An increasing number of solicitors do not accept a contractual obligation to pay counsel’s unrecovered fees in personal injury and medical negligence cases, the Bar Council has complained.
The grievance came in its response to the Ministry of Justice’s (MoJ) review of part 2 of LASPO, and in other responses the Forum of Insurance Lawyers (FOIL) argued strongly against any relaxation of the rules on damages-based agreements (DBAs).
The Bar Council said “anecdotal evidence” suggested that, following LASPO, there had been a “significant decline in income” for barristers undertaking personal injury work.
“Measuring the effect of recoverability on income is problematic because of the impact of other reforms; in particular, the introduction of fixed fees in the fast-track and the expansion of the portal, which has resulted in a decline of work to the Bar, particularly at the junior end.”
FOIL argued that although there may have been a “slight drop-off” in claims as a result of LASPO, volumes were “largely unaffected” and medical negligence claims “continued to increase after LASPO and have only recently begun to stabilise”.
The Civil Justice Council’s (CJC) response said: “Claimant lawyers point to the loss of some law firms and a reduction in access to justice and parties receiving less in damages as their lawyers recover more in fees.
“Defendant lawyers and insurers would say that large numbers of cases are still being brought with CFA funding and the overall numbers of claims have not fallen post‐LASPO.”
The Bar Council said most of the personal injury and medical negligence work carried out by barristers was under the Association of Personal Injury Lawyers/Personal Injuries Bar Association (APIL/PIBA) conditional fee agreement.
Although the agreement provided an option for counsel to be paid success fees, anecdotal evidence suggested that “many, and probably most, solicitors do not agree for counsel to be paid a success fee”.
The Bar Council said that under the APIL/PIBA agreement “in the event of success, any of counsel’s fees not recovered inter partes” were paid by solicitors, but law firms “differed widely” in their approach.
“The essential problem is that payment of any of counsel’s unrecovered fees will have to come either out of solicitor’s profit costs or the lay client’s damages.
“An increasing number of solicitors do not accept a contractual obligation to pay counsel’s unrecovered fees. In these circumstances, counsel’s entitlement to costs is limited to inter partes costs recovery: ‘an eat what you kill agreement’.”
On qualified one-way costs shifting (QOCS), the Bar Council said: “There is a concern that allegations of fundamental dishonesty are being made in inappropriate cases, causing unnecessary additional time and expense in response.”
FOIL disagreed, describing the “doctrine of fundamental dishonesty” as a “key feature” in the effective operation of the QOCS regime, which had “bedded down” and was working well.
However, FOIL mentioned noise-induced hearing loss claims as one example where QOCS had increased “unmeritorious litigation”.
It said claimant lawyers had developed a business model “based on the fact that claimants with low incomes are exempted from court fees, which together with QOCS removes the risk to the claimant and the legal adviser to such a degree that almost any case is worth running on the basis that the insurer may be tempted to make a nuisance payment in settlement”.
The problem with QOCS highlighted by the Bar Council was that, since interlocutory costs awarded against successful claimants could still be recovered by defendants, claimant lawyers were “unwilling or unlikely to make applications” which risked costs being taken from clients’ damages.
The CJC restated its belief that there was “a strong argument in principle” to extend QOCS to actions against the police.
The Bar Council said there had been “no real take-up” of DBAs since LASPO, and because a finding of unenforceability meant that no costs at all were recoverable by the barrister, “very few barristers are prepared to risk of entering into a DBA even if the case is deserving”.
It went on: “This is not an acceptable state of affairs. The Bar Council has been urging the government to undertake reform to this area ever since the DBA regulations were first promulgated.
“It is very disappointing that still no reform has come about. The message from the Bar Council, supported by the senior judiciary, in calling for reform has gone unanswered.”
FOIL argued that, in paving the way for DBAs, Lord Justice Jackson believed that a market would develop, with claimants shopping around, resulting in competition in the litigation market and lower costs.
“That has not proved to be the case. If DBAs, or hybrid DBAs, were to be introduced which weakened the current regulatory framework or allowed the sums recoverable from damages to be increased, it is unlikely that claimants will be able to control the market and the sums deducted from damages would be likely to increase.”
Referring to its 2015 report on the DBA regulations, the CJC said: “Usage of DBAs remains small, and the CJC remains of the view that the regulations should be reformed.
“As things stand, the objectives of the legislation are not being fulfilled given the limited use of DBAs.”
FOIL added that it did not believe that the current ban on personal injury referral fees was effective, basing its views on a 2017 survey for the Solicitors Regulation Authority which found that claims management companies were “encouraging non-compliance by law firms”.