LAPSO Legal Aid, Sentencing and Punishment of Offenders Act 2012

ATE After the Event

CFA Conditional Fee Arrangement

DBA Damage Based Agreements

QOCS Qualified One Way Shifting

CRU Compensation Recovery Unit

NHSLA National Health Service Litigation Authority

ABI Association of British Insurers

MIB Motor Insurers Bureau

MOJ Ministry of Justice








The Legal Aid Sentencing and Punishment of Offenders is a statute of Parliament, creating reforms in

the Justice System; the Act is a result of Jackson Reforms was introduced in the House of Lords on 21

June 2011. It received Royal Assent on the 1 May 2012.

Royal Assent for Legal Aid, Sentencing and Punishment of Offenses Bill ” (2012) by the UK

Government stated that the: (Press Release 2012)

“… Passing of the act means a wide range of improvements to the justice system can now go ahead”

Changing the terms of no win no fee law suits to stop lawyers being able to double their fees which

has driven up insurance premiums…… Focussing legal aid on cases where legal help is most needed

Justice Secretary, Kenneth Clarke, said: “ the reforms will strengthen..and protect the public and

ensure tax payers’ money.”

The resultant legal aid removed financial support for most cases, including houses, welfare, medical

negligence, employment, debt and migration cases.

Lord Bach, the shadow spokesman at the time, stated this was: “ a rotten bill that demeans our

justice system and therefore our country” (Boycott -2012):

The Ministry of Justice defended the legislation stating the legal system would continue:

Focussing legal aid on cases where legal help is most needed, where people’s life or liberty is at

stake or they are at risk of serious physical harm, face immediate loss of their home or their children

may be taken into care, and reducing the £2.1billion per year legal aid bill for England and Wales”

( MOJ 2012): *

With the abolishment of Legal Aid, funding of litigation was reformed; Lord Justice Jackson identified

Conditional Fee Arrangements and success fees, as arrangements used by claimants to litigate “risk

free” at huge cost to the defendant.

Cost to the defendant was disproportionate and unfair. Government accepted the recommendation



“The need to reduce unfair costs suffered by the many businesses, individuals and other organisations

(including the NHS) that have been faced with CFA”

History -Jackson Reforms

Jackson Reforms were initiated due to the rising cost of litigation; disproportionate costs to

claimants, businesses, taxpayers, NHS and local authorities: [Citadel Civil Report 2009]. Jackson

Reforms were intended to transfer cost of civil litigation from the defendants, public and insurers, to

the claimant; their lawyers,ing.

Implementation of the Jackson Report was published in “ The Review of Civil Litigation Costs final

report December 2009” . The Judicial Executive Board agreed recommendations. Key changes in the

Legal Aid Sentencing and Punishment of Offenders Act (2012) (LASPO) which affected civil litigation

costs included but are not restricted to:

  1. Removal of Conditional Fee Arrangements and Success Fees
  2. Damage Based Arrangements –
  3. Qualified one way cost shifting
  4. Increase in damages by 10%
  5. Cost Saving Portals
  6. Cost Management/ Case Management/Proportionately
  7. Ban on Referral Fees
  8. Part 36 Offers
  9. Third Party Funding

Civil Justice Quarterly 2011; 30 (4) 411-28*

The Compensation Culture

Government cited compensation Culture as key reason for rise in litigation claims. The term

Compensation Culture was a “catch all” (Lewis 2014:210), a term used to encapsulate, a number of

different; though related complaints (Morris 2007: 350).


The term was used in at least five ways:


Indicates that too many lawsuits are being commenced. Secondly, (it) refer to a society in which

damages awards are frequently excessive. Thirdly, (it) may mean that a substantial number of claims

are fraudulent. Fourthly, (it) may refer to an undesirable readiness of sections of the public – to seek

legal redress for their grievances. Fifthly, (it) may be a society in which legal redress for injuries is too

readily available – (Goudkamp 2012).

