This Commons Library briefing paper considers current proposals to increase the small claims track limit for personal injury claims to £5,000, and either to remove the right to general damages for minor soft tissue injuries (whiplash) or to set a reduced fixed amount of compensation.Jump to full report >>
This briefing paper deals with the law in England and Wales.
Defended cases in the civil courts are assigned to one of three tracks, one of which is the small claims track (the others are the multi-track and the fast track).
The small claims track is supposed to provide a simple and informal way of resolving disputes. Although lawyers may be instructed, in most cases, the court will not order legal costs to be paid by the losing party. This means that the successful party must generally pay their own costs and for this reason, many claimants deal with a small claim without the help of a solicitor. In contrast, in multi-track or fast track cases, the successful party would normally expect to recover costs from the losing party (there are rules which determine how much can be recovered).
The financial limit for the small claims track for many types of claim is currently £10,000 (it was increased from £5,000 in April 2013). However, a lower limit of £1000 applies to claims for personal injury and housing disrepair.
From time to time, the Government of the day has considered whether or not to raise the small claims limit, generally, or specifically for certain types of claim.
A number of arguments have been made for and against doing so. For example, those in favour of an increase in the limit for personal injury claims have pointed to disproportionately high costs in lower value claims, and have argued that lower value injuries are straightforward for an unrepresented litigant to understand. Those against an increase have argued, among other things, that personal injury claims involve complex law and that potential claimants could be deterred from making a claim, or accept too low a settlement figure, because of the difficulties involved. They also point to a potential "inequality of arms".
In December 2012, the Ministry of Justice opened a consultation on proposals to increase the small claims track limit to £5,000 for road traffic accident personal injury claims. In its October 2013 response to that consultation, the Coalition Government said that it believed that there were good arguments for increasing the small claims track limit for all road traffic accident claims. However, after considering the consultation responses and a Transport Committee report, it was persuaded, on balance, that it would not be appropriate to increase the small claims limit at that stage. The Coalition Government said it would consider the impact of other reforms and would keep this issue under consideration.
The Government is concerned about the number of whiplash claims and the associated costs and about the impact of legal costs on motor insurance premiums. It is now consulting on what it refers to as “a package of measures to crack down on minor, exaggerated and fraudulent soft tissue injury (‘whiplash’) claims stemming from road traffic accidents (RTAs)”. Among other things, the Government proposes to increase the small claims track limit for personal injury claims to £5,000, and either to remove the right to general damages for minor soft tissue injuries or to set a reduced fixed amount of compensation.
The Law Society and the Association of Personal Injury Lawyers are among those who have raised concerns about the effect of the Government’s proposals including the impact on access to justice, with the prospect of claimants having to represent themselves when the defendant might be legally represented, and when there might be complex issues involved. The Association of British Insurers (ABI) has welcomed the proposals.
There has been some debate about whether the cost of motor insurance premiums will fall as a consequence of the proposed reforms. The Government considers that the reforms could result in a saving for motorists, but others question whether savings will be passed on by insurers. A separate Library briefing paper provides further information: Motor car insurance.
Commons Briefing papers SN04141
Author: Catherine Fairbairn