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Justice Committee throw new obstacles in the way of reform to small claims handling

Today saw the publication of the latest report from the House of Commons' Justice Select Committee, which deals with their analysis of the impact of the proposed increases to the Small Claims Track affecting injury claims. These are the increases, to £5,000 in the case of RTA and to £2,000 for EL/PL and other injury cases, which the government proposes to introduce alongside Part 1 of the Civil Liability Bill bringing in a tariff for PSLA in minor whiplash claims.

Summary and way forwards

There were clear signs from the lines of questioning adopted at the committee's evidence sessions on 16 January that there were differences of view on key matters as between members of the committee on the one hand, and the MoJ minister Lord Keen who is currently piloting the reform on the other, and the report has confirmed this.

The central point from the JC's report is that they accept that an SCT increase based on inflation is justified for injury claims, and that an increase to £1,500 might be justified in April 2019. They recommend against an RTA increase to £5,000. They recommend the £1,500 limit should also include EL and PL claims and were "deeply unimpressed" with the MoJ being unable to quantify the effects of an increase to £2,000 for those types of claim.

It is though access to justice arguments which are the most troubling to the committee who have a high level of concern as to where the SCT reforms would leave the position of claimants often acting for themselves. The committee is concerned that "access to justice, including access to the courts, is a cornerstone of the rule of law but these reforms risk putting that right in doubt". It is clear that the judgment last year of the Supreme Court in the Unison case on the importance of access to justice is seen of particular relevance by the Justice Committee.

There is some overlap as between the report and the Civil Liability Bill which will shortly move into Report Stage in the House of Lords. The MoJ can be expected to respond to the committee and will usually do so within 2 months, but may do so more quickly on this occasion. Past experience has shown that a firm government response to the committee can be expected as to the need for reform in principle, though some further consideration by the MoJ and clarification at least around future processes and the time that will be needed to both establish and to test them may also be on the cards.

Who are the committee?

The chair of the committee is the Conservative Bob Neill, a former criminal barrister. There are 11 members in total including Mr Neill, that is 5 Tory and 5 Labour, with 1 member from the Scottish National Party, so the Conservatives do not have a majority. The report is a unanimous one however.

They examine the work being carried out by the relevant government department, here the MoJ. They are able to hold inquiries as they have done in this case, and to publish reports. Those reports do not by themselves have any specific standing in relation to the passing of Bills such as the Civil Liability Bill through parliament, but can be influential on those measures and can inform parliamentary debate.

Claims numbers

The committee looked primarily at the CRU new claims data between 2010/11 and 2017/18. They noted specifically the decrease in new RTA claims of 17% over the last year from 780,324 in 2016/17 to 650,019 in 2017/18.

As to whether that number represented more than a reasonable number of claims, they drew no conclusion seeing it outside their inquiry's remit.

As to the number of fraudulent claims, they referred back to Lord Keen's comment when giving evidence to them that he did not know an exact number saying that what was need was what he termed a "qualitative assessment", and were troubled by way what saw as an absence of reliable data, and advised the MoJ to do more work with the ABI in this area.

They were also referred to a reduction of EL claims by 30% over the past 4 years based on CRU data.

Impact on insurance premiums

On this point the report echoes back to the recent Report Stage of the CLB in the Lords, noting the "unenforceable nature of insurers' promises to reduce premiums". They recommended that the MoJ work with the PRA or the FCA to monitor the extent of reductions attributable to the reforms and proposed a report back to the committee after 12 months. In reality the committee's thoughts in this area will be subsumed within what is already proceeding on the Bill itself.

Calculation of a new SCT limit

They agree that the SCT limit should be increased to reflect inflation. Their maths take April 1999 as the starting point and allowing for CPI note that £1,000 then would be worth £1,454 in March 2018. They say that this indicates that £1,500 might be appropriate to use in April 2019 as the SCT PI limit when the government hope to introduce their measure.

As to the proposed £2,000 for EL/PL, they note that at a CPI rate of 2.5% it would take a further 13 years for this level to be reached.

RPI has been used historically in uprating PSLA awards and is still used by the Judicial College Guidelines. The committee give no reason why this rate should not be used in preference to the CPI other than noting that CPI is now the government's preferred measure of inflation. On this basis it may be difficult for the next edition of the JCG to use anything other than CPI (which tends to be lower than RPI).

The level of the SCT at any one time is a matter for the Secretary of State for Justice who can change it through secondary legislation. It is of course outside the CLB itself. Notwithstanding the opinion of the JC, the minister will ultimately decide the point.

New SCT limit for RTA claims

The JC recommend that the government does not proceed with its plans to increase the SCT for RTA claims to £5,000. They would it seems see an increase to £1,500 as justifiable.

