Legal Aid, Sentencing and Punishment of Offenders Bill

Memorandum submitted by the Law Society of England and Wales (LA 11)

1. The Law Society (‘The Society’) is the professional body for solicitors representing over 145,000 solicitors in England and Wales. The Society represents the solicitors’ profession to decision makers within Parliament, Government and the wider stakeholder community, and has an established public interest role in law reform.

2. The Society takes an interest in Parts 1, 2 and 3 of the Bill. The Society welcomes the opportunity to give written and oral evidence to the Public Bill Committee.

Part 1 - Legal Aid

3. The provisions in this Part of this Bill represent the most profound change to the structure and nature of the legal aid system in England and Wales since it was set up in 1949. Whole categories of law will be removed from the scope of legal aid, an approach that the Law Society considers fundamentally misguided. Many of those areas that remain will be limited to telephone advice only which will not allow effective help to be given. People on income-related benefits will be subject to assessment of their capital, and those who are homeowners whose home is worth more than £200,000 will be automatically ineligible for help in all means tested areas. In practice this will exclude homeowners in large swathes of the country from legal aid even if they have no equity in their home. The Bill also allows, for the first time, for means testing of emergency advice in the police station to people who have been arrested.

Independence of decision making

4. The Bill requires the Lord Chancellor to appoint a member of the civil service to the statutory post of Director of Legal Aid Casework. This decision has not been consulted on.

5. We believe that a Government official should not be in charge of deciding who should receive legal representation and who should not, particularly as many of the claims will be against the Government. These decisions have always been independent of Government and must remain so. Government is entitled subject to ratification by Parliament, to lay down criteria for granting legal aid but, the decisions in individual cases need to be independent of Government.

Scope

6. In response to the initial legal aid Green Paper consultation, the Law Society set out in detail its concerns about the proposals to reduce the scope of civil legal aid. As most of these proposals have now been adopted in the Bill, our previous concerns remain valid and we attach at Annex A the section of our consultation response that deals with this issue.

7. The scope cuts apply to categories of law that affect the poorest and most vulnerable members of society: welfare benefits, housing, debt, clinical negligence, immigration, employment, and private family law.

8. In all these categories there are many complex cases that will not meet the restrictive criteria for exceptional funding, but nevertheless cannot be presented properly without specialist legal advice and representation. Moreover in each of the excluded categories of law, the most vulnerable members of society such as children, people with mental and physical disabilities, victims of domestic violence in non-family cases, and people with little or no English will face very high barriers to obtaining access to justice for profoundly significant issues such as loss of benefits, removal from the UK or compensation for catastrophic injuries resulting from medical negligence.

9. Without legal aid, those of little or no means will not be able to pursue cases even if they are intellectually capable of doing so, because they will not have the means to pay for essential evidence which is currently payable as a disbursement in legal aid cases. This includes medical reports for welfare benefits appeals, survey reports for housing disrepair cases that do not meet the new threshold, or DNA reports for refugee family reunion cases.

10. For these reasons we believe that the Government's approach of cutting whole areas out of scope is fundamentally flawed and will mean that people with strong cases simply will not be able to obtain justice.

General case

11. Clause 8(1) will provide civil legal services to individuals whose cases are in scope and who meet merits and means tests, but under Clause 8(2) The Lord Chancellor may by order modify Schedule 1 "by omitting services from Part 1 of the Schedule ...."

12. The Law Society does not believe that the Lord Chancellor should have power to amend an Act of Parliament to remove services from scope. Such a significant power withdrawing legal services available to vulnerable individuals should be exercised only through primary legislation approved by both Houses of Parliament.

13. However we do believe that a power to bring areas of law back into scope, subject to the approval of Parliament by regulation, would be appropriate.

Exceptional cases test

14. We believe that the exceptional cases test as set out in the Bill is seriously inadequate. It could never apply to the early stages of a case, such as correspondence and negotiations with a public body about their legal obligations to a client. While an argument could be made that it could apply to pre-litigation preparation, it would be very difficult to meet the threshold. This means that in practice even those who would qualify for legal aid under this provision will not be able to reach the stage of making an application.

