Legal Aid, Sentencing and Punishment of Offenders Bill

Memorandum submitted by Manley Turnbull Solicitors (LA 93)

PROPOSED AMENDMENT SECTIONS 41 AND 43 PART 2 LEGAL AID SENTENCING AND PUNISHMENT OF OFFENDERS BILL

We have considered the submissions to the Scrutiny Committee and have as yet not seen one submission which highlights the extraordinarily wide impact of the proposed reforms in sections 41 and 43 as set out below. The point is:

The entire nation – you, your family, your friends, your business – all currently have the benefit of funding ANY civil litigation case by:-

a. Conditional Fee Agreement (CFA/‘no win no fee’) and the ‘success fee’ is recoverable from the losing opponent; and

b. After the Event insurance (ATE) against the costs of losing the case and the ‘premium’ is recoverable against the losing opponent.

Recovery of success fees and ATE premiums will be abolished under Part 2 of the Government’s proposed Legal Aid Sentencing and Punishment of Offenders Bill.

Many will lose the ability to fund their cases after the law is changed because they will need to pay their own success fees and ATE premium which could add up to more than the damages recovered even if the case succeeds.

The previous PNLA submission to the Scrutiny Committee is referred to as attached which explains the types of typical professional negligence claims that arise. This area is of particular concern for recovery of success fees and ATE funding because it is often the case that there are claimants of vastly inferior financial and legal resources to the professional indemnity insurer and professional defendants. Many claimants are elderly or disabled.

Furthermore the solvency of the claimants frequently depends upon such claimants having the ability to afford the financial risk in litigation costs in the same way as their opponents.

Adding the proposed amendments as set out below will not affect the tax payer nor ordinary people as to their insurance premiums – professionals pay their indemnity insurance premiums normally as a professional conduct requirement from their professional bodies. Underwriters currently can base the level of premium on the risk of claims using the current legal system and judicial process.

Civil claims arise in this area of practice in highly unpredictable and unpredicted situations and in all cases a trusted professional has let down their client. Cases are only brought if lawyers for the claimant assess the chance of success at 60% or more which is the normal minimum requirement for ATE cover to be obtained.

Professionals and their indemnity insurers frequently vigorously defend claims even if their defence is weak perhaps for reputational or other reasons. It is only if they are found liable that the claimant’s success fees and ATE premiums are payable by the wrong doing defendant.

It is an area where claims can cause considerable friction in local communities to the detriment of both the claimant and the professional concerned. There is a need for an efficient dispute resolution process for the protection of the professional and his/her practice as much as for the claimants funding their claims.

Professionals and their indemnity insurers are highly skilled at defending claims and for claimants to be unable to fund a claim – even with a 60% or more chance of success – is likely to cause considerable injustice with predictable consequences in local communities – whether geographic or niche business communities.

This is very much an area of practice where claimant lawyers and ATE insurers take on a genuine considerable risk of non payment when faced with highly novel claims against experienced and well resourced professional defendants and their insurers which may well be found to be weaker than originally thought after the case has travelled for some time and evidence has been scrutinised.

It is an area of practice which generally is a long way from the type of volume low value claims which interest claims management companies in the personal injury sector. Ordinary people and small businesses can have high value claims eg a first time buyer purchasing a ‘home from hell’ based on negligent advice from a surveyor or conveyancing solicitor.

Technical legal defences are common – eg ‘causation’ where it is a defence that the loss claimed in damages was not caused by the negligence. Legal arguments such as ‘failure to mitigate’ and ‘contributory negligence’ are also frequently raised. The quantum of the claim is therefore highly uncertain to predict at the outset and itself can cause many hours in legal costs for both parties to address.

The Scrutiny Committee should ask itself whether or not it is a good thing for claimants to be unable to afford to bring a strong professional negligence claim? – what benefit is professional indemnity insurance if not? - surely the reasoning behind the use of professional indemnity insurance as required by most professional bodies is to ensure that when negligence, incompetence and/or dishonesty happens then there is insurance cover in place. This promotes confidence in the professions themselves. If there is no funding for claims then how can a professional justify the value of its service to clients?

What alternative dispute resolution process is suggested to replace the use of the existing law and judicial processes? The advantage to both professionals, insurers and claimants of using the law, the existing pre action protocol and Court procedure is that there is some certainty in the process for the professionals and their clients – use of non legal processes like the Legal Ombudsman provide uncertain outcomes which may well prove to be wrong in law or as a matter of professional conduct. There may be some justification for using a non legal process in lower value and less complex complaints of poor and inadequate service but also there should be an option for claimants to use the proper judicial process if it is appropriate in their particular case and complex issues of professional negligence and liability are involved.

The impact of a restricted Civil Legal Aid system and abolition of recovery of success fees and ATE premiums is likely to encourage those very professionals who are negligent/incompetent/dishonest. The Government is surely not intending to create a society where those seeking professional advice must do so in the knowledge that if they are let down by such conduct then they have no affordable recourse?

It is also separately submitted that the Government should require appropriate warnings and publicity of the true impact of these reforms on all of us in any civil claim in good time before the Bill comes into force. If there are those with civil claims that can be funded now but not after the reforms take effect – then they should be informed and advised to take legal advice in good time. MPs as elected representatives could be regarded as having a professional duty to their constituents to provide such a warning in particular in the absence of press or media interest.

Proposed Amendments to the Bill

Legal Aid Sentencing and Punishment of Offenders Bill

Part 2

41 Conditional fee agreements: success fees

(1) In section 58 of the Courts and Legal Services Act 1990 (conditional fee

agreements)...........

(4) For subsection (6) of that section substitute-

"(6) A costs order made in proceedings may not include provision requiring

the payment by one party of all or part of a success fee payable by

another party under a conditional fee agreement."....

(6) The amendment made by subsection (4) does not apply in relation to a success

fee payable under a conditional fee agreement entered into before that

subsection comes into force.

(6A ) This section does not apply to non medical professional negligence and liability claims

43 Recovery of insurance premiums by way of costs

(1) In the Courts and Legal Services Act 1990, after section 58B insert-

"58C Recovery of insurance premiums by way of costs

(1) A costs order made in favour of a party to proceedings who has taken

out a costs insurance policy may not include provision requiring the

payment of an amount in respect of all or part of the premium of the

policy, unless such provision is permitted by regulations under

subsection (2)........

(2) In the Access to Justice Act 1999, omit section 29 (recovery of insurance

premiums by way of costs).

(3) The amendments made by this section do not apply in relation to a costs order

made in favour of a party to proceedings who took out a costs insurance policy

in relation to the proceedings before the day on which this section comes into

force.

(6A ) This section does not apply to non medical professional negligence and liability claims

September 2011