The Contingency Legal Aid Fund: A Third Way to Finance Personal Injury Litigation

AuthorDavid Capper
Publication Date01 March 2003
Date01 March 2003
ISSN: 0263-323X, pp. 66–83
The Contingency Legal Aid Fund: A Third Way to Finance
Personal Injury Litigation
David Capper*
Northern Ireland missed out on all the major reforms to civil justice
which took place in England and Wales during the 1980s and 1990s.
However the reform movement is now gathering pace and a Legal
Services Commission is due to start work in the spring of 2003. This
article considers how personal injury claims might be funded. The
government wants to introduce conditional fee agreements (CFAs) but
widespread hostility expressed by many interested parties led to the
consideration of an alternative funding system, the Contingency Legal
Aid Fund (CLAF). The relative merits of CFAs and CLAF are
considered in the following pages.
Legal aid in Northern Ireland inhabits an almost prehistoric age. Along with
civil justice it remains a ‘reserved matter’ so responsibility for it rests with
the Lord Chancellor’s Department and the Northern Ireland Assembly has no
jurisdiction over it.
The governing statute, the Legal Aid, Advice and
Assistance (Northern Ireland) Order 1981 (the ‘1981 Order’), prescribes an
administrative and adjudicatory edifice similar to that which applied in
England and Wales prior to the Legal Aid Act 1988. Thus the solicitors’
professional body, the Law Society of Northern Ireland (the ‘Law Society’)
still manages the system and entitlement to legal aid for civil cases depends
on an applicant meeting financial eligibility criteria and a merits test
untouched as yet by the funding code.
The Courts and Legal Services Act
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*School of Law, Queen’s University Belfast, 27–30 University Square,
Belfast BT7 1NN, Northern Ireland
1 Northern Ireland Act 1998, sch. 3, para. 15.
2 Under the 1981 Order art. 10(4), the merits test is whether an applicant shows
‘reasonable grounds for taking, defending or being a party’ to legal proceedings. The
funding code requires wider considerations, such as the potential benefit to be gained
from taking proceedings, costs relative to that benefit, and whether the case concerns
a matter of public interest, to be taken into account.
1990 and the Access to Justice Act 1999 do not apply so that conditional fee
agreements (CFAs) remain subject to the common law prohibitions on
lawyers having any personal stake in the outcome of their clients’ cases.
A lengthy consultation process has got as far as publication of draft
legislation, the Access to Justice (Northern Ireland) Order 2002. Northern
Ireland will get its own Legal Services Commission, which is expected to
start work in April 2003. A capped civil legal aid budget and a funding code
will be introduced. As far as personal injury cases are concerned the
government’s preferred approach is to replace legal aid with CFAs. However
this idea, first seriously floated in the government’s 1999 consultation
met with an overwhelmingly negative response from consultees. One
consultee, the Lord Chancellor’s Legal Aid Advisory Committee for
Northern Ireland (‘LAAC’),
somewhat casually suggested the introduction
of a Contingency Legal Aid Fund (‘CLAF’) as an alternative to CFAs. This
would involve the establishment of a fund, probably with taxpayers’ money,
which would provide financial support for litigants taking civil cases. The
fund would pay some or all of the costs of unsuccessful litigants and, as
originally conceived, would be replenished by contributions from successful
litigants. Following the publication of its decisions paper in 2000
government requested LAAC to investigate the potential viability of a CLAF
(or CFAs) in Northern Ireland. Although never openly acknowledged it was
clear to all involved that the government’s expectation was that LAAC
would conclude that CLAF would not be viable. LAAC’s conclusion,
little contrary to its own expectations, that CLAF could well succeed and
would be preferable to CFAs, clearly disappointed the Lord Chancellor’s
Department. Articles 39–40 of the draft legislation allow for the introduction
of CFAs and in articles 41–42 ‘litigation funding agreements’. The latter is a
version of CLAF but the detailed provisions reject some of the most
important recommendations made by LAAC (see below).
It is worth explaining LAAC’s position a little further. LAAC has never
found the arguments for the withdrawal of legal aid from personal injury cases
particularly convincing. Legal aid covers a much smaller proportion of the
population than when first introduced but why not extend it to persons with
greater means than those who currently qualify? The argument against that,
and the other argument in support of withdrawal, that costs are rising
inexorably, is weak. In most legally aided cases costs are paid by the
3 The relevant principles were most recently restated by the Court of Appeal in Awwad
v. Geraghy & Co (a firm) [2000] 3 W.L.R. 1041.
4 Northern Ireland Court Service, Public Benefit and the Public Purse – Legal Aid
Reform in Northern Ireland (1999) para. 8.9.
5 Established by 1981 Order, art. 23.
6The Way Ahead: Legal Aid Reform in Northern Ireland (2000; Cm. 4849).
7 Report by Lord Chancellor’s Advisory Committee (LAAC) on The Viability of
Establishing a Contingency Legal Aid Fund or Conditional Fees in Northern Ireland
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