WOOLF TEN YEARS ON: HAS IT WORKED?

ALARM SOUTH EAST 6/7 November 2007

  • Perceived pre Woolf problems
  • Aims of the reforms
  • The Woolf vision
  • Judging success from the stakeholders
  • Department of Constitutional Affairs proposals
  • Feedback from stakeholders
  • Considering the impact of the proposals

PERCEIVED INJUSTICES WOOLF SOUGHT TO REDRESS

1Civil litigation was too expensive, costs often exceeded the value of the claim.

2Too slow.

3Too uncertain.

4Too adversarial.

AIMS OF THE REFORMS

Fairness

Woolf wanted to achieve fairness in the way litigants were treated. Prevent the perceived intimidation by disparity of wealth between the parties by discouraging continuous applications for disclosure, additional expert evidence and Unless Orders.

Timescales

It was believed cases were taking too long to be processed and Woolf envisaged tighter timetables with an aim to process fast track cases to trial within 30 weeks trial dates or windows fixed early in all cases, dates to be immoveable save for in the most exceptional of circumstances.

To be understandable to those who use them

Woolf wanted to make the language more straightforward and encourage more approachability. Woolf envisaged more directness between court users and the judiciary.

Effectively, adequately resourced and organised court service

Woolf wanted a properly resourced court service with dedicated trial centres, specialist Judges and an active case management system for use by the judiciary.

WOOLF’S VISION

1Litigation should be the last resort. This vision was to be achieved with more mediation, ADR schemes and effective Part 36 offers to encourage early settlement together with pre-action protocols.

2Reduce time scales.

3Costs to be affordable and predictable, fixed costs for fast track cases and lower tracks.

HAS WOOLF’S VISION BEEN ACHIEVED?

Some statistics:

Avoiding litigation

County Court claims issued:

19982,245,324

20051,870,374

A reduction of 374,950 claims since the introduction of the Civil Procedure Rules.

High Court, Queen’s Bench Division claims issued:

1996142,505

2005 15,317

A reduction of 127,188 claims since the introduction of the Civil Procedure Rules.

Disposal of issue claims

  • 1999 – 101,826 claims disposed of by trial (5.1% of claims issued)
  • 2005 - 64,839 claims disposed of by trial (2.9% of claims issued)

Court Fees

Cost of issuing a claim where the value exceeds £5,000 but is less than £15,000:

Oct 00 £ 230.00

Oct 07 £ 225.00

Cost of issuing a claim in the multi-track where the claim does not exceed £50,000:

Oct 00 £ 350.00

Oct 07 £ 360.00

Cost of issuing a claim where the value exceeds £50,0000 but is less than £100,000:

Oct 00 £ 500.00

Oct 07 £ 630.00

Issue fees have largely increased in line with the retail pricing (RPI), however allocation fees have been increased from £100.00 to £200.00 with effect from the 1 October 2007, and the introduction of hearing fees in multi-track cases of £1,000.00 and of £500 in the fast track. Hearing fees in the small claims track are scaled from £25.00 to £300.00.

Legal Costs

According to the IUA and ABI (8.10.07) over the past twenty years costs in relation to bodily injury claims paid out by UK motor insurers have risen by 840%. The total cost of claims paid out by UK motor insurers has risen by 9.5% per annum between 1996 and 2006. The inflation rate in respect of costs for claims over £5 million was considerably higher that this, rising by 30% a year over the past five years.

Solicitors’ hourly rates

Central London rates for a Grade 1 fee earner:

  • 1999 - £260.00 an hour
  • 2007 - £380.00 an hour (retail price index £393.97)

However, these rates do not take account of success fee uplifts up to 100%.

Insurers pay 43 pence in costs for every £ in compensation.

Time from issue to trial

  • 1999 – 79 weeks
  • 2005 – 58 weeks

Notwithstanding, the number of bodily injury claims of which UK motor insurers were notified rose by 3% a year between 1996 and 2006.

HAVE THE WOOLF REFORMS FULFILLED THEIR AIMS?

Fairness?

The rules have largely simplified litigation. The costs regime has arguably disadvantaged defendants with staged success fees encouraging settlement of cases which might otherwise have been fought. However, this needs to be balanced with the chances of recovering costs where successful unlike the previous Legal Aid Scheme.

Reasonable speed?

