You may know that I am always interested in personal injury laws of other countries. The United Kingdom seems to be going through a period of “tort reform” similar to efforts her in the United States. The net result of all tort reform laws is to deny access to the courts for plaintiffs, especially low-income plaintiffs. It’s interesting, but sad, to see this happening in other countries also.
This guest post is from Lewis Wild, a university law professor. He often writes posts about current law concerns on legal blogs.
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (or LASPO) has made a lot of changes in the area of legal costs, and not just to the Legal Aid system.
Part Two of the Act, which came into effect in April 2013, has brought significant changes to the costs regime for personal injury (PI) cases. It’s not known for sure what effect the changes will have in the long term. But probably the number of people who can get representation for PI claims will decline somewhat, due to less generous rules coming in for solicitors acting for claimants in those claims.
What cases are affected?
The main changes are to ‘no-win-no-fee’ agreements. Relatively new in UK law, these conditional fee agreements allow for PI lawyers, like http://www.irwinmitchell.com/, to be paid only if a case is successful. They are mostly used for damages claims brought by individuals. Most such cases are personal injury ones.
What has changed?
UK law on costs has long involved the principle that the loser should pay most or all of the winner’s costs. When no-win-no-fee arrangements came into the picture, that principle remained.
To meet the risk of losing and being liable for the defendant’s costs, the claimant usually buys an insurance policy, which also covers his own basic expenses. If the claimant wins, then the defendant pays the claimant’s costs, which, until the changes, included the policy premium. If the claimant loses, he is covered by the insurance. Until April 2013, it’s been said, the claimant had very little to lose by starting a claim.
In cases funded by conditional fee agreements (CFAs), a claimant’s lawyer’s fee typically includes a ‘success fee’, an added amount, over and above normal costs, which is paid when a case comes to a successful conclusion. That’s meant to compensate for the financial risk to the claimant’s lawyer of losing the case. Before April 2013, the success fee was usually added to the costs paid by unsuccessful defendants along with the insurance premium.
The new rules change that, placing liability for the success fee squarely on the claimant; but they also restrict the amount of the success fee as a proportion of damages. The aim of that is to protect damages, since they may be badly needed by claimants just in order to get by in life with their injuries.
As well, the rules now allow another type of no-win-no-fee agreement, the damages-based agreement (DBA) to be used in civil litigation for the first time. The DBA was previously only permitted in tribunal cases, and bases the claimant’s lawyer’s bonus for a successful case on a percentage of damages awarded, rather than a percentage of the allowable fees as assessed by the court, which is how the CFA works. As for the CFA, there is a limit on the permitted percentage.
A major rationale for the reforms was the perception that claimants’ solicitors might be taking on unmeritorious claims, having a lot to gain and little to lose by doing so.
The new rules restrict the lawyer’s profit, and also introduce a risk of reduced damages for the claimant. Both the claimant and his lawyers will have to think more carefully as a result of the changes, though the defendant is also incentivised to reach a reasonable settlement, which is a bonus for claimants.
- Success fees and the premium for insurance cover are no longer payable by the losing party.
- DBAs are now available in civil cases.
- It is now unlawful for a lawyer to pay another party for referring cases.
- The financial limit for special Road Traffic Act cases goes up to £25,000.
- There will be new fixed recoverable costs.
- The amount that personal injury lawyers can take from their clients’ damages under DBAs and CFAs is restricted to 25%. Further, any part of the damages awarded for future care and loss as a result of personal injury will now be completely protected. For damages cases other than PI, the limit is now 50%.
- General damages (that’s the amount paid for pain and suffering, as distinct from financial loss) are to go up by 10%.
- Costs to be paid by unsuccessful claimants to defendants are capped if the case has been well conducted.
- The penalty for defendants who unreasonably refuse to settle cases is increased.
The changes in practice
The changes update some costs limits, and bring in measures to encourage well-conducted litigation and reasonable settlements. They will tend also to reduce the overall number of PI cases which are brought, because of the abolition of referral fees and the restrictions on recoverable costs for the claimant.
Claimants’ solicitors will have to charge any success fee to their own clients rather than the defendant, and the amount of the fee is restricted. That obviously eats into the damages, and reduces the number of cases that are economically viable for lawyers to take up.
Solicitors specialising in claimant personal injury cases have, understandably, not welcomed the changes. One complaint is that less wealthy people will no longer have the same access to justice when they are injured as previously. It’s still too early to know how the changes will work out, but hopefully there will be future adjustments to the rules if they lead to injustice.