Guest post by Paul Philip, chief executive of the Solicitors Regulation Authority
Philip: We’ve had worries for some time
Bulk litigation gained prominence in the 1990s when legislative measures were introduced to support its use as a way of increasing access to justice. Often at its core is a ‘no win, no fee’ agreement.
When this works well, it can be an excellent way to help the public gain access to justice. For example, it has enabled tens of thousands of people to defend and enforce their rights in equal pay cases, when alternative routes would quite simply have been unaffordable.
But for consumers to get the benefit, bulk litigation needs to be done well, and we are increasingly concerned that there are significant problems in some areas of this market.
We have had worries for some time, but recent cases, including SSB, have caused us to look under the bonnet and, while the picture is not yet complete, we have seen enough to persuade us that we need to begin to expose some of the problems we are finding.
Of course, we should be clear that there are some well-established firms working in this space doing good work to high professional standards and delivering all the benefits that consumers need and want. We hope these players will be willing to work with us and others to address the issues that are emerging and in doing so help to ensure the sector as a whole can deliver what is expected.
Recent regulatory activity
We have had concerns about pockets of bad practice for some time now. Last year, we fined a firm £45,000 for breaking our rules when handling mass bank refund claims. We also refreshed our guidance, issued a notice warning about risks relating to mass financial services claims, and introduced new rules to cap fees for this work.
Towards the end of 2023, we received reports from MPs that former clients were unexpectedly being pursued to pay costs in relation to their discontinued cavity wall insulation litigation claims. The clients had entered into the claims on a ‘no win, no fee’ basis backed by after-the-event (ATE) insurance to cover the other side’s costs.
However, the ATE insurance providers have declined to meet the costs under the insurance policy, with the applicant then being pursued for costs, sometimes for tens of thousands of pounds. It is a grim situation, causing significant distress for those impacted, some of whom were vulnerable at the time they made the claim.
This case raises serious questions about the solicitors involved and as you would expect we have a live investigation which we expect to complete early in the new year.
Wider sectoral concerns
The issues raised by recent cases caused us to look more broadly at the sector. We have been pulling together intelligence, talking to stakeholders, doing targeted visits to firms working on bulk claims, and have started a thematic review of this area.
We have not completed this programme of activity yet, but we have found a variety of issues which need to be addressed. These range from unstable business models and poor supervision of work to inappropriate use of expert witnesses. Our visits to firms have also exposed issues such as ‘cold calling’, lack of due diligence on clients or claims, and failure to keep clients and ATE providers updated with matters that affect their claim.
Where we find evidence of serious misconduct, we will of course take disciplinary action, and where necessary intervene and close down the firm to protect the public.
But intervention is a double-edged sword in this context because it may result in delay or disruption to the underlying claims, even where they are able to be handed over to another firm. In the event that cases are closed, it is possible that this crystalises action against consumers for costs, as in the case of SSB.
In short then, intervention can be a blunt tool and we will need to consider other options, where practicable. This could include, for example, working with a firm to monitor their practice under a compliance plan, placing conditions to restrict practice or requiring specific outcomes.
Our decision in each case will focus on what is in the best interest of clients while managing risks and also protecting the wider public. We are actively working through possibilities as we reach conclusions on each set of issues we are finding.
You should expect to see and hear more of this work in the coming months. We will take action where the public needs protecting and do whatever else is necessary to make sure the high professional standards we expect of firms in this market are crystal clear.
We expect firms to examine their approach to this kind of work in light of all this and get ahead of any areas of weakness. We will be happy to work with those who need support or want to discuss issues they identify.
Bigger than legal regulation
Our work so far has also identified a variety of issues that extend beyond legal regulation. In particular, there are emerging concerns that relate to the regulation of surveyors and third-party litigation funders, as well as the role of after-the-event insurance. The emerging picture raises concerns that are cross sectoral and likely to require policy changes.
The Civil Justice Council is already looking at the model of third-party funding and we welcome this. But we think there will be a need for action across a wide variety of players and this is why our chair has written to the government raising our concerns.
It is in our view critical that we work together to ensure that consumers can reap the benefits of bulk litigation and have trust and confidence in what is a critical tool for delivering access to justice.
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