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| This research explored the link between the way a personal injury case is funded and how it progresses through the legal system. Interviews were conducted with a sample of pursuers and their solicitors who were involved in 45 personal injury actions raised in 1989 and with a sample of key actors with an interest in the area. The study forms part of a small programme of research which examined personal injury cases dealt with in the Scottish Courts. The research was conducted by Professor John Blackie, Professor Alan Paterson, Dr Andrew Phillips and Dr Tim Squires of the Law School, Strathclyde University. |
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| Main Findings |
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- The way a personal injury case was funded had a significant effect on all parties involved in the action - the pursuer, the defender and their legal advisers.
- In some workplaces there existed attitudes to personal injury litigation which differed from those held more generally, constituting an employment culture which influenced how cases were dealt with.
- Different funding sources affected the relative bargaining power of the parties both by influencing the risk of personal financial loss and the type of solicitor typically available.
- The role and amount of involvement of the pursuer was affected by the funding source at all stages of the case.
- An important aspect of funding was the extent to which funding arrangements protected the individual litigant from financial risk.
- Funding through Trade Unions or Legal Expenses Insurance Schemes generally meant that specialist solicitors worked on a number of cases for these funders; this had the effect of placing the individual litigant in the position of a repeat player and as such put pursuer and defender on a more equal footing. Whilst this increased bargaining power and reduced the risk to the individual, it had the effect of reducing considerably the extent to which that person was involved in the case.
- Legal Aid funding brought similar benefits, except a specialist solicitor was not as likely to be involved and the individual litigant retained a considerable amount of personal financial risk if the case was unsuccessful.
- Where a case was pursued on a speculative fee basis, the lawyer acting was likely to require the case to have a very high chance of success before accepting to work on that basis.
- Where cases were funded by a Trade Union or Legal Expenses Insurance Scheme, the solicitor tended to regard the funder rather than the individual litigant as the client. This shift did not occur for clients funded by legal aid.
- Different funding sources provided very different services to and experiences for the litigant; assessments of the quality of service provided by different funding sources must address these differences.
- Insufficient data were collected to assess the extent to which funding sources were related to the success of the case. More research is required to consider this further.
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| Background to the study |
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| The process of moving from being the victim of an accident to the pursuer in litigation is a complex one. First, the victim must decide that another party is to blame; second, she or he must decide to take action and that a legal remedy is both available and appropriate; and third, the potential litigant must be prepared to initiate a legal action against the defender. Each aspect of this process is influenced by a variety of individual, social and legal factors. |
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| Only a small proportion of accidents result in a legal claim and recovery of damages for the injury sustained. Injuries sustained in road traffic accidents or at work are more likely to result in legal action than others. Most personal injury actions, like other civil actions, are settled 'out of court'. |
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| Research undertaken on personal injury litigation has dealt mainly with the American or English and Welsh systems. In 1991, The Scottish Office, on behalf of Scottish Courts Administration, commissioned a small programme of work to collect information on the operation of personal injury cases in Scotland. The first of these studies collected descriptive data on a sample of personal injury cases raised in 4 Sheriff Courts and the Court of Session during 1989 1. This study found that many of the findings on personal injury litigation in other countries could be applied to the Scottish system. For example, personal injury litigation consisted primarily of individual pursuers taking action against corporate defenders, particularly in the Court of Session. Road traffic and employment related accidents outnumbered other types; employment related cases were most common in the Court of Session. |
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| In 1992 a second study on personal injury actions was commissioned. This research collected details of cases funded through different sources and examined the impact of funding source on cases. Interviews were undertaken with the pursuers and their solicitors involved in 45 cases drawn from the earlier descriptive study. Interviews were also carried out with those with a key interest in personal injury litigation in Scotland 2. The fieldwork for the study was carried out during 1992-1993 and the findings are summarised in this report. |
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| A third study was commissioned in 1994 to look specifically at personal injury cases dealt with through small claims procedure 3. |
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| Sources of funding in personal injury cases |
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There are various different sources of funds for those wishing to pursue personal injury actions. These are: - Legal Aid
- Private Funding
- Trade Unions
- Legal Expenses Insurance
- Speculative fee 4
- Contingency fee 5
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| The funding options available to potential litigants obviously depend on various factors. Membership of a Trade Union usually brings with it automatic access to legal services provided through the Trade Union. Car and house insurance often include the option of taking out extra insurance to cover legal expenses for actions such as personal injury. Income and assets determine whether the individual is eligible for assistance through the legal aid fund; and the individual's own resources determine whether she or he can afford to take legal action using their own funds. |
