The Indemnity Principle - Programme of Change
Response by Thompsons Solicitors - December 2002
Thompsons is the most experienced trade union and personal injury firm in the UK. It has a network of offices across the UK, including the separate legal jurisdiction of Scotland and Northern Ireland. Thompsons only acts for the victims of injury.
Thompsons only acts for the victims of injury, not for employers or insurance companies. The vast majority of personal injury cases pursued by Thompsons relate to employment liability claims on behalf of trade union members. At any one time the firm will be running 70,000 claims.
The firm participates regularly in government consultations on legislation.
The Indemnity Principle
The indemnity principle is an anachronism, the abolition of which Thompsons has long called for.
The indemnity principle has been a major obstacle for the trade unions and for Thompsons (as the biggest law firm instructed by the labour movement) in our collective ability to offer free legal services to union members on unambiguous terms. Opening up access to high quality legal advice to a wider audience has been restricted by our inability to provide concise, straightforward information on the deal a client can expect.
The Programme of Change
The indemnity principle could and should have been abolished when the Access to Justice Act was introduced. It is a point that Thompsons made at the time. We were assured that there would be an enabling provision made within the Act for abolition subject to consultation. Yet now, three years on, we are told that outright abolition was rejected at the time as impracticable.
Paragraphs 9 to 12
We do not accept that abolition of the indemnity principle cannot be achieved through legislation – see our comments on paragraphs 13 and 14 below. Assuming that the LCD chooses not to seek to abolish the indemnity principle through legislation, it is fundamental that changes are made to the CFA/CCFA regulations. Any change must enshrine a principle that the only party able to challenge a CFA/CCFA is a party to that agreement. The alternative is to open up yet more grounds for technical and spurious challenges to be made and to allow the courts to become increasingly clogged up by such unmeritorious points of dispute.
Paragraphs 10 and 11 (bullet point 4)
We object in the strongest possible terms to any suggestion that costs should be assessed on a global basis rather than an item by item basis. This proposal is irrelevant to the issue of the indemnity principle. It is an attempt to introduce fixed costs by the back door.
The introduction of fixed costs will undermine the government’s much trumpeted aim of opening up access to justice. We have set out our detailed reasons as to why this is the case in submissions to the Civil Justice Commission’s ‘Big Tent’. The points of concern that we have raised have not been answered by those proposing fixed costs.
There is no reason why abolition of the indemnity principle need lead to any alteration in the way that costs are assessed. Whether the indemnity principle exists or not costs will continue to be assessed on the basis that only reasonable and proportionate costs will be allowed.
The transparency that abolition of the principle offers can only be for the good. It will restrict the insurers ability to clog up the courts by taking highly technical, unmeritorious challenges to avoid and delay payment. The assessment process should no longer be used as a front in a war of attrition against the principle of recoverability of reasonable costs.
The ‘underlying ethos of the principle’ – referred to in paragraph 6 and elucidated in paragraph 2 of the consultation paper vis ‘a tool for ensuring that the receiving party does not receive more than he actually owes’ – will be retained through adherence to the principles of proportionality and reasonableness.
There is no need on abolition of the indemnity principle to alter the underlying tenet of costs assessment. Removing the fetter should mean there can be greater scrutiny not less by the courts as they will be freed up to focus on the real issues of reasonableness and proportionality rather than being side-tracked by technical, unmeritorious points currently raised on the indemnity principle.
We are at a loss to see any logical reason for a move to a system of global assessment - a dramatic change – because a discredited rule honoured more in the breach than in the observance is being abolished.
There is on the other hand a great deal of logic for those in the insurance industry and the judiciary who are proponents of fixed costs to have global assessment. It offers them a chance to have lump sums applied to costs rather
than proper assessment of the work that had to be done to pursue a case and the reasons for that.
Paragraphs 13 and 14
We do not accept that the need to define the principle is grounds not to abolish the principle entirely by primary legislation. The principle will need to be defined in any event to create an enabling power.
Thompsons condemns the fact that despite the call over many years for the indemnity principle to be abolished it is only now, after the Big Tent has been established by the CJC to drive through fixed costs, that anything is done about it. Paragraph 16, tying as it does the abolition process to the Big Tent timetable on fixed costs, along with the attempt to slip in a reference to global costs assessments, makes the link explicit.