More Civil Justice? The impact of the Woolf reforms on pre-action behaviour Research Study 43 Tamara Goriely, Institute of Advanced Legal Studies

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1 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour Research Study 43 Tamara Goriely, Institute of Advanced Legal Studies Richard Moorhead, Cardiff Law School Pamela Abrams, University of Westminster Commissioned by The Law Society and Civil Justice Council 2002

2 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour Research Study 43 Tamara Goriely, Institute of Advanced Legal Studies Richard Moorhead, Cardiff Law School Pamela Abrams, University of Westminster Commissioned by The Law Society and Civil Justice Council 2002 i

3 Research Study 43 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour Acknowledgements The authors would like to acknowledge the tremendous help of our colleague Susan Guilfoyle with this research. We are very grateful to her for her hard work and support and for her boundless energy and enthusiasm for the project. We wish her well in her new career as a solicitor. We would also like to extend our gratitude to Morag Russell for her help and energy in collecting information from files. Thanks are due to the many people who provided us with advice, assistance and information, including: Suzanne Burn, Clinical Disputes Forum; Margaret Dangoor, ALARM; Alistair Kinley, Association of British Insurers; Neil Mackay, Legal Services Commission; Annette Morris, APIL; Claire Morgan, Law Society; David Ormondy, University of Warwick; Andrew Parker, FOIL; Pascoe Pleasence, Legal Services Research Centre; Arnold Simanowitz, AVMA; Steve Walker, NHSLA; and Tim Willcock, Lloyd s Underwriters Non-Marine Association The Steering Group provided much needed advice and support through the various stages of the research. Finally, we would also like to express our gratitude to the practitioners, insurers and claims managers who took part in the study and who gave up their valuable time and office space to assist us with interviews and file reviews. All rights reserved. No part of this publication may be reproduced in any material form, whether by photocopying, scanning, downloading onto computer or otherwise without the written permission of the Law Society and the Civil Justice Council except in accordance with the provisions of the Copyright, Designs and Patents Act Applications should be addressed in the first instance, in writing, to the Publications Department of the Law Society. Any unauthorised or restricted act in relation to this publication may result in civil proceedings and/or criminal prosecution. The Law Society and Civil Justice Council 2002 ISBN ii

4 Contents Foreword ix Summary xi Section 1. Background Chapter 1.1 Background Aims and methods Pre-action protocols Other changes in the litigation market Previous research evaluating the Woolf reforms Structure of the report Section 2. Personal Injury Work Chapter 2.1 Personal injury work: introduction Other relevant literature Methods Structure Chapter 2.2 The context for personal injury work Developments affecting claimants: replacing legal aid with CFAs The rise of claims intermediaries Adapting to CFAs Making success fees recoverable Developments within the insurance industry Summary Chapter 2.3 The Woolf reforms: overall views and their impact on method of work Overall views The impact on claimant solicitors methods of work The impact on insurers methods of work The impact on defendant solicitors Summary Chapter 2.4 Letters of claim Respondents views Work and timing Content Summary iii

5 Research Study 43 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour Chapter 2.5 Responding to the claim: acknowledgement, response and disclosure Acknowledgement The response on liability: meeting the time limit The response on liability: content Disclosure A presumption of liability? Summary Chapter 2.6 Expert evidence Medical evidence under the pre-action protocol The protocol process step by step Delay and cost Experts in multi-track cases Summary Chapter 2.7 Settlement Claimant offers under Part Methods of settling Time taken Mediation More settlements? If the case fails to settle: supporting subsequent litigation Summary Chapter 2.8 Meeting the aims: is the process less adversarial, quicker or cheapter? Is the culture less adversarial? Speed Cost Summary Section 3. Clincial Negligence Work Chapter 3.1 Clinical negligence work: introduction and context Reforming the NHS Defending clinical negligence litigation Developments affecting claimants Methods Structure iv

