LASPO part 2: MoJ content that civil reforms have driven down costs

Law Society Gazette, 7th February 2019

Civil justice reforms in the Legal Aid, Sentencing and Punishment of Offenders Act have reduced costs in personal injury claims by eight to 10% according to the government’s post-implementation review.

The Ministry of Justice today hailed the success of Part 2 of the 2013 reforms, suggesting the rate of early settlement has improved and the number of unmeritorious claims is likely to have fallen.

Ministers say they are content the changes have met their objectives and do not propose any amendments to the primary legislation. But this met with derision from claimant body the Motor Accident Solicitors Society, which described the fact ministers are proposing no changes as ‘frankly astonishing’.

But the review has uncovered two areas of concern from respondents to the consultation: the scope of qualified one-way costs shifting and the poor take-up of damages-based agreements. The government is ready to make changes after a separate review of DBAs is completed later this year. However it has ruled out extending the QOCS regime – which protects claimants from costs risks – beyond personal injury, at least until the threat of unintended consequences for defendants has been addressed.

LASPO brought in sweeping changes to how civil litigation claims are funded and brought in, abolishing the recovery of success fees and ATE insurance, banning referral fees in personal injury claims and introducing damages-based agreements to litigation funding. The act also implemented the reforms recommended by Lord Justice Jackson for costs budgeting and proportionality in assessing costs.

Consultation leading up to the review led to 155 responses, with large areas of disagreement between claimant and defendant representatives.

The review said most lawyers would now support a ‘period of relative stability’ and would not welcome any major changes, even if they were deemed necessary.

On referral fees, a high proportion of respondents backed the ban, but most agreed that pre-LASPO practices have continued, albeit under the guise of marketing, subscription and recommendation fees.

The MoJ said it also received some evidence which appears to document the overcharging of PI clients for ATE premiums by PI solicitors for straightforward RTA cases, at prices ’significantly higher’ than the cost and/or the market rate. Examples were given of policies being incepted on behalf of clients without a fair market analysis.

The review said that if true, this suggests that some PI clients are being overcharged for ATE premiums or, at a minimum, are not always being recommended the most competitively priced premiums for their needs. It was suggested that the difference between the ‘true cost’ of the ATE premium and the amount deducted from a client’s damages should be fully disclosed as a form of commission.

LASPO part 2: MoJ content that civil reforms have driven down costsLASPO part 2: MoJ content that civil reforms have driven down costsMASS chair Paul Nicholls responded to the review by observing that solicitors ‘should not be the least bit surprised’ the MoJ has given part 2 clean bill of health, ‘despite its many obvious shortcomings and negative consequences’.

He added: ‘We have always been concerned that the Jackson reforms concept, implemented in LASPO, of a “one size fits all” approach does not necessarily work in all aspects and has a detrimental impact on the rights of some groups, for instance, vulnerable people such as children and protected parties. MASS has no objection with the principle of Fundamental Dishonesty or QOCS providing they are used as intended, but there remains a clear imbalance in the absence of a similar sanction for defendants.’

Nicholls said LASPO has actually made very little difference to the payment of referral fees, which have been either rephrased as something else or by-passed through alternative business structures. ‘It is simply not good enough for the government to sideline the issue by saying that “we didn’t receive any detail proposals about strengthening the ban so we’re not going to do anything about it”,’ he added. ‘Our door is always open for more detailed discussions.’

After nearly two years of review, and a market that has ‘fundamentally changed’ since the LASPO reforms were implemented, Nicholls said it is ‘quite frankly astonishing that MoJ are not proposing any amendments to LASPO. Not a single one. It is clearly that much fabled creature, the absolutely perfect piece of legislation.’

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