Taymour Keen
Class 1C
(i) Explain what is meant by a conditional fee agreement and when it is used
ii) Describe the other ways of funding legal help and representation when bringing a civil claim.
Explain the criticisms that have been made of conditional fees and the other methods of funding.
Part One
Explain what is meant by a conditional fee agreement and when it is used.
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 (as mentioned above). 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 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 you.
Insurance premiums
However, 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 than 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 contingency 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 that 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.
Conclusion
So now if you win a civil case and take out a conditional fee agreement as well as insurance against losing you can claim back the solicitor’s normal fee, the success fee and the insurance premium leaving you to pay nothing. In addition, if you lose a case and have taken out an insurance premium and a conditional fee agreement then you pay no solicitor’s fees on either side and only would have had to pay the insurance premiums.
The government is currently considering introducing collective conditional fee agreements for the use of people or organisation who use legal services often such as trade unions and insurance companies.
Part Two
Describe the other ways of funding legal help and representation when bringing a civil claim.
On the 1st April 2000 the Legal Aid board was replaced by the Legal Services commission. The commission is an executive non-departmental public body reporting to the Lord Chancellor and the Lord Chancellor is only allowed to give advice on priority of funding or general issues to do with the running of the Legal Services Commission however, he cannot give advice on the handling of any individual case.
The Legal Services Commission has a quality mark, which every business or advice centre that has relations to the legal services commission and has met the quality standards that they expect is awarded. The Legal services commission also has a website, which is www.justask.org.uk, which provides basic information for members of the public on legal matters including where their nearest solicitors participating in the legal aid scheme are.
The Community Legal Service
The Community Legal Service is the branch of the Legal Services Commission who is concerned with the civil cases. The Community Legal Service is funded by the Community Legal Services fund, which has a fixed budget. In 2001-2002, the budget was £732 million and the Lord Chancellor announced proposals to decrease the budget for years to come. This leads to immediate problems with the Community Legal Service as it could mean that people are denied access to Justice because all the money in the Community Legal Services fund has been used up. Therefore, the funding criteria has tightened and not as many people are being awarded legal funding as in the old scheme.
As mentioned in question one, there are certain excluded matters. These include personal injury cases, conveyancing, boundary disputes, the making of wills, matters of trust law, defamation or malicious falsehood, matters of company or partnership law or other matters arising out of the carrying on of a business. The government feels that cases such as these are a waste of government funding in most cases. However, the Access to Justice Act (1999) allows the Lord Chancellor to direct the commission to provide services for excluded categories in exceptional circumstances.
Only solicitors holding a contract with the Legal Services Commission and solicitors whom have been awarded the quality mark are allowed to provide advice or representation directly funded by the Legal Services Commission. Direct funding is provided for different categories of legal service. These included legal help, which provides initial advice and assistance with any legal problem and a means test is applied. There is also legal representation, which is when a person is represented in court proceedings and both a means and merits test are applied. You can also be awarded help at court, this is when a solicitor or adviser speaks on behalf of somebody at court without formally acting for him or her, and for this, a means test is applied. Otherwise, there is Approved family help and family mediation.
There is certain priority for funding in state funded cases. For civil cases, priority is firstly given to cases where a person is at risk of losing their life of liberty and then priority goes to cases where the welfare of children is involved. Other cases given high priority include domestic violence cases, breaches of human rights and social welfare cases. However, section six of the Access to Justice Act 1999 states that the Lord Chancellor can give priority to certain cases each year.
The funding criteria are set out under Section seven of the Access to Justice Act 1999. There are two matters taken into consideration when means testing, these are the person’s disposable income and their disposable capital. Disposable income is the amount of income available to a person after taking into account essential living expenses and disposable capital is the assets owned by the person. For most cases, the maximum level of disposable income is £601 per month and £3000 disposable capital. People on income support of income based job seekers allowance automatically qualify. Some people may have to pay a contribution towards their legal funding.
The other test is a merits test which assesses how likely the case is to be successful. The funding code states that full representation will be refused unless: the prospects of success are very good and the likely damages will exceed costs; or, where the prospects of success are good and the likely damages will exceed costs by 2:1; or, where the prospects of success are moderate and the likely damages will exceed costs by a ration of 4:1.
Other Sources of Legal Help
There are also other participants in the Community Legal Services, many of which are non-profit organisations offering a free legal advice to those refused legal aid or just those who need help with matters. The two main ones are law centres and citizens advice bureaux however there is also the accident and legal advice service (ALAS), trade unions, motoring organisation such as the AA and Race was well as going to law students at university who often run free ‘law clinics’ which are supervised by trained lawyers.
Law Centres
Law Centres offer a free non-means tested legal service to people in their area. They aim to be there to help any person with any sort of legal problem so that everyone is allowed access to justice. In order to achieve this they are normally located near a high street or in the town centre and they normally stay open beyond office hours employing a number of lay people as well as professional solicitors. Many Solicitors offer to do pro-bono work for people and they volunteer at their local law centre in order to help the local community.