The blame and claim mentality was laid at the doors of the “have a go” (BRTF 2004) claimants, the

lawyers and judiciary, through the changes on statute and legislation. Lord Steyn in 2004 said “ claims

that would have been unheard thirty years ago are now entertained ” (House of Lords 2004).

The report by Lord Young in relation to; payments for referral fees, looked at the Compensation


Lord Young stated “a climate is evident in which businesses, the public sector and even voluntary

charity organisations fear litigation for the smallest of accidents” Lord Young concluded that the

compensation culture was unclear.

Valuation of personal injury litigation was difficult; very little statistical evidence existed.

In the United Kingdom, the Pearsson Royal Commission (1974) “ Personal Injury Claims Statistics”

identified reliable facts relating to personal injury data; this was utilised to establish whether a

compensation culture had developed in the UK.

This identified the Compensation Recovery Unit (CRU), the Association British Insurers and National

Health Service Litigation Authority (NHSLA) to be reliable sources. ABI the paper concluded that in

2006 there had been:

“… a very substantial increase in the number of personal injury claims ” and cost of compensation

claims had risen. Costs relating to claims were due to changes in legal rules relating to damages,

increase of lawyers’ fees and general increase in income levels.

Further information from these sources confirms between 2010 -2011, the NHS alone paid out over

£257 million in lawyers’ fees. This cost was broken down to reveal between 2004 -2011 a 5%

increase in NHS legal fees and 130% increase in claimant legal costs.

The Association of British Insurers (ABI) showed by 2010 one insurer’s average claim represented

142% of sums received by the victim, i.e. every pound that was paid in compensation; £87.00 was

paid in legal costs.


Analysing increased claims and compensation costs, one must assert, what factors contributed to

the rise in personal injury claims in Britain?

Claim Management Companies (CMC)

The compensation system increased post introduction Conditional Fee Arrangements in 1999, (2008

How Did No Win No Fee Change Things). CMC’s appeared with business tactics, resulting in

the public receiving calls, texts and encouragement, to seek “Have a Go Compensation.” The

Business of Claims Farming grew (2015 Claims Farming, Cold Calling).

Education, Awareness and the Media

With the relaxation of advertising laws, No Win No Fee Advertising increased, along with social

awareness of injuries, cause and claim.

Justice became more accessible, through CMC and direct contact with firms offering, free advice and

consultations to claimants.

Irwin Mitchell (2016 Irwin is a good example. The company’s website displays client

stories, evoking emotional attachment, whilst stating:

“Whether you were treated privately or by the NHS, you may be able to make a No Win No Fee

compensation..Include errors such as the wrong tooth being removed and anaesthetic not

being given properly”

One may argue this is business; generating income in any profession is important to business

development. People have a right to know their legal stance; educating the public with

advertising is contributing to knowledge. In my opinion that if the correct legal advice is

provided a “just claim” identified – the business of compensation is just. The business of

CMC’s often resulted in people being provided with advice; to claim minor injuries, where

proportionality legal fees outweighed damages to the person.

Legal Changes

Law Changes introduced greater numbers of people who could claim compensation for damages.

The armed forces were first allowed to claim damages against the Ministry of Defence in

1987; under the Crown Proceedings Act 1987 * (Squaddie Claim Process). Statistics

demonstrated a large rise in compensation costs; particularly legal ones relating to damages

increasing year after year (Hampson 2014)*


The Motor Insurers Bureau (MIB), for uninsured or unidentified motor vehicles, added claims, by

allowing third party passengers to claim injuries. Figures in 1995, showed 40,000 claims

recovered or received; increasing to 75,000 in 2003 *

Comparing compensation paid in both years, using the same dates; figures in 1995 were over £100

million; £240 million in 2003. Legal changes introduced new claimants into the personal

injury business.

The Traditional Conditional fee arrangement

The term “No win No Fee” is well known, commonly advertised in magazines, newspapers, via radio

television – with the consistent message: “Take legal action, with little risk , without incurring cost”.

The conditional fee arrangement (CFA) was introduced in limited form, via the Legal Services Act

(1990, section 58). 1995 saw its introduction to limited courts in England and Wales; 1999 this

extended to all civil cases, except Family Court .