15. Case law under the European Convention on Human Rights shows that the legal obligation to provide legal aid for non-criminal cases is complex, narrow and highly dependent on individual circumstances. It is almost impossible to conceive of circumstances in which someone would be able to demonstrate that they meet the test to the satisfaction of the decision-maker.

16. The Law Society believes that the test should be extended to provide that those who are not reasonably able to assert or defend their legal rights without assistance, by reason of mental illness, low levels of education and literacy, learning disabilities or other vulnerability, are entitled to legal aid for both casework and litigation in areas of law that are otherwise excluded.

Crime

Clause 12 - Means test in police station

17. Clause 12 of the draft Bill contains a power to introduce a means test for police station advice. This would permit the Lord Chancellor by regulation to exclude people from advice at the police station.

18. There is currently no provision under the Access to Justice Act 1999 to introduce means testing for police station advice and assistance. This is a brand new power under this Bill which has never been consulted on.

19. The Law Society has grave concerns about the introduction of such a power, of both principle and practicality. Whether or not this is, as the Government argues, merely a power to give future flexibility, which the Government has no current intention of using, this Bill is Parliament's only chance to debate whether or not this is a power the Government should have.

20. The reality of means testing in all other areas of the legal aid system is that some people who are deemed not to qualify are nonetheless not realistically able to afford to pay lawyers' fees. For such people, the introduction of a means test would for all practical purposes abolish their right to a solicitor. This is unacceptable.

21. In purely practical terms, the introduction of a means test in the police station is unworkable. There are strict requirements for clients to provide evidence of means in order for the means test to be undertaken. For a client in custody access to the documentation required will be impossible. For anyone who does not meet the means test, the problem then arises of how they are going to arrange to instruct and pay for a solicitor while in custody.

22. Both the means test and the negotiations to instruct a solicitor will cause significant delay that will seriously hamper the police in doing their job, and will create further cost to the public purse while the defendant remains in custody for the means assessment to be carried out.

Inferences from silence

23. Serious questions arise as to whether the introduction of a means test and merits test in the police station would have the effect of removing the possibility of drawing inferences from silence. Inferences can only arise where a defendant has had the opportunity to take legal advice (see: Murray v United Kingdom).

24. If a person is not given the opportunity to take legal advice (for example because the case does not meet the merits test), then no inference can be drawn. The outcome of having a merits test in the police station would therefore be to reintroduce an unrestricted right of silence in this category of cases.

Please see Annex B for further detail on this point.

Choice of provider and types of service

Telephone gateway

25. Telephone advice can be very satisfactory in some circumstances for some clients, but not everyone can assimilate advice received over the telephone. Positive feedback is available from the current system because those who use this method chose to do so and face to face advice is still available for those who do not, or cannot, use the telephone.

26. Telephone advice is not suitable for those

· who are vulnerable, have learning difficulties or suffer from various disabilities

· those with numerous documents and reading difficulties

· those without fluency in English even though interpreters are available

· those who cannot find a private place to have a conversation

27. A single telephone gateway will be problematic if the system becomes overstretched and clients are unable to get through. A telephone gateway should not be the only way clients can access the legal aid system.

28. There should be categories of individual and categories of law for which face to face advice must be provided in order to protect vulnerable individuals, and restrictions should be embodied in the legislation.

Choice of provider of services

29. We are extremely concerned about the provisions in clause 26 that limit an individual's choice of solicitor. The importance of choice has been reflected in European Legal Protection Directive 87/344, in the context of legal expenses insurance. There are three key reasons why choice is important, quality efficiency and confidence in the system.

30. If the organisation delivering a service will have clients directed to them, subject only to bureaucratic checks after the event on the quality of service they deliver, there is little incentive on the organisation to ensure that quality is embedded in their work. This is particularly the case in the context of legal aid services, where there will be no external suppliers who can take over from a failing organisation, because there is little or no market other than that funded from legal aid. If organisations have to attract clients to choose them, they have a strong incentive to maintain quality to ensure good word of mouth recommendations and to avoid negative publicity in local media.

