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UK Government plans another raid on solicitors

Editorial Staff

It's all becoming a little too Orwellian. When the previous, Labour government created the "Ministry of Justice" it sounded more 1984 than we were comfortable with. After all, the whole point of the various ministries in the book is to deliver the opposite of what their name promised. Recent changes to costs are removing access to justice except for those that can pay.

And it's all building up to look like a raid on solicitors' firms.

It all started with the decision that, in criminal trials, an order against the prosecution where a defendant is acquitted will be limited to legal aid rates, regardless of the rate that the client is paying the solicitor and counsel.

The end result is that defendants who are not entitled to Legal Aid, or who choose to instruct lawyers who do not undertake legal aid work, will end up having to settle a bill to prove their innocence.On 1 November, the Law Society of England and Wales issued a practice note which drew attention to the new regime - and expressly warned solicitors that failure to fully inform their clients of the new regime and its effect - would be a matter of professional (mis)conduct.

The changes are to section 16 of the Prosecution of Offences Act, as amended by Schedule 7 of the Legal Aid, Sentencing and Punishment of Offences Act 2012.

The Law Society said "

3.4 Magistrates' court proceedings

In simple terms, the new legislation provides that clients in the magistrates' court will be entitled to recover their costs under a Defendant's Costs Order if they are acquitted, but the amount will be limited to legal aid rates.

3.5 Crown Court proceedings

Your clients appearing in the Crown Court, in respect of proceedings commenced on or after the 1 October 2012, will not be entitled to recover their legal costs expended in successfully defending those proceedings if they chose to be represented privately.

The rationale for this policy position is that all defendants in the Crown Court will be entitled to legal aid whatever their means, but subject to a contribution.

If they succeed, at first instance or on appeal, their contributions will be repaid in full.

There is no official tie-in with other changes to e.g. the regulation of advocates which is currently taking place but it seems that the end result is to ensure that barristers, who generally have lower hourly pay rates and much lower overheads than solicitors, will appear in cases which, ordinarily, a solicitor would be the advocate. But that's another story.

Now the Ministry of Justice is tossing another brick at solicitors' firms with a decision that fixed costs on many personal injury actions, already limited to GBP1,200 will be reduced to GBP500 when a new "portal" is launched.

The government is, in part, angered by the massive growth in advertising of personal injury claims services, a significant amount of which has recently been handled by spammers sending millions of messages to mobile phones. Moved from mobile phones, they have already begun e-mail campaigns. But for years, television viewers have been force-fed a diet of adverts for claims handlers and even law firms.

The whole thing arose because of some rather silly mistakes made in relation to law firms in the 1980s and 1990s: advertising used to be illegal, not just unprofessional. When the rules were relaxed, some advertising went overboard into the utterly tacky. But the biggest change was when the ban of referral fees was removed: until then it was a serious disciplinary offence for solicitors to pay anyone for the introduction of work. In some cases, it has been said, solicitors are paying referral fees to companies that issue adverts of as much as GBP700. It seems - perhaps simplistically - that someone has worked out that if the fixed fees are GBP1,200 and of that GBP700 is being paid to get the work, then the fees might as well be limited to GBP500. After all, it is argued, why should the defendant - who is an insurance company - pay for a solicitor to buy work? It's not a silly argument.

But it's also flawed. True, there are solicitors who have built a practice around referrals. But there are many more who have served, through thick and thin, a local community and who have loyal clients or who gain work by reason of having an office that is conveniently situated for the community it serves. The advertisers all offer "no win, no fee," which attracts clients who are often too ashamed to call their "family" solicitor to see if he has the same arrangement. If the new rules are designed to force a flight to quality, they are not going to work. Far from it: they will remove some of the best lawyers from the field.

There is an argument that, by applying the Protocols (which our big boss, Nigel Morris-Cotterill, demonstrated, in his book Sun Tzu and the Art of Litigation, to contain errors ) and the use of the computerised portal (which means nothing more than an internet-based form filling issue and filing system) costs will be reduced. But it is not true. The proper preparation for a personal injury case is both time consuming and costly. A competent solicitor should expect no less than GBP250 per hour (out of which he has to pay considerable overheads, his staff, professional fees and insurance). The after-costs amount remaining for the partners as profit is very likely to be significantly less than the after-costs hourly rate for a plumber.

There is a sliding scale: for claims of up to GBP10,000 the fixed fees will be GBP500 and up to GBP25,000, GBP800. There are also fixed costs arrangements for public liability and employer liability claims, where the limits are higher, but not much.

The end result is that solicitors will be forced to look to their clients to make up the shortfall between the fixed costs and the actual costs of the action. That will mean that many small claims will be totally uneconomic. It also means that defendants will be able to benefit from tactics such as delay, excessive interrogatories and death by paper (all terms explained in Morris-Cotterill's book) which will make the conduct of the litigation even less likely to produce a profit for the client.

This all adds up to a significant disincentive for solicitors to provide legal services to those who suffer personal injury.

But there is one final threat to this part of a solicitor's practice: the creation of the Alternative Business Structure in which law centres and, perhaps most disturbingly, supermarket chains are gearing up to offer selected legal services. With premises costs already covered, a supermarket can set up a booth next to the entrance/exit - and it has a steady footfall including many who are off work for a variety of reasons, including accidents. The marginal cost of such an operation is insignificant compared to the cost of running a proper law firm.

This, ironically, may be the only avenue open to many plaintiffs (which in the NU-Speak of the current UK legal system are called "claimants").

But it might also signal the death of the traditional family law firm just as cheese shops, butchers, bakers and greengrocers have died. And the irony is that, because their cost base will be so much lower, and the experience levels so much reduced therefore staff will be cheaper, these supermarket factories will not even need, probably, to sell legal services as a loss-leader.