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Guest post: Warning signs – Who’s to blame when commoditised legal services go wrong?

The recent Court of Appeal decision in Proctor v Raleys [2015] EWCA Civ 400 raises the interesting question as to whether commoditisation of legal services, which may lead to cheaper more accessible justice for consumers, should be held to the same professional standards as lawyers providing services in a more traditional manner.

Put like that, the answer seems to be a plain yes, though I am tempted to complicate the case by suggesting that, as long as consumers understand that ‘commoditised’ services are a riskier proposition (if indeed they are a riskier proposition), then a market for legal services might very sensibly allow a lower standard of service to be provided. There are signs in the research on wills and online divorce that consumers have something of a grasp of this, but I would not say it was a good grasp (yet).

In this case a personal injury claimant had a relatively straightforward claim for compensation which he pursued with a firm (Raleys) who tended to use questionnaires and standard form letters to communicate with their clients. These letters were long and gave the Court of Appeal (Tomlinson LJ gave the judgment) concerns about being misleading in that they failed to describe ‘service claims’ in a way that was clear.

For whatever reason, the claimant did not make a claim for ‘services’ (the cost of having to get someone to do his own gardening etc) when it seems he would likely have succeeded. There were a number of warning signs (especially in his medical evidence) that he might be able to make such a claim but, because the claimant did not tick the relevant box saying he wanted to make a services claim, Raleys assumed he did not want to make that claim. Subsequently, having accepted an offer settling the claim without making a service claim (and having definitely turned down another element of the claim he might have made which would have delayed his settlement) he decided to sue Raleys for negligence.

The case provides something of a lesson in how the evolution of legal case management systems needs to be adaptive to the humans it works with. Raleys clearly did try and adapt (they seem to have picked up the potential claim but were not able to say they spoke to the claimant about the point either in person or on the phone). They could point to three long standard letters where the potential to make the claim was explained to the claimant but that was not enough.

It is worth observing that not only were these letters pretty long, but using the Flesch–Kincaid readability score (which I did on the third letter) the letter did not fall into the category easily readable by a 13-15 year old using this test. According to the Wikipedia page on this test, insurance policies in the US are required to be written to something like this standard. Also the letter got a similar readability score to Moby Dick (although it was of course shorter). I don’t know about you, dear reader, but I’ve put Moby Dick down at Chapter One more than once.

Because the judge at first instance did not accept that the letters were misleading, it was submitted by Counsel for Raleys, ‘that it was not open to the judge to conclude that the solicitors should have done more to ensure that Mr Procter [the claimant] actually understood the advice he was receiving.’

It is worth observing also that (according to the judge at first instance):

…The Claimant had stated in evidence that his education was limited. Even if the Defendants were not aware of this they could have assumed that most miners were not highly educated. …it was clear from the documents …that the Defendants knew there were risks in accepting information from the clients at face value. …There is some indication from the Defendants records that they were regularly experiencing clients who had not notified them of a potential service initially, but changing their minds at a later stage on receipt of further information.

That evidence suggested the firm had changed its procedures to speak to clients in person or on the telephone when dealing with offers because, ‘more clients made claims for services if they actually spoke to the lawyer directly about the issue either in person or on the telephone.’ Given a series of warning signs that the client might have such a claim, the guts of Tomlinson LJ’s judgment is as follows:

In my judgment the situation here cried out for a short discussion with the client, preferably face to face, but if necessary over the telephone, in order to ensure that the client understood the circumstances in which a claim for [services] could be made. … [As calls were had with the client this could easily have been discussed]

I would add that, on the assumption that the client was responsible for payment of the solicitors’ fees, taking up the point in the course of these telephone conversations would have been likely to increase the cost to the client by only a trifling amount, if anything. At the hearing I was under the impression that Mr Procter had himself been responsible for Raleys’ fixed fees, and that Raleys would receive a fee in respect of advice concerning a services claim only in the event of a successful claim under that head. Closer perusal of the documents subsequent to the hearing leads me to wonder whether Mr Procter in fact had any potential liability for Raleys’ fees, as the documents seem to suggest that the relevant fees were paid to Raleys by IRISC. For the avoidance of doubt however I reject the notion that a solicitor should feel inhibited from ensuring that his client has understood advice given to him by the consideration that so ensuring might generate a further fee payable by the client.