31. The checks on quality currently available are peer review, which is too expensive for the Government to use on a widespread basis, and management systems which do not look directly at the quality of the work. Choice by the client remains the cheapest and most effective quality control measure available.

32. The efficiency issue operates on two levels. First, if a client can choose their solicitor, it means they will be able to return to someone who knows them and their history. This means that resources will not have to be wasted going through the client's past history each time they have a new issue. In the criminal field where there is a significant amount of repeat business, the financial benefit of this prior knowledge of clients should not be underestimated.

33. Secondly, as noted above, there is little private market for much of the work covered by legal aid. Imposing significant limits on client choice will therefore also limit the number of competing organisations who will bid for future contracts. When the Government moves towards price competition, the effect of reducing the number of competing organisations will be to weaken competition in the market for services so that the Government is unable to secure optimum value for money. This effect was seen two years ago in the market for very high cost criminal advocacy, where the limited number of advocates available to undertake this work resulted in the Government being required to increase the rates paid to these advocates, which were already the highest rates in the system, at a time when rates were being cut for all other participants in the system.

34. Thirdly, the right to choose your own lawyer is an important element in ensuring confidence in the civil and criminal justice systems. If the client has no choice in their lawyer and does not have confidence in the lawyer assigned to them, there is a higher likelihood that they will ascribe an adverse outcome to the system being unjust. If they have a relationship of trust with their lawyer, then they are more likely to accept an adverse result if that lawyer can explain why the case went the way it did. The Government has already noted in its impact assessment in November 2010 that introducing these cuts risks increasing criminality if clients perceive the outcomes they get as less fair. Ensuring that clients retain a choice of provider is an important tool to mitigate that risk.

35. We accept that clients cannot have a completely unrestricted choice of provider. Clients are already restricted to a choice only among those who have a contract with the Legal Services Commission. Provided the Commission and its successor continue to ensure that there is a sufficient number of contracted providers, there is no reason why this position should not continue.

Crime:

36. Subsection (4) of Clause 26 retains the right to choice of solicitor in criminal proceedings, however this is qualified by subsection (6)(b), which states that anyone who has received advice at the police station - e.g. from the duty solicitor - is then 'taken to have selected that person under sub-section (4)'.

37. In certain cases in the police station - where advice is by telephone only - the right to choose a solicitor has already been removed, and the Bill would permit its removal in all cases. It cannot be right to deem the client to have 'selected' a solicitor when they have not been given a choice.

38. Allowing clients to request their own solicitor can in most cases save time and money, as noted above, and this is a particular issue in criminal cases. Clients are in general far more likely to co-operate with, and to listen to the advice of a solicitor that they know and with whom they have built up a relationship of trust. This may include situations where the client is persuaded by their own solicitor to plead guilty rather than not guilty where they do not have a strong case. 'Own' solicitors also have prior knowledge of the client's history and character, which saves time and cost by avoiding the need to gather background information from the client. The solicitor is also in a better position to understand the best way of dealing with their client's situation.

39. Refusing a client access to their own solicitor could provoke non-cooperation, or the client may even choose to represent themselves rather than be represented by a solicitor they do not know or trust. Unrepresented defendants take far longer for the courts to deal with and create additional cost as a result. The Law Society is aware of the current concerns of the judiciary over the increase in unrepresented defendants as a result of means testing, and this provision could aggravate this situation.

Impact Assessments

40. The Government's response to the consultation 'Reform of Legal Aid in England and Wales' includes final Impact Assessments and an Equality Impact Assessment, which we believe fails to meet the Government's Public Sector Equality Duties, for the following reasons:

· Litigants in person: the consultation response and the Equality Impact Assessment acknowledge that the reforms will give rise to the likelihood of an increase in volume of litigants in person, and potentially some worse outcomes for them materialising", but fail to assess the degree to which litigants in person fall into each of the protected groups under section 149(7) of the Equality Act 2010.

