LASPO – Insolvency cases exempt from reforms

Further news to the LASPO Bill, which was given Royal Assent last month; with the recoverability of success fees and ATE insurance premiums being unavailable with effect from April 2013, insolvency cases will now be exempt from no-win, no-fee reforms until April 2015.

LASPO is still progressing but there are still big issues and small yet significant concessions that bring into question how it will be implemented as early as spring 2013. As discussed in a Legal Futures article, problems with QOCS still exist, the government is “seeking further advice from the Civil Justice Council” with speculation that there may be some issues making the “qualifications work”. QOCS is an important aspect to get right as claimants are intended to be protected from defendants’ costs in most circumstances, even when they lose.

On the concessions side, Mesothelioma cases were excluded during the ‘ping pong’ stage between the Houses until an impact review has been undertaken. The latest exemption from the April 2013 date brings us to the insolvency cases.

As reported in Law Society Gazette, Justice Minister Jonathan Djanogly made a written statement to the House of Commons, “Insolvency cases bring substantial revenue to the taxpayer, as well as other creditors, and encourage good business practice which can be seen as an important part of the growth agenda with wider benefits for the economy. These features merit a delayed implementation to allow time for those involved to adjust and implement such alternative arrangements as they consider will allow these cases to continue to be pursued.”

The Law Society Chief has welcomed the latest decision asking that “this logic applied to other types of cases, where a similar implementation delay, until 2015, would help to avoid unwelcome impacts on ordinary people’s right to secure legal redress.”

The LASPO rollercoaster continues, be sure to check back soon for more news!

For and most importantly against the LASPO Bill

Various government proposals and bills seem to be having a tough time in the House of Lords, not least the rocky ride being shown to the Legal Aid, Sentencing and Punishment of Offenders Bill (LASPO) which proposes cuts to legal aid and sweeping changes to civil litigation.

Currently in committee stage there have already been a few concessions made but with many peers opposed to the Bill the next report stage should be very interesting.

The last couple of weeks have seen a number of articles in the news with varying opinions on the LASPO Bill.

In the Telegraph over the weekend, the Justice Minister Ken Clarke was defending the Bill by highlighting the costs that the NHS pays in success fees to lawyers in clinical negligence cases. According to their figures:

• the number of claims rose from 5,426 in 2006/07 to 8,655 in 2010/11
• legal costs of claimants suing the NHS rose over the same period from £83 million to £195 million
• the cost of defending the actions rose from £49 million to £62 million.

Blaming the compensation culture, Clarke explained that "Taxpayers expect that the system should compensate claimants properly and reward their lawyers appropriately, not liberally.”

On the other side of the fence, the Telegraph article mentions phone-hacking victims like the Dowler family who have lobbied the government with a letter saying that “the changes will make it difficult for any but wealthy people to launch legal actions.”

Similarly, a range of charities, organisations and campaign groups are fighting back against the Bill, including AJAG and the CJA both of which ARAG is a member of.

The latest press release from the Law Society explains: “Peers in the House of Lords will discuss altering the legislation in a bid to eradicate "compensation culture" but the move would instead penalise victims of accidents, fraud, negligence and wrong-doing as well as businesses and even the Government.”

In an article in the Guardian, charities Oxfam and Amnesty International have joined the campaign on behalf of those suffering human rights abuses, warning that, “Victims of oil spills, pollution or land grabs in developing countries will no longer be able to pursue claims in British courts against multinational corporations under [these] legal reforms.”

Another hole identified in the Bill is that of the money saving aspect. Concerns have been raised by many that the calculations haven’t been done and that the cuts in legal aid and amends in civil litigation will cost more than they save. A report by King’s College London identifies that “these changes will incur new costs for the taxpayer by simply shifting the burden onto other parts of the public purse.”

In another academic report, Dr McIvor, Senior Lecturer at Birmingham Law School, accused the reforms of being “excessive and over-zealous”. She advised that “the evidence does not necessarily demonstrate that the primary source of the current high level of costs is the recoverability of success fees and after-the-event insurance premiums.”

