The impact of far-reaching civil justice reforms was greatest for personal injury lawyers – just as government intended. Leading practitioners discuss their responses at the latest Gazette roundtable, held in Manchester. By John Hyde.
More than two years ago, the Jackson reforms were introduced – and the outlook for the personal injury market was bleak. The ban on referral fees removed a common source of instructions, costs reforms left firms at a loss how to fund cases, and many solicitors were sent into a tailspin by new case management requirements.
When fees for road traffic accident claims were subsequently slashed by 60%, many claimant firms either packed up or concentrated on other practice areas.
Those that remained have in some cases thrived, with healthier profits than expected and firms finding new ways to achieve their marketing, training and recruitment needs. So has the market shown its resilience; survived by reducing quality; or simply taken longer to implode than we expected? And will Michael Gove’s tenure as lord chancellor see the sector fundamentally changed for good? These are among the points considered at the Gazette roundtable, attended by nine leading lawyers from the world of personal injury.
They meet on the eighth floor of DAC Beachcroft’s Manchester office, in the heart of the city’s legal district, Spinningfields.
Andrew Twambley, founder of claimant-focused firm InjuryLawyers4U and managing partner at Amelans, begins. While some firms are still ‘teetering on the brink’, he notes, the strongest have found ways to thrive post-Jackson.
‘It’s been so dreadful for a lot of smaller firms because they didn’t know how to market their services,’ Twambley says. ‘I think marketing has been the key. If you’re able to get the claims and clients in, you will prosper. If you’re not able to work to fixed fees, portals and [so on], then you’re doomed to disaster.’
Janet Tilley, managing partner at Colemans-ctts, another claimant practice, agrees that marketing has been the key to firms responding positively to sweeping reforms, but says practices have had to be quick to respond in other ways.
‘I don’t think it just happened,’ she says. ‘Marketing is the key but also efficiency of process and how you structure your departments. So, it’s hard work to actually make a profit post-Jackson. The fees are undoubtedly less but most switched-on firms have grasped this and changed the way that they do things. I think they are thriving.’
But isn’t ‘efficiency’ simply a euphemism for taking on unqualified staff and dumbing down on quality?
Tilley says not. ‘We employ younger people who are enthusiastic and quick learners and are well capable of learning to do the job in hand on the lower-value work,’ she says. ‘We wouldn’t do it on higher-value work. Not only is it an opportunity, we actually find they are extremely good at what they do. All one needs to do is put very robust training programmes in place.’
This challenging environment – not least the need to cut staff costs – has motivated firms to improve their recruitment policies.
Irwin Mitchell’s Frank Patterson says his firm is working with Manchester Metropolitan University on degree-apprenticeships, allowing the firm to recruit people straight from school.
‘They’re young professionals, it’s not dumbing down,’ Patterson stresses. ‘The bright young things, frankly, are very bright.’ A key motivation for people joining the law straight from school is a desire to avoid the debt incurred through a degree. ‘You get a different calibre of candidate. [They] are enthusiastic and have a different mindset from your typical law graduates.’
There is a consensus nevertheless that specialist knowledge is still paramount in a landscape where the threat of professional negligence claims looms over any firm which is cutting corners to achieve short-term savings. ‘You’ve got to be hot on client care, which means employing 16-year-olds [only] is out,’ Michael Hardacre, principal lawyer at Slater and Gordon, insists. His greatest fear is that in the future ambitious lawyers will not want to specialise in personal injury law.
Richard Powell, partner at JMW Solicitors, has similar concerns. ‘Fewer and fewer trainees are declaring a passion for PI, because they’ve worked out that it’s not necessarily a good career path for a qualified lawyer,’ he observes. ‘At the moment we are still getting the bright young things who come in and do paralegal work – but maybe we’re not going to get the same quality after a while. They will all get taken by the corporate and commercial [teams].’
Patterson accepts solicitors entering the profession do not want a career in the personal injury field, with most firms seeking to hold on to young talent for, at best, two years: ‘It is a transient workforce now.’
Hardacre subscribes to the belief that for firms to survive they must ‘get big, get niche or get out’. His firm Slater and Gordon would certainly fall into the first category, having embarked on a rapid period of expansion and acquisition since arriving in the UK in 2012.
