SMALL CLAIMS: THE KEY CHANGES-- The increase in the jurisdiction from £1000 to £3000 only applies to claims issued on or after 8 January 1996.-- From 26 January 1996 the amount which can be awarded for experts' fees will increase from £112.50 to £200.-- From the same date an additional amount of up to £260 may be awarded for legal advice obtained in order to bring or defend a small claim for an injunction, an order for specific performance, or similar relief.-- Seek ways of maximising damages.
But in the county court an inflated claim may be penalised by no award of costs.-- Guidance on how to assess a case's 'complexity' can be found in ord 19 of the County Court Rules.-- The Legal Aid Board (LAB) announced this week that it will be unreasonable for legal aid to be granted except in exceptional circumstances.-- Ask your local LAB area office if limited legal aid will be available for work prior to an application to refer a case out of arbitration.-- Personal injury claims are not defined in the statutory instrument.
And a test case may be needed to establish that they include special damages.-- Claims over £1000 which include only an element of personal injury might not be excluded from arbitration.SOLICITORS MUST BECOME EXPERT AT COST BENEFIT ANALYSISMany potential clients were happily ignorant of the change to their legal rights when the small claims jurisdiction was increased from £1000 to £3000 on Monday 8 January.High street solicitors are dreading telling clients that no costs will be awarded and that the only way to avoid losing most of their damages is to argue their case in person before a district judge.
Most of all solicitors fear that their client base will fall substantially.However, the secretary to the Law Society's civil litigation committee, Suzanne Burn, says that solicitors are not helpless in the face of this, the first wave of Lord Woolf's reforms to take effect.
'Solicitors must think about how they will give potential clients the quickest possible advice when they first come through the door,' says Mrs Burn.
'They will have to do a rapid benefit analysis of the cost to the client of employing a solicitor on the assumption that the client is not going to get any of that back.'Mrs Burn says that one of the big problems for solicitors will be working out the value of a claim with a value of around £3000 in order to be able to advise the client to which proceedings they will be subject.An additional hurdle will be assessing whether a claim which would normally be low enough to fall within the new jurisdiction is complex enough to be transferred out of it.
The new rules remove the provision that the judge should be satisfied that the facts are of 'exceptional' complexity before making the order referring the claim for trial in open court.'You can't make an application for exclusion until you've issued proceedings,' says Mrs Burn.
'This can entail a lot of work for clients before they find out whether they will be able to recover their costs.'One way to retain clients while still making some money is through work sharing, says Mrs Burn.'Some clients are quite capable of writing their own witness statements and getting their own paperwork together,' she says.
'The solicitor could do the procedural side, tactics, negotiating and representation.
It could be an effective way to operate.'According to Mrs Burn, solicitors will need to pare down their small claims work and do it as effectively as possible.
And if smaller firms want to move their business into the area of claims above £3000 they will have to do a lot of marketing to attract work from larger organisations.
Mrs Burn says the increased jurisdiction would have a big impact on high street solicitors whose private clients might no longer pursue small claims.Already many private individuals who do take claims worth under £1000 to arbitration feel they cannot afford to use a solicitor.
In a 1994 study of the operation of small claims procedures, Professor John Baldwin, of the Institute of Judicial Administration at Birmingham University, interviewed 262 small claims litigants in 16 county courts throughout the country, with a response rate of over 85%.Professor Baldwin found that less than 40%, excluding the court regulars who appeared on behalf of business clients, claimed to have taken advice from a solicitor.
Under 10% had approached voluntary advice agencies.
And only 10% of those who were not themselves professional court users were legally represented at the hearing.Almost three quarters of the sample interviewed by Professor Baldwin were car owners who had driven to the hearing.
'If the small claims procedures have been devised to enhance the rights of the poor then they cannot be said to have achieved that objective,' he says.BIG CHALLENGE -- Housing solicitors must find every possible way of maximising damagesTenants will continue to need legal advice and where possible representation in dealing with problems of housing disrepair, illegal eviction and harassment.