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| Analysis of the 45 cases in the current study shows that there were two main types of case: those related primarily to employment and road traffic accidents. These types of case dominated both the Court of Session and Sheriff Court samples, but employment cases (particularly those relating to injury sustained over a long period of time, such as occupational deafness) were by far the most common case type dealt with by the Court of Session. |
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| Solicitors treated the two types of employment related injury differently. Where injury was due to prolonged exposure to certain conditions, there were usually pre-existing ways of dealing with the case, so that such cases were dealt with on a similar basis to 'multi-party actions' in other jurisdictions. |
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| Cases in the Court of Session sample were most likely to be funded by Trade Unions and one firm of solicitors in particular undertook the bulk of this work. In the Sheriff Court, legal aid was the dominant source of funding. Privately-funded cases were rare in the Court of Session, but accounted for over a quarter of personal injury actions raised in the Sheriff Court. Funding through Legal Expenses Insurance Schemes or on the basis of a speculative fee were rare in either forum. |
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| The research showed that the way in which a case was funded had a significant impact on how that case progressed and how it was conducted. Funding source influenced pursuers, legal representatives and defenders at all stages of the case. |
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| The impact of funding source on pursuers |
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| Legal aid |
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| Solicitors reported that public awareness of the legal aid scheme was low and generally limited to those who had made use of the scheme previously - usually related to family or criminal matters. |
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| Many of those who were eligible for legal aid were required to make a financial contribution to the costs of the case as it was ongoing. In interviews, legally aided pursuers expressed mixed views about the impact the contributions had made to their ability to raise and continue the case. Whilst this research only interviewed those who had taken legal action, it was clear that contributions could lead to hardship for the legally aided pursuer and it is likely to have discouraged some potential pursuers from taking legal action. |
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| An important financial consideration was the risk of paying the defender's costs if the pursuer is unsuccessful. However, given the court's discretion to reduce or waive this liaibility altogether in legal aid cases, solicitors reported that such payments were rarely required from unsuccessful pursuers. The fear that such a payment might be required of them did weigh with pursuers. |
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| One factor which did not weigh with pursuers, although it would be expected to, was the operation of the statutory clawback. This is the provision whereby the successful party to an action may nevertheless be required to pay towards their legal expenses from any property or winning recovered, if the losing party does not pay the full expenses of the action. This provision can cause considerable hardship to pursuers. However, as in earlier English studies, this research found that awareness of the statutory clawback amongst pursuers was almost non-existent, despite the fact that all of the solicitors surveyed claim to explain the operation of the clawback to their clients at the outset of the transaction. |
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| Private funding |
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| Over a quarter of the cases dealt with in the Sheriff Court were funded privately - that is the costs were borne totally by the individual pursuer. It was clear from solicitors and pursuers that in actions which were privately funded, as would be expected, the costs of the action played an important role in determining how the case was dealt with. |
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| In privately-funded cases, the potential pursuer was primarily responsible for deciding the course of the action at all stages and was the one who faced all the financial risks of litigation. It was up to the individual to assess the seriousness of the injury and possible courses of action; it was the pursuer who initiated the action and who identified sources of legal advice and legal services. |
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| Costs incurred during the course of the action were one concern, but privately funded pursuers also had to take heed of the risks of losing the action. For example, if the pursuer lost the action, she or he could be required to pay not only their own costs but also those of the defender. The potential risk of facing these costs had an important influence both on the advice that solicitors gave their clients and on decisions made about how to deal with the case. |
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| There was evidence from the study that some privately funded clients settled their cases because they could no longer afford to continue the case, particularly where the expenses of court hearings loomed, bringing costs into sharp focus. |
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| Trade Union funded cases |
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| Where accidents occur at work, employees are under a legal duty to report the accident. Interviews with pursuers showed that in some workplaces, a report in the accident book triggered the local Trade Union official to approach the member concerned and initiate a claim for compensation. This happened almost automatically and was most commonly found in workplaces with an active Trade Union presence in areas of work where personal injuries and accidents were likely to be common - such as mining and the railways. In other workplaces, the victim notified the local official who then took up the case |
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| Here and in other situations the Trade Union played a crucial role in raising members' awareness of the possibilities of litigation. For example some pursuers reported that the Trade Union automatically initiated claims related to industrial deafness cases. |
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| It was the Trade Union, therefore, and not the individual victim which was mainly responsible for identifying cases where litigation might be appropriate, for initiating the action and for providing the resources required to pursue the case. In some instances it was apparent that no action was required on behalf of the individual at all. |
