Examining the Lord Jackson Reforms and the impact they may have on civil litigation and law firms in England and Wales
The chief executive of the Law Society, Des Hudson, has admitted in an article with Litigation Futures here, that some law firms specialising in personal injury litigation will undoubtedly go bust as a result of the civil justice reforms recommended by Lord Justice Jackson.
“[on behalf of the profession he was] angry that insurers’ advice to government seems to go unchallenged. I’m angry that many solicitors who work hard for their clients are going to struggle – some firms will undoubtedly fold. But I am most angry that in all the spurious talk about fraudulent claims, many innocent victims with real, debilitating injuries will lose out. They will not get the redress they deserve; the individuals and companies at fault will have fewer incentives to correct their behaviour.”
But that is not the only call of dissent aimed at the changes to civil litigation. Society president Lucy Scott-Moncrieff has declared that the government must postpone all further civil justice reforms until lawyers have had sufficient time to prepare for change. Several MPs have also called on the government to halt personal injury law reforms amidst ‘deep concern’ at the pace and extent of change. The full article in the Law Gazette can be found here.
However, a group of law firms, headed by Martin Coyne, managing partner of law firm Ralli Solicitors, has called for the resignation of the Law Society exec as part of its Save The Legal Industry Campaign. In a letter to chief executive Des Hudson, Coyne writes:
“It is with great sadness coupled with anger and frustration that I am writing to you on behalf of the supporters of our campaign to Save The Legal industry. Anger at the lack of support from the Law Society over the last 12 months in defending its members and those who work within the legal industry. Frustration because within months of the reforms on 1 April, 100,000 people across the legal services industry could lose their jobs…And it’s the ‘human toll’ of these reforms that the government and the executive of Law Society has ignored with non-legal staff such as secretaries and administrative staff bearing the brunt of job losses.”
It is hard to see why the Coyne, the Law Society and several MPs are wrong with their concerns over the reforms. Under these reforms a successful claimant has to pay their own lawyer a ‘success fee’ of up to 25% of the damages recovered as well as the After The Event (ATE) insurance premiums, both of which could potentially be significant amounts, while their own general damages are only increased by 10%. It is hard to see how this is not just unfair to the claimant but to their lawyers as well as it would put a strain on their business having previously been able to recover 100% success fees from the defendant.
As Martin Coyne goes on to claim in his letter insurers have previously admitted to the government that these reforms will make no difference to premiums:
“In pandering to the wishes of the insurance lobby, this government and by association the Law Society have done nothing to counter the argument, which will jeopardise the lives of many families across the UK. We are calling on the government to stop any further changes to the legal industry and protect jobs by signing our petition. Our representative body – The Law Society – has let us down – Its the Law Society who should have been at the forefront of this fight, but instead you have sat back and left it to others…Your shameful inaction should have the same kind of consequences it is having for those you purport to represent and so we are calling on the leadership of the Law Society to take responsibility and resign.”
With referral fees being banned under the reforms it is likely we will see more large firms try to align themselves with the insurance sector as Plexus Law and Goldsmith Williams have done recently. I would suggest that it is highly likely that we will see more law firms, or Alternative Business Structure (ABS) hybrids, that will be more akin to sausage factories churning out case after case with one eye on the bottom line and not on the welfare of their clients. The longer a case goes on the less money these firms make, in fact the more likely the firms are to actually be making a loss by representing their own clients. Of course these firms do already exist – I am well aware of them having worked within them and against them – but there are other firms out there who while obviously trying to make money also have a culture where their clients’ interests are paramount.
If Des Hudson’s opinions at the beginning of this post are correct, and the fears of Martin Coyne are realised, then these traditional firms may soon disappear altogether. More firms may be forced to re-examine their business models through mergers or perhaps by becoming an ABS. The outsource of low-level tasks, such as document review or administrative work can be farmed out by these firms to countries such as India and South Africa in order to obtain cost savings as Eversheds and the Parabis Group already do. The small and mid-sized firms will not be able to compete with this, and with lower billings brought on by the reforms, they will be forced to close, their talent being swallowed up by Tesco Law or the Co-Op Legal Services. Law graduates, the future lawyers of tomorrow, will enter their training contracts wearing white-hair-nets working on their sausage conveyor belts more concerned with the bottom line for their firm than the bottom line for their clients.
Disclaimer: The views expressed are those of the writer and this article does not constitute legal advice.