Geoff Hoon, Minister at the time, stated:

“No Win No Fee conditional agreements would result in better access to justice” (Access to Justice Act 1999).


Access will be given to the many people, who fall between those, that are very rich or those that are

very poor; so they qualify for legal aid.

The “Woolf Report, Access to Justice Act 1999” was enforced in April 2000, making conditional fee

arrangements, more attractive to claimants. Enabling Judges to make the losing side pay extra costs;

associated with CFA’s. Legal Aid was abolished for personal injury claims, making CFA’s many

people’s only hope for justice.

The Criminal Justice Act 1999, recognised alternative fee arrangements were necessary; as the

lawyers won not all cases. Therefore an “uplift or success” fee could be claimed from the defendant,

if they lost. Over time this became disproportionate to the cost of damages.

Lord Justice Jackson identified the CFA to be a major factor regarding cost.

Lord Justice Jackson in his report (CRP 2011) identified claimants (normally the user CFAs) could

litigate “risk free”.

“Citizens Advice” concluded (CFA’s) “ Conditional Fee Arrangement, consumers simply did not

understand” (2009: Dryburgh). Costs borne by the defendant were disproportionate if they

contested the case and lost.


Defendant’s costs could be up to “four times” the normal cost of litigation:


  • Their own legal fees and expenses
  • The claimant’s fees , expenses
  • The claimant’s “success or “uplift” fee
  • The claimant’s After The Event (ATE) Insurance premium

Lord Justice Jackson recommended the ability to recover “Success Fees and “After the Event”

premiums was unfair and unjust, this was abolished.

We are seeking to reduce the unfair costs suffered by the many businesses, individuals and other

organisations (including the NHS) that have been faced with CFA actions .” (2011, Ministry of Justice 566)


The legislation was controversial. One argument was should an injured party be subject to the “cost

of justice” or lawyers’ fees from their compensation?


Others asserted the removal of the CFA/Success Fee was just (2011 Kennedy Law) and fair to the

both parties. Why should a legal representative receive a “success or uplift fee” if the case was won?

Paid for by a defendant who had already born costs of their defence and paid the claimants?

It is asserted that the idea of a “success fee” cannot be justified. Legal representative already claim a

“normal fee”. Is it ethical that a professional receive fees beyond their normal fee for completing a

task that should already have been completed with skill and competency? The original success fee

was introduced, as it was apparent that not all claims were successful. Is it ethical that an

unsuccessful claim should be paid by another individual’s success. In my opinion this was unfair.

Post April 2013, Conditional Fee Arrangements have been used for a number of individuals, who

could not afford legal fees; CFA’s continue to be challenged.

Denise Jones v Spire Healthcare (Liverpool County Court September 2015) is at present at appeal.

The case involved the question of assignments of Conditional Fee Arrangements in bulk to third


The decision concluded that a CFA is a personal agreement and cannot be assigned. The resultant

appeal if upheld will provide protection of post LASPO Litigation costs.

In the A&M v Royal Mail Group in Birmingham County Court (2015).


District Judge Lamb refused to approve settlement agreement in damages against two minors.

Whilst agreeing that the damages were modest, the judge ruled that the deductions from their

damages of success fees and ATE were “unreasonable”; two fees of £2115.00 and £20675 had been

awarded, under a Conditional Fee Arrangement with the 100% success fee capped at 25% of

damages, the result and damages received were £1176.25 A and £1138.75 for M.

The Judge made two remarks: the ATE Cover was unreasonable, as the two minors involved in a road

traffic accident were innocent. The prospects of them having to ever pay costs were negligible.

Judge Lamb stated “disturbingly what it perhaps betrays is an intention that the formulation of the

success fee at 100% is designed to ensure that the cap of the success fee at 25% is always reached”


The judge then assessed the reasonable base costs and success fees payable under the CFA. He

concluded that if a proper risk assessment had been completed, a success fee of 57% would have

been reasonable. In addition, the judge allowed a further 5% relating to a postponement fee in a

deductible fee in each case £141.80 including VAT.

