Response of the. Bar Council of England & Wales. To the Consultation Paper CP13/10

Transcription

1 Response of the Bar Council of England & Wales To the Consultation Paper CP13/10 PROPOSALS FOR THE REFORM OF CIVIL LITIGATION FUNDING AND COSTS IN ENGLAND AND WALES Implementation of Lord Justice Jackson s recommendations Page 1 of 86

2 Contents 3 I: INTRODUCTION AND EXECUTIVE SUMMARY The Bar Council Executive Summary II: THE APPLICABLE PRINCIPLES The problem defined Proportionality Access to Justice A coherent package Specialist areas III: COMMENTS ON SPECIFIC QUESIONS Success fees ATE insurance The proposed increase in general damages for PSLA Part Qualified one way costs shifting The alternative packages Proportionality (revisited) Damage based agreements Other specific points IV: CONCLUSIONS AND A BETTER WAY FORWARD? Appendix A Response to the specific Consultation Questions Page 2 of 86

3 I: INTRODUCTION AND EXECUTIVE SUMMARY The Bar Council 1. This is the response of the General Council of the Bar of England and Wales ( the Bar Council ) to the Consultation Green Paper Proposals for the Reform of Civil Litigation Funding and Costs in England and Wales. 2. The Bar Council is the governing body for all barristers in England and Wales. It represents and, through the independent Bar Standards Board, regulates over 15,000 barristers in self employed and employed practice. Among its principal objectives are to ensure access to justice on terms that are fair to the public and practitioners, to represent the Bar as a modern and forward looking profession which seeks to maintain and improve the quality and standard of service to all clients, and to work for the efficient and cost effective administration of justice. This response is made by the Bar Council acting in its representative capacity, in the public interest. 3. This response has been prepared with the benefit of detailed and specific representations made by a number of the Specialist Bar Associations including: (a) Constitutional and Administrative Law Bar Association ( ALBA ) (b) London Common Law and Commercial Bar Association ( LCLCBA ) (c) Personal Injury Bar Association ( PIBA ) (d) Professional Negligence Bar Association ( PNBA ) (e) Commercial Bar Association ( COMBAR ) (f) Technology and Construction Bar Assocation ( TECBAR ) (g) Northern Circuit Commercial Bar Association ( NCCBA ) (h) Chancery Bar Association ( ChBA ) This response also draws important material from contributions by the: (i) Midland Circuit (j) North Eastern Circuit (k) Northern Circuit (l) Western Circuit (m) The Legal Aid Sub Committee of the Bar Council. Page 3 of 86

4 4. In addition to the above representative bodies, we have also received valuable contributions from individual practitioners. 5. We should also say that each of the specialist bodies will be putting in responses to the MoJ consultation. Whilst we do address certain points which are relevant to particular specialist areas of the bar, for a more detailed exegesis of the particular concerns of the relevant specialism, and more detailed information, the MoJ is also referred to the various papers from the Specialist Bar Associations. Executive Summary Key concerns and questions. 6. In the remainder of this summary, we set out a summary of the thinking that informs our response. However, we think it may be helpful if we set out the key concerns that need to be addressed. (a) We agree that in some areas of the law costs and by this we mean base costs, or actual costs, as opposed to other funding costs are excessive and disproportionate. We also agree that steps must be taken to curtail this, and indeed such steps are being taken. (b) The need for reduction of excessive cost must be distinguished, however, from issues as to funding of litigation. Here, the question is not how much should the costs be, it is who should pay those costs. Whilst the two questions are related, they are distinct. They are not informed by the same considerations. Questions relating to the how much should not obscure the more fundamental question of who. (c) The object of all of these steps in combination must be to ensure that claimants have adequate access to justice, on the one hand, and defendants have adequate protection against frivolous claims, or excessive costs, on the other. Definition and differentiation. 7. It is quite clear that different types of litigation involve different considerations, and that in litigation one size most certainly does not fit all. Any reforms that are made must therefore be clearly targeted. 8. Those reforms must be targeted to solve problems that are clearly defined, and in particular must be targeted to the types of litigation in which costs are said to be excessive. There are many areas in which costs are not said to be disproportionate, and in such areas reforms may be unnecessary, worse still, they may be positively undesirable. We consider what areas these are in the body of this response. Unintended consequences must be avoided. Page 4 of 86

