In response FOIL supported continued BTE involvement in these claims and identified reasons why it could be expected to continue to be available.

Increased CMC involvement was seen by the panel as likely and the need for the incoming changes affecting their regulation were generally recognised. Nigel's experience as MedCo director enabled him to explain how other aspects of the claimant market were dysfunctional too – not everything could be put at the door of CMCs.

The Numbers

Nigel was also able to clearly identify with CRU figures how RTA claims volumes had surged, from around 400,000 per year in the early noughties, to effectively double at a current 5 year average of 780,000. The extent of the increase was attributable, he said, to changes such as referral fees becoming lawful, the effect of which was that claimants had become commodities.

The union predictably took the claimant view of seemingly accepting that nothing about the current system should change: they saw the best solution for claimants in these cases as being advice from a lawyer and their spokesman wanted to maintain current processes and indeed the current SCT limit notwithstanding it not having changed since 1991, over a period now approaching 30 years.

Understandably though, the union was most concerned about the SCT rise to £2,000 for EL/PL claims, arguing that inflation from 1999 onwards (their preferred start date for the calculation) would mean that the level was yet to reach £1,500. Their spokesman noted the reduction in the number of new EL claims on the CRU data over recent years.

In response, FOIL were able to refer to their calculations showing that updating the £1,000 by RPI now reached a figure of nearly £1,700, and that you should then add in the fact that that figure should be higher still as recent inflationary increases for minor injuries over the last 5 years had in fact reached 20% whereas RPI over the same period had only been 5.5%.

In conclusion, provided it was coupled with process reform, Nigel saw no reason why the SCT level could not be increased.

Next Steps

The MoJ's 5 working groups will continue their work in the months ahead. The Civil Liability Bill and indeed the Courts Bill are awaited when parliamentary time allows. We will see what the various party interests within the new make-up of the Justice Committee make of the changes when they publish their report and whether it has any impact on the way the government are seeking to fulfil their agenda.

Contact

For more information please contact Simon Denyer, Partner on +44 (0)161 604 1551 or email simon.denyer@dwf.law

By Simon Denyer

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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