by Frances Gibb, London. The Australian. April 5, 2013
RADICAL reforms that take effect this week in Britain could herald the end of the compensation culture in accident claims.
Under the changes, referral fees paid for the passing on of personal injury cases will be banned; and the fees that can be recouped from bringing “no win, no fee” claims will be severely curbed.
The result, the most senior civil judge in England and Wales predicted, would be to deter people from pursuing meritless claims.
John Dyson, Master of the Rolls, disputed that Britain had an American-style compensation culture, saying this was not borne out by the evidence.
Yet “no win, no fee” deals introduced in 1999 had inflated legal costs and that in turn had put pressure on defendants to settle claims. “It is plain to see how a compensation culture could arise in this way.”
The perceived compensation culture had fuelled a rise in worthless claims while the risk of high court costs had forced defendants to settle out of court. In turn, such settlements had encouraged more unmeritorious claims, Lord Dyson added.
“The growth in the number of such claims and the concomitant increase in costs was matched by an increase in the number of claims management firms and an increase in advertising and other practices aimed at drumming up work,” Lord Dyson said.
But under reforms taking effect this week based on a report by Rupert Jackson, a Court of Appeal judge, judges would have control over costs in court cases.
Second, changes to “no win, no fee” cases should “go a considerable way to reducing the pressure on defendants to settle unmeritorious cases,” he said.
“Through bringing costs under control, and removing the perverse incentives to settle claims lacking in merit, we should be able to make substantial improvements to this aspect of the system. The pressure to settle such claims should be reduced, if not eliminated,” Sir Rupert said.
Lord Dyson said he hoped that the result would be to “discourage any misguided sense that, simply by raising a claim, no matter how hopeless, a claimant will receive compensation and costs”.
Under the changes, people bringing claims on a “no win, no fee” deal will no longer be able to recover the extra costs involved (the higher fees paid to their lawyers) or their insurance premiums from the other side.
But what do lawyers think? Reaction tends to fall down the claimant-defendant lines, with insurers welcoming the changes and lawyers fearing the collapse of the personal injury market.
Tom Blackburn, lawyer at Just Costs Solicitors, a specialist costs law firm, says that the majority of the legal industry was completely unprepared for the changes.
“As a result there will be blood on the floor in courts across the country as cases are dismissed and costs not awarded,” he said.
As for the ban on referral fees, the Solicitors Regulation Authority estimates that slightly less than 900 firms doing PI work have referral arrangements in place.
It has written to all firms warning of the ban from April 1 and making clear what activities are prohibited or permitted.
The Forum of Insurance Lawyers welcomes the reforms, saying they will reintroduce balance, proportionality and sustainability into a claims system that over 10 years has “ballooned hugely and become excessive and expensive”.
It would reduce the billions paid in legal costs that often falls on taxpayers, leading to a fall in insurance premiums and reducing the bill paid by the NHS Litigation Authority, it says. “Despite the hyperbole, genuinely injured claimants will still be able to obtain their rightful compensation.”
Laurence Lieberman, partner at Taylor Wessing, said that new controls would ensure “costs are proportionate to the subject of the claim and with claims of a value up to pound stg. 2 million ($2.9m) will need the court’s blessing for their costs budgets for the first time”.
Over time, he said, this should weed out “unmeritorious claims and make it more difficult for claimants to bring inflated claims against insured defendants”.
Claimant lawyers, unsurprisingly, are less sanguine. Des Collins, senior partner of Collins Solicitors, who acted for victims and families in a landmark class action against Corby Borough Council, condemned the changes as “ill-conceived”.
“Claimants will inevitably be left out of pocket if they are injured through no fault of their own, which can’t be right,” he said