Last reviewed 20 May 2013
Some of the most wide-ranging reforms to affect the county courts came into effect at the beginning of April 2013 with the implementation of the Jackson reforms and other changes. Basil Long reports.
The small claims limit has been raised for the first time in more than 20 years. Claims of up to £10,000 will now be heard in the small claims system ― previously the limit was £5000. The small claims system is a streamlined procedure within the county court, designed to reduce costs, and neither the claimant nor the defendant are entitled to recover any fees associated with instructing lawyers. With the raised upper value, this will increase the number of claims where the claimant and defendant represent themselves (or have to fund the cost of a lawyer themselves). In addition to the increase in claim value, a cap of £750 on the fees that can be added to the claim to pay other experts, such as doctors or surveyors, has been introduced. This means that if either party has to pay more than £750 for an expert report, that party will have to bear the additional cost.
All claims are now handled either by Northampton County Court Bulk Centre for online claims, or Salford County Court Bulk Centre for paper claims. If a claim is submitted at a local county court, they will merely date-stamp the claim (for the purposes of complying with any limitation period) and then send it to Salford for processing.
The end of no-win, no-fee?
Until April 2013, the majority of personal injury claims were brought about under conditional fee agreements (CFAs). These agreements meant that the claimant did not pay any legal fees to his or her solicitor, who instead got paid by the other side (if the claimant was successful) or not at all. If the claimant lost the case, he or she would normally be liable for the legal costs of the defendant. However, these costs would be paid by an after-the-event insurance policy (ATE) taken on by the claimant’s solicitors. If the claimant won, his or her solicitors would additionally be awarded a success fee, payable by the defendant, which would cover the ATE premium and the solicitor’s own time for unsuccessful cases. The success fee was designed to encourage the solicitor to only take on meritorious cases.
These agreements are being replaced by damages-based agreements (DBAs) and the differences are many.
First, if a claimant is successful, the defendant will not have to pay the ATE premium that the claimant (or their solicitor) has paid. Instead, this will be deducted from the damages award.
Second, the claimant’s solicitors will not be paid a success fee by the defendant. Again, this will be deducted from any damages awarded.
The fee, which the claimant’s solicitors can charge the claimant, will need to be stated in the DBA as a percentage of the damages ― up to 25%. Under CFAs, the solicitor charged their normal rate plus a success fee of up to 100% of that normal rate. However, this will now not be allowed and, instead, the solicitor will have to take the risk that the damages awarded are not substantially less than expected.
In order to ensure that the majority of legitimate claimants are not disadvantaged, the court will usually increase the level of damages by up to 10% to cover these fees and costs.
The percentage the solicitor can deduct applies to damages “recovered” not “awarded”, so the solicitor will be particularly aware of any counterclaim or potentially insolvent defendant.
Similar changes have been introduced for non-personal injury civil cases falling outside of the new small claims limit, with the percentage that the solicitor can deduct from the damages being limited to 35% for employment claims and 50% for all other civil claims.
In addition, qualified one-way costs shifting means that, where the claimant (or the ATE insurer) would have had to pay the defendant’s legal costs if the defendant was successful, these costs will now be “shifted” on to the defendant. This may reduce the number of ATE premiums taken out (for which, otherwise, the claimant would be responsible for the cost). However, this is qualified in that, if the claim is fundamentally dishonest, the claimant will still be liable for the defendant’s legal costs.
Throughout the civil courts, there will now be a much more judicial-led approach to costs management; parties will have to submit budgets at the start and throughout if they need to make changes. Any costs over those budgets for which permission was not sought will be disallowed.
Legal aid has not been available in many civil claims for quite a while now. However, since April 2013, it has been removed from even more areas of law, including personal injury, employment, immigration, family and divorce, and almost all housing cases.
The overall effect?
While it is possible that by raising the small claims threshold and increasing the cost risk for claimants could deter claimants from making a claim against a business, the flip-side of the argument follows that it could in fact increase the number of claims handled personally by the claimant with no legal advice, therefore making him or her more reluctant to settle or withdraw a claim. If your business is considering a claim against another business, it will also affect your own consideration as to whether you handle such claims in-house or pass them on to legal advisors.