5 Base costs vs funding costs. 9. It is necessary to draw a clear distinction within the current system between the actual costs of a piece of litigation the base costs and the costs of funding litigation as a whole represented by the success fee and the ATE premium. Base costs. Reductions in base costs. 10. We entirely agree with the Government that the actual base costs of litigation, where they are too high, should be brought down by whatever means possible. Many initiatives in this respect are under way, many of which are discussed in the body of this response. We would welcome the opportunity to participate in the design of further such initiatives. The size of the costs pie should be as small as possible. Base costs: recoverability. 11. Having reduced the base costs insofar as possible, it is necessary to ask to what extent such base costs should be recoverable ie how the costs pie should be split. We are in favour of a more stringent approach to taxation, to ensure that it is only costs which are in truth reasonable which are recoverable. We are also in favour of much clearer guidance to parties in advance, and to judges and tribunals, as to what should be regarded as reasonable (always leaving an element of discretion to take care of the particular facts of the individual case). 12. We are not however in favour of Lord Justice Jackson s revised definition of proportionality. If it is necessary to incur a cost to achieve a recovery, then it cannot be right, in our view, that just because the overall costs look high in comparison, for example, to the amount in dispute, some or all of that cost should be irrecoverable. If a cost is necessary, that is because the system that is in place makes it so. If the cost of vindicating a right through that system is too high, then the system must be changed. The Claimant should not have to bear the cost of a faulty system. The speed and method of reform. 13. As we have indicated already, there are many costs savings initiatives which are already in place. Those initiatives are however in their very early stages. In our view the impact of such initiatives should be awaited before any more fundamental reform is decided upon. 14. We note in this context also that the impact assessments carried out are at a very basic level. Page 5 of 86

6 Access to justice and its importance. 15. Having reduced the base costs, the next question is how litigation is to be funded, and how to reduce the costs of such funding. We turn therefore to funding mechanisms. We start however by emphasising the importance, in ensuring access to justice, of fair and full funding mechanisms. 16. The Government recognises, in both this Consultation Paper and in the Consultation Paper on the Reform of Legal Aid (CP 12/10) that access to justice is, as it is put in the Legal Aid paper, a hallmark of a civilised society 1. We agree. Funding mechanisms and related questions. 17. With that preliminary comment, we turn to make more detailed comments on funding. By the costs of funding we mean the success fees and ATE insurance premia. Those fees fund litigation in the following ways: (a) Lawyers are entitled to charge success fees so that they are able to take on cases which lose on a contingency fee basis. The extra amounts earned in cases in which the claim succeeds fund the costs of representing those whose claims fail. (b) ATE insurance protects claimants against the risk that they may lose and have to pay the other party s costs. If they win, the recoverability of these premia transfers this risk which has not eventuated to the losing party. 18. There are three interrelated questions here. (a) In principle, who should bear the costs of funding litigation and allowing access to justice? (b) Does the manner in which the responsibility for funding litigation is arranged impact on the quantum of base costs, and funding costs? (c) Does the manner in which responsibility for funding is arranged place undesirable bars on meritorious litigation, or give inappropriate incentives for litigation? 1 Paragraph 1.2, CP 12/10. Page 6 of 86

7 The approach in principle. 19. The question under this head is, in essence. simply who should pay for the costs of claims which seem meritorious, but which, for whatever reason, eventually fail? 20. Prior to the Jackson reforms, the position was as follows: (a) Successful Claimants obtained 100% damages. (b) Unsuccessful Claimants paid either nothing or some part of the ATE premium, depending on the structure of the ATE insurance industry and the type of ATE insurance taken out. (c) Successful Defendants obtained their costs, from the ATE insurer or the Claimant in practice the ATE insurer. (d) The costs of funding (ie success fee and ATE premium) were met in whole or in large part) by unsuccessful Defendants, who paid the success fee and the costs of the ATE premium, together with its own costs. 21. If all the Jackson reforms were to be implemented (leaving aside the potential qualifications in relation to QOCS), then: (a) The successful Claimant obtains less than 100% damages; the damages obtained will be reduced by the amount of the success fee plus the amount of the ATE premium. A slight increase in damages for pain, suffering and loss of amenity ( PSLA ) (which will in practice be a small amount) will pass on some small part of this to the unsuccessful Defendant. (b) The unsuccessful Claimant obtains nothing, pays nothing to his or her solicitor and does not pay the successful Defendant s costs. Depending on the structure of the ATE insurance taken out, the unsuccessful Claimant would either pay nothing, or would pay the amount of the ATE premium, if and insofar as ATE insurance is necessary as to which see below. (c) The unsuccessful Defendant pays its own costs and a small amount of increased damages to the Claimant. (d) The successful Defendant pays its own costs. 22. The net result of this is that: (a) The base costs of litigation remain unchanged. Page 7 of 86

