Michael Forrester – Intellectual Property & Media Associate

John Prescott in the Guardian this week focuses upon the affect the Bill will have upon individuals bringing claims against large organisations outside of the personal injury arena.

At the center of these changes are the proposed changes to how no win no fee agreements operate. Simply, this allows a Client to enter into an agreement with a lawyer or legal team that if they don’t win the case there will be no charge to them but if they are successful the costs incurred by their legal team will be recovered from the other side. Therefore, these no win no fee agreements are backed by policies of insurance to cover the Opponents costs if the Client loses.

John Prescott is right; Part 2 of the Legal Aid Bill (the Bill) as proposed is going to affect a lot of people. Widely published as dealing what are said to be excessive costs in personal injury cases, the Bill as drafted has wide ranging consequences for any individual or company looking at bringing a case of any sort in the civil courts.

There have been a number of suggestions surrounding the Bill of what should happen with these agreements. These include the banning of being able to recover insurance premiums from a losing Opponent, Defendants not being able to recover their legal costs if they are successful (except in certain cases where the Claimant’s case was very weak) and an increase in damages of around 10% to partly pay for these costs.

The problem is, as John Prescott points out, these changes may mean that a winning Claimant ends up with nothing as the damages are taken up by legal costs and insurance premiums. Further, there have also been proposals to increase the small claims limit, where litigants normally appear without representation, to £15,000 or even£25,000. That is a very large amount of money at risk with no legal assistance.

However, the proposals in the Bill as drafted have an even wider ranging effect. Any individual or small company unable to pay privately for a case in the civil courts is affected. Defamation cases, defective goods, mis-sold cars, company disputes, every sort of claim in the civil courts will be changed by the proposed reforms.  For example, we acted for a number of Defendants in precedent cases relating to alleged copyright infringement via file sharing programmes on the internet. Those Defendants were successfully defended under no win, no fee agreements and the legal costs they incurred recovered from the other side. However, it is only possible to act for the Defendants in that way through operation of the no win no fee system. Without that it is very unlikely they would have been able to obtain legal representation to defend themselves.

The position is the same for any Defendant as well as any Claimant. Any tradesman accused of negligent work, any homeowner involved in a legal dispute with a neighbour, any small business owner in dispute with a rival needs to be aware of these changes. The question is how will access to justice be maintained if the Bill goes through as proposed?

No win no fee agreements were introduced to England and Wales to allow for a reduction in legal aid during the 1990’s. With legal aid available to an ever diminishing number of individuals, the proposed changes to litigation funding through the Bill make unclear how individuals and smaller companies will be able to obtain access to justice.

Could the present be better regulated and managed to work for lots of cases? Every solicitor has seen cases where the other side’s costs appear wholly disproportionate and in many cases these are written down by a Judge to a sensible level. Therefore, it is not clear to many Lawyers why proper regulation and management of the present system cannot be successful.

Before these changes are made the Government needs to consider the real world ramifications for individuals and smaller companies who cannot afford large legal bills. At present the Bill raises a number of questions and it not clear what the answers are.