6 Contents Chapter 3.2 The Woolf reforms: overall views and their impact on method of work Overall views Views on cost The impact on methods of work Pro-active claims management within trusts Courts and the Woolf reforms Summary Chapter 3.3 General aims of the clinical disputes protocol Wider aims of the protocol Interaction with the complaints system Relationships between claimant solicitors and trusts Summary Chapter 3.4 Formulating and responding to the claim Requests for medical records Investigating claims Letters of claim Letters of response Summary Chapter 3.5 Expert evidence Changes to the identity and use of experts Joint reports Meetings of experts Summary Chapter 3.6 Settlement A shift to a settlement culture? Claimant Part 36 offers Defendant Part 36 offers and payments Mediation Summary Chapter 3.7 Clinical negligence work: do the reforms meet their aims? Facilitating settlement without litigation Is the culture more open? Exchange of early and full information v

7 Research Study 43 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour If the case fails to settle: supporting subsequent litigation Speed and cost Overall Section 4. Housing Disrepair Work Chapter 4.1 Housing disrepair work: introduction Other relevant literature Methods Structure Chapter 4.2 The context for housing disrepair Fast track or multi-track? The funding context Landlords scepticism of tenants and their lawyers Towards a protocol Changes to levels of damages Other changes Summary Chapter 4.3 The Woolf reforms: overall views and their impact on methods of work Overall views Speed Cost An open culture? The impact on methods of work Negatives Summary Chapter 4.4 Formulating and responding to the claim Notification of housing claims The landlord s response Seeking the housing file Summary Chapter 4.5 Expert evidence Single joint experts? Changes in the quality of reports Changes in the identity of experts Joint inspections Summary vi

8 Contents Chapter 4.6 Settlement Attitude to settlement and the economics of settlement Admissions The process of making offers Part 36 offers Mediation Costs and settlement Summary Chapter 4.7 Housing disrepair work: do the reforms meet their aims? The impact on structure and management Costs: reasonable, predictable and proportionate? Changes in information and culture Problems with the courts Notification of claims Disclosure Single joint experts? Speed Problems with the draft protocol Overall Section 5. Conclusion Chapter 5.1 Conclusion: areas for review Reviewing Part 36: penalties attached to claimant offers Approving new protocols The Personal Injury Pre-action Protocol The Clinical Disputes Protocol Housing Disrepair Pre-Action Protocol Costs Bibliography Appendix 1 Personal injury: methodology Appendix 2 Clinical negligence: methodology Appendix 3 Housing disrepair: methodology Footnotes vii

9 Research Study 43 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour viii

10 Foreword Foreword This research was commissioned jointly by the Law Society and the Civil Justice Council and is the first substantive research to be carried out on the effect of the Woolf reforms, implemented on 26th April The study is intended to assess the impact of the Woolf reforms on parties pre-action behaviour in civil cases. It concentrates on three areas of work; personal injury, clinical negligence and housing claims. Two of these areas (personal injury and clinical negligence) have a pre-action protocol in place while the third area (housing) has no pre-action protocol at the present time, although one is in the process of being developed. The research was conducted by: Tamara Goriely, a Senior Research Fellow at the Institute of Advanced Legal Studies (IALS) and a qualified barrister. She has over 15 years experience of research into legal services and the courts, using both qualitative and quantitative techniques. Pamela Abrams, a Principal Lecturer at the University of Westminster School of Law, a member of the Bar and a qualified solicitor. She has substantial experience as a qualitative researcher. She teaches personal injury and clinical negligence litigation on the Legal Practice Course. Richard Moorhead, Senior Research Fellow at Cardiff Law School and a qualified solicitor. He has over ten years experience as a socio-legal researcher specialising in work on legal services and legal aid. The project was overseen by a project steering group made up of the following members: Robert Musgrove, Private Secretary to the Master of the Rolls and joint project manager Anna Rowland, Policy Adviser to the Law Society on Civil Litigation and joint project manager District Judge Dabezies, Civil Justice Council Vicki Chapman, Civil Justice Council Judith Sidaway, Head of Strategic Planning Unit, the Law Society The project steering group and research team would like to thank all those who cooperated with the research project, by providing information and generously committing their time for interviews with the researchers, and for their help with producing this research. ix

