Jackson's Elephant

The situation in which the law found itself (see last two blogposts) post recoverability caused considerable concern amongst those paying a large number of the bills – and in particular the motor and liability insurers.

Lord Justice Jackson was asked in late 2008 to undertake a review of the Civil Justice system with a view to considering the cost of justice and access to it. His recommendations, published in January are radical. In particular they recommend a removal of the recoverability of success fees and ATE premiums, and (for certain types of action) something called one-way costs shifting (OWCS). The idea of OWCS is that a claimant can bring an action knowing that should she lose the other side will not look to her for costs. This means that no ATE insurance is required for those costs.

Jackson’s recommendations are only that – they will require primary legislation in some areas to enact. There is also an ongoing process (next stage 30th April 2010) to reform costs in low value cases, and how the two sit together has yet to be answered.
Should this all come in to force the effects will be significant. I believe they will be significantly detrimental to far more people than they will help.

If you are a claimant – you face having to contribute something towards your case, although damages will be ‘uplifted’ to help with this. This should force economic accountability – you will go to the lawyer with a cheaper price if you are paying for it. This is good, provided that low price does not mean low standards (think conveyancing here, where a monkey with a typewriter seemed to do my last transaction). What happens however if you now cannot find a lawyer to take on your case. This is most likely to be where cases are relatively low value, or high value and not clear-cut. In both these cases, the solicitor may not get enough reward for the risk of running a CFA. This doesn’t feel like Access to Justice to me.

As a defendant insurer, all seems much clearer – lower costs pretty much guaranteed. But – lower costs will mean lower premiums (good for us) not higher profits; this is a very competitive market and if you don’t pass on the savings, someone else will, and the dreaded meerkat will ensure they get the business.

Big winners will be the areas of the state that have to pay for lots of litigation – in particular the NHS. This means more money (eventually) to spend on proper treatments, and hopefully to spend on getting things right in the first place. BUT – if it spends less because good cases can’t be brought for economic reasons, that’s not so good.

The more I have thought about Jackson, the more my eye has been drawn to a large grey shape sitting in the corner of his lodgings, which seems to escape comment altogether. This is the subject of lawyers’ fees themselves.

Jackson has focussed on ancillary costs but makes little comment on the fact that lawyers hourly rates have outstripped inflation for years in a manner best described as grotesque. The real problem at the heart of costs is the amount lawyers get away with charging. This is Jackson’s ‘elephant in the room’.

I struggle to see how it is right that a partner in a clinical negligence case can charge £400 per hour for his services. Defamation lawyers (should I say allegedly here) charge more, and some City litigators more still.

Now, success fees are obviously a function of basic fees (because its 50% of the base number). It is logical that ATE premiums are also related to them – because the insurer is paying out an amount in lost cases – and if that amount was lower, claims and premiums would be too. (A friend peer-reviewing this comment has pointed out there is probably a fixed amount of administration to do, so the relationship is not linear here – I accept this but there is still a strong correlation.) Yet Jackson has left these fees untouched.

I was given a fine example of another charging issue which I found staggering last week, when I met with a regional commercial lawyer. His charge-out rate was I think £350 per hour in a case where he was suing a large company represented by a ‘Magic Circle’ law firm. A mediation meeting was scheduled, where he turned up with his client, to be met with the opponent and SIX lawyers, from partner down. The partner’s fee was around £650 per hour, and the six together were taking nearly £2,500 per hour! Not only was the rate high (not that I see £350 as cheap) but the legal resources deployed, and the cost of them, were staggering.

So, dear reader, what do you think? Do lawyers deserve those sort of fees, compared perhaps to an NHS consultant? We hear a lot about ‘fat cat’ bankers, but not so much on ‘fat cat’ lawyers. Time for a change?

Next time - so if it is broke - how else could we fix it?