· Lack of qualitative research: the MoJ has not obtained data and has undertaken little analysis as to the degree of disadvantage which clients may suffer as a result of the reforms.

· Inadequate analysis of the impact of the reforms on the availability of legal aid services for clients whose cases remain in scope.

· Failure to adequately address the Government's duties under 'Advancement of equality of opportunity'; failure to consider the wider effects of the proposed cuts.

· Telephone Gateway - lack of detail in consultation; failure to consult adequately, or to give consultees the opportunity to provide an intelligent response.

Human Rights

41. We have concerns that the reforms may be incompatible with European Court of Human Rights case law, which has developed an implied right of effective access to the courts in civil cases, and which provides that each side must be afforded a reasonable opportunity to present his or her case under conditions that do not place him or her at a substantial disadvantage vis-à-vis the other party.

Part 2

Civil litigation costs and funding aspects

42. The British constitutional settlement is one of the oldest in the world, and while substantive law, duties and rights have changed over time, its development has been underpinned by key principles that embody both access to justice and the rule of law.

43. However, in the Law Society's view, the Government's proposals for reform of the way civil court cases are funded undermine access to justice. These changes were also not contained within any party manifesto during the last general election nor included in the Coalition Agreement. It is also notable that these proposals do not appear to solve any real or identified set of public policy issues - rather they appear to be designed to deal with unjustified perceptions of problems that don't exist in practice.

44. These reforms have not been forged through debate between elected politicians or Parliamentarians; the changes are based upon a lengthy report made by Lord Justice Jackson. While judicial inquiries have long been a feature of our political system, it is rare for the results of such an investigation to produce wide-ranging proposals that affect public policy, civil rights and the way in which citizens can seek legal redress against other citizens, as well as government itself. The report was not accompanied by any substantive impact assessment and therefore the scope for unintended consequences remain.

45. It is therefore even more disappointing that once the report had been considered by Government what then emerged actually removed many of the meritorious parts of the proposals. Lord Justice Jackson was explicit in advocating that the proposals formed a single interlocking package, which would only operate as envisioned if the reforms were introduced as a whole. But when the Government published its plans it was clear that many of the proposals had been 'cherry picked', with a variety of changes and modifications. Indeed, the excellent proposals that legal aid should be retained in many types of civil case - and that referral fees for personal injury claims should be abolished or limited - were deleted. Civil legal aid is now being substantially cut by the very same Bill. The Society believes that this is not a good example of proper, evidence-based policy development and because of this, the Government now risks introducing uncertainty and instability into the civil justice system, coupled with years of satellite litigation.

46. In the 1990s the government introduced Conditional Fee Agreements (based on a 'no win, no fee' basis) in order to partly alleviate reductions in civil legal aid. The current Government is now further reducing the scope of civil legal aid while introducing changes to 'no win, no fee' agreements that will make them much harder (and in some cases impossible) to be used. This will mean that only the very affluent could have access to civil justice in future and the ability to enforce their legal rights.

47. It remains the case that while there will be many losers if the proposals are implemented (including accident victims, victims of negligence and wrong-doing, small and large businesses and even the Government itself) there will be a set of very clear winners - the general liability insurers - who wholeheartedly support these plans. And insurers will particularly benefit in cases where they represent the wrong-doer against the innocent victim. While the Government is with one hand quite rightly trying to place the victim at the heart of the criminal justice system, it is with the other seemingly removing the victim from the heart of the civil justice system - and replacing them with the insurance lobby.

48. Because of these issues the Society therefore welcomes the fact that consideration of the Legal Aid, Sentencing and Punishment of Offenders Bill will finally allow some (but not all) of the more contentious proposals to be the subject of proper debate among parliamentarians, especially given the effects these changes will have on the public's ability to properly uphold their rights.

