LITIGATION FUNDING – ISSUE 17 –FEBRUARY 2002 VORSPRUNG DURCH TECHNIK? REPORT BY NEIL ROSE Does civil litigation have life beyond costs? Not really, at least at the moment, if last month’s Law Society civil litigation conference is anything to go by. And that goes doubly for the issue of fixed costs. There were some valiant attempts to stray into other areas of contention – experts, for example – but most people were preoccupied with the ongoing saga of costs. As the Mast of the Rolls, Lord Phillips of Worth Matravers, said in opening the conference, ‘costs are the Achilles’ heel of Woolf’. However, he did note that the front-loading of costs under the new regime may not be a bad thing. ‘It must be an incentive to settlement,’ he said. He also indicated that the government may be coming round to his point of view on the need for legislation, rather then rules of court, to remove indemnity principle. But finding a parliamentary slot could prove troublesome. In his speech on the alternatives for reform of the costs rules, senior costs judge Peter Hurst revealed that he finished his report on benchmark costs in November, which was welcomed by Lord Phillips as a way forward but not the complete answer It is understood that the range of applications considered for benchmarking has dropped from 200 at the start to 20 now, and they will not have different levels depending on the level of the fee-earner. That will be for the solicitor and client to determine. However, there will be different levels geographically. ‘There are those, who feel that there should be a single benchmark figure,’ Judge Hurst said. ‘I don’t subscribe to this view.’ There is now to be another consultation as to the geographical banding. Rather than have different figures throughout the country, the current proposal is to have three bands for London and four for the rest of England and Wales. Judge Hurst turned to Germany for ‘the germ of an idea which might well be worth looking at’ in relation to fast track. There, lawyers are not paid on an hourly basis; rather they receive up to tree fixed payments linked to different stages of the litigation process. The only way to receive a fourth payment is to settle. A similar system applies to appeals. He explained that the amounts are quite low. On a £1,000 claim, for example, each staged payment is around £70, so the maximum a lawyer can claim, subject to settlement is £210. Judge Hurst also suggested that limited fee-shifting in favour of claimants could be appropriate in public law cases, group actions and, if they are introduced, representative actions.
On multi-track, he encouraged the courts to ‘make much more use of their power in costs budgeting and costs estimates’ He finished by arguing that ‘serious consideration’ should be given to ending the recoverability of success fees and insurance premiums, saying that it had been the primary cause of the costs chaos. Fraser Whitehead, chairman of the Law Society’s civil litigation committee and head of trade union services at Russell Jones & Walker, spoke- largely in a personal capacitywith some passion about the need to run a successful litigation business. One of his first concerns was what would happen once the indemnity principle is eventually abolished. ‘The replacement is yet to be seen, but it is likely to focus upon a defined costs rule, restriction costs recoverable from paying parties to reasonable remuneration for services that are reasonable and proportionate having regard to the subject matter of the litigation and issues raised,’ he said. While this would deal with the immediate problem, he expressed strong concerns that if solicitors were not careful, it would also strip out from the recoverability element to proportion of costs which reflect items such as development and funding, a worry he also expressed in relation to fixed fees. There is also the fear – expressed in a later session by David Marshall, treasurer of the Association of Personal Injury Lawyers – that well-resourced defendants will outspend claimants in an effort to force settlement or even damage the finances of claimant law firms. To stop this, Mr Whitehead suggested one-way costs shifting on the fast-track in claimants’ favour, subject to unreasonable behaviour on either side (an unreason-able defendant would not be protected by capped costs). Mr Whitehead predicted that conditional fees will not be rescued, and that ‘certainty and stability are as far away as ever’. He said the underlying point was that the right to recover costs at all can be wholly jeopardised by a failure to comply with any one of dozens of small procedural requirements. ‘That is not right and it needs to be made clear somewhere, somehow that it should not be case.’ The main impact of conditional fees, Mr Whitehead argued, is the words ‘no win, no fee’, and the perception of litigation they have engendered. By running margins so tightly, it was imperilling the principle that winning cases pay for losers. ‘Nonetheless, the benefits of conditional fees is in my mind twofold. First, they have shown that the ethical barriers of alleged lawyer self-interest is a myth or, if it is not a myth, does not appear to be causing any major problems. Secondly, that the damages of the wrongly done-by can be preserved by a costs-shifting rule. If that is right, then it seems to me difficult to understand what the objections can now be to a contingency fee approach.
And that debate may even outlast the costs argument.