Matthias Kelly QC knows he's fighting an uphill battle. The London barrister assumed the post of chairman of the Personal Injuries Bar Association (PIBA) in late June and immediately launched a salvo of opposition to the emerging legal environment for personal injury litigation in England.
The Financial Times heralded his appointment with the headline “Ambulance chasers beware”. In the article that followed, Kelly denounced the rise of “US-style contingency fees” and the “ambulance-chasing compensation culture”.
Kelly says the “overwhelming mass” of the PIBA's members also opposes the new culture. However, he is aware that PIBA's battle against the government's revolutionary no win, no fee system of legal financing is, at least at present, a fight against the odds. He does not expect the incumbent government to be open to suggestions of abandoning or radically overhauling the system so soon after its introduction.
He says: “It may not be something that is going to happen in the immediate future, but it is something we must keep at the forefront and look at critically as the system develops.”
Lamenting loss of legal aid
Kelly says the legal aid system was both cost-efficient and just, as well as revenue-positive for the government, and thus should not have been abandoned for personal injury cases.
“The state was funding the litigation. The vast majority of claims were successful, so the losing party reimbursed the state for court costs. Since other costs were recovered (by government), the state made a profit out of it.”
The no win, no fee system that has come in its wake is riddled with inequity, Kelly says. He is particularly vociferous about the rise of commercial claims assessors, who he condemns.
“Non-legally qualified claims people, those who have been called ‘claims farmers' by some lawyers, contribute to what can be loosely described as a compensation culture,” he says. “Yet, from the victim's point of view, the fees being charged by these companies to run the claims are extremely high, compared to the system as it functioned under legal aid.”
As a member of the Blackwell committee, which reported to the Lord Chancellor in February 2000 on the role of non-legally qualified claims assessors, Kelly was a dissenting voice. But the findings in his personal report were particularly clear-cut. “Contingency fees ought to be banned. They serve no useful purpose and are contrary to the consumer's interests,” he wrote, adding: “Damages are intended to compensate the claimant. They are not intended to enrich the claimant. Compensation is merely a lump sum representing the claimant's loss.”
Kelly found problems in law with the concept of contingency fees. He says: “It is the policy of the law that there should be full compensation. Where the adviser is remunerated by way of a percentage of the damages paid by the client to him, the entire object of the law of damages has, thus, been defeated. Companies such as Claims Direct charge up to 30% plus VAT for processing a claim on behalf of an injured person. The result is that the injured person, instead of receiving 100% of the sum intended to compensate him for his losses, receives 70%.”
Kelly also says conditional fee arrangements (CFAs) are not in the public interest. Since solicitors fund the action and barristers are paid only if they win, lawyers may choose to accept only strong cases.
“That leaves those with a lesser chance of success, without the opportunity to go to the courts,” Kelly says. “Someone with a 60% chance may not be able to find a lawyer to run the claim. In my view, that's not a healthy system.”
Worse is the potential conflict he sees between lawyers and clients. “The client may want to carry on with a claim and bring it to court, but a lawyer may want to accept an offer to ensure he gets his fees paid,” he says. “In a proper system of justice, you ought not to have those conflicts.”
Another bugbear is the government's proposed reform of damages for clinical negligence, announced in July this year. “They say the goal is to take the ‘blame culture' out, which is rather difficult. Is the government going to hand out a cheque to everybody who says they are dissatisfied with the treatment they receive in hospital? If not, how do they distinguish between the claimants?
“If you are going to compensate the victims of medical negligence, as opposed to the victims of medical accidents, you can do so only if you can establish causation and fault,” Kelly says.
The government has proposed a tariff-based system of awards for clinical negligence cases that PIBA sees as crude and inflexible. “They are not tailored to individual needs, yet our whole system is geared to giving you exactly what is proved you need, not any more, not any less.”
He sees other agendas behind the proposed clinical negligence compensation reform. “We are saying the real motivation is to cut the amounts awarded to injured people. That is unacceptable, because the people who are injured most severely are those who will need the most care and care is the biggest component of most awards.”
Kelly knows CFAs will not disappear overnight. While they remain, he says insurers can help ease the situation.
“Premiums have to be kept manageable in order for justice to be kept affordable. There is a clear challenge for the insurance industry not just in designing after the event (ATE) cover, but also in making before the event (BTE) legal expenses insurance commonplace, as it is in Germany, by making products available, affordable and actually bought by the public.”
Widespread take-up of legal expenses insurance would address multiple concerns, he says. “People would be insured against one of life's obvious misfortunes – facing a claim in court. And it removes the danger of lawyers having a vested interest in the outcome of a claim.”
He praises insurers' moves to increase the take-up of BTE cover and suggests the government ought to offer tax relief on premiums.
If BTE cover fails to become commonplace, CFAs will become more widespread and public concern about the sums involved and the inherent conflicts of interest will grow.
“That will probably lead to more pressure for a move to a contingent fee system,” he predicts. “Then, claimants would only be compensated to, say, 70% of what the true loss is. Justice would not be done and that's of little use to a disabled child whose parents have to care for that child. Who picks up the balance of the cost that has gone to the lawyers? It will probably be the taxpayer,” he says, pointing out that such a result is unfair after the courts have found such costs are the responsibility of a third party.
Nor is increasing awards to compensate a viable option. “In the US, many awards are set by juries and they award more because they know lawyers are taking a percentage. But the victim still ends up with only a proportion of the true loss.”
That, he says, means justice will not be properly done. “As a matter of logic, there comes a time when the fund for care runs out. Who, then, pays for that person's care?”
He says the principle of insurance as a tool for loss distribution should be carefully considered. “One might look at the question of corporate responsibility. If a corporation has a poor record of industrial safety, shouldn't it attract a substantially enhanced premium?”
Another approach to working the evolving system is to settle strong claims at an early stage. “The overall bill is kept down, as a lot of expensive costs, such as experts' fees, have been avoided,” he says, noting that “many progressive elements in the world of insurance are already adopting that approach”.
Equally, insurers should not roll over and give up their right to justice. “When insurers form the view that a claim is not genuine, or that it is inflated, their duty is to stand and fight it, because to do so is in the interest of the premium-paying public.”
He also sees challenges for personal injury barristers who, typically, work on both sides of the courtroom, for claimants and for defendants. “How do we deliver high quality services, at reasonable prices, without unnecessary litigation?” he asks. “That is what I want to address. Maybe we can make more use of mediation and structured settlements and cut down on some of the paper work that goes with these claims.”
In the end, it comes down to justice. “Every litigant wants, in the end, fair compensation within a sensible time frame. I would like to help deliver that.” He says if the professions, the insurance industry and the government work together, it could be possible.