There is a “very high risk of a mis-selling scandal” as a result of the Jackson reforms, a leading claimant lawyer has argued.
David Marshall, managing partner of London firm Anthony Gold and a former president of the Association of Personal Injury Lawyers, also predicted that under-settlement looks like becoming a fruitful area for professional negligence claims.
With the Jackson reforms introducing competition around price, the government has said that it expects accident victims to shop around. “But the new marketplace is very confusing. Neither buyers nor sellers have any benchmark against which to judge prices,” said Mr Marshall.
Writing in the latest edition of the Chambers Directory, he said: “Some suppliers – either solicitors or claims management companies operating through alternative business structures (ABSs) – will compete for business by offering a zero success fee. However, they are accordingly likely to only want to take on cases they judge to be dead certs.
“In the complex world of solicitors’ costs, there is also a clear risk of ‘small print’ exceptions undermining the advertised promise to consumers. Some may charge solicitor and client costs over and above recovered fees. Others may reserve the right to charge success fees if the case doesn’t settle quickly. Some may even offer different risk-dependent success fees, as Jackson and the government anticipate.
“But assessing and pricing risk is a challenging task and there is an obvious gap in the information available to solicitor and client.”
Meanwhile, damages-based agreements – which sound simpler to consumers – bear no relation to the time spent or to individual case risk, “which could lead to much higher charges to the consumer than under a traditional HP2-T31 conditional fee agreement”, Mr Marshall continued. Further, the ban on referral fees will lead to claims management companies buying law firms and vice versa under the ABS regime.
“This will increase competition for legal services for better or worse. It is not easy for the consumer to assess the quality of the supplier. There is a strong potential for consumers making poor choices based on inadequate information. This is particularly so in the face of headline promises advertised by highly promoted brands.
“There is ultimately a very high risk of a mis-selling scandal. Because of HP2-Z12 the long-tail nature of personal injury work this is not likely to become obvious for several years.”
The solicitor also predicted that for more serious injury claims, the new rule on proportionality – and lack of a detailed practice direction on how it will operate – will add to the uncertainty. “The Master of the Rolls has positively welcomed satellite litigation here. This means that it is likely to be several years before there is any clear understanding of what the new proportionality rule will mean in practice.”
The new rules on budgets will create “a contested hearing on every application and directions hearing in substantial claims. As most such applications were previously dealt with by consent this seems likely to push the under-resourced Court Service to breaking point”. This may force personal injury litigators to embrace mediation.
Mr Marshall said while qualified one-way cost shifting may fatally wound the after-the-event insurance industry – and cast doubt on the need for before-the-event insurance – “this will mean the loss of the costs protection provided by after-the-event insurance if a part 36 offer is not beaten. This will provide economic incentives to both claimants and their solicitors to settle cases cheaply. Under-settlement looks like becoming a fruitful area for professional negligence claims”.
The challenge for the independent law firm post April 2013, he concluded, is “to successfully market itself and to continue to provide high-quality professional services to clients in the face of this statutory and competitive onslaught”.