The increase in jurisdiction will make it more difficult for solicitors to give this assistance.Last week the Lord Chancellor approved an amendment to the County Court Rules which provides that up to £260 may be awarded for legal advice obtained in order to bring or defend a small claim for an injunction, an order for specific performance, or similar relief.
It does not cover representation at hearings.
This is a welcome improvement on the original proposal of £135 and is the result of lobbying by the Housing Law Practitioners Group, the Law Society and consumer groups.
However, it is only a small part of the likely cost of obtaining such advice.
The Law Society also thinks that £260 is unlikely to be anything like sufficient in the majority of cases.Tenants' solicitors will still need to consider all possible methods of maximising damages.
In disrepair cases a claim for diminution in value can be made in addition to a claim for general damages.
The value of the works of repair needed to the property can also be included in assessing the value of the claim.
The Lord Chancellor's Department is believed to take the view that this is a valid approach even if an order for specific performance is also sought.
Possible personal injury claims, for example for asthma exacerbated by dampness, should also be explored in respect of any member of the tenant's family who can be included as co-plaintiff.
Other claims for special damages, for example damaged furnishings and clothing, should be explored.
In cases of harassment or illegal eviction a claim for aggravated and exemplary damages may be appropriate.
However, a realistic assessment of the value of the claim is vital as an inflated claim which should have been dealt with in arbitration may be punished by no award of costs.For cases where the value of the claim is under £3000 the district judge now has a widened discretion to refer cases out of arbitration on the grounds of complexity.
This term is not defined but there is some guidance on the factors to be considered by the district judge, in ord 19 of the County Court Rules.
Applications should be considered in cases where an interlocutory injunction is needed; if there are complex issues of law or fact or if the client has poor English or would otherwise have difficulty in dealing with the case him or herself.It may be possible to obtain limited legal aid for the work needed prior to an application to refer a case out of arbitration, or alternatively an extended green form can be used.
Solicitors could try to liaise with their local Legal Aid Board to explore how such cases will be considered in future.
The green form will not cover drafting the proceedings or representation at the hearing of t he application and solicitors will have to consider with their clients how much help they can give with these vital stages in the case.
Even if the case is referred out of arbitration only limited fixed costs will be payable by the defendant for the work done prior to the order, thereby increasing the statutory charge.For cases which stay in arbitration legal aid may still be available, for example for cases involving an interlocutory injunction or where the likely damages will exceed the costs.
Tenants must be told that the statutory charge is likely to take most of their damages.
Otherwise an extended green form can be used to prepare the case, including obtaining expert evidence.
It will be difficult to enforce the green form charge in such cases as solicitors are unlikely to know whether the tenant is ultimately successful in obtaining damages.
One effect of the increased limit will therefore be to transfer the costs of these cases from bad landlords to the Legal Aid Board.VOLUNTARY AGENCIES WILL BE SWAMPED BY CLAIMANTS WHO CANNOT AFFORD SOLICITORSThe Citizens Advice Bureau (CAB) service has argued in the past that the increase in the small claims jurisdiction limit should not take place until other connected recommendations had been implemented, in particular better support and advice for litigants.
Civil legal aid will not be available for most small claims and the successful party will not generally be awarded costs, although limited costs will be available for injunctions and orders for special performance.
This will mean that many people who are considering bringing or defending a claim worth £3000 or less will no longer seek advice from a solicitor.The raising of the limit will increase access to the courts for those who previously could not afford the risk of litigation if they feel confident in using the small claims procedure with little or no assistance.
However, for many people, the procedure will only be an option if they have some advice and assistance.
Pressure on court staff means that they are not always able to help and in many cases litigants will turn to their local CAB to provide that support.At the moment the amount of advice that CABx can provide is quite limited, especially if representation is involved, as workloads are stretched to the limit.
Currently, the majority of our enquiries relating to small claims concern housing, debt and consumer issues.While the CAB service supports the aims of the small claims procedure, the raising of the limit should be accompanied by better training for judges and better information, advice and support for litigants.
Evidence from CABx up and down the country shows that despite the fact that the process is specifically meant for use by litigants in person, it remains unclear for many ordinary people.