Tighter timescales but greater disparity and quality of court listings and court staff. The courts are routinely adjourning cases and the waiting time for interim hearings often jeopardise trial dates and trial windows. The headline figures are impressive, but do they tell the whole story?

During an interview with Radio 4’s Law in Action programme Judge Paul Collins, London’s most senior judge, commented that due to the under funding of the court service litigants are facing longer and longer delays in getting access to

justice. In particular he says that court staff often do not realise the importance of putting document before the relevant judge as soon as possible. Consequently cases may be wrongly struck out or default judgment may be granted – Judge Collins points out that whilst these errors can be rectified, it takes time and work to do so.

More understandable

Currently the LCD is on the 45th Edition of CPR (introduced 1 October 2007), and in addition to the introduction of thirty statutory instruments which have led to a large amount of satellite litigation leading arguably in some cases to a litigation cycle i.e. Part 14 interpretation in Sowerby followed by amendment to the Part 14 rule. In some instances the rules have been used to reverse decisions of the judiciary.

Adequately resourced and organised

This is arguably the biggest area of failure. Specialist Judges and competent trial centres have not emerged. There are regular instances of Chancery Judges hearing personal injury cases. The Government want the core service to be entirely self-funding but continue to limit the budget of the court service, leading to under resourcing of experienced and qualified staff with the emphasis on new buildings. The computer system envisaged by Woolf has not been forthcoming. The Judges have too many cases and are unable to carry out much, or any pro-active case management. Cases are routinely listed for trial with no Judges available.

On this subject, Judge Paul Collins also commented that due to spending cuts court staff are the “poorest paid of all Government servants and in London it is proving difficult to retain the services of experienced staff”. As such, the court service often lacks the resources to deal with matters as properly and promptly as is necessary.

Judge Collins further comments that as a result of spending cuts this year the civil justice system is currently in crisis. He also expresses concern that if further spending cuts, which are looming as a result of the next comprehensive spending review of the courts, are visited on the County Courts, it could bring about a real risk of collapse in the service the courts are able to give litigants.

OTHER FACTORS

It may not be fair to look at the Woolf Reforms in isolation when considering the amount of compensation and costs paid to claimants. Introduction of a new costs regime, lower discount rates, revised Ogden Tables and JSB Guidelines together with a number of unfavourable House of Lords and Court of Appeal decisions have fuelled the increase in the value of settlements, and litigation.

WINNERS AND LOSSERS

The claimants as winners:

  • Claims being settled quicker and without recourse to litigation;
  • Damages have increased beyond the RPI;
  • Alternative funding available;
  • More judicial control and less for the convenience of legal representatives.

The claimants as losers (have a go claims):

  • Less have a go claims;
  • No legal aid;
  • Media / press bombardment;
  • Compensation culture;
  • Higher insurance premiums.

The defendants as winners:

  • More information to enable a more informed judgement on merit;
  • Faster disposal of the claims;
  • Predictive costs (although currently limited to RTAs).;

The defendants as losers:

  • Number of decisions/changes in law have forced up the cost of claims;
  • Costs are totally disproportionate to the amounts involved.

Winners

Claimants and their solicitors.

Losers

Court staff, Judges, defendants and their solicitors!

Insurers: winners or losers?

Paying more out in claims, but is this reflected in premiums? The ATE market has opened up new opportunities.

NEW PROPOSALS DEPARTMENT FOR CONSTITUTIONAL AFFAIRS CONSULTATION PAPER PUBLISHED IN 2007

The consultation period has now been closed. Recommendations are expected in November. The stated aims of the consultation are to assess whether Woolf requires modifying to “uphold the principles of the quality, proportionality and expediency to ensure that cases are dealt with in a manner appropriate to their value and complexity”.

Issues

1Raising the small claims limit;

2Raising the fast track limited to £25,000.00;

3Streamlining the claims process.

The small claims track limit was raised to £5,000.00 in 1999, but remained at £1,000.00 for personal injury claims.

FEEDBACK

Raising the small claims limit:

  • The Law Society believes that the proposed increase would remove lawyers from small claims which would lead to inequality and discourage people pursuing legitimate cases;
  • Proposal for an increase rejected by APIL and most claimants’ solicitors;
  • The ABI are disappointed that the DCA do not support increasing the limit for small claims track claims.

Riasing the fast track limit from £15,000 to £25,000

  • The Law Society largely supports the proposal provided more flexibility to transfer cases between tracks;
  • APIL rejects the increase as it is likely to lead to complex cases falling into an unsuitable track;
  • The ABI supports the proposed increase.

