Bar Council and the Personal Injuries Bar Association response to the Extension of the RTA Portal PA Scheme consultation paper

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1 Bar Council and the Personal Injuries Bar Association response to the Extension of the RTA Portal PA Scheme consultation paper 1. This is the response of the General Council of the Bar of England and Wales (the Bar Council) and the Personal Injuries Bar Association (PIBA) to the Ministry of Justice s consultation letter entitled Extension of the RTA PI scheme: Proposals on fixed recoverable costs The Bar Council is the governing body and the Approved Regulator for all barristers in England and Wales. It represents and, through the independent Bar Standards Board (BSB), regulates over 15,000 barristers in self employed and employed practice. Its principal objectives are to ensure access to justice on terms that are fair to the public and practitioners; to represent the Bar as a modern and forward looking profession which seeks to maintain and improve the quality and standard of high quality specialist advocacy and advisory services to all clients, based upon the highest standards of ethics, equality and diversity; and to work for the efficient and cost effective administration of justice. 3. The Personal Injuries Bar Association (PIBA) provide a forum for discussion on matters of common concern and interest to its members; to ascertain and represent the views of members on matters affecting their professional interests; and to further the study, understanding and development of the law relating to personal injuries. Overview 4. These proposals will deny access to justice for injured people. PIBA, and others, have previously made forceful representations about these changes warning that they will deny access to justice to many injured people especially those with complex cases on liability. These additional fixed costs proposals are likely to bring further unintended consequences. Excluding the Bar from Portal cases as well as Fast Track case preparation and pleading will make the funding of litigation more difficult and will impair access to justice. 5. The consultation letter proposes a fee system that seeks to combine a proposal for fixed fees on the Portal (a bespoke system for claims where liability is admitted at an early stage) with a proposal for fixed costs in Fast Track claims (which are totally different because they involve disputed liability and civil actions in the county court). 1 Ministry of Justice (2012) Extension of the RTA PI scheme: Proposals on fixed recoverable costs. 1

2 6. The principle behind the proposals is commoditisation of work which imposes fixed prices and abolishes hourly rates. The Bar Council and PIBA accept this principle, but it can only work if the fixed process allows the lawyers involved to provide a reasonable professional service to the injured person taking into account the issues raised by insurers and the procedure for achieving resolution. 7. The Ministry of Justice s (MoJ) proposed fixed fees are being imposed without any substantive evidence of the average number of hours of work needed to complete each type of commoditised case or of the proposed reasonable average hourly rate. The Bar Council and PIBA are concerned that the MoJ has not made available information on how these figures were reached which means that no meaningful consultation can take place. 8. The previous consultation on the extension of the RTA Portal did not cover the appropriate level of Fixed Recoverable Costs (FRC) on the Fast Track. This is a wholly different scheme requiring its own separate consultation based on commoditisation and hours of work and hourly rates. 9. We note in the legal press that Following a legal challenge the Justice Secretary is now considering afresh the timing for implementation of the extended scheme. Further details will be announced in the New Year." 10. We welcome this move and believe that this will enable Professor Fenn's recommendation for a more fuller review of the current scheme to take place. We also believe that any review of the scheme should include a call for evidence from practitioners, professional bodies and any other interested parties who have experience or an interest in the scheme. The present Portal is unfit for purpose 11. Professor Fenn (University of Nottingham) was commissioned by the MoJ to prepare a report entitled Evaluating the low value road traffic accident process into the proposed extension of the Road Traffic Accident Portal. Section 1 of the Executive Summary reads as follows: The aim of the scheme is to standardise the pre action process in RTA personal injury claims and to encourage admissions of liability and thereby settlement whilst keeping costs to a minimum. However, due to the immaturity of the Scheme, it is imperative that its effects are fully evaluated prior to any extension, in particular we need to know the effect on settlement times, levels of damages, the numbers of cases reaching trial and whether there have been any issues pertaining to access to justice. 12. Section 3 clarified the point: If we do nothing we risk extending a scheme which is having unintended consequences that we are unaware of. We cannot make an informed decision about an extension without empirical data to support this. If we do the research informally we will not have the benefit of a specialist 2