11 Research Study 43 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour x

12 Summary Summary Introduction In April 1999, wide-ranging reforms were introduced into the civil courts of England and Wales. New Civil Procedure Rules (CPR) were designed to cure the ills identified by Lord Woolf in his review of the civil justice system particularly the problems of cost, delay and complexity brought about by a culture of excessive adversarialism. At the same time, interest groups were encouraged to negotiate among themselves to produce pre-action protocols on how lawyers should exchange information before starting formal litigation through the courts. This study, conducted two years after the reforms were introduced, focuses on the way that representatives behave before they litigate. It does so in three specific areas of work: personal injury, clinical negligence and housing disrepair. We were keen to assess the effect of the personal injury and clinical negligence pre-action protocols and to consider the shadow that the new court rules cast over inter-party bargaining. The research is mainly qualitative. We spoke in depth to 54 lawyers, insurers and claims managers, of whom 30 specialised in personal injury work, 12 specialised in clinical negligence, and 12 specialised in housing disrepair. We asked them what they thought of the reforms, what impact the reforms had had on their practices, and how they responded to the various rules. We were particularly interested to see whether they thought that the reforms had resulted in a less adversarial culture of litigation, which put greater emphasis on settlement and co-operation. In the case of personal injury work, we were able to supplement the interviews with a study of files which compared around 150 claimant solicitor files concluded before April 1999 ( pre-woolf ) with around 150 opened by the same firms after April 1999 ( post-woolf ) and closed by the time of our study. Given that fieldwork took place within two years of implementation, the study inevitably focused on small, quickly resolved cases. xi

13 Research Study 43 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour Themes Several general themes emerge from the study. The first relates to greater specialisation. In all three markets, claimant work was now concentrated in fewer, more specialist solicitor firms. For housing and clinical negligence work, this was mainly the result of Legal Services Commission policy, which has restricted legal aid funding to those firms which are able to demonstrate specialist expertise. For personal injury work, dabblers were being discouraged by the pressures of the market. Defendant work was also more concentrated as insurers merged and as they and the National Health Service Litigation Authority reduced their own panels of solicitors. Greater specialisation has been accompanied by greater particularisation, with different areas of work following different procedures. Personal injury and clinical negligence now effectively have their own pre-action codes, as set out in separate protocols, and the same is envisaged for housing disrepair. There are also considerable variations in the use of experts. Part 35 of the Civil Procedure Rules allows for both individual and joint experts, but the personal injury protocol effectively adds a third possibility, agreed experts, who exist only for personal injury work. The next theme is the importance of context. Procedural rules rarely change cultures on their own. The possibilities for cultural change are greatest when reforms work with other structural and economic transformations. The court reforms have been most successful where they have worked alongside legal aid and managerial changes which also emphasise early focus and a pragmatic approach to settlement. We have therefore attempted to place the Woolf reforms in the context of these other developments. A general finding from this study is that litigators like clear structures. They want timetables and example letters, provided that both can be adapted where necessary. Thus, in general, the protocols have been well received. Personal injury litigators appreciated the new-style letter before action and liked having a deadline for the response. Clinical negligence specialists spoke well of the standard form for pre-action discovery and thought the 40-day compliance period worked well. That said, in all three areas there was an undertow of criticism: opponents failed to comply, or replied late. It is also crucial that deadlines are realistic. For example, interviewees raised doubts about the feasibility of the proposed deadlines contained in the draft housing disrepair protocol. xii

