Has LASPO tipped the balance too far in favour of the defendant?

The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) came into force in April 2013. It implemented the reforms proposed by Jackson LJ in his 2010 report on civil litigation costs, the ‘Jackson Review’.

Subsequently, access to justice for claimants has been reduced, which leads me to conclude that LASPO has indeed tipped the balance too far in favour of the defendant.

Political expediency

The overriding theme of the Jackson Review was ensuring that civil litigation costs are proportionate. Lord Neuberger, then Master of the Rolls, greeted the review with the words: “The measures the report proposes will ensure that legal costs are reduced, and that civil justice will be more efficient and fairer.” This is an entirely laudable sentiment, but between the review and implementation of the reforms, political expediency intervened.

Jackson stated in his report: “The legal aid system plays a crucial role in promoting access to justice at proportionate costs in key areas.”

Since April 2013, however, there has been significantly reduced access to civil and family legal aid as a result of a reduction in the categories for which it is available and a tightening of the means-test criteria, so that fewer individuals qualify for legal aid.

The outcome has been reduced access to justice for potential claimants who have a claim with merit but with difficult prospects. In practice, some claimant lawyers will be more risk averse where there is a valid but risky and complicated case, for example involving disputed liability, a difficult point of law or complex issues relating to causation.

Further, there has been a significant reduction in costs recoverable between the parties, with the introduction of an extended fixed-costs regime for personal injury fast-track cases.

While the Jackson Review recommended the extension of fixed costs, to bring certainty for all parties in fast-track cases, the review proposed a costs matrix significantly in excess of the figures that were subsequently imposed by the Ministry of Justice, despite the review costs matrix having robust evidence to support it.

The impact on profitability arising from the new fixed-costs regime has yet to be fully absorbed by claimant firms as pre-Jackson work in progress is billed. But the result is fast-track cases becoming less viable unless larger caseloads are conducted, often by less qualified fee earners than was previously the case.

Funding pressure

Accompanying the extended fixed-costs regime have been changes to litigation funding, ending the recoverability of success fees and after the event insurance premiums between the parties. These charges are now paid out of a successful claimant’s damages.

Jackson considered that claimants had no interest in keeping their costs down because they would never have to pay them and the huge costs involved put unfair pressure on defendants to settle.

These changes, however, along with the extension of fixed costs, make smaller claims less viable because where funding is required there must be enough damages to pay the success fee and insurance premium.

Moreover, smaller value cases can often cost as much as larger cases to run when you are faced with a particularly difficult case and you may still have a lot of work to do in building the case. These cases will, for some practices, not be taken on at all.

Cost budgeting was another important core element of the reforms, to promote access to justice at proportionate cost in multi-track cases.

Parties file and exchange detailed budgets setting out their estimated costs of litigation before the first case management conference. Budgets are likely to act as a cap on the successful party’s recoverable costs. Unless there is good reason to depart from the budget, the winning party will not be able to recover more than the budget figure.

Budgets are intended to enable the courts to take case management decisions while also considering the costs of the litigation, which in principle is commendable, but there are a number of difficulties in practice. One is the preparation of budgets on a phase-by-phase basis without the ability to balance out between the phases.

More importantly, inconsistency in the way in which budgets are assessed by district judges, who may have had little or no training in costs matters, has led to uncertainty. This uncertainty inevitably has a long-term impact on the criteria applied by claimant practitioners in assessing the merits and financial viability of cases at the outset. SJ

Michael Hardacre is a lawyer at Slater and Gordon