People are often confused by the language of the court its procedures.If CABx are to cope with the additional demand that will inevitably accompany the increase in the small claims limit it is vital that priority is given to making additional resources available so the CABx can manage and people do not go without the assistance they need to be able to make use of the small claims procedure.PERSONAL INJURY SOLICITORS STILL DO NOT KNOW WHICH CLAIMS WILL GO TO ARBITRATIONFor personal injury lawyers the most important feature of the increase in jurisdiction is the exclusion of personal injury claims over £1000 from the new regime.
This is a result of Lord Woolf's recommendations in his interim report.
Lord Woolf accepted the strongly held view of the Associatio n of Personal Injury Lawyers and others that small personal injury claims involve special difficulties in evidence, law and quantification, and that costs must be recoverable by plaintiffs if they are to obtain legal advice and representation.This is the opposite view to that held by the Court of Appeal in Afzal v Ford Motor Co [1994] 4 All ER 720.
In the future all personal injury claims up to £10,000, including those under £1000, will be part of Woolf's fast track procedure.However, we do not have a fast track yet.
This leaves personal injury claims under or around £1000 in a post Afzal and pre-Woolf limbo.
To escape arbitration and win costs plaintiffs must still satisfy the Afzal test that there is a reasonable and genuine expectation that the claim is worth more than £1000.
The test has been interpreted restrictively by the courts, for example in Rajaratnam v Ford Motor Co September 1995 Current Law para 395.
Claims definitely under £1000 may still escape arbitration if the plaintiff can show that a question of fact or complexity is involved, as opposed to exceptional complexity under the old rules.
Costs will then be payable in these cases but only from the date of the order for trial (ord 19, r 4(4) CCR) which makes this remedy fairly useless.What is a claim for damages for personal injuries for the purpose of the rules? No definition appears in the statutory instrument despite a promise in the consultation paper to provide one.It seems that a claim for damages for personal injuries includes the special damages arising from the injury, such as loss of earnings, and the cost of care and treatment.
Thus a whiplash valued at £750 plus loss of earnings of £500 and physiotherapy of £250 should not be sent to arbitration.
However, it may take a few test cases to establish this beyond doubt.A whole new group of claims which have an element of personal injury may no longer qualify for costs.
Special damages for car or bicycle repair and hire of vehicle are not likely to be considered as flowing from a personal injury claim.
Therefore cuts and bruises valued at £750 and a car repair of £600 may now be caught by the new rules and unlikely to result in a costs order.Those plaintiffs most affected by the limbo are individual plaintiffs without group clout, typically elderly pavement trippers, pedestrians and cyclists.
Let us be clear that it is not arbitration which is the problem, but the denial of costs which means that no solicitor will take the case.Without legal assistance, and facing court proceedings unaided, most plaintiffs do not go ahead, a point demonstrated by Professor Baldwin's recent research into small claims.
The hole in the system is unfair and indefensible.
As the government appears to accept Lord Woolf's proposal for small personal injury claims it should have done something now to assist the many thousands of claimants denied compensation because Afzal has denied them representation.There are no transitional provisions in the statutory instrument -- an oversight -- but I have been assured by officials that the new rules will only apply to claims issued on or after 8 January 1996.This was a missed opportunity to correct defects in the system.
However, it could have been a lot worse.ROAD TRAFFIC ACCIDENT LITIGANTS WILL BE UNDEFENDED AGAINST THE MIGHTY INSURERSThe Lord Chancellor's decision to implement the recommended increase in the small claims limit without putting in place any of the safeguards recommended by Lord Woolf, including extra training for district judges and information te chnology innovation, is almost upon us.The Motor Accident Solicitors Society (MASS) estimates that there are some two million road traffic accidents (RTA) per annum in England and Wales.
Given this fact how are the changes likely to impact on the individual motorist and on solicitors pursuing RTA claims?The advice to clients with claims clearly below the new £3000 limit will obviously be that they must either pay costs from their own pockets or else pursue claims as litigants in person.
The vast majority of claimants cannot afford the legal costs involved.With no hope of recovery they will be forced either to drop the claim entirely or else deal with it themselves.
