Solicitors who do not pay referral fees spend around £500 to acquire road traffic accident (RTA), employers’ liability (EL) and public liability (PL) cases, figures from the Association of Personal Injury Lawyers (APIL) have indicated.
APIL also revealed that a survey of members showed that around one in six firms will stop handling personal injury claims worth less than £25,000 if the government’s proposals remain unchanged.
The association’s response to the Ministry of Justice consultation on the new fixed recoverable costs for portal and non-portal fast-track cases outlined its “grave concern” about the lawfulness of the proposed extension of the RTA claims process, particularly around the timetable and the failure to conduct the promised full evaluation of the existing scheme.
It was a judicial review process begun by APIL and the Motor Accident Solicitors Society over these issues that led to the announcement shortly before Christmas that the date for implementation is being reconsidered.
However, the government said the fees consultation is unaffected by this, indicating that cuts could happen on 1 April regardless. APIL’s response argued that “the government continues to draw conclusions about the link between referral fees and lawyers’ costs which are illogical and flawed”, insisting that it is wrong to say that abolishing referral fees will save claimant lawyers money.
The survey of APIL members who do not pay referral fees indicated that the cost of acquisition for RTA, EL and PL cases was around £550 (median) and £450 (mean). The only exception was EL disease cases, where the cost was significantly lower.
APIL said: “The figures indicate that the cost of acquiring cases is not substantially different from the [government’s] speculated level of referral fees… The approximate £700 reduction would therefore significantly adversely affect non-referral businesses, even though the reduction is meant to directly target those firms paying referral fees.”
The association sought to illustrate the detrimental effect the changes would have on injured people’s ability to access independent legal advice with its survey of 155 members showing that 15% of firms would not continue to do personal injury work under £25,000 if they remain unchanged; 30% said they would and the rest were unsure.
Three-quarters said they anticipated reducing staff numbers (only 9% said they would not), with band D fee-earners likely to be hardest hit. “In the current economic climate, this is of particular concern as… PI practices to which they would normally apply for a new job are unlikely to be hiring new staff.”
APIL added: “The impact of the introduction of alternative business structures also needs to be evaluated and clearly understood. These appear to enable insurers to continue to enjoy at least some of the benefits of referral fees, whilst in a position of conflict of interest or potential conflict of interest, whilst preventing fair competition.
“This aspect needs to be carefully examined by the Office of Fair Trading and/or the Competition Commission. The impact on access to justice and fair competition is grave.”
The response reiterated the other key arguments against the fees reduction, including the absence of any explanation or justification for the proposed figures; the “irreducible minimum amount of work” that “seems to have been forgotten or ignored”; the failure to consider the impact of raising the small claims limit; the recommendations of Professor Paul Fenn in his review of the first year of the RTA portal; and the inequality of arms that fixed costs outside of the portal will engender.
APIL also said “it would be grossly wrong to fix claimants’ costs [for non-portal cases] without fixing defendants’ costs too”.
The association further questioned whether the “perceived high level of motor insurance premiums” could be used as a justification for the reforms, given evidence that premiums are already falling.