Solicitors' commercial arrangements with claims management companies undermine their duty to the client, says John Barstow.

SOLICITORS ARE seen as “arrogant, slow and crooked” according to an article in the Guardian on 26 August 2002 reporting the ICM Poll commissioned by the RAC.

I believe the profession in personal injury litigation is doing little to dispel such negative sentiments. Basic professional rules and principals are at best distorted and at worst disregarded, primarily as a consequence, of conflicts of interest involved in the arrangements with claims management companies and other agencies seeking to usurp the function of the solicitor.

Protecting the consumer
The judicial system exists to administer justice. It is an adversarial system and is best served where each party in dispute is represented by a lawyer, and an independent judge decides the outcome. A solicitor has the right to conduct litigation and is bound by the professional rules of conduct. Those rules are statutory, made under s 31 (1)of the Solicitors Act 1974. The solicitor's duty to the client should not be undermined by creating conflicts of interest.

Lord Hobhouse (in Medcalf v Mardell [2002] UKHL 27) said the duty of the lawyer “…is with proper competence to represent his lay client and promote and protect fearlessly and by all proper and lawful means his lay client's best interests. This is a duty which the advocate owes to his client but it is also in the public interest that the duty should be performed.”

So how have thousands of vulnerable victims of accidents been left substantially short-changed while, at the same time, profits are made on the backs of those victims?

Conditional fees are permitted by stature. The debate in the House of Lords on tabled amendments to s 58 CLSA raised the issue of disparities between lawyers and non-lawyers. The issues identified were quality control and the lack of regulation for claims assessors and related categories.
In 1999, during the committee stage of the Access to Justice bill, the Lord Chancellor made it clear his overriding concern was protection of the consumer. If there is a need for regulations to protect consumers of legal services, he said, he would not hesitate to promote the necessary measures.

The Blackwell committee was asked to investigate the provision of legal advice by non-legally qualified persons who act as claims assessors.
The Committee excluded claims management companies (CMCs) from their terms of reference as it was believed the consumer was protected by the professional body (the Law Society) regulating CMCs' panel solicitors through them.

How effective has that reputation been?

I am currently acting for 150 former clients of Claims Direct and The Accident Group, who were persuaded by the respective company's employees to pursue their claim with them. They, however, have no right to conduct litigation and the success of the business model depended upon solicitors accepting referrals. It is at that point, I believe, the solicitors' duty to act fearlessly in the interests of the client was undermined by the conflict of interest created by the panel solicitors' firms signing commercial agreements compromising clients' rights. The CMCs through their manual stipulate how the claim should be conducted; sometimes including which Counsel and medical experts should be instructed. In some cases, clients were not advised of their then eligibility for legal aid. Other clients were inadequately advised of those matters contained in the solicitors' costs information and client care code.

In relation to The Accident Group, the duty to advise on alternative forms of funding which was entrusted to the solicitor was delegated to non-solicitors working for The Accident Group.

Duty to client cannot be delegated

Two years ago I argued that the duty to advise was personal to the solicitor and not capable of delegation (see sj news 9 June 2000 p526). I know of no solicitors' firms from the CMCs' panels who advised that either the Claims Direct or The Accident Group insurance policy was the most appropriate where that client was not referred to them through the CMC. Claims Direct operated national competitions among its panels for settling the most cases in any one month.

One of the Claims Direct cases concerns a 10-year-old child who was awarded £750. The solicitor did not approve settlement with the court. The £750 was paid to the First National Bank in discharge of any irrevocable undertaking that solicitor made when signing the CMC agreement. The client's litigation friend has now been served with a bill of £984 to pay the outstanding loan. Had that case been approved by the court, by definition it would have been allocated to the multi-track and costs would have been payable. I have four other clients who have also been served with bills. They have won their claim but have obtained no compensation.

Others have been left with literally pennies out of their compensation payment. In all these cases, had the solicitors discharged their duty to the client, these perverse results would not have come about. CMCs have only operated as a result of solicitors joining their panels. Having joined them, the integrity of the profession has been placed in jeopardy. Is it any wonder nearly half of the recent ICM poll of 1,000 people showed the public believes solicitors are arrogant, slow, incompetent and, at worst, plain dishonest.

Courts step in

Both Claims Direct and The Accident Group started supporting claims on a contingency fee basis only. They took a share of the spoils. The Access to Justice Act 1999 enabled these CMCs to change their business model by selling insurance premiums in place of taking a percentage of the damages but, in doing so, allowed them still to take a share of the spoils.
With the deregulation of legal aid, the most vulnerable in society have been exposed to hard-sell techniques from CMCs. Thereafter, the solicitor gives them the standard advice to the letter of the manual and not, I suggest, in the spirit of their duty to act fearlessly in the best interests of the client.

Both the Claims Direct and The Accident Group business model have come under scrutiny by the courts. The judgement of Chief master Hurst in Re Claims Direct Test Cases, 19 July 2002 and of District Wharton in English v Clipson (5 August 2002) picked up on the reality of the commercial practices which are taking place between CMCs and the panel solicitors. I welcome these judgements as a first positive step by the courts to regulate their officers and how their duty to clients should be discharged. Unfortunately they have come too late to help the many vulnerable accident victims already short-changed. Ultimately, however, it is the Master of the Rolls who bought the Solicitors' Practice Rules into effect and it is now high time the courts ensured their officers comply with those rules, so consumers seeking justice get justice.

Solicitors Journal 06.09.02