I last spoke at the APIL / FOIL conference in 2001, and I'm pleased to be back again.
I am delighted to be here in Brighton and, pleased to see that despite the opportunity to be across the road, on the beach, so many of you have come to take part this morning. This demonstrates your commitment to the subject, and above all your commitment to your clients.
Personal Injury lawyers are often, and quite wrongly, seen as ambulance chasers. APIL has a proud and distinguished history, and has proved itself to be the antidote to such criticism. Today I congratulate you for the hard work that you put in.
I am also pleased to see a wide range of key issues being discussed. The theme of the conference agenda demonstrates very clearly that 'costs' are not the only thing that personal injury lawyers are concerned about. You also want to become 'holistic' lawyers focusing on more than just monetary compensation. This feeds into what we're doing on the Community Legal Service and the Community Legal Service Partnerships. What we know as lawyers is that people rarely have one problem. Their problems, and therefore the problems that face us, are multi-faceted.
Unfortunately though cost is one of the dominating issues. It is an issue rarely discussed in a positive way and the last two years or more have provided many reasons for costs to be a key issue on nearly every legal conference agenda.
You are to debate costs later today this afternoon with a formidable trio of past and present APIL Presidents. I would like to use this opportunity to inform your debate and to discuss how I think the resolution of costs concerns can be resolved through a combined approach of mediation, simplification and research.
When Conditional Fee Arrangements (CFAs) first came in under Access to Justice, there was a period of halcyon days when APIL and FOIL worked in comity for the benefit of their clients. April 2000 saw significant changes to the way in which personal injury cases are funded with the withdrawal of legal aid, apart from in clinical negligence, and the introduction of recoverable success fees and after the event insurance premiums from opponents. This shift was designed to increase access to justice. Individuals who could not afford to litigate privately, despite having good cases, were given the opportunity to do so more easily. Making a personal injury claim became no longer the preserve of the wealthy or poor, but open to all with good cases. The reforms also provided defendants with a fairer system in which at the very least they could recover costs in successfully defended cases and were no longer faced with what many referred to as legal aid 'blackmail'.
But such was the dramatic nature of the upheaval some adjustment time was predictable. Some challenges to the new regime were inevitable. New legislation is invariably scrutinised and its parameters tested. However, what actually occurred went well beyond this and has been unreasonable and destructive.
We have had to be careful with the use of the word 'war' in recent weeks, but I think I can say here the often used phrase 'costs war' and most will recognise it.
And we have been concerned for sometime about the extent and nature of the satellite litigation around CFA legislation and related issues and at the widespread breakdown in relations between claimant and defendant interests. Now this has been a tremendous waste of resources for all involved and may have affected the effective delivery of access to justice. I am concerned about the delays the costs disputes have had on thousands and thousands of cases.
It would be easy to criticise the liability insurers' approach in, first, taking on the new legislation and then using that legislation as a vehicle to target individual CFAs. It would also be easy to say that insurers' tactics have not always been constructive.
It is ironic that the controls we were asked to put into the April 2000 regulations by APIL and others to protect the consumer from unscrupulous solicitors have been utilised to attack claimant solicitors costs. I don't think anyone anticipated that this was the use to which they would be put. Many of the set of test cases which we are waiting for the Court of Appeal's imminent decision on involve what are commonly described as 'technical challenges'.
I know that you generally recognise defendants' right to challenge the reasonableness of your base costs, of your success fees and of any After The Event (ATE) insurance premium but have found the technical challenges to be intolerable. And I can see why you think that. If deficiencies in the CFA are found the consequences can be significant and where deficiencies are not found such fishing exercises can be disruptive, cause delay in payment and can lead to cash flow problems.
The insurers' balance sheets are though worthy of some attention too. There are a number of factors that have led to the liability sector experiencing record underwriting losses and the insurers obviously need to scrutinise their bottom lines and account to their boards and shareholders for the position they find themselves in. As part of that process it is understandable that insurers need to develop strategies to reduce their costs, including tackling increasing claims cost. It is the means to the end that is the issue here.
There is though a constructive way forward and I think the conditions are now right to make substantial progress towards resolving matters in a way all sides can live with and to overcome the behavioural problems we have seen. Now it's clear to me that the between the parties costs regime can really only operate effectively with a fair degree of consensus between claimant and defendant interests. The only way to reach that consensus when the parties, as now, are so far apart is through dialogue, trust and evidence with the helping hand of mediation.
It was only through spontaneous mediation, helped not inconsiderably by the objective research produced by Paul Fenn and Neil Rickman, that the Civil Justice Council was able to facilitate an agreement at the Milton Hill House costs forum in December - the agreement, which I think you will all know well, on the fixed recoverable costs scheme for low value pre issue road traffic cases. I don't think there'll be anyone in this room who will not now be aware of that agreement.
