Amendment of Financial Conditions for Public
Funding of Litigants by the Legal Services Commission
At the end of July 2000, the government published a
Consultation Paper on revising the financial conditions that apply
to people who apply for or are granted public funding for legal
advice or representation in proceedings. These changes are
consequential to the replacement from April 2000 of the former
civil legal aid system, with its statutory eligibility limits and
conditions, by the Community Legal Service Fund, with its more
flexible procedures set out in The Funding Code, and would take
effect in April 2001.
Important proposals relate to funding of group
actions and would almost certainly facilitate the bringing of more
claims.
The imposition or removal of conditions or barriers
on the funding and costs of litigation have a direct effect on the
number of claims that may be brought. At one extreme, governments
are concerned to ensure that consumers have appropriate access to
justice so as to enforce their rights in genuine cases. On the
other hand, there should be barriers on the bringing of ill-founded
claims. During the 1980s and 1990s, a very considerable number of
group product liability claims were funded by legal aid but proved
to be ill-founded. The enormous public expense involved was
entirely wasted.
The Consultation Paper contains some proposals
which would maintain or increase the barriers on poor claims, but
some proposals which would tend to encourage poor claims. It is
recommended that comments on the proposals should be sent by 20
October 2000 to Sean Langley, Lord Chancellor's Department,
Selborne House, 54-60 Victoria Street, London SW1E 6QW or
slangley@lcdhq.gsi.gov.uk. Lawyers representing claimants have
already strongly objected to some of the Government's proposals and
it is important that industry's voice should be heard in
response.
The full Consultation Paper is available at
www.open.gov.uk/lcd/consult/civ-just/lsc.htm. The following
comments summarise some of the more important points, with
references to particular questions on which the government requests
comments (referred to as Q numbers).
The Government's general philosophy
Although the Government supports the concept of
facilitating consumer's access to justice, these proposals are not
strongly pro-claimant. The Government's stated aim is to make the
financial conditions fairer and more consistent and to simplify the
rules. The Government has limited the financial resources available
to the Community Legal Service Fund and has been careful to ensure
that the package of proposals is designed to cost no extra money
overall.
The Government's intention to try and achieve a
balanced approach is indicated in the following passage relating to
proposals on costs rules:
"The rules governing costs between
the parties in funded cases seek to balance competing objectives.
On the one hand, funded clients would be deterred from pursuing
worthwhile cases if they risked facing an unknown and effectively
open-ended liability for costs. If the Fund faced this liability,
there would be fewer resources available for other priorities. On
the other hand, it is undesirable that funded clients are placed in
a more favourable position than their unfunded opponents (who may
be only slightly better off). [It is argued above] that funded
clients should, so far as practicable, be placed in an equivalent
position to private litigants; this would include accepting some of
the discipline inherent in the risk of costs..."
The Government also states that:
- funded clients should be required to pay as much as they can
reasonably afford towards the cost of their cases; and
- the rules governing the financial conditions are as
fair as possible as between applicants for funding in
different circumstances, and between funded litigants and their
unfunded opponents.
Whilst these general statements appear balanced,
industry is likely to object that some individual proposals are not
balanced.
Group actions
The Consultation Paper states that, wherever
possible, the Commission seeks to fund group actions by selecting
an appropriate test case. It notes that it often happens that not
all of potential claimants are eligible for funding, so the
Commission's choice is limited to those who are, and this limits
the Commission's ability to select and fund the case that would
test the generic issues most cost-effectively. The Government
therefore proposes to give the Commission power, where it considers
that the majority of potential claimants are likely to be eligible,
to waive the upper financial eligibility limit in order to
fund a test case (Q.7). The Commission would also be able to waive
further contributions where these would exceed a reasonable share
of the generic costs. The Commission already has power to waive all
or part of the statutory charge in these circumstances. The
Government would also consider further whether to extend this power
to any case with a significant wider public interest.
We consider that these proposals are very
dangerous. They would mean that people who would not normally
qualify for public funding would be entitled to receive it if they
were involved in a group claim. Given the abysmal history of public
funding of group cases which should never have been funded, we have
the gravest reservation about the wisdom of this proposal,
particularly given that, unlike many of the other proposals, there
is no balancing proposal.
We also consider that the Commission's underlying
assumptions are incorrect. It is assumed that all group claims will
contain generic issues and that it will be appropriate for the
court to resolve them by selecting a single test case. Academic
analysis of US class actions and UK group actions has clearly shown
that these assumptions are not true of all multi-party actions. In
product liability or toxic tort actions, for example, individual
issues predominate over any supposed common issues and it is
inappropriate for the Commission to fetter the court's discretion
as to how it might wish to resolve the litigation: the Civil
Procedure Rules 1998, Rule 19.III are entirely clear that the court
has full discretion on the appropriate methodology which it might
adopt to resolve group litigation and that, although the court has
the power to order one or more test cases, this is not mandatory in
all cases.
We would oppose the proposal.
Financial eligibility changes
The current funding rules are complex, as are some
of the proposals, so will not be summarised here: the current
limits on income and capital eligibility are annexed to the
Consultation Paper.
The most significant provisions are summarised
below:
- An increase in the eligibility limit for Legal Help to the same
level as that for Legal Representation (currently 8,067 pounds).
The aim is to improve access to early advice on legal problems.
- An increase in the current capital limit for Legal Help to
3,000 pounds and for Legal Representation (currently 6,750 pounds)
to 8,000 pounds.
- A limit on the amount of contributions payable and/or
the length of time that contributions can be payable. The
government notes that this carries the risk that clients who no
longer pay contributions would have no incentive to have their case
completed as quickly as possible. Industry should object to these
proposals (Q.4) since a claimant would be exempt from the normal
principles of being put in the position of an unfunded person and
the disciplines of cost-benefit analysis that apply to such a
person.
- A simplified means test. Roughly the same number of people as
now would qualify, but more pensioners and people in low-paid
employment would become eligible and homeowners in the South East
with relatively high gross income and most likely to cease
eligibility.
- A single 3,000 pounds allowance applicable to both
contributions from capital and the statutory charge.
- Maintain the rule that the first 100,000 pounds equity value of
an applicant's home is disregarded for determining financial
eligibility, but in future include the full equity value
of the home where calculating capital contributions. The
Law Society has said that the proposed treatment of equity in homes
would effectively abolish public funding for virtually all owner
occupiers, with a catastrophic effect on access to justice and
consumer lawyers are strongly opposed to this proposal. Industry
should strongly support this proposal (Q.9).
- To give the Commission power to charge a funded person interest
the statutory charge and capital contributions. Industry should
support this (Q.10).
- To charge such interest at commercial rates. Industry should
support this (Q.11).
Costs rules in litigation
Under the court rules, in deciding whether to order
costs against a funded client, the court must take account of
both parties resources. For this purpose, equity that the
funded client owns in his own home is disregarded up to a value of
100,000 pounds. The Government proposes to reduce the disregarded
figure to 3,000 pounds plus any contribution from equity due to the
Commission. However, the current rule that a non-funded party
cannot enforce an order for costs by forcing the sale of a funded
client's home would be maintained.
A successful non-funded opponent may be able to
recover some or all of his costs from the Fund where he can satisfy
the court that he would otherwise suffer severe financial hardship.
The Government proposes to relax this test to plain "financial
hardship".
Industry should support both these changes
(Q.12).
For further information please contact Chris Hodges
on telephone 020 7367 2738 or e-mail csh@cms-cmck.com.