Legal Aid, Sentencing and Punishment of Offenders Bill

Memorandum submitted by the Consumer Justice Alliance (LA 10)

1. Introduction

1.1 This submission relates to Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Bill – Litigation Funding and Costs.


1.2 The proposals outlined in Part 2 of the Bill seek to fundamentally alter the way in which injured victims are able to access justice. We are extremely concerned that if this legislation is passed in its current form it will serve to place insurmountable legal and financial hurdles in the path of many legitimate claimants, curtailing broad access to justice, whilst also increasing the overall cost of civil litigation to the public purse.


1.3 The Consumer Justice Alliance is greatly concerned that controversial and insufficiently scrutinised proposals that will fundamentally reduce the ability of injured victims to access justice have been ‘buried’ in four pages of a Bill extending to 196 pages.

2. What does the Bill mean for injured victims?

2.1 The Bill will make injured victims pay part of their legal costs from the damages which have been awarded to help them recover from their injuries. Awards of damages are based upon compensation for the injuries and losses sustained as a direct result of the accident caused by someone else and are awarded to put the victim back into the financial position in which he or she was prior to the accident.

2.2 By definition any deduction from compensation will mean the victim will be worse off than they would have been had they not been injured. Injured victims should not be denied rightful compensation, intended for their recovery, to help the defendant insurance companies to further increase their profits.

2.3 It is worth noting that in personal injury claims, nearly all claims are brought against a Defendant who is insured and it is the insurance company who pays the compensation. This has not led to a decline in insurance company profits contrary to the perception encouraged by the insurance industry that they are beleaguered and are ‘forced’ to raise premiums to meet personal injury claims.

2.4 The Bill’s proposals will serve to significantly reduce the level at which defendant insurance companies are liable to pay claimant costs. As a result, many good and meritorious cases will no longer be commercially viable for law firms.

3. Omission of Qualified One Way Costs shifting and 10% uplift on damages

3.1 In the consultation that preceded the Bill, two measures were proposed to go some way toward mitigating the widely acknowledged damage the proposals above would do to innocent victims awarded rightful compensation. The Bill as presented to Parliament has no reference to either of these measures: a 10% uplift in general damages awarded to the injured victim; and Qualified One Way Costs Shifting, a mechanism for rebalancing the likely liability for costs away from the claimant.

3.2 Without these two elements, proposed by Lord Justice Jackson as an integral part of his reforms, the Bill will deny many of the most vulnerable in our society access to justice.

3.3 It is understood that these will be introduced via secondary legislation. However, as the Bill does not specify any detail on the Government’s future plans, it only serves to make all those in the industry additionally concerned about the government’s intentions and therefore less likely to take on complex no win no fee cases. As a result, access to justice will be restricted to those who can afford it.

4. Recoverability of ATE premiums for expert reports

4.1 The Government has conceded in one area from Lord Justice Jacksons’s recommendations by allowing recoverability of ATE premiums for expert reports in clinical negligence cases.

4.2 This is welcome but does not recognise that in the many other complex cases, including industrial deafness, RSI, and carbon monoxide poisoning, expensive expert reports are also required at an early stage the costs for which will not be recoverable.

4.3 As a result, After The Event (ATE) insurers are on record as saying that they do not consider there will be sufficient capacity in the market for clinical negligence policies alone.

5. The Compensation culture and misleading criticism of Conditional Fee Agreements

5.1 The Bill introduces sweeping, draconian changes which intend to significantly shift the financial burden of bringing a claim from the defendant insurance company to the claimant. While much of the attention has been focused on legal aid and sentencing, the impact of these other proposals cannot be underestimated.

5.2 The Bill is trying to answer criticisms that Conditional Fee Agreements lead to spurious cases, but that is simply not the case. Lawyers will only get paid if successful and do not invest time and money into spurious cases. If anything, Conditional Fee Agreements work as a very effective filter system to ensure that only the meritorious claims are actually brought, with unmeritorious ones being weeded out at a very early stage. There is simply no incentive for lawyers to take on claims where there is no merit and for which they will therefore not be paid.

5.3 The Government says that it aims to address the ‘compensation culture’ in the UK as justification for the reforms. Yet Lord Young in a report commissioned by the Government, acknowledged that this is a myth. Crucially, the government’s own figures fail to back up the very idea.

5.4 A good example of this is the personal injury statistics for the NHS - often cited as an example of a government department that will save money as a result of the Bill’s proposals. The NHS handles fewer personal injury cases now than when conditional fee agreements were introduced. In 1997/98 6,711 claims were brought and in 2009/10, that figure was 6,652. These figures do not demonstrate a litigation system that is out of control.

5.5 To justify the Bill’s proposals, the government chooses to paint victims as spurious claimants, which drives the mythical compensation culture. It deliberately fails to acknowledge that the compensation these victims are awarded is used to rebuild their shattered lives and those of their families, as some will never earn a wage again and many will need special care for the rest of their lives.

5.6 As a result, victims will fundamentally pay the price for the Government's cost-cutting agenda. They will have their hard-fought compensation slashed by the end to recoverability and many will find it difficult even to find a firm willing to take on their case under the new regime.

5.7 Claimant lawyers will be forced to fight for their clients with one arm tied behind their back, the odds stacked in favour of the other side, often in the form of well-resourced organisations and large insurance companies.

5.8 The NHS currently recovers, from Defendant Insurance companies, approximately £170 million per year in costs incurred by injured victims awarded compensation and state benefits are also recovered under the Compensation Recovery Unit Scheme, amounting to approximately £154 million per annum.

5.9 On the MoJ's own admission they state that "there is a lack of consistent, routinely collected data covering private funding arrangements", and they "are unable to assess how different aspects of the policy package may interact, and how different parties will respond to the behavioural responses of other parties". More so, they have "limitations on what they are able to model, based on the data received over the consultation period".

6. A denial of access to justice

6.1 In essence The Bill proposes changes which will radically affect access to justice without any proper assessment of the impact this may have on the public purse. If the number of injured people who are prepared to take claims forward declines there is a very real risk that instead of seeing a reduction in public expenditure there will be an increase.

6.2 As we have made clear throughout the Consultation period and since, we are very concerned about the system that this Bill seeks to introduce. Fair access to justice and equality of arms are the cornerstones of a civilised society and the Public Bill Committee should be in no doubt that these will be severely impaired if the Bill is enacted in its current form.

July 2011

Prepared 14th July 2011