Select Committee on Constitutional Affairs Third Report


Conclusions and recommendations


Conditional Fee Agreements

The use of CSAs

1.  The introduction of CFAs was designed, in part, to widen access to justice. The evidence appears to show that it has had some success in meeting that aim, although perversely some cases which previously would have received legal aid funding may not receive CFA funding because the chances of success are not high enough. Conditional fee agreements have not directly caused the perception of a compensation culture. The statistics demonstrate that the number of claims has not risen since CFAs were introduced as the primary method of funding personal injury claims. Nonetheless, we agree with the conclusions drawn by Citizens Advice, that the introduction of CFAs (and with it a class of unregulated intermediaries acting as claims managers) has adversely affected the reputation of legal service providers, whether professional lawyers or not. The increased awareness of the public that it is possible to sue without personal financial risk, when combined with media attention to apparently unmeritorious claims being brought, has contributed to a widely held opinion that we do indeed have a compensation culture. (Paragraph 17)

2.   It is not easy to design a system whereby a claimant without funds is allowed access to justice without exposing the defendant to the chance that he will not recover the costs of the action if the claimant is unsuccessful. Given the power of the press, it is right that people should have a remedy when have been defamed; and because of the high level of costs inherent in bringing a claim it is likely that those with modest means will continue to have to rely on CFAs. (Paragraph 29)

3.  The uplifts which claimant's solicitors receive should reflect the risk that they bear. Reassessment of risk as the claim proceeds may go some way to ensuring proportionality, but only for that stage of the proceedings. This would require a clearly staged process. Further use of cost capping orders may prove useful in some circumstances. The courts need to ensure that appropriate case management takes account of proportionality, preferably before the costs are actually incurred. (Paragraph 30)

The Compensation Bill [Lords] and Risk Aversion

Excessive Risk Aversion

4.  We believe that the question of how to set targets for the HSE is an important one, since it may well affect the culture of the organisation. If the targets are set in terms of a reduction in the number of accidents, rather than in terms of ensuring that reasonable measures are taken to reduce risk, the likely outcome is that activities will be stopped altogether rather than being better managed. We believe that the basis of these targets should be reviewed. (Paragraph 49)

5.  The HSE admitted that it was unable to conduct risk balancing exercises looking at the dangers of different risks. We do not accept this and believe that the HSE should find ways of doing so. (Paragraph 49)

6.  It has also been suggested that authorities and other bodies fall back on health and safety arguments when they are unable to provide a service for financial or other reasons. Such practices should be identified and eradicated. (Paragraph 50)

7.  While we accept that health and safety issues can be an easy scapegoat for many problems, far more has to be done to educate the public that responsible risk management does not equate to the avoidance of all risk. (Paragraph 51)

Clause 1 of the Compensation Bill [Lords]

8.  Methods of stemming current levels of risk aversion go to the heart of the compensation culture debate. While the number of people claiming compensation may not have risen in recent years, a contrary perception remains. The fear of prosecution by the Health and Safety Executive is likely to combine with the exaggerated fear of being sued to discourage people from planning or undertaking activities which require risk management and may also impact on the competitiveness of business. (Paragraph 52)

9.  We agree with the majority of the evidence that we have received that clause 1 to the Compensation Bill [Lords] is unnecessary. We have concluded that it should not be in the Bill. While it is undoubtedly well meaning, it satisfies neither those who wish to reduce risk aversion in society, nor those requiring legal certainty. It is impossible to encapsulate the law of negligence in a single sentence. (Paragraph 67)

10.  If clause 1 were implemented, it would undoubtedly, at least in the short term, lead to an increase in costly satellite litigation to define what is a "desirable activity". Moreover, the wide breadth of that term (or any alternative proposed such as "social value" or "utility") could have unforeseen consequences, since while the Government states that it is not intended to change the law, it is likely that interested parties will seek to rely upon the clause before the courts in order to improve their shield against liability. This could result in possibly inconsistent decisions where judges try to refine further the concept of "desirable activity". (Paragraph 68)

Regulation of claims management companies

11.  We are pleased that the Government is now moving to regulate claims "farmers" who act as intermediaries referring cases to solicitors. This work is undertaken by a range of organisations including not only commercial companies but also trade unions and voluntary bodies. The system of regulation and redress needs to ensure that claimants are protected and that enforceable codes of practice apply. Regulation is long overdue and we hope that it will assist in restoring the reputation of the many legal professionals and others in the field who fulfil a necessary function ensuring that deserving claimants receive adequate compensation. (Paragraph 81)

12.  The Compensation Bill [Lords] lacks detailed proposals on how the Government intends to regulate claims management companies. There are a number of important issues that need addressing, including advertising, potential mis-selling of insurance products and the quality standards that an authorised person needs to meet. Self-regulation of claims management companies would be insufficient and undesirable. The market is relatively new, too diffuse and many different services can be offered to consumers, from financial products to quasi-legal advice. (Paragraph 82)

13.  We favour a system whereby claims managers would be subject to the same type of overarching supervision that is being proposed by the Government for the legal profession. We also believe that all persons involved in the claims management process should meet minimum standards. Finally, we suggest that some limits need to be placed on the nature and placement of advertisements by claims management companies. Given the obvious benefits that all of these changes would bring, we do not see any benefit to consumers in granting organisations exemptions from regulation. (Paragraph 83)

The NHS Redress Bill [Lords]

Independent legal and medical advice

14.  It is surprising that the Department of Health has brought forward an ambitious Redress Scheme, without setting out in detail how it will be run. During the course of our inquiry, the NHS Litigation Authority was still unaware as to whether it would definitely be responsible for running the scheme. We were informed that contact had not been made, either with lawyers or medical experts, about whether they would work for fixed fees and to the timetables envisaged. These lapses appear to threaten the viability and effectiveness of the scheme. (Paragraph 94)

Potential difficulties

15.  Given the particular concerns which have been expressed about the potential expenditure and difficulties inherent in the Redress Scheme, it is essential that it is piloted, and that the pilot be comprehensively assessed, to ensure that the benefits that it will bring are sufficient to outweigh the costs. We are alarmed that the Department of Health is "relaxed" about the possible cost implications of the scheme, since we believe that it is difficult to forecast the potential demand accurately. (Paragraph 103)

16.  The Government has modified the proposals for a redress scheme and restricted the scheme to low value cases. There is a danger that the scheme will not be cost-effective. Some of the objectives which the Government has set out for the scheme could be achieved by other means, such as more open and transparent handling of claims and the willingness to admit mistakes of health professionals on a more extensive basis than has previously been the case in the Health Service. Another concern is that claimants may be ineligible for legal aid if they fail to use the Redress Scheme. This would arise if it became a requirement for obtaining Legal Aid that the scheme be used first. The impact of this would be greater if, as seems possible, the threshold of £20,000 were to be increased in the future. Where so much is to be done by secondary legislation, it is unfortunate that such issues have not been adequately addressed in the main body of the Bill. (Paragraph 104)

Care contracts

17.  We recommend that further consideration be given to the proposal in clause 3(3) (a)of the NHS Redress Bill [Lords] to offer a 'contract to provide care or treatment' as part of the Redress scheme. On the basis of the evidence that we have received, we believe that relatively little attention has been paid to this area of reform, although we accept that this may be because the relatively low threshold of £20,000 means that patients in need of a significant period of remedial care are unlikely to be affected by the Redress Scheme. (Paragraph 110)



 
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