Evidence submitted by the Rt Hon Sir Anthony
Clarke, Master of the Rolls (LAR 226)
INTRODUCTION
As head of civil justice, my responsibility
relates only to civil justice and not to criminal justice or family
justice. I shall therefore speak only to the effect of the Carter
review on civil justice. My concern, and I am sure that of other
judges who deal with civil cases is that any reforms should improve
access to justice and that none of the reforms in the family or
criminal fields should redound to the disadvantage of civil litigants.
HISTORY
The Legal Aid scheme was introduced in England
and Wales in 1948. The scheme provided access to justice for people
who could not otherwise afford to litigate. In the 1960s 80% of
households qualified for civil Legal Aid. Over the years the growing
demand from the criminal, family public law and asylum fields
has meant that there has been a reduction in the amount of funding
available for civil work. In the 10 years from 1995 to 2005 the
civil legal aid budget was reduced by £168 million; so that
we are now in a position where only a very small number of the
population is eligible—households must have a disposable
income of less than £645 per month to qualify and then only
in certain types of claim. Legal Aid is no longer provided for
routine personal injury claims, this type of case is funded by
the private sector through Conditional Fee Agreements.
CFAS
Conditional Fee Agreements, which are a form
of "no win—no fee" arrangement, operate on the
basis that should the claimant lose his case, the solicitor will
either take no fee at all or it will be significantly reduced.
In recognition of this risk, the solicitor is able to charge a
success fee of up to 100% of his costs, for which the defendant
is then liable. However, if the claimant loses, he is liable for
the defendant's costs. As most litigants who are represented by
CFAs do not have sufficient funds to cover this eventuality, the
claimant must have insurance cover—known as after the event
insurance or ATE—as protection against any liability for
the defendant's costs.
The ATE insurance premiums can be expensive.
Although they too are recoverable from the defendant if the claim
succeeds, this means that the defendant is liable, not only for
the normal costs of litigation (which include the solicitor's
ordinary profit costs, but also a success fee of up to 100% of
the costs, and the ATE premium. This has led to an increasing
amount of litigation in which paying parties, usually backed by
liability insurers, have attacked the validity of individual CFA
agreements.
Whilst the CFA market is buoyant at the moment,
the ATE market is immature and there is a worry that it may become
vulnerable. Should the ATE market collapse, CFAs will become inoperable,
leaving a significant number of people with no means of gaining
access to justice. This position was recognised by Lord Carter
in his report. He agreed that the time had come to look at establishing
some form of Contingency Legal Aid Fund (or CLAF) or Supplementary
Legal Aid Fund (or SLAS). In the case of a CLAF it is necessary
to find someone to provide money to set up a fund to fund the
first claimants. Thereafter the idea is that the fund would be
self-financing, either with an uplift on the costs or (more likely)
by clawing back part of the damages paid to the claimant. In the
case of a SLAS, as the name suggests, the Legal Services Commission
(LSC) might provide the funds in the first place and again be
self-financing in the same way.
The Civil Justice Council of which I am Chairman,
has undertaken research of schemes which are operating successfully
in other parts of the world, notably in Hong Kong and Canada.
In Hong Kong, the funds came from the Jockey Club. Another possible
(and to my mind justifiable) source would be the large sums of
unclaimed monies paid into court in the past. However, in the
first place, it seems to me that it may well be possible to start
a SLAS within current Legal Aid funding and I very much hope that
the Civil Justice Council's recommendation—that such a scheme
should be developed on a pilot basis for group litigation cases,
where Legal Aid is currently highly restricted—will be taken
forward.
IMPLEMENTATION OF
CARTER
Turning then to Lord Carter's proposals for
Civil Legal Aid. I hope I have set the context within which civil
legal aid operates today. I annex to this statement a summary
of the main points in the Carter Review. I comment as follows.
As I see it, the recommendations designed to
avoid litigation are sensible and should, if anything, be expanded.
There are, for example many worthwhile ombudsmen schemes which
assist the claimant without involving legal cost.
The problem is that the funding that is left
for civil work, is now only available for the most disadvantaged
and vulnerable people in our society. From a judicial perspective
our concern is that these people should receive quality advice
and assistance from appropriately skilled lawyers close to their
homes.
In their response to Lord Carter's report the
Civil Justice Council expressed a concern that many civil practitioners
have already abandoned legal aid work; in the past five years
the number of solicitors' offices operating general civil contracts,
has reduced by 28%[133].
There is a real concern that the Carter reforms may make this
trend worse.
Lord Carter's main focus was rightly directed
at reforming the systems for criminal legal aid, but many criminal
firms also undertake family and civil work. If these firms close
down due the development of "super criminal practices",
their civil work may also be lost. I am concerned that insufficient
thought has been given to this problem. The CJC recommended that
the criminal reforms should be monitored over a period of three
years to see how they affect supplies of services and structure
of firms before any changes to family and then civil are made.
Whether three years is the correct period or not, surely some
research is required
As I understand it, although new contracts are
likely to be made in April 2007, the proposed fixed fee structure
will not be implemented until October. It is not for me as a member
of the judiciary to comment on any particular level of fee. The
concern of the judges is, however, that both the fee structure
and the level of fees should be fixed at a rate that will provide
reasonable remuneration for solicitors, so as to ensure that there
are enough solicitors to advise and represent the seriously disadvantaged,
as for example those with mental health problems and those with
housing problems, and to ensure that there are no "advice
deserts".
The same concern centres on the proposed new
CLACs. A CLAN is a network of lawyers and seems very sensible,
at least to me. However, the idea of a CLAC is that solicitors
should combine into a centre. As the CJC observed in its response
paper, which I would invite the committee to consider, contract
with existing solicitors should only be replaced by a CLAC, if
it can be shown that there will continue to be the same number
of specialist advisers available for the vulnerable.
In this regard the CJC has had considerable
success in the past in brokering a sensible way forward by discussion
with the various interested parties, including the LSC. On a positive
note, the CJC is now working with the DCA, LSC and practitioners
to develop joint proposals for improving efficiency and value
for money. The CJC has an excellent track record in negotiating
agreements between parties and I am delighted that the DCA, and
the Legal Services Commission has agreed to work with the Council
and practitioners to jointly identify areas where improvements
can be made.
November 2006
133 LSC Civil Contracting Report 06-07-January 2007.
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