14 Summary Finally, the study shows how intractable is the problem of cost. Although the reforms are well liked, and may have led to perceived soft improvements in, for example, the level of co-operation and settlement, it is much more difficult to make litigation cheaper. Here we summarise the main findings. We start by looking at overall views, and then attempt to place these in the context of other changes. We ask, in particular, whether the reforms have contributed to alterations in organisational structures and methods of work. We then look at the main impact of the protocols in formulating and responding to claims (through, for example, letters of claim and disclosure); at expert evidence; and at settlement. We conclude with an indication of views on speed and cost. Overall views Most practitioners regarded the Woolf reforms as a success. The reforms were liked for providing a clearer structure, greater openness and making settlements easier to achieve. Claimant offers under Part 36 of the Civil Procedure Rules were singled out for praise; claimants saw them as a useful way of obtaining a response from the defendant, while defendants appreciated them for setting an upper limit to the bargaining range. Those involved in personal injury and clinical negligence work also felt positive about the protocols. By establishing clear ground rules on how claims should be formulated and responded to, protocols were thought to focus minds on the key issues at an early stage and encourage greater openness. This smoothed the way to settlement. Interestingly, housing practitioners reported similar changes even though there was no protocol. Most people thought that the dispute culture was now more open, with improvements in the relationship between, for example, personal injury claimant solicitors and insurers, and between clinical negligence claimant solicitors and claims managers working for NHS trusts. Housing practitioners reported sometimes quite dramatic changes in approach to disrepair claims. However, the picture was qualified. Often old antagonism proved difficult to cast off, with respondents frequently criticising their counterparts for failing to adapt to the new culture. Many respondents reported that change had been patchy. Some litigants, especially specialists, had adapted. Others maintained pre-woolf attitudes and approaches. xiii

15 Research Study 43 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour There were four main areas of criticism. The first was the lack of sanctions on those who failed to act reasonably in their pre-action negotiations. Personal injury claimant solicitors were particularly concerned about the perceived lack of sanctions when defendant solicitors failed to comply with the preaction protocol. Other groups also wanted clear sanctions on opponents (but not their own) poor practice. Secondly, expert evidence is a subject that continues to provoke controversy. Many solicitors continue to believe that they should own their experts and they resented moves towards joint experts. This gave rise to disputes over, for example, the status of agreed experts under the personal injury protocol and joint reports on quantum in clinical negligence work. Local authority landlords were particularly critical of single joint surveyor reports, wanting to maintain control of the repair process (and, to a degree, the litigation) through their own in-house surveyors. Thirdly, although case management was not explored in any depth, interviewees frequently highlighted perceived failings within the courts. This was particularly true of those involved in clinical negligence litigation, which is heavily court based, but similar points were repeated by those involved in housing disrepair and, to a lesser extent, personal injury litigation. Respondents criticised the courts for inefficiency and delay, suggesting that some courts were unable to list applications quickly enough for procedural timetables to have much bite. Case management was far more positively received in London than outside, where there were problems with providing experienced judges and apparently inconsistent decisions. Finally, defendants complained that the Woolf reforms had failed to reduce the cost of litigation. This criticism was made most frequently by personal injury liability insurers, though landlord lawyers also complained that the costs of housing claims had not reduced sufficiently and remained disproportionate to the scale of disrepair. Housing disrepair and the lack of a protocol Disrepair litigation is characterised by considerable mistrust and some hostility. As local authority staff struggle to maintain their housing stock in the face of scarce resources, they perceived much disrepair litigation as illegitimate. Many blamed sharp lawyers for stirring up litigation, often encouraging feckless tenants to jump the queue, through the help of biased courts. This mistrust has hampered efforts at reform. Although Lord Woolf saw a particular need for a pre-action protocol for disrepair claims (and made xiv

16 Summary specific suggestions for what it should contain), landlord and tenant representatives found it difficult to reach agreement on its contents. At the time of this study (2001), no such protocol had been introduced, although a draft had been subject to consultation and a final version is expected in Given the lack of an agreed protocol, and the apparent culture of mistrust, it is encouraging that most respondents thought the Woolf reforms had improved pre-action negotiations in housing disrepair cases. Many interviewees described how, before 1999, disrepair litigation was characterised by neglect and delay. The parties could sleep-walk through the procedural steps until just before trial, without focusing on the substantive issues. The fast-track timetable means they can no longer do this. Cases need to be readied for issue and progress to trial. Some landlord lawyers had responded by proposing their own protocols to tenant firms, promising to respond within three or four months if the tenant agreed to postpone litigation. Thus, as with personal injury and clinical negligence, the overall picture was positive. Most housing lawyers thought that cases were settling more quickly, often without litigation, and at lower cost. This was matched by a perceived improvement in the way the parties exchanged information and engaged in resolving claims. It should be stressed, however, that improvements were not uniform: tenant lawyers complained that some landlord representatives continued to ignore correspondence, failed to disclose housing files and forced them into making unnecessary applications. The introduction of a proper protocol may improve practice. More protocols? Despite the overwhelming support for protocols, solicitors and insurers can only handle so many. When we asked personal injury practitioners whether they supported new, specialist protocols they were extremely wary. It was felt that the existing personal injury protocol was easy to adapt, and additional protocols would bring unwarranted complexity. There was little awareness of the Motor Accident Solicitors Society s attempt to introduce a road traffic accident protocol. xv

