Reforming Civil Justice

Sadiq Khan Excerpts

Tuesday 29th March 2011 Commons Chamber

[The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)]

With permission, Mr Speaker, I wish to make a statement. I have today laid before Parliament two documents—the Government’s response to our recent consultation on Lord Justice Jackson’s recommendations for reforming no win, no fee arrangements, and a fresh consultation document on proposals further to overhaul the civil justice system. Copies of both documents will be available in the Vote Office and on the Ministry of Justice website. I hope to bring forward legislation on the Jackson reforms as soon as parliamentary time allows.

To many people in this country, the prospect of legal action is an expensive, daunting nightmare. One of the worst features of our compensation culture is that our justice system has increasingly become closed to vast rafts of the ordinary public by legal costs out of all proportion to the dispute or the claim. The proposals that I am announcing today will, I hope, begin to restore proportion and confidence in our system of justice, for both claimants and defendants.

First, following careful consideration of the consultation responses, I have decided to reform no win, no fee arrangements to stop the perverse situation in which fear of excess costs sometimes forces defendants to settle, even when they know they are in the right.

I can therefore announce that the Government will seek legislation to return the no win, no fee system to the first principles on which it was set up. We plan to end the recoverability of success fees and insurance premiums that drive legal costs; to award claimants a 10% uplift in general damages where they have suffered loss; and to ensure that they take an interest in controlling the bills being run up on their behalf by expecting them to pay their own lawyers’ success fee. We will also bring forward our plans to encourage parties to make and accept reasonable offers, to protect the majority of personal injury claimants from paying a winning defendant’s costs, and to allow claimants to recover the cost of expert reports in clinical negligence cases.

I am also publishing a consultation paper that I believe paves the way for the more efficient and effective delivery of civil justice after 15 years of stagnation. The current system is slow, stressful and expensive, and change is long overdue. My aim is to help people to avoid court wherever possible, while reducing costs where that is unavoidable. We are proposing that small-value cases should automatically be referred to mediation so that many people are able to avoid the experience of court entirely; and that the maximum value for small claims be raised from £5,000 to £15,000 to enable more cases to be heard through the simple small claims process rather than a more costly, complicated trial.

We are also proposing: to increase the value below which claims cannot be brought in the High Court to £100,000 so that the county court jurisdiction is extended and the High Court is reserved for only genuinely complex or high-value cases; new measures that will improve the ability of courts to tackle those who evade payment of their debts even though they have the means to do so, while ensuring that those who cannot pay continue to be protected, for example by setting a minimum level of consumer debt at which property could be put at risk for non-payment; and the extension of a successful online system to cut waiting times and legal expenses in personal injury cases, as recommended by my noble Friend Lord Young of Graffham.

We have a duty to deliver a civil justice system that is more equitable, accessible and just. Resorting to the law need not be the long, drawn-out and expensive nightmare that so many people experience today, but could become a sensible and affordable way of resolving disputes in a proportionate manner. I believe these reforms, on which we are now consulting, will help to restore those fundamental values of proportion and fairness in our civil justice system, and I commend this statement to the House.

[Sadiq Khan (Tooting) (Lab)]

I thank the Secretary of State for his usual courtesies and advance sight of his statement, which, on face value, is difficult to disagree with. We accept that the issue of costs in civil proceedings is worth investigating, and did so in government. I note that my right hon. Friend the Member for Blackburn (Mr Straw) is in his place. Those suffering injury through the negligence of public and private bodies who cannot afford to fund actions privately must have recourse to the civil justice system. There is a fear, however, that these plans go so far in trying to keep down costs that some claimants with meritorious cases will find it difficult, if not impossible, to find a lawyer to take on their case.

I am afraid that the devil will be in the detail of today’s announcement. I have a number of questions for the Justice Secretary that I hope will tease out some of the detail. He referred to the Lord Justice Jackson report to justify his announcement. However, has he taken into account Lord Justice Jackson’s view that his proposals are a package and should not be subject to cherry-picking, and will he take into account Lord Justice Jackson’s desire to retain civil legal aid for criminal negligence and housing cases currently under threat from the Government?

The Justice Secretary proposes that claimants’ solicitors will be able to recover up to 25% of their costs from the damages that a claimant recovers. He will be aware that the increase in compensation from defendants to claimants will be only 10%, not 25%, and will apply only to general damages, not to total damages. Why should someone who has suffered the trauma of an injury at work be told that the money they have justly received as compensation will go to their lawyer?

