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Jackson Report Update

July 3, 2011

The Government is in the process of consulting on the possible implementation of the recommendations made by Lord Justice Jackson in his final report on civil litigation costs, which was published in January 2010. One of the main issues which is causing concern amongst many personal injury Solicitors in respect of both the report and the consultation are in respect of proposed changes that will ultimately result in Solicitors’ costs being deducted from Claimants’ damages.

Conditional Fee Agreements (CFAs), perhaps better known as “No Win, No Fee” agreements, exist primarily to ensure equal access to justice for anyone who wishes to bring a claim, regardless of whether they have the financial means to pay their Solicitor upfront or on a regular fee-paying basis or not.

All personal injury claims arise out of the tort of negligence. Put simply this means that when someone has suffered loss or damage due to the negligent act of a third party they are entitled to be compensated by that negligent party for the loss and damage they have suffered. In other words, they are entitled to be put back in the position they would have been in had the accident not happened. The default position in respect of costs is that costs follow the event and the successful party is entitled to recover their costs of the action from the losing party. If the party bringing the claim is the successful party then damages will also be awarded for the loss and damage suffered.

It is worth mentioning at this point that this principle is at the heart of all personal injury claims no matter how small or large the injury and no matter whether it was caused, for example, by the negligence of a Doctor in a hospital, or a Driver on the road. This is a fact which has been much overlooked by the frequent references to a “Compensation Culture” that has allegedly evolved in our society and the recent “Attack” on personal injury claims arising out of road traffic accidents, also stemming from Lord Justice Jackson’s Report. This particular issue has been discussed in more detail previous articles, which can be found on our website at www.lamb-law.co.uk.

In the absence of a CFA, the Claimant would have to pay their legal fees either upfront or on a regular fee-paying basis. The successful Claimant would then be effectively reimbursed for the costs they had paid to their Solicitor by the negligent party. This practice is all well and good for the potential Claimant who has the financial means to pay for their legal representation on this basis. However, the vast majority of us simply cannot afford to do this, especially in the current economic climate. CFAs were introduced, amongst other reasons, in order to fill the void when legal aid funding was cut from civil litigation. They allow a potential Claimant to enter into an agreement with their Solicitor whereby the Solicitor agrees to wait until the end of the claim for their costs to be paid.

In order to reflect the added risk of the Solicitor taking on a case and not being paid if the case fails, CFA agreements provide for a “Success Fee” to be claimed by the Solicitor as a percentage uplift on top of their base costs. The Success Fee should be proportionate to the risk involved in the case. However, in many areas now the success fee is fixed, for instance, in road traffic claims the success fee payable if the case settles prior to a final hearing is 12.5% on top of base costs and 100% if the matter concludes at a final hearing.

CFAs are usually accompanied either by Before the Event Legal Expenses Insurance (BTE) Policies, or After the Event Insurance (ATE) Policies which insure the Claimant against the risk of the claim being unsuccessful. In the event that the Claimant loses their claim and costs are awarded against the Claimant as detailed above, the BTE or ATE policy will kick in and pay the Defendant’s costs.

In order for a Solicitor to be able to enter into such a funding arrangement with their client they will first have to assess the risk in taking on the case. In other words, they will make an informed decision as to the likelihood of success of the case for the client, and ultimately, from the Solicitor’s point of view, the likelihood that they will be able to be paid at the end of the claim. It therefore could be said that the very existence of CFAs already helps to reduce the number of dubious and frivolous claims, and also those that are simply highly unlikely to succeed, thus saving time and money for the taxpayer, the courts and the legal profession as a whole.

Lord Justice Jackson, in his final report on costs in civil litigation, shows concern for the amounts of costs generated in all civil litigation. The report highlights a particular concern with the level of success fees and ATE premiums being claimed. The report recommends that Success Fees and ATE policy premiums, whilst still remaining valid sources of funding, should cease to be recoverable from the losing party. In other words, a Claimant would still be able to enter into a CFA with their Solicitor and also take out an insurance policy to insure against the risk of losing the case, but they would not be able to recover the Success Fee or the insurance premium from the negligent party. This then leads to the very important question; where will the money come from? The short answer is – From the Claimant.

Lord Justice Jackson within his report seeks to justify these costs being deducted by suggesting an increase in damages across the board by 10%. He also encourages the practice of taking up BTE insurance so that a policy is already in place when the negligent act happens. There are a number of problems with these proposed changes in themselves, let alone with the ethical dilemma they create.

Firstly, it is highly unlikely that an increase in damages of 10% will be sufficient to cover the Success Fee and ATE premiums. Secondly, it is very difficult to encourage people to take out an insurance policy before an accident happens. The average person does not think about protecting themselves just in case a negligent act is committed against them. Finally, and most importantly, it still involves talking money out of a Claimant’s damages, something which flies in the face of the very reason CFAs were devised in the first place, and that goes against the principle at the very heart of civil litigation, that the Claimant must be figuratively put back in the position they were in had the accident not happened in the first place. The proposals within Lord Justice Jackson’s report in relation to the recoverability of Success Fees and ATE premiums simply do not allow this to happen.

We would like to assure the readers and our clients that we are doing everything we can to oppose the implementation of Lord Justice Jackson’s proposals in order to protect everyone’s right to access to justice. We have consulted a number of MPs who have confirmed that they are equally concerned about the proposed changes to CFAs and that they plan to do everything they can to oppose these changes in parliament in order to ensure access to justice for all, especially people from low income backgrounds.

For free, quality advice on your potential claim call Lamb & Co Solicitors today on 0151 632 2213 or text “Claim” to 80809. Alternatively please visit our website at www.lamb-law.co.uk and see what our previous clients have to say about our service.