Looking at the proposed whiplash tariff, an over 9 months but less than 12 month injury would be worth £1,250 and so below the proposed new SCT level. But a case where the injury was said to last over 12 months but less than 15 months would be worth £1,910, and so above the SCT level proposed by the committee. Avoidance behaviour or prognosis creep would see alleged 13 month whiplashes being sufficient to be over the SCT limit.

The committee says they can see "compelling evidence of the obstacles that would be faced by self-represented claimants navigating the current PI claims process in the SCT, and we conclude that this would represent an unacceptable barrier to justice".

While agreeing that fraudulent and exaggerated claims must be prevented, in the light of the common law right to compensation for negligence which currently applies regardless of claims value, they see that more convincing evidence is needed before it can be justified to reduce claims numbers by raising the SCT limit "simply because the claims are minor".

They also recommend that Vulnerable Road Users (pedestrians, cyclists, motor cyclists etc.) are excluded on policy grounds from any higher SCT limit which applies to RTA claims (beyond £1,500).

New SCT limit for EL/PL claims

This was an area of focus at the January 2018 evidence sessions. The JC noted that the MoJ had been unable to quantify the number of EL and PL claims that would be affected by the proposed increase to £2,000.

The committee said it was "deeply unimpressed" by this inability. Referring both to what they accepted was the potential complexity of those claims for LiPs, and what they accepted was "the role of litigation in maintaining safe and healthy workplaces", they recommended that these claims should be subject to the lowest SCT threshold, in other words the £1,500 they have proposed.

Again, this is a matter for the minister who can exercise power through secondary legislation.

Impact on the courts

The committee thought there were reasonable concerns on the part of the judiciary regarding the reforms, and recommended that if the SCT is increased above £1,500, then the MoJ and HM Courts and Tribunal Service should agree with the senior judiciary to monitor the impact of the new limit, to start immediately after it is introduced in order that urgent steps can be taken to address any adverse impacts.

LASPO review

The JC notes that the MoJ have said that a post-implementation review of the part of the Act dealing with the funding of civil litigation is taking place this year. To cap off their recommendations, in a way that is bound to find no agreement with the MoJ, the committee advises that in order to be logical, that review should first be concluded before adjustments such as the current package of reforms are brought forward.

New claims process

The committee commends the MoJ working with experts to develop a new electronic platform to handle these claims, but see a need for the MoJ to "take a more realistic approach to the technical challenges that may be faced in developing a fully functional electronic platform that has been properly tested with a wide range of users".

This leads them to recommend that roll-out of the new platform and therefore as they see it any changes to the SCT limit be delayed at least a further year till April 2020. They also suggest exclusion of EL and PL claims from the new platform due to complexity, as well as independent evaluation of the new process after 3 years. They also see the need for targeted face to face support to overcome digital exclusion.

The underlying inequality of arms as between "professionally represented insurers and self-represented claimants" concerned the committee, as well as how those LiPs would pay court fees and expert reports. These are areas for central focus on the part of the MoJ, say the committee.

Impact on others

The JC notes without offering any solution a view that the government has under-estimated the effects of the reforms on the BTE market, another area of focus at the January sessions.

As to CMCs, they welcome the steps taken in the Financial Guidance and Claims Act, but recommends that the FCA impose a 20% cap on fees as with PPI claims, as soon as it takes over regulation.

In the case of paid McKenzie Friends, they say that the senior judiciary should conclude their examination of this issue as soon as possible.

As to the position of claimant lawyers, it will be recalled that the MoJ's Impact Assessment had said that those needing other work due to the impact of the reforms would be able to "replace the lost work with other legal work of an equivalent economic value". The committee disagrees with this approach, saying that it was regrettable that "the potentially substantial impact on the PI legal sector", especially in the North West of England, had not been seen as relevant.  

Next steps

The claimant lobby will be pleased that many of their views have been listened to by the committee, but in reality due to the make-up of the committee another report disagreeing with various principles behind the proposed reform package could have reasonably been anticipated. We await the MoJ's response to the committee but it is unlikely to be persuaded from a firmly held view that reform of the process is required, even though the committee would wish the MoJ to reflect on what it sees as key concerns relating to access to justice.

The report itself is stated to be primarily in relation to the SCT limit, which of course is outside the CLB and is a matter for the Justice Secretary in his role as Lord Chancellor in any event, though it has been said that increases will not be made until the Bill is in a position to become law.

We will need to await the Report Stage of the Bill in the Lords, and in due course the views of the Commons including the MPs who are members of this committee when the Bill reaches that House. The report gives an indication of certain key related issues which the government will need to address if its passage is to succeed.

Regards,

Simon

Contact

For more information please contact Simon Denyer, Strategic Legal Development Consultant, DD +44 161 604 1551, Simon.Denyer@dwf.law

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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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