3 in the field of personal injury, who understands the motivations of the parties and can interpret nuances in the data in our view Professor Fenn has the necessary skills and expertise. 13. Professor Fenn s research into the quality of the current scheme showed undersettlement, despite the fact that the base information was taken from high quality claimant solicitors firms. Professor Fenn concluded that the current Portal was producing settlements of pain, suffering and loss of amenity at 6% below the proper rate. This is significant because the original intention was that the scheme would have no affect to the level of damages. 14. It is noteworthy that Professor Fenn only conducted research into the level of general damages and not other heads of loss. It is likely that claims for special damages, such as care and loss of earnings, are being inadequately compensated within the Scheme. Certainly the experience of the few barristers who are instructed in Portal cases is that there are clear cases of overlooked damages as a case study from a PIBA member demonstrates: C was badly scalded by hot water which fell on her at work. Her solicitor had told her generals were 5,000. I advised 25,000. C also lost job as consequence of accident, but recovered shortly thereafter and was able to reenter the job market. However, she could not get a job with the same benefits as her previous job. I had a robust argument with the solicitor about 'but for' test and pleading loss of earnings for three years with loss of training which she was receiving with employer. I had conference with C and total value of specials after mitigation, thereafter was pleaded at 20,000. This was as against a loss of earnings claim for 3,000 which the solicitor had pleaded. Case settled for 43,000. With the protocol in place C would have got 8,000 to 10,000. With advice from counsel and proper analysis of complicated 'but for' situation and valuation, C gets four times that amount. This was a good qualified solicitor who just was unsure of her ground on one legal point and did not have court experience. The bottom line is that most cases between 10,000 are either worth that amount or are worth (in my experience) more than 50,000, with the difference in value often turning on complicated analysis of causation of loss of earnings and cross referencing of more than one medical report. I do not see how this can be achieved within the Portal. 15. Professor Fenn s key recommendation was that the current Scheme and the existing fixed recoverable cost scheme should be jointly reviewed to shape future policy in this area. He noted a high level of cases exiting the Portal, which he considered surprising, and may suggest a lack of integration with the fixed recoverable costs scheme. He also cautioned that the data he has analysed is limited. Data from the Portal is not as useful as it could be partly due to insufficient development time allowed for management information purposes. No information is recorded in the Portal about the levels of the offers made by the parties or the settlements reached so no proper analysis of the Portal product is available. He advises that 3

4 the Portal should keep records of outcomes for all such claims to allow the system to be monitored and evaluated more effectively in the future. 16. Before the proposed fixed costs regime is implemented there should be a proper, fair analysis of the effects such a scheme has upon access to justice and the financial implications upon the NHS and the welfare state and the Compensation Recovery Unit (CRU). Excluding the Bar 17. There has been no consultation by the MoJ on abolishing the disbursement basis for paying the Bar. Jackson LJ stated that the Bar has a vital role to effect in Fast Track work. He proposed that a lump sum should be added to the costs in every Fast Track case to cover the average cost of solicitors instructing the Bar. The sums he recommended were RTA 110, Employment Law (EL) 225 and Public Liability (PL) Litigation without barristers will result in more costs, more delay, less focus, the abuse of court time and increased satellite litigation. Excluding claimants from access to the Bar will have a negative effect upon access to justice, will place excessive burdens upon the court system, will result in under settlement of claims, will cause a rise in professional negligence claims against solicitors and will place further strains upon the Courts Service, the National Health Service and the welfare system. 19. It has been the Government s stated objective to reduce the cost to insurers by capping or reducing legal fees. This objective is best achieved by involving the Bar (at fixed cost). This will prevent unmeritorious, unfocussed and exaggerated claims from proceeding. 20. The Bar Council and PIBA have consistently advocated retaining counsel as a disbursement to ensure that independent, highly trained and intelligent service, at a cost that is good value for the public, is offered to both Claimants and Defendants rather than just to the latter. The MoJ proposals make no reference to the Bar as a disbursement, ignore the lump sum proposed by Jackson LJ and make no provision for counsel whatsoever. Any suggestion that solicitors will share their (very low) fixed fee with the Bar is misguided. They will not do so on the Fast Track (or indeed any expanded Portal) any more than they currently do under the existing Portal system. 21. The Bar Council and PIBA recommends that a simple fixed costs table in relation to access to advice and pleading from a barrister is added to any proposals on extending the scheme following a positive evaluation of the current scheme. The Bar s proposals to protect claimants 22. The extension of the Portal for claims up to 25,000 will include claimants with difficult cases where injury has caused them and their families a loss of livelihood. Claims of up to 25,000 will include the severely injured. These can be complex cases and require a high level of skill to run. By restricting costs and excluding the assistance of counsel as a disbursement (even as a fixed one), such life changing injury cases will not be properly run 4