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| Trade Unions appoint solicitors to deal with cases raised by their members. In Scotland, one firm of lawyers deals with the bulk of Trade Union business. The individuals had no say in which solicitor was to take the case, this was decided solely by the funder. |
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| Nor was the individual involved in making decisions about how the case should be dealt with and some pursuers reported that they received no information on how much had been claimed, how the case was progressing or about proposals for settlement. Interviews with pursuers raised instances where the individual concerned was not aware that a court action had been raised, even though compensation had been received. However, none of those interviewed reported this as problematic - all were content with the way their case had been dealt with. |
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| Legal expenses insurance |
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| The potential pursuer with Legal Expenses Insurance is required to take the first step of contacting the insurer and initiating the claim. Solicitors reported that insurance companies tended to limit the solicitors available through the scheme, thus restricting the client's access to legal advisers. |
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| Once initiated, it appears that cases were dealt with in a similar manner to those outlined under Trade Union funding above. That is, the solicitors undertaking these cases tended to see the insurance company not the individual as the client and to make decisions on cases not on an individual basis but in relation to the larger volume of personal injury cases with which they dealt. |
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| As with Trade Union appointed lawyers, lawyers working under Legal Expenses insurance tended to be specialists in the area. This in turn influenced how cases were dealt with. |
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| Speculative fees |
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| Funding personal injury actions on the basis of a speculative fee is relatively rare in Scotland. The research shows that for solicitors, funding on this basis was only an option if the risks of losing were very low and the benefits of winning sufficiently high to counteract the possible risks. As fees are only payable if the pursuer wins the action, then the solicitor takes the risk of having to pay all the costs if the action is lost - including the defender's expenses. As these can be considerable, solicitors were clear that, expect in very rare cases where there was a public interest in the incident, they would only take a case on a speculative basis if there was a very good chance of considerable financial benefit. |
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| Speculative funding leaves the control of all aspects of the case - from initiation to settlement - in the control of the lawyer. Of course, all the risk is also with the lawyer, the individual pursuer faces no actual financial losses, whatever the outcome of the case. |
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| Impact on the Solicitor |
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| Funding source clearly influences the solicitor-client relationship and is an important factor in the advice that is given to the client. However, interviews with solicitors revealed that funding source also had an impact on the way that solicitors went about their work and the decisions they made. |
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| Legal aid funding |
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| In cases where the client is legally aided, the solicitor not only has to assist the client with the law but also the legal aid system. This includes helping the client understand how the contribution system works and the risks of having to pay the defender's costs if the case is lost. |
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| In this aspect, legally aided clients are similar to privately funded pursuers as both face directly the financial implications of their actions, albeit to different degrees. In the light of this it is interesting to note that solicitors varied in the extent to which they involved legally aided clients in decisions about the case. Some clients reported that they did not know the sum sued for. Some solicitors said that they would not always fully inform legally aided clients about all aspects of their case or of the legal aid scheme nor would they necessarily consult over all proposals to settle. |
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| Whilst some aspects of working for a legally aided client mirror the situation for privately funded clients, the fact that a case was covered by legal aid meant that solicitors knew that they would be paid for the work they had done, whatever the outcome of the case, even if part of this included a contribution from the pursuer. On the other hand solicitors in the study were critical of the level of remuneration in civil legal aid cases as compared with the private client rate or even those paid in England and Wales. |
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| One area of particular concern was the delay in waiting for reimbursement of outlays such as for medical or expert reports. Some solicitors reported waiting several years for this money to be paid. There were also complaints about the amount of administration involved in legally aided work. Solicitors working in firms which did less legally aided work reported that this area was subsidised by work funded through other channels. |
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| For these reasons, legal aid was not the preferred method of funding for solicitors, but one to be used when the client was eligible and no alternatives were available. |
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| Private funding |
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| Solicitors were very aware of the financial implications of litigation for privately funded clients and their concerns affected how they worked in various ways. Some solicitors said that they tended to consult more with privately funded clients and the advice they gave took account of the potential impact of financial considerations. Other solicitors reported that with privately funded clients they tended to look for ways of cutting their costs by reducing the work undertaken to a necessary minimum. |
