New rules to cut down frivolous injury claims

Government backs reforms to end 'costs war' which inflates solicitors' fees

Unscrupulous firms that urge people to make frivolous legal claims after suffering an injury face being shut down under radical proposals designed to cut millions off the cost of civil justice.

So-called "claims farmers", which sell on cases to personal injury lawyers, would be banned under a plan drawn up by one of Britain's most senior judges. The clampdown is part of a series of reforms aimed at cutting back Britain's burgeoning "no win no fee" legal industry.

Lord Justice Jackson, a judge in the Court of Appeal, said: "The focus of our litigation process should be upon compensating victims, not upon making payments to intermediaries and others. That such substantial referral fees are being paid shows that there is too much money swilling around in the personal injury compensation process."

His reform looks set to be supported by the Government as it attempts to tackle the spiralling cost of defending legal actions against the health service. Clinical negligence claims cost the NHS £796m last year.

Lord Justice Jackson warned that in some personal injury "no win no fee" cases, the legal "costs war" meant that solicitors' fees were more than 10 times the amount of damages finally paid out. He added that changes should be made to the way solicitors were paid to discourage speculative and costly cases.

His reforms propose that a claimant who loses his case should not have to pay the defendant's legal costs but that if the claimant wins he should still get his costs paid by the defendant. He said the claimants should also have to pay for their own insurance to cover the cost of potentially losing the case.

The move should discourage frivolous actions launched in the hope that the defendant will not dispute the case for fear of being hit with huge legal fees, as well as the cost of the insurance and legal fees of their accusers. Those "success fees" can double the cost of an original damages claim.

However, Lord Justice Jackson said general damages for personal injuries and other civil cases, such as libel and defamation, should be increased by 10 per cent to ensure that successful claimants were properly compensated.

Judges raised concerns about rising costs of litigation after a series of high-profile cases, including one in which lawyers pocketed more than £20m after the fire at Buncefield fuel depot in 2005.

The recommendations of the year-long study will now be examined by the Justice Secretary, Jack Straw.