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
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