Taking a step in the right direction

The final piece of the conditional fees jigsaw is in place. On 3 July, the Rules and Practice Direction came into force to give substance to the provisions of the Access to Justice Act and its associated regulations, which had a commencement date of 1 April.

The Association of Personal Injury Lawyers (Apil) fought hard against the abolition of legal aid for personal injury cases and won many of the arguments, if not the votes.

Earlier this year, Apil described the implementation of changes to legal aid and conditional fees as "a shambles".

And so it was. A start date for conditional fees and an end to legal aid was two months away with no rules to implement it. Removing legal aid was always going to be the easy bit. The construction of a workable scheme to make the new CFAs work was always going to be a huge undertaking. Apil feared it risked being undermined by traditionalists who did not care for the Government's policy of modernising ways of accessing the justice system.

So what has happened?

It is not ideal that the Practice Direction was published on the day it came into effect. There has been three months of uncertainty for the profession and Apil's clients.

The Practice Direction will not be the last word on the subject. There are bound to be ambiguities that no one can foresee. But it is a good start.

Sensibly, an inclusive approach was taken to obtain the views of groups likely to be affected by this new regime and who might have insights into its practical application.

Government policy has been adhered to. The loss of legal aid has been a massive blow to accident victims' access to justice. Its replacement by CFAs could only work if victims themselves did not lose out substantially and their lawyers could still run the cases.

Accident victims have lost their entitlement to state support for meritorious cases. They will have to hawk cases around the market until they find a lawyer willing to take the risk. This will probably not be too difficult for the majority. But a minority who have complex cases will find it difficult.

The modicum of state litigation support left is so small and subject to complications that it is unlikely to fill the gap. But accident victims will not have to pay anything out of their damages for the lawyer taking over from the State the risks in the case. Success fees and after the event premiums will normally be recovered as costs of the action in the usual way. But accident victims or their lawyers will have to bear the cost of financing the claims attributable to the loss of interim payments on account.

For years, insurance companies complained bitterly about what they perceived as state subsidised blackmail through the legal aid scheme. Apil does not agree that many such cases were pursued, although there were clearly some abuses. But they have got their wish – legal aid has gone.

Another complaint was that even when they won, the legally aided client enjoyed the privilege of costs protection. After the event insurance will now step in to pay those costs in cases where the liability insurer succeeds.

As far as the detail is concerned, the proposals on notification, proportionality and assessment also strike the right balance.

The existence of the CFA, and the after the event insurance policy, must be notified, but not the success fee percentage or amount of premium. A party who has to pay more in costs if they lose must be told. But telling them the level of the success fee claimed would be tantamount to giving them counsel's advice on merits.

Pre-issue notification is not dealt with very well in the Practice Direction, but should be improved upon shortly by amendments to the Pro-action Protocol. In the meantime, Apil's guidance to its members is to give similar notification pre-issue to that required post-issue by the Practice Direction.

Proportionality will apply to the base costs in the usual way, but not to the success fee percentage uplift. The success fee is to reward risk taking and an additional risk of an arbitrary after the event reduction would make solicitors think twice about taking on a case.

The cost judge is required to assess the reasonableness of the success fee at the time of signing the CFA and to take into account other funding methods available including pre-purchased legal expenses insurance.

Costs judges should have no difficulty in reducing success fees which do not properly reflect the risk. But it is to be hoped they will recognise the change that affects claimant's lawyers in having to back their judgment with their time and money.

Whatever we may feel about the demise of legal aid, it is time to move on. The Rules and Practice Direction is not perfect, but it does set the right framework for the profession to try and make CFAs work fairly for the benefit of all clients.

David Marshall is Apil treasurer and partner at Anthony Gold.