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| An important aspect of working with privately funded clients was that the advice given had to take account not only of the fees and outlay costs incurred but also of the possible risk of paying the defender's expenses if the action was unsuccessful. |
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| Solicitors indicated that they often tailored their own requests for payment to suit the client where possible. Some solicitors reported that where the case involved an existing client, they would wait for payment of fees until the case was completed - taking a long term view that such 'favours' would help to facilitate the relationship with the client. Others phased payments so that clients could re-consider continuing with an action at key stages. |
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| By contrast, some solicitors reported that they would require an advance payment before proceeding with a case involving a new client. |
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| Trade union funded cases |
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| Solicitors working for Trade Unions tended to be highly specialised in personal injury work and to deal with large numbers of such cases. |
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| In interview, solicitors appeared to treat the funder as the client rather than the litigant. Once the case had been referred, it was the solicitor who took decisions on progress and when or if to settle. Decisions were made not only on the basis of an individual action but also with regard to the total volume of cases dealt with on behalf of the Trade Union. The solicitor acting in these cases did not have to take account of whether the individual pursuer could afford to initiate or continue litigation. |
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| This could benefit the individual litigant as Trade Union solicitors would often take some 'risky' cases to court as the funder expected them to do so. Other funders might have assessed the risks of such cases as too high or the chances of winning too low to risk litigation. |
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| Compared with private and legally aided clients, in Trade Union funded cases individual litigants were generally not consulted by the solicitor about cases. However, this did not appear to cause a problem for Trade Union pursuers. |
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| Solicitors undertaking Trade Union work would usually only be required to seek approval from the funder under specific circumstances (for example some Trade Unions required to be consulted before a Court of Session case was initiated). Trade Union funders could remove funding (and so end the case) but this seemed to be an unusual occurrence. Solicitors reported that Trade Unions were more content than other funders to take the risks of continuing cases where the chances of winning were less clear cut. |
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| Complaints about payments from Trade Union funders were few. Because solicitors generally dealt with a volume of cases for a Trade Union, the costs of an individual case were not an issue - it was the overall balance of costs that counted. Whilst most interviewees were happy with this arrangement, some complaints were made about the requirement in Trade Union work for solicitors to recoup their costs through recovering expenses from defenders - sometimes a risky venture. |
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| Solicitors also reported that Trade Unions expected them to take to court all the cases referred to them and as a result, cases were litigated which otherwise might not have been. This had the effect of increasing the overall losses incurred by the solicitor who had to recoup these from expenses recovered in successful actions. Getting the balance right between taking risks and keeping losses under control could be difficult. |
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| Legal expenses insurance |
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| Whilst few of the solicitors interviewed had experience of taking cases funded on this basis, Legal Expenses Insurance Schemes appeared to operate in a similar fashion to funding through a Trade Union - the client was seen as the funder rather than the victim, and the funder was responsible for passing cases to the solicitor and had to be consulted at key points in the litigation process. The difference between Legal Expenses Insurance funding and funding through a Trade Union was reported to be that working on a Legal Expenses Insurance-funded case, the solicitor was required to obtain the funder's permission before making decisions about the case, whilst Trade Union funders tended to allow the solicitor considerably more leeway and discretion. Therefore control of the case stayed very firmly with the insurance company and not with the lawyer. It is not clear from the research the extent to which Legal Expenses insurers or Trade Union officials or staff vetted cases before a referral to a solicitor was made. |
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| Speculative fee |
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| Where funding is on the basis of a speculative fee, legal fees are only paid if the litigant wins. Few solicitors in the study had experience of working on a speculative fee basis, but their responses clearly show that not only does all the decision making lie with the solicitor, so does the risk. The potential pursuer's role is little more than contacting the solicitor, after that point it is the solicitor who decides whether to take the case, and if so, how it should be run and settled. Decisions about speculative fee cases were based almost entirely on the financial implications for the solicitor. |
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| Other forms of funding |
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| Lawyers in Scotland/UK are not permitted to work on a contingent fee basis (ie to work for a proportion of any sum paid by the other side to the claimant). However, there is information from this study from interviews with a 'claims company' which negotiates personal injury cases on a contingency fee basis. This information indicates that most pursuers using this route had either no access to any other form of funding or had previously developed negative impressions of lawyers' services. The research demonstrated too, that the decision by the company to back a case was made on a commercial assessment of the risks and the size of the gains that might be made. |
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| Wider influences |
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| Impact on defenders |
