(ii) Describe the other ways of funding legal help and representation when bringing a civil claim.
Written by Italie Adams
Part A (i) - Explain what is meant by a conditional fee agreement and when it is used
Introduction
Conditional fees are becoming an ever-increasing popular method of funding personal injury cases. They are otherwise known as “no win- no fee” agreements, which as the name suggests, if they do not win, they do not pay, simple as that. It is now very common to see companies specialising in these sorts of cases, frequently advertising their services on daytime television.
As this essay question seems quite complex and lengthy, I have decided that it would be most appropriate to answer each question separately, providing detailed information in key areas.
What is a conditional fee?
Conditional fee agreements (CFAs) were first allowed by section 58 of the Courts and Legal Services Act 1990 in personal injury, insolvency and human rights cases. However, by 1998 the use of conditional fees was extended to all civil cases except family cases.
The Legal Services Commission introduced the Community Legal Service Fund and the Criminal Defence Service in order to allow everyone access to Justice. The Criminal Defence Service is concentrated on criminal cases whilst the Community Legal Service Fund is concentrated on civil cases. There are certain types of case, which are excluded from the state funded system. A major type of case is a personal injury case (with the exception of clinical negligence cases).
The government decided that personal injury cases were not important enough to justify public funding. As approximately, 80,000 people are injured each year at work the Community Legal Service fund found that out of the cases they fund nearly 60% were personal injury cases, which was unfair to others who need legal representation more urgently and was unfair as it was draining away the already tight budget.
Because of personal injury cases being excluded, the government introduced conditional fee agreements. Under a conditional fee agreement the solicitor may agree to take on the case on a ‘no-win no-fee’ basis or instead only charge a reduced fee. If the client loses the case then they do not have to pay their solicitors costs, however if they win the case they not only have to pay their solicitors costs but they also have to pay a ‘success fee’.
The success fee is calculated on the likely outcome of the case. If the client is likely to win their case, then the success fee will normally be quite low however if the outcome of the case is more difficult to predict then the success fee may be quite high. The success fee can be up to 100% of the agreed normal fee. However, there is a cap that the success fee cannot be more than 25% of the damages won by the client.
Conditional fee agreements are thought to be a very important part of funding civil cases and seeing as conditional fee agreements can now include all civil matters except for family matters many more people who are denied legal aid may choose a conditional fee agreement instead.
If you lose a civil case and have taken out a conditional fee agreement then you may still find yourself in financial difficulty. Even though you do not have to pay your solicitors fee’s you do still have to pay the other sides costs. These can spiral into thousands of pounds and can leave the loser in a very difficult situation. In order to protect against this it is possible to insure against losing a case. This means that if the client loses then the insurance company will pay the winner’s costs, leaving no financial burden on the client.
Insurance premiums
Insurance is not free and the insurance companies will expect you to pay insurance premiums in advance just as they do for any other type of insurance. The insurance premium is calculated on the likeliness of winning the case. If the likeliness of winning is high then the insurance premium will generally be low and vice versa. This all seems fine although many people who take out insurance against losing do so because they have no money so the problem of paying the insurance premium arises. This is one of the criticisms with the conditional fee agreement as it may be denying people access to justice.
Can you claim the success fee and the insurance premiums back?
The case used to be that because the success fee was an extra fee it could not be possible for the winning party to claim back the success fee from the losing side. However the Access to Justice Act 1999 now allows courts to order that the losing party pays the amount of the success fee to the winning party. This is because if the client had to pay the success fee out of their compensation this would mean that the client was not receiving full compensation.
In the Case of Callery v Gray the Court of Appeal ruled that a success fee could also be recovered where an action had been settled before substantive proceedings had been commenced. However, in normal cases the success fee would be limited to 20%. In this case, it was also decided that insurance premiums could be recoverable by the winner as part of the costs of the case. This was under section 29 of the Access to Justice Act 1999 and extended to Rule 44.12A of the Access to Justice Act 1999, which enabled pre-action costs to be recovered where an action had been settled before substantive proceedings, had been commenced, in addition the cost of the premium had to be reasonable.
