Legal Aid, Sentencing and Punishment of Offenders Bill

Memorandum submitted by the Motor Accident Solicitors Society (LA 17)

Introduction

1. This written evidence is submitted on behalf of the Motor Accident Solicitors Society (MASS). MASS would very much welcome the opportunity to provide oral evidence to the Public Bill Committee, believing that we have unique knowledge and experience of the personal injury (PI) civil litigation process.

2. MASS is a society of 180 solicitor firms throughout the UK acting for the victims of motor accidents, including those involving PI. It is estimated that member firms conduct upwards of 500,000 PI motor accident claims annually on behalf of the victims of those accidents.

3. The central objective of the Society is to promote the best interests of the motor accident victim. We seek to promote only those policy and other objectives which are consistent with the best interests of the accident victim. We seek to set aside any self interest in promoting these arguments, recognising that we are in a position of trust, and best placed to observe the best interests of motor accident PI victims first hand.

4. MASS is a not for profit organisation, which requires specialism in motor accident claimant work as a pre-requisite for membership. As a condition of membership, MASS member firms must abide by a Code of Conduct, which is directed to the best interests of the motor accident victim.

General comments and observations

5. As a Society, MASS has always have been supportive of moving forward with efficiency and technology to make the compensation process in low value straightforward cases more proportionate and cost effective, without reducing access to justice. We have engaged fully and constructively in the development of the Road Traffic Accident (RTA) PI scheme and we continue to be engaged in ensuring that going forward the Portal works more effectively.

6. Whilst MASS shares the Governments dual objective of preserving and enhancing Access to Justice at proportionate cost, we have serious concerns about the "one size fits all" approach being suggested by the legislation before Parliament. We believe that proper care over evaluation and implementation are essential to avoid a variety of unintended consequences that would inevitably lead to further reviews and adjustments to the civil litigation environment in the near future.

7. MASS acknowledges that the current system is far from perfect. It is entirely understandable given the wider economic environment that the Government wishes to analyse ways of reducing cost in maintaining the court system. MASS is happy to work with the Government to help ensure that this process is conducted with carefully considered and evidence-based solutions.

8. We do, however, believe that the interpretation of Lord Justice Jackson’s recommendations represented in this Bill will have a number of detrimental consequences to the civil litigation process and will significantly impact on the ability of the majority of Road Traffic Accident (RTA) victims to access justice.

9. We believe that important principles of our justice system must be preserved: specifically Access to Justice and proper compensation to accident victims. Both of these key foundations of our legal process are threatened as the Bill is currently drafted.

10. MASS has always been extremely concerned about many of Lord Justice Jackson’s recommendations. This is exacerbated by the Governments subsequent piecemeal interpretation and implementation of some of Lord Justice Jackson’s recommendations in this Bill.

11. In its current form, the Bill does not address several fundamental issues at the heart of necessary reform to civil justice in the UK and ensure access to justice by; excluding the implementation of Qualified One-way Cost Shifting (QOCS) which was proposed to eradicate the need for After-The-Event (ATE) insurance or legal costs; making no provisions for an overall increase in general damages for Pain, Suffering and Loss of Amenity and considering further the complex and costly issue of referral fees.

12. Qualified one-way cost shifting was an integral part of Jackson’s reforms, designed to eradicate the need for after-the-event (ATE) insurance or legal cost. Under this scenario, claimants would not be liable for defendant costs in civil claims and the insurer would pay in any case, as long as there was no unreasonable behaviour and the claimant was not ‘conspicuously’ wealthy. Thus it was proposed that the need for ATE insurance was eliminated, effectively introducing a quid pro quo that balanced the impact on consumers.

13. As such, Lord Justice Jackson recommended that success fees and ATE premiums would be made irrecoverable in conditional fee arrangements, with the insurer costs coming out of any damages awarded to claimants. However the failure to implement the qualified one-way cost shifting recommendation and the non-recoverability of success fees and the ATE insurance premium has in short removed the ‘quid pro quo’; effectively saddling consumers with the same or increased costs and reducing their damages.

14. Removing recoverability of ATE Insurance premiums and success fees and the introduction of Damages-Based Agreements (DBAs) (Clauses 41-43) will lead to a huge reduction in the damages for the most seriously injured victims and will seriously threaten the important legal principle that damages are restorative (the accident victim should always be returned to the position they were in before being involved in an accident through no fault of their own).

