Legal Aid, Sentencing and Punishment of Offenders Bill

8. There is nothing wrong with a genuine interest in the way legal aid works in other countries. Indeed, the last Government conducted a research study that seemed to conclude that the "legal aid costs were unusually high in England and Wales" [4] . However, it also added as a caveat that "international comparisons in the report should be treated with care" as to the interpretation. It concluded that "legal aid was provided for different kinds of motives, conditioned by different kinds of legal systems and evolved operationally along a variety of pathways. International comparison should be seen in the context of these differences and as treated with circumspect". Using New Zealand as a comparator is simply ignoring these social differences.

9. New Zealand spent NZ$172 Million on legal aid in the year 2009/10. [5] This amounts to 40 NZ dollars per head of population; translated into sterling this amounts to £20 per person, significantly higher that the oft-repeated New Zealand figure of £8. One would expect a lower figure for a country with a lower crime rate, significantly lower GDP per head, and a population of only 4 million compared to 62 million.

10. Legal Aid is a demand led system, compounded by the rise in the number of new criminal offences created since 1997 (more than 3,000). [6] Being a demand led system invariably means unexpected and unforeseen increases in demand. A case in point is the recent riots. Other cost drivers are the high number of divorces in England and Wales and the legislation applying to procedure; and public law cases involving children.

11. The Government’s own comparative study found that spending on running the courts in England and Wales was much lower than in comparable countries [7] . It was suggested that this might to some degree off-set the higher levels of legal aid spending. Indeed, the Council of Europe’s data on judicial systems across Europe illustrates that when the costs of courts, public prosecution services and legal aid are combined, the budget in England and Wales, as a percentage of the GDP per capita, is equal to the average [8] .

12. What is abundantly clear from the evidence of academics [9] is that international comparative studies are notoriously difficult and should not be used to inform ground making changes to Legal Aid policy. In his review of Legal Aid last year, Sir Ian Magee pointed out that:

"Legal aid is interconnected with other legal and social provision, and decisions beyond the remit of the Legal Services Commission (LSC) and indeed of the Ministry of Justice (MoJ), can impact upon it" [10] .

Myth 3: England and Wales has a high threshold level for legal aid and public funding compared to other countries

13. Free eligibility for legal aid is based on certain prescribed benefit levels. For example, clients in receipt of certain prescribed income related benefits will automatically be eligible for legal aid.

14. If a person’s gross monthly income is over £2,657 (including the partner’s income if applicable) s/he will be ineligible for legal help. However, If a person (and his or her partner’s gross income) is less is than £2,657 per month, a series of assessments are applied. If, following these assessments, disposable income is no more than £733 per month, the person/couple will qualify for free legal help. As a matter of completeness, the figure of £2,657 per month (which equates to £31,884 per annum) is applicable to a couple with four children where one or both partners may be working. The maximum levels of income for legal aid in New Zealand for a couple with 4 children is $72, 302 (this equates to £37,583.79). The scheme in New Zealand is more generous to couples and single parents with dependant children than the English equivalent [11] . The gap is actually wider in real terms if the higher cost of living in England is taken into account. We would urge the Government to consider proposals that cuts costs significantly whilst preserving access to justice.

15. When Lord Justice Jackson produced his final report into Civil Litigation costs, he categorically insisted there should be "…no further cutbacks in legal aid availability or eligibility". [12] The clauses in Part 1 of the Bill alone will have a detrimental impact on access to justice, but together with those in Part 2 of the Bill, represent a "double-whammy" on some of the most vulnerable sections of our society, making it much more difficult for ordinary people to have recourse to the courts to seek redress.

Myth 4: These changes need to be made to deal with the ‘compensation culture’

16. Reference is continually made to the emergence of a so-called "compensation culture". ILEX believes the perception and reality do not match.

17. In May 2004, the Better Regulation Task Force released its report ‘Better Routes to Redress’, The report concluded that the compensation culture was a myth, stating that advertising by claims management companies and reports in the media created an inaccurate perception that large sums of money were available to those who have suffered at the negligence of another.

18. In 2010, Lord Young of Grafham concluded in his report [13] that "The problem of the compensation culture prevalent in society today is…one of perception rather than reality" [14] . Lord Young acknowledged that the broad consensus amongst stakeholders that responded to his call for evidence "did not believe there was a growing compensation culture in the UK" [15] He noted there was "…a general agreement that the rise of a compensation culture is largely a myth perpetrated by the national press."

