CLAF: ‘A tax on brain-damaged children’


The CLAF (contingent legal aid fund) is ‘dead’, writes Elizabeth Davidson. That’s according to Roger Smith, director of JUSTICE. A CLAF – a fund which backs claims and re-invests a proportion of any damages won into future cases – was first proposed by JUSTICE in the late 1960s, and has been backed by the Law Society, Bar Council and various consumer bodies at various times, but never found its way into existence.

Its latest incarnation was the government’s proposed Supplementary Legal Aid Scheme (SLAS) – the proposal was dropped at the end of September to sighs of relief all round. Separate to this, a Bar Council working party, headed by Guy Mansfield QC, has been looking into the potential viability of CLAFs for some years but has put its investigations on hold until after the Jackson reforms bed down.

According to Smith, ‘the Bar Council is wasting its time. It’s dead.’ The reason, he says, is the prevalence of conditional fee agreements (CFAs). Why give up a share of your damages under a CLAF when you can keep the lot with a CFA?

‘The large scale development of CFAs means lawyers prefer to operate under them rather than a CLAF. They don’t want to contribute to a collective fund, they would rather take their chance with individual cases.

‘At the point when CFAs were being introduced – that was the point when a CLAF could have been introduced. You can’t have it if you have CFAs.’

The many critics of the Ministry of Justice’s (MoJ’s) doomed scheme point out it was not really a CLAF but an attempt to raid the damages won by those few claimants still eligible for legal aid after April 2013 – almost all of whom will be, in practice, the families of babies suffering brain damage at or near birth as they will be the only ones still in scope and able to win large amounts of damages. Under a CLAF, a share of the damages goes into a pool to fund future claims. Under SLAS, the government was to deduct 25% of damages and past losses and return it to Ministry coffers for legal aid.

Opportunistic and disingenuous
Smith says: ‘It always seemed to me to be a complete con. It was a scheme to take money out of damages, a supplementary tax. The phrase ‘SLAS’ comes from a scheme in Hong Kong. It works in a small way there, but this was just misnamed, opportunistic and disingenuous.’

Peter Walsh, chief executive of Action against Medical Accidents, which campaigned against the proposal, says:

‘It was in effect an extra tax on brain-damaged children. We were relieved when the new intake of ministers decided to drop this idea.’

‘Past losses could be loss of income where a parent has to give up their job to look after their child, the cost of finding new accommodation more suitable to the needs of their child, changes to accommodation, and additional care that a family may need to have brought in. It would have been devastating,’ says Walsh. ‘We campaigned against this and were thinking of challenging it through judicial review on the grounds it was irrational and unlawful.’

‘One of the biggest weaknesses was the proposed rationale for doing this was to create a level playing field between CFAs and legal aid, since lawyers will be able to deduct up to 25% in success fees.

‘It’s just a provision that solicitors can deduct that much. Under legal aid, the MoJ was definitely going to take it. [Former Justice Secretary] Ken Clarke said before he left that market pressures means solicitors won’t deduct 25%, and if they deduct anything at all then it won’t be anything like as much as 25%. So, this was would have been unfair to legally aided clients.’

The amount to be deducted also attracted criticism from Lord Justice Jackson. Last October, in a speech to a professional negligence bar association seminar, Jackson LJ expressed concern that 25% would be taken off damages even if the case settled immediately. He recommended a lower deduction, perhaps on a sliding scale, and pointed out the Hong Kong scheme only deducts 6% of damages if the case settles before delivery of the brief for trial, and 10% if it goes beyond that.

An MoJ spokesperson said: ‘Having carefully considered the views expressed in a recent stakeholder engagement exercise, Ministers have decided not to proceed with implementation of the proposed Supplementary Legal Aid Scheme in April 2013.’

Given the abandonment of the government’s scheme, and the concerns that no pooled fund can operate as long as there are lawyers working under CFAs, is it over before it’s begun for the CLAF?

Guy Mansfield QC, chair of the Bar Council working party, thinks it may yet be viable.

A Bar-commissioned report by consultants Europe Economics concluded last year that a CLAF could work and could secure seed funding as long as it had a good business case, but that it could not assess viability until the Jackson reforms settle down.

Mansfield says: ‘Everyone is waiting to see how the market develops – we need to see how the new damages-based agreements affect CFAs. We don’t know what gaps will emerge in the market, and what will cease to be attractive to lawyers. The CLAF should be seen as one of a number of funding mechanisms, but it is too early to tell if it will work. We won’t know until at least autumn 2014.’

‘There could be specialist CLAFs, for example, in clinical negligence, or they could be regional. A CLAF might fund investigation costs and disbursements but not the legal costs of the solicitor, who would act on a CFA. Clients often don’t have enough money to fund the initial investigation, and with this idea the solicitor would also be taking a risk so wouldn’t be sending us the hopeless cases.’
Guy Mansfield QC

‘I think it’s important to keep the concept alive because there will be cases that don’t get funding,’ Mansfield says. ‘Everybody’s going to have to be imaginative about this.’


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