Jackson in the dock – the opposition has its say

Like many people, Carole Whittingham has not read Lord Jackson’s weighty 900-page review of civil litigation costs in full. That doesn’t stop her worrying about it.

A passionate supporter of the right to access justice, she set up the charity Support and Care after Road, Death and Injury (SCARD) following the death of her son in a road traffic accident nearly 20 years ago. In the days before the arrival of no win, no fee conditional fee agreements, she says that she struggled to pursue a claim against the driver who killed her son.

Now the bets are on that the government will roll out the majority of Lord Justice Jackson’s proposals following the conclusion of its consultation on the reforms last week. Whittingham fears that if this happens, many claimants and their families will face the same ordeal.

“I know that it is going to affect people in a negative way. We think it is a downward step that is going to affect a lot of people who have already been traumatised,” she says.

An open door to fraud

The majority of general insurers are in favour of the proposals and many could be forgiven for thinking that the reforms are a done deal. But Whittingham is just one of many who have misgivings about the proposals as the anti-Jackson lobby gains momentum.

Groups such as the Consumer Justice Alliance and the Legal Expenses Insurer Group (LEIG) are now working hard to convince consumer groups and charities that the reforms will work against them. The CJA now has 16 members including SCARD.

They argue that the reforms will impede access to justice for genuine claims, while opening the door for a spate of fraudulent or unmeritorious claims.

According to legal expenses insurer DAS, Jackson’s proposed reform of qualified one-way cost shifting will shackle insurers with an extra £300m in legal costs as they battle these spurious claims.

Borderline cases scrapped

So how valid are their arguments?

Legal expenses insurers argue that scrapping the recoverability of after-the-event insurance premiums and success fees from the other side will create difficulties for claimants wishing to pursue a complicated but deserving claim.

The anti- Jackson lobby argues that lawyers will now only take on cases that are sure-fire winners because it will be uneconomic to take on borderline cases.

Stephensons partner and head of litigation Andrew Welch explains: “At the moment, a lawyer can recover quite substantial success fees for winning a difficult and complex case - a claim that was deserved but difficult to run. Under the proposals, that incentive will be gone.”

Racial issues

Furthermore, the Jackson Review has come under attack for being racially discriminatory.

Legal expenses insurer Lamp chief executive Alan Cousins has submitted a complaint to the Equality and Human Rights Commission. He argues that the Jackson reforms will pose a barrier to approximately 65,000 claims, of which a significant proportion will be industrial disease claims- such as noise-induced deafness and vibration white finger syndrome - that are complicated to establish and pursue.

“Many claimants had one or more employers over a period of time and that makes the claims quite complicated,” he explains. He points out that a high proportion of the claimants that sustained their injuries in low-paid industrial work in the 1960s and 1970s were immigrants from ethnic minority backgrounds.

He adds that of the 12,400 industrial disease cases on Lamp’s book, a quarter of claimants are in this demographic. “It is simply that people who work in relatively low-paid industries in the time periods in question tended to be from an ethnic minority background. By our analysis, it is about six times the national average."

He argues that Lord Jackson failed to do adequate research in his review to establish what portion of the population would be most affected by his reforms.

Costing everyone money

What’s more, the anti-Jackson brigade holds that the reforms will deprive successful claimants of their full compensation.

To counter the loss of the recoverability of ATE and success fees, Jackson has proposed that general damages be increased by 10%, from which ATE premium and success fees will be extracted.

CJA chairman Nigel Muers-Raby argues that this is not enough to cover the ATE premium and success fee, which can range from 25% to 100%.

DAS Legal Expenses chief executive Paul Asplin believes the Ministry of Justice Impact assessment is flawed and the government has rushed its consultation on the reforms.

“The biggest problem is that there is no fact-based evidence. It is all pure speculation and conjecture. People have been pushed to give quick responses. The thing that we miss is a factual cost-benefit analysis. There is such thing,” he says.

In fact, Asplin suggests the reforms will cost the government money, because the loss of ATE will have to be absorbed by the public purse, creating an additional cost burden of £40m.

Scaling back legal aid

The legal expenses market is gearing up for battle. Asplin warns that DAS will take action if the government attempts to push “the reforms through the back door” and will lobby for a judicial review of the MoJ’s impact assessment.

