The government has pushed back implementation of the Jackson reforms and the referral fee ban to April 2013, it announced yesterday.
Government law officer Lord Wallace of Tankerness made the announcement as the House of Lords began scrutinising part 2 of the Legal Aid, Sentencing and Punishment of Offenders Bill, which contains the provisions.
It had originally been scheduled to take effect in October 2012, but speculation had been growing that the timetable was too tight to have everything in place. The government had already pushed back implementation of part 1, dealing with legal aid reform, to April 2013.
A Ministry of Justice spokesman said: “We are committed to reforming the ‘no win no fee’ system so that legal costs for reasonable compensation claims will be more proportionate, and avoidable claims will be deterred from going to court.
“This will help us to move away from the current unacceptable situation where, for example, the NHS paid £200m to claimants’ lawyers for compensation cases in 2010-11 – around three times more than it paid its own lawyers.
“This will require changes to legal rules and regulations and we want to give sufficient time to get the complex details right. We are also conscious that legal businesses will need sufficient time to plan for the changes, alongside other forthcoming regulatory and funding changes to the industry. We will therefore implement the new measures, subject to parliamentary approval, in April 2013.”
Seamus Smyth, president of London Solicitors Litigation Association, said: “The Jackson consultation process took a long time, and highlighted a great deal of disagreement. Implementing his proposals, even as a whole, would have taken time and would not have been easy but tackling them piecemeal was bound to generate more disagreement and take even longer. It is no surprise that the timetable is being stretched. Let’s hope the detail and drafting quality of the outcome justifies the wait.”
During the six and a half hours of debate, the government rejected all the amendments to clauses 43 and 45, which end the recoverability of success fees and after-the-event (ATE) insurance premiums, despite a particularly passionate plea on behalf of asbestos sufferers. Justice minister Lord McNally said: “To succeed, we will have to stand firm against some of these hard cases, I am afraid.”
He also questioned claims that the Dowler family would not have been able to take legal action were it not for the current regime. “I thought at the time, and I still think, that it is almost inconceivable that the Dowlers would not have been able to pursue their case under conditional fee agreements.
“The idea that they would have been powerless in the case that they had is perhaps countered by the fact that the matter was settled out of court – and if reports are to be believed, at a cost of £3 million to the offending company. I am not so sure that the argument that they would have been left powerless stands up in those circumstances.”
Lord Wallace had earlier told peers that the reforms “can help businesses and other defendants who have to spend too much time and money in dealing with avoidable litigation – actual or threatened”. He added that they will promote competition among solicitors.
He said: “No doubt some firms of solicitors will get a reputation for taking on cases with very modest or no success fees, whereas other firms prepared to take on more risky litigation would have higher success fees.”
However, he acknowledged concerns among peers that some of the main Jackson reforms, particularly qualified one-way costs-shifting (QOCS), would be dealt with by the Civil Procedure Rule Committee with little involvement from Parliament. But he indicated that there would not be a “primary financial threshold” to apply QOCS.
Lord Wallace said: “We will, however, continue to work with stakeholders on the detail of a QOCS regime for personal injury cases. We acknowledge and are grateful for the expert stakeholder contributions that have been received. That work will resume in earnest once the details of this bill are finalised.
“However, there are some difficult issues which we are addressing, and which need to be got right for the hundreds of thousands of personal injury cases dealt with each year: what does ‘unreasonable behaviour’ mean? How can we balance certainty for the claimant with the need for the claimant to face at least some litigation risk, the absence of which is a major flaw in the current regime? How can we ensure fairness to all sides, and reduce the scope for satellite litigation?”
He said “there does appear to be broad agreement that it should not be a primarily financial threshold in personal injury cases, although that would not necessarily apply were, at some future date, QOCS to be extended to other categories”.
Lord McNally said later that the government will examine the experience of QOCS in personal injury claims before considering whether it should be extended further. “Different considerations apply in different types of case. Environmental claims, for example, typically involve more than one claimant who can contribute towards the costs. Before-the-event legal expenses insurance may be available in relation to the provision of goods and services.” He also pointed to the introduction of contingency fees as another option.
Lord Wallace argued that the insurance market will “respond positively” to the reforms. “It is easy to say ahead of an event that all sorts of appalling things will happen, but after 1999 the market certainly adjusted to the opportunities with ATE premiums, and it is not surprising that those who wish to maintain the status quo are making substantial representations to that effect.”
The only clarification of substance during the debate was that the 10% uplift in damages awards will also apply to bereavement damages.