The case concerns the protection of the minor and their damages awarded, although Lord Justice

Jackson concluded that 10% was a fair sum to increase damages by to pay their success fee.

Claimant stakeholders in the original report claimed that 10% was not enough, Jackson on Professor

Fenn’s analysis stated that: “61% of personal injury claimants would benefit and 39% would lose

out.” Under the post Jackson Rules, the claimants would have lost more of their damages than under

the old system. Jackson did however state: “Full Cost Recovery is no part of the law.” The case

demonstrates that “excessive costing” will not be tolerated. It is asserted that, this judgement serves

as warnings to the legal profession, to ensure their cases are assessed, analysed and are at

reasonable cost.


The Referral Fee


Advertising or touting for business was prohibited until 1987. Solicitors were prohibited from having

arrangements with third parties until 1998 (Solicitors Advertising Summary 2002). The Law Society

retained a ban over rewarding introducers. In 1999, Solicitors Conduct ruled, permitting the business

of referrals. The business of CMCs and referral fees was born. Trade Unions, paramedics, insurers

and car hire companies, sold details on to CMC’s .A referral fee would increase the cost of a claim.


Jackson concluded “ the lifting of the ban for referral fees of 2004 has not proved to be of benefit

either to the claimant or defendant.. .. offensive and wrong in principle for personal injury claims to be treated as a commodity” (2010 – A Summary Law Society).


Tactics of CMC resulted in “buying in” claims, which they utilised themselves or passed on to other

solicitors or referrers at a profit. Banning Referral Fees and Inducements (section 50 LASPO) placed

a ban on third party inducements: referrer’s fees. The ban was enacted to remove the perceived

“Compensation Culture”, ensuring the business compensation was stopped.

Lord Justice Jackson stated: “ on the various meetings and seminars I attended there was

considerable hostility to the concept of solicitors paying fees for referral.”

The argument of referral fees has been debated. 23 April 2009, the Association of Personal Injury

Lawyers, argued that competition was needed; it enhanced the choice solicitors available to the

public and helped to source good solicitors (Review Civil Litigation Costs 2009).

Others argued that small firms could not compete with larger firms in terms of cost; thousands were

being paid out in manufactured claims, claimants and defendant’s fees, were often made

fraudulently because of referral fees paid.

Accident Compensation Solicitors group said that following the “ introduction referral fees, the whole

scope the claims process in road traffic accident claims has shifted from independent, impartial

advice from qualified staff, to low quality advice by inexperienced staff ” (2010 Legal Services Board)


Is it ethical to sell leads? Trading referrals is common in many businesses, including dentistry. ‘What’ is one example? In dentistry, we pay for potential patients with unlimited gains. What

differentiates this business, between dentistry and law? In law, is it illegal or immoral to pay for

potential litigation on the pretence that it will save costs or reduce business? It is accepted that it

may decrease the number of claims available and save the Government money in unmade claims.

There is no evidence of how it decreases costs of personal injury litigation.

The Otterburn Report, (2012 Transforming Legal Aid), looked at expenses of acquiring business. The

value varied between £535.00 -£880.00 per case. If a claim is bought in for £800.00, what is the

difference in acquiring two claims with similar costs both with the potential to litigate?

The farming of claims by middle men appear immoral to some, to others just business, where the

legal representatives pay for everyday business.


Damage Based Agreements and Case Management


  • Damage Based Agreements were introduced (section 45) allowing DBA to be used in

litigation. The Reasoning behind the DBAs was to provide the claimant with a means to fund

their litigation, whilst decreasing the defendant’s potential cost of liability. In a report the

Bar Council published in September 2014 “(LAPSO): 1 Year on, advised that the take-up of

DBA were slow. Problems with liability, regulation and a “professional distaste for accepting

work on the basis of taking a share of the lay client’s damages” were cited to be the cause.

  • The damages were capped at:

25% damages in personal injury cases – does not extend to future loss for a case (pecuniary


35% damages in employment tribunal cases

50% damages in all other cases

  • The DBA were also introduced to align the sharing of risk in litigation, between claimant and

lawyers. Increasing ethical and business problems.

