THE COURT of Appeal could derail the government's legal aid reform plans next week if it rules that the firms handling a multi-party action against two tobacco companies are liable for their opponents' costs if they lose.
The crunch ruling, due on 26 January, is over the tobacco companies' claim that Irwin Mitchell and Leigh Day & Co's conditional fee funding arrangements amount to 'maintenance', an ancient tort whereby solicitors could be seen as illegally meddling in defendants' affairs. An adverse ruling would present the two firms with the prospect of having to pay between £10m and £20m if their case fails.
Personal injury lawyers say such a ruling would jeopardise the Lord Chancellor, Lord Irvine's plans to replace legal aid for most money claims with conditional fees by making it impossible for firms to pursue conditional fee actions. Lord Irvine would either have to drop the plans or rush through legislation to overturn the court's decision, they claim.
The firms launched the action against Gallaher and Imperial Tobacco on a conditional fees basis in July last year after their clients were refused legal aid.
The clients are not insured, against having to pay their opponents' costs because such insurance is not available for tobacco-based litigation, and no insurance policies are available for firms because the need for them has yet to arise.
Prominent personal injury lawyer Ian Walker, a partner at Russell Jones & Walker, said a ruling in favour of the tobacco companies would sound the 'death knell for conditional fee litigation' and 'shoot an enormous great hole in the Lord Chancellor's proposals'.
The Law Society's head of solicitors' remuneration, David Hartley, added: 'If the court decides this is maintenance, the question arises whether it is proper for solicitors to act on a conditional fee basis.'