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Curbing legal aid |
To save money, legal aid has been removed for
virtually all personal injury and business disputes (except clinical negligence)
and have to be brought under
"conditional fee agreements".
The winning side can recover both the success fee
and insurance premium from the losing side.
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What
is a Conditional Fee Agreement (CFA)? |
A
Conditional Fee Agreement (CFA) is a type of arrangement whereby payment to the
solicitor is dependent upon the result of the proceedings.
It is permitted (in
certain instances) by Section 58 of the Courts and Legal Services Act 1990 and
the Conditional Fee Agreements Order 1998. Under a CFA, a solicitor can charge
his client his usual hourly rate (charge out rate), plus an uplift (or "success
fee"), if he pursues his clients' case successfully.
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CFA = "No win no fee"
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N.B. it
does not mean:
"Win,
no fee"
"No
Win, no cost"
or any
other combination of similar words.
Conditional fees are arrangements between client and lawyer on a "no win no
fee basis", or a variation of that.
The
client benefits because he doesn't pay if the lawyer doesn't win the case, and
the lawyer benefits because if he wins the case he charges a higher fee. Both
parties can take out insurance against losing the case.
There
are only a few areas where barristers will conduct no win no fee arrangements,
the scheme is mostly confined to arrangements with solicitors.
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Clinical negligence |
Only contracted organisations are able to take on publicly funded clinical negligence cases.
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Costs "uplift" |
In all civil non-family cases, a person may enter into a
conditional fee agreement
with her/his solicitor.
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If s/he loses the
case, s/he will only have to pay the costs of the other side and, depending on
the agreement, the solicitor's expenses, including any barrister's fees.
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If s/he wins the case,
s/he will pay her/his solicitor a higher fee (up to 100% but typically 25%)
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CFAs and insurance |
In certain personal injury cases, a person can take out a special insurance policy that can cover her/his costs if s/he loses the case.
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Prescribed information |
The person providing advocacy or litigation services must provide prescribed information before the agreement is made.
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Compensation Act 2006 |
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Claims Management Services |
The
activities of Claims Management Services (sometimes referred to as Claims
farmers) are now regulated by the
Compensation Act 2006.
The Act
paves the way for a new regulatory regime that is expected to be in place by
Spring 2007. Regulation will be undertaken directly by the Secretary of State
for Constitutional Affairs, supported by a senior individual with appropriate
skills and experience recruited from outside the civil service.
For too
long people have been pressured into making claims by "hard sell" tactics and
misled by inappropriate and aggressive advertising. This legislation makes those
who sell such services conform to strict rules of conduct and deal with their
clients honestly.
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Mesothelioma victims receive particular help |
Victims
of mesothelioma, a form of lung cancer, also benefit from the new Act. It
ensures that those suffering from mesothelioma due to another's negligence are
able to receive full compensation from any responsible person as quickly and
easily as possible. The responsible person isl then be able to claim back
contributions from other responsible persons.
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Monitoring unit, like Trading Standards |
A key
part of the proposed regulatory mechanism is an external monitoring and
compliance unit that utilises the existing expertise of a local authority
trading standards department under contract to MoJ. This ensures that benefits
are delivered to consumers as quickly as possible.
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Unauthorised persons will commit an offence |
After
regulation comes into force, any unauthorised person offering claims management
services will be committing an offence and will be liable to up to 2 years
imprisonment.
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Courts assessment of care taken |
The Act
confirms that courts considering what standard of care is reasonable in a claim
for negligence or breach of statutory duty can take into account whether
requiring particular steps to be taken to meet the standard of care would
prevent or impede a desirable activity from taking place. This will improve
awareness of this aspect of the law and helps to ensure that normal activities
are not prevented because of the fear of litigation and excessively risk averse
behaviour.
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School trips and others need not fear litigation for accidents |
The Act
gives reassurance to voluntary organisations and other groups who have curtailed
activities due to a fear of litigation.
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The history of the 2006 Act |
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In 2004 the
Citizens Advice Bureau published a report
No
win, no fee, no chance which
discussed access to compensation by around 2.5 million people who have
accidents each year. Only 31 per cent actually claim compensation
using legal processes. The number has fallen since the ‘‘conditional
fee agreement’’ was introduced in 2000 when legal aid for personal injury
claims was withdrawn.
The CAB produce evidence
that the personal injury compensation is failing consumers.
The system, they say is too complex for unrepresented individual to pursue
a claim for compensation on their own, they need legal help.
The consumer usually takes out insurance to cover themselves against the
risk of having to meet both sides’ costs if they lose. The complex
financial and legal processes involved are often misunderstood by
consumers, and consumers’ needs can be misunderstood by the service
providers.
There is widespread
mis-selling of legal and insurance products, and
consumers are often induced into signing conditional fee agreements (CFAs)
inappropriately.