5 or settled. The consequences are that further burdens are placed upon the NHS and the welfare state; both of which are funded by the taxpayer The Bar offers a low fixed cost and independent resource to such claimants whether they are on the Portal or within the Fast Track. The modest fixed additional cost provides Claimants both with a safeguard as to the merits of their claim and certainty as to fair settlement. Furthermore there is a cost saving for Defendants in that strong claims will be settled and weak cases will not be litigated. 24. The low level of the MoJ s proposed FRC will obviously mean that solicitors will either reduce their standard of service or utilise the lowest grade of fee earner to conduct litigation. 25. A low fixed fee system for instruction of the Bar in Fast Track cases would provide the following benefits to all parties: a. A control on costs being incurred by providing an independent check upon the system of bringing claims. Rather than merely the opinion of the instructed solicitor allowing a case to continue, the instruction of the Bar at low cost would provide a second assessment as to whether a case was fit to continue. b. Involvement of the Bar could be relevant and necessary in implementing any revised system of before the event or after the event insurance. This residual involvement can allow some funding of claims to take place but also provide a check against poor cases which would be stopped by negative advice from a barrister. c. The Bar would operate within a simple and easy to apply fixed fee scheme which could cover three items of work, advices on liability, quantum and Particulars of Claim. d. The Bar s proposed fixed costs are lower than the costs that are presently recovered in litigation. Access to the Bar by way of a fixed disbursement would militate against the adverse effects of the proposed reduction in the solicitors costs thereby guaranteeing greater access to justice for claimants with contested cases. e. Guaranteeing access to the Bar would ensure some equality of arms in circumstances where the defendant will have resources to instruct the Bar. f. Early involvement of the Bar will encourage cases to be properly prepared. 2 For example, the main breadwinner in a family who suffers a leg fracture which prevents them from working in their previous capacity for one year and previously earning approximately 12,000 net per annum will find that their family s lives are turned upside down. Mortgage payments or rent and living expenses cannot be covered due to such losses. The Claimant will end up being reliant upon the state and local authority. 5

6 g. Experience from the Portal indicates that the Bar has de minimis involvement under the Scheme. At present the system works well in respect of pre trial involvement of the Bar on the Fast Track. h. The prospects of settlement are increased by the independent insight provided by the Bar. i. Pre trial involvement from the Bar is not a cause of controversy or difficulty at the present time. 26. PIBA has already put forward tables for Portal work at stages two and three in letters to the MoJ. The Bar Council and PIBA recommend that following a review of the current scheme that these tables are consulted upon more widely. 27. For the Fast Track work the table below could be adopted. Counsel s fixed costs for Non Portal Fast Track Cases Case Type Item of Work 1,000 3,000 3,001 10,000 10,000 25,000 RTA AQ RTA AL RTA POC EL AQ EL AL EL POC PL AQ PL AL PL POC For the avoidance of doubt, no advice on liability should ever be recoverable in a case where liability has been admitted clearly such cases would be within the Portal. Inflation 29. The Bar Council and PIBA believe that provision should be made for any fixed recoverable costs to be revised annually in line with inflation, as is done for solicitors hourly rates under the Guide to Summary Assessment. Failure to build this in will mean a constantly reducing value in the remuneration to the detriment of solicitors and barristers. 6

