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Lawyers say government moves to stop 'spurious' personal injury claims will lead to cases increasing
Government plans to end Britain's burgeoning litigation culture will achieve the opposite result, according to legal experts who warn that the measures will trigger an increase in the number of individuals pursuing "spurious" personal injury claims.
The embarrassing claim threatens to undermine the government's case for overhauling Britain's legal aid system, which ministers say is long overdue and is necessary to save the taxpayer some £400m a year.
The justice secretary, Ken Clarke, has said the measures are necessary because the "civil justice system has got out of kilter", resulting in "spiralling legal costs, slow court processes [and] unnecessary litigation".
However, the Consumer Justice Alliance, an umbrella body comprised of charities, law firms and insurers, warned that key proposals to transform the personal injury claims system, outlined in the legal aid, sentencing and punishment of offenders bill, will backfire.
Under the current system, legal costs are borne by the losing party. The system works because a claimant takes out "after the event" (ATE) insurance that pays the defendant's costs if the claim fails. But under the new scheme, known as "qualified one-way cost shifting", the defendants will bear their own legal costs whatever the outcome.
In addition, under the new system the claimant does not have to obtain a lawyer to make a claim, nor do they need to obtain ATE insurance.
The alliance warns that this combination will result in a "chancer's charter". It argues that defendants will find themselves under pressure to settle small personal injury cases – often disparagingly referred to as "slips and trips" in the legal profession – based on economic realities rather than merit.
The alliance quotes a typical example of a local authority who could take the view that it is better to pay out £2,000 in compensation to settle a spurious case where someone has slipped on a wet floor, rather than pay £10,000 in legal costs which they will face whether they win or lose.
Robert Khan, head of Law Reform at the Law Society, warned that once introduced "many defendants including public authorities will be worse off". The society has launched a campaign, Sound Off For Justice, against the reforms.
Khan warned that the reforms to the way that personal injury claims are funded will result in many becoming uneconomic for solicitors to take on. "This will lead to a major increase in accident victims representing themselves without the benefit of legal advice," he said.
The alliance argues that the current system works well by ensuring lawyers and insurers will take on only cases that have a reasonable chance of success, a system that "filters out" the majority of claims. But it claims the new system removes this filter.
"The government is seeking to tackle a compensation culture," said Nigel Muers-Raby, the alliance's chairman. "Astonishingly, their remedy – qualified one-way cost shifting – to this non-existent problem will almost certainly result in a significant increase in bogus claims that it will be financially sensible for defendants to settle even if they are not at fault. This is a chancer's charter."
A spokeswoman for the Ministry of Justice defended the reforms saying that the current system encouraged "excessive, costly and unnecessary litigation".
She said that the government acknowledged that as a result of reforming no-win no-fee agreements, it was necessary to protect personal injury claimants from having to pay the other side's costs if they lost, otherwise genuine claims would not be brought.
Instead claimants will have to make a minimum payment to initiate their claim in a bid to block spurious claims being brought. The government has yet to set a level for the payment.
Concerns about the impact of the government's legal aid reforms are threatening to cause divisions within the coalition.
A number of Lib Dem MPs are known to have reservations which are expected to be aired when the party holds its conference this week. Alistair Webster QC, chair of the Liberal Democrat Lawyers' Association, has described the bill as "dire".
Jamie Doward
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