Making Success Fees and After The Event (ATE) Insurance Premiums Non-Recoverable will be unjust, unfair and unworkable

49. The Government's intention is to repeal provisions originally introduced to protect access to justice for those accident victims who would no longer qualify for legal aid, by now making success fees and ATE premiums non-recoverable from the losing defendant under 'no win, no fee' agreements. Success fees will now be taken from the claimant's general damages up to a cap of 25%.

50. The availability of 'no win, no fee' with recoverability of the success fee and ATE claimant has protected claimants from adverse costs orders and any liability for their own solicitor's costs; this means that meritorious accident victims whose financial circumstances prevent them from taking on these risks were able to pursue their cases and obtain compensation. However, the Government's proposals will seriously undermine this in future. The consequences will be:

· Abrogation of the restitution principle, as injured victims will no longer receive 100% of their compensation. Victims who have suffered harm due to the wrongdoing of others will now lose a significant proportion of their damages;

· In contract or debt matters, the creditor may lose a significant proportion of the monies legally due under the contract. As a result, many businesses may suffer;

· Restriction of success fees to 25% of general damages in all cases will mean that many claims will be uneconomic to pursue, particularly those of lower value or greater complexity;

· Many victims with catastrophic injuries will lose out in that their damages will be reduced and/or solicitors will not take on their case due to the complexity and the restriction on success fees;

· The legal services market is unlikely to be willing to absorb the greater losses that cases of lower value, higher risk and/or higher complexity would present under these proposals, with an accordingly drastic reduction the availability of access to justice for claimants with these types of claims.

Example: Making Success Fees non-recoverable

Michael has been badly injured due to someone else's negligent behaviour, and wishes to pursue a claim for compensation. He plans to use the compensation to pay for the adjustments he will have to make to his life as a result of the injury.

Michael cannot afford the costs of hiring legal representation and he is not eligible for legal aid, so he finds a solicitor willing to take his case under a conditional fee ('no win - no fee') agreement. These agreements allows his solicitor, Lucy, to charge a 'success fee', the purpose of which is to compensate Lucy for the risk of not being paid in the cases she does not go on to win. This allows Lucy to provide people like Michael access to justice even in cases that are not certain to win, for example, in cases of greater complexity.

If Michael were to win his case under the existing rules, Lucy's success fee would be taken from the defendant, along with the legal costs of the case. This would mean Michael would receive the full amount of his compensation and could make the necessary adjustments to his life. Under the Government's proposals, success fees would not be recoverable from the losing party, but would instead come from up to 25% of Michael's compensation. Michael would be left with only three-quarters of his compensation, potentially leaving him to rely on the state for additional help.

In cases where the amount claimed was relatively low, or the facts more complex, the amount of success fee due to Lucy could substantially exceed the 25% of Michael's damages from which they are recoverable. Lucy would therefore be less able to cover the costs of those CFA cases she lost, and as a business decision would therefore be forced to stop providing representation for people with these kinds of cases.

Example: Making ATE premiums non-recoverable

When considering whether to pursue his case, Michael realises that if he loses, he will incur a level of debt that he will be unable to cope with, which could mean bankruptcy or losing his home. In order to mitigate this risk, Michael takes out After the Event (ATE) insurance, which means that a single premium is paid for a policy that will cover the costs should he lose.

Under the present rules, this is again payable by the losing party, meaning that if Michael wins, he will still receive his full compensation. However, under the proposed changes the premium will no longer be recoverable from the losing party so Michael either has to take the risk that he will be faced with a costs order from the other side that he cannot pay or a further reduction to his compensation.

Qualified One Way Cost Shifting (QOCS) In Personal Injury Cases

51. Under this proposed change to personal injury cases, defendants would continue to pay the claimant's legal costs if the claim is successful (but not the success fees or ATE premiums). Claimants however, would not pay the defendant's legal costs where the claim is unsuccessful unless a claimant was shown to have 'acted unreasonably' or was of 'sufficient financial means'. It is argued that, under these arrangements, ATE insurance will be unnecessary for claimants. While these changes are not in the Bill they form part of the inter-locking framework of the Jackson proposals and the Society expects them to be introduced concurrently by the Civil Procedure Rules Committee.

