Funding and costs

The Legal Aid, Sentencing and Punishment of Offenders Bill was introduced to Parliament on 21 June 2011. Hidden in Part 2 of the bill are the provisions needed to bring the main Jackson reforms into effect. As outlined in the Government’s response to the consultation, these are:  

  • The recoverability of success fees and after the event (ATE) insurance premiums from the losing party will no longer be possible, with the exception of premiums to cover the cost of expert reports in clinical negligence cases (sections 41 and 43).
  • Contingency fee agreements (now called damages-based agreements or DBAs) will be allowed in civil litigation (section 42).
  • Part 36 sanction - defendants who do not accept a claimant's reasonable offer that is not beaten at trial will be subject to an additional sanction equivalent to ten per cent of the value of the claim (section 51).

The detail of the reforms, such as the proposed increase in general damages and qualified one-way costs shifting (QOCS) in personal injury claims, the rules about DBAs and the new proportionality test for costs assessment, will be implemented by regulations, changes to the CPR or, in the case of damages, presumably by changes to the current Judicial Studies Board guidelines. Although some have commented that it is surprising that so little is included in the primary legislation, what has been done accords with the Jackson Report.

The sections concerned with recoverability and DBAs state that they will not apply to agreements or policies entered into before the date the provisions come into effect.  

Legal aid for civil claims

The Bill also contains the revised proposals for the provision of legal aid. The full details of the proposals were published simultaneously in the Government’s response to its consultation paper Proposals for the Reform of Legal Aid in England and Wales. The introduction to the response says that legal aid will continue to be available in cases where people’s life or liberty is at stake, where they are at risk of serious physical harm or immediate loss of their home, or where their children may be taken into care. Legal aid remains for criminal cases, asylum cases, domestic violence, debt and housing matters where someone’s home is at immediate risk, judicial reviews of public authorities and for mental health cases. The consultation has led to revision of the original proposals so as to retain legal aid for victims of domestic violence in private family cases, for children at risk of abuse or abduction and for those bringing special educational needs (SEN) cases.

Legal aid will no longer be available for the following claims: private family law cases not involving domestic violence, clinical negligence, employment unless brought under the Equality Act, immigration, some debt and housing issues, education cases not involving SEN or contraventions of the Equality Act 2010 and welfare benefits. Full details are available at Annex B of the consultation paper. The Government estimates that this will save £350 million by 2014-2015.

The response says that the Government will introduce a Supplementary Legal Aid Scheme (SLAS) under which a fixed percentage of 25 per cent of the client’s damages (excluding damages for future care and loss) awarded in the legally aided proceedings is repaid to the legal aid fund. In the Jackson Report this option was considered as a means of providing access to justice for specific classes of those not entitled to legal aid. The report records the Law Society’s opposition to the idea of an SLAS. Those it had canvassed were of the overwhelming view that the Government would use the assets of the SLAS to supplement the legal aid fund, rather than to plug holes in access to justice. Their fears have proved to be well-founded.

Comment

It is notable that each stage in the present process of reforming civil costs has been accomplished on time, if not slightly ahead of schedule. This is not the usual story and is a measure of how keen the Government is to implement these changes. It must also mean that implementation could be unusually quick – perhaps the target date of April 2012 is achievable although many think it will slip to October 2012. There is, however, a great deal of detail to sort out before implementation. Just to take one example, the present proposal is that under a DBA in personal injury cases only the solicitor’s fee would be capped at 25 per cent of the damages recovered, excluding those for future care and loss. Contrary to the Jackson recommendations, the Government’s response does not propose a cap in other types of case and does not see the need for regulation nor independent legal advice. In instances like this where the Government intends to depart from the Jackson recommendations, it is likely to have a fight on its hands.

In addition to the time-consuming task of agreeing the details of the reforms on funding, the swift implementation of the new regime may face obstacles in the form of legal challenges on the ground that the legislation fails to ensure access to justice for certain classes of claimant. The removal of legal aid for certain types of claim could lead to a challenge as could the reversal of the recoverability rules. High value complex personal injury cases are an obvious candidate for a challenge under the European Convention on Human Rights. Seriously disabled claimants not making a clinical negligence claim will not have the benefit of the proposals to allow recoverability of ATE premiums for policies covering disbursements on expert reports. In addition to the problem of funding disbursements, the increase of ten per cent in general damages may not be sufficient to enable them to pay for the success fee under a CFA.

In the meantime, as anticipated, the Bill confirms that the recoverability provisions will not affect existing conditional fee agreements and ATE insurance policies. As the time for implementation approaches, we can expect to see a spike in claims funded in this way. On the other hand, it seems likely that the Part 36 additional bonus for successful claimants will apply to claims which are already on foot. This means that existing defendants need to be extremely cautious about rejecting claimants’ offers. If they reject a valid claimant’s offer, not only will they have to pay indemnity costs and enhanced interest under CPR 36.14 but they will also have to pay an uplift of ten per cent on the value of the claim.