17 Research Study 43 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour Woolf within a context of funding and organisational change The reforms need to be understood in the context of the funding and organisational developments affecting different forms of litigation. The research suggests that court reforms work best when they work with other changes, to produce transformations in culture and approach that reach beyond the details of the specific rule. Here, we look at the three areas of work studied to ask how the Woolf reforms have tied in with other changes in organisational structures and methods of work. We consider each of the main groups in turn before discussing the implications for barristers. Personal injury: changes within the insurance industry The last five years have seen the insurance industry go through several high profile mergers and take overs, out of which eight or so giant insurers have emerged to dominate the market. This has led to the development of fewer, larger, claims centres. Increasingly, centres specialise in an area of work and cover the whole of England and Wales from a single office. The telephone has increasingly been used to replace post (too slow) and meetings (too expensive). Meanwhile, insurers have invested heavily in information technology. Sophisticated computer systems prompt action and monitor staff performance. Insurers said they had also changed their philosophy. A study from the 1980s argued that the insurance industry used delay as a negotiating weapon, to discourage claimants and induce lower settlements (Genn 1987). Insurance managers stressed that this was no longer the case. Instead, they emphasised the importance of settling cases quickly, pointing out that the cost of claims increased faster than their return on investment. A quick claim was believed to be a cheap claim, saving both solicitor costs and increases in damages. Claims handling staff felt under increasing pressure to get claims sorted. Instead of waiting for the claimant to make the next move, they would chase on progress. These developments were felt to have both positive and negative elements. Claimant solicitors agreed that settlements could be easier to obtain, but they also accused insurers of taking cost cuts too far, by reducing both the number and level of staff to an unacceptable extent. Meanwhile, claims handlers appreciated the greater efficiency, while expressing concern about stress, the heavy level of monitoring, and loss of discretion. xvi

18 Summary These changes preceded the 1999 reforms, but insurers felt that the reforms had consolidated and focused the process in three ways. First, several insurers reported undertaking major reviews of their processes in the run-up to the implementation of Woolf s reforms. Although reviews might have taken place in any event, Woolf ensured that they attracted greater resources. Secondly, the most immediate effect was that firms added more dates to their computer systems. This has led to greater standardisation: systems now include more occasions on which the claims handler is prompted to consider the file and the prompts are set in a more structured way. There is also greater supervision to see whether deadlines are met. Thirdly, the reforms made it easier for insurers to insist that policyholders and brokers complied with protocol deadlines. Claims handlers reported that after some initial teething problems they had adapted to the new systems fairly easily. They fitted closely with existing trends. Personal injury claimant solicitors For solicitors acting for accident victims, the main change has been the withdrawal of legal aid from personal injury work and its replacement by conditional fees agreements (CFAs). CFAs work most smoothly and profitably for bulk work that is, small, quick, easy cases that are handled in bulk. These provide a regular cash flow with little risk. Indeed, insurers suggested that since the Court of Appeal decision in Callery v. Gray, 2 solicitors were over-remunerated for this type of work. Meanwhile, firms have had to be extremely cautious about taking on large, riskier cases. Most firms were keen to expand their bulk casework, taking large numbers of small, simple cases. However, the market for such work has been changed by the rise of claims intermediaries, who advertise heavily for claims which they then pass on to solicitors for a fee. Solicitors were highly critical of such organisations, but few felt able to ignore them. Four firms had joined such schemes, and two other bespoke practices (with national reputations for work on difficult claims) were about the join such schemes. Other firms were keeping the matter under review. Claimant firms were less standardised than insurers, but many were proceeding down the same path. Several large claimant solicitor firms were developing standardised ways of handling fast track cases, by which work was delegated to lower-level staff supported by sophisticated computer systems. These systems combined a diary function (telling staff when to undertake xvii

