Press release

Clarke stamping out compensation culture fears

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Fears that a damaging compensation culture and an unwieldy justice system is costing businesses millions of pounds are to be tackled.

The first major overhaul of the civil justice system in 15 years and reform of controversial ‘no win no fee’ deals have been announced to prevent expensive and unnecessary litigation which compromises the essential work of our businesses, schools and other bodies.

Proposals to modernise the system and make it simpler, quicker, cheaper and more effective have been launched for consultation. These include plans to improve how court judgments are enforced, so that people receive what it is judged they are owed, as well as introducing automatic referral to mediation in small claims cases, or mediation awareness sessions in higher-value cases, to help people avoid court where possible.

We propose to raise the small claims limit and to change the county court jurisdiction so that the High Court is used for bigger and more complex claims only.

Justice Secretary Kenneth Clarke said:

‘An effective system of civil justice is one of the cornerstones of a civilised society. Without it businesses couldn’t trade, individuals couldn’t protect their liberties, and government couldn’t be held to account. But, despite this, most people dread going to court because of all the cost and anxiety it involves. We must change that by helping them to avoid court where possible and cutting costs where that is unavoidable.

‘With no major reform for 15 years, the civil justice system has got out of kilter. Businesses and other people who have been sued can find that spiralling legal costs, slow court processes, unnecessary litigation and the ‘no win no fee’ structures, which mean greater payments to lawyers than to claimants, are setting them back millions of pounds each year.

‘At a time when the Government is committed to doing all it can to help businesses to grow and to help ordinary citizens to regard the justice system without fear, I will not allow this to continue. Today I am announcing plans to modernise and simplify the civil justice system, make it quicker and more efficient and crucially, to offer more effective alternatives to going to court.’

Justice Minister Jonathan Djanogly added:

‘We know going to court is stressful, expensive and does not always result in the best outcomes. The measures proposed today ensure there are cheaper, quicker and simpler alternatives, whilst also ensuring the costs of necessary court cases are limited.

‘Once disputes have been resolved it is vital those who are due recompense receive it, which does not always happen under the current system. So today’s consultation also proposes options to crack down on those debtors who won’t pay their debts, while ensuring that those who can’t pay are protected.

‘Taken together with our plans to reform ‘no win no fee’, by tackling the perverse situation in which lawyers can be awarded a greater proportion of payouts than claimants, these reforms will help put an end to the fear of a compensation culture which has put a stranglehold on the activities of businesses and public bodies as well as restore faith in effective justice.’

The Government has today confirmed it will go ahead with the plans in last year’s consultation ‘Proposals for reform of civil litigation funding and costs in England and Wales’. The plans include:

  • Abolishing recoverability of success fees and associated costs in ‘no win no fee’ conditional fee agreements. Under the current regime, defendants must pay these additional costs (which can be substantial) if they lose. Instead, claimants will have to pay their lawyer’s success fee and will therefore take an interest in controlling the costs being incurred on their behalf.
  • Allowing damages-based agreements (also known as contingency fees) in litigation before the courts. These are another form of ‘no win no fee’ agreement, under which lawyers can take a proportion of the claimants’ damages in fees.  This would increase the funding options available to claimants.
  • Introducing a 10 per cent increase in general damages, and introducing a mechanism to protect the vast majority of personal injury claimants from paying a winning defendant’s costs (through qualified one way costs shifting).
  • Other measures including encouraging parties to make and accept reasonable offers, introducing a new test to ensure that overall costs are proportionate and increasing the costs which can be recovered by people who win their cases without representation by lawyers

At the same time, the Government launches a new consultation on radically reforming the civil justice system - ‘Solving disputes in the county courts: creating a simpler, quicker and more proportionate system’. This consultation proposes:

  • Expanding the use of a successful online system to slash waiting times and legal expenses, as recommended by Lord Young: The time taken to resolve road traffic accident personal injury claims of up to £10,000 has dropped from one year to four months in some cases following the introduction of a simple online system that allows lawyers and insurance companies to resolve low-value claims without going to court. We propose expanding the availability of this online system to process Employers’ Liability and Public Liability personal injury claims as well as deal with higher value claims of up to £50,000.
  • Increasing the use of mediation: We are proposing introducing automatic referral to mediation in small claims cases, automatic referral to mediation awareness sessions in higher-value cases and consulting on making mediated settlements enforceable by courts. This is to help people avoid the anxiety and expense of court where possible, although court will still be an option for those who mediation cannot help.

Over the past two years around 10,000 small claims have been mediated with nearly three-quarters reaching successful conclusion. We know that 96 per cent of mediation takes place over the telephone - saving people from the time and expense of having to attend a court - and so want to extend people’s awareness and use of mediation to help disputes be resolved more efficiently and at an earlier stage. Last year, more than three quarters of claims in the civil system were settled after allocation, but before trial. This represents 87,000 cases which could potentially have been resolved earlier if mediation had been used more widely. * Raising the maximum value for small claims from £5,000 to £15,000: This would enable more cases to be heard through the simple small claims process rather than a more costly, complicated trial. We are proposing that several other limits are raised in the same way, for example the maximum value for housing equity cases to be sent up to the High Court should increase from £30,000 to £300,000 - the £30,000 limit was set in 1981 when the average house price was £23,730.More effective enforcement: Research points to ‘inefficient enforcement processes’ as a weakness of the small claims system. Today’s consultation therefore contains proposals which will ensure the court is able to tackle those debtors who won’t pay their debts, whilst ensuring that those who can’t pay are protected. We are proposing introducing Information Orders and Requests to enable the courts to access independent information about a debtor’s status and assets. We also propose a number of ways to tighten enforcement techniques - for example making it more difficult for debtors to stop money from being frozen by putting it in different accounts.

We also propose protecting property owners by setting a minimum level of consumer debt at which your property or stocks could be put at risk for non-payment of a judgment debt.  Creating one national county court jurisdiction across England and Wales: This will enable cases and judges to be allocated more efficiently and centralised processes to be used more widely. From the user’s point of view, this makes the system quicker.

Notes to editors

  1. Statistics provided by insurers show that in 1999 claimant solicitors’ costs were equivalent to just over half the damages agreed, or awarded at 56 per cent. By 2004, average claimant costs were 103 per cent of the damages. By 2010 average claimant costs represented 142 per cent of the sums received by the injured victims.
  2. At present civil cases can end up in the High Court unnecessarily and build disproportionate costs. In a prolonged building dispute case in August 2000 a builder had issued proceedings for approximately £18,000 and the defendants counterclaimed for a sum over £100,000. The builder, following the trial, was awarded £18,327 and the owners £14,373 on their counter-claim. However the costs, of around £185,000, were far higher.
  3. The proposals announced today relate to England and Wales.
  4. View consultation paper: Solving disputes in the county courts: creating a simpler, quicker and more proportionate system.
  5. View consultation document and response: Proposals for reform of civil litigation funding and costs in England and Wales.
  6. The proposed reforms to the court enforcement system were part of the Tribunals, Courts and Enforcement Act 2007. The Ministry of Justice plans to consult on related proposals about reforming rules for bailiffs, also contained in the Act, later this spring.