15. The Bill does not address the very important issue of the levels of damages to be awarded to the accident victim. In order to go some way to counteract the non recoverability of ATE premiums and success fees (which will have to be paid out of damages received), Lord Justice Jackson recommended an overall 10% increase in general damages for Pain, Suffering and Loss of Amenity. The Governments decision not to include this within the Bill is condemned by MASS and the claimant community at large. MASS believes that an increase in general damages awards for personal injury is long overdue and would argue that the proposed 10% increase, whilst welcome, was still woefully inadequate, bearing in mind there has been little or no real increase for over 10 years. By proposing to increase the costs that accident victims will have to pay (ie ATE premium and Success fee) and not increasing damages levels to assist with this extra cost the Government has penalised the accident victim still further and reduced their right to fair and just compensation and ultimately access to justice as many will simply not be able to afford to make their claim.

16. MASS refers to the analysis of Stewarts Law data which found that all cases settled for damages of £25,000 or more concluded between May 2007 and 2009, and applying the proposed 10% increase along with the bulk of Jackson’s reforms, gave the following results:

· Average general damages increase £11,532.

· Average reduction of damages from success fees £58,664.

· Average net loss to the Accident Victim £47,132.

In one case involving a young tetraplegic man, this would have reduced his damages by £236,044.

17. It can therefore be seen that although there may be some benefit for a small number of claimants, even the Jackson proposed uplift of 10% would undoubtedly be insufficient to counteract the detriment to the majority of claimants, with the most seriously and tragically injured likely to see the largest reduction in the compensation they receive. This will make it increasingly difficult for a person who has been injured due to someone else’s negligence to find, or fund, a lawyer to represent them. To therefore bring in proposals to increase legal costs (payable by the accident victim), without any increase in the level of damages is nothing short of scandalous.

18. MASS challenges the view of successive Governments that the UK is gripped by a "compensation culture" and that legal costs are too high and unfair on the insurance industry. In 2004 the Cabinet Office’s Better Regulation TaskForce ("Better Routes to Redress the Compensation Culture; Exploding the Urban Myth") demonstrated that the perception of a compensation culture is more a myth than reality.

19. From 2000/1 to 2009/10 employer’s liability claims fell from 219,183 to 78,744 and public liability claims fell from 95,883 to 91,025. But over the last five years, motor accident claims rose from 401,757 to 674,997, an increase of 47%.

20. MASS believes that there is increasing evidence that increased costs in civil litigation are primarily the result of insurer/defendant action, rather than those of claimants or their solicitors.

21. A major contributor to this increase in the number of motor claims has been insurer activity in the referral fee market, by leading price inflation; and in third party capture by promoting claims which would not otherwise be pursued - solicitors have to carry out strict risk assessments and MASS members estimate that up to 40% of claims received are not pursued.

22. According to ABI Annual Insurance Statistics, the costs that insurers have incurred over the last five years to 2009/2010, for RTA PI have risen 15% from £8.2 billion to £9.4 billion However, with the number of motor accident claims also having risen steeply (see paragraph 20), the subsequent amount that each claim is costing has actually fallen by around 22%.

23. Consequently before fundamentally changing the procedure for the funding and costs of civil litigation, MASS strongly urges the Government to carry out further detailed research on the true and actual cost of claims, which must not only include the actual cost of claims but also the income derived from claims such a referral fees and commissions received from other parties in the claims process. Whilst referral fees are currently a very controversial issue, it is important to establish full transparency on the income they generate as well as the amount of money that may be made available to serve the accident victim should they be removed from the system.

24. MASS believes it is important to emphasise that in order to provide true Access to Justice, the consumer must have access to professional and independent legal advice. If costs are driven down much further, legal representation for the accident victim will be inadequate, in an industry where there is such a clear need for independence and representation. This is exemplified with Third Party Capture which MASS has consistently campaigned against. MASS questions what justice the accident victim receives when the insurer acts as judge, jury and paymaster.

Clause 41: Conditional fee agreements: success fees

25. Clause 41 will mean that a success fee under a Conditional Fee Agreement (CFA) will no longer be recovered from a losing party in any proceedings. A lawyer will still be able to recover a success fee from a client under a CFA, but how it is to be calculated in certain proceedings will now be subject to further regulation.

26. A cap on success fees might appear at face value to benefit consumers by reducing costs within the personal injury system by maximising compensation for victims; however the unattended consequence will undoubtedly be a limitation of access to justice.