So will we be seeing just a handful of giant firms taking the bulk of PI work in 10, or even five years’ time?
Tilley says the introduction of court fees for claims over £10,000 earlier this year is accelerating change – firms are forced to cover this cost for clients who cannot afford to pay.
‘I think only the biggest ones, which are cash rich, will be able to deal with it,’ Tilley notes. ‘I think that’s why defendants have probably been so successful in working on fixed fees, which [they] have done for a long time, because of the economies of scale. So, smaller firms can’t do it, unless they do it big.’
Hardacre says such pressures are just as pressing at larger firms, but admits economies of scale can help firms in tough times of trouble.
‘Your high street law firm, as things stand now, what do they do?’ he asks. ‘A bit of conveyancing, a bit of PI that walks through the door, a bit of family. You’re not going to make a living out of just a bit of conveyancing, and wills and probate. They will go and they are going.’
Many believe the biggest consequences of Jackson are still to come, and the backlog of cases pre-April 2013 has insulated much of the market from disruption.
‘I don’t think we’ve seen the full effect yet,’ Hardacre adds. ‘I think the next financial year is when firms are going to find they haven’t got any of the pre-Jackson work still coming through. There is a very long tail to this.’
Powell agrees that the caseload of claims governed by old costs recovery rules has taken longer to work through than expected.
This presents its own difficulties, Stephensons partner Kate Sweeney explains: ‘It’s the impact of limitation that has a big effect because it’s three years. If those cases take longer to run then it could be a number of years yet, couldn’t it? [There is] work still out there [covered by] the old fee regime. All the while we’ve got complications with the new fee regime.’
In cases started since April 2013, lawyers are having to brace themselves for difficult conversations with clients about the deduction to be made from their damages to cover part of their legal fees.
Powell’s experience so far is that clients have not objected to paying at the conclusion of the case, but this has been for more moderate claims. In clinical negligence cases running over several years, the sum to be taken from a client could be ‘very significant’.
At the table:
Michael Hardacre, Slater and Gordon; Tracy Smyth, Weightmans; Janet Tilley, Colemans-ctts; Alistair Kinley, BLM; David Williams, DAC Beachcroft; John Hyde, Law Society Gazette; Kate Sweeney, Stephensons; Andrew Twambley, Amelans; Jo McLeod, Law Society; Frank Patterson, Irwin Mitchell; John O’Brien, Law Society; Richard Powell, JMW
Patterson believes the biggest post-Jackson challenge has yet to arrive and it would be ‘foolish’ to think there will be no issue when lawyers’ fees are to be paid: ‘That’s going to be a whole new experience for us because we’re not used to the idea of taking money from clients, frankly.’
For those lawyers and firms whose work has dried up, the challenge now is to find other areas in which to practise. This has inevitably led to an increase in clinical negligence claims and noise-induced hearing loss claims, which are both subject to more favourable costs recovery rules and free from the fixed-fee regime which has made so much personal injury work unsustainable.
Defendant lawyers say both statistics and anecdotes suggest clinical negligence claims have become the fashionable course for displaced PI lawyers.
Alistair Kinley, director of policy at BLM, cites official figures: ‘Clinical claims reported in 2011/12 [numbered] 13,500. In 2014/15, the year that’s just concluded, there were 18,458. It doesn’t compare in terms of order of magnitude with RTA cases, but there’s still a significant increase.’
Patterson says the change in emphasis is noticeable in TV and radio advertisements drumming up work for law firms. ‘A few years ago it would have been, “Have you recently slipped in a shopping centre?”. Now it’s “Have you been negligently treated? Have you got noise-induced hearing loss”?’
Claimant lawyers fear clients will suffer if novice solicitors are let loose on cases which they have neither the expertise nor finance to run. Patterson says there has been a ‘huge increase’ in people trying to ‘swim upstream’ in search of new areas of work. But the effect on clients, many of whom will be vulnerable and unaware of their rights, could lead to ‘disasters’ along the way.
He recalls a story about the recent recruitment process for an assistant solicitor. One application came from a candidate describing themselves as the ‘head of clinical negligence department’ at their firm. It turned out they had been qualified for just 18 months and had simply been given the title because the firm had decided to move into clinical negligence.
