Government Signals Reform to No Win, No Fee

Posted: 29th March 2011

 Stafford CourtTFollowing a major review carried out last year by Lord Justice Jackson, the Government has unveiled its plans for a radical overhaul of the civil justice system.

Firstly, it intends to reform ‘no win, no fee’ conditional fee agreements (CFAs), which were introduced in 1999 and allow claimants to pursue legal disputes and only pay legal fees if they win the case. Under the English legal system, the ‘loser pays’ principle applies, which means that the loser of the case pays their fees plus those of the winner. The introduction of CFAs was an attempt to widen the access to justice for those least able to pay legal fees.
Lawyers taking cases on a no win no fee basis charge a ‘success fee’, which broadly varies depending on the risks attached to the outcome of the litigation, but which typically runs from 10 to 100 per cent of the usual charging rate.
Citing a ‘cost explosion’, particularly as regards claims against the NHS, Justice Minister Kenneth Clarke claims that in many cases the legal fees involved far exceed the value of the claim. In a recent libel case, for example, a claim valued at £5,000 was accompanied by a bill for legal costs from the claimant of nearly 10 times that amount.
The Government is committed to tackling what it sees as a trend towards a ‘damaging compensation culture’ and intends that the reforms will make costs more proportionate to the issue at stake. To that end, it proposes to abolish the general recoverability of success fees and after the event insurance premiums from the losing party. These would instead be deducted from the damages award made to the successful claimant.
To compensate for this, the level of damages payable in all civil wrong claims would be uplifted by 10 per cent. Success fees in personal injury cases would be capped at 25 per cent.
The consultation also proposes a simplified claims procedure on a fixed cost basis for more types of personal injury claim, similar to that introduced last year for dealing with motor accident claims under £10,000, and extending the upper limit of these simplified claims to £25,000 or £50,000.
In addition, more people should be encouraged to settle their claims through mediation, and that small claims courts should be able to handle claims of up to £15,000, compared with the present figure of £5,000, and the minimum value for a case to be brought in the High Court should rise to £100,000.
The proposed reforms have been widely criticised, with the President of the Law Society of England and Wales calling them ‘a devastating attack on access to justice’ and the General Secretary of the TUC describing them as ‘simply lining the pockets of insurers at the expense of claimants seeking compensation for injuries caused by the negligence of others’.
The consultation document can be found here.
The consultation closes on 30 June 2011.