A (i) Explain what is meant by a conditional fee agreement and when it is used.
Written by Richard Maslin
Introduction:
One of the main concerns facing the English legal system today is the cost of civil cases. With the expenses of mounting a civil case being so high, it is questionable as to whether the idea of ‘justice for all’ is necessarily a correct one.
There is no way of knowing in advance the exact cost of taking a case to court, factoring in court fees and attorney fees, which may dissuade many from undertaking civil action. In response to this, Conditional Fee Agreements (CFAs) were created in an attempt to give any potential plaintiffs a chance to launch their own civil case.
How does a Conditional Fee Agreement work?
Under section 58 of the Courts and Legal Services Act 1990, Conditional Fee Agreements were formed to follow Government objectives in the interests of making justice affordable to all.
This system, more widely known as a ‘No win – No fee’ agreement, was implemented to allow those people on a lower income to have the same access to justice as anyone else. By 1998 conditional fee use was extended to all civil cases except family cases.
The first stage in the arrangement of a CFA involves deciding with your solicitor on the standard fee they will be paid for their work. On top of this, a success fee is also agreed upon. If the solicitor does not win the case, the client pays nothing. However, if the solicitor wins, the client must pay the standard fee, plus their success fee, which can be anywhere up to 100% of the normal fee. The Access To Justice Act 1999 stated that courts can now order for the success fee for the winning party to be claimed from the losing party.
The success fee is decided upon by the solicitor based on the prospects of a case. If the case is fairly simplistic and has a high likelihood of success then the fee will be low. However, if the case is more complex and has a greater chance of failure, then the fee will naturally be higher. To ensure that the success fees are proportionate and never too high, there is a system known as ‘capping,’ whereby it is made impossible for the solicitor to claim over 25% of the damages for his success fee. This was decided after Callery v. Gray (2001) where the Court of Appeal ruled that 20% is the maximum a defendant should be expected to pay as a success fee.
Claims firms and insurance premiums
The ‘No win – No fee’ agreement is not only employed by some solictors, but also the majority of claims firms. These firms work on behalf of a client and attempt to negotiate a settlement with between the claimant and the defendant. If such a settlement cannot be reached then the client is then referred to a solicitor for further representation. This is seen as a more popular option than seeking the assistance of a solicitor, as the public are believed to find claims firms less intimidating.
They also offer insurance premiums to cover the client’s costs if the worst should happen and they lose the case. In this respect, the term ‘No win – No fee’ is quite false, because if they do lose, they will have to cover the costs of the other party, instead of their own.
The insurance allows those who cannot afford the cost of losing to be able to pay the winning party. The insurance is paid for in monthly installments, based again on the likelihood of success with a particular case. The insurance premium would have to be paid before the trial has been lost or won.
Claims firms use this uncertainty and fear of loss to sell insurance premiums at very high prices. Along with this, there are a number of other negatives to this scheme, the most significant of which is that some people cannot afford the premium. There was also the fact that, in previous years, the premium could not be reclaimed from the losing party as part of the total costs. However, this has since been amended by section 29 of the Access to Justice Act 1999, and now allows the court to order that the winning party recoups the cost of the insurance premium from the losing party.
Conclusions:
A Conditional Fee Agreement allows easier access to the civil courts of this country for those who may otherwise be financially incapable of obtaining the justice they may deserve. It is an attempt at reaching a greater sense of equality in the court system, to overcome the division between those who can afford justice and those who cannot.
It is a relief to many to think that their solicitor’s fees will be taken care of whether they win or lose (although, as we have discussed, they will have to pay for the winning party’s). It has also been suggested that the ‘No win – No fee’ agreement actively encourages a solicitor to work hard on behalf of the client at the risk of them not getting paid. This should provide the highest standard of representation possible.
However, there are still many problems with the system. Although it attempts to correct, or at least, tackle the issue of being financially incapable of affording representation, it still cannot solve the problem. People can find that, if they lose the case, they are simply unable to pay the costs. Although taking out an insurance premium against the loss may help, many people are still unable to afford the premium.