‘We hear horror stories from [the National Health Service Litigation Authority],’ Patterson says, ‘about the number of pre-action protocol letters of claim that are simply not compliant. They’re just saying, “Our client has been injured. You treated them. Pay up or else.” I think certainly they’re just batting them back. It may well be that over three or four years these firms realise that they’re not going to be able to hack it. There will be a lot of clients who have instructed them in the interim.’
Twambley says the market for noise-induced hearing loss claims has ‘gone into overdrive’ since RTA claims became less profitable. ‘It’s the big one at the moment. You can buy those by the thousand,’ he says. Claims companies sell lists of people who have, for example, ‘done dodgy little hearing tests on a computer’. The lists are not technically referrals, but are sold to firms as ‘marketing’ information.
Hardacre adds: ‘The irony is they’re very difficult cases. I think people just think you get an audiogram and there’s a little tick and you’re home and dry.’
Tracy Smyth, a partner at defendant firm Weightmans, sees the same trend from the other side of the claims process: ‘As the market focus has changed on that side of the table, so has ours. Deafness is just phenomenal. I can remember in the early noughties allocating a deafness [case], thinking I haven’t seen one of those in a very long time. So the market has moved, yes, but not necessarily contracted.’
Conversation moves on to what the future holds and what message those present would like to convey to new lord chancellor Michael Gove.
Many are cynical about the last government’s reforms. There is, for example, almost universal agreement that one of the key planks of personal injury legislation, the ban on paying or receiving referral fees, has been toothless in the face of determined vested interests.
Hardacre says the referral fee ban was ‘shunted’ into the Legal Aid, Sentencing and Punishment of Offenders Act 2012 at the last minute, and has been ineffective: ‘It was ill thought through and it was inevitably open to abuse. What’s happened is referral fees by another name.’
Powell is in no doubt that an ‘underworld’ still exists in the PI market featuring elements dealing in old-style referral fees: ‘I’m sure other claimant lawyers will get calls like I do from claims management companies [CMCs], offering business on a model which is completely against the rules. They then feign surprise when I tell them that I can’t and won’t do that, because they tell me that they’ve got a panel of solicitors who are quite happily working on that basis. Of course, they clam up when I try and find out who those firms are.’
Tilley agrees: ‘There’s a lot of CMCs coming offering work. I’m saying “no” [to them] because it’s not a model that’s compliant.’
Patterson says breaches of the rules are evident on social media: ‘I’m always amazed at how blatant they are – saying, for example, that they’re looking for a £750 referral fee for this sort of work. They’re not even trying to dress it up as anything other than a referral fee.’
Many claimant solicitors are unhappy that a relaxed attitude to policing the ban has created an uneven playing field consisting of those who are compliant and those who are not. There is also disquiet from the claimant side at last year’s legislation involving fundamental dishonesty, when the government ordered that claimants could lose the entire value of their claim if found to have lied – so long as this does not cause a substantial injustice.
Twambley says the implication is that simply causing an injustice is acceptable under the new law: ‘I would guess that the distinction between substantial injustice and injustice won’t occupy too many judges. But it’s indicative of what the government is doing in the attempt to vilify people. They have a statute that, by implication, allows an unjust result.’
Patterson argues it is wrong to have to probe vulnerable clients at the outset of the case: ‘When you get somebody coming to you whose life has been destroyed, who is in a terrible state, and who wants to tell us their story, and they want advice as to whether we can do anything to seek redress and restitution for them, we have to say, “Oh, by the way, I hope you’re not lying about any of this because if you are, there will be penalties”.’
He adds: ‘We have to give that advice because it would be negligent not to. That’s what this is about. It’s about vilification. Demonising people who’ve got the temerity to protest when they’ve been injured.’
Kinley, though, rejects the idea that defendant solicitors will use the legislation to make opportunistic challenges in the hope of having meritorious cases thrown out.
‘We think it’s probably going to apply in few cases – the really egregious examples of fabricated cases or dishonest exaggeration,’ he says. ‘There is a risk that you will have people testing it cynically and perhaps exploiting it in particular ways. If people are making dishonest cases, then they should be kept away from the system.’