19 Research Study 43 More Civil Justice? The impact of the Woolf reforms on pre-action behaviour tasks) with a bank of standard letters. Interestingly, the firm displaying the greatest level of standardisation said they preferred to recruit insurance staff rather than solicitors because they were more used to their methods of work. The Woolf reforms have not caused standardisation among solicitors, but they have dovetailed with the process. First, they provide a useful conceptual distinction between fast track (suited to standardisation) and multi-track (not suited). Lord Woolf s report can be taken as an ideological justification for dealing with fast track cases in a cheap and cheerful way. Secondly, the preaction protocol provided a clear structure to negotiations. At its most basic, it gave firms more dates to programme into their computer systems. Thirdly, it meant that the deadlines would be more likely to be understood and adhered to by others. Finally, the reform process triggered solicitors to undertake wide-ranging reviews of their systems. At the time of our study, few firms had much practical experience of recovering success fees and insurance premiums from defendants. However, the issue provoked strong feelings. Insurers complained that success fees led to unacceptable increases in costs and predicted more years of messy litigation. Several respondents (on both sides) felt that the ill-will generated by the issue had soured relationships between claimant solicitors and insurers and undone much of the improvement brought about by the reforms. Personal injury defendant solicitors Defendant solicitors acting for insurance companies were the group most immediately affected by the introduction of the Civil Procedure Rules (CPR). As of April 1999, they experienced substantial reductions in workloads as litigation decreased. Although some of the reduction was short-term (and work has since picked up a little), most of the reduction is long-term. Insurers are now settling more claims in-house, before issue. Some companies have also established in-house legal teams to deal with fast track litigation. At the same time, insurers have reduced the rates they pay their solicitors. Whether or not as result, defendant solicitors seemed less positive in their views of Woolf than either claimant solicitors or insurers. Clinical negligence claimant solicitors The main change affecting claimant solicitors undertaking clinical negligence work has been the concentration of the market brought about by the Legal Services Commission. Now that legal aid funding is restricted to those who xviii

20 Summary can demonstrate expertise in this area, practitioners are more specialist. Claimant and defendant solicitors have more dealings with each other and know each other better. This ties in with moves under the Woolf reforms towards less adversarial relationships. However, unlike the personal injury market, there are no discernible moves towards standardisation. Clinical negligence remains a highly complex, individualised form of litigation, which makes considerable use of the courts. Generally, solicitors said they had not made major changes to their practices or ways of working to deal with the new regime. For High Court cases, Practice Direction 49 already required active case management and specialised systems to deal with these claims. However, the protocol timetable and greater emphasis on case management under the CPR had resulted in increased workloads and the need to pursue clearer and more immediate case strategies. Clinical negligence defendants Clinical negligence claims represent a considerable cost to the National Health Service and have therefore been the subject of much government attention. New organisations have been established to improve the quality of care, including the Commission for Health Improvement and the National Institute for Clinical Excellence. Claims handling has become more centralised. A central authority, the National Health Service Litigation Authority (NHSLA), was established in 1995 and presently deals with larger claims, above the excess for which the individual NHS trust is liable. At the time of our study, trusts also employed claims managers who played a central role, liasing between clinicians, complaints departments and patients and managing and negotiating smaller claims below the trust s excess. After April 2002, however, the NHSLA will deal with all new claims, requiring changes to the role of claims managers working within trusts. Unlike the personal injury protocol, the clinical negligence protocol contains good practice commitments, which reach beyond the legal process and summarise best practice for dealing with adverse outcome reporting, patient dissatisfaction, and complaints. For example, healthcare providers should ensure that patients receive clear and comprehensible information in an accessible form about how to raise their concerns or complaints. It was felt that the culture of openness had not yet permeated the complaints procedure. xix

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