Proposals for the Reform of Legal Aid and Litigation Funding

Thursday 18th November 2010

On 15 November, 2010, the Government published two consultation documents. One relates to proposals for the reform of legal aid in England and Wales, and the other is on implementing some of  Lord Justice Jackson's recommendations on civil litigation funding and costs.

Legal Aid Reform

The aim of the consultation on legal aid is to tackle the expensive and unnecessary litigation that is funded by the taxpayer. Currently over £2 billion is spent on the legal aid system in England and Wales.

At the moment the scheme is available for a very wide range of issues and is criticised in some quarters for encouraging people to bring their problems before the courts too readily, where alternative solutions should have been explored.

The idea is to return to basic principles and to make choices about which issues are of sufficient priority to justify the use of public funds (subject to people's means and the merits of the case). The importance of the issue, the litigant's ability to present their own case, the availability of alternative sources of funding and/or alternative routes to resolving the issue will all be taken into account.

If implemented, the proposals could achieve savings of around £350 million in 2014-15.

The proposals are summarised below:

1. Legal aid should remain routinely available in civil and family cases where people's life or liberty is at stake, or where they are at risk of serious physical harm or immediate loss of their home;
2. Legal aid will be retained for asylum cases, for debt and housing matters where someone's home is at immediate risk, and for mental health cases;
3. Legal aid will still be provided where people face intervention from the state in their family affairs which may result in their children being taken into care, and cases involving domestic violence, child abduction or forced marriage;
4. It is also proposed to retain legal aid for cases where people seek to hold the state to account by judicial review, for some cases involving discrimination which are currently in scope, and for legal assistance to bereaved families in inquests, including deaths of active service personnel;
5. Legal aid will still be available for all criminal cases where it is currently available, to ensure fair trials for those accused of more serious criminal offences;
6. The application of a more targeted scheme will direct limited resources to serious issues in civil and family cases that have sufficient priority to justify the use of public funds, subject to people's means and the merits of the case;
7. Some types of cases will no longer routinely qualify for legal aid funding. This will include private family law cases: for example, divorce and child contact, where long, drawn-out and acrimonious cases going through the courts can often have a negative impact on the well-being of any children and not necessarily achieve the most effective result;
8. Funding for cases where domestic violence is involved will, however, continue.  Funding will also continue to be provided for mediation as a better alternative to family disputes going to court in most cases;
9. Other civil cases that will no longer routinely qualify for legal aid funding include clinical negligence, where in many cases alternative sources of funding are available, such as "no win no fee" arrangements (Conditional Fee Agreements;
10. Other issues proposed for removal from the scope of the legal aid scheme include debt, education, employment, housing, immigration and welfare benefits (except where there is a risk to anyone's safety or liberty or a risk of homelessness), where in many cases the issues at stake are not necessarily of a legal nature but require other forms of expert advice to resolve;
11. Legal aid funding may still exceptionally be provided for individual cases through a new funding scheme for excluded cases.  Generally this will only be where it is necessary to meet domestic and international legal obligations: for example, in a particularly complex clinical negligence case involving a disabled claimant who cannot represent themselves, where access to the court could not otherwise be secured;
12. Telephone services will be extended to help people find the easiest and most effective ways to resolve problems;
13. Changes will be made to means testing for non-criminal legal aid, to ensure that those who can pay or contribute towards the costs of their case should be asked to do so;
14. The proposals include ensuring that all civil legal aid applicants undergo an assessment of their available capital, including those on benefits. Greater account will also be taken in future of equity in people's homes when assessing their capital means. A minimum £100 contribution to their legal costs will be introduced for all successful applicants with £1,000 or more disposable capital, and higher contributions will be expected from those who currently contribute to their legal fees;
15. Changes will be made to the way that lawyers are paid in criminal cases, in order to promote an efficient system of justice and to ensure that the taxpayer is receiving the best possible value for money. The intention is to move towards a competitive market to replace the current system of administratively-set fee rates;
16. Proposals are planned to promote swift and efficient justice as well as to achieve savings. These include proposals to pay the same fee in respect of a guilty plea in the Crown Court, regardless of the stage at which the plea is entered. In Crown Court cases that could realistically have been dealt with in the magistrates' courts, it is proposed to pay a single fixed fee for a guilty plea based on fee rates in the magistrates' court. This complements other reforms to the justice system designed to encourage cases to be brought quickly and efficiently to justice, so sparing the victim the ordeal of giving evidence in court unnecessarily, and the justice system significant but avoidable costs;
17. To contain the growth in costs of the most expensive (Very High Cost Criminal Cases - VHCCCs), arrangements will be made for solicitors in VHCCCs to be paid in line with the fee scheme the last Government introduced for advocates. This will mean that more of these cases will be paid within a graduated fee scheme, where costs are more easily controlled;
18. To reduce fees paid in civil and family cases by 10% across the board;
19. To extend lower legal aid 'risk rates' in civil cases where costs are likely to be paid by the opponent, pending the introduction of competition once any proposed changes to the scope of civil and family legal aid have bedded in. Similar levels of reductions are envisaged in experts' fees to exert greater control over costs;
20. To review alternative sources of funding for the legal aid fund, to help supplement existing funding arrangements. These include making use of the higher rates of interest generated by money invested in a new pooled account where solicitors would hold their clients' money, and recovering a proportion of legal aid funds in cases where a successful claim for damages has been made; and
21. To make the administration of legal aid more efficient and less bureaucratic for solicitors and barristers doing legal aid work.

Reform of Civil Litigation Funding and Costs

The intention is to reduce the spiralling costs payable by people who have been sued in 'no win no fee' cases.

Defendants are currently liable for substantial additional costs while the claimant has no interest in restraining legal costs when deciding to bring a case.

The premise is that the claimant should have a financial interest in controlling costs incurred on their behalf, which would also lead to lawyers having to keep costs down in order to compete for business.

The proposal is to abolish recoverability of success fees and associated costs (the costs of "after the event " insurance premiums) in no win no fee conditional fee agreements and pass these expenses on to the claimant, who will therefore take an interest in controlling the costs being incurred on their behalf.

It is also proposed to allow damages-based agreements (also known as contingency fees) in litigation before the courts. These are another form of no win no fee agreement, under which lawyers can take a proportion of the claimants' damages in fees. This would increase the funding options available to claimants.

The consultation also seeks views on some of Lord Justice Jackson's other recommendations, which include:

1. A 10% increase in general damages;
2. A mechanism to protect the vast majority of personal injury claimants from paying a winning defendant's costs (through qualified one way costs shifting);
3. A framework to encourage parties to make and accept reasonable offers;
4. Introducing a new test to ensure that overall costs are proportionate; and
5. Increase the costs that can be recovered by people who win their cases without representation by lawyers.

Parliamentary Under Secretary of State, Jonathan Djanogly, MP, says:  "These two sets of reform proposals complement the wider programme of reform which we will be bringing forward to move towards a simpler justice system: one which is more responsive to public needs, which allows people to resolve their issues out of court, using simpler, more informal remedies where they are appropriate, and which encourages more efficient resolution of contested cases where necessary."