Rise in small claims threshold deferred allowing claimants to continue instructing lawyers

Posted: 12/11/2013

The Ministry of Justice (MoJ) has recently formally announced its response to its consultation ‘Reducing the number and costs of whiplash claims’ together with its intention to defer any increase to the small claims threshold until it can determine the full impact of the previous reforms made following ‘Jackson’ and the effect this has on motoring costs in the coming months.

In April 2013, the MoJ introduced a number of reforms following the ‘Jackson’ proposals which significantly reduced the level of legal costs which are recoverable from insurance companies in certain personal injury claims. In addition to this, they also implemented a ban on referral fees paid between lawyers, insurers and claims firms. Much of the Government’s focus has been on suspected fraudulent or exaggerated claims following an alleged sharp rise in the number of claims made over the years.

The potential increase in the small claims threshold from £1,000 to £5,000 was seen as an additional way of tackling fraudulent or exaggerated claims by further reducing the level of legal costs recoverable. The idea behind this increase in limit was that, by reducing the legal costs recoverable in lower value claims, lawyers would be less inclined to take on these cases and therefore the number of fraudulent or exaggerated claims would be reduced.

Following the Government’s sharp turnaround in opinion, it is clear that the Transport Select Committee’s recent report on the matter may have gone a considerable way to bringing about the change. The report highlighted that any such increase in the small claims threshold was likely to deny access to justice for genuinely injured claimants.

The Motor Accident Solicitors Society (MASS) has stated that this announcement from the MoJ 'is a victory for the legitimate claimant as MoJ pauses on whiplash reforms'. While this is ultimately very good news to those individuals who do have genuine claims, it is clear that the ongoing changes to the system are making it increasingly difficult for genuine claimants with bigger claims to obtain funding, access to justice, and full and proper compensation.

Philippa Luscombe, partner in Penningtons Manches' personal injury team, said: "While it is in everyone’s interest to stop fraudulent or exaggerated claims, the Government must take a closer look at the driving force behind further reforms. Time must be allowed to assess the impact of the most recent changes before any further decisions are taken. Of main concern to us here at Penningtons Manches is the potential for genuine claimants to be denied access to justice and specialist expert legal advice when injured through no fault of their own."

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