In less than six months the Legal Aid Sentencing and Punishment of Offenders Act (LASPO) will come into force. A look back at the process which led to this makes me feel wholeheartedly that successful reform of the personal injury (PI) system has been scuppered by a hurried approach, a lack of joined-up thinking and a government so desperate to attack a perceived ‘compensation culture’ that they have embarked upon a way forward that will potentially harm among the most vulnerable in our society.
There is no denying that the PI system in the UK is in need of reform. Our current system has resulted in high costs for the consumer, wealthy opportunistic insurers and has damaged the reputation of PI lawyers. The LASPO Bill was an opportunity for the government to give birth to a reformed personal injury system free from its previous ills. Therefore, it was with more than mild irritation that I watched the haphazard consultation process result in a piecemeal approach which snatched defeat from the jaws of victory.
While it may be true that spurious and fraudulent claims should be reduced by the current proposals, it should also be recognised that the hurried, ‘one-size-fits-all’ approach will cause significant collateral damage. Most worryingly, those involved in serious cases, such as catastrophic injury, will suffer dramatically from an overzealous desire to stamp out all the claims targeted by such reform.
A number of missteps
A 25% cap on success fees, regardless of the case type, is a prime example of the lack of foresight which has marred reform. The government believes that it will force lawyers to consider the merits of a claim more stringently, reducing spurious claims dramatically. What has not been considered, however, is that the introduction of such a cap will, on many occasions, make complicated injury cases commercially unviable. As the most complex cases tend to involve those with the most serious injuries, there is a significant risk that the most vulnerable will be denied access to justice.
A lack of coherent thinking can also been seen in the ban of referral fees in PI cases – which was itself a hard-fought amendment to LASPO. My initial satisfaction at the ban soon dissipated when it became apparent that the wording and scope of it would not be adequate. The language used is ambiguous and, astonishingly, no attention has been paid to how the use of alternative business structures (ABSs) could potentially be used to circumvent the ban. Once again, an idea that was supposed to combat amoral profiteering and improve the legal experience for those involved in PI cases has been undermined.
In reality, holistic reform of the PI system was highly unlikely to have emerged from the brief and narrow consultation process that followed the Jackson report. Whilst no one holds all of the answers to the numerous questions brought about by this process, addressing two key areas would have meant that many involved in the PI system would be celebrating a victory rather than mourning a litany of missed opportunities.
First, while I would not have advocated the creation of a new quango or ombudsman to regulate the sector, reform would have greatly benefited from the appointment of a PI reform tsar to manage the process. The creation of such a role would have ensured that a single civil servant was responsible, helping to create a less politically or commercially motivated approach, which would potentially combat some of the contradictions and oversights previously mentioned.
It is unsurprising that muddled views have emerged from a reform process that has involved a plethora of government departments including the Ministry of Justice, the Office of Fair Trading and the Department of Business, Innovation and Skills. The pervasive presence of the insurance lobby throughout this process should also not be forgotten.
Second, the reforms would have benefited from a close examination of what impact they will have on different cases. Yes, spurious and fraudulent claims do a great deal of damage to the PI system and combating them will go a long way to improving the reputation of the entire system. However, the lack of wide consultation has left us in a situation in which we are in great danger of the baby being thrown out with the bathwater. For clarity, I am not proposing that each claim should be dealt with on a case-by-case basis to judge, for example, the appropriate success-fee cap. Such a system would buckle under the weight of administration, delay and extra costs. However, it is completely feasible that cases are grouped by severity - clearly road accidents resulting in severe brain injury should require a different approach to those resulting in whiplash.
Inadvertently, the proposals will make complicated injury claims an unviable financial risk for lawyers and, as the proposals stand, many will lose out. Broad policy brushstrokes have not left us with a masterpiece but rather a muddled, missed opportunity.
I fear that unless the ABS circumvention issue is resolved and a much clearer definition of what constitutes a referral fee emerges, holistic reform of the PI system will remain as nothing more than a fantasy. Going back to basics, holism is defined in the Oxford dictionary as ‘parts of a whole that are in intimate interconnection, in such that they cannot exist independently of the whole, or cannot be understood without reference to the whole, which is thus regarded as greater than the sum of its parts’. This is a far cry from the fragmented LASPO.
A lack of joined-up thinking is not confined to ABSs and referral fees, but extends throughout the government’s approach to PI reform. The government has prioritised cost-cutting without a view to the wider implications of the changes they propose. For example, the decisions to extend the upper claim limit of the RTA PI Portal from £10,000 to £25,000, ignores the results of research commissioned by the MoJ which found that there is little justification for such an extension and will force the portal to consider more complicated cases for which it was not designed. The idea to channel more cases to the small claims court, risks further undermining access to justice by limiting legal representation for lower ‘value’ cases.
While both changes will undoubtedly save money, the true cost will be to justice for injured parties. After all, the core goal of the PI system is to ensure justice is done for those who have been wronged. I fear the incoherent reforms which are taking place are indicative of the fact that the government and the main players in the PI system have lost perspective and I therefore urge the industry to adopt a mentality of holism, to put aside vested interests and ensure that a system emerges that benefits the public.
John Spencer is director of Spencers Solicitors