MoJ to lift ban on contingency fees in revamp of no-win, no-fee system

The Ministry of Justice (MoJ) will radically depart from the current conditional fee agreement regime (CFA) by lifting the ban on contingency fees in a bid to tackle escalating legal fees.

The MoJ today revealed its plans to reform the no-win, no-fee system, which, it claims, has enabled lawyers to profit massively by charging ramped up fees that can be claimed back from the losing side.

The move comes in response to Lord Justice Jackson’s  review of civil litigation costs, which was commissioned by the former Master of the Rolls Anthony Clarke in 2008.

Under the plans put forward the MoJ will roll back the Woolf reforms introduced by the Labour Government in 1999 and bring in a raft of new measures aimed at speeding up the court experience in favour of reducing costs.

Claimant lawyers will no longer be able to recover success fees from the losing side if they win the case. Instead, the MoJ said “claimants will have to pay their lawyer’s success fee and will therefore take an interest in controlling the costs being incurred on their behalf”. 

There will be a 10 per cent increase in general damages to compensate for the loss and qualified one-way costs shifting introduced. In addition, the MoJ said it would bring about a “new test” to ensure costs are proportionate, although it did not specify what the test would be.

Claimants who represent themselves will be able to recover higher costs than those represented by lawyers, it added.

At the same time the MoJ has launched a consultation on reforming the civil justice system called Solving disputes in the county courts: creating a simpler, quicker and more proportionate system.

Under the proposals litigants will be encouraged to make greater use of mediation to settle disputes, with a proposed automatic referral for smaller claims cases. 

Meanwhile, the maximum value for small claims is expected to be raised from £5,000 to £15,000.

In addition, views are being sought on proposals to create a national county court jurisdiction across England and Wales. According to the MoJ, if the plans go ahead it will better enable cases and judges to be allocated and centralised processes to be used more widely.

Legal reaction:

Thomspons head of policy and public affairs Tom Jones: “This is the dawn of access to limited justice for the lucky few. Insurers will save tens of millions of pounds whilst injured people who have a valid claim but one that isn’t absolutely open and shut, will be unable to find a lawyer able to help them. The lucky ones who can find a lawyer will be hit by deductions from their damages. Those with good cases but less than 75 per cent chance of success will be left with no compensation because lawyers wont be able take on cases tomorrow that they would today. The most vulnerable claimants are being hung out to dry to increase insurance company profits.”

Irwin Mitchell head of personal injury Andrew Tucker: “This is a bleak day for access to  justice in Britain and a double whammy for the consumer. The Government’s  proposals will force consumers – irrespective of their means – to pay some of  their legal fees even if they win and will deter them from bringing perfectly  legitimate claims. At the same time, it is slashing the legal aid budget so  the public will effectively lose out twice. This is even more extraordinary  when the level of claims is falling and the people who will suffer the most  are the most seriously injured – those who should be able to rely on the law  for help, irrespective of their means.”

Beachcroft head of strategic litigation Andrew Parker: “Recovery of success fees and ATE premiums distorted the balance between the interests of claimants and defendants and lined the pockets of claims farmers. This announcement will go a long way to restoring the balance needed. The announcement of a consultation on extending the RTA process is also a welcome step in the right direction. Ultimately we must complete the work started by Lord Woolf in 1999 and fix costs for all claims up to £25,000 in value. We welcome the Lord Chancellor’s criticism of the whole referral fee industry and, in particular, the role of claims farmers.”