Claims firms
These firms take on all of their cases on a unforeseen event agreement ‘No win, No fee’. They are often criticised as they charge very high rates for insurance cover. They negotiate compensation on behalf of a client and can seem less daunting to visit them than going to see a solicitor. However, if a case cannot be settled by negotiation then the firm would often refer the client onto a solicitor so that they can have legal representation.
Part ii - Other ways of funding legal advice and representation for civil claims.
Obtaining legal services from the legal profession, and paying for those services privately is only one of the options open to someone with a legal problem. There are a number of other providers and sources of funding available. More commonly the state will provide Legal Aid, which will enable a vast majority of the public to free legal advice and representation.
Since 1st April 2000 the Legal Services Commission replaced the Legal Aid Board and took over its responsibilities. The Legal Service Commission is set up by section 1 of the Access to Justice Act 1999 and manages the Criminal Defence Service dealing with criminal matters and the Community Legal Service for civil matters.
The Lord Chancellor is responsible for providing a budget for the Legal Services Commission. Out of the two services the Criminal Defence Service will get priority over funding because here they are dealing with people who are at risk of losing their liberties.
The Legal Service Commission also has a quality mark and is able to make contracts to all other legal services providers, including solicitors and advice centres. However, each firm or organisation must meet the specified quality standards set up by the Commission, in order for them to be awarded. On top of this, the Legal Services Commission has also set up its own website www.justask.org.uk. This site provides a wide range of legal advice, and is extremely beneficial to those in rural areas and those confined to home by disability.
The Community Legal Service
The money to pay for this service is met by the Community Legal Service Fund. Their main aim is to secure value for money, and provide financial assistance by making grants or loans to individuals who can then purchase services themselves.
The Lord Chancellor will set out the annual budget for the CLS section 5 of the 1999 Act, working on figures within the budget given by the government. This means that there is a set budget for the fund and in the old system of legal aid; it was worked on a basis of demand led.
This system faced intense criticism including: lawyers having no incentive to deal with cases quickly and efficiently, because they were paid by the work claimed. However, under the new system, there is a cap on the amount of money available. The disadvantage of the new system implies that in some cases, it is possible that some people will not be entitled to funding simply because the money has run out. In year 2001-2002, the budget was set at £732 million, but the Lord Chancellor indicated proposals of decreasing this already tight figure in the following years.
Generally, money will be allocated annually to different services for different areas of England and Wales, according to the amount identified as necessary for that area. It has been acknowledge, that this has resulted in some places having necessary funding, whilst in other areas there is not enough.
Legal aid
Legal aid was first introduced in 1949 following the Legal Aid and Advice Act 1949. Since then there has been a massive increase in the cost of the essentially demand-led state provision for Legal Aid and Advice. By 1999, figures suggest that legal aid reached excess figures of £2,041 million for criminal and civil cases. The Lord Chancellor had to put a cap on this level of expenditure.
In general, it appears that whether pursuing legal proceedings, or obtaining legal advice, they will be highly unpopular unless the state can provide some form of financial support. The costs involved in any case whether civil or criminal can be prohibitive to a rich individual or a poor individual.
Legal aid is available in most civil proceedings in the following courts: House of Lords, Court of Appeal, High Court, County Court and the Magistrates Court. Some of the matters excluded from funding by the Community Legal Service Fund include: defamation, conveyancing, and the making of wills.
Eligibility
Every individual case is assessed on the basis of a means and merit test. Taken into account is the likelihood of whether the case is likely to be successful. The client must have reasonable grounds for taking a case to court, before any public money is made available for it. The cases now must be subjected to a wider test in favour of government priorities and the available resources. An application for legal aid may be refused where, the client is only going to gain a very small advantage from such a proceeding, or the nature of the proceedings is such that a solicitor would not normally engage on. Therefore it is reasonable to say that, even though a poor person
is elegible to qualify for legal aid, it does not mean that they will automatically be granted legal aid. Those whose income or capital fall above certain limits will have to
pay a contribution towards certain legal services, assessed according to means. One must bear in mind that those who pay the most tax are the least likely to be recipients of legal aid.
There is also the necessity of making a formal application for legal aid, which could in practice take weeks or even months before legal aid is granted or refused.