While it is clear that Tomlinson LJ is suggesting that the solicitors cannot resist the idea that a client cannot be advised in person (or on the telephone) on an economic basis, and that they must so advise the client, in person or on the phone where the facts demand it, he is also doing so in circumstances where he can see that Raleys’ could readily adapt. It seems to me the judges may have been influenced also by the uncertainty over who had conduct of the file, although they do not say so explicitly. The judges also were plainly influenced by the series of warning signs that the Claimant probably did have a services claim and had not explicitly declined the opportunity to pursue it. Tomlinson LJ returns to the commoditisation point:

…Mr Pooles drew to our attention the difficulties posed for solicitors in modern conditions, where financial constraints may require them to ‘commoditise’ their advice to potential claimants. …The circumstances in which a claim for services could be made were not complex but as I have already pointed out not entirely straightforward. These letters in my view signally failed to give a clear exposition [on the services claim] …Furthermore, whatever may be the practical and economic constraints in conducting face to face meetings or telephone discussions with clients in claims handling of this nature, it is apparent that in this case there were at least two opportunities to give, without significant additional cost, a straightforward exposition …It is to the solicitors’ credit that their system did generate internal reference to these very matters. To impose liability for the failure to follow up the issues flagged in this way does not, to my mind, involve the imposition of an unrealistic standard. The solicitors were dealing with a client who could fairly be regarded as unsophisticated in the relevant field. The written advice given to him was unclear, and there were clear indications that it may not have been understood. It is not asking much of a solicitor in such circumstances to make sure that his client understands the opportunity apparently being passed up.

To my mind, this passage is important. What is being shown here is a system that is not, for a certain class of clients, effective; that Raleys knew they had a problem; and, that they failed to deal with it adequately. An attempt to pass the system’s inadequacy back onto the client failed and responsibility remained with the professional service provider. I think that is a good thing. Of course, there is a potential for injustice if the claimant had understood he was turning down a service claim, but that is a risk which Raleys can adapt to – apparently relatively cheaply- by having a better system. The interesting question will be whether other cases provide a better contrast between a rough and ready system which it would genuinely not be economic to run the other way. Tomlinson’s judgment seems to me to leave that question open, whilst leaning towards the view that lawyers’ will not easily push responsibility for errors back onto clients. Of course, such claims will not generally be brought, as rough and ready systems are likely to apply to minor cases, but it’s not impossible.

One further point is worth noting. Lawyers are not always notoriously brilliant communicators with lay clients. Traditional legal service providers might get an easier ride if they have had a meeting with a client and given them a muddled explanation of a services claim which a client then fails to pursue. In such a case, the commoditisers might be subject to higher standards: the judge is forcing on them something of a requirement to develop systems that clients genuinely understand. While I do not think the courts should close their minds to the argument that rougher justice may be necessary to make some types of case economic, they probably should resist for now attempts to shift the blame for negligence claims onto clients not filling in convoluted forms properly.


Gordon Exall has written an interesting piece on his excellent blog on the commoditisation argument which I think is important context. He says this:

The ‘economics’ of the situation makes for interesting reading.

According to the Mellor Hargreave’s Blog:

‘The fee income of Raleys as a result of handling these claims under the compensation scheme, which also included a scheme for respiratory disease illness, rose between 1999 and 2003 from £2.5m to £15.7m and £11.8m for 2004. Mr Firth and Mr Barber the two senior equity partners took respectively as their share of the profit for the years 2003, 2004 and 2005 a total of £9.9m and £7.2m.’

…Far be it for me to ponder on the economics of running a practice. However it appears likely that, for a tiny smidgeon, of that amount it would have been possible to hire at least one (and possibly several) fully qualified lawyers whose sole task was to explain settlements and offers personally to clients and ensure that the client understood what they could claim for. If I have misunderstood this I am sure that there is an accountant or solicitor out there who can put me right.

I too perused the Mellor Hargreaves blog and it says this:

Raleys handled in excess of 12,000 claims under the scheme. It is understood that in the region of 63% of the miners qualified to claim for services, yet this defendant only claimed for 20% of those. Notwithstanding the fact they submitted to the court this claim would not have been successful, their own statistics suggest that 97.2% of those claims submitted, were in fact successful.

If they are right, and I must emphasise it is an if, then the question raised is whether Raleys undersettled a raft of cases and whether that undersettlement was caused by the design of their system?

Richard Moorhead is Professor of Law and Professional Ethics at UCL, you can read his blog here.