The problems related to Damage Based Agreements (DBAs) are twofold, for the lawyer and client.

In small claims or those of limited success the lawyer argued that cases would not be economical to

defend. Ethically, cases would not be accepted; justice not provided. The other argument of in

Medical Negligence Cases, the defence and mediation could continue for years. Given that who

would fund the litigation? A law firm would not be able to fund the person’s legal

representation; the person may not be able to afford to pay. Would this stop legitimately injured

people obtaining legal representation and ultimately justice? Third Party Funding was

introduced, allowing a person or corporate to fund action. When it comes to settlement, costs

and case management this creates ethical issues between client, lawyer and third parties.

Cost Management/Case Management

  1. a) Part 36 Offers were introduced to incentivise Defendants to make well organised offers and

to consider the claimants claim .


The recommendation and sanction were imposed, whereby, if a defendant fails to beat a claimant’s

offer, the claimant’s recovery could be enhanced.

Lord Justice Jackson concluded that the consequences of a defendant failing to accept a claimant’s

Part 36 offer was less devastating than the consequences for the claimant failing to accept

the defendant’s offer (2013 – Litigation Focus Changing Tack). This legislation provided a

logical solution to early settlement at a fair market value. It was asserted that the

introduction of an incentive to settle was good for both parties and would save on cost.

  1. b) Qualified One Way Shifting (QOCS) for Personal Injury Claims

Traditionally in Common Law, as a result of the legal costs that “follow the event,” the loser had to

pay the winner’s costs.

Lord Jackson reviewed Litigation Costs, introduced ( Rule 44), Qualified One Way Shifting (QOCS).

The idea was to offer personal injury claimants some form of protection (this was originally offered

by a legal aid certificate) Meaning the defendant would be ordered to pay the costs of

successful claimants, their own costs would not be recoverable from the claimant, if they


QOCS was a measure to counterbalance the loss of the ATE and CFA (success fee) that could

previously be claimed from the defendant (2015 Beat The QOCS)

QOCS was intended to create a system of fairness. Its benefits have not been demonstrated.

  1. c) Case Management

Jackson sanctioned penalties for noncompliance. Previous costs relating to non-compliance, for

court orders, practice rules and breaches; had no real consequences. The Court of Appeals

provided a stark warning to non-compliers, Mitchell v News Group Newspapers (2013)

where they were not entitled to recover costs due to failure to file cost budget. Non

–compliance was identified as affecting, efficiency of litigation and ultimately cost of court

resources. The Ruling Backed the LASPO Act.

Ethics of LASPO 2012 – Conclusion and Reflection an Overview

The Law and Tort and a claim for damages is based on the principle that if a person has committed

“a civil wrong, he must pay compensation by way of damages to the person wronged”. (Pandit 2009,

US National Library)


Under LASPO Act 2012, legal aid was reduced in areas such as family, social and clinical negligence

claims with the Ministry of Justice (MOJ) advising that the claimants would be able to use a modified

no win, no fee arrangement instead.

The legal aid categories were cut and the traditional Conditional Fee Arrangement modified,

resulting in “success fees” being removed and damage based agreements instated (which have been

previously discussed).

Removing legal aid for clinical negligence was controversial; during the debate many parties argued

the case for retaining legal aid. “The cost of both sides in medical negligence are ultimately born by the public, the maintenance of legal aid at no less than the present level makes sound economic sense and is in the public interest.” Steve Walker NHSLA stated : “legal aid is the cheapest and simplest way to fund cases” (Julia Rix, Guardian 2011.


NHS Redress Scheme was referenced as a solution for clinical negligence costs to be considered.

(NHS Redress Act 2006) giving patients the ability to have their complaints heard outside court.

Losing legal aid for most types of clinical negligence cases reduced access via legal aid, it removed

the claimants’ ability to access help and advice through Citizen Advice Bureaus and Law Centres

(, 2011).