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| Defenders in personal injury actions are usually experienced in this type of work and operate as 'repeat players' with a longer term interest in court actions than the individual case being dealt with at any one time. Repeat players are usually in a strong position in court, but the relative strength of defender and pursuer was significantly affected by how the pursuer was funded. |
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| Where funding was from a Trade Union or a Legal Expenses Insurance Scheme, defenders were often facing very experienced solicitors, acting on behalf of individual pursuers who faced no personal financial consequences for the action, in cases funded by bodies with more than simply a financial interest in one case to consider. This had a major effect on the relative power and bargaining positions of pursuer and defender. |
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| Where the pursuer was funded through legal aid, defenders knew that pursuers were in the position of having their costs met, even where expensive proofs were involved - a considerable advantage compared with the pursuer funding the case through private resources. However, this strength was tempered by chinks in the legally aided pursuer's financial armour - the personal responsibility for paying contributions to the costs of the case and the risks of paying their own and defender's expenses if unsuccessful. Both of these factors considerably weakened the pursuer's position in legally aided actions. |
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| Financial factors outwith the legal aid system could also have an impact on the bargaining position of the pursuer. For example, pursuers who were on State benefits were subject to 'clawback' whereby if the final award was greater than £2,500, the pursuer had to repay benefits received to the Benefits Agency 6. Where defenders were aware that the pursuer was in such a situation, this would be used to encourage the pursuer to settle for a lower sum. |
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| Funding and quality |
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| The question of the quality of client care is important to the study. This aspect of quality of service is assuming increasing prominence in the literature, not least because of its significance for client retention. Particularly in England and Wales, but to a lesser degree in Scotland, solicitors are required by their professional rules or guides to good practice to communicate effectively with their clients. This includes advising clients at the outset as to the steps which will be taken on their behalf and the likely scale of expense which will be involved. It is clear from the study that in many Trade Union and Legal Expenses Insurance cases, solicitors were not communicating effectively with the pursuer. Not a few individual clients were unaware that a court action had been raised by their lawyer. It seems that in Trade Union and Legal Expenses Insurance cases, the funder, rather than the individual was regarded as the true client. Whilst understandable in economic terms, the legal and professional basis for such a view is unclear. |
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| There was insufficient evidence to assess the extent to which different sources of funding led to different outcomes even though it was clear that funding source had an impact on crucial aspects of the case. Further work is required to assess any link between funding, trajectory and outcome if the issue of quality is to be properly assessed. |
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| Finally, consumer satisfaction is another important measure of quality, though one fraught with problems. In the current study, most pursuers were content with how they had been dealt with and complaints tended to focus on the system rather than the individual lawyer. However, it can and has been argued that consumers are not in a position to make full judgments about quality of legal performance, and that they are susceptible to judging the service on the basis of how their lawyer appears to perform rather than how good she or he actually is. |
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| Other factors |
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| Other factors which were crucial in determining how cases were dealt with had nothing to do with funding. Solicitors' experience and preferences were important. Those who preferred working in the Court of Session tended to take cases there; others preferred working in the Sheriff Court. Some solicitors preferred not to settle cases out of court and liked to litigate to get results in court - which was thought to be well regarded by the funders. Some had a particular image they wished to convey; getting 'good results' was important for credibility with the client, funder and for the solicitor's legal reputation. These factors were more significant for solicitors who were regularly in court, i.e. for repeat players. |
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| About this study |
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| This research was undertaken to look at how the way a personal injury action is funded influences the way cases are initiated, dealt with and concluded. The study was commissioned by The Scottish Office Legal Studies Research Group and was undertaken by a research team from The Law School at the University of Strathclyde. The team consisted of Professor John Blackie, Professor Alan Paterson, Dr Andrew Phillips and Dr Tim Squires. |
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| Interviews were conducted with a sample of pursuers and their solicitors who were involved in 45 personal injury actions raised in 1989. This time period was chosen to allow for most of the cases to have concluded by the time the interviews were conducted in 1992-93. Interviews were also conducted with others who have an interest in this area of law, including solicitors and advocates. |
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| 1 Cameron, G. with Johnston, R. Personal Injury Litigation in the Scottish Courts: A Descriptive Analysis, The Scottish Office Central Research Unit, Edinburgh, 1995. |
| 2 Similar studies in America suggest that this methodology is essential to gain a proper understanding of the area. |
| 3 Samuel, E. Personal Injury Cases Under Small Claims Procedure; The Scottish Office Central Research Unit, Edinburgh, forthcoming. |
| 4 Where the legal fees are paid only if the litigant wins. |
| 5 Fees are only paid on the basis of winning. In Scotland, one 'claims company' operates on these terms. |
| 6 Amended by the Social Security (Recovery of Benefits) Act 1996. |
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