High Court cases against solicitors drop 47% in a year
There was a 47% fall in the number of High Court cases brought against law firms in the last year to 221, down from 418 in 2014, but much of the pain from last year’s spike in cases is yet to be fully felt, says RPC, the City-headquartered law firm.
RPC says that the drop is due in large part to a fall in the number of cases arising out of the financial crisis, as the legal time limit on bringing a claim has now passed in the vast majority of instances.
However, RPC says that there is a large amount of potential litigation sitting in the background that arguably skews the statistics.
Much of this potential litigation involves property or conveyancing disputes over subprime mortgages originating during the financial crisis. Solicitors who contributed to clients purchasing these property assets at inflated valuations have found themselves subject to professional negligence claims, often running to hundreds of thousands of pounds, if not into the millions.
RPC explains that many of these cases are now subject to ‘standstill agreements’ which freeze the case without settling or dismissing it. This means that many of the costs involved are yet to be incurred and suggests that the official figures may not be entirely reliable as an indication of a drop in claims against the profession.
Joe Bryant, Partner at RPC, says: “The drop in the number of new cases is substantial but it does not mean that solicitors have seen the back of recessionary claims just yet.”
“A large number of property and conveyancing cases are still sitting there dormant for now, whilst the Claimants and their legal teams accumulate the evidence they need to bring their cases in front of a Court".
“The idea behind standstill agreements is that they give Claimants some extra time over and above the official time limits within which to finalise their investigations, in circumstances where they would otherwise be forced to start litigation and incur expensive Court fees and other legal costs.
“However, another effect is to keep the cloud of litigation hanging over the Defendant's head, so they are only used sparingly. Sadly, due to the volume of claims that institutional lenders have pursued against solicitors and valuers since the recession began, we have seen a significant number of requests for these agreements over the past year or so, as Claimants have struggled to get all of their claims up and running within time.”
Lawyers who specialise in suing lawyers behind many new cases
Although the 221 negligence claims brought against solicitors in the last year is down on the year before, it is still a 55% increase on the 143 cases brought in 2012-13.
RPC says that another reason why this is the case is that many new claims are being brought by specialist law firms who sue other solicitors on behalf of their former clients. The typical allegation being that the original solicitor failed to obtain the best financial settlements for the client in their own case – so called ‘under-settlement’ of claims.
RPC says that the two major categories of claims are:
- Ex-wives disappointed with their divorce settlements – particularly regarding the inadequacy or lack of any pension-sharing agreements
- Litigation supported by unconditional fee, also known as ‘no win, no fee,’ agreements – with many claims relating to harm caused by industrial processes such as the long term use of vibrating tools
Joe Bryant continues: “These cases are being brought on an industrial scale, on the back of carefully-targeted advertising campaigns to bring the claimants through the door.”
“Given that the Court rules don't require the loser to pay the winner's legal costs until the matter reaches formal litigation, firms are launching into often spurious scatter-gun cases without starting Court proceedings, purely in the hope of getting a low 'nuisance' payment, free of any down-side if they fail.”
“Ever-improving legal software is also making it far easier for claims to be launched against solicitors on a large scale – it is now far quicker and cheaper than it might once have been both to produce volumes of largely formulaic claim correspondence and to run huge caseloads using largely junior staff.”
"The quality of the claims is not necessarily very high but it is a low cost way of pursuing a high volume of litigation. Whilst perhaps only one in fifty claims reaches litigation, the whole approach places a huge burden both on the firms being targeted and their professional indemnity insurers, and associated insurance premiums.”
“A pilot scheme for dealing with relatively straightforward claims against solicitors in a more cost-effective way is ongoing, and it is hoped that this might result in fewer of these ‘commoditised' claims being initiated.”