The question of the legal aid reform is also generating concern. Personal injury law firm Pro Legal director Susan Brown and author of the CJA policy brief on Jackson explains that the recoverability of success fees and ATE premiums was brought in by the Access to Justice Act 1999 to preserve access to justice for injured people as legal aid was removed from personal injury claims.

Moreover, Lord Jackson has stressed that the reforms should only be implemented if there is no change to legal aid.

However, the government has announced that it will scale back legal aid even further, making it available for only asylum and mental health cases and family cases involving domestic violence, forced marriage or child abduction.

This, argues Brown, will prove a huge barrier to deserving claims. “Jackson’s proposals come as a double-whammy as these measures would be implemented alongside the further removal of legal aid funding for a wide range of claims,” explains Brown.

Breaching human rights?

It is not just legal expenses insurers and consumer groups that are worried. In a report by a working group of 11 academics, headed by Ken Oliphant, professor of tort law at Bristol University, Jackson’s proposals are lambasted as “inconsistent” with “the fundamental principle of civil justice”. The reforms are described as a “slippery slope towards ever greater inroads into compensation to which injured persons are legally entitled”. The report accuses Lord Jackson of systematically preferring the evidence of the defence lobby.

Consequently, it is suggested that this removal of access to justice could be potentially in breach of the European Convention of Human Rights - creating headaches for the government in the long run.

“There is a very strong argument that it would breach human rights and the reforms are a sitting duck for a human rights case. It is inconceivable that somebody wouldn’t bring one,” says Asplin.

If it ain't broke ...

The crux of the anti-Jackson lobby’s argument is that while the present system is flawed, it requires a makeover rather than a radical overhaul. Legal expenses insurers and claimant lawyers argue that ATE presently acts as a valuable filter to get rid of the vast majority of unmeritorious claims from the process.

Arag chief executive Tony Buss explains: “The solicitor decides to take the case and we act as a double check. If we don’t back the case then it doesn’t go ahead." He suggests that the ATE market typically declines two-thirds of all cases.

LEIG’s response to the consultation attacks the myth of compensation culture, pointing out that only 40% of public liability cases succeed. This, according to the report, shows evidence of the local authorities’ improved ability to defend cases. Moreover, LEIG member DAS reports a decline in the incidence of public liability claims, from 32% in 2006 to 11% in 2010.

According to AJAG’s research on the legal expenses market, insurers Elite and Templeton each reject 63% of cases, Arag rejects 67% of cases; Amtrust rejects 61.37%, and Lamp rejects 55%, while DAS declined 38.7% of cases.

Getting close to a US system

To counter the loss of ATE insurance, Jackson has proposed qualified one-way cost shifting, where the defendant is required to pay the claimants costs if the claimant is successful and not vice-versa.

But it is argued that this reform will bring about a plethora of unintended consequences, including an increase in weak claims. “If you are a 'have a go' claimant, qualified cost shifting will look attractive because you don’t have to pay the costs of the other side,” explains Welch.

According to Asplin, qualified one-way cost shifting is the most dangerous of Jackson’s proposals. He argues that it will bring the reforms closer to the US legal system, where tort litigation is currently three times higher than the UK.

“While the genuine claimants may have trouble getting their case through, you will get a whole new breed of vexatious nuisance claims,” he says.

He points out that a similar system operates in employment tribunals, where insurers have seen a considerable spike in claims.

“The number of cases in employment tribunals went up by 56% last year and the CBI has said that 26% of their members pay off claimants even when they have legal advisers saying they have a good case because it is uneconomic for them to fight the claim,” he says.

There are other ways

The CJA argues that alternative routes can be taken to save the government money without implementing Jackson’s reforms.

These include extending the recovery of the NHS charges scheme and making tax and national insurance recoverable as part of loss of earnings claims by the defendant insurer on every claim. According to the CJA, this will compensate the taxpayer for the losses suffered as a result of the injured person’s incapacity for work.

The response also proposes making statutory sick pay recoverable in all claims and that solicitors instructed by the NHS and public authorities should enter into CFA to mitigate costs.

“The government saw this as an opportunity to reduce pressure on the public purse. Our argument is: don’t just throw the system out, let’s see if we can make it better,” says the CJA’s Muers-Raby.

The government’s consultation has drawn to a close and the final decision on the implementation of Jackson’s reforms is expected in May. The anti-Jackson brigade has some strong arguments but only a short amount of time to swing both public and insurers' opinion against Jackson. The race is on.