Law Centres
There are about 50 law centres located in London and other major metropolitan areas. Law centres offer a free non-means tested service to members of the public and they aim to give out free legal advice to people with legal problems so that everyone is allowed access to justice.
Their work covers a wide range of topics including matters such as welfare law, immigration, planning and environment, discrimination and children‘s rights. Trained lay people staff these centres and qualified solicitors who volunteer to do free work.
In general, law centres have been praised for the work that they have provided, as they try to offer a service, which is easily accessible and not intimidating. However, lack of funding subsidised to law centres will threat their future operation.
Citizens Advice Bureaux
These advice centres were first set up in 1938 and at the moment there are approximately 2,000 outlets across Britain. They are frequently situated in high streets and other accessible locations such as health centres. Their role is similar to that of the law centres, and frequently they deal with problems concerning social welfare and debt.
However, they are not restricted to these topics and should they feel that legal representation might be needed for that particular case, they may refer you to a solicitor who specialises in that area of law.
Volunteers staff CAB’s and occasionally a solicitor may also sit in and provide free legal advice. The volunteers are given general training and many become quite experts in certain fields. It is estimated that the CAB deal with approximately 6 million enquiries per year, of which it is estimated that around one-third involve legal issues.
The Benson Commission in 1979, viewed CAB’s as excellently placed to provide a preliminary advice and referral service. They also stated that they should receive extra government funding, but until now funding is still patchy.
Pro bono work
It is definitely an offer that you cannot refuse when something is free. Regarding access to justice, both branches of the profession, solicitors and barristers has kindly established various schemes and services free of charge, to assist people with
presenting their cases. They believed that it was an important aspect of their duties and tried to raise awareness of this type of work. For this reason, they have decided to replace the term pro bono with “law for free”.
Free Representation Unit schemes
This was first introduced since 1992, helping people mainly that are ineligible for legal aid. Figures suggest that over 2,000 cases per year are handled this way.
Other advice agencies
The legal profession could not cope with providing legal advice to everybody who needs it and it is inevitable that other organisations will play a part. Law centres and the Citizens Advice Bureaux are the main two organisations which are popular and which provide help in a wide range of legal topics. However, there are many more advice agencies, which specialise in a particular topic.
These include: Trade Unions, which offer general advice to members on employment law issues. Charities such as Shelter whom; offer advice to people with housing problems. Child Poverty Action Group and the National Association of Victims Support Schemes.
Other charities offer information particular to their areas of work. Local authority advice units typically cover housing problems, benefits and consumer issues. The motoring organisations, both the AA and RAC offer advice to members involved in traffic matters.
Part B - Explain the criticisms that have been made of conditional fees and the other methods of funding.
Conditional Fee Agreements
Conditional fee agreements are under constant scrutiny and are often being criticised for charging excessive ‘success fee’s’ or for not explaining to their clients in full how the conditional fee scheme works.
Disadvantages of CFAs
A major disadvantage of conditional fee agreements is that solicitors participating will only want to take on cases, which they think have a good chance of being successful. Therefore cases, which could go either way, may not be taken and this is denying the individual access to justice. Critics including the Bar, the Law Society, the Legal Action Group and the Vice-Chancellor of the Supreme Court have all expressed strong concerns about the new conditional fee agreements. Due to these strong concerns clinical negligence cases have been kept within the state funded system because they are normally very difficult to win, indeed the success rate is only 17% compared to 85% for other personal injury claims. Although the government has taken steps to counter the concerns in this area, the critics say that there may still be other types of case where similar problems arise.
Another major disadvantage is the fact that if people want to insure themselves against losing then they will have to pay out insurance premiums which could amount to a lot of money.
If there is a personal injury case then the law society provides an affordable insurance scheme however, the only suppliers for other cases are private insurance companies who can in effect charge what they like. A proposal for reform by the Law Society and the Bar Council is to have a self-financing contingency fund, which would pay for cases on the understanding that successful clients would pay a proportion of their damages back to the fund. However, the government have n plans are the moment to embark on the creation of such a scheme.
