At the House of Lords Committee stage, Part 1 of LASPO - relating to the reforms of legal aid - proved the most controversial. The Bill has now moved out of Committee stage and we provide a round up of the debate surrounding the removal of legal aid in clinical negligence cases and comment on the Lords' concerns.  

The Government considers there are viable alternatives to legal aid for clinical negligence cases so this funding can be targeted in other areas. This includes the proposal that after the event (ATE) insurance premiums should remain recoverable from the losing party for obtaining experts reports. The Government’s view is not supported by Lord Justice Jackson, the architect of the civil justice reforms. Speaking at the University of Cambridge in September 2011, Jackson LJ said: "Of all the proposed cutbacks in legal aid, the removal of legal aid from clinical negligence is the most unfortunate".

Referring to the particular complexities surrounding proving causation, Lord Thomas dismissed suggestions by some peers that the reason for retaining legal aid was due to "special pleading". Lord Faulks (a practising barrister in clinical negligence claims) was also particularly vocal during the Lords debate: "Without legal aid I cannot see how a brain-damaged child and his or her family can begin to pursue these cases. The cost of an ATE premium will be beyond the means of almost all litigants."

The various objections to the removal of legal aid (and allowing recoverable ATE insurance) fall into two main categories - increase in costs payable by the NHS and complexity. 

Increase in costs payable

As the largest compensator in England, any changes to civil litigation will have a huge impact on NHS budget. As highlighted by Lord Beecham, the King’s College London report on the implications of changes to legal aid, suggests that the cost to the NHS will be considerably more than £10 million (as previously estimated). He drew attention to the figure of £28 million being the actual cost to the NHS of the Government’s proposals, suggesting this would be caused by the availability of success fees where legal aid cases would not attracted such fees.

Factors for increased cost include:

  • Winners paying for losers – currently, if a claim is funded by legal aid, the NHS will only pay the costs of expert reports on those cases where the claimant is successful. If expert evidence is funded via ATE insurance, the costs of expert reports on "losing cases" will also be factored into the premium of "winning" cases. In effect, the NHS will end up paying the costs of expert reports in all cases.
  • Additional costs in ATE premium - the ATE insurance premium will also have to cover administrative costs, insurer profits and the premium itself, which will be significantly higher than the NHS simply paying expert reports on the winning cases (if funded by legal aid).
  • Targeting - recoverability for ATE insurance will apply to all litigants rather than just those of limited means. ATE insurance on the other hand will apply to all claimants, regardless of their financial means. Replacing legal aid with ATE insurance is not, therefore, "like for like" and may encourage an increase of claims and in turn, increased costs.
  • Quality control - currently, only those claimant law firms with relevant expertise in clinical negligence can undertake the work. They are monitored by the Legal Services Commission (LSC). Removing legal aid risks opening up the market to "advisers" without the necessary expertise, as well as a reduction in the current policing arrangements provided by the LSC. This is likely to lead to spurious cases being pursued and poor quality litigation - without the safety net of the NHS being able to recover its costs under the proposed arrangement of qualified one way costs shifting.  

Complexity

The underlying reason, as advocated by Jackson LJ, for abolishing the recovery of the ATE insurance premium (as with conditional fee arrangement success fees) is to reduce the disproportionate costs in civil litigation. The claimant has no interest in the level of costs. This is particularly so for personal injury and has resulted in an increase in the number of personal injury claims.

The cost of ATE insurance premiums has spiralled as there are no conventional market forces in operation and the courts have made decisions that make it near impossible for defendants to challenge the level of premiums. If ATE insurance recovery remained for disbursements there would be no change from the present regime. In addition, it would add a layer of complexity. There would continue to be no control on the cost of ATE insurance premiums and ATE insurance premiums would continue to be very expensive for the access to justice benefit they deliver.

A way forward?

Retaining legal aid for clinical negligence cases and abolishing recoverability for ATE insurance for clinical negligence disbursements is the optimum result. Complexity would be removed, costs would be limited and controlled for the NHS, and assistance would be targeted to the most vulnerable in society.

There are two further alternatives:

  1. Retention of legal aid for obtaining expert reports only
  2. Retention of recoverability for ATE insurance for clinical negligence disbursements, but with reference to the same qualifying conditions as for legal aid.  

The former option would mean that the "pure" cost of the report is paid for only (and not any ATE administration cost/profit factor) and the LSC would be able to exert control over experts’ fees. The LSC would also be able to recover its costs in successful cases. This would ensure that assistance is targeted to those of limited means and would carry a more "modest" cost of £6 million to implement (according to Jackson LJ).

The latter option would provide assistance without extending it to all litigants in clinical negligence. Assistance would be targeted to those that actually need it rather than to all. Both alternatives would save NHS money.

The proposed amendments to the Bill relating to clinical negligence did not move to a vote. Given the levels of criticism, it is quite possible that the Government will provide some concessions on this issue before the Bill goes to Report stage. However, speaking last week, Justice Secretary Ken Clarke seemed determined not to let Peers unpick the Bill or bow to lobby pressure. Such alternatives or concessions therefore, appear by no means certain.