Fixed recoverable costs are restricting smaller firms’ ability to offer services, says CILEx

7 June 2019 

Fixed recoverable costs are restricting smaller firms’ ability to offer services, says CILEx

The introduction of fixed recoverable costs (FRC) for low-value personal injury cases has restricted smaller law firms from offering their services to the public and this will be made worse by plans to extend FRC, the Chartered Institute of Legal Executives (CILEx) has told the government. 

FRC are distorting the market for legal services, which needs a healthy mixture of providers to function effectively, the organisation warned.

In its response to the Ministry of Justice consultation on extending fixed recoverable costs to non-injury cases as well as, in some instances those worth up to £100,000, CILEx urged the government to consider the wider impact of FRC on the availability of legal advice to support people needing the justice system.

It says small local firms and specialists have been forced to turn away personal injury clients because they cannot handle the volume of claims required to achieve a balance between profitable and unprofitable cases. 

This leaves consumers with a limited choice of either larger national providers which handle cases in bulk or being forced to represent themselves. Ultimately the consequence is a reduction in both quality advice and access to justice.

The response highlights the test set by Lord Justice Jackson in his 2009 costs report that “if litigation becomes uneconomic for lawyers, so that they cease to practise, there is a denial of justice”.

It adds: “We are therefore of the view that FRC should be reserved for only the least complex cases, and restricted to cases below a realistic value level, to avoid exacerbating these understandable concerns.”

CILEx also points out that the consultation fails to take account of the Competition and Markets Authority (CMA) review of the legal services market, which has led to regulatory efforts to encourage price and service transparency. CILEx argues that pursuing significant interventions in what is an independent market should be a last resort, and that without considering frontline regulators’ active efforts to improve information for consumers, this consultation is fatally flawed.

In the wake of cuts to legal aid, court closures, and systemic underfunding of justice, CILEx’s response states that the government has abdicated its responsibilities to ensure meaningful access to justice, leaving CILEx professionals to go above and beyond for clients who find it difficult to meet legal costs. Conditional fee agreements, damages-based agreements and pro bono work cannot be relied upon to secure long-term sustainability of the legal services market at a time when fixed recoverable costs are making it financially unviable to take on some cases.

CILEx also stresses the importance of fee rates that are flexible enough to accommodate unexpected complexities that arise in individual cases and argues that judges should have discretionary powers to award modest cost increases, especially in cases that are more complex than they look at the point of allocation or where circumstances add additional costs.

CILEx President Phillip Sherwood says: “The introduction of fixed recoverable costs has had a detrimental impact on the effective functioning of the legal services market. A healthy market is one where the public have a choice of specialists and generalists, local and national firms, offering their services to the public.  

“What we are seeing is smaller firms being forced to turn away clients because it is not financially viable for them to undertake the work. This is not conducive to a competitive marketplace and ultimately drives down quality and impacts access to justice negatively.

“These proposals come at a time when regulators and professional bodies, such as CILEx, are making considerable efforts to give the public more information about the services they need following the CMA review. It is beyond belief that this doesn’t even get a mention in these proposals, and should at least be considered before further interventions are made into the operation of the independent legal services market.”

 

ENDS

For further information, please contact:

Kerry Jack, Black Letter Communications on 07525 756 599 or email:

kerry.jack@blacklettercommunications.co.uk

Louise Eckersley, Black Letter Communications on 0203 567 1208 or email:

louise.eckersley@blacklettercommunications.co.uk

Notes to Editors:

The Chartered Institute of Legal Executives (CILEx) is one of the three main professional bodies covering the legal profession in England and Wales. The 20,000-strong membership is made up of Chartered Legal Executives, paralegals and other legal professionals.

CILEx members are regulated through an independent body, CILEx Regulation. It is the only regulator covering paralegals.

CILEx provides training, with qualifications open to those holding GCSEs, A levels or a degree. Over 100,000 students have chosen CILEx over the last 25 years, with the majority studying whilst in full or part-time employment.

CILEx provides a non-graduate route to qualification as a lawyer, although graduates are also welcomed and the Graduate Fast-track Diploma offers a more affordable and viable alternative to the LPC.

Those who complete the full CILEx qualification are known as Chartered Legal Executives. They can become partners in law firms, coroners, judges or advocates in open court.

The membership is diverse – 75% of members are women and 14% are from a BAME background.