8 (b) The costs of funding remain the same (unless the change in responsibility for payment leads to a reduction through market forces, a matter discussed below). (c) The costs of funding are transferred from unsuccessful Defendants to successful Defendants and successful Claimants. 23. We see very little logic or sense in this result. The wrongdoer profits by the change at the expense of those whose rights have been vindicated. 24. It should also be borne in mind that the majority of Defendants, at least in personal injury actions, which form the vast majority of cases in which CFAs are used, are insured. Insurers are of course those best able to spread the risk by increasing premia across the board. Changes in the quantum of base costs introduced by changes in funding arrangements. 25. First, there is the suggestion that if Claimants have more of a stake in the litigation, they will police costs more carefully. As we indicate below, whilst there is some force in this argument, we think that force is limited. Claimants themselves often have little control on the quantum of costs though they do have control over whether to litigate at all. We address this latter point below. 26. Conversely, the extent to which unsuccessful defendants are liable to contribute towards the costs of unsuccessful claims is, to a large extent, in their own hands. They choose whether to admit liability or to make an appropriate offer. The sooner they do so the lower their liability in costs. By way of contrast, successful claimants have relatively little control over the extent to which they have to incur costs in order to vindicate their claims. That will depend upon the approach of the defendant. To an extent, therefore, unsuccessful defendants under the present costs regime have only themselves to blame and the present cost shifting regime provides an incentive for defendants to make early admissions and offers. We should recognise that costs, often significant costs, will be incurred by claimants before defendants are even aware of an impending claim and offer to work on measures requiring early notice of potential or intended claims to potential defendants so as to enable them to make any admissions or offers they think appropriate before significant costs are incurred. Changes in the quantum of funding costs. 27. As we have noted, the costs of funding are the success fees and the ATE insurance premia. Page 8 of 86

9 28. Dealing first with success fees, the question here is whether the change will lead to increased competition and lower success fees. There is no real research material to suggest this will be the case. Instead, the changes are likely to lead to riskier cases (ie those that might have justified higher success fees) not being taken on at all. 29. Turning to ATE insurance, the position is more difficult. (a) First, will the need for ATE insurance be removed or reduced by the introduction of QOCS? For reasons that we elaborate on in our paper and the answers we give to the CP questions, we doubt whether the need for ATE insurance will in fact be obviated. Whether premia will reduce to take account of reduced risk is more difficult to predict; and again there is no proper impact assessment on this. (b) Secondly, is the ATE insurance market satisfactory at present? In our view, the market is not a true one, and it is likely that premia are in general too high, and in some cases far too high. That is, at least in part, because the party negotiating the premium is not necessarily the party who is funding the premium, particularly in cases where the insurance is on terms which only require payment of premium if a claim is successful. 30. We would therefore anticipate that the costs of funding might be reduced to some extent if the changes suggested by Lord Justice Jackson were implemented. Claimant behaviour: A stake in the litigation. 31. Lastly under this heading, we turn to the impact on Claimants of the change in funding requirements. Here, the question is whether more unmeritorious claims will be weeded out by reason of the change in responsibility for funding costs. 32. In general terms, we agree with the suggestion that the Claimant should have a stake in the litigation. We are doubtful as to whether the Claimant does have any great control over the quantum of costs once suit is brought, but of course accept that what the Claimant does have control over is whether to bring suit. At this point, it is our view that the Claimant should have to make a choice which involves an element of risk on the part of the Claimant in going forward with the litigation. 33. Whether the reforms proposed in the CP will achieve this is another matter, however. (a) At present, the presence of ATE insurance acts as a brake on litigation, since ATE insurers require independent opinions on the merits before agreeing to give insurance. Page 9 of 86

10 (b) QOCS will be likely to affect this substantially. We believe that the introduction of QOCS will remove a substantial brake to litigation. (c) On the other hand, it may be said that removing recoverability of success fees may lead to increased scrutiny of claims by lawyers, and thus impose some alternative brake to litigation in cases which are clearly lacking in merit. We doubt whether lawyers are in fact taking on cases which are clearly lacking in merit, however. Access to Justice. 34. Turning from deterring litigants who should not be litigating to deterring litigants who should be litigating, we take the view that the impact of the changes in funding arrangements would inevitably be to reduce access to justice, and reduce access to effective justice in particular. (a) The removal of recoverability of the success fee will mean that it will clearly be less likely that Claimants will run the risk of uncertain litigation, since the damages potentially recoverable will be reduced. (b) For reasons we discuss elsewhere in this paper, it is likely that the uncertainties inherent in the system in relation to QOCS, together with the disbursements which may have to be expended in the litigation (often very substantial) will mean that it remains necessary to take out ATE insurance, the premium for which will be irrecoverable. Again, this will reduce the ability of the claimant to litigate. The impact assessments. 35. The impact assessments produced in support of the proposals are entirely inadequate, in our view. They contain no figures, and the text in each one is entirely general, simply assuming in many cases the efficacy of proposals rather than providing support for such an assumption. In particular, we feel that there needs to be a full and proper impact assessment of the effect on the disabled, particularly those disabled by virtue of clinical negligence. Funding: concluding remarks. 36. In conclusion, therefore: (a) We think it possible that the costs of funding might be reduced to some very limited extent by the introduction of the Jackson proposals. However, the extent of such cuts is at present wholly speculative. (b) We do not think that the changes will impose brakes on inappropriate litigation. We think in fact that the opposite is likely to be the case. Page 10 of 86

