Firms face closure in face of whiplash reform and fixed costs review

More than half of claimant personal injury practices will be forced to shut down or look for alternative work if the government's proposed whiplash reforms go ahead unopposed, a new survey has revealed.

A survey of 71 firms was conducted by First4Lawyers in the wake of last month's announcement that the Ministry of Justice is considering an increase in the small claims limit to £5,000 and a removal of general damages for 'minor' soft-tissue injury claims.

Some 41 per cent of respondents indicated they would be forced to shut down the whole firm or the PI department if the small claims limit went up as proposed. A further 24 per cent said they could adapt and survive but only if the increase was limited to road traffic claims, instead of the government's preference to apply it to all PI claims.

A more optimistic 17 per cent saw opportunities to advise those with small claims. Meanwhile, 11 per cent predicted an impact on their work but believed they were sufficiently diversified to survive.

The survey also concluded that Lord Justice Jackson's separate review of fixed recoverable costs could put those law firms still standing out of business.

Some 37 per cent predicted Jackson LJ's review would lead to fixed recoverable costs on the multi-track, while 23 per cent expected any reform to be limited to the fast-track. One in seven, however, thought the Court of Appeal judge would realise the task was far greater than expected, resulting in limited change to the status quo.

However, one-third of respondents said that any significant extension of fixed costs, on top of the government reforms, would signal the death knell for many PI firms. Another 37 per cent said fixed costs could work if set at a reasonable level '“ but they had no confidence this would happen.

Qamar Anwar, managing director of First4Lawyers, said the government needed to realise that its plans would cause serious damage to thousands of lawyers who are 'doing no more or less than upholding the law of the land'.

Despite what Anwar described as an 'existential threat' to many firms, only half of those surveyed said they would respond to the government consultation. The marketing collective chief said the legal profession needed to unite and mobilise if it is to save access to justice for injured people and the future of many law firms.

'Every claimant solicitor needs to make their voice heard to stop these deeply damaging reforms,' said Anwar. 'And those representing them need to stop treading carefully and instead pull out all the stops to protect the rights of injured people '“ and of their own members.'

However, the survey of solicitors did not show huge confidence in representative groups. Asked which group they had the most confidence in to represent their interests, APIL and pressure group Access to Justice came out on top, but with only 30 per cent each. Just 8 per cent retain faith in the Law Society.

'There are already signs of the kind of infighting that will ultimately be fatal to all '“ some solicitors are trying to pin all the blame on claims management companies, but scapegoating will not achieve what they want and will instead play into the hands of the Association of British Insurers,' said Anwar.

'Yes, the excesses of a handful of CMCs need curbing '“ and we fully back a total ban on cold calls and texts '“ but equally ethical, regulated CMCs provide a valuable service,' he continued. 'We should not be fighting among ourselves '“ instead, we should train our focus on the unfair, misleading, and profit-driven campaign run by the insurance industry that has got us to this position.'

John van der Luit-Drummond is deputy editor of Solicitors Journal

john.vanderluit@solicitorsjournal.co.uk | @JvdLD