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This briefing paper deals with the law in England and Wales.

The small claims track

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 are sometimes 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 legal 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 legal costs from the losing party.

The small claims track limit

The financial limit for the small claims track for many types of claim is currently £10,000. A lower limit of £1,000 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 track 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 claims in lower value personal injury cases 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 unrepresented 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 possible “inequality of arms”.

Government proposals for reform

The Government has been concerned about the rising cost of motor insurance premiums and sees the number of whiplash claims, and the associated costs, as a contributing factor. The 2015 Government consulted on what it referred 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)”.

Measures intended to cap whiplash compensation payments and ban the settlement of claims without medical evidence are included in Part 1 of the Civil Liability Bill [HL] (the Bill). The Bill has completed its passage through the House of Lords and has been introduced in the House of Commons. A separate Library briefing paper provides information about the Bill: Civil Liability Bill [HL].

The Government also intends to increase the small claims track limit for personal injury claims – to £5,000 for RTA related personal injury claims, and to £2,000 for all other types of personal injury claims. This could be achieved without primary legislation.

The Government has presented Part 1 of the Bill and the secondary legislation on the small claims track limit as a package of reforms. The increase in the small claims track limit would affect claims for whiplash injuries, as would the Bill. Peers raised issues relating to the increase in the small claims track limit in debate on the Bill at all stages.

Justice Committee inquiry

The House of Commons Justice Committee conducted an inquiry into the small claims track limit for personal injury claims and published its report on 17 May 2018. The Committee considered that an inquiry focusing on this issue would assist Parliament’s scrutiny of a proposal “that might otherwise receive less attention than it merited, owing to its introduction via secondary legislation effecting a change to the Civil Procedure Rules”.

The Committee concluded that increasing the small claims track limit for personal injury claims, with the consequence that legal costs would not be recoverable in many more claims, created significant access to justice concerns. It considered that the reforms should not proceed unless the Government could explain how it would ensure access to justice would not be affected. The Committee thought that a lower increase, reflecting inflation, would be more appropriate, and called on the Government to have a realistic approach to the technical challenges of introducing a new electronic platform for claims.

On 17 July 2018, the Government published its response to the Justice Committee’s report. Among other things, the Government confirmed that implementation of the whiplash measures, including the rise in the small claims limit to £5,000 would be delayed until April 2020, and would follow large scale testing of the online platform.

Reaction to the Government’s proposals

The reaction to the Government’s proposals for reform from interested parties has been mixed. In general, lawyers’ groups, including the Law Society and the Association of Personal Injury Lawyers, are among those who have raised concerns about the Government’s proposals, while the Association of British Insurers (ABI) has welcomed them.

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