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COUNSEL’S FEES AFTER APRIL 2013

ANDREW RITCHIE QC

9 Gough SquareLONDON

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Before 2003In PI cases in claimant work: Solicitors were paid by the

hour The courts supervised

solicitors fees at detailed assessment

Solicitors hourly rates were set by the courts annually

Barristers were paid as a disbursement

Barristers fees were negotiated with the solicitor

who had a duty to keep them down for client’s benefit

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Before 2003 – The disbursement basis If a solicitor wanted to instruct

counsel to advise or plead he could do so

The choice was cost neutral The solicitor was paid to instruct

counsel (if the claim was won) Counsel was paid by the losing

Defendant Or counsel was paid nothing if the

case was lost (no win no fee) This allowed injured claimants full

access to the specialist personal injury Bar

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Commoditisation

Commoditisation is a business principle

It involves paying the same fixed fee

for every PI case in a category even though the work

involved is different

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The Vital Rule of commoditisation

to maintain access to justice

to ensure victims can still bring their claims

the commoditised price must be the average for the category of cases

Mid way along the Bell Curve:

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Failure to follow the Vital Rule

If the commoditised price is too high

The insurers pay too much for the claims in the category

Claimant lawyers get rich

Society suffers due to excess insurance costs

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Failure to follow the Vital Rule

If the commoditised price is too low:

Claimant lawyers cannot make money on the claims in that category when they do a proper job

So they do a lot less work - a cheap job – a bad job

Or they refuse to do the claims at all

Access to justice is blocked or damaged

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Benefits to Insurers of commoditisation

The benefits for the insurers (D) are:

[1] complete certainty about the C’s costs

[2] insurers can behave as badly as they like (deny everything, object to everything, refuse interims, fail to give disclosure) and there are no adverse costs consequences to them

- the C’s costs are fixed- Only the claimants lawyers

suffer – so insurers have the whip hand

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Commoditisation: the effects on Claimant lawyers work Fee certainty promotes

certainty in planning for accommodation, staff, salaries

Fixed fees means taking the rough with the smooth

Solicitors are paid the same price for a whole range of different cases

Solicitors make profit on one case (low level of work needed)

Solicitors lose money on the next (high level of work needed)

Obviously this will promote cherry picking the easy cases

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Commoditisation: The effects on C’s solicitor’s behaviour

Fixed fees put commercial pressure on solicitors to: Set a maximum number of

staff hours which can be spent on each case

Keep expenses down to the minimum

Instructing counsel costs money

D will not pay for counsel even if D loses

Therefore commoditisation stops solicitors instructing counsel

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Commoditisation of counsel’s fees

To maintain access for victims to advice from barristers

The MoJ merely need to commoditise counsel’s fees

Which means fixing the fees for each category of case

If counsel is instructed then low fixed fees are paid by the losing D

MoJ refuse to consider this or even to comment on it

Why?

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Effects on injured victims:

Anyone with a difficult case in the category:

Will either be refused legal help

Or will have the case run by low qualified, inexperienced, para legals

Will not have advice from counsel

Will probably recover damages (if they win) below the level to which they are entitled in law

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The First commoditisation: The Fixed Recoverable Costs scheme 2003 Introduced for liability admitted

RTAs under £10,000 Fixed fees for solicitors who

settled cases before issue Barristers were excluded from the

list of allowed disbursements Costs Forum 2002, result: Bob

Musgrove the then CE of the CJC stated: “Disbursements and Counsel’s fees are not included: It was agreed that careful and specific wording in the Practice Direction should aim to avoid “out-sourcing” or possible shifting of costs into disbursements”

The MoJ cannot get this Musgrove Principle out of their minds. The Musgrove Principle

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Effect of victim’s blocked access to advice from the bar FRC scheme: solicitors paid

£800 + 20% of damages No extra for instructing

counsel to advise on quantum

So solicitors rarely instruct the bar

Do not want to “give away” what they regarded as “their fees”

Clients know no better so the risk of under settlement arose

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The second commoditisation:The Portal - 2010

Flush with the success of the FRC insurers pressed on lobbying government for more commoditisation

So Labour created and introduced the Portal

A commoditised system for dealing with all RTA claims under £10,000 where liability is admitted.

Fixed fees: £400 stage 1, £800 stage 2 and £500 stage 3 (to trial).

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Disbursements - counsel

Following the FRC pattern, counsel was excluded from the list of disbursements.

As a result solicitors stopped instructing counsel

PIBA surveyed members last year and the largest PI sets received 20-30 instructions in portal case pa!

This is de-minimis. The MoJ just cannot get the

Musgrove principle out of their minds.

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Under settlement

So since 2010 victims who have been advised to take settlements in Portal cases have faced a high risk of under settlement

Low grade staff do the cases No profit for the solicitor in

fighting for the extra 10-20% No advice from the independent

bar Professor Fenn analysed the

Portal results and concluded under settlement of 6% was occurring on pain, suffering and loss of amenity alone (7/2012).