11 (c) We think that the price of any reduction in funding costs is that those costs (even if reduced) are imposed on the wrong people. (d) Finally, and perhaps most importantly, we take the view that the proposals are likely to have a significant impact in reducing access to justice. Particular types of dispute. Larger commercial claims. 37. We include in this category all large commercial disputes, whichever Court the matter is decided by. Such disputes will involve most of the claims in the Commercial Court and TCC, and many disputes in the Chancery Division and general Queen s Bench Division. Where we use the word commercial, we should be taken to include these types of dispute, wherever determined. Whilst there may be some difficulties of definition, we are of the view that such disputes are readily identifiable. 38. In relation to these types of claim, then, in general terms, there is no perceived problem of excessive costs, and, again in general terms, no potential problem of access to justice. As we go on to consider in the body of this response, we are broadly in favour of abolishing the recoverability of success fees and ATE premia (which are not in use to any significant degree in any event). We are against the introduction of QOCS and the suggested changes to Part 36. Both of these proposals are not merely unnecessary but are positively undesirable. Smaller personal injury claims. 39. We understand that much of the perceived problem has to do with these cases, and in particular the (very small) subset which come to trial. In this regard, we would comment as follows: (a) It is very important that the base costs in these cases are reduced. The expansion of the fast track will, in our view, achieve a reduction. However, we believe that there is ample margin for procedural reform over and above that made to date. (b) It is also important, in our view, that early settlement in these actions be promoted. In this regard, in relation to this type of claim, we welcome the proposals in relation to Part 36 made by Lord Justice Jackson. (c) Thirdly, it is important to ensure that there is an adequate brake on litigation. It is not, in our view, correct that a Claimant should be able to enter into litigation without any risk at all. We have doubts as to the QOCS proposals in this regard. Those proposals are, in effect, a Page 11 of 86

12 counterweight to make up for the loss of the recoverability of the success fee uplift and ATE premium. We consider that: i. A better solution would be to retain 2 way costs shifting, but to retain recoverability of success fees and/or ATE premia, in whole or in part. ii. Reductions in base costs will reduce the burden of such success fees. iii. Fixed success fees will also have (and have had) an impact in reducing the burden of such fees. (d) In considering all of the above, it is in our view extremely important to ensure that: i. Claimants have adequate access to justice. In this type of case, alternative funding is in general not available. ii. Claimants are not forced to give up large parts of their damages to fund litigation, particularly where those damages are far from generous, and are needed to provide compensation to Claimants. (e) Overall, we would favour: i. Retention of the current system, but with further steps being taken to ensure that base costs, and ATE premia, are reduced as far as possible. ii. Alternatively, the retention of the current system in relation to success fees, but with recoverability of ATE premia to be either reduced or excluded. Larger personal injury claims, with particular reference to clinical negligence. 40. Problems of disproportionality are, in our view, less evident in large claims. 41. Quite apart from this, however, clinical negligence claims raise, in our view, very specific considerations which give rise to significant concerns and which make the proposed reforms particularly dangerous in relation to this class of case. (a) Many such claims are currently legally aided, reflecting the significance that is accorded to the need to protect such Claimants. The current proposal is to abolish legal aid. That means that the private funding system is now required to take over, and thus it is doubly important that the system remains structured in such a way as Page 12 of 86

13 to enable adequate access to justice. We remain entirely unconvinced, for reasons set out in the body of this response and also addressed in our response to the Consultation Paper on the Reform of Legal Aid in England and Wales, that this is the case. (b) Claimants in this type of claim are often amongst the most vulnerable in society, including in many cases children. The claimant will have the most pressing need to retain damages to pay for care over what may be many years. We would therefore strongly resist any change in the system which requires the Claimant to pay for the costs of litigation out of the damages awarded. (c) These cases are complex and are very often expensive, because of the need for expert input. Moreover, it is often very difficult to judge the merits of claims without significant expenditure at the outset. (d) The Defendant in many instances is the National Health Service, which has significant resourcing. There is a severe risk of inequality of arms in such cases. Indeed, the very fact that victims of clinical negligence have suffered at the hands of the state is a further factor taking their claims out of the ordinary run of what the Consultation Paper calls simple money claims. (e) We note that proceedings where clients are primarily seeking monetary compensation are thought not generally to be of sufficient importance to merit public funding. We suggest that that is a rather crude generalisation. The degree of injury of claimants in clinical negligence claims will vary, but, obviously, in some cases it will be of the highest order. What claimants in such cases are seeking is not so much compensation, but funds to enable them to try to live with the consequences of the negligence of one or more clinicians whose duty was to care for them. While in a claim for damages for breach of a commercial contract an award of damages may provide complete redress in that the injured party will be put back into the position in which he would have been had the contract not been broken, the position of a successful claimant in a clinical negligence case will usually be very different. The award of damages will contain an award of general damages which is supposed to provide compensation for pain, suffering and loss of amenity. However, the main element will usually be special damages which will enable the claimant to try to live with the long term consequences of his injuries. Those injuries will remain. (f) While the potential seriousness of issues raised in some clinical negligence claims is acknowledged in paragraph of the Consultation Paper, we suggest that insufficient thought has been given as to why they are not just simple money claims. On the Page 13 of 86

