A risk at the Bar

Lawyers bear the financial risk in personal injury cases but, unlike barristers, solicitors can withstand losses by spreading the risk, says Andrew Hannam. Andrew Hannam is a partner at Clarke Willmott & Clarke.

The litigation landscape is changing constantly, bringing threats as well as opportunities to the two branches of the legal profession.

Conditional fee agreements (CFAs), now used widely for personal injury claims, are beginning to feature in medical negligence claims, although they remain much less popular and more expensive to insure.

It is the risk-free element of CFAs that makes them attractive. However, insurance is dependent on the status of the acting solicitor – for personal injury claims the solicitor has to be on the Law Society's Personal Injury Panel. For medical negligence, the cheaper insurance appears to be available only to those solicitors accredited by the Law Society on its medical negligence panel or by Action for Victims of Motor Accidents' referral panel.

For the time being, there is no similar restriction for counsel. The argument against restricting the choice of counsel is that such a choice will be made by an informed client (that is, the accredited solicitor). That situation may change. The Government's Green Paper, Access to Justice with Conditional Fees, has raised the question of accreditation for counsel.

The financial risk is now being borne more by the lawyers than the client. That is acceptable, provided that the risk is assessed by the lawyers together as a team. It is incumbent upon the solicitor at an early stage to discuss with counsel the level of risk and to reach agreement on the uplift.

Solicitors working within partnerships are likely to be more able to withstand the loss of income from losing cases by spreading the risk. However, the risk is far greater for barristers practising as sole practitioners. The differing viewpoints need to be reconciled in order to agree on an appropriate uplift to the lay client.

At present, the success fee is deducted from the client's compensation, which imposes on a successful – and often needy – client a guaranteed shortfall in their compensation. This cannot be allowed to continue.

The Government's consultation paper addresses this issue and it seems likely that the success fee will be recoverable from the defendant. The real issue will then become the means of establishing the success fee to be paid by the defendant.

It is suggested as one option that the success fee will be determined by the trial judge. That seems unacceptable in many respects. A trial judge, having found in favour of a plaintiff, may well not appreciate the difficulties that existed when the success fee was first assessed. He may have some sympathy with the defendant. The risk would be of too many success fees being reduced so that the lawyer's overall return falls below an acceptable level.

Many cases will still settle before trial and a procedure other than summary justice by the trial judge will still be required. The alternative, and preferable, method of assessing the level of the success fee is by taxation. Order 62 Rule 15A already provides a procedure for determining disputes on success fees between the solicitor and his client.

The threats posed by CFAs include:

a risk to income; and

the imposition of unacceptable success fees by incompetent solicitors.

The opportunities include:

more cases; and

the chance to work more closely, and from an earlier stage, with instructing solicitors.

Meanwhile, Lord Woolf's reforms will offer both professions challenges. The fast-track system for those cases (probably excluding medical negligence claims) with a value of less than £15,000 seems designed to offer "cheap and cheerful" justice.

The regime of fixed costs will drive down the money available to lawyers from individual cases. This will lead to more work being done by solicitors without recourse to counsel. A maximum of three hours to hear a matter will require the development of new skills which solicitors may feel better able to provide than counsel. The fees available for advocacy will be seen as a way of making up for the shortfall imposed by the fixed costs available prior to trial. The likelihood is that junior counsel will be involved to a much lesser degree.

The Woolf reforms may well produce a climate where the distinction between the two branches of the profession begins to blur. The trend is likely to be for firms of solicitors to undertake the settling of pleadings and advocacy in fast-track cases. In these cases the junior members of the bar may find their early professional careers will be on "the other side of the fence".

Multi-track cases are likely to be handled in a way more akin to present litigation. As such, any fusion of the branches of the profession is unlikely to be much more than a blurring at the edges.