“No win no fee”, in reality, is a grotesque over-simplification which reflects the naïve innocence of clients. It has developed into an impenetrable jungle of regulations and procedures, mostly concerned with insurance premiums and payments. There is also a significant body of case law dealing with CFAs and their insurance implications. In outline, a solicitor assesses the chance of success in a case and decides on a success fee to be paid on top of normal fees if the claim succeeds. This includes the cost of an insurance policy to cover costs if the claim fails. The introduction of CFAs is another example of the commercialisation of legal practice. CFAs make it less likely that poor claimants with cases which are not overwhelmingly likely to succeed will be able to find professional representation. Claims with a significant risk of failure are not taken on. In 2009 a study by Oxford University concluded that the use of CFAs in defamation cases (essentially, libel) made such cases 140 times more expensive in England and Wales than in other European countries. Defendants who lost defamation cases faced a doubling of reasonable costs against them. Media outlets were being forced to settle claims because of the financial risks of fighting such cases. CFAs in defamation cases enabled lawyers to charge up to twice their normal fees of up to £800 an hour. The study made the point that media companies were being forced to self-censor because they had no economic incentive to defend defamation claims. Where the claimant had the benefit of a CFA, there was no longer any incentive to control the amount of work being done. This distorted the normal costs control mechanism and potentially breached Article 6 of the European Convention on Human Rights (the right of access to justice) and Article 10 (freedom of speech). Compensation in libel cases assesses a person’s reputation as if this was a commodity. The valuation of a person’s reputation in money risks undermining the very thing which the law seeks to restore, namely the intangible good name of the injured person. The law of defamation is fundamentally geared towards financial compensation. English law imposes a monetary value on injuries. Although there are a number of non-money remedies available in the employment tribunal, they are rarely ordered. Employment tribunal claims, like the vast majority of civil claims, are mainly about money. What is the client’s ultimate aim? If it is financial compensation, then the system functions. If it is otherwise, for example to “obtain justice” or to “have a day in court”, the procedural aspects of the case become highly problematic.
The Bar Council’s guidance on public access work for barristers makes the following points about CFAs: • While in principle there is nothing to prevent barristers undertaking work on a conditional fee basis, there are likely to be considerable problems with their doing so in public access work. • Barristers should consider the question of payment. Payment in advance or on completion of a particular piece of work would not be possible since, by definition, no fee is payable until success has been achieved. • Any money paid in advance would be the client’s money and barristers are not permitted to hold this.
Claims management services Since the introduction of conditional fee agreements (“no win no fee”) in England, many claims management companies, formed to profit from such agreements, have been heavily criticised for high-pressure sales techniques and the high cost of their services, which can significantly reduce the amount of compensation received by claimants. In 1995 English lawyers were allowed to take on cases on the basis that, if they lost, they would not charge. If they won, they would charge a success fee calculated as a percentage of costs to recompense them for the risk of not being paid. In April 2000 personal injury cases were taken out of the legal aid scheme and replaced with conditional fee agreements. Between 2000 and 2004 there were, reportedly, 130,000 references to the Citizens’ Advice Bureau related to rogue claims management companies and poor legal advice. Part 2 of the Compensation Act 2006 responded to these criticisms by introducing strict regulation of the claims management industry. The Act states that all claims management companies must be registered. They are obliged to comply with detailed rules which are designed to protect consumers. For example, the Act makes it unlawful for representatives of such companies to visit accident victims in hospital to encourage them to make claims. In August 2009 the Ministry of Justice reported that 100 claims management companies had lost their authorisation to provide services since the Act of 2006 came into force. The reasons for the disqualifications included: • Criminal convictions for fraud. • Misleading marketing. • Some companies targeted consumers who were in debt. • There was a trend towards high pressure cold calling from call centres, including making unsubstantiated claims and encouraging people to hand over fees on the spot. Claims management companies are now prohibited from advertising in hospitals and doctors’ surgeries. These companies can be seen as an example of the parasitism encouraged by the rich financial rewards of the law. They are a clear example of commercial enterprises calculating and making profit from the misfortunes of others.