Wednesday, April 27, 2011

The one bit of good news from the forthcoming No win No fee reforms

Part 36 Offers

Almost unnoticed in the furore caused by Ken Clarke's recent assault on No win No fee lawyers came the news that "Part 36 offers" are to be given more weight in litigated cases. Harking back to the early phase of the Woolf Reforms when insurers actually believed that P36 proposals mattered.
Clarke's proposals introduce two changes that act as enticements:
A defendant that does not beat a claimant's Part 36 offer is already liable to pay the claimant's costs on the indemnity basis and interest on those costs and damages awarded at a rate of up to 10% above base rate. 
Now though an additional costs sanction of 10% of the value of the claim will be paid by defendants who do not accept a claimant's Part 36 offer that is not beaten at trial. 
If a money offer is beaten at trial, even by a small margin, the costs sanctions under Part 36 will apply. This reverses "Carver" and ensures that the P36 mechanism remains a very useful tool in accelerating settlements.
Whilst not easily digestible by The Sun and other rags, it is nonetheless a significant part of the reform process and one that Legal Spy welcomes.

Sunday, April 03, 2011

No win No fee witch hunt ... the winner loses

Ken Clarke the Lord Chancellor announced this week that the government were to implement many of the recommendations presented by the Jackson Review 2010. This blueprint document set out radical reforms which apparently are badly needed in the No win No fee litigation sector.

As a battle hardened personal injury litigator I can see why there is a need to reform. The disappointment for me is the complete failure once again for the pro personal injury lobbyists to compete with the insurance big wigs who pretty much call the shots at the Ministry of Justice. We have been trampled over and made to look like dead eyed sharks.

The main points are pretty radical.

At the moment when you pursue a personal injury claim, your solicitor will offer you a “No win No fee arrangement” which in short means they will take your case on without charging you if they lose the case. However the solicitor is entitled to a success fee in addition to base costs to reflect the risk they have taken in pursuing the case on a “no win no fee” basis. Both base costs and the success fee are paid by the defendant insurers if the case succeeds.

The claimant is also encouraged to take out an insurance policy that protects them if they proceed to court. This is known as an After the Event (ATE) policy.  The cover provided by the ATE basically pays the defence legal fees if you have a bad day in court and lose at trial. The ATE premium is also paid by the defendant insurers if the case succeeds – the premium is not recovered at all if the case fails.

The key change in the reforms reverses the principle that the loser pays. Instead, it is proposed that the claimant rather than defendants should pay lawyers success fees and cover ATE insurance costs in order to pursue their case.  Lawyers can charge a success fee against damages up to 25% of the sum awarded. Base costs can still be recovered from the insurers but the intention is to remove the current “free to claim” and “win 100% of your award” mentality that prevails in the market. To accommodate this radical move, compensation awards will be increased across the board by up to 10%. The idea being that the 10% increase ultimately cushions the blow suffered by the claimant in having to fork out the extra charges.

Once these reforms are made law, it will no longer be free to claim and successful claimants will no longer win 100% of their compensation award. Those days are gone.

So why do this..? Well the reasoning is simple. The government and the all powerful insurance lobby want to discourage claimants and lawyers from making – what they deem to be – frivolous and unnecessary claims. These are the cases that, they say, fuel the “compensation culture”.

So will this work…?   Absolutely not.

All that will happen is that lawyers will forgo the success fee in many low value cases and probably take on even more frivolous / risky claims to make up the difference. Seriously injured claimants will lose out twice over because they will be stuck paying up to 25% of much needed damages to their lawyer and then have to cover the cost of the ATE.

Pity those that are seriously injured and need to make a claim to cover much needed treatment costs and lost wages.

The industry will need to adapt and of course that’s exactly what it will do. The lost revenues will be made up in other ways and of course.... we will still as always be perceived as sharks.