Most law centres are run by a management committee run by the local area so that they have direct links with the local community. Also the people employed in the law centres are normally local so they too have direct links with the local community.
There are normally law centres in most of the London borough’s or in towns or cities where the need is greatest however there are not too many of them due to problems with funding. Many Law Centres have closed due to a lack of finding which is hoped that the Access to Justice Act 1999 will solve some of the problems with funding. The local authorities are still reluctant to fund centres mainly because the law centres tend to being cases against the local authority and tend to deal with issues relating to housing and employment for which the local authority has a degree of liability.
The first law centre opened in North Kensington in 1970. this stated its aims as providing ‘a first class solicitor’s service to the people… a service which is easily accessible, not intimidating, to which they can turn for guidance as they would to their family doctor, or as someone who can afford it would turn to his family solicitor.’ In areas where there are few solicitors, the law centres may also provide free legal representation.
As well as law centres dealing with individual cases they also run campaigns, act as a pressure group and take action where appropriate on behalf of groups as well as individuals. Their mean emphasis of work is centred on social welfare problems such as those to do with housing, planning and environment and welfare problems. Other common problems include discrimination, immigration and children’s rights however; law centres can give advice on any point of law.
Many law centres have set up duty solicitor schemes to deal with housing cases in the county court and help prevent evictions. In general, law centres are very effective in allowing people to acquire free legal advice and they are made very accessible to people however, the ever-growing problem with funding means that the future of law centres is jeopardised.
Citizens’ Advice Bureaux
These were set up in 1938 and there are about 700 across the country. They offer free advice and help with a whole range of problems however the main topics are problems regarding social welfare and problems regarding debt. They are staffed by trained volunteers and some citizens’ advice bureaux have a volunteer solicitor who visits once or twice or week or they employ a solicitor there full time. This is normally only the case in very busy citizens’ advice bureaux. Otherwise the volunteers can give advice on where to go if the client needs to take their matter to a solicitor.
The volunteers become experts in the areas they most frequently deal with as they acquire knowledge of all different types of information. Sometimes law students will work in citizens’ advice bureaux to offer their knowledge of law and to help people on more complex issues; this can also help contribute towards their training period.
The bureaux are overseen by the National Association of Citizens’ Advice Bureaux and must conform to its standards and codes of practice. One of the Citizens’ advice bureaux major advantages is the level of public awareness they have, most members of the public know about the citizens’ advice bureaux and most people know where there nearest one is located.
Like law centres, Citizens’ advice bureaux are inhibited by funding pressures. They are not awarded a lot of funding and therefore can only afford to be open a few days a week for a few hours, which do not normally extend beyond or even cover office hours. This leaves them inaccessible to those who work a 9am-5pm day. Once again the future of Citizens’ advice bureaux depends on the Access to Justice Act 1999 providing required funding.
ALAS
The Accident Legal Advice Service is provided by the Law society and aims to help accident victims claim compensation. The service will give a free initial interview to decide whether the case is worth pursuing and if so will try to claim the person compensation. In addition, there is a free telephone service, which puts accident victims in contact with solicitors who do legal aid personal injury work.
Cheap/Free interviews
Some solicitors offer a free or reduced rate first interview. Therefore if a person wants to have some initial advice or whether to pursue with a case/claim then they can visit a solicitor and not have to pay for the initial interview, which could be a waste of time to the individual depending on the legal advice, they are given. For example if the individual pays £200 for an hour interview with a solicitor and the solicitor says that there is no chance of success then that would be £200 wasted, whereas a free initial interview allows the individual to acquire legal knowledge without wasting any money. Having this may also encourage people to see a solicitor and cure some of the problems, which people have regarding solicitors.
Other forms of representation
Many barristers who are offered places in chambers today will only accept on the basis that they can offer their services to deserving cases free of charge or ‘pro bono’. The Free Representation Unit set up by the Bar in 1992 is aimed at helping those who are ineligible for legal aid present their case in court. Barristers will represent clients in court for no cost. More than 2000 cases per year are handled in this way.
Motoring organisation such as the AA and RAC can provide advice on motoring disputes or if someone is trying to claim against a driver who is insured or covered by the AA and RAC then they can advise them on what steps to take and how to handle the situation.
Trade unions often give advice regarding employment law and can be of valuable use to employees. However, the membership of a trade union is not normally free, so this service is charged for however the amount is very small compared to having to pay solicitors’ fees.
In conclusion, it is easy to see that even if someone is refused legal aid from the Community Legal Service they can turn to other organisations for help. Community based alternatives such as Citizens’ advice bureaux and law centres provide free and accurate advice and sometimes representation to any individual on any sort of problem. However, due to the lack of funding many organisations such as the CABx and Law centres will soon not be able to continue.
Part Three
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 there 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.
The question to be asked is, 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 any 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 teem 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.
Bibliography
AS LAW
Elliot and Quinn
Longman 2002
The English Legal System
Jacqueline Martin
Hodder and Staughton 2002
AS LAW
Charman, Vanstone and Sherratt
Willan Publishing 2003