14 contrary, we believe that the particular problems faced by victims of clinical negligence in obtaining access to justice mean that the state would be failing in its duties under Article 6.1 if some form of assistance by way of civil legal aid were not available: see Airey v Ireland 2 EHRR 305. Public law, defamation and other area which raise special considerations. 42. These sort of cases raise special considerations. The areas of law include public law, defamation and actions by insolvency practitioners. The types of special consideration, which are addressed further in the text below, include the following. (a) Often the claimant is seeking to vindicate more general public rights and not merely personal rights. (b) Damages are either not a consideration or not the major consideration. Damages claims are rare. (c) The use of CFAs is common, and a necessary prerequisite for such actions to remain viable. 43. We think that a separate defined system for such cases is warranted. Other claims which are currently legally aided: housing and social welfare cases. 44. The Government is proposing to take out of scope a number of types of dispute which have a particular impact on the disadvantaged, working on the principle that the CFA system will be usable in relation to such cases. However, social welfare cases are quite different from personal injury and other damages claims: (a) Damages are rarely the primary objective of the litigation. (b) Where damages are sought such as for housing disrepair or breach of covenant of quiet enjoyment, these will rarely be substantial. Even were damages to be increased by 10% increase, there would only be a modest sum from which any success fee could be extracted. (c) The market for ATE is more limited and more expensive given the nature of these claims. (d) Most Before the Event ( BTE ) insurance policies are unlikely to cover these claims. (e) Special cost rules are required as the successful outcome is rarely a monetary one. Page 14 of 86

15 45. Lord Justice Jackson s report recognised that these were very different disputes and proposed reforms to be made in tandem with the retention of legal aid. These proposals are not being carried through, and yet legal aid is being cut. We are very concerned that the result of the proposed changes of the Consultation seems to be to reduce litigation costs for defendants in these types of dispute not the type of dispute that Lord Justice Jackson had in mind at all at the expense of the most vulnerable litigants who will be denied access to justice. II: THE APPLICABLE PRINCIPLES. 46. We set out in the body of this response the principles which we have sought to apply in answering the questions posed in the consultation paper, and the concerns which we believe ought to inform the Government s considerations. In the Appendix to this response, we then seek to answer each of the various questions posed by the Consultation Paper in turn. The problem defined. 47. We start by asking what the problem is that the measures addressed in the consultation paper are designed to address. Lord Justice Jackson, in the foreword to his report, put it in this way: In some areas of civil litigation costs are disproportionate and impede access to justice. I therefore propose a coherent package of interlocking reforms, designed to control costs and to promote access to justice. 48. Every part of this description of the problem needs to be borne in mind in considering the desirability of any reform. We address each aspect, and deal below with the following topics. (a) Proportionality. (b) Access to justice. (c) A coherent package of reforms. (d) Specialist areas. Proportionality. Proportionality and funding. 49. The first point to note is that much of the Jackson report does not directly concern ways to reduce costs. Instead, it has to do with who pays the costs of litigation and, in particular, who pays the costs of those claims which fail. Thus, under the current system in which conditional fee uplifts and ATE premia are recoverable from Defendants in costs, the Page 15 of 86

16 unsuccessful Defendants pay the costs, not only of the successful claims, but also the costs of the unsuccessful claim of other claimants. Under the new proposals (where the uplift and ATE premia are not recoverable), the successful Claimants will pay the costs of the unsuccessful claimants, whilst QOCS will mean that successful Defendants will not receive their costs. 50. Although the quantum of costs and the funding of those costs are to some extent linked, they are separate questions, and must be looked at separately. We begin therefore with the question of how to reduce costs. The quantum of costs and how to reduce costs. The importance of base costs. 51. Here, although it is an obvious point, the first point to make is that the most important step to take would be to reduce the base costs of litigation. To take the example of personal injury, where a 100% uplift is charged, for every 100 knocked off base costs, 200 is knocked off the overall costs bill. The Bar Council supports measures which are designed to reduce the costs of litigation, and to ensure that litigation is run more efficiently. Steps to reduce base costs. 52. We turn therefore to consider various steps which could, and we believe should, be taken to ensure that base costs are reduced as far as possible. 53. First, we think that active case management, and costs management, by the Courts is essential to ensure that costs are reduced. We note that the pilot scheme in the Birmingham Mercantile Court is set to be introduced to every mercantile and construction court by Easter 2011, and welcome this. Our understanding from those who have had experience of the system in operation is that it is, overall, working well. 54. Mediation is also, in our view, a resource which might usefully be considered in more cases. We are aware that the government is aware of the advantages of mediation. We, for our part, would echo the words of Lord Neuberger, who spoke of the proper role for mediation being one which focuses on its proper function as an adjunct to justice, as a complement to the justice system and not as a substitute for effective access to justice 2. We are of the view that, as an adjunct to litigation, mediation has a valuable part to play in reducing Court costs. 55. Next, we would draw attention to the Portal system set up by the Ministry of Justice to reduce costs in road traffic cases in which liability is admitted. That system (which may be found at 2 Gordon Slynn Memorial Lecture, 10 November Page 16 of 86

