The time is right to limit solicitors' costs in personal injury cases, says Lord Hunt.

"The problem of costs is the most serious problem besetting our legal system." These were Lord Woolf's words in 1996 when he introduced his proposed reforms of civil justice. How right he was.

Personal injury claims inflation is running at 13% per annum. While in Wells v Wells the Judicial Committee of the House of Lords did not heed the effect of increasing damages on the UK economy, judicial opinions since, in particular in Heil v Rankin, have shown that judges are prepared to contain what would otherwise be an excessive rise in damages. There are even signs the government is considering a fixed range of damages as the appropriate tariff in the more straightforward clinical negligence cases. So far, so good.

Increasingly, however, the problem lies with costs. Lord Woolf also said: "Costs are central to the changes I wish to bring about." What was not predicted with his reforms was the virtual abolition of civil legal aid. The introduction of conditional fee arrangements (CFAs) has resulted in costs and disbursements rising through the roof. Action needs to be taken if we are to minimise the effect on the consumer and on the economy. Claimants' costs were already running at a third of the total of claimants' damages. In fast-track cases, where the reforms spoke of restricted costs, the bills now substantially exceed damages.

In Callery v Gray, Callery's "modest and straightforward" damages claim was settled for £1,500. The County Court had to reduce the solicitors' base profit costs on three linked small cases (driver and two passengers) from £5,600 to £1,700. The Court of Appeal then cut the uplift from the 60% claimed to 20%.

Sarwar v Alam also involved low damages (£2,250). Here the Court of Appeal did at least make it clear that motor insurers should not have to pay unnecessary disbursements.

There is, therefore, a judicial mood to tackle costs. A study by Adrian Zuckerman, Fellow at University College, Oxford, discussed a number of mechanisms for controlling costs in advance, such as budget-setting, fixed fees relating to value, fixed fees related to procedural activity or a mixture of the two. Now that Lord Woolf's reform package has bedded down, the time is right to apply costs restraints.

In most cases, there is scope for making the process simpler and faster. There is no justification for increasing delays and costs. The onus is now on the Lord Chancellor's department to come forward with a system for fixed costs, which will give much greater certainty to both sides - and costs can be agreed and paid at the same time as damages. Claimants with a valid case will be dealt with more quickly. Case management will provide them with better care and a speedier recovery. Lawyers will have greater incentives to minimise complexity and speed up settlement and the procedural reforms will at last have overcome the most serious problem besetting our litigation system.

  • Lord Hunt of the Wirral is senior partner of national law firm Beachcroft Wansbroughs.

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