There will always be the factor of finances involved in the mounting of a civil case. There is only so far that representation can be made available for civil cases, even if people are thought to be being denied justice. Unfortunately, very little in this world is free, and that includes justice.
A (ii) Describe the other ways of funding legal help and representation when bringing a civil claim.
Introduction:
Although the option of paying for the representation of a professional solicitor is still the most highly recommended by the legal community, financial inhibitions may still prevent this. Because of this problem, there are other measures in place to allow the public access to the justice they may require, in bringing a civil claim to court. For example, the majority of the public already qualify for Legal Aid from the government, allowing advice and representation from a qualified solicitor.
The Community Legal Service:
The Community Legal Service provide financial assistance for those who cannot otherwise afford to mount civil action, again, to provide greater access to justice for all. They also openly provide the public with information about the law and the legal system of this country and how it relates to them. This has the effect of making those with an interest more aware about the system of which of they are a part, and informs them of how they may wish to undertake a civil case.
These services are paid for through the Community Legal Service Fund, which designates money to specific areas annually. Depending on the area, a greater or smaller amount of money will be given in accordance to that area’s level of requirement. The budget for the Community Legal Services Fund is decided upon by the Lord Chancellor, from the overall budget of the Government. He must then calculate approximately how much money will be required for each area and set it accordingly.
In July 2004, the Constitutional Affairs Select Committee published a report that led to a capping system of the overall money available for funding. With capping of funds in effect, this means that many people who are entitled to legal aid may not receive it if the money were to run out.
The Citizen’s Advice Beureaux:
The Citizens Advice Bureaux is a major provider of free information and advice, now available at over 1,000 centres across the country. It was first set up in 1938 and has developed over the years in credibility and accessibilty, with a centre now present in most towns in England and Wales.
The CABx seeks to give free advice and support of anyone who requires it, covering any number of legal topics. The most common are based on social welfare problems and debt but they will give advice on starting a civil action, including references to local solicitors with LSC contracts. There are even schemes in place, whereby a solicitor may come in regularly to give more qualified and professional advice.
All the workers in the CABx are volunteers, lay people, probably with some degree of legal interest. Many volunteers are University Law students working for free to gain some experience, so that although they are not fully qualified, they will be well-versed in matters of law. There is a training process within the CABx for the volunteers and, as a result of prolonged work, many become expert in certain areas of law.
There are still a number of problems with the CABx, in that they do not receive very much funding for this vital service they provide. It is also forced to rely on the contribution of volunteers, and since they are not paid to work full-time, the centres may regulrly be closed during working hours. The Benson Commission validly emphasised the importance of the CABx and it’s value to society. Despite these endorsements and proposals, they still do not receive the funding they require and can only work on a limited basis.
Law Centres:
In 1970, the first Law Centre was opened in North Kensington, with the aim to provide free, non-means tested legal services to locals. They gave the public free access to professional solicitors, and attempted to stop the public from feeling too intimidated to seek the advice of lawyers. Such free advice could even lead to pro bono representation, which is an essential public service to those in need in an area with few solicitors. The Law Centre was designed to be orientated around the particular requirements of the community it served, and helped identify certain areas that the community were having trouble with. These areas primarily included housing, employment, immigration and children’s rights.
Although this system would seem ideal, preferable even to the Citizen’s Advice Beureaux because the advice is from professionals, it has never had much success. This is because the government’s refusal of funding the scheme. The Home Office does provide some money, but not as much as it would require.
As a result, many Law Centres have been forced to close and only a few still remain, even though they still provide the greatest free access to legal advice for the more financially challenged.
Other schemes run by lawyers:
Cheap/Free Interviews:
Solicitors do regularly offer cheap or free initial interviews, lasting up to about half an hour. This gives a person the opportunity to talk to a solicitor in a professional environment, to find briefly explain the situation and see if their case has any basis of pursuing. The solicitor may inform them that their case has a good chance of success and subsequent arrangements will be made. If not, then no money has been wasted. This system is used by solicitors to make potential clients more willing to come to see them regarding a legal matter, in the hopes that it will be taken further.