17 is designed to ensure that cases in which there is no dispute on liability can be dealt with rapidly and at minimal cost. In our view, systems of this sort, which involve the use of technology and the rapid exchange of information to enable informed decisions on settlement to be made as early as possible, are likely to be very helpful in reducing the costs burden. Again, it is the view of the Bar Council that the efficacy of this scheme should be monitored as rapidly as possible, with a view to determining whether the ambit of the scheme can usefully be expanded. 56. Fourthly, it is our view that the use of costs capping orders should be increased. Although, of course, it is necessary to ensure that a residual discretion remains to remove a cap if it can be shown in an individual case that this is necessary, a Claimant or Defendant that knows that it must work to a budget is far less likely to engage in conduct which causes unnecessary costs. At present, we believe that there are significant problems in obtaining such orders. Again, this is a matter on which we would be very pleased to work with both the government and the judiciary, in order to improve the viability of such orders. 57. Fifthly, we draw attention to the recommendation of Lord Justice Jackson that referral fees should be outlawed. This is a recommendation that, again, the Bar Council endorses. 58. Sixthly, we turn to the proposed reforms to Part 36. In this regard, as in other areas (this being a point we return to later in this document), we believe that a distinction must be drawn between different types of litigation. 59. As regards larger claims, such as commercial claims and the majority of claims in the Technology and Construction Court, we take the view that the proposed reform to Part 36 is unnecessary, and, indeed, undesirable. We set out the detailed reasons for this in the separate section dealing with Part 36 below. 60. Conversely, in the area of personal injuries, including clinical negligence, we think that the proposed changes would be beneficial. There is a clear perception amongst practitioners in those areas that Defendants (and, where applicable, their liability insurers) need to have as clear an incentive as possible, to consider the claim and bring any offer of settlement to the table as early as possible. Whilst the sanction may be regarded as punitive, in such cases the end justifies the means. 61. Apart from Part 36, we believe that consideration should be given to other means of promoting early settlement. 62. Our seventh point relates to the use of the fast track and fixed costs in the fast track. We support the suggestions of Lord Justice Jackson that fast Page 17 of 86

18 track systems should be introduced in various areas in which they do not currently exist. Thus, by way of example, he suggested that the TCC introduce a fast track system. In the commercial sphere, he suggested various changes to the Mercantile Courts, designed to improve their accessibility and cost efficiency, which again we support. 63. In addition, he recommended fixed costs in the fast track. Once again, our view is that this recommendation is a useful and valuable one, and is likely to decrease costs. Just as in the case of costs capping, working to a budget is in our view likely to prove a useful discipline. 64. Next, and our eighth point, is that a number of the reforms proposed by Lord Justice Jackson in particular areas have already been implemented, but there has not as yet been time to determine the effect of those reforms. 65. Examples include clinical negligence, a particularly difficult case for reasons which we address later in this paper. These included: (a) penalties for NHS authorities which fail to provide copies of medical records without good reason (this should impact directly on the costs incurred by legally aided claimants in investigating claims); (b) an increase in the time for a response to the protocol letter of claim (the intention is that greater thought be given by defendants leading to more and earlier settlements, again reducing claimants costs); (c) a requirement that the NHSLA obtain independent expert advice at that stage in relation to all save frivolous cases rather than, as to date, relying on the views of the clinicians who were alleged to have been negligent (again, this should put an end to or at least substantially reduce the all too common experience of our members that the NHSLA fights cases which should have been settled at an early stage; again, if successful, claimant s costs should be reduced); (d) a system for identifying and reporting cases where the defendant body had failed to address the issues until late in the day (by when costs had been run up on both sides) (again, this should lead to more earlier settlements) (e) specific costs management measures for clinical negligence cases; and (f) implementation of the NHS Redress Act 2006 (which provides for a scheme to be administered by the NHSLA in relation to low value clinical negligence claims with claimants lawyers receiving fixed fees). Page 18 of 86

19 66. No doubt these examples could be multiplied. The important point is that steps are being, and must continue to be, taken to reduce the base costs of litigation in any way possible. The Claimant s stake in the litigation. 67. It is suggested that the Claimant, under current arrangements in litigation funded by conditional fee arrangements, has an insufficient stake in the litigation and thus no incentive to exercise control over the costs incurred in the litigation. (a) If the Claimant loses, then the ATE insurer will pay the Defendant s costs and the Claimant s disbursements, and the solicitor will not be entitled to any costs from the Claimant. (b) If the Claimant wins, then the Defendant will pay all of the costs, including the ATE premium, paid for protection against the risk of losing and having to pay costs. 68. We believe that this point has some force. However, we would make the following points, in relation to the question of the quantum of costs 3. (a) The ability of the Claimant to control costs is limited. (b) Recoverable costs (if properly assessed), are, in any event supposed to be limited to those which were reasonably incurred and proportionate. Accordingly, Defendants already have some protection against excessive costs. Recoverability of costs. 69. This last point takes us on to a second question. Thus far, we have been considering the quantum of costs. The next question is to what extent should costs be recoverable from Defendants. In this section, we are concerned with recovery of base costs. We deal with recoverability of success fees and ATE premia later, in the context of funding. A revised test of proportionality? 70. Lord Justice Jackson reviewed the concept of proportionality and the approach of the Courts to proportionality, in Chapter 3 of his report. He suggested that the test, as construed by the Courts, now failed to do the job of controlling costs. This was essentially because the Courts had held that costs which were necessary, albeit disproportionate, should be recoverable. He recommended that this test should be reversed. 3 The question of dissuading litigation is addressed elsewhere, where the necessary stake in litigation is considered. Page 19 of 86

