As Legal Aid was withdrawn from the Civil side of the legal profession at the end of the 1990s the vacuum was to be filled by the advent of conditional fee agreements otherwise later to be known as (and misleadingly so in my view) no win no fee agreements. To avoid the failing litigants having to pay fees after Court cases there developed a product known as after the event insurance (ATE). These policies would protect the litigant from having to worry about his case failing.
As the legal profession as usual sat and watched the private sector moved in. The Accident Group (TAG) ClaimsDirect offered a policy to parties who wanted to insure their cases and then having snaffled the premia for the insurance they then would sell the case with insurance to whichever solicitor would buy the case. The public were wooed into this by the promise that the solicitors were “Hand Picked” and on a “panel” when the reality was they were anything but. Solicitors without a following would buy cases to fill the void in their cabinets created by their lack of ability.
Countless case law developed as defendants tested the applicability of these schemes. Some schemes went to the wall as a result of these cases but some simply were never viable such as TAG. Large amounts of solicitors were also prejudiced by having to pay back monies which were properly advanced under these schemes but later was found to be not so. The bankers who had voted with their cheque books in favour of the schemes turned angrily on the lawyers when it turned out that they were far from profitable.
From the remains of the case law in the middle part of the last decade there emerged schemes that whilst less challenged legally perhaps could be challenged morally. Now claims are trawled in by Claims Companies and sold onto solicitors for sums ranging from £250 to £1000. Claimants who think that the Claims Company will fight for them find themselves sent to the other end of the country to solicitors who buy their claims from Claims Companies.
The solicitor wants to make a profit. If he has just paid £1000 for your claim then that can be 5-6 hours of his chargeable rate that he has to pay. In other words he does the first five hours for nothing. If he settles the claim after three hours he has lost two hours work-about £300. He has made nothing. If he wins the case after ten hours he has made about £600 for an outlay of £1000 before he has paid the overheads. Probably the road to rack and ruin.
Solicitors faced with this problem give these cases to the lowest level fee earner to reduce the cost. The result is that some cases that should be won are lost and some that are abandoned are ones that could have won. Why therefore give your claim to a Claims Company?
In my view some cases are discouraged because the initial evidence is not enough to make it sellable. If a solicitor needs some more information that can only be gathered in by writing to the defendant before he can decide if to take the case on then that claim may end up in the reject bin. The Claims Company cannot give the claim away. The solicitor will not pay for it until he has the answer the result being that the claim is rejected. Someone who could be compensated is left in limbo thinking his claim is not a good one. The solicitor cannot tell him that as that would be biting the hand that feeds him making the claims company look bad. The solicitor SHOULD tell the claimant when that happens as he simply is not doing his job if he doesn’t. Shouldn’t the solicitor tell the client that there is no merit at all in using a claims company. I would love Esther Rantzen to tell me what good they do as I cannot find anything that they do that is positive.