ALAS:
The Law Society’s free Accident Legal Advice Service. This is desgtined to help the victims of an accident claim the compensation they are entitled to. This scheme also conducts cheap intial interviews to check to possibilty of success. The ALAS also features a freephone service, which gives rapid response and puts the client in touch with legal aid and personal injury solicitors.
Free Representation Unit:
Set up by the Bar in 1992, this scheme was used as pro bono work from barristers for people who ineligible for legal aid. It allows these people to have their case presented in court free of charge. It’s effectiveness has been shown by the fact that over 2,000 cases a year are handled in this way.
B - Explain the criticisms that have been made of conditional fees and the other methods of funding.
Introduction:
At first glance, the prospect of conditional fees and legal funding for the more financially impaired seems valiant, noble and a reminder of the benefits of living within a democratic welfare state. But as with all systems, there are a number of disadvantages to even out the advantages. Because this is a world where practicality sadly outweighs idealism. So we must now explain the criticisms of conditional fees and other funding methods and draw conclusions from them.
Conditional Fee Agreements:
Conditional fee agreements, since their conception, have always been questioned regarding their effectiveness. The scheme can be complex to lay people and clients, and there is the possiblity that the details may not be explained to them, which is never ideal.
Conditional fees were left as the only alternative for many when, in 1999, the majority of civil legal aid was abolished. This was seen as denying people access to justice and many criticised the Lord Chancellor for his actions, stating that he was being motivated simply by cutting costs and sparing the budget.
The main principle in favour of CFAs is that it allows the majority of people to undertake civil action and claim for compensation. It allows a case that has a high chance of success being undertaken at no cost to the claimant. The only prerequisites are for the client finding a solicitor who is willing to take on the case and to be able to afford the insurance premiums. This could be seen as an argument in favour of the idea of allowing greater access to justice for all.
Another advantage is that CFAs are not a financial burden to the State, which frees up money sorely needed for funding other areas of legal aid. This means that these legal advice and representation schemes are more widely available for those who cannot even afford a CFA, and allow them to still receive the justice they should be entitled to.
On a more practical note, a solicitor will naturally be inclined to work harder on a case if they know that their fees rely on their success. The knowledge that their negligence in the preparation of a case will result in them not being paid would certainly mean that their client receives the highest level of dedication and efficiency. This is supported by the fact that 85% of personal injury cases are successful.
The high charge of success fees on top of compensation being claimed may also make an a early settlement more likely. This is because many cannot afford the costs of the success fees and the compensation.
I have already spoken about the prerequisites for engaging in a civil action. The idea is that having a solicitor agree to take on your case and affording the insurance premiums is all that is necessary for anyone to have access to justice.
There are however a number of argument s against that idea. Amongst other reasons, a solicitor is only likely to take on a case they are fairly certain of winning. The Law Society have criticised the ‘No win, No fee’ scheme as being the primary excuse for solicitors to become more selective about which cases they choose. This, effectively, denies the principle of greater access to justice.
The other factor is that many people cannot even afford the insurance premiums, which are usually extremely high. The purchase of the insurance premiums can even be insisted upon seeing as most solicitors will not take a case on unless the client has such insurance. The Law Society have attempted to remedy this but can only provide insurance premiums for some personal injury cases. The rest is left up to private insurance companies who, at their discretion, can charge as much as they want.
The final prominent criticism against the scheme is rooted in the potential dishonesty of the solicitor. The suggestion is that solicitors tend to underestimate the likelihood of succeeding in the case so that they can charge extortionate success fees. The chairman of the Bar Council suggested that solicitors can get achieve this because, generally, a client will not have the skills required to assess their own chances of success. This allows the lawyers to charge whatever they think they can get away with. The Policy Studies Institute (1997) produced a report that showed the average uplift to be approximately 45%, with 1 out of 10 solicitors charging between 90-100% uplift on their success fee. This an inevitability because without strict guidelines in place about limits on success fees, a solicitor may choose to be dishonest and over charge their client.
With all of these disadvantages to the conditional fee scheme, it is easy to draw the conclusion that it is not effective. Since the abolishment of the majority of civil aid, it is hard to suggest a viable alternative to the system in place. There are only suggestions to improve the current system, for example: imposing a strict limit on the amount charged as a success fee to avoid a client being over charged.
