PI Brief Update

LASPO And The Scales of Justice - Michael Hardacre, Slater and Gordon (UK) LLP

24/06/15. We have reached another milestone in the on-going process of reform of civil litigation costs having just past the second anniversary of implementation of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) which came into force in April 2013.

It is a useful opportunity to reflect on the position we have reached and whether in fact the raft of reforms proposed by Jackson LJ in his 2010 report have been implemented efficiently and effectively.

Going back to the starting point of Jackson’s report, it was intended by him that the various reforms be implemented in what he referred to as an interlocking fashion, that it is to ensure that the various changes which complemented each other be brought together as a whole in order to ensure that each piece of the jigsaw worked together.

What Jackson wanted more than anything was to ensure that the implementation of his proposed reforms allowed an outcome where civil litigation costs were proportionate and that the administration of civil justice was more efficient and fair.

My argument then, as it remains now, is that from the ivory towers of the judiciary to the coalface of personal injury practice is a very long journey and in the intervening process, political expediency has inevitably intervened.

For example, Jackson was absolutely clear in his report that the legal aid system placed a crucial role in promoting access to justice at proportionate costs in key areas; however, since April 2013 there has been significantly reduced access to civil and family legal aid as a result of the reduction in categories, for which it is available and a tightening of the means test criteria, so that fewer individuals qualify for legal aid.

It must plainly follow that this has resulted in reduced access to justice for potential claimants who may have a claim with merit but with difficult prospects. In practice, some claimant lawyers will be more risk averse where there is a valid but risky and complicated case, for example, involving disputed liability, a difficult point of the law or complex issues relating to causation.

One aspect of LASPO that was not mentioned at all by Jackson was referral fees; however, a ban on referral fees was hastily drafted and inserted at the last minute into LASPO, at the behest of insurers who wanted to use the referral fee ban as a lever for their primary objective of ensuring a corresponding reduction in fixed costs for fast track claims once referral fees had purportedly been removed from the equation.

The main target of the insurers was in turn to reduce the overall number of claims being brought by removing the income stream of intermediary claims management companies which had proliferated since the ban on referral fees was lifted in 2003. In fact, the referral fee ban has proved to have been a mirage, with still significant fees being paid by some law firms for the introduction of work from claims management companies in other guises.

As a general point, the issue of access to justice and what role advertising and marketing plays needs to addressed plainly and straightforwardly. It is perfectly reasonable to argue that intermediary claims management companies were simply performing a role that claimant law firms, had, until that point, proved unable or unwilling to do, that is to market their services and bring in work by advertising direct to the consumer.

Increasing the overall number of claims by way of advertising is simply a means of ensuring that claimants who have been genuinely injured in accidents are informed of their right to make a claim against an at fault party and that, in doing so, access to justice is enhanced.

So, with the significant reduction in costs recoverable between the parties in portal cases and the introduction of an extended fixed costs regime for other personal injury fast track cases the insurers primary objective of reducing the overall number of claims significantly has been achieved. That, in the simplest of terms, is the best indicator of whether access to justice has been reduced or enhanced by LASPO.

That is not however to say that LASPO reflected Jackson’s view on costs. While his report recommended the extension of fixed costs, to bring certainty to all parties in fast track cases, he proposed a costs matrix significantly in excess of the figures that were subsequently imposed by the Ministry of Justice despite that costs matrix having robust evidence in support.

The impact on profitability arising from the new fixed costs regime has yet to be fully absorbed by claimant firms as pre-Jackson work in progress is billed. The result, however, is fast track cases becoming less viable and less larger caseloads are conducted, often by less qualified fee earners than was previously the case.

Accompanying the extended fixed costs regime had been changes to litigation funding ending recoverability of success fees and after the event insurance premiums between the parties. These charges are now paid out of a successful claimant’s damages. Jackson considered that claimants have no interest in keeping their costs down because they would never have to pay them and the huge costs involved put unfair pressure on defendants to settle.

These changes, however, along with extension of fixed costs, make smaller claims less viable because where funding is required there must be enough damages to pay the success fee and insurance premium.

Further, smaller value cases can often sometimes cost as much as larger cases to run when you are faced with a particularly difficult case and you may still have a lot of work to do in building the case. These cases will, for some practices, not be taken on at all.

Costs budgeting was another important core element of the reforms to promote access to justice at proportionate cost in multi-track cases.

Parties file and exchange detailed budgets setting out their estimated costs of litigation before the first case management conference after issue of proceedings. Budgets are likely to act as a cap on the successful party’s recoverable costs. Unless there is good reason to depart from the budget, the winning party will not be able to recover more than the budget figure. Budgets are intended to enable the courts to take case management decisions while also considering the costs of the litigation, which is in principle a commendable point, but there are a number of difficulties in practice. One is the preparation of budgets on a phase by phase basis without the ability to balance out between the phases.

More importantly, inconsistency in the way in which budgets are assessed by District Judges who may have had little or no training is costs matters has led to uncertainty. This uncertainty inevitably has a long term impact on the criteria applied by claimant practitioners in assessing the merits and financial viability of cases at the outset.

Michael Hardacre
Principal Lawyer
Slater and Gordon (UK) LLP

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