52. The consequences of these changes will be:

· The creation of legal uncertainty for claimants, as they would not know from the outset what, if any, adverse costs liability they may face. This would act as a bar to justice, as claimants would not be able to proceed without the risk of serious and uncertain financial liability. In practice this would manifest as the risk of losing their homes, facing bankruptcy or falling into serious debt;

· This uncertainty would lead to satellite litigation ('costs wars'), as parties sought to determine the extent of the terms 'acted unreasonably' or being of 'sufficient financial means'. Even if unsuccessful claimants were required to make a minimum payment towards the defendant's costs, the same type of litigation would arise over the defendant seeking their full costs based on unreasonable claimant behaviour.

· A dramatic reduction in the availability and/or affordability of ATE products, which would still be required for non-personal injury claims;

· Subsequent loss of the claims screening function that ATE provides. In combination with removal of a major disincentive for bringing claims (adverse orders to pay defendant's costs), this would lead to an increase in speculative, vexatious and unmeritorious claims.

· An increase in litigation costs for successful defendants, particularly local authorities and/or SMEs, due to the nature of the "self insurance" arrangements typically used in public liability cases;

· An increased legal costs burden for Police, Ambulance and other public authorities, who are exempt from Road Traffic Act insurance requirements, if they successfully defend RTA claims;

· Defendants would unjustly have to consider settling unmeritorious claims for economic reasons due to the risk of paying their own high legal costs even if a claim against them is unsuccessful.

Example: Qualified One Way Costs Shifting in Personal Injury

Michael continues to deliberate whether to take his case forward. This is primarily a financial question, as if Lucy did not think Michael's claim had a reasonable chance of winning on the legal questions, she would not have agreed to represent him.

Michael would be primarily worried about whether he would be liable to pay the other party's costs. Under the QOCS proposal, Michael would not have to pay the defendant's costs if he loses, unless he is shown to have acted 'unreasonably' or is of 'sufficient financial means'. Far from making it an easier decision, these uncertain terms, undeveloped in the proposals and with no history of case law in this context, would make it very hard for Michael to judge his total financial liability if he loses. He could well be inhibited from pursuing his claim for this reason, regardless of his chances of success. Michael's opponents will also probably frighten him further by emphasising that they think he is acting unreasonably and that they will seek costs against him.

If Michael were to try to mitigate this risk by taking out ATE insurance, he would find it harder to do so under the proposals; the increased uncertainty would be reflected by an increase in the premium payable, or simply reduced availability. If he won, this higher premium would of course further diminish the compensation he receives.

To take the alternative perspective, Michael's opponent could be a business or any one of many public service providers, including the Police, the NHS or a local authority. Even if they were to be successful in defending Michael's claim, they would be liable to pay their own costs, which in complex personal injury claims could be very substantial. These bodies would have to spend increasing amounts to defend themselves (with a correlating impact on the public purse, either through lost tax revenue or greater public spending), and in terms of principle, they would be footing their own costs even though they had been shown to have done nothing wrong.

General damages for pain and suffering to be increased by 10% - too little, too late

53. The Government is also proposing to increase damages paid to successful claimants by 10%. Despite the evident incongruity of the figure with the 25% of damages that claimants may lose, this change has been justified on the basis that it will make up for claimants having to pay success fees out of their own damages. However, there is no such proposal contained in the Bill and so the consequences of this change will therefore be:

· Impossible to police. There will be no way of knowing if 10% is added to damages in cases which settle without judicial intervention;

· The proposed increase would not compensate claimants for the loss of up to 25% of their damages through success fees;

· Many cases are settled by the acceptance of a 'global' figure and in those cases it is impossible to distinguish between general damages and special damages. Additional costs would be incurred in argument over which proportion the 10% increase should apply to.

