The ‘no win, no fee’ legal gravy train has hit the buffers as Justice Minister Kenneth Clarke has signalled a shake-up in the way courts pay damages for small claims.
Lawyers will now have to agree a share of the spoils won in court in advance – and that is capped at 25% of the total damages awarded.
The government claims some solicitors have asked the courts to settle bills of up to 1000% of the compensation awarded.
Campaigners say the payouts have forced councils, health trusts and newspapers
to settle accusations out of court rather than risk the costs of losing. In 2008-9,
the NHS paid out £312 million in damages but £456 million in legal costs.
For small claims, the maximum compensation in county courts will rise from
£5,000 to £15,000 – with a cap on legal costs at £3,250 included in the award, not
calculated separately.
Slashing costs is aimed at shutting out fat-cat lawyers
Claimants will have to consider mediation rather than issuing a claim to reverse
the trend of ambulance-chasing fat-cat lawyers taking frivolous claims to court.
The aim is for lawyers and claimants to reach an agreement before entering the
court about costs.
Capping costs is also supposed to reduce the numbers of lightweight claims, as
defendants will know the full extent of their liability if they decide to go to court.
The idea is many defendants who settle out-of-court because they fear huge
costs will now state their cases before a judge.
The move is also aimed at making small claims less rewarding for lawyers to
reduce their role, especially in crash-for-cash accident scams where fraudsters
deliberately drive in to the back of innocent drivers.
Mr Clarke says he sees the changes as a move away from an increasingly litigious
society where civil disputes are settled by arbitration. He is also introducing a
similar system in to working out divorce settlements.