The arrangements have contributed to a system which involves relatively
high legal costs and delays.
Problems with the present system include:
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Consumers are subjected
to high-pressure sales tactics by unqualified intermediaries
introducing them to a legal process. Inappropriate marketing and sales
practices are used – for example with salesmen approaching accident
victims in hospital.
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Few consumers seem to
understand the risks and liabilities they are exposing themselves to as
the risks of conditional fee agreements have not been clearly explained
to them at the outset by salesmen. Consumers are misled into thinking
the system will be genuinely ‘no win no fee’ but can often find that
costs are hidden and unpredictable.
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Loan financed insurance
premiums, in addition to other legal costs, can often erode the value of
claimants’ compensation. In some cases consumers even owe money at the
end of the process. This turns the whole claims process into a
zero-sum gain for consumers and denies effective access to
compensation.
Conditional fee
agreements create perverse incentives for the legal profession and
provide the conditions for cherry-picking of high value cases with high
chances of success. This results in lawyers refusing to take on good small
claims which may nevertheless be of enormous financial and personal
significance to the client, thus denying access to justice.
The CAB does not advocate a simple return to public funding for personal
injury cases. Legal aid is very restricted and means tested, and by
definition was not actually of assistance to many consumers.
They make recommendations to regulate claims advisors and the system of
complaints, they say that the Financial Ombudsman Service and the
Legal Services Ombudsman should co-ordinate complaints procedures
about conditional fee agreements so that there is a “one stop shop” for
any consumer complaints.
There should be consideration of the viability of introducing ADR
or no fault based systems to deal with personal injury cases, and
review how to achieve fair rehabilitative compensation and proportionality
between costs and damages.
The Government issued a consultation paper Making Simple CFAs a Reality
(2004). which examined Conditional Fee Agreements a Bill followed and
on 15 December 2005 was progressing through the Grand Committee of the
House of Lords. The
Compensation Bill was introduced in the House of Lords.
Claims Standards Council
The industry is providing self regulation with the Claims Standards
Council which was established in 2004 The Claims Standards Council is
a non government organisation aiming to introduce self regulation for
claims management companies and to ensure that consumers receive the best
possible service.
The Council's
member-companies agree to operate by a code of conduct (The Claims
Standards Council has submitted its code of practice to the Office of Fair
Trading for approval). However, membership of the Council is voluntary, so
some claims management companies are not members.
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29 June 2004: The Department for Constitutional Affairs
announced that it intends to simplify the rules for Conditional Fee Arrangements (CFAs) ("No Win No Fee") which were hoped would promote
access to justice. CFAs replaced Legal Aid in civil cases, four years ago.
Some observers claim this will take the UK further towards an unrestricted compensation culture.
Problems:
Defendants' costs which have risen substantially to cover the success
fees, which is part of their CFA.
CFAs are complex and opaque.
Reports that clients are being exploited by the unregulated and sometimes
unscrupulous intermediary claims management companies.
The ‘indemnity principle’, where a party cannot recover from the loser
more than he is actually liable to pay his lawyer.
Little is expected to change until late 2006.
MoJ details here |
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"No win no fee" arrangements
From 1st June 2004, in Road Traffic Accident cases, a new scheme, brought
into effect by rules of court, will fix the success fee paid by a
defendant’s insurer to the claimant’s solicitor or barrister where they
are funded by a conditional fee agreement.
For example, insurers will pay solicitors a 12.5 per cent success fee on
top of their costs if they win cases that settle out of court, and a 100
per cent success fee for the riskier cases that go to trial.
In employers' liability accident cases, a similar scheme applies, but the
rates can be higher.
MoJ website here |
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Citizens Advice is warning that one of the Government’s flagship policies
- the modernisation of the legal aid system - is now in danger of
collapse. Access to legal aid solicitors in England and Wales is a
postcode lottery with one in four Citizens Advice Bureaux saying they are
in an “advice desert”, according to a survey published on 6th February
2004.
Press release
here
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The Government provides £2billion to fund legal services.
There is funding for legal help and (where appropriate) representation in
criminal cases; in many areas of civil law, including family law.
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July 2003
The Clementi
Review into the provision of legal services is to report by the end of
2004. It is thought that it is a move towards multi-disciplinary legal
services, referred to as "Tesco Law" because solicitors will be able to
offer services in supermarkets.
Link
here |
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May 2003
The Accident Group, the UK's biggest injury-claims specialists with
centres in Manchester, Birmingham and Liverpool, was put into
administration because "lower than expected claims success rate" created
financial difficulties, which "resulted in increased insurance premiums on
new business and retrospective claims from the underwriters".
It was reported that workers were sacked by text message and later
disgruntled workers looted offices of computer equipment before leaving
their workplace following news of the redundancies.
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