Precisely ‘where the bar sits’, Kinley adds, ‘we will wait for the courts to tell us, but used sparingly it may well help drive out some of the really poor examples’.
Twambley counters that systems are already in place to weed out spurious claims without asking civil judges to effect ‘close to’ criminal penalties: ‘The judge can say, “Do you know what? You’re not having any of your own costs because you’ve misled the court.” There are already penalties there. The defendants have weapons available to them.’
What PI solicitors seem to crave most of all is a period of stability to let fixed costs bed in, adapt to the new costs regime and find a way to make the work profitable.
But there is widespread scepticism about the government’s will to leave the sector alone, and many fear Gove could be even more driven to make his mark than predecessors Chris Grayling, Ken Clarke and Jack Straw.
Patterson says last year’s Social Action, Responsibility and Heroism Act is a warning sign of a governing party that cannot stop itself from legislating.
‘In terms of what future reforms there might be, I can’t see it getting any worse than that, frankly,’ he insists. ‘It doesn’t alter civil law in any way at all. What’s it doing there? Why is it on the statute book? Answer – because the government is manipulating people’s opinion in favour of the insurance lobby. What better title than heroism? Brilliant. What a stroke of PR genius.’
Some would like a review of the fixed fees introduced in 2013, though as Tilley points out, ‘I think the problem is a review will mean just reviewing them down.’
Others want greater efficiency in existing systems such as the MedCo scheme for diagnosing whiplash cases. Sweeney notes: ‘The askCUE system [which all solicitors have to use to check clients’ claims history] has been down again [recently]. The claims notification forms that we’re currently working with have not been amended to include the mandatory requirements to put your reference in.
‘So we’re working with a haphazard system that’s all over the place. That’s holding us back – inefficiencies outside our control. The whole medical situation is a farce.’
Hardacre warns that any further fee cuts would be fatal for swathes of the profession: ‘Efficiency can only take us so far and that applies on both sides of the fence. Everybody has teams of paralegals trying to do the job as effectively and efficiently as possible.’
He adds: ‘I guess I’ve heard many defendant lawyers say, “Well, you know, we’ve been living with this for years. So, get over it.” That’s fair enough. We are getting over it. We’re maintaining viable business models as things stand but it cannot survive further cuts. It’s just not physically possible.’
If fixed costs are to be extended to disease claims, many solicitors are pleading for them to be subject to consultation and the consequences fully considered.
Kinley says the best way is to allocate significant resources to find the relevant data and design a procedure, though whether this will happen is ‘anybody’s guess’. He adds: ‘It seems to me that the wrong way of going about it would be just to pick a figure and settle on that.’
Patterson is concerned at the prospect of a clampdown on costs in clinical negligence cases. He is conscious that the government could act as both the driver for reform and, as the main health provider, the defendant party that could benefit from changes. He believes the government has been so successful in embedding the concept of a ‘compensation culture’ that some clients with serious injuries are ‘embarrassed’ to come forward.
‘They tell us that they have really had to wrestle with it in their own mind as to whether or not they should be bringing a claim for damages, even though they’ve been, in some cases, quite horrifically injured. Once they’ve broken or manipulated people’s attitudes to those who want to claim damages, it’s easy… to introduce things like fixed fees in low-value clin neg. You can do all that without a murmur. After all, who’s going to speak up?’
Some in the PI sector even suggest that the government would like to go even further and abolish the current claims system altogether.
Twambley worries that the ultimate goal would be a quasi-compensation system, where insurers pay into a pool and a team of bureaucrats works out how much money claimants get.
‘I think those ideas are already out there,’ he says. ‘Whichever government is in power is the biggest employer in the country. They’re picking up the bill for all these cases, and maybe they do genuinely feel that there’s something wrong with the way people seek redress.’
By way of closing, Twambley reflects that lawyers will survive by diversifying. But claimants will be left with no one to advocate their cause and little conception of what they are owed.
‘What about the clients who have ended up with their lives destroyed? Are they supposed to fill in some forms and some insurance company somewhere will send them a bunch of flowers?’
John Hyde is Gazette deputy news editor