NUMBER 1 Serjeants' Inn has taken on more than 100 personal injury cases on a conditional fee basis, but senior clerk Clark Chessis last week told The Lawyer the existing system is seriously flawed.
His concerns are shared by many at the Bar, who believe they are being pushed into Conditional Fee Agreements (CFAs) with little evidence that they are fair to clients.
The Government last summer extended CFAs to all civil proceedings except family matters, hailing them as a means of providing “access to civil justice for the vast majority of people”.
The number of CFAs in operation is expected to quadruple from 25,000 to about 100,000 if legal aid is this autumn abolished for personal injury cases.
Chessis highlighted the experience of one tenant who lost three CFA cases in a row – effectively earning nothing for his work. This, says Chessis, places him in an invidious position. If the barrister accepts another case on a CFA basis, the temptation will be to settle early – with the guarantee of some financial reward – rather than risk his fees again by fighting the case in court.
Many of Chessis' peers agree that CFAs currently introduce a real risk of under-settlement. Their fear is that, if their income is riding on the outcome of the case, barristers will not be objective in the advice they give.
Matthias Kelly, a tenant at Old Square Chambers, says: “They [CFAs] create a conflict of interest and a feeling that a wedge is being driven between the lawyer and the client. Lawyers have an inarticulate agenda, certainly against the client.”
Michael De Navarro QC, chairman of the Personal Injury Bar Association (PIBA), says: “There are always black sheep at the margins of any profession – it would be idle to pretend otherwise – who will be tempted to under-settle cases.”
De Navarro argues that an objective barrister is an essential counterbalance in negotiations on whether to accept an out-of-court settlement.
He says PIBA has heard many horror stories of after-the-event insurers threatening to go “off-risk”. This means that if an offer to settle is laid on the table and the client refuses to accept it, the insurer can withdraw its cover if it deems the client's refusal to be unreasonable.
In a recent case in Birmingham the insurer made the threat on a £80,000 offer. Client and counsel disagreed and went on to secure £120,000. A plaintiff counsel under financial pressure might not always be so willing to press on with the case.
Members of the Bar argue that the solution to this conflict of interest is to treat a barrister's fees as a disbursement, so the barrister is paid whatever the outcome of the case.
The PIBA says a growing number of after-the-event insurers, such as Saturn Professional Risks and Litigation Direct, do this.
“The newer insurers are partly thinking about the implications in a wider environment in relation to negligence claims and commercial litigation,” says Peter Bennett, practice manager at 36 Bedford Row and co-author of a forthcoming book on conditional and contingency fees. This new breed of insurers, Bennett says, want an objective viewpoint when undertaking risk assessment.
Another potential solution, says Chessis, is to increase the barrister's potential uplift, or success fee, to reflect the fact that they risk losing money if they rigorously pursue a case. It is expected that the Access to Justice Bill will in future allow the success fee to be recoverable from the defendants, with the 25 per cent maximum uplift no longer applying.
The second conflict of interest highlighted by Chessis occurs if barristers from the same set of chambers act on opposing sides of the same case.
David Newcomb, senior clerk at 2 Crown Office Row, believes this is not really an issue because barristers are independent. “I cannot envisage a case where a barrister representing a defendant is not going to try their best. We have had that situation in chambers, but the defendant barrister was unaware that the plaintiff barrister was acting under a CFA. I don't advertise the fact.”
Others are less optimistic. Bennett says that although this is not a problem at the moment, there could be conflict in the future where sets are 100 per cent reliant on a small number of high-value CFA cases.
Other aspects of CFAs are also causing concern. Peter Kirby, a tenant at Hardwicke Building, highlights the inherent problems of risk assessment. He recently acted in a case he would have considered suitable for a CFA. Three days before the trial, influential documents appeared that put a completely different complexion on the case.
Kirby says CFAs should take into account a situation where the prospects of success change rapidly. “If the client deliberately withholds information in order to get you to take the case on a CFA basis, who should take the financial hit – the lawyers or the clients who mislead you?” he asks.
Perhaps one of the most troubling aspects for barristers is that, like it or not, they could be forced to accept cases on a CFA basis.
“There is pressure on the barrister. As an individual, if they don't accept work on a CFA basis, they risk losing all work from that provider,” says John Taylor, senior clerk at Old Square Chambers in Bristol. “The risk is greater for younger tenants because they have yet to establish a reputation.”
Many at the Bar feel they are being coerced into accepting CFAs and on terms which are deliberately skewed in favour of solicitors.
Taylor cites a number of regional chambers that are being offered CFAs which do not allow for payment of nominal counsel's costs in the event of not beating a payment into court. This is contrary to a model CFA developed by PIBA and the Association of Personal Injury Lawyers.
Kirby argues that barristers and solicitors need to be more imaginative in their approach to CFAs. He suggests a hybrid arrangement for riskier cases to provide a minimal amount of cover for barristers for three or four days of trial work. Another possibility is a drawing down fund where the solicitor pays basic fees and counsel fees and the balance is run on a CFA.Other options include contractual joint ventures, or “purse sharing” between groups of barristers within a set of chambers.
Risk assessment can be made easier, says Bennett, through closer co-operation with solicitors. Chambers, he says, can give preferred status to firms which share a similar approach to CFAs.
IT supplier Meridian will next month release software to help analyse the operation and win ratios of CFAs. Yet, despite these developments, many at the Bar insist that their clients will lose out under CFAs.
De Navarro believes the client is “losing the transpar-ency of objective advice” and there is a risk of after-the-event insurers going to the wall, or of premiums inflating exponentially. “There is a very grave danger that it will disenfranchise the poor, and for what?”
Newcomb believes the Bar has been forced into a corner. “We're stuck with it, we don't like it, it's wrong and the only losers are the plaintiffs,” he says.
“If anyone suggests it is good for anything other than saving government money, it's pure hypocrisy. It's a gesture which will cost an awful lot of people the chance to litigate.”