No win, no worries

With success fees now recoverable, Jon Robins investigates how conditional fee agreements are developing and finds one firm is taking its message to television

An anxious-looking man with a neck brace sits at his desk and nervously sifts through a pile of correspondence.

So begins the first in a series of advertisements currently being broadcast in ITV's Anglia region by Hertfordshire-based solicitors' firm Underwoods.His pregnant wife clutches at her wrist - she has repetitive strain injury - and looks on forlornly as a sympathetic voice-over intones: 'At Underwoods solicitors, we know how hard it can be when you've suffered an injury that's not your fault...

'The campaign is timed to capitalise on the new era of litigation as heralded by this month's costs practice direction which resolves the confusion over the recovery of success fee and premium in conditional fee agreements (CFAs).No doubt some traditional practitioners will recoil in horror at the prospect of a firm taking its message to the public through their television screens.

But Kerry Underwood, author of No Win, No Fee, No Worries, is unconcerned.In fact, the solicitor sees little future for old-style legal practice in the brave new world of CFAs.

He says conditional fees can no longer be ignored and those firms that do so will simply go under.Mr Underwood predicts a 'rapid concentration' in the legal market as specialist firms embrace CFAs and others drop out of the picture.

'If you're confident in your skills, you'll be getting the risk assessment right,' he says.

The ability to judge a case on its merits, he argues, is what the business of law is all about.Underwoods might be ready to meet the new challenges, but it was only the beginning of the year that the Law Society urged the government to slow down.

'At the moment, the market is so unstable that legal aid must be retained,' cautioned the then Law Society President Robert Sayer.

'Any improvements to CFAs need to bed down before the government even considers withdrawing legal aid'.Speaking last week, David Hartley, the Law Society's head of solicitors' remuneration, still thinks that it is a big step into the unknown.

'The big issue remains the funding of cases as the impact of the withdrawal of legal aid with its payment on accounts bites,' he says.

'That's the big issue we have yet to see.

But clearly the market is developing and it is likely that some firms will be able to find solutions to the problem.' And those who do not find a solution? 'They'll have to consider very carefully how much risk-based business they can afford to take on.'Defendant solicitors are less than thrilled with the new costs practice direction.

Laura Wilkin, a personal injury partner at Liverpool-based defendant firm Weightmans, attacked the new direction as 'a diluted version' of original plans which was now 'weighed heavily in favour of claimants' (see [2000] Gazette, 6 July, 1).

She was particularly concerned about the lack of an obligation on solicitors to disclose more than the barest of details about agreed success fees to the other side.These were issues that the Forum of Insurance Lawyers (FOIL) forcibly brought to the attention of the government when it was consulting earlier in the year.

The government was 'not living in the real world', claimed FOIL president Martin Staples; adding his view that its plans would be licence for unscrupulous claimant solicitors to 'line their pockets' by claiming a 100% uplift every time.Mr Staples says there is still great opportunity for abuse, and recently called on insurers to keep a record of the level of success fees that firms charge.

He also warns of inevitable satellite litigation as defendant solicitors challenge the amount they are expected to contribute.Mr Staples contends that the government should be backing the legal expenses insurance attached to motor and household insurance policies, which can cost as little as 8.

At the very least, he says solicitors should be making their clients aware of its existence.

He maintains that there is a duty on claimant solicitors to investigate alternative funding.

'It ought to be a requirement,' he adds.A leaflet issued recently by the Association of Personal Injury Lawyers (APIL) for libraries and citizens advice bureaux to help the public choose a personal injury lawyer does tell people that 'you may already have insurance cover for legal expenses - take time to check your current policies'.Claimant solicitors fear that their clients will be denied access to justice under the new regime.

Frances McCarthy, president of the APIL, says borderline cases that were previously run on legal aid will be overlooked under the new system.

She reckons that generalist practices might turn down cases with chances of success as high as 70% because of the prohibitive cost of funding their disbursements.Ms McCarthy also has concerns about the ability of the after-the-event insurance market to support CFAs in the way envisaged by the government.

She says insurers are being over-cautious in their risk assessment and the premiums are too expensive for many clients.

The problem is especially acute in clinical negligence work, where she reports that practitioners are having problems finding cover.

Even when they do, it is expensive.After-the-event insurance is 'patently not working', says Kerry Underwood bluntly, and the insurance companies are 'scared' of funding cases.

'They're getting jumpy about controlling the litigation,' he says.

He mentions the scenario of insurers 'pulling the plug' on the funding of a case when a part 36 offer to settle has been made but both solicitor and client wanted to fight on.Unsurprisingly, Brian Raincock, managing director at after-the-event insurance company Litigation Protection, delivers a spirited defence of his colleagues in the insurance industry, saying it is still early days.

'The advances we've made in the private sector in the funding of litigation are so rapid that it just shows the wisdom of the government,' he declares.He argues that the issue of affordability of the premium will soon be a thing of the past as insurers develop products that cover the initial payment of the premium.

He also says that concerns from solicitors that they are being second-guessed by insurers on risk assessment will be overcome as relationships develop and greater authority is delegated to the law firms.

He cites a computer programme that Litigation Protection is testing which allows solicitors to complete their own risk assessment.Last month, CFAs received another boost from the Lord Chancellor's Department when it published a consultation on collective conditional fee agreements to ease the way for bulk users such as trade unions and insurers.

Under these proposals, unions will be able to enter into a single agreement with solicitors to allow them to run their members' cases, which should cut down on costs and complexity.According to Ian Walker, immediate past president of APIL and senior partner with trade union firm Russell Jones & Walker, it is an opportunity for forward-thinking unions to develop their legal services.

His firm's CFA runs to eight pages, but he hopes that under a collective agreement he will not to have to explain 'every dot and comma'.

All a union member wants to know is that the action is funded by the union and they are not going to have pay any costs, he says.

The consultation ends at the end of the month.One of the few things that commentators will agree upon is that CFAs are inherently complicated.

Research published last year into clients' experience of CFAs revealed that out of 40 clients interviewed, only one understood the funding arrangements in their entirety and he had considerable experience of the law.It is a nightmare explaining labyrinthine agreements to clients, says Frances McCarthy.

APIL is calling for a 'radical simplification' of CFAs which includes the abolition of the indemnity principle that the winning party cannot recover more than they would have been liable to pay their solicitor had they lost.

'They understand it's a legal document and they expect it to be a serious document, but to be incomprehensible is too much,' she says.

The Underwoods advertisement winds up with a series of fast close-up shots of hands as they rush to pick up phones.

But whether the television viewers of the south-east will take the hint or whether it is just wishful thinking remains to be seen.

Jon Robins is a freelance journalist