Example: General Damages increased by10%

Michael receives an offer of settlement from the other party, which in practice would be offered and paid for by their insurer. Under the proposals, Michael would be entitled to a 10% increase on the existing level of compensation paid out on the type of injury he has.

However, neither Michael nor Lucy would have any way of knowing whether this settlement represented 110% of the typical compensation paid before this change to the system was implemented. There is no way that this could be policed, and insurance companies would have a strong financial incentive to keep the details of compensation payouts obscure, to the detriment of successful claimants (and to the benefit of the companies' shareholders).

Even if Michael did receive 10% more damages than he otherwise would have, he would still receive less than full compensation because the increase would in the vast majority of cases not cover the success fees and ATE premium taken from his damages.

Who are the winners and the losers from the proposals?

Low to Middle Income Earners - Losers

54. The proposals would have a devastating impact on access to justice, at a time where legal aid is already under threat. CFAs were deliberately introduced to facilitate access to justice for middle income people who did not qualify for legal aid, in the context of successive cuts to legal aid funding.

55. Proposals to make claimants pay CFA success fees from their damages will cripple access to justice through this remaining route. With the amount of success fee limited to 25% of the value of the claim, many claims will be uneconomical to pursue, particularly those of lower value, high risk, or great complexity. Provision of CFAs in these cases will accordingly vanish, leaving people with no route to obtaining justice.

56. The Law Society's concerns are widely shared. In its recent report on Complaints and Litigation, the Health Select Committee explicitly acknowledged the harm that the proposals present, particularly in combination with legal aid proposals to remove clinical negligence from scope. It expressed concern over the negative impact they would have on "some of the most seriously injured or disabled claimants, both by reducing the value of final settlements (after erosion by fees) and by undermining access to justice".

Businesses - Losers

57. In a volatile and depressed economic climate, the proposals would saddle small and medium sized businesses with extra costs, and in some cases make it impossible for them to pursue money owed to them in court.

58. The effects of the proposals on the ATE market would mean businesses would find it harder to protect themselves from the risks of losing a case and then having to pay the defendant's costs. Businesses would be inhibited from taking action to recover debts in future.

59. Businesses would also have to pay for their legal costs out of any damages they win. If a business had a dispute over money owed to them it would be much harder to pursue a claim, allowing bad debtors to escape without paying.

60. Finally, firms who faced claims for personal injury would be similarly disadvantaged; QOCS would mean that businesses would have to pay their own costs even if their defence was successful. While many companies take our insurance, a number choose to self-insure. Even those with insurance are like to have an excess to pay on the policy, putting the business directly out of pocket when it has been proved to have done nothing wrong.

Taxpayers - Losers

61. Under the proposals, claimants would not be entitled to the full amount of their compensation, as in excess of 25% of which would be used to pay success fees and ATE insurance premiums, in breach of the principle of restitution. Where the restitution principle is not adhered to, the state - and therefore the taxpayer - would be liable to pick up the costs of this shortfall; for example, an accident victim who was not fully compensated could well have to rely on the state for additional assistance, with a according cost to the taxpayer.

62. Entirely separately, the legal uncertainty arising from the introduction of QOCS would result in lengthy costs wars, as parties tested the limits of the law, unnecessarily taking up vast quantities of court time and resources.

The insurance industry - Winners

63. While the proposals include a 10% increase in damages, which in practice is typically paid by insurers, this rise will be impossible to police. In addition to the difficulties in assessing whether the courts are consistently enforcing this increase, there will be no mechanism for determining whether this increase is being applied in settled cases.

64. Were insurance companies not to consistently pay the increase, experience shows that these savings would not even be passed on to consumers in the form of lower premiums, but rather used to increase the profits of the insurance industry - as occurred with the RTA claims process.

65. Furthermore, winning claimants would effectively be underwriting the costs of losing claimants from their damages. We believe this burden should properly sit with insurers as it does now, whose resources allow them to spread this risk more effectively. The catastrophic impact of the proposals on access to justice, particularly when combined with planned reductions of scope for legal aid, has not been assessed by the Government.