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Expanded Commoditisation: expansion of the Portal April 2013

The MoJ will expand the (liability admitted) portal in April 2013

Unless the APIL JR stops the plan

It will expand horizontally to cover EL and PL claims.

It will expand vertically to cover claims up to £25,000

The cuckoo is growing in the nest

Mum’s looking small

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This commoditisation breaks the vital rule: The fees set by the labour

government in 2010 were fixed through negotiations between insurers and claimant lawyers

This coalition government has proposed much lower fixed fees (cut in half)

at levels requested by insurers at and since the Downing Street “summit” on 14.2.2012.

Submissions made by all claimant lawyers and the Law Society and the Bar Council in consultations since that time have been ignored

Fix the fees far too low and access to justice is blocked

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The Fourth Commoditisation –The Fast Track The most recent

consultation paper from MoJ proposes to commoditise Fast Track fees.

The same pattern is proposed namely: commoditise (fix) solicitors

fees ignore the bar (namely do

not fix barristers fees) thereby abolishing access

for victims to advice and pleadings from the bar

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What does the future hold?

Successive ministers for justice have been briefed to: tackle the

“compensation culture” bring down the costs of

personal injury litigation with a view to reducing

the costs of RTA and EL insurance

Whilst maintaining access to justice

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Steps taken/proposed so far

Government has: Abolished referral fees; Made success fees payable only by

the injured victim out of damages; Capped success fees at about 12.5%

of damages Made ATE insurance fees payable by

the victims out of damages Commoditised 95% of all PI claims –

those in the Portal and on the Fast Track – by fixing fees.

Excluded victims from gaining access to advice from the bar by abolishing the disbursement basis

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Now the final threat- increase the small claims limit

Last week the Minister for Justice announced that he is considering increasing the small claims limit to £15,000 in PI

No legal fees are paid in small claims

Who will this affect?

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What’s involved in running a small RTA claim?

Get the police report (how?)

Interview witnesses and draft witness statements (time consuming)

Draw a plan Write your own

witness statement on liability and quantum

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What is involved in running an employers liability claim?

For instance a manual handling or dermatitis claim:

Obtain and engineering report on the item lifted or the substance which caused the dermatitis (how? Who?)

Find the relevant safety regulations and identify which was breached

Interview witnesses at work Obtain disclosure of policies

and procedures of employer re manual handling or skin protection

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Small claims procedure

Find a the appropriate medical expert (where do I start?)

Instruct the expert Get a medical report from

the expert Find the insurance

company or the MIB (who?) Write to the insurance

company or MIB Make the claim (what is a

head of loss?)

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Suing

Draft the claim form (where do I get that?)

Get the court issuing papers (what?)

Copy them (where?) Send a cheque for the

correct amount (how much?) plus the right number of

copies Send to the Central

processing unit in Birmingham

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Getting to trial

Deal with directions What are directions anyway? Make part 36 offers Sorry what are they? Draft a schedule of loss… what? Turn up at trial with no barrister Meet the insurance company barrister

and get cross examined Have the case heard by a District Judge

with no copy of Kemp on Quantum because the MoJ refuse to provide the DJ with their own copies.

Produce comparable cases for quantum (where do I find them?)

Lose or achieve under settlement

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Justice MoJ style

Who could do this? Middle class well

educated people? Yes Elderly people? No Mentally disabled

people? No Socially

disadvantaged people? No

Immigrants? No Poor People? No

Who cares about them anyway?

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The role of counsel in PI claims

Traditionally the role of counsel in PI claims has been to advise and to represent at trial

Barristers kill off bad claims and fraudulent ones

Barristers promote and fearlessly fight good claims

Barristers are independent, well trained and highly regulated

The involvement of Barristers in PI cases ensures that the law is followed and that settlements are at the right level

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The way forwards:

Simple Drop the small claims increase Fix fees in the Portal and on the

Fast Track at fair average levels for solicitors based on a fair analysis of the work involved

Fix barristers fees payable in all cases (Portal and Fast Track) and require the losing D to pay

Stop worrying about the Musgrove “outsourcing” issue. It is de minimis.

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Multi-track cases:

The disbursement basis is still in existence in multi track PI claims

Success fees: APIL/PIBA 6 needs to be re-written for CFAs.

QOCS will affect the drafting

Difficult cases will have minimal success fees which do not match the risk

Many injured people will face no access to justice because the rewards will not match the risk

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The future

The junior bar will wither Victims in 95% of PI claims will suffer

barriers to access to justice and a substantial risk of under settlement

Courts will see an increase in litigants in person PI claims which are run and prepared in a shambolic way

Insurers will make more money … but will premiums come down?

In 3-4 years the MoJ and government will realise that they have really damaged the tort law system in England and Wales …. when a “Daily Mail” journalist suffers an injury and has to run his own small PI claim, then bleats about it in the newspaper.

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Conclusion

Commoditisation is workable in PI law if the vital rule is followed properly

If the vital rule is not followed:

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Thank You

Andrew Ritchie QC

9 Gough Square