STREAMLINED CLAIMS PROCESS

The proposal

  • Simplified claims. A standardised claim form will be sent to the defendant and an investigation period by the defendant of 15 days for RTA and 30 days for EL and PL claims after which the defendant will have to respond to the claimant solicitor on the issue of liability. During this time the claimant solicitor can carry out no further work unless it is necessary to preserve the claimant’s position. The defendant may be able to request an extension of the set timeframes providing specific and legitimate reasons for this are given;
  • Where liability admitted that will be binding (although this is the case under the current law in any event);
  • Where liability is admitted the claimant will then obtain a medical report, to be sent to the defendants as part of a settlement pack including the medical report, details of special damages and an offer to settle;
  • The claimant will have 15 days to send out pack from receipt of medical report;
  • The defendant has 10 working days to review the offer and accept or make a counter-offer. Thereafter there will be a negotiation period of 20 working days for consideration/negotiation.
  • Where liability is denied the claim will fall outside of the streamlined process and be dealt with under the existing process.

Negotiation breakdown in respect of quantum.

  • Cases under £2,500.00 are referred to the District Judge to resolve without the need for a hearing if both parties agree to a paper review.
  • Claims over £2,500.00 a simplified review process. If no further papers required be set down for a hearing, although further directions may be required.

Response

  • The Law Society supports proposals but not up to £25,000.00. Concerned about less scrutiny of the merits of the claim and feels the streamline process should only apply to low value claims i.e. those under £5,000.00;
  • APIL supports quicker process with earlier admissions of liability – only suitable in RTA cases where liability is obvious, and one medical report required. Should only be used in cases valid at less than £2,500.00;
  • ABI – welcomes streamlining – defendants need more time to investigate – supports a default position for paper only determination in respect of quantum – same processes should apply regardless of value.

Costs/proposals

  • Stage fixed costs and fixed success fees;
  • To include applying where there is a hearing on quantum/paper review by a District Judge;
  • No recovery of ATE taken out at the commencement of the claim – where quantum not agreed ATE should be significantly limited – ATE where liability denied – claimants only recover costs when they have beaten their own offer and not the defendants’ offer up to £2,500.00 claims.

Responses

  • The Law Society rejects the claimant having to beat their own offer as there would be a disincentive for sensible defendant offers;
  • Largely supports fixed costs;
  • Concerned by the possible impact on the ATE insurance market which could become disproportionately expensive;
  • ABI supports staged fixed fees and stage success fees, supports removal of ATE where no costs risk.
  • APIL rejects lack of funding, low fixed fees and claims under £2,500.00 which it see as increasing the small claims track limit by the back door. APIL is also concerned about the impact on the ATE market;
  • Further issues raised by the DCA proposals, contributory negligence standard scenarios? To be dealt with in streamline process?
  • Fixed special damages for certain losses, i.e. care, travel etc.

CONCLUSIONS

Woolf has led to a marked reduction in litigated claims for reasons beyond those supposed by Woolf, and there has been a marked increase in claims numbers and payouts. Woolf has failed to keep costs proportionate, and has been hampered by the lack of investment in the court services.

NEW PROPOSALS

The value of the claim should not be the single determining factor regarding track. There may be complex issues that go beyond the claim presented i.e. floodgate type claims or new types of injury.

Streamline process

  • Is the timescale realistic? i.e. what about PL claims where there would be little or no pre-claim notification or where the incident occurred a relatively long time ago?;
  • The claims department will they be able to cope?;
  • New conditions on insurance policies making time of the essence. Will claims departments sufficiently gear up. If the streamline process is limited to claims of £2,500.00 will claims be settled regardless of merits because of costs benefits?;
  • Will the fixed costs reflect the cost of claims acquisition?;
  • Opportunity for TPA’s?;
  • New claim forms: will these lead to the return of the “have a go litigation”? Leading claimant union firms state they currently weed out 40% of all claims presented.

Costs & funding

The industry says everything will depend upon the level that the costs are set. Will they include marketing costs and paying for cases that are generated. Has the ATE market been dealt a final blow? The principal of insurance that many pay for the few may no longer be the case with the result that there be a 75% reduction in the ATE market and consequently threefold increase in premiums in cases where liability is in dispute.

Andrew Caplan

25 October 2007

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