Will accident claims be stopped by the Ministry of Justice?

By Kevin Donoghue, Principal Solicitor, Donoghue Solicitors.

Kevin Donoghue, Principal Solicitor at Accident Claims Specialists, Donoghue Solicitors
Kevin Donoghue, Principal Solicitor at Accident Claims Specialists, Donoghue Solicitors

Today I e-mailed the UK Ministry of Justice to ask them to re-consider their proposed reforms of the accident claims process.

As an Association of Personal Injury Lawyers (‘APIL’) Senior Litigator, who runs an APIL corporate accredited practice, I represent many innocent accident claims victims. I am deeply concerned by the potential impact of the reforms.

Briefly, the government proposals will:

  • ban referral fees, which many solicitors pay instead of marketing/ advertising to reach out to injured accident claims victims
  • reduce fixed fees in road accident claims by £700 in the average case, down from £1200
  • increase the value of road accident claims within the ‘portal’ to capture all cases worth up to £25,000
  • extend the regime where fixed fees will be paid, via an online ‘portal’, in road accident claims to include all cases up to £25,000
  • include other types of accident claims, such as work accidents and in public places, within the fixed fee scheme
  •  potentially include complex ‘multi- track’ cases within the fixed fee scheme.

The proposals are due to be introduced in April 2013.

If implemented in full they are likely to have devastating consequences for innocent accident claims victims, people involved in the legal profession and those they support in their local communities. Only insurers and their shareholders will benefit.

It is for this reason that I have urged the government to re-consider.

My e-mail is reproduced below:

Subject: Request to the Government to reconsider their proposed MOJ reforms

Dear Ms Kebirungi

I refer to the MOJ’s letter to stakeholders of 19 November 2012, a copy of which has been passed to me.

I note the request for input by 4 January 2013. Please consider the following:-

Background

I am a sole practitioner in Bootle, Liverpool. Bootle is an impoverished area, with many under-educated and otherwise disadvantaged people.

I set up my firm in December 2010 to provide a personal service to clients I considered was lacking.

I live in Bootle and recognised the need to represent local clients, many of whom rely upon me and my staff to provide a one-on-one service given the complexities of the law.

I am a Senior Litigator with the Association of Personal Injury Lawyers.

I, and my colleagues, deal exclusively in civil litigation. A significant part of my practice relates to claimant personal injury work, of which virtually all is ‘no win no fee’ conditional fee work.

I maintain low overheads and have a small staff (including my wife, and colleagues with young families). We are not ‘fat cat lawyers’.

I am actively involved in my community, charity work etc.. My firm sponsors and supports local charities, such as Brunswick Youth Club, where Liverpool and England footballer Jamie Carragher learned to play.

We also provide ‘pro bono’ services to our community.

Referral Fees

Although not solely reliant on referred work for personal injury claims, we do source some work that way and pay referral fees in various amounts.

As I understand the proposals, the RTA portal fees will be reduced by £700, seemingly to reflect the anticipated referral fee paid at present, which will be subject to the ban in April 2013.

It appears that the government believes that referral fees are paid by defendant insurers in addition to legal costs in successful cases.

This premise is fundamentally wrong.

Referral fees are NOT paid to claimant solicitors by defendant insurers in successful cases. They are absorbed as a marketing fee. In losing cases, not only is the referral fee not paid, but the legal costs incurred have to be written off too.

Solicitors have had to compete in a marketplace with claims management companies and insurers for some time. We, like them, must market ourselves (by advertising, paying referral fees etc.) to get work.

If the proposed reduction in fees is approved, the Government will create an anti-competitive situation where solicitors are unable to compete with others (in particular insurers).

We will be denied the opportunity to operate in a free market.

This cannot be fair or right and, I anticipate, will be subject to a legal challenge.

Fixed recoverable costs in RTA/EL and PL portal cases

The proposals will drastically affect many small practices such as my own. The personal service we currently provide to our clients, especially the disadvantaged and under-educated, may suffer.

I have seen no report or evidence that the current figures have been costed. The existing portal figures were calculated following ‘big tent’ meetings organised by the CJC. They were intended to be reviewed (upwards) at some point.

On what basis is the Government now seeking to reduce them?

We take our duties to our clients, regulators, bankers etc. seriously. There is a fixed amount of work which must be done on every case to comply with our obligations. The currently proposed figures do not accommodate this.

The Claimant has no say in how much work must be done to win their case.

Depending on the defendant insurers’ approach, we may have to undertake many hours additional work, such as obtaining witness statements, site reports, preparing for trial, etc.

If fixed fees are introduced, there will be no incentive on the defendant insurers to conduct a thorough pre-action stock take and attempt to narrow the issues, as required by the CPR.

This will have the effect of increasing the number of court issued cases, putting an increasing strain on the court system.

The introduction of fixed costs without reforming the process by which defendants deal with claims will result in a widening gap between (rich) defendants and (poor) claimants.

Value of claim and allocation to track

I am not sure from the letter if the fixed fees are to apply to multi-track cases. If so, this would be a mistake.

I personally have dealt with numerous multi-track cases, one of which recovered only £1,500, but were rightly kept in the multi- track due to complexity.

It is a fallacy to think that any claim worth up to £25,000 should be treated as ‘simple’. Multi- track cases are allocated by the court on the basis of experience, and actively case managed by judges to ensure costs are kept under control.

There is no place for a ‘fixed fee’ regime here.

Defendant’s costs

Nowhere have I seen proposals for limiting defendant’s costs. Without similar costs sanctions, the inequality of arms mentioned above with respect to fixed fees will be stark.

Impact on the communities

As explained above, I work closely within my local community of Bootle. Me, my staff and their families all live nearby.

We provide a valuable service which is at risk if the proposals are implemented.

These proposals are unjust and unfair to the vast majority of the population.

They will result in an erosion of access to justice, especially to the disadvantaged.

Moreover, there will be a significant impact on local communities, such as Bootle, with (likely) unemployment in the legal and support sectors, as well as reduction in support for charity and other ‘pro bono’ activities.

I urge the government to reconsider these proposals.

Kind regards
Kevin Donoghue
Solicitor – Principal