To nobody’s surprise, the government last night rejected arguments on behalf of mesothelioma sufferers and overturned a Lords amendment that would have exempted them from the effects of Part 2 of the legal aid bill (known as the Jackson reforms).
The justice minister Jonathan Djanogly argued that asbestos cases are not sufficiently different from other types of personal injury to justify allowing lawyers to undertake them on a ‘no win, no fee’ basis, to recover from the defendant their success fee and any legal expenses insurance premium.
He said that the conditional fee system has “frequently ended up as something of a racket allowing risk-free litigation for claimants, inflated profits for legal firms, and punitive additional costs for defendants”. Djanogly firmly put the onus on clients to negotiate the level of success fee, and on the lawyers to decide whether to charge one at all. This bid to use competition to force down legal costs ignores the original policy behind success fees, which was to compensate lawyers for the cases that lose and for which they don’t get a penny.
Lawyers are now resigned to the measures going through, so the focus has moved to implementation next April. The Jackson reforms are far broader than just these headline changes, and a lot of activity has been going on in the background, with rules of court already drafted, working parties formed – the most recent this week to advise on the introduction of contingency fees – and stakeholder meetings held.
Much of it is relatively uncontroversial, but some significant rows are in the offing, particularly around the banning of referral fees in personal injury (PI) cases. Related to this is the extension of the electronic portal used for low-value road traffic claims to bigger cases and other types of PI (this is technically not part of the Jackson reforms, but is a key part of the picture).
Although the company behind the portal has told the government that from a technical point of view it is not possible to extend it beyond next April, the argument over how much lawyers should get paid under the portal is revving up following a recent stakeholder meeting chaired by Djanogly.
For a standard road traffic accident worth less than £10,000, lawyers receive a basic fixed fee of £1,200; however, insurers say that much of this goes on the referral fee paid to secure the case in the first place, and that with such fees banned, the figure should fall to £300-400. Djanogly has been clear that he expects a reduction and so the fight is over how much. Lawyers counter that referral fees are just a form of marketing – and a significant minority of firms refuse to pay them anyway – meaning they will have to invest in other ways to attract work. A figure of around £800 could be where we end up.
The referral fee ban will make life difficult for claims management companies, but does not directly address the problem of nuisance texts and automated phone calls asking whether you have had an accident in the last three years. That is subject to separate work at the Ministry of Justice, although to judge by the calls I have received in recent weeks, it’s not having much of an effect yet.
It was years of unseemly scrapping between insurers and lawyers over legal fees in PI work that led to the Jackson reforms in the first place – while the system has got out of kilter, lawyers are entitled to make a living out of what they do and many thousands of people every year benefit from it with legitimate compensation for negligently inflicted injuries.
The reality is that access to justice relies to some extent on having lawyers who consider it financially viable to do the work; at the same time, in my experience lawyers usually find a way of working with changes that they previously predicted would lead to the end of the world.
However, the winds of change are blowing strongly, and with their business models set to change, some law firms are undoubtedly in a precarious position – well-known Manchester PI firm Donns went into administration just last month. Consolidation is afoot and it is no coincidence that the first wave of major announcements about alternative business structures in the law have come in the PI sector. As we head towards April 2013, they will not be the last.
