Defendant lawyers have told the government that the ban on referral fees in personal injury claims is not working, as part of a wide-ranging response to inform the government's review of civil litigation funding reforms.
The Ministry of Justice is looking at whether or not part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) is working. Publishing an initial assessment and call for evidence in June, the ministry said it would be helpful to know if the current referral fee ban in personal injury cases is effective. The Forum of Insurance Lawyers (FOIL), which has 8,000 members, says it is not.
FOIL, in its response, says it believes a survey commissioned by the Solicitors Regulation Authority last year 'significantly under-represents the degree to which current claimant business practices breach LASPO'. Quoting the SRA's findings, FOIL says 88% of managers in the firms the regulator visited were aware of firms breaching the ban.
Elsewhere, FOIL says its members report that qualified one-way costs shifting (QOCS) is 'working as intended', enabling claimants to bring meritorious claims with costs protection without the need for after-the-event insurance (ATE) cover.
Recovery of ATE insurance premiums, except in relation to clinical negligence expert reports, was abolished under section 46 of the act and replaced with QOCS. The Public Law Project, in its response, called for QOCS to be extended to judicial review proceedings, after telling the ministry that obtaining ATE insurance is nearly impossible for claimants.
FOIL says there are circumstances where QOCS has increased instances of unmeritorious litigation. It says: 'Some claimant firms have developed a business model for NIHL [noise-induced hearing loss] claims based on the fact that claimants with low incomes are exempted from court fees, which together with QOCS, removes the risk to the claimant and the legal adviser to such a degree that almost any case is worth running on the basis that the insurer may be tempted to make a nuisance payment in settlement'.
FOIL says it is unaware of any categories of cases where the numbers of claims have been affected by the non-recoverability of success fees. It says there are no access to justice issues with regard to personal injury claims which require wider use of damages-based agreements.
FOIL tells the ministry that it believes the objectives of LASPO 'have to a large extent' been achieved and that improved proportionality on costs has improved access to justice for defendants.
It says: 'LASPO should be seen as one part of the process of reforming the civil justice system, focusing on personal injury claims, which has been ongoing over the last two decades. The outcomes of changes are complex, often leading to loopholes or unintended consequences which in turn need to be tackled. LASPO should be seen as part of a broad reform programme which is moving civil litigation in the right direction but is not yet complete.
'To continue the reform process, it is important that the Civil Liability Bill and the associated reforms are implemented, and that the process of implementing Lord Justice Jackson's supplemental report on fixed recoverable costs is commenced as soon as possible.'
The bill will have its second reading in the House of Commons on Tuesday.