The scheme agreed appears to have provided the foundations for a return to reasonable and co-operative behaviour and to help bring an end to the costs disputes. I congratulate the Civil Justice Council on being able to bring the various factions together and for delivering a provisional agreement. Prior to the forum Nick Phillips promised a Christmas present and I really think that he provided one for us all.
I am aware of the determination and patience of those who took part in the Little and Big Tents and the Forums to find a solution. I was particularly impressed and grateful for the good faith and persistence shown by APIL representatives in entering into those discussions and adjusting positions on many occasions to get to a deal. That resolve (which I know was fuelled by those who negotiated on your behalf) was focussed, not just on getting costs rights for solicitors, but on getting a regime that will work for the clients.
I know though that Michael Napier, who chaired these events, was on many occasions tempted to lock the participants in and throw away the key! And I understand Frances McCarthy's involvement as a costs mediator has also helped her launch a new career as an actor in a programme of APIL/FOIL mediation master classes!
I realise the need to implement the scheme quickly and my officials and drafting lawyers are currently working with the Rule Committee to complete the necessary rules and practice directions. In fact I can tell you that at the Committee's initial consideration of the scheme in April they were almost unanimously impressed at what had been achieved. I understand the Committee are due to consider the first draft of the rules later today.
I appreciate the importance of delivering a scheme that gives the least possible means for parties to argue their way out of it and rules sustainable against a possible attack by a party not willing to be bound by it. And I understand there are some details that remain to be resolved and that forms part of the Rule Committee's work in consultation with its advisers, Lord Chancellor's Department's officials and the Civil Justice Council (CJC). The CJC are currently conducting a mini consultation exercise on implementation date and this will be taken into account by the Rule Committee.
It seems unlikely that the amount of the success fee allied to the scheme will be resolved until later in the year and after the scheme is formally up and running. 5% is the working figure suggested but not agreed as part of the Milton Hill House mediation and is now subject to the new mediation process that APIL are involved in may be able to tell you more about later on. The outcome will again be dependent on the production of new objective data relating to success fees and I suspect we will therefore not see a result until later in the year. However, this won't delay the start of the scheme and in any event CFAs are used in a minority of road traffic claims.
The spirit of transparency promoted in the development of the scheme will continue during its implementation and in other areas. The draft rules will be shared with APIL and other interested parties as soon as possible after today's Rule Committee meeting and will be available via the CJC costs website. The rule making process will inevitably throw up points that were perhaps not identified or made clear during the agreement reached in December. I would urge all to seek to resolve any such points in a constructive and speedy manner. The Rule Committee of course has the right to accept or reject the views put to it.
And I anticipate that it will take a few meetings of the Committee to finalise the rules but I would hope this process would be completed by the summer to come into force shortly afterwards.
My officials have worked closely with the CJC and will continue to do so to implement and monitor it. The LCD will also be fully involved with further mediation attempts under the Civil Justice Council's guiding hand to resolve other costs issues and despite limited resources we will help fund more independent and objective research to help provide the means to more mediated resolutions.
This research will be in addition to the comprehensive study the Department has already commissioned into the impact of making success fees and after-the-event insurance premiums recoverable. The study by Paul Fenn, Alistair Gray and Neil Rickman will also investigate the role being played by funding mechanisms in clinical negligence cases and review experience in relation to funding mechanisms in other European jurisdictions. The research is due to be completed in the summer of 2004.
Working in partnerships, backed where possible by research, is a theme running through the series of targeted measures the Department is taking to deliver changes to the CFA regime.
I'd like to talk to you now about the Indemnity principle reforms, if I may. I know this is something that has generated a great deal of interest.
The first of these is new legislation we are about to introduce to abrogate the effect of the indemnity principle in CFAs and collective conditional fee agreements (CCFAs) and to introduce a lighter regulatory regime for the new simpler agreements that will be possible under the new legislation.
The legislation will enable solicitors to enter into agreements with their client in which they can plainly state that they will not seek to recover more than is allowed between the parties, subject to such an arrangement being drawn up as a CFA. Solicitors will now be able to openly contract with their client on a true no win, no fee basis and will be able to do so under a more streamlined contract, in a way that will be easier for the client to understand.
I know one esteemed legal professor has coined the phrase CFA 'lite' but I would be happy for you to come up with your own alternative suggestions.
These reforms like the road traffic costs were developed in almost 'groundbreaking' style in partnership with the Master of the Rolls - whom many of you would have heard speak about the indemnity principle at your conference last autumn - with the CJC and delegates at the Milton Hill Forum and of course with the Rule Committee.
The Rule Committee agreed the necessary rule changes just before Easter and these along with the commencement of s.31 of the Access to Justice Act and the amending CFA regulations should come into force on 2nd June. Advance copies have made available to the APIL executive.
This is just the first step.
