On 9th March 2015 huge increases in the court fees for issuing proceedings came into effect. A couple of months into the new regime and the impact of these fee increases remains uncertain. Has the anticipated increased revenue for the government been worth the denial of access to justice for many individuals and small businesses that will now shy away from issuing a County Court claim to pursue a debt in fear of having to come up with a large fee?
In 2014 the Court fee for issuing a debt claim worth £30,000 was £610 and since March of this year it is now £1,500 (being 5% of the value of the claim). Similarly, last year a £70,000 claim had an issue fee of £910 and this fee is now a colossal £3,500.
The Law Society and many other legal associations, such as the Bar Council, have been running campaigns setting out their fears for access to justice and urging the government to reconsider these new rules.
One of the main issues is that the fees will act as a deterrent to pursuing cases through the courts and that they will disproportionately discourage small businesses and individuals from seeking redress through the courts, in circumstances where their other options have been exhausted. The introduction of employment tribunal fees two years ago has led to a noticeable drop in the number of cases being pursued by employees.
In the case of personal injury claims, for example, the increased fees are likely to encourage large companies to deny liability pre-issue, safe in the knowledge that the individuals who have been injured are not in a position to fund expensive court fees. Many law firms in personal injury cases underwrite their client’s claims on the basis that they will recover these costs when the claim is successful. As this disbursement funding becomes more expensive there will be less firms able or willing to do this type of work, hence decreasing competition in the market place and choice for the client.
The Law Society has pointed out in their consultation paper on this subject (February 2015) that solicitors are concerned that claimants will either abandon their claims entirely or settle them for far less than they are worth. This is a denial of access to justice, which effectively taxes use of the court system.
It is also feared that the new court fees will increase the number of insolvencies of small businesses which are owed sums of tens or hundreds of thousands of pounds by debtors. The court system is usually the course of last resort for claimants pursuing debtors who are not prepared to pay and won’t take claims seriously until they have received an issued Claim form.
Inheritance claims have also been identified as an area of concern under the new regime. These are cases where the value of the estate in question can be substantial, but the financial means of the claimant is often very limited. I have dealt with such claims where my client had a strong legal case in respect of an estate, but where the legal costs were potentially so large that they have had to borrow money to finance their claim. This increase in court fees appears only to increase this problem and deny their ability to pursue such claims even further.
Landlords and lenders are likely to be adversely effected by these fees. The increases will add a further financial burden to local authorities and private landlords who seek to recover unpaid rent from their tenants. Although court fees remain the same for small claims under £10,000.
In February the Law Society issued a pre-action letter for judicial review to challenge the government’s decision to introduce the new fees. Amongst the points made in their letter was that the fee scheme was tantamount to “selling justice” contrary to the principles of the Magna Carta. The courts provide an important and essential service in a democratic liberal society in upholding the rule of law and making sure that disputes can be resolved in a fair and transparent manner. They provide an essential forum for dispute resolution and prevent individuals taking matters into their own hands and all the negative results that follow from that course of action. It is essential that the government makes sure that the court system can be accessed and used effectively by everyone.
At the moment the Law Society has decided not to pursue an application for judicial review, albeit that they are continuing to campaign against the fees and monitor their effect. In the meantime the new fee structure remains in place and its impact will begin to be felt, particularly, amongst those individuals and businesses that rely on it to provide them with the redress they deserve.
For further information, please contact our Dispute Resolution team on 01825 761555.