Neither option is particularly attractive.It is well recognised that at least 95% of claims such as RTAs which are dealt with by lawyers are settled by negotiation either before issuing proceedings or after issuing but before a hearing.A litigant in person is not experienced even in quantifying a claim, and certainly not in negotiating a proper settlement with an expert defendant.
The well established negotiation process will break down as more claimants go to their local county court office to issue a small claims court summons and become litigants in person.
The extra resources required to enable the courts to deal with this influx of work are not there.For those brave enough to proceed, what problems face a litigant in person in an RTA claim?MASS has consistently argued that RTA cases are inherently complex and unsuited for arbitration for a number of reasons.
These include the importance of complying with strict procedural requirements, for example notices to insurers; the complications in finding and presenting liability evidence, for example police and independent witnesses or photographs and sketch plans; and evidence as to quantum, for example the reports of medical and engineering experts.It would be difficult enough if both parties were on an equal footing.
In an RTA claim however the defendant will be represented either by insurers or their lawyers or else by the MIB.A litigant in person therefore faces the double blow of trying to deal with complex facts and legal requirements while faced with an experienced opponent.
Where now is the equality of arms sought by Lord Woolf?The problem does not lie with Lord Woolf and MASS welcomes the general thrust of his interim report.
The problem is in the hasty implementation of only selected parts of the interim report.DEBT AGENCIES WILL TAKE OVER RECOVERY WORKThose solicitors who represent big business creditors may well operate a form of retainer on a standard charge basis.
As such the new rules should not create much difficulty.
However, those solicitors who provide a general debt recovery service to the community at large, particularly small business, will be very adversely affected.By my calculation, something in the order of 90% of my current debt recovery turnover comprises debts less than £3000.Because my practice has recently merged it is difficult to provide any up to date figures for the percentage of turnover represented by debt recovery but prior to the merger it was something in the order of 30% to 35%.My anxiety is that as the new rules and their effect become known to the business community potential clients will choose either to do their debt recovery themselves or will pass their work to non-solicitor debt recovery agents who will frequently advertise a 'no win, no fee' service or a contingency service based on a percentage of value.These organisations will attend at heari ngs and will seek the district judge's discretion in representing the plaintiff creditor which one can only presume will frequently be granted.
It is said by the Lord Chancellor's Department that 90% of debt recovery summonses are not defended.
This begs the whole issue.
If clients find that their solicitors are unable to provide a cost-efficient solution to the problem of disputed debts they will be tempted not to bring any of their debt collection to solicitors at all.LEGAL EXPENSES INSURANCE MAY BECOME IMPORTANT IN FUNDING SMALL CLAIMSMarket research undertaken by legal expenses insurers operating in England and Wales consistently shows that the public regard legal processes as something of a mystery.
Increases in the small claims court limit are likely to mystify the public further.
Whilst the concept of the small claims court is well understood, an increase from £1000 to £3000 will capture a significantly larger percentage of all disputes.
For example, in motor-related claims, a £3000 limit will make a huge impact on the number of claims qualifying to be heard in the small claims court.
By extension, an equivalent impact will be felt by motor uninsured loss recovery providers.
Similarly in consumer contract disputes, how often do most people pay more than £3000 for a single item or service? For the average citizen not very often.How will the public react to the changes in the small claims court limit? The market research evidence gathered in-house by the Legal Protection Group in mid 1995 suggests that many members of the public will be discouraged from pursuing their valid rights without professional help.
We tested eight focus groups of 12 private individuals and conducted 20 in-depth interviews on perceptions and knowledge of the issues and remedies in the small claims court.We found that many members of the public regard the prospect of having to foot their own bills regardless of the validity of their claim as too much of a lottery to make the small claims court route a viable option.Also the public claims to lack the confidence and understanding of legal processes to be prepared to represent themselves in what they perceive to be an alien environment.How can legal expenses insurers adapt their products and services to fill the gap which now arises? The committed players in the legal expenses insurance market who can couple their resources, expertise and integrity with the necessary vision can market their ability to act as the public's gateway to cost-effective, accessible and efficient legal services
No comments yet