Damage based agreements concluded; a system where claimants ultimately paid for success from

their damages. The ethical question is the subject of ‘moral correction’ and adherence to the basic

law of Tort, meaning the person should be returned to the same condition, they were in prior to

injury (without loss). The DBA does not adhere to this.

Government maintains success fees should be paid from damages awarded. In civil injury cases, how

can this be morally correct? A person receives an injury; they then have to pay to claim?

Capping DBA’s may also prevent access to ‘justice’ for smaller claims, if lawyers refuse to take a

claim, where the likelihood of success represents too high a risk, or the injury or damages are

calculated as not profitable enough.

In my opinion Lord Jackson may have intended LASPO to curb fraudulent, unnecessary; minor claims

where legal fees outstripped the proportionality of damages (a one size fits all approach to

compensation). In doing so access to justice for smaller claims is threatened, by the small gain in





Official figures released by the Ministry of Justice, show legal aid has reduced since LASPO was

introduced (Legal aid Figures 2015 ) whilst the NHSLA confirms that complaints received against the

NHS rose 9,174 (2009) to 11,059 (2015). With the loss of legal aid, funding from CFAS or private

funding, appear to be utilised.

Previous Factors linked to the increasing costs of litigation included; compensation culture,

expensive ‘fat cat legal fees’, fraudulent claims, the rise of CFAs, CMCs and the ‘business’ of


The legal framework allowed a system to operate, without definitive guidelines, and uncapped legal

expenses. Media advertising increased public awareness, ability of individuals to litigate in areas

such as personal injury and clinical negligence.

CFAs promoted claimants to take action with no risks and defendants were in a situation, which was

ethically unfair. Claimants could make a claim with virtually no repercussions; defendants faced the

prospect of mounting cost even in situations where a defence was appropriate.

Post LASPO, a number of changes was documented. The Claims Management Regulation Unit

(CMRU) reported 30% decrease in the number of registered companies – decreased referrals.

Personal injury lawyers witnessed closure of smaller firms; amalgamation of others.

Road Traffic Portal reduced fixed fees for lawyers, limiting costs. Medco was introduced (Medco

portal 2015); sourcing initial independent medical reports – where no conflict of interest existed

(May 2015 Co-operative Legal Services).

These changes have been introduced in an attempt to reduce legal costs.

November 2015- Government proposed to abolish compensation rights from minor injuries in road

traffic accidents; and introduce rehabilitation services. This is at present is still under review. The

chancellor has announced plans to increase personal injury claims to £5,000.00, meaning no legal

costs can be claimed (Nov 2015 – Kerry Underwood- WordPress),

Is it ethical, an injured person to represent him or herself, as legal fees will not be recoverable? Will

a layperson with no previous experience of the legal system be able to negotiate with experienced

insurers? Many argue the alleged victim in such a situation would be placed at a disadvantage,


others argue the claimant should seek to negotiate damages without need for legal costs; monies

being taken from their damages.

In the business of dentistry on reviewing the history the Criminal Justice Act (1999) Jackson Reforms

and LASPO Act. I now understand why letters from Dental Law Partnership and similar organisations,

started arriving at our practices mid 2000’s. I blamed it on the dentists, treatments provided and the

expectations of the patients. I never considered that the legal framework and business surrounding

personal injury or clinical negligence could or would have an effect on the number of complaints


I also never appreciated the differences between law in the Isle of Man and the UK. In the Isle of

Man we have never had a system allowing CFA’s or referrers to exist. This may explain why the

number of complaints received in similar practices in the Isle of Man; have had no significant

increase in the last 15 years; whilst in the UK we have had growth year on year.

The government will continue to debate access to justice, as will indemnifiers and the public, LASPO

was, in one’s opinion, a step in the right direction ethically, morally and in the interests of society as

a whole.

“We will sell to no man, we will not act or defer no man, either justice or right” (The British Library,

“English Translation Magna Carta-1215). This statement may no longer be achievable in a society

where the law is more complex, litigation more evident and a culture diverse. In today’s world

justice does come at a price.




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