What is also surprising about the Bill is the lack of joined up thinking in the government. With Clarke, together with his counterpart, Eric Pickles, continually following the party line about saving money (Guardian article: Eric Pickles: council tax rise a 'kick in the teeth' for cash-strapped residents), if the Bill is passed and legislation implemented then Council Tax will increase. The reason for this is quite simple. Unlike the present system where Local Authorities can recover their legal costs when they successfully defend a claim, under the new proposed system, they will not unless the case is deemed to be fraudulent or frivolous, which is extremely difficult to prove. This Bill is leaving Local Authorities will their hands tied behind their back. One the one hand they will want to defend cases, but on the other they know that if they do they won’t recover costs. Claims won’t reduce, so compensation payments by local authorities will increase, meaning only one thing, a cut in services or an increase in the Council Tax.

With the report stage to come and many amendments expected to be tabled by the Lords to all sections of the Bill, the fight is not yet over for those battling for and most importantly against the LASPO Bill.

The (un)Justice Bill

It is with regret that I am writing this blog as it means that the government has chosen to ignore the negative response that it received to both the Jackson reforms and legal aid cuts and instead implement them in the Legal Aid, Sentencing and Punishment of Offenders Bill.

Despite recent support from three cost judges and non-stop campaigning from groups like the Consumer Justice Alliance (CJA) and Access to Justice Group (AJAG) as well as consumers themselves, the Bill was first presented to Parliament on 21 June.

With only a few concessions, the Bill lays out plans to implement the legal aid and civil litigation changes in full. This will mean massive funding cuts in legal aid, removing provision to pursue cases in areas such as clinical negligence, debt issues and divorce cases and will leave some of the most vulnerable without suitable access to justice. In a recent Law Society Gazette article, Linda Lee, President of the Law Society, said how the Bill, “amounted to an attack on the vulnerable and was fundamentally wrong”.

On the civil litigation side, the much-criticised Jackson reforms will remove the recoverability of success fees and After-the-Event (ATE) insurance premiums, therefore shifting legal costs on to the victim.

The AJAG response to the Bill highlights in its summary the reasons why these changes will “result in a major denial of access to justice for claimants”; a few of these are detailed below:

• No win, no fee claims are not the preserve of the wealthy - 53% of claimants earn less than £25,000 per year and only 18% over £40,000


• Almost 3 million people benefitted from this form of funding over the last 5 years


• Currently, success fees and ATE insurance provide important checks and balances, acting as a brake on unmeritorious cases


• Without recoverable ATE, risk aversion by claimants will mean many perfectly good but problematical cases will fall by the wayside


• The proposed 10% uplift in general damages would not compensate claimants for losing up to 25% by way of success fee

Similarly, the CJA in its response describes how the “government’s proposals would ultimately mean that many victims, entitled to rightful compensation, would be unable to obtain proper legal representation due to the financial constraints that the new system would create.”

The Bill’s fast-tracked nature is another cause for concern. The consultation paper closed in February this year, just six weeks later Ken Clarke stood in the House of Commons to announce that the civil litigation reforms would be implemented in full. Now, just two months further down the line, the Bill has been presented to Parliament and rushed through to its second reading in just 9 days.

The worry is that the mainly negative reactions to the proposed changes have been ignored and the impact on the public has not been properly assessed. Some have expressed ‘outrage’ at the speed and Nigel Muers-Raby, CJA Chairman, comments how the government is, “pushing through sweeping and dangerous reforms with alarming speed.”

He explains further that, “by publishing such a wide-ranging Bill, it is the controversial sentencing aspects that will grab the headlines. However, buried in the Bill, you can see that thousands of injured people will suffer as a result of what is being proposed – the door to justice is effectively being slammed in their faces.”

Now that the second reading has been completed and debates have opened up on referral fees and market viability for ATE insurance in clinical negligence cases, a more in-depth analysis is required. Check back soon for our next blog - The second reading.