Next we will be reviewing and consulting on whether, and how, the CFA and related regulations could be simplified and made more transparent regime across the board. I would like the regime to be easier for the consumer to understand, for the legal representative to use and harder for any mischievous challenges to be brought and will be consulting widely to identify the views and suggested options from both legal and non legal parties. I really hope you'll engage in that process very energetically.
I acknowledge APIL's concern about the opportunity the regulations, including the amended regulations, provide for bringing of 'technical' points. I also note the general concern that the CFA regulations are too complex and unnecessarily burdensome given the client's risk of liability for costs seems to have diminished with the April 2000 reforms. There are some primary legislative constraints in relation to some of the things we are being asked to do. I would ask consultees to take that into account in considering their responses but of course primary legislation is not immovable if there is a strong enough case. But if you look at our parliamentary timetable, you'll understand why that may prove to be a bit of a challenge!
Besides any legislative constraints consideration will need to be given to other issues relevant to easing the CFA requirements. For example, leaving client care to the Law Society's Practice Rules and Codes might raise questions around solicitors' client care standards and the handling of complaints. Consumer groups therefore will have an input to this.
A consultation paper will be issued in the next few weeks. The consultation will run for three months and will include a small consultation forum being arranged by the CJC for July. I would expect firm proposals to be in place by the Autumn and any changes to secondary legislation by early 2004.
If I can move away a little from costs for a moment.
I know that many APIL members have concerns about the activities of claims management companies and dislike some of their proactive marketing methods. I also know that many APIL members are by necessity on the panels of these intermediaries but some are concerned about the nature of that relationship.
Recent test cases have or are involving leading claims managers and aspects of their business models. I am though quite certain that provided claims management companies and similar intermediaries act responsibly and with probity they can expand access to justice for people with good claims and provide helpful claims management services to solicitors. While improper approaches to vulnerable people must be of concern, it is of equal importance that people who may have been injured by others' negligence should have access to help to seek compensation.
If individuals are to enforce their rights they need to be aware of the ways in which they can enforce them. Marketing approaches, including advertising, provided it is not misleading or dishonest, assist in raising awareness.
I am keeping under review the emerging market and working with a range of organisations to encourage high and common standards in accident compensation - both in terms of the consumer and in dealings with solicitors. I have said before that I would welcome the establishment of a representative voice for the claims management sector, particularly one that encompassed common standards.
I know of at least four separate initiatives, which to varying degrees are seeking to set standards, draw up codes of practice and establish different forms of representative bodies. This really is a good sign, but for sufficient progress to be made these initiatives need to be drawn together. I would prefer a voluntary approach and a degree of self-regulation to any new Government regulation. The case for the latter has not yet been sufficiently made and indeed as the industry matures and quality standards obviously rise the argument for formal regulation seems to weaken.
Recent developments such as solicitors buying up parts of claims management companies, other firms combining to form marketing networks and claims managers broadening their portfolios to include the provision of a wide range of advice and financial services suggests this is a lively and competitive market, on service at least.
It may be for now that there is sufficient regulation but the door is not closed. The law society are re-establishing their working group on raising costs standards, and I believe they are meeting again at the end of this month.
Turning briefly to the Law Commission reports in the late 1990s on different aspects of the law on damages. The three main reports to which the Government has still to respond are those on Claims for Wrongful Death; Liability for Psychiatric Illness; and Medical, Nursing and other Expenses and Collateral Benefits.
Because of the wide-ranging nature of the Law Commission's proposals, the fact that they are closely interlinked in a number of areas, and the developments in policy and case law that have occurred since they were completed, we have decided that the best approach is to carry out a comprehensive review of all the recommendations, with a view to further consultation. We are also taking the opportunity to give further consideration to the Commission's proposals on aggravated and restitutionary damages, which the Government announced its initial acceptance of in November 1999.
My officials have held preliminary discussions with APIL and other key organisations to develop a fuller awareness of the various factors affecting the operation of the law on these issues, and to identify key areas of concern. I cannot at present give an indication as to what the timetable will be for taking this work forward. I will, however, ensure that APIL are informed as soon as any announcement is made.
I am confident that the conditions now exist for us all to work together to make significant progress towards resolving the major costs issues and to generally achieving greater stability, simplicity and higher standards in personal injury litigation.
And I want to keep the amount of statutory change to a minimum to avoid creating further uncertainty and I think substantive progress is possible through evidence-based mediation and sensible targeted statutory measures.
APIL, the Law Society, TUC, ABI, the liability insurers and others have a vital role to play in delivering a solution and I really do hope you and they continue to treat it as a top priority. If the costs war is not checked I will need to think again about the need for more fundamental reforms, and I'd really rather no do that.
In conclusion I genuinely repeat thanks to you all. The fact that you're in this room and not on the beach demonstrates commitment to this subject and also to your clients. We are very grateful for the fact that we have lawyers, and also a court, who are so committed to the proper conduct of personal injury litigation. I can reassure you that you also have a government committed to helping you make the changes to achieve this.
Thank you.