7 We note that the fixed trial advocacy fees (under CPR 46) have only been increased once since they were introduced in April 1999 and in the case of those for cases exceeding 25,000, not since they were introduced in April 2009, three and a half years ago. Disease claims 30. It is unclear whether the original proposed extension to Employer s Liability will include disease claims or be limited to those arising from accidents. Disease claims involve more complex issues of liability than accident claims. There is rarely a single identifiable event that causes a disease. Almost invariably, the cause is gradual and cumulative exposure to conditions or substances that affect the victim. For this reason, they can be hard to identify. Proving a causative link between the trigger and the disease may require extensive and skilled work. It is questionable whether many claims could be the subject of a rapid admission as required by a Portal. Further, if CPR 14.1B withdrawal of admissions under the RTA portal, is extended to EL and PL claims there will be a risk of exits from the portal. The Bar Council and PIBA would welcome clarification as to the position of disease claims if the scheme is to be extended in future. Question 1 - What are your views on the proposed rates and the differential above and below 10k? 31. The MoJs proposed fixed fees are being imposed without any substantive evidence of the average number of hours of work needed to complete each type of commoditised case or of the proposed reasonable average hourly rate. There is no arithmetic or methodology behind them. No allowance is made for the difference in staff and accommodation expenses between London and less expensive areas of England and Wales. 32. The evidence presently available from Professor Fenn clearly indicates undersettlement of the one element of claims within the RTA Portal which has been analysed. Extension of the Portal to cases above 10,000 is not consistent with justice for injured people. If this question is geared towards whether there should be a difference in the legal fees likely for the gathering of evidence for losses over 10,000 as opposed to those below 10,000 then in most cases this will, of course, be the case. 33. Solicitors costs for stages one and two under the current Scheme for RTA claims up to 10k should remain at the current level. The current level was negotiated between the stakeholders, on evidence and with actuarial analysis provided by Professor Fenn. No evidence has been provided by MoJ to prove that the costs previously agreed are too high. 34. Lord Justice Jackson recommended a regime of fixed solicitors costs within Fast Track actions. The figures proposed by the MoJ for the Fast Track do not match the figures Jackson LJ proposed. The only explanation given for the MoJ s reduced figures is that referral fees are to be banned. No evidence is provided by the MoJ in support of the proposition that banning the payment of referral fees will reduce the costs to solicitors of gaining work beyond a general view of the Association of British Insurers (ABI) that this will indeed reduce costs. 7

8 35. The truth is that costs will not be reduced. Referral fees are only one of five methods by which solicitors gain work. If the referral fees ban is properly administered then solicitors will still have to pay to gain work by one of the other four methods, all of which cost money: a. contracts with Trade Unions and Before the Event (BTE) insurers b. advertising c. maintaining a high street office, and d. joint ventures with Alternative Business Structures. 36. The MoJ has clearly not factored in these costs. 37. The Bar Council and PIBA are unable to assist with evidence in relation to the appropriate level of fixed costs at Stages 1 or 2 for claims valued above 10k and below 25k in an expanded Scheme. The fixed costs in the current Scheme were agreed between stakeholders through negotiation under the Civil Justice Council and with actuarial evidence provided by Professor Fenn. This was patently a fair process for setting fees. The rate should depend on the work necessary properly to evidence and prove the average case. This process should be repeated for the expanded Scheme. We do not understand why the MoJ refuse to re implement the previous and patently fair system for setting the fixed fees. What are your views on the proposed differential between RTA and EL/PL FRC rates? 38. The Bar Council and PIBA agree that there has to be a difference between RTA and EL/PL cases because of the increased complexity that ordinarily applies to the latter cases on quantum. The present fixed costs were agreed between stakeholders through negotiation under the Civil Justice Council and with actuarial evidence provided by Professor Fenn. Again, this was patently a fair process for setting fees. The rate clearly should depend on the work necessary properly to evidence and prove the average case. This process should be repeated. What are your views on the proposed apportionment between stages 1 and 2 above and below 10k, for both RTA and EL/PL? 39. The Bar Council and PIBA question whether the outlawing of referral fees would create such a saving in circumstances where solicitors will still have to market competitively to obtain claims. The fixed costs in the current Scheme were agreed between stakeholders through negotiation under the Civil Justice Council and with actuarial evidence provided by Professor Fenn. Again, this was patently a fair process for setting fees and this process should be repeated. 40. The Bar Council and PIBA believe that advice from a barrister should be a disbursement at Stage 2 if the Portal is to be extended. The current Portal rules should be amended to include (qualified) recovery of counsel s fees as follows: 8