Has the Justice Secretary had a chance to assess the road traffic accident portal scheme, which was introduced by the last Government to reduce costs? The scheme uses fixed fees and efficient processing to limit costs, and came into force in March last year. Does he accept that it has reduced costs by half in 75% of personal injury cases? Does he agree that expanding the scheme to personal injury claims would save costs?

The Government have said that one aim of the reform is to reduce the costs that defendants have to pay. Many defendants are insurance companies. In light of that, can the Justice Secretary say what reductions he expects in insurance premiums? Can he confirm whether an impact assessment has been conducted on how the changes affect access to justice, cost to defendants and reductions to insurance premiums? Is he concerned that, although there will be limitations on a claimant’s ability to bring a case and the costs incurred by their solicitors, there will be no such controls on a defendant in defending a case, raising concerns about the inequality between the two sides?

Finally, a fundamental principle of our justice system is proper access to justice. I agree with the previous Government, who agreed with senior judges such as the Lord Chief Justice, Lord Judge, as well as Lord Justice Jackson and others, that the costs of civil litigation were sometimes excessive. We would all like the costs of litigation to be reduced and alternatives to it found wherever possible, but the effect of the proposals could be to restrict access to justice, particularly for those who do not have their own means of funding. It will be on this key issue that we will hold the Government’s actions to account.

[Mr Clarke]

I welcome the right hon. Gentleman’s agreement with me on the importance of tackling cost. He has focused principally on the conclusions that I have announced today of the Government’s consideration of the consultation on Rupert Jackson’s proposals, which I accept were initiated by my predecessor, the right hon. Member for Blackburn (Mr Straw), under the previous Government. We are trying to get the cost of litigation down.

The right hon. Gentleman talks about access to claims. We are going back to no win, no fee arrangements of the kind that existed when they were first set up by my noble Friend Lord Mackay in the mid-1990s. It was the changes made at the turn of the century that led to the cost escalating to such an extraordinary extent. Among other things, in many cases the legal fees paid by a losing defendant now far exceed the damages paid to the claimant. Indeed, it can be an extremely profitable area of practice if people have some successes. We will keep no win, no fee on the basis of the kind of arrangements we used to have—the kind that are familiar in most jurisdictions. The arrangements that we are proposing to sweep away are unparalleled in any other country and are making litigation too expensive for those faced with it.

The right hon. Gentleman then asked about the cost that can be borne by the plaintiff out of his damages. As he quite rightly said, the 10% enhancement to the level of damages that can be awarded is designed to help plaintiffs and claimants, but it will be confined to general damages, otherwise the figure could be astronomical in some cases. However, the costs that can be recovered—the success fee or bonus paid to a solicitor who has won a case—will be limited to 25%, so they will be kept in proportion.

The right hon. Gentleman mentioned the road traffic accident portal scheme, which has certainly speeded up and helped many personal injury cases. We are indeed proposing to extend the scheme to other personal injury cases, as he suggested.

The right hon. Gentleman asked me what would happen to insurance premiums. The answer, of course, is in the hands of the insurance industry and the competitive market in which it works. We all think, “Oh well, it doesn’t matter: it’s only the insurance company that is paying colossal legal fees”—on top of damages—“in no win, no fee cases,” but that could be one explanation for why car insurance costs have leapt to such an extraordinary extent in this country. I hope to see insurance premiums come down.

Impact assessments were produced at an earlier stage, after Sir Rupert had received wide representations from all sides. We have taken quite a long time getting to this point, and we are pretty clear on what the impact will be. On balance, I think it will be highly desirable. [Interruption.] I cannot read my notes on the last question that the right hon. Gentleman asked.

[Sadiq Khan]

It was about cherry-picking, and clinical negligence and housing cases.

[Mr Clarke]

Yes, the right hon. Gentleman raised an important point about clinical negligence cases, which can be very expensive to start. We are therefore making an exception in regard to the non-recoverability of insurance premiums. We will allow the recoverability of such premiums when they are used to cover the cost of expert evidence in clinical negligence cases. We are, however, working with the NHS Litigation Authority with a view to getting the NHS and other defendants to co-operate with claimants to produce joint medical reports. That should narrow the dispute and cut the costs for all parties, making justice more easily attained.