Counting the cost

At the current time, it is hard to credit that the government has done anything in the last 3 years, than break itself to pieces on a reef called Brexit. Certainly, the great issues of the day including housing policy, social care, climate change and air quality, seem to have been ignored in favour of debating the European question.

Yet government has still been functioning in a distracted way in the background, and one of the projects the Ministry of Justice has been working on, largely ignored by the popular press, the post implementation review of LASPO 2012 and the reforms of 2013, has now come to fruition.

The review has been published in two parts and is supplemented by the review into funding legal costs for inquests, and a legal support action plan. Part 1 is 293 pages long and focuses on legal aid. It is part 2 of the review, which is some 67 pages long which will be of principal interest, to those practicing in civil litigation.  Part 2 focuses on assessing the impact of 5 reforms, namely

  1. Non recoverability of conditional fee agreement (CFA) success fees;
  2. Non recoverability of after the event insurance (ATE) premiums;
  3. The introduction of Damages Based Agreements (DBAs);
  4. Section 55 changes to part 36 offers; and
  5. Banning referral fees in personal injury (PI) cases.

These reforms were meant in turn to achieve 5 objectives

  1. Reducing the cost of civil litigation (Objective 1)
  2. Rebalancing costs liabilities between claimants and defendants (Objective 2)
  3. Promoting access to justice at proportionate costs (Objective 3)
  4. Encouraging early settlement (Objective 4)
  5. Reducing unmeritorious claims (Objective 5)

The format of the part 2 review is to summarise in several chapters the representations that the review received from various stakeholders, on the five topics that it had chosen to concentrate on in the review. In chapter 9 the review sets out its conclusions on the 5 objectives, which were the goals of the reform programme. Perhaps unsurprisingly, the government considers that the reforms have been a success. In respect of objective 1, reducing the costs of civil litigation:

151. The independent analysis by Professors Fenn and Rickman shows that based costs have reduced by approximately 8-10% in real terms for PI (non-clinical negligence) and clinical negligence cases respectively. This is a significant reduction in costs. The feedback provided also suggests that costs in other categories of law have also fallen (see 10.3) although there is not sufficient data available to make a quantitative judgment outside of PI and clinical negligence cases.

In respect of objective 2, rebalancing the costs liabilities between claimants and defendants:

152. The government considers that the Part 2 reforms have met the objective of rebalancing the costs liabilities between claimants and defendants, since stakeholders from across the spectrum agree that the disparity in legal costs between claimants and defendants has generally reduced.

With regards to objective 3, promoting access to justice at proportionate cost

153. The Government considers that, overall, the objective of promoting access to justice at proportionate cost has been met and emphasizes that lower costs, by their very nature, increase access to justice. However, the government also recognizes that many claimant lawyers feel that it has become more difficult and challenging to bring some claims, in part due to the Part 2 reforms. Although general concern was expressed about the consistency of the court’s approach to proportionality, most respondents agreed that the proportionality test was an effective way of ensuring that costs and damages were aligned. That said, concern among some correspondents remains in some areas of litigation where costs to damages ratio are high, although claimant representatives in these areas argue that relatively high costs are necessary to maintain access to justice due to the complexity of these cases, the amount and quality of evidence required and the holistic value of a case beyond the monetary damages themselves.

In respect of objective 4: encouraging early settlement, the review notes:

154. The Government considers that, on balance, the objective of encouraging early settlement has been met. The analysis by Professors Fenn and Rickman indicates a 9% improvement in early settlement for PI and clinical negligence cases. Stakeholder feedback was generally supportive of the reforms to Part 36 and some stakeholders felt that the additional 10% uplift gave claimant Part 36 offers additional “clout”. There was also a view expressed by several at the CJC seminar and in the survey responses that it would be preferable not amend Part 36 further, at this time, in order to allow the reforms, case law and practitioner experience to bed it. It is noted that Part 36 is a finely balanced set of rules and so caution would be needed, when considering any further amendments.

Objective 5: reducing unmeritorious claims

155. The Government considers that the combined effects of the Part 2 reforms have had an impact on reducing the number of unmeritorious cases, which may have been pursued pre-LASPO. While there are concerns from liability insurers and defendants that QOCS may encourage more (and weaker) claims, we have not been presented with any reliable or conclusive evidence that supports that theory. There are stronger measures in place to deter unmeritorious claims such as the qualification of fundamental dishonesty for QOCS, the ban on referral fees for PI and there is also anecdotal evidence of claimant lawyers looking for higher prospects of success before taking on a case. The volumes of claims also supports this view-generally the volumes of claims indicate a slight decrease.

So that’s alright then.

Two areas of unfinished business are also considered in the conclusions. The first and perhaps not so important one, relates to the problems with DBAs. In effect the necessary reforms to the poorly redrafted Damages Based Agreements Regulations 2013, have been put off to a further report to be undertaken by Professor Mulheron and Mr Bacon QC.

The second is far more significant, and that is the question of whether the scheme of qualified one-way costs shifting (QOCS) currently applicable to personal injury litigation, should be rolled out to other areas of asymmetric litigation. The Government’s response is luke warm:

…In terms of any potential extension of costs protection there are clear attractions for claimants and their lawyers in being able to litigate at no or reduced costs risk. However, there is also a clear risk that by extending costs protection some of the benefits of the Part 2 reforms would be undermined: the shifting of costs back to defendants, an overall increase in costs and the potential for prolonging rather than settling litigation. The Government would wish to be satisfied that these risks have been addressed before considering the case for extending costs protection further.

This is perhaps the most pressing area where further reform is needed. The reason being that I would identify it as a key area, which could underpin the rule of law; a principle which is vulnerable when substantive rights are at stake in asymmetric litigation .

The disparity of resources between an individual and the state or a well-financed PLC, can render substantive rights illusory because the individual can never afford to litigate, nor risk the costs consequences of losing, unless, some adjustment of the rules is made in his favour.

This is not a novel problem, upon which further evidence is required.

Pre 2000, with a munificent Legal Aid system, it was possible to obtain Legal Aid for judicial review, environmental claims and other claims where qualified costs shifting applied due to the scheme of the Legal Aid Act 1988.

From 2000 to 2013, all these claims could be run under a CFA with ATE insurance, with claims under the Equality Act 2010 being added to the litany, yet another example of asymmetric litigation.

Now in 2019, if you are confronted with blatant illegality by a public body, and wish to judicially review its decision making processes, or you wish to sue a PLC for its discriminatory practices, if you are a person of average income or with some equity in your house, you are required to risk your home and financial well being should you lose. The most that can be said for this sorry state of affairs, is it does at least keep the volume of litigation down.


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