27. Stewarts Law data, published in April 2011, and submitted to the Justice committee by the Motor Accident Solicitors Society (MASS), found that in the most seriously injured category of accident victims (with damages in excess of £250,000), around 44% of their claims may not be capable of being brought if there was a cap on success fees.

28. In short, the result of the cap will be that high risk cases, which would normally be economically viable due to a proportional success fee, will be highly unattractive to lawyers and claimants will have increasing difficulty finding representation to take their case, threatening justice for claimants.

29. For example, analysis of the same Stewarts Law data sample, applying the Jackson model, gave the following results:

· An excess of 75% success probability required to make a case commercially viable.

· Those at risk beyond 25% would be at risk of not being represented.

· In 26% of cases, the Accident Victim would not have been represented post implementation.

· A further 18% would have been borderline acceptance cases.

30. Virtually all complex or catastrophic injury claims would be borderline at best without the ability to recover a 100% success fee.

31. Changing the funding system to one that requires accident victims to pay for legal advice out of their damages, is, we believe, fundamentally wrong.

Clause 42: Damages-based agreements (DBAs)

32. Clause 42 enables the use of DBAs in most civil litigation by persons providing advocacy services, litigation services or claims management services.

33. MASS regard DBAs as a potential further erosion of the long established principal that an innocent party should be placed back in the position they would have been but for the accident. The legal system should protect the most vulnerable in society. DBAs would potentially significantly reduce damages recovered by those injured.

34. The suggestion of independent legal advice underlines the risk and potential conflict of interest that can occur in these agreements. These agreements could act against the interests of a claimant and have a serious detrimental impact on the ultimate damages recovered.

35. The current professional rules of conduct can be relied upon to ensure that a claimant is adequately advised as to the availability and impact of DBA (or other) funding agreements. However the arrangements for, and cost of independent advice, would either increase the financial burden upon the claimant or (if recoverable from the responsible third party) increase the cost of claims for liability insurers.

36. MASS feels that DBA’s would not be attractive in lower value claims and in any event motor accidents are adequately covered by fixed recoverable costs and the new streamlining process. MASS therefore see’s no need to introduce DBA’s where costs are already fixed without the need for making deductions from the clients damages and thereby reducing their Access to Justice.

37. MASS is opposed to DBAs as they erode the client’s compensatory award and their Access to Justice. However, if DBAs are introduced and QOCS is introduced for claims under CFAs it should be extended to DBAs as well.

38. Should solicitors be permitted to maintain their client’s actions the percentage recovery from damages should not be increased. The risk being that this could encourage the less scrupulous lawyer to advise on such an arrangement so as to improve their potential share even where the risk was modest/low. Moreover, building in such distinction only serves to complicate the arrangement which is already complicated for a consumer client. The additional explanation required (either independent or otherwise) only serves to make the provision of legal services less accessible.

Clause 43: Recovery of insurance premiums by way of costs

39. Clause 43 makes new provision relating to the recoverability of insurance premiums from a losing party. The effect of the new provision is to provide that the cost of any insurance policy taken out by a party to insure against the risk of having to pay their opponent’s costs and their own disbursements if they lose cannot be recovered from a losing party except in certain limited circumstances.

40. The view of MASS is that costs recovery from the opponent should be on the conventional basis but any additional liability should also be borne by the losing party. The additional liability should not be borne by the claimant as that only serves to erode the damages which are intended to place the claimant in the position they would have been but for the defendant’s negligence.

41. MASS is totally opposed to any deduction of the clients damages as these are to put the client back in their original position had the accident not occurred, pursuant to practice over the last decade but rooted in our legal system. MASS is also concerned about the impact 25% would have on preventing cases of maximum severity being pursued at all, unless the probability of success is in excess of 75%.

42. MASS disagrees that claimant’s solicitors should take the risk of paying disbursements. This is in effect maintenance of an action. Moreover, such a position could place a solicitor in a position of potential conflict where their consideration of the recovery of a disbursement is in actual or apparent conflict with the claimant’s desire for recovery of his or her losses. Whilst such a conflict will be much less likely in cases with strong prospects of success it will be much more common where there are moderate prospects of success (say 60 – 70%). It is this category of cases that consumers would be most vulnerable and Access to Justice might potentially be jeopardised.

July 2011

Prepared 18th July 2011