Legal Aid, Sentencing and Punishment of Offenders( LASPO) Act 2012 and Ministry of Justice Reforms 2013( extension to Claims Portal and Fixed Fees) by Cathyrn Lacey
Background
The Access to Justice Act 1999 replaced the legal aid system in England and Wales. One of the changes under the Act was the extended use of Conditional Fee Agreements( CFA) allowing for the recovery of success fees from the losing party in civil cases.
With no personal risk to the victim of an accident in pursuing a claim for compensation and an increasing number of services offering help to do this, the cost of insurance claims spiralled.
In 1999 the Association of British Insurers( ABI) estimated that 38 pence was paid in third party legal costs for every £ 1 in injury damages. By 2009 this had increased dramatically to 86 pence in every £ 1.
What is a Conditional Fee Agreement?
Generally referred to as‘ no win no fee’ a conditional fee agreement is between a law firm and a client for services provided, where the fee is only payable if there is a favourable result i. e. the solicitor will take the case on the understanding that if lost, no payment is made.
What is a success fee?
Under a conditional fee agreement, if a case is won, the solicitor will be entitled to the normal fee for services provided, plus a success fee. Until 1 April 2013 in England and Wales, this was a percentage of no greater than 100 % of the normal fee and was recoverable from the losing party.
The Legal Aid Sentencing and Punishment of Offenders( LASPO) Act 2012 – 1 April 2013
With effect from 1 April 2013 new reforms have been implemented following the review on civil litigation costs by Lord Justice Jackson and represent the largest overhaul to the personal injuries legal framework in England and Wales in over a decade. These reforms are intended to bring more balance to the civil litigation system by:
• making solicitors costs proportionate
• combating the compensation culture
• creating an environment where insurers can pass on savings to customers through lower premiums
Summary of the Reforms
• Introduction of qualified one way cost shifting
This means that defendants, whether they win or lose at trial will have to pay their own costs. There are some exceptions including where a claim is found to be fraudulent.
• Banning of Success Fees
The Legal Aid Sentencing and Punishment of Offenders Act 2012( LASPO) states that success fees will no longer be recoverable from the losing party. Instead the successful party will have to pay their own success fee from the awarded damage, but this will be capped at 25 %.
• After the Event( ATE) insurance premiums will no longer be recoverable
In the event that a claim succeeds, ATE insurance premiums will no longer be recoverable from the defendant.
• Banning Referral Fees
A ban has been imposed on all FCA regulated firms as well as solicitors and claims management companies. Solicitors will no longer be able to pay claims management companies, insurance firms etc. for personal injury details and some business arrangements will need to be restructured as a result.
• 10 % increase on general( injury element) damages
To assist claimants who will now need to pay their own uplift out of damages, general damage awards have increased by 10 % unless the claimant entered into a CFA before 1 April 2013.
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