Clause 52 (and Schedules 6 and 7) - Limiting the Costs Recovered by People Acquitted of Offences to Legal Aid Rates

66. At present, s 16 of the Prosecution of Offences Act 1985 allows a court to order that an acquitted defendant who has privately funded his or her legal representation should have his or her legal costs reimbursed out of central funds. The order will be for such amount as the court considers reasonably sufficient to compensate the defendant for any expenses properly incurred in the proceedings. This may be determined by the court, or more commonly, by an agency of the HMCTS known as the National Taxing Team ('NTT'). The amount of costs are limited to what is reasonable and are governed by case law, regulations and NTT guidance notes.

67. The Clause 52 will provide the Lord Chancellor with a power to cap the amounts that the courts award for the purposes of proceedings in England and Wales, other than in relation to costs incurred in proceedings in the Supreme Court. It will also largely prevent orders being made in respect of legal costs (that is, lawyers’ fees, charges and disbursements including expert witness costs) where legal aid is available.

68. The Law Society believes that if the state wrongfully prosecutes the state should bear the costs the defendant has reasonably incurred in defending the case and the acquitted defendant should not be out of pocket.

69. In the common law system of justice, costs generally follow the event. Where an innocent defendant, who has had no choice but to defend the case brought against them by the state, is acquitted it is fundamentally unfair that they are unable to recover their reasonable costs.

70. Successful defendants who have funded their own defence (including defendants who are now excluded form any entitlement to legal aid by means testing) will generally face a very considerable shortfall of irrecoverable costs. Having been subject to prosecution by the state and having obtained an acquittal, such defendants will be forced to bear a significant part of the reasonable and properly incurred costs of their own successful defence.

71. The effect of limiting the amount of costs recoverable on acquittal to legal aid rates in the Magistrates' Court, and effectively to zero in the Crown Court (on the basis that everyone is entitled to legal aid with a recoverable contribution) will allow the Government to suppress the overall the level of fees payable to defend criminal cases, and the criminal legal services sector will accordingly be reduced. Many criminal defence firms, who are already in a fragile financial state, are only able to survive and conduct poorly remunerated legal aid work cross-subsidised by privately paid cases.

72. It is a fundamental principle of natural justice that when individual have had to defend themselves against a prosecution brought by the state, and have been acquitted of any wrongdoing, provided they meet certain criteria, they should not find themselves in a worse position financially than they were before the prosecution was brought. In criminal cases the citizen has no choice as to whether or not s/he is a party to the proceedings. The state deliberately visits prosecution on an individual and the individual incurs costs as a result of the prosecution. It is fundamentally unjust not to compensate the individual, who has not even brought suspicion upon himself, for the costs properly and reasonably incurred in defending him/herself.

Part 3 Chapter 6: Out of court disposals

73. Under the Criminal Justice Act 2003 a relevant prosecutor must decide that there is sufficient evidence to charge an offender and that a conditional caution should be given. Clause 107 will enable an 'authorised person' to make this decision - they will generally be a police officer. The Law Society opposes giving the police the power to authorise conditional cautions, and the strongly submits that the Crown Prosecution Service retain this power.

74. Conditional cautions, unlike simple cautions, have consequences and require follow-up, and are therefore akin to a sentence that should properly be imposed only by a court or, in the very least, by a prosecuting authority that is independent of the investigative process. The police should not be able to act as investigator, judge and executioner. The role of the CPS in the process is an essential safeguard and helps to increase consistency of decision-making with regard to conditional cautions.

75. We fear that the police will impose conditions that may not be appropriate, with the result that the offender will fail to comply with the conditions, and result in their being charged. Police already impose what may be considered to be very onerous, and perhaps unnecessary, conditions of bail. We fear that police having the power to authorise conditional cautions, without referral to a lawyer at the Crown Prosecution Service, will result in the inappropriate use of this out of court disposal.

July 2011

Prepared 14th July 2011