Myth 5: Claimants have no interest in their costs as they do not have to pay for them, and lawyers do not have an interest in concluding a case as they want to make cases last longer to get more costs.

19. Sweeping statements such as these were included in the report by Lord Justice Jackson, [16] and subsequently repeated in the green paper published prior to the Bill [17] when it was stated "under the current arrangements, claimants on Conditional Fee Agreements (CFAs) generally have no interest in costs being incurred on their behalf, because win or lose they do not have to pay anything towards those costs". Such statements continue to be repeated, for example, Justice Minister Jonathan Djanogly said [18] that with the current system "…claimants are able not to lose a penny even if they lose their case, and if you can’t lose anything why should you not sue, even if your chances of winning a case are negligible…". He claimed that the proposed changes mean that "…claimants will have an interest in what they are paying their lawyer…" and that lawyers will be "…more cautious…" when deciding to take on a case.

20. ILEX strongly advocates that this is a misconception. Claimants can be, and often are, put under considerable costs pressure should a defendant (or rather their insurers) make a sensible offer to settle. Once a defendant does this, as soon as the last date upon which such an offer can be accepted has expired, the claimant is on risk as to costs. [19] In a situation where a defendant makes an early offer which the claimant does not beat at trial, the claimant will not receive costs after the last date at which (s)he could have accepted that offer. They will be responsible for the defendant’s costs, and potentially (depending on the terms of the CFA) (s)he will be responsible for the costs of their own lawyer.

21. There may be a situation where there is a counterclaim made by the defendant, and if such a counterclaim is successful, the costs of this will be the responsibility of the claimant. If costs are excessive, and by implication, if the success fee as a percentage of those costs is excessive, then they are susceptible to scrutiny by the courts under the case management powers. As a result of the CFA being an agreement between a claimant (usually) and a lawyer, although not always done, it is entirely legitimate for a lawyer to recover the shortfall between the costs incurred in running the case, and the costs awarded. Should a claimant breach the terms of a CFA, the lawyer will be entitled to terminate the retainer, with the claimant being responsible for the fees to date. These are clear examples where a claimant has an interest in the costs incurred in running a claim. When accepting instructions and taking on a matter, a lawyer will explain all of these possibilities with a client when considering the different funding options, and generally, such examples will be included in the CFA document.

22. A claimant therefore has a significant interest in the costs incurred.

23. Statements that lawyers have no incentive to deal with claims in a timely fashion are simply not true. Ultimately, if the case is lost, the lawyer is unlikely to be paid (aside from the instances where the claimant may be liable), this acts as a strong enough incentive for costs to be kept reasonable and proportionate. In any event, lawyers runs businesses. They are as aware as any other business of the need for adequate cash flow. It makes no sense for a business, and that includes a legal business, to delay work, and therefore invoicing for work, and therefore payment for work.

Myth 6: The costs burden has moved too far in favour of the claimant and against the interests of the defendant.

24. Whilst not in the Bill, Qualified One Way Costs Shifting (QOCS) will be introduced. The Government believe this will act as a substitute for the removal of the recoverability of the After The Event (‘ATE’) Insurance Premium [20] from the Defendant. The removal of recoverability is proposed at clause 43 of the Bill. ILEX believes that this is wrong. QOCS essentially means there is a deviation from the usual rule where the loser pays the winners costs (the ‘costs follow the event’ rule). A losing defendant would continue to be liable for the costs of a winning claimant, but a losing claimant would pay for a winning defendant’s costs where, and to the extent, it is reasonable for them to do so. Conduct and financial resources will be taken into account, and if the claimant is considered to have sufficient funds, the successful defendant’s costs will be payable.

25. It is extremely likely that this is going to lead to ‘satellite litigation’ (where proceedings are issued not related to the main issue in a matter, but matters which are ancillary to it) [21] and will therefore not serve to reduce civil litigation costs, but will in fact increase them.

26. This position actually restricts access to justice for a defendant. In practical terms, there may be a disincentive for defendants (or their insurers) to defend a claim, no matter how strong a defence they feel they have. Why defend a matter if it can be settled at a lower cost to themselves? To have a system where a winning claimant will recover their costs, but a winning defendant must bear their own, brings a fundamental inequality between the parties. QOCS could ultimately restrict access to justice for defendants. This may be something the insurance industry is willing to accept as a ‘trade off’ for not having to pay success fees to winning claimants, but not all defendants are supported by insurance companies. This regime could be particularly detrimental to private individuals and small businesses.

October 2011