COUNSEL’S FEES AFTER APRIL 2013

1. COUNSEL’S FEES AFTER APRIL 2013 ANDREW RITCHIE QC 9 Gough Square LONDON

2. Before 2003 In 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

3. 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

4. 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

5. 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:

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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?

12. 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

13. 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

14. 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

15. 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).

16. 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.

17. 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).

18. Expanded Commoditisation: expansion of the Portal April 2013 Mum’s looking small • 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

19. 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

20. 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

21. 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

22. 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

23. 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?

24. 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

25. 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

26. 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?)

27. 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

28. 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

29. Justice MoJ style Who cares about them anyway? 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

30. 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

31. 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.

32. 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

33. 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.

34. Conclusion • Commoditisation is workable in PI law if the vital rule is followed properly • If the vital rule is not followed:

35. Thank You Andrew Ritchie QC 9 Gough Square