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fund (and consequently the taxpayer)
would not, for civil cases, be unbearable.
That is not to say that Legal Aid
expenditure as a whole was insignificant
but the expense tended to be more to do
with criminal and family law cases, where
legal costs could not usually be recovered
from anywhere other than the fund.
Despite this, and in a bid to make inroads
into Legal Aid expense, certain types
of civil cases were, in the Access to
Justice Act 1999 (AJA 1999), outlawed
from receiving Legal Aid funding. These
excluded matters were primarily personal
injury claims and disputes related to a
business (no matter how small).
In place of Legal Aid for such matters,
the law that was then passed, introduced
the concept of the Conditional Fee
Agreement (CFA) which basically
promised clients that if they could find a
solicitor willing to take their case on, they
would not have to pay any legal fees up
front but may have to pay something out
of their compensation if they won.
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The unforeseen consequence of this
was the growth of the claims industry,
with claims management companies
such as Claims Direct and Accident
Group suddenly springing into life with
huge marketing budgets, TV adverts,
shopping mall stands and so on.
It also meant that those law firms wishing
to carry on dealing with such litigation
had no choice but to buy into one or
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more of these schemes, as not doing so
meant that very little of that type of work
would be attracted to the firm.
Last year, the government recognised
that perhaps the system needed further
amendment. If you read my articles in the
last edition of the magazine, you will know
that I am not a fan of the compensation
culture lobby. I think it has been exaggerated
by the insurance industry to meet its own
ends and we should not move too far down
the road of denying people some basic
protection from injury without careful thought.
However, I can see that reform of the way
that such cases are paid for was probably
needed. The rules therefore changed on 1
April 2013 so that in any cases started on
or after that date, if a client succeeded in
a claim, the success fee of up to 25% of
the client’s compensation would now be
payable from the client’s money and not the
losing party, as would any insurance that
the client needed to buy to protect against
having to pay the other party’s legal fees.
In return for this, in injury claims, the ability
of insurers to recover their legal fees from
losing claimants would be restricted.
It was thought by everyone at the time
(including of course the government)
that cases started before 1 April 2013
would still be governed by the old rule
that the losing party paid the success
fee and the insurance, which meant that
the winning claimant would get to keep
all of their compensation. In common
with other law firms, that is what we
therefore advised our clients.
Unfortunately, in a decision handed
down by the Supreme Court in
July, Coventry v Lawrence, that
understanding is no longer certain. The
Court has decided that a challenge to
the recoverability of success fees and
insurance premiums for CFA cases,
recently made by a set of insurers under
the Human Rights Act, may succeed,
and if so, could render the government
culpable in respect of the drafting of the
Access to Justice Act 1999.
It could also affect the ability of
claimants to protect their compensation
from claims that the success fee and
insurance premium should be deducted
from it, even though such claimants
would have been advised, quite
properly, that no such claims on their
compensation would be made.
For the Supreme Court to reinterpret
15-year-old legislation (the AJA 1999,
which has subsequently been repealed)
in this way completely defies logic,
makes advising clients next to impossible
and creates unnecessary uncertainty
concerning future unpredictable legal
decisions that could be made.
When considering any laws that may
retrospectively affect decisions people
have made concerning how they run
their lives and businesses, legislators
and courts should take much more care
to avoid making the overall position worse.
By Chris Randall
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