Justice secretary Ken Clarke has announced that there are to be changes to the rules on ‘no win no fee’ arrangements between lawyers and their clients. In case you’re not aware, these are the arrangements that allow “lawyers” (for which, by and large, read the call centres of companies whose revenue comes from the referral of potential claimants to solicitors) to advertise their services as offered at no cost to the prospective client. These arrangements, properly known as “conditional fee agreements”, mean that should a claimant be unsuccessful in his or her claim, they are not required to pay anything to their lawyers for the services rendered. In return, lawyers receive a nice bonus should the case be won.
Shamelessly, Clarke appeared on the Today Programme (@r4today) this week, decrying the fleecing of the NHS and poor innocent insurance companies who have had to pay multi-millions on an annual basis to crafty lawyers. ‘This is not how it was supposed to work’, he shouts, ‘and we’re all paying’. But let’s be clear, it’s not just the lawyers that benefit from these arrangements. There are the Mercedes dealers, the country clubs, the Rolex retailers. And those corporate palaces in the centre of England’s fair cities don’t just build themselves, you know. Honestly, Clarke is supposed to be a business specialist. Isn’t he aware of the multiplier effect? We’re keeping these people in business. And if it wasn’t for no win no fee, daytime TV would be deprived of the majority of its revenue. And what would Trisha do then?
You’d think, given the explosion in litigation over the last decade, that the no win no fee agreements were invented by a Conservative government. Actually they were, but they only really took off in the late 90s when the Labour government decided to do away with Legal Aid for most forms of litigation. By way of compromise for those complaining that access to justice would be denied for those most in the need, who are usually those who are least able to afford a lawyer to advise and represent them, the administration decided that “success fees” earned by lawyers would be recoverable from the losing party. In addition, because of the principle in English Courts that the loser pays the winners legal costs, it was also proposed that insurance premiums charged for covering the risk that a case might be lost should also be recoverable.
Quite possibly, back when these reforms were first contemplated, not even the most optimistic lawyer could have expected the litigation revolution that was to follow. This was because of the innovations that followed.
First, “claims farmers” were allowed to enter the market with glossy TV advertising. Anybody contacting one of these companies claiming to have what looked like a dead cert case was then sold on to the highest bidding firm of solicitors with all the grace of a sheepskin clad football agent approaching the gates of Old Trafford with his arm around the latest wunderkind. This was the reality of access to justice in the post-Thatcher age.
Second, and I still sometimes have to pinch myself about this, the legal expenses insurers came up with a tremendous wheeze. The premiums that clients had been expected to pay for the insurance cover that would eliminate their risk altogether were themselves insured. And the payment terms were that the premium would be paid at the end of the case. If the case is lost, the insurance policy pays the premium. If the case is won, the losing party pays the premium. And then the same companies would provide finance to pay the fees of barristers and expert witnesses and insure those costs too. Lost cases are rare, but you can imagine that the hit an insurer takes when such a case arises is such that the premiums charged are massive. And the losing party, or, more usually, the losing party’s insurer, foots the bill. Oh those poor insurance companies, being fleeced by, er, those other insurance companies.
Given the availability of “legally trained experts” (honestly, this is what one of the present crop of claims farmers purports to offer in its current TV campaign), able to assist anyone with the semblance of a claim with no risk whatsoever AND the guarantee that all damages awarded will be safeguarded for the claimant (this being de rigeur after the scandal of the miners required to pay the referral fees to their claims farmers out of their damages), who can possibly be surprised that the litigation culture spread through England and Wales like swine ‘flu?
So, was this access to justice? Well, not if you were wanting to pursue a commercial litigation or intellectual property claim, where costs remained high but because of the greater number of variables, very few lawyers were brave enough to offer no win no fee agreements. I tried twice and both times had my fingers burned by clients that, how shall I put it, strategically withheld information that, when uncovered at the crucial time, utterly undermined their cases. I never did it again.
And not for the Defendants. Not any Defendants. Not that conditional fee agreements are forbidden for Defendants. It’s just that, if you were to represent a Defendant, how would you go about describing just what constitutes success? Litigation is not a black and white issue but is pursued in shades of grey. And not for two of the key areas of justice for private individuals: family, where legal aid remains, and criminal proceedings, where that legal aid is universal, regardless of means. And in employment matters, lawyers have always been allowed to act in return for a share of the winnings, something that is strictly forbidden in normal court proceedings.
And obviously, if your case is tricky; if you have clearly suffered but the evidence pinning the blame on someone else is suspect; if you have been injured but that has merely aggravated a pre-existing condition, you’re going to find your choice of lawyer radically reduced. That is, if you ever had a choice, because the lawyer that you get to use will probably be dictated by your insurance company or by the claims farmer you called.
Access to justice? Not really.
Does it have to be this way? No. I’m not saying that lawyers don’t do a good job. Of course they do. And anybody thinking that running a law firm is a licence to print money should wake up and smell the freshly ground. Times is tough, folks. In personal injury and most other areas as well. There are loads of conscientious lawyers whose primary aim is to find a way to help their clients to secure their objectives and only then try to make it pay. Dozens, literally.
In the dying days of the last Labour government, then Justice Secretary Jack Straw commissioned a report on the chaos that is the field of legal costs from Lord Justice Jackson. The resulting Jackson Report recommended that success fees and insurance premiums cease to be recoverable from the opponent and that to make the system work, levels of damages be lifted by 25% across the board. So the insurers still pay, but at least the claimants have something at stake and therefore have an incentive to look around for the best deal. And the lawyers that will lose out are only those that have made a living out of litigating over the levels of costs recoverable.
Somehow, I still don’t find this satisfactory. It still doesn’t address the imbalance between claimants and uninsured defendants, nor does do much to enable those engaged in commercial disputes find competent yet affordable representation. For some reason, we have chosen to make it so much more complicated than the way it works in the USA, where a lawyer can take a percentage of his or her client’s damages and businesses know that they have to budget a certain amount for defending litigation, and then keep skilled lawyers on retainer for that very purpose. The USA is where the phrase “ambulance chaser” was invented. It’s also the home of community justice, public law centres and the like. You don’t find many over there complaining about the absence of access to justice. They just get on with it. And if a party does behave really badly, an American court can still order that party to pay the other’s legal costs, but that is very much the exception.
The problem is that we are building not on virgin ground but with the conviction that we must imitate what existed before. And what existed before was an unsustainable legal aid system that protected the legally aided party to the extent that in 99% of cases, the losing legally aided litigant could not be required to pay the winning party’s costs. And yet were the result to be reversed, the losing party would have to repay the Legal Aid Board for the subsidies it had paid to the opponent’s lawyer. Compared with that, the current conditional fee system seems sensible, even though allowing a Claimant to pursue litigation without having to put anything on the table him or herself is to pursue a system that has no real foundation in reality. And in the realm of unreality, the bizarre is merely ordinary. Conclusion: lawyers are afraid of the new system not because there is any real jeopardy to access to justice – at least no more than there is already – but because they don’t want the job of having to explain to their – our – clients that they will have to invest in the process themselves. And what of the claims farmers? Let them find another market to leach on, say I. Something tells me they won’t go hungry.