Select Committee on Northern Ireland Affairs Appendices to the Minutes of Evidence

Letter from the General Manager, DAS Group to the Lord Chancellor's Legal Aid Advisory Committee


  We are exceedingly grateful for the opportunity to have given evidence to the Committee. Should the Chairman be of the mind that we can "further assist" we can be called upon as appropriate. The idea of a CLAF is interesting. On balance though we do wonder whether a CLAF is the most appropriate vehicle to facilitate the Government's intention.

  Clearly the end result is going to be dependent upon how a CLAF is set up and run. If we may suggest though that from the discussions a CLAF would involve the setting up of a fund which would be administered by the Legal Services Commission to at least some extent. The extent of the involvement of the LSC would be influenced if the participating lawyers in effect acted as vetters or alternatively whether that task was carried out by the LSC. It is therefore clear that the setting up of a CLAF fund would involve an administration which would in fact be quite expensive. The CLAF would be a quasi insurer which would require auditing, actuarial investigation etc, in other words, most of the type of work which would generally be associated with a commercial insurer. The expense of running a CLAF would not be insignificant and it seems to us that the running expenses of running a CLAF must come from the contributions being made by the winning litigant. On top of this there would be the cost of the losing cases, together with also the cost of funding disbursements or other costs of supporting any action during its life. Realistically, a winning litigant would have to contribute at the very least 15 per cent of damages and possibly rather more than this. There is a lack of data to enable any firm estimates to be made, but we are confident that if a well known firm of actuaries such as Bacon & Woodrow was asked to examine the position, they would probably arrive at our sort of assessment in a general way. The cost of running a CLAF, particularly if as would only seem right it is extended to cover the costs of the other side in the event of a loss, should not be underestimated.

  There was the idea discussed that perhaps solicitors should be either CLAF or non CLAF solicitors. This would be difficult to enforce given that one is looking at tax-payers funding.

  The problem for the CLAF is that it would be in competition with other commercial schemes which inevitably will develop and it is quite likely that there would be adverse selection against the CLAF.

  The idea was floated that perhaps losing firms which introduced a case to the CLAF should only receive half their costs. This to my mind represents in practical terms no real deterrent to adverse selection. If the committee should be so minded to accept that the system now to be found in England and Wales, it was said this increases commercial costs significantly, but there is no evidence yet about this. We hold the view that the products to be offered by the insurance market should be examined. The insurance market already offers a choice. There are policies which cover both sides, costs or alternatively just the other sides' cost together with disbursements.

  One alternative therefore to a CLAF is to allow the insurance industry to develop products in a competitive market place. The premiums, which would be paid by the policyholder, would we think settle at a level which would probably be no more than and indeed quite possibly less than the contributions which would be required for running a CLAF.

  Reference has been made to the tariff fees and how these may make a number of solutions difficult to work. Given average damages for personal injury claims, modelling may well suggest that premiums in the commercial market may well be no greater than would be the contributions from winning litigants to make the CLAF economically viable and combined with other measures the effect on the fees system might well be neutral.

  We would suggest that to begin to think in terms of any CLAF being viable would actually require a great deal of work. A major problem for a CLAF is that unless it was a marketed product, and this of course is out of the question, it would find itself in competition with other commercial schemes which would be advertised and this would perhaps exacerbate the problem of adverse selection.

  Although there has been much concentration upon personal injury claims, given that these would probably make up the majority number of applications to a CLAF, there are a wide variety of money claims. It would be difficult for the administrators of the CLAF to deal with these on any set figure basis given the diverse nature of disputes.

  There are a number of politically based points which we do not feel competent enough to comment upon, however it does not appear to us that a CLAF does necessarily protect the one and two partner firms from commercial disadvantage when put alongside larger firms.

  The Before the Event Legal Expenses Insurance market is growing and indeed the more citizens of Northern Ireland which have such cover, the smaller the problem now being considered. For modest premiums, Before the Event covers are available and it seems to us that quite possibly the promotion of such covers would be of an advantage to the government.

  As we began by saying we are available to offer any further assistance to the Chairman as he may think we are able to provide.

1 February 2001

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 13 July 2001