Appendix: Government response
Letter dated 4 December 2014 from Lord Faulks QC, Minister of
State for Justice, to Rt Hon Sir Alan Beith MP, Chair, Justice
Committee
Government Response to the Justice Select Committee
Report on Mesothelioma Claims (Third Report of Session 2014-15)
I am grateful to the Justice Select Committee for
their report on Mesothelioma Claims (Third report of Session 2014-15),
which was published on 1 August 2014.
I am writing to set out the Government's response
to the recommendations made in the report. As agreed with the
Committee, this response is later than the usual two months because
of the need to consider how to respond to the court's judgment
on this issue, which was handed down on 2 October.
As you are aware, this Government made an early priority
of controlling legal costs which had become unsustainably high.
We made changes to the law on how 'no win, no fee' conditional
fee agreements (CFAs) operate, following recommendations by Lord
Justice Jackson. The CFA reforms in Part 2 of the Legal Aid, Sentencing
and Punishment of Offenders Act 2012 ("the LASPO Act")
were delayed for mesothelioma cases pending the outcome of the
section 48 review.
The LASPO Part 2 reforms came into force generally
on 1 April 2013, and already apply to all other personal injury
cases, in particular other serious claims which also have tragic
consequences — such as catastrophic injuries involving a
need for life long care, and a reduction in life expectancy.
On 24 July 2013, the Government published the 'Reforming
Mesothelioma Claims' consultation paper, which considered
specific proposals intended to improve the efficiency and, where
necessary, the speed of the process for claimants to recover compensation
in cases where a liable employer or insurer is traced. The consultation
also covered the review by the Lord Chancellor required by section
48 of the LASPO Act regarding the likely effect of the application
of the 'no win no fee' CFA reforms to mesothelioma claims. In
assessing the information provided by respondents to the s.48
review, the Government concluded that: (i) no evidence was provided
that the LASPO impacts would not be similar for mesothelioma cases
as for other personal injury cases; (ii) no evidence was provided
to the effect that mesothelioma cases are sufficiently different
regarding costs and funding matters to other personal injury cases
such as to merit differential treatment; and (iii) no evidence
was provided to show that mesothelioma sufferers in particular
are worse off with LASPO being implemented.
The Government announced its decision following that
consultation on 4 December 2013, stating that it had decided to
commence sections 44 (conditional fee agreement: success fees)
and 46 (recovery of insurance premiums by way of costs) of the
LASPO Act for mesothelioma claims. The Government's substantive
reasons were set out in the consultation response on 6 March 2014,
which included the report under section 48 of the Act.
That decision was also subject to an adjournment
debate held in Westminster Hall on 29 January 2014, called by
Mr Andrew McDonald MP, a member of your Committee.
The Government's decision was challenged by judicial
review. It was also the subject of the Justice Committee's inquiry,
to which I gave evidence on 17 June.
The judicial review was heard on 29 and 30 July.
On 2 October, the High Court overturned the decision to apply
the LASPO reforms to mesothelioma cases. No win no fee agreements
in mesothelioma cases therefore continue for the time being to
operate on a pre-LASPO Act basis with any additional legal costs
— success fees and after the event (ATE) insurance premiums
— remaining recoverable from the losing party. However,
in line with its overall policy, the Government will undertake
a review under s.48 of the Act in due course to identify the likely
effects of the LASPO reforms on mesothelioma cases and will then
consider whether, in the light of that review, there is a case
to maintain the exception of these cases from those reforms.
Details of the format and timing of the review will be set out
at a later date. We will of course take into account the Court's
judgment and your Committee's recommendations as part of that
process.
The Committee's recommendations are set out in bold
text below, followed by the response by the Government on each
point.
1. We recommend that the Government commission
an independent review of the risks of success and failure of all
mesothelioma cases to inform the setting of a maximum level of
success fee, expressed as a percentage of costs, for lawyers representing
claimants in such cases. We also recommend that the Government
commission research to evaluate trends in the ATE insurance market
in relation to personal injury claims since the provisions of
Part 2 of LASPO came into force.
Lord Justice Jackson found that the pre-LASPO CFA
and ATE arrangements were 'the major contributor to disproportionate
costs in civil litigation in England and Wales'; that is why the
LASPO Act reforms were introduced. In the Government's view,
it is preferable to control legal costs through market competition
where possible. For the time being, while the pre-LASPO arrangements
continue to apply in mesothelioma cases, the maximum success fee
that can be charged in mesothelioma cases is 27.5% (of base costs)
in cases that settle and 100% in cases that go to trial.