9 a. The amendment should add to the list of allowable disbursements: advice from counsel at stage 2. b. This disbursement fee should be fixed at 150 plus VAT in cases valued at between 3,000 and 10,000. c. This disbursement should be payable only if the claimant recovers more from the defendant as a result of counsel s advice than was originally offered by the defendant at stage 2 (the added value trigger). No valid argument has ever been produced to refuse this added value disbursement. If the defendant s stage 2 offer is too low and counsel advises so and the defendant later pays more voluntarily or because of a court order, the barrister s advice should be paid by the losing party. d. Cases of more than 10,000 justify the instruction of counsel for advice on evidence and quantum due to their size. counsel s advice should be recovered on a disbursement basis at a fixed rate as set out below. To filter out cases where there is no need for advice we propose that the trigger should be where the defendant s offer is 5% or more below the Claimant s offer at Stage 2 What are your views on the proposed rate for EL/PL claims at Stage 3? 41. In EL/PL there is often a wider range of injuries and loss compared with RTA claims. Invariably arguments are raised by the Defendant on medical and legal causation which require investigation and evaluation. The standard RTA fees for a Stage 3 hearing are already too low and deter a solicitor from issuing. To adopt the same level does not in fact represent the additional complexity that is involved in EL/PL injuries. In addition, if claims above 10,000 are to be included then this should be reflected in higher rates at Stage 3. It is perverse to suggest that a 2,500 claim can be determined for the same fee as claim involving damages of 25,000; the trial fees should be raised for such claims to Advocacy costs at Stage 3. The value and complexity of the case is the determinant of the time necessary to prepare and present the case at Stage 3. We consider that if the system is to be expanded to include claims up to 25,000 the rules should reflect the issues in the case by tapering the fee according to the value of the claim. This is the system endorsed by Lord Justice Jackson in his recommendations for fixed costs on the fast track and advocacy fees on the fast track have always been fixed according to bands. What are your views on the interface between the proposed FRC arrangements within and outside the Protocols, particularly with regard to incentives for either side to exit? 43. The way that the Portal is set up (to exclude the Bar and to give a fixed fee whatever the work involved) provides a powerful incentive for under settlement of claims as has been already evidenced. Those cases that exit the Portal will be difficult and contested fast track claims. It must be correct, once the claim is registered within the Portal, the Defendant 9

10 benefits from meeting the requirements of the Portal (i.e. modest costs). If a case exits the Portal the costs are properly higher fees to reflect the nature of the additional work in investigating and contesting both liability and quantum. Where liability is in dispute the evidence to be investigated and presented is more likely to be varied and extensive. The wide ranging differences in terms of complexity and issues makes judicial assessment and costs management preferable to FRC. If this is not accepted, where liability is disputed it must be recognised that the costs incurred by Claimant and Defendant are far greater. Bar Council January 2013 For further information please contact Mark Stratton, Policy and Remuneration Officer The General Council of the Bar of England and Wales High Holborn, London WC1V 7HZ Direct line:

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