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When is an increase a deduction?

Stephen Brookes, of Salmons’ Stoke office, reviews whether the announced increase in awards for compensation claims is good news or bad.

It has been a view held by many lawyers for some time that compensation payable for an injury itself (what lawyers call “general damages”, as opposed to compensation for out of pocket expenses such as “special damages”) have historically been set far too low.

The case of Heil v- Rankin in 2000 sought to address this by uplifting awards in compensation claims for personal injuries. Not following the Law Commission’s recommendations, however, the Court in Heil v- Rankin recommended that there be no increase in awards for general damages (compensation for the injury itself) if those awards were up to 10,000, but in respect of awards in excess of 10,000 up to 150,000 there should be a tapering percentage increase escalating up to one third.

For example, a case worth 80,000 would, after Heil v- Rankin attract an award of 95,000, and a case worth 135,000 beforehand would afterwards attract compensation of 175,000.

Sir Rupert Jackson is his report upon the funding of compensation claims for personal injury dated December 2009 recommended, amongst other changes, an increase in compensation for personal injuries by 10%.

That is, however, where the good news ends. One of his other proposals was to require Claimants, from their compensation, to make a contribution of up to 25% of their compensation in order to pay the lawyer’s success fee which arise when a claim is funded under a no win no fee agreement. The previous position was that the success fee was paid by the Defendants.

Many of Sir Rupert Jackson’s recommendations were incorporated in the Legal Aid Sentencing and Punishment of Offenders Act, 2012, which comes into force on the 1st April 2013.

The Court of Appeal in the recent case of Simmons v- Castle, following the recommendations of Sir Rupert Jackson, himself a member of the Senior Judiciary, announced that with effect from the 1st April 2013, there would be a 10% increase in general damages. However, the court in Simmons v- Castle suggested that this 10% increase would not be restricted to compensation claims for personal injuries funded by a no win no fee agreement which generates the need for the success fee, but would apply to all personal injury claims and not only that, but to all claims for general damages arising out of a claim for a civil wrong known as a tort.

The good news – Claimants with injury compensation claims can expect their solicitor, after Simmons v- Castle to postpone the settlement of the compensation claim if time permits, in spite of the fact that such Claimants stand to recover their success fees either in whole or substantial part from the Defendants.

The bad news, for Claimants bringing claims after 1st April 2013 is that those Claimants stand to lose up to 25% of their compensation in meeting their own lawyer’s success fee.

An optimist would expect insurers to introduce across-the -board reductions in premiums to reflect this reduction in their liabilities.

A pessimist would expect no reduction in premiums whatsoever.

A pessimist is an optimist with experience!

The Court of Appeal has now changed its mind and said that the 10% increase will only apply to cases where judgment is given after the 1st April 2013.

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