‘Academic’ Intelligence: LASPO- a Rear- End Shunt?

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The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPO’) will be coming into force as at 1^st April 2013, i.e. in less than two weeks’ time.

Today’s article will opt to provide the reader with a brief overview of the issues which most Personal Injury (‘PI’) law firms will have to tackle and adapt to. Furthermore, the article will try to familiarise potential claimants with the upcoming changes as, unfortunately, the Latin proverb ‘Ignorantia Juris Non Excusat’ is as valid today as it was millennia ago.

I should further like to note that neither of the issues or solutions to be discussed in this article has been set in stone. This has proved an issue in itself as it has introduced a high degree of uncertainty which is unsettling for lawyers and clients alike.

Prior to delving into a discussion, it needs to be noted that, until now, most PI claims have been taken by law firms on a no win, no fee basis. The way that works is that the claimant does not pay anything (so long as he is being honest and co- operative) regardless of whether he wins or loses.

Should he win, his law firm recovers its costs from the losing party (or the losing party’s insurance, in most cases) and the claimant retains 100% of his compensation.

If he loses, his law firm writes off its costs (fees) and the defendant’s law firm’s costs are covered by an insurance policy which has been set up in advance.

The premium for the said policy is paid by the claimant’s law firm and is recovered from the losing party if the claimants wins. If he loses, the premium is paid by the claimant’s law firm.

Further to the above, to justify the risk for taking on a claim on a no win, no fee basis, the law firm is entitled to recover a ‘success fee’ from the losing party (this is justified as, even though the claimant does not pay anything in any event, if he loses, his law firm not only writes off its fees but also pays the insurance premium out of its own pocket). The success fee varies and is fixed with some types of claims; for instance, with road- traffic accidents (‘RTA’), it’s capped at 12.5% of the compensation awarded.

For instance, if a claimant was to secure £ 1000 in damages, the success fee payable would be £ 125; this would be recovered for the losing party along with the insurance premium.

As at the 1^st April 2013, neither the insurance premium, nor the success fee will be recoverable from the losing party. I shan’t go into any detail in relation to that as it has been discussed at some considerable length by the legal profession in the last couple of months.

Suffice to say that the success fee would either have to be scrapped or taken off the client’s compensation. As for the insurance premium- it will either have to be covered by the claimant’s law firm or taken off the claimant’s compensation.

Another part of the changes to come into force on 1^st April 2013 (to be implemented in the Civil Procedure Rules rather than LASPO) will be the system of qualified one way cost shifting (‘QOSC’). Although the court has the ultimate discretion as to who pays the costs in the proceedings, the general rule is that the losing party covers the winning party’s (on top of his own) legal costs.

What QOSC effectively does (at least in its present state) is restrict a defendant from obtaining a costs order from a bona fide claimant (one who has been dealing in good faith).

Put simply, a claimant, who at all times co- operates with the court, and is pursuing a genuine PI claim will not be made to pay the defendant’s legal costs, even if he loses.

Although the above seems to address the fact that insurance premiums will no longer be recoverable from the losing party (and, thus, it will be best to move away from them), it somewhat fails to take into account the fact that the defendant’s legal costs will still need to be covered by someone.

Furthermore, if a claimant fails to agree to a Part 36 offer (a type of settlement offer) of, say, £ 5000 and then secures a lower amount at trial, say £ 3000, the defendant can only recover as costs an amount of no higher than the amount of the Part 36 offer, namely, £ 5000.

The issues outlined above are but a few of the concerns that law firms are currently trying to address and tackle.

And with only two weeks to spare, we can but hope that those issues (and many others) will be dealt with in a way which will not unjustifiably restrict claimants’ access to justice.

After all, as Baroness Hale said:

‘It is true that the court system must always be the last resort; yet, it must also always be one that is accessible to all.’