The controversial Legal Aid Sentencing and Punishment of Offenders Act received royal assent on 1st May 2012, 11 months after it was introduced to parliament. The bulk of reforms contained within the Act are expected to come into force in April 2013.
This Act contains the most drastic reforms to civil litigation reforms since Lord Woolf rewrote the rule book for civil procedure in 1999. It also paves the way for significant legal aid cuts in a number of areas including private family law, social welfare law, clinical negligence, education and employment. This article shall focus on the three major changes to civil litigation which will dramatically alter the legal landscape for the foreseeable future.
Firstly, the Government plans to radically alter civil litigation funding by abolishing the recoverability of success fees under conditional fee agreements. A conditional fee agreement (“CFA”) is a private funding agreement between a lawyer and a client under which the lawyer agrees to represent the client on a ‘no win, no fee’ basis known as a CFA. Under a CFA the lawyer does not generally receive a fee from the client if the case is lost. If the case is won, however, the lawyers’ costs are recoverable from the losing party with an uplift known as a ‘success fee’ to compensate the lawyer for the risk of taking on cases where they do not get paid. After the Government withdrew legal aid for personal injury claims this system was designed to ensure that people who sustained injuries in road traffic accidents or accidents at work etc. could get access to justice without having to pay up front. These reforms, however, mean that a success fee under ‘no win no fee’ agreements will no longer be recovered from a losing party in any proceedings. Instead, Claimant will be liable to pay for these success fees out of their damages up to a maximum of 25%. The Government plans to increase general damages by approximately 10% across the board to provide some compensation for the additional burden on Claimant’s but this increase will be implemented separately.
Secondly, the Act prevents Claimants from recovering the cost of purchasing insurance which covers the potential costs of their claim. This insurance is known as After the Event (“ATE”) insurance and insures a Claimant against the risk of having to pay their opponent’s costs and their own disbursements if they lose. Now a Claimant will either have to cover the cost of an insurance policy out of their own pocket or using their damages. Alternatively, if they don’t purchase ATE insurance then Claimants run the risk of being left with a significant legal bill from the Defendant; literally adding insult to injury in the event that they lose.
Finally, the Act bans referral fees for taking on potential claimants in personal injury cases. Referral fees were partially responsible for the increased advertisements and promotional activity surrounding personal injury litigation. According to the Government’s own impact assessment this is likely to mean that some claimants may not pursue cases, for example, “because they might be unaware that they can do so, or unaware of the chances of success and of the possible damages available, or are otherwise simple not persuaded to go through the process”. Instead, of relying on a referral from a third party, the Government recognised that it will be much more important for Claimants to select solicitors carefully.
The Government has included some very limited exceptions from the reforms above in areas where they may cause real hardship. For example, ATE premiums in clinical negligence cases will continue to be recoverable but only to cover the cost of the Claimant obtaining an expert’s report which would be prohibitively expensive otherwise. Further, in claims for damages for diffuse mesothelioma success fees and “ATE” insurance premiums will continue to be recoverable until the Lord Chancellor has published a report on the likely impact of these reforms on such claims.
Otherwise, the combination of all of these proposals mean that it will be much more important for potential Claimants to select quality solicitors based on sound reputation and a track record of competence. A good solicitor is vital to ensure the best prospects of success for every claim and to keep costs down by dealing with cases efficiently and promptly. In the meantime, anyone who is considering pursuing a claim in respect of any personal injuries they may have sustained in the last three years is well advised to do so before April 2013. Even the Government’s own impact assessment candidly conceded that Claimants “are likely to be worse off in aggregate as a result of the package of proposals”.