20 However necessary the cost, if it resulted in the costs as a whole being disproportionate, it should be disallowed. 71. His recommendation was thus that the definition of proportionality be amended to provide that: Costs are proportionate if, and only if, the costs incurred bear a reasonable relationship to: (a) The sums in issue in the proceedings; (b) The value of any non monetary relief in issue in the proceedings; (c) The complexity of the litigation; (d) Any additional work generated by the conduct of the paying party; and (e) Any wider factors involved in the proceedings, such as reputation or public importance. 72. As we have said, the principal thrust of this suggested reform is that costs which are necessary should be disallowed if they are disproportionate. 73. Leaving aside for a moment funding issues (which raise separate concerns and which we deal with below), it is in our view clearly wrong that a wrongdoer, who has caused the necessity for proceedings, should escape responsibility for the payment of the costs which are necessary for the prosecution of those proceedings, whether or not the costs are large in comparison to the sums in issue. The Bar Council takes the view that if this is to be the approach adopted, then procedural reform is necessary as a matter of urgency, to ensure that claims can be pursued without the necessity to incur costs which are disproportionate. We would support proposals for such procedural reform, and would be willing, and indeed eager, to assist in the formulation of possible reforms. 74. In principle, therefore, we are not in favour of Lord Justice Jackson s suggested reformulation. 75. We would add that the importance of litigation is not to be measured in merely monetary terms. In many cases, the litigation, even if it does not involve huge sums of money or in many cases any money at all may be of very great importance to the litigants, or indeed to the public or the market in which the litigants do business. Recoverability of base costs. 76. Moving on from the amount of the base costs, the next issue is to what extent those base costs should be recoverable. Page 20 of 86

21 77. Here, the fundamental problem, in our view, lies in the robustness and consistency of approaches to taxation of costs. (a) On many occasions, costs will be taxed at the end of a day, in circumstances which are not conducive to full argument. Often, there is insufficient evidence available to a judge to allow proper consideration of the need for costs. (b) In other cases, the taxation may be being carried out by a different costs judge with only a relatively limited understanding of the particular features of the case. 78. We emphasise that this is not a criticism of the judges concerned. It is instead a criticism of the system, and the lack of data available to judges by reference to which to make costs decisions. In our view, the system of taxation of costs could be improved, and again we would be very willing to assist where we can in this regard. Access to Justice. The central importance of access to justice. 79. The Government recognises, in both this Consultation Paper and in the Consultation Paper on the Reform of Legal Aid (CP 12/10) that access to justice is, as it is put in the Legal Aid paper, a hallmark of a civilised society The Bar Council endorses this sentiment wholeheartedly. It is, in our view, of the utmost importance that access to justice is not impeded, particularly where such access is sought by those who are in particular need of the assistance of the civil courts. 81. Any reform that has the effect of impeding access to justice must thus be justified particularly scrupulously. That is particularly so where those who are denied access to justice are those who most need such access. The proposed reduction in legal aid. 82. It should be borne in mind in this context that the government proposes (in CP 12/10) to cut legal aid so that many more types of dispute will have to be funded by alternative means. The impact of the proposals in this consultation paper will also have to be assessed by reference to these other types of claim. 83. In this connection, we would stress that Lord Justice Jackson was working, in his report, on the footing that there would be no reduction in legal aid. As he said, at paragraph 4.2 of Chapter 7 of his report: 4 Paragraph 1.2, CP 12/10. Page 21 of 86

