The Solicitors Regulation Authority has been urged to investigate whether a ban on referral fees in personal injury cases has simply driven the practice underground. NHS Resolution, formerly the NHS Litigation Authority, suggests claimant lawyers should be made to account for how they acquire business.
The Ministry of Justice is reviewing reforms to civil litigation funding under part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO). In its submission to the review, NHS Resolution says it welcomes the ban on referral fees. However, it says it frequently sees new clinical negligence and public liability claims 'where the claimant lives in (say) Northumberland and their solicitors are based in (say) Southampton or Bristol. It strains credibility that many people living in Newcastle would want to be represented by a firm of solicitors 300 miles away, and therefore we infer that the referring of claims still happens, perhaps on a major scale'.
NHS Resolution suspects referral fees have 'gone underground' and says a Solicitors Regulation Authority investigation 'would uncover attempts to circumvent this ban'.
Recording a higher number of clinical negligence claims in 2017/18 than 2012/13, NHS Resolution does not think the LASPO reforms have diminished access to justice. However, some claimants were 'inappropriately advised' by their lawyers to switch from legal aid funding to old-style conditional fee agreements.
The response highlights 'other attempts' by claimant lawyers to maximise their costs: 'For example, we have encountered attempts to charge non-legal work as legal work, such as a fee-earner seeking to secure the supply of rehabilitation, care and accommodation needs of clients from local authority or other providers. This type of activity is normally undertaken by case managers. Another example is the claiming of secretarial and administrative work as profit costs, whereas these are correctly regarded as overheads and therefore not recoverable from the paying party.'
Highlighting the 'downside' to qualified one-way costs shifting, NHS Resolution says claimants and their lawyers 'are able to push unmeritorious claims as far as they feel able, in the knowledge that there will be no liability to pay the defendant's costs unless fraud is demonstrated'.
It states that part 36 offers are rare because 'claimants' lawyers (as opposed to claimants personally) have no clear incentive to settle early because that will effectively reduce their fees'. An arrangement that offers a higher incentive when cases are settled early is suggested.
Claimant lawyers also advance budgets on a worst-case basis, NHS Resolution says, inflating claimant costs paid by the NHS. Comparing average base costs settled in clinical negligence claims over the past eight years between non-budgeted and budgeted claims, NHS Resolution's costs lawyers have calculated that the NHS is paying, on average, an additional £12,000 per claim for base costs on budgeted cases.