MoJ to lift ban on contingency fees in revamp of no-win, no-fee system
29 March 2011 | By Katy Dowell
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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.”
Readers' comments (7)
Injury lawyers for who? | 30-Mar-2011 11:30 am
Not a surprise to see the reaction from Claimant firms such as Thompsons and Irwins. Why don't they just say what they are really thinking...'we're the ones who are going to lose out as we can't continue to charge excessive and disproportionate levels of costs!"
I am a Defendant lawyer who deals with costs on a daily basis....in my view these changes are long overdue. Whenever I speak with lay people and tell them about the level of legal costs claimed in cases in comparison to the amount of damages paid, they are astonished. It is incredible that Claimant firms have been able to get away with it for so long.
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Anonymous | 30-Mar-2011 1:23 pm
I am neither lawyer nor currently working for a claimant firm but I have worked with many people who have required compensation for very serious injury and who have received it after a thorough battle with a guilty (liable) party.
Leaving aside what the talented claimant lawyers are paid as of course defendent lawyers would never claim full costs or look to make profit, the real tragedy is asking those seriously injured to give up part of their carefully calculated compensation to pay for that battle.
This is not about lawyers it is about the victims.
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Anonymous | 30-Mar-2011 4:32 pm
Quite simple.A wholly one sided and partial proposal that has no grip on reality. The only aim is clearly to keep business happy and deter claims. This is a very sad day for the underdog.
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Anonymous | 30-Mar-2011 5:52 pm
This is a poor decision by the government. As a claimant lawyer, I know that the reason our costs are in some cases on the high side is mainly because defendants' insurers do very little to progress the claim and it leaves us with no option but to litigate. What also doesn't help is if the defendant's solicitor decides to defend the claim on all issues, even when the claim is relatively straightforward.
The decision to ban success fees and increase damages by 10% does nothing to help anyone. Even though solicitors can take 25% of the claimant's damages, how is this making access to justice more available for the claimant? The whole point of personal injury law is to put the claimant in the position they would had been in but for their injury. Forcing solicitors to take a chunk of the damages will not do anything to help claimants and if anything will give the general public an even more bitter taste in their mouths regarding lawyers.
What the defendant insurers and solicitors seem to forget is that if claimant solicitors cannot afford to bring claims because it is simply not profitable, then they too will eventually be finding themselves in a difficult position.
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Anonymous | 30-Mar-2011 6:03 pm
These proposals remind me of the fiasco of HIPS. I do not doubt that Jackson LJ is well intentioned and genuinely belives that he is promoting a wise solution to the problem of disproportionate costs, but in the real world litigation practitioners know that the practical effect of these reforms will be that we will be forced to turn away injured and other vulnerable clients who we no longer be able to help and they will have no remedy. It is not us lawyers who will suffer, we will change our business models and carry on. It will be the consumer who suffers, and in years to come these reforms will be recognised as a bad mistake and yet another reforming measure will be needed.
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Anonymous | 31-Mar-2011 4:55 pm
I work for a specialist PI firm.
Most of our claims are low value RTAs where liability is admitted and the success fee is minimal. We are talking about losing a couple of hundred pounds a claim, at most. This could be recovered from the client as part of a contingency fee or, more likely, written off.
The people who will suffer most are those involved in complex cases where the prospects of success are not clear cut. They could struggle to get a solicitor.
Nevertheless, in the current market where work is often difficult to attract, I am confident there will always be someone willing to take these on.
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Adam | 1-Aug-2011 1:12 am
Very good moj
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