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No Win, No Fee: How Clients Can Lose.

The Times, October 29th 1996

Critics predicted a "lawyer's bonanza." A year ago, plans by Lord Mackay of Clashfern, the Lord Chancellor, for "no win, no fee" work ­ by which lawyers can take on cases for nothing and charge up to double their fees if they win ­ came in to a barrage of criticism. Senior judges claimed people would be exploited by unscrupulous solicitors charging huge fees which would swallow up any damages recouped for the client. "No win, no fee" work certainly seems to have opened up a large new market of work, enabling people to pursue claims previously denied them through lack of funds. But it is also spawning a new industry: claims-brokering.

Quasi-legal firms and companies that negotiate with insurers are moving into the accident claims market, seeking to settle claims for victims. Others handle employment claims ­ all on a no win, no fee basis, taking their fees as a large slice of the client's damages ­ usually a third but sometimes more. In reality, the arrangements are akin to American-style contingency fees.

The new breed of negotiators or assessors attracts clients through aggressive marketing: advertisements are placed in Yellow Pages, newspapers, hospitals, doctors' surgeries and even ambulances. Some obtain referrals from insurance companies or brokers, from police and welfare services. Shadier methods are also employed: solicitors have encountered assessors in hospital wards.

Concern among solicitors is growing. Solicitors accept they will be accused of protectionism and of mounting a rearguard action over their patch. But they also have justifiable concerns about the public interest. Low-cost legal services, they say, are being marketed by unqualified and unregulated people who exploit people's ignorance.

In Nottingham, solicitors have launched a campaign to alert the public after receiving a stream of complaints about firms offering low-cost will-drafting services. One firm advertises that it can do a will in 20 minutes at a fee of £29.

Often, their literature implies ­ inaccurately ­ that they use qualified solicitors. Rupert Bear, president of the local law society, says: "These wills are usually drawn up using basic word-processed documents out of which standard clauses are picked. This results in wills that are internally contradictory ­ in one case, even rendering the will invalid. People have even been asked to witness wills in which they are beneficiaries, so they would lose any inheritance.

Probate and will-writing is just the tip of the iceberg. Hilary Campion, a partner with Eversheds in Nottingham, is worried about unqualified people offering to handle employment disputes. "These people are interested only in obtaining compensation ­ so they can cream off their one-third fee," he claims. "But reinstatement in the job might be more appropriate. And why should a client pay more than a third of their compensation to a representative? A 30-year old who was employed for four years before being unfairly dismissed can obtain maximum unfair dismissal compensation of £12,140. To have to pay more than £4,000 of that to an unqualified representative would be preposterous. A solicitors' fee would be about £1,000.

In the field of lucrative accident claims, negotiators boast they can achieve quick, speedy settlements for their clients. But, according to the Association of Personal Injury Lawyers (Apil), there is a danger of claims being under-settled because the negotiators are not qualified to take claims to court. The threat of litigation never even exists. People are often not told they may qualify for legal aid; and they may not understand that a large slice of their damages will go in paying the negotiator's fees.

Gerard Mullins was left a tetraplegic after a car crash in 1993. While lying in the spinal unit at Stanmore, northwest London, he was contacted by a loss assessor who had obtained details from his insurance broker. "He wanted to handle my claim [likely to be about £1 million]," Mr Mullins says. "I agreed; I thought that was the only way to do it. But about two years later, when nothing seemed to be happening, I was told I should have gone to a solicitor.

"By then, the driver of the accident had been convicted 12 months previously ­ and we could have applied for summary judgment. Nor was legal aid even mentioned."

The new operators can easily be confused with marketing groups such as Claims Direct (run from Market Harborough) and Accident Assist (AA). They deploy heavy promotion to penetrate the 30 per cent dormant sector of the market; people who do not pursue their claims. AA, for instance, declares its aim is to "become a national household name synonymous with accident and injury compensation within two years ­ aiming to refer up to 30,000 in 1996, rising to possibly 300,000 by 1998. But The difference is that these groups use panels of solicitors to handle claims.

Yet, here, too, concerns have arisen. The lawyers need not be members of the Law Society's own personal injuries specialist panel. AA, according to Apil, is a vehicle that enables solicitors to "buy accident cases " ­ a charge the group strongly rebutts. Rather, says AA, solicitors employ it to do their marketing. AA's advertising can also target people when most vulnerable.

But the charges are being levelled from both sides. Claims Direct (of Bournemouth) recently complained to the Advertising Standards Authority ­ a complaint only partly upheld ­ over what it said was misleading "no win, no fee" advertising.

David Marshall of Anthony Gold Lerman & Muirhead, one firm complained of, says: "These people [eg, CD] are not subject to any professional regulation. The reality is they are worried about the attack on their market." His firm has now taken on 60 no win, no fee cases and predicts a rising market, as public awareness grows.

Unsurprisingly, the claims negotiators put another side to the story. Claims Direct of Bournemouth (no link to the marketing Claims Direct) says it offers the only "genuine no win no fee service", with no extra disbursements or fees. Nicholas Leigh, the managing director, says: "Clients do not have to fork out a penny. If they win, we take 30 per cent ­ although with some large claims it can be only 20 per cent."

Claims Direct has been in the business for 20 years. It accepts that if the claim becomes litigious, it would hand over to lawyers. "But 95 per cent of claims are settled out of court," Mr Leigh says. The advantage for the clients, it says, is experience in personal injury claims, coupled with a "speedy, efficient service". He rejects charges that they are unregulated. "We have professional indemnity insurance and are accountable to the Advertising Standards Authority and Office of Fair Trading ­ outside bodies. Solicitors regulate themselves."

As for undersettling claims, he says: "We have a vested interested in obtaining as much as we can for the client ­ so we're not likely to undersettle.

"We have made an impression on the market, so obviously solicitors are not happy about it. They'll have to look out and wake up to the 20th century."

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