The size of the success fee that a lawyer may charge
is capped at 100% of base costs in all cases. In all other personal
injury cases (apart from mesothelioma cases) the success fee is
further controlled by an additional rule, that it may be no more
than 25% of the damages (excluding any damages for future care
and loss which are protected for claimants in their entirety).
In relation to Committee's recommendations regarding
the risks of the success and failure of mesothelioma cases and
trends in the ATE insurance market, the Government will bear those
recommendations in mind when considering what evidence and research
may be necessary for the conduct of the s.48 review.
2. We recommend that progress on drawing up this
legislation be expedited with a view to its inclusion by means
of amendment in a suitable Government bill this Session. The Small
Business, Enterprise and Employment Bill, Part 10 of which contains
a range of provisions concerning insolvency, would seem to be
a suitable vehicle.
The legislation to which the Committee refers is
the Third Parties (Rights against Insurers) Act 2010, which is
yet to be implemented. The Government considers that the 2010
Act needs certain technical amendments so that it can be implemented.
It has introduced the necessary provisions in the Insurance Bill,
which was introduced in the House of Lords on 17 July. The Bill
has passed its Second Reading and is to be considered by a Special
Public Bill Committee. I hope the Committee will be reassured
that this is now in hand and good progress is being made.
3. We welcome the amendment which has been made
to the Deregulation Bill to facilitate production by HM Revenue
and Customs of employment histories of mesothelioma victims seeking
compensation under the Diffuse Mesothelioma Payments Scheme. We
recommend that the Ministry of Justice pursue in tandem with the
Department of Health the provision of guidance to NHS trusts to
expedite their production of medical records in mesothelioma cases.
The Ministry of Justice is working closely with stakeholders
to see how we can improve the claims process for these compensation
cases. We have included provisions in the Deregulation Bill, currently
before Parliament, which will enable HM Revenue and Customs to
disclose the work records of deceased victims to their legal representatives
and dependants without — as now — the need for a court
order.
We are also working with the National Cancer
Registration Service, Public Health England and others to secure
resources to expedite receipt of hospital medical notes (pathology
records and imaging reports) to reduce delays in the claims process.
We believe these changes will benefit mesothelioma
sufferers and their families by providing them with simpler and
quicker access to vital evidence necessary to resolve their claim.
4. We conclude that the Government, perhaps as
a consequence of being forced into the concession of including
an exemption for mesothelioma in the LASPO Act pending a review,
did not prepare the ground for its section 48 review in a thorough
and even handed way. We recommend that the Government defer the
introduction of the change it has announced until it has undertaken
a further consultation, which should be framed unambiguously and
centrally on the question of whether the LASPO provisions should
be brought into effect for mesothelioma. This consultation should
be informed by an updated cost-benefit analysis, on which respondents
should be asked to comment. We consider that such a consultation
should not be undertaken until sufficient time has elapsed for
the effects of the LASPO changes in non-mesothelioma cases to
be assessed.
The Government's decision to commence the LASPO reforms
for mesothelioma cases has now been overturned by the High Court.
As a result of the Court's decision, CFAs in mesothelioma cases
continue to operate on a pre-LASPO Act basis, which means that
any additional legal costs — CFA success fees and ATE insurance
premiums — remain payable by the losing party for the time
being. As a consequence, claimants will of course not receive
the 10% general damages uplift either, since this relates to application
of the LASPO reforms.
As stated above, the Government will undertake a
review under s.48 of the Act in due course. These issues will
be considered as part of that process. Further details on the
format and timing of that review will be set out in due course.
Following the 'Big Tent' meeting the Ministry of
Justice held on 30 June — which was attended by Mr McDonald
on behalf of the Committee, as well as a wide range of stakeholders,
including victims' groups, claimant lawyers, insurers, trade unions
and members of the judiciary (the latter as observers) —
we continue to work with stakeholders to see how we can improve
the claims process for these tragic cases.
The Government has introduced a significant reform
in the Mesothelioma Act 2014. This created a payment scheme for
victims of mesothelioma who are unable to trace a liable employer,
or liable employer liability insurer, from which to claim the
damages they are rightfully due. This is an important milestone
in ensuring that those who were previously unable to claim are
now able to do so. The untraced scheme started making payments
from July 2014; to date over £13 million has been paid under
the scheme to over 230 sufferers or their families.
I would like to thank the Committee for their work
on this important issue.
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