The Community Legal Services Fund:
The overriding criticism of the Community Legal Services Fund is that it has a fixed budget, as opposed to the demand budget of the Criminal Defence Service. This means that once the budget has been used up, someone may be unable to receive legal aid even if they are eligible for it.
In fact, if the budget for the CDS runs out, money is then taken from the budget of the CLS. Although this is the natural reaction, since the majority of Criminal cases are far more important to society at large than any civil case, it would still be preferable to have a higher budget for both.
This problem has been partially combatted by the CLS by the creation of the two sub-divisions within it’s budget – civil and family. The division does allow the two budgets to be shared if one budget were to run out. There is only so far this can be stretched, however, and if both budgets run out then any civil action will have to be funded privately by the claimant themselves.
The conclusion here is that the problem lies not so much with the CLS fund, but more with the lack of funding they receive from the government. As I have said, when it comes down to it, the financing of criminal cases take precedent, but ideally the government should increase the budget of the CLS and the CDS to avoid these problems.
Law Centres:
The advantages of Law Centres seem fairly clear. They provide the public with free access to professional lawyers in areas that are poor or where legal advice is at a minimum. At Law Centres, the public receive free advice and can even obtain pro bono representation from a barrister. All of this shows why, while they remain open, Law Centres are the most popular source for free, non-means tested advice and representation.
There a number of problems with the Law Centres, again not so much in the schemes themselves, but in the funding they receive. They receive very little government funding for what is, essentially, a fairly expensive project. They receive a small grant from the Home office, but this still leaves a big void in the money they require. This is why many Law Centres seek financial support from local businesses and local authority funding. However, this can lead to a bias in cases brought against the local authority and council, as the solicitors are less likely to pursue a case against the people who are funding them. As a result, many of the Law Centres close either temporarily or permanently.
Considering Law Centres provide such an important and commendable service, I believe that they should be funded entirely by the Home Office. They must be completely free from influence from local authority funding, because most of the cases they deal with involve housing issues against the council.
Law Centres need the funding to stand alone, untainted by those who fund their services, so that they can continue to give free and impartial advice to those who require it.
Citizen’s Advice Beureaux:
Once again, it is sad to say the main disadvantage with the Citizen’s Advice Beureaux is one connected to poor funding. The Benson Commission (1979) have highlighted the importance of the CABx, calling it ‘the first tier of legal advice.’ They provide advice for those who are either unable or too intimidated to seek the help of a professional solicitor. The service that the CABx provides gives people who are unsure about the law and legal system to have some of their questions answered free of charge.
Due to the lack of funding, the service of the CABx is somewhat hindered. It is forced to rely on volunteers to remain open. Because the majority of volunteers may have jobs, it is unlikely that the Beureau will be open during business hours, making it’s services less accessible to the public.
The opening times, along with the ever-present funding issue, draw people to question whether the services of the CABx are entirely beneficial.
Conclusions:
There are a number of problems with all of the systems above. Each one is a brilliant piece of idealism shot down by the harsh realities of society. The idea of equal access to justice for people from all walks of life is a noble one, but sadly it seems, just not practical.
There are only so many times I can conclude that funding is too great an issue for each of these schemes to be beneficial. I personally think it highlights just how little money the Government is actually willing to spend on legal aid in the civil division. Obviously I am not an expert in economics or how the Government budgets it’s money, but it seems to me that such a fundamental right, access to justice, is being denied because the Government is not willing to spend it’s money in that way.
In writing this, I was reminded of a quote by the Prison Warden Norton in The Shawshank Redemption:
“The only way people are willing to spend money… is on more bars, more guards and higher walls.”
This is clearly the way our current Government thinks, because the money certainly isn’t going into funding Law Centres, the Citizen’s Advice Beureaux or even the Community Legal Services Fund.
Although Criminal matters may well take precedence over Civil matters, we still must ask ourselves: What is being done to ensure that all people, rich or poor, are being granted access to civil legal aid?
The answer, it seems, is not enough.
Richard Maslin.
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