22 I do not make any recommendation in this Chapter for the expansion or restoration of legal aid. I do, however, stress the vital necessity of not making any further cutbacks in legal aid availability or eligibility. The legal aid system plays a crucial role in promoting access to justice at proportionate cost in key areas. The statistics set out elsewhere in this report demonstrate that the overall costs of litigation on legal aid are substantially lower than the overall costs of litigation on conditional fee agreements. Since, in respect of a vast swathe of litigation, the costs of both sides are ultimately borne by the public, the maintenance of legal aid at no less than the present levels makes sound economic sense and is in the public interest. General principles regarding access to justice. 84. The issue of access to justice involves a number of strands. (a) First, there is the position of the Claimant. We believe that any Claimant should be able to obtain full compensation where that Claimant has suffered as a result of the wrongdoing or breach of duty of a Defendant. (b) However, it is also necessary to consider the position of the Defendant. Thus: i. A Defendant should not be forced to defend claims which have no substance, and where a claim is without substance, there should be procedures available to enable that claim to be weeded out as rapidly as possible (and before excessive costs, which the Defendant may be unable to recover, have been incurred). ii. In principle, the Defendant should not be forced to expend disproportionate sums in the defence of a claim which turns out to be ill founded. (c) Finally, there is the position of the Courts themselves. Litigation should not be brought unless there is good reason for it. In this connection, it is also important that the Claimant should have a stake in the litigation, so that there is always a potential downside to deter frivolous claims. 85. The system should, if at all possible, be designed to ensure that these various aims are achieved insofar as that is possible. Particular problem areas. 86. In this section of our response, we now deal with particular problems that arise in relation to particular types of claim. Page 22 of 86

23 Personal injury claims generally. 87. The view ot those elements of the Bar most closely involved with personal injury claims, ever since the Jackson Review itself was published, has been clearly expressed as follows: if implemented, these proposals are bound to result in widespread injustice for those who are (i) without substantial means, and (ii) are injured through the fault of others and it follows have good claims against them. 88. This is because of the consequent (and widespread) violation of two separate fundamental principles applicable to PI cases. 89. The first principle is that of access to justice. It is a fundamental principle of our judicial system that every victim of injury as a result of another s negligence (or worse) should be able to approach the court for justice whatever his or her financial position. 90. Serious violence will undoubtedly be done to this principle if CFA uplifts are capped as proposed. Specifically, a large number of worthy Claimants without private means in particular those with serious injuries and complex and lengthy, and therefore potentially costly, cases will be unable to secure representation. 91. The second fundamental principle which applies in relation to personal injury claims is one which relates to the funding of such claims. It is also a fundamental principle that valid injury claims, which in our jurisdiction are carefully calibrated to reflect actual financial loss and need, should be compensated in full: there should be no arbitrary reduction of damages as the price for successful prosecution of a claim. 92. Substantial inroads will be made into this principle too, in all CFA funded cases, if the CFA uplift and ATE insurance premia are to become irrecoverable as costs. Assuming that Claimants can find CFA representation (i.e. do not fall at the first fence identified above) they will in almost all cases be denied full recovery upon successful prosecution of their claims. This is because their damages will be significantly reduced in order to fund that part of their own legal costs represented by the uplift and the ATE premium. The proposed slight increase in damages for PLSA will not compensate for this. 93. Whilst the concerns expressed above apply in all personal injury claims, there is an even greater concern in relation to larger and more complex personal injury claims, involving more serious injuries. Put shortly, the impact of these changes upon catastrophically injured Claimants may be so disproportionate (when compared with the impact upon noncatastrophically injured Claimants) as to mean that the former s rights under Articles 6 and 14 of the HRA are infringed. Page 23 of 86

24 94. Thus the concerns as to access to justice which the Bar has expressed on a number of occasions hitherto, and which are set above, are (perhaps unsurprisingly) apparently mirrored by potential breaches of the HRA. 95. We suggest that this represents a fundamental problem for the implementation of the scheme at least in the unrefined form envisaged by Jackson. Clinical negligence. 96. One area of particular concern, which is tied to some extent to the Human Rights Act concern just raised, is clinical negligence. Although we have identified a number of reasons in the earlier section of this paper why this area, leads to concern, and at the risk of repetition, the reasons why this area is of particular concern include the following. (a) The nature and identity of the parties. Clinical negligence claimants are in many cases amongst those who are the most vulnerable litigants there are. Thus, for example, a significant proportion of claimants are children who are the victims of obstetric accidents at birth. Conversely, Defendants are in the main employees of the NHS, funded by the State. The imbalance in such cases is very great. (b) The other changes to funding proposed and the overall impact of the proposed changes. Clinical negligence claimants are to be taken out of scope of legal aid. For the reasons we set out in our response to the Consultation Paper on Legal Aid in England and Wales, then there has been insufficient consideration of the special nature of clinical negligence cases in this regard. The retention of clinical negligence within scope when legal aid for personal injury cases generally was abolished was for good reasons. Those reasons have not changed. However, if legal aid is abolished for clinical negligence, then these very vulnerable claimants are faced with a double whammy. They are to be thrown into the privately funded arena, where it is already the case that only very strong cases can be pursued. Thus, even now, most ATE insurers require that a case has very substantial prospects of success before being willing to issue a policy. If the system is changed in the manner proposed, only cases with near certain prospects of success will be able to succeed. (c) Particular problems with lower value claims. Although many clinical negligence claims are very high value, there are also numerous lower value claims, worth 100,000 or less. These claims are nevertheless extremely significant to the parties who have suffered as a result of the negligence of clinicians. It is our view that the adoption of the Jackson proposals in such claims will render it almost impossible to bring such claims. These cases, despite their relatively lower value, Page 24 of 86