Another disadvantage is regarding the financial involvement of lawyers. It has been criticised that lawyers have a financial interest in the outcome of a case when taking out conditional fee agreements. The Chair of the Bar Council argued that since clients generally lack the knowledge to assess their chances of winning their case, lawyers would be able to charge whatever they think they can get away with.
A 1997 report by the Policy Studies Institute on the effects of the changes made under the Courts and Legal Services Act 1990 found that the average uplift was 43%. However, within the average one in ten solicitors were charging between 90 to 100% uplift. It has been thought that solicitors may be underestimating the chances of winning in order to increase the uplift.
In 1999, the Forum of Insurance Lawyers (FOIL) suggested that because solicitors could make additional money they were urging clients to take out conditional fee agreements even though they did not need them.
Are conditional fees working?
Research in 1998 by Sheffield University found that the poorest clients could not pursue their case even on a conditional fee agreement, as they could not afford the insurance premiums. Their research also showed that the amount of work needed to
be done on some types of personal injury case meant that it was difficult to estimate the costs and sometimes the cost of the case was more than 100% of the uplift fee.
Advantages of CFAs
However, conditional fee agreements are not all bad. They have allowed a number of people to get access to justice. Some advantages include there being no cost to the state. This means that the government can direct its resources to cases, which need funding more, or invest in Citizens’ Advice Bureaux or Law Centres.
Also the inevitable decrease in the people who are denied access to justice because of conditional fee agreements. As long as a client can afford to insure against losing and persuade the solicitor that their case is worth fighting for then nearly anyone, can pursue a civil case and claim for damages.
In addition, on the contrary to the financial involvement of lawyers being a disadvantage it could make solicitors more inspired in the case and in turn make them perform better for the client because they have a financial interest.
Criticisms of the Community Legal Service Fund
The Community Legal Service Fund is often criticised for having a fixed budget instead of having cases funded on a demand-led basis like the criminal defence service. Critics argue that because of there being a fixed budget that once the money has run out no one can get legal funding even if they are more than eligible for it. Therefore, they are being denied access to justice.
However, to help this problem the Community Legal Service fund has two sub budgets of family and civil so that there can be some flexibility between the two. For example, if a particularly important case could not acquire funding from the civil side it may be able to claim on the family side. This does not solve the problem if all the money runs out and by increasing the amount of excluded matters this also denies people access to justice.
Although personal injury cases and some others are covered by conditional fee agreements, some cases cannot be covered by any other service and therefore people are being denied access to justice. In addition the criteria for funding has become for tighter with both a means test and a merits test which means that it is more difficult to acquire legal funding and your case has to have a chance of being successful before any funding is awarded.
The Legal Services Commission website is also heavily criticised, as many people who cannot afford to pay for legal representation will also not have a computer or access to the internet. The Legal Services Commission says that most public libraries will have access to the internet so people can access the website via their local library.
Another criticism is that many people will not know what legal problem they have, therefore will not know where to look on the website. The issue of literacy and computer literacy also has to be taken in to consideration.
Criticisms of Citizens Advice Bureaux and Law Centres
The main issue is the lack of funding available to these centres. Many have shut down due to the local authority not awarding enough funding. Citizens’ Advice Bureaux provide an essential service to individuals who cannot afford to see a solicitor and
they are also more welcoming than going to see a solicitor. There are currently less than a thousand in the United Kingdom and it is estimated that without increased funding this number will fall. The inaccessible hours for which CABx are open for also mean that those who are in full team employment may not be able to seek advice this way.
The same is apparent for Law Centres, which provide an essential service to those who again cannot afford to pay for legal advice and representation. Law Centres are often not awarded funding because the local authority knows that they may be pursuing cases against them, so they are not allocating the funding in a fair manner.
In Conclusion, it is clear that Conditional fee agreements have their advantages and disadvantages and that funding is needed in order to keep services like the CABx and Law Centres going.
Written by Italie Adams (November 2006)
Bibliography
-Elliot and Quinn
-The English Legal System - 3rd edition by Jacqueline Martin
-37th Legal Aid Annual Reports
-The Fourth Right of Citizenship
-30th Legal Aid Annual Reports
-Legal Aid Act 1988, s.34