Work harder for less

It is a central pillar of a civilised society that it makes freely available a justice system to enable civil disputes to be resolved by competent and independent courts, according to the rule of law. In the last few years, it has been government policy to reduce expenditure in this area both by ceasing to provide public funds to litigants of modest means and increasing court fees. There are no votes to be had from honing the system for resolving disputes so as to preserve, let alone enhance its quality or accessibility. Yet, in the last ten years, by introducing new procedural rules and replacing legal aid with conditional fee agreements (CFAs), the government has facilitated a vast increase in the costs of litigation and the concomitant reward for litigation lawyers. The question now is whether the Jackson reforms will facilitate greater access to justice at lower cost or whether the law of unintended consequences will kick in.

Funding worthwhile claims

The Legal Aid and Advice Act 1949 was introduced as part of the post-war legislation that created the welfare state. Subject to means testing, which sometimes required a modest contribution from the assisted litigant, legal funding for the services of a solicitor and counsel was made available in virtually all types of mainstream litigation in the courts. Solicitors and counsel were paid 90 per cent of the fees assessed by the court’s taxing master. This discount was the profession’s contribution to the scheme. The cases had to pass the private client test; would you advise a person of sufficient but not unlimited means that it was reasonable and worthwhile to for him to proceed with the claim? In short, the profession was trusted by government to act fairly and objectively in advising on the merits and in authorising or, as the case may be, refusing funding, to ensure that worthwhile claims were funded and those that lacked either legal and or economic merit were not. 

Those in receipt of legal aid were given an effective immunity against having to pay the other side’s costs. This immunity, together with the requirement for cases having to pass the merits test meant that the vast majority of legally aided claims were settled by the - usually insurer backed - defendants, who, unless they were satisfied that they had a rock solid defence, usually took a commercial view of the matter. 

In the late 1970s the county courts had limited jurisdiction, both as to the area in which their writ ran and in terms of the level of claims they could determine. Most personal injury work was conducted in the Queen’s Bench Division (QB). At an interlocutory stage, cases were heard by experienced masters and, at trial, by High Court judges, either in London or on circuit. Except for employer’s liability claims, funded by trade unions, personal injury claims were mostly conducted by the claimant’s local high street firm of solicitors. The actual work was often carried out by solicitors’ managing clerks who knew their civil procedure, the workings of the courts, the idiosyncrasies of individual judges, who to instruct at the bar and when to instruct them. On the defendants’ side, firms which were small by modern standards, defended these claims, usually on the instructions of insurers. Their work was also often conducted by managing clerks. 

Low cost litigation 

Civil litigation, until 26 April 1999, was governed by the Rules of the Supreme Court (RSC) and, in the county court, the County Court Rules (CCR). The costs of standard civil litigation were really quite modest. 

Disputes arising in the course of proceedings were usually heard by Queen’s Bench masters. The masters did no pre-reading. They were merely handed the summons and the statements of case,  heard each party’s short submissions and gave their decision, manually endorsing it on the summons. There were no skeleton arguments, no list of issues, no case summaries; just short sharp oral advocacy, on each side. Effective advocacy in front of a busy, sometimes impatient and occasionally cantankerous master was indeed an acquired skill, deployed by managing clerks, solicitors and, in 12 o’clock list, counsel. Counsel’s fees for such work were also modest with brief fees in the region of £20 to £25.

Trials in the High Court, in the early 1980s, seldom took longer than a day and often considerably less. Expert reports and a usually modest number of relevant contemporaneous documents were all that was disclosed to the other side before trial. Both medical and non medical experts’ reports were seldom more than a few pages long. The odd ambush, usually relying on evidence from private investigators, sometimes augmented by film, was not unknown. The process of calling evidence in chief from all the key witnesses was a potent forensic tool. Judges gained far more insight from hearing what a witness had to say, in his or her own words, in answer to open questions, than from witness statements crafted by lawyers that, under current rules stand as the evidence in chief. 

When I was first instructed to appear in the High Court, in the early 1980s, brief fees were between £125 and £150. However, because their cost was not prohibitive, there were many more trials. The listing of these short cases allowed for court door settlements. There was often some waiting for a judge to become free. As a result, with the time available for discussions to take place, with all parties present, many cases settled at this stage. 

Even then, the costs had seldom ramped up to a level that stood in the way of a settlement. Disputes about the level of costs payable were rare but, if they were not settled, they went to the court taxing master. 

Style 1 CFAs

The 1990 Act introduced the concept of the conditional fee agreement (CFA) between a lawyer and his client, whereby the former would only be paid by the latter if the case was successful. However, the regulations required for the practical introduction of CFAs were not introduced until five years later with The Conditional Fee Agreements Order 1995 (SI 1995/1674) and the Conditional Fees Regulations 1995 (SI 1995/1675). These regulations allowed CFAs in three types of proceedings: personal injury claims, insolvency and ECHR applications. They permitted a success fee of up to 100 per cent on the normal fees payable. But they placed no liability on the losing party to pay any part of the success fee. This fell to be borne by the client out of any damages that were recovered. The Law Society’s then model CFA capped the client’s liability to pay such a success fee at 25 per cent of the damages recovered. The premium for any after-the-event (ATE) insurance against the risk of being ordered to pay the other side’s costs also fell to be paid out of the damages recovered, also subject to a cap of 25 per cent of the damages in the model CFA. This original type of CFA was referred to by Lord Justice Jackson as a ‘Style 1 CFA’.

The Access to Justice Act 1999 removed legal aid from mainstream civil litigation leaving the funding gap and access to justice to be facilitated by new style CFAs. The impetus for the removal of legal aid was said to be that the volume of funded cases and case costs had risen steadily throughout the 1980s and 1990s and were no longer affordable. The government simply looked at the overall cost of legal aid, without differentiating between the total costs of legal aid in criminal cases, family cases and finally civil cases. As Jackson LJ put it: “Legal aid expenditure (including crime) rose to £1.5bn by 1997 and is over £2bn today.”

In fact, the vast bulk of these costs were attributable to criminal legal aid and family cases, particularly those dealing with children, where there was little in the way of claw back for the taxpayer. Whereas, with civil legal aid, the bulk of which was granted for injury claims, the vast majority settled and the fund got its money back. 

Many were successful at trial with the same result. In addition these successful claims recouped for the public purse, the state benefits received by each claimant.  

Yet, the argument that the provision of civil legal aid, when granted only to cases that passed the private client test, cost the state very little and gave it a means to claw back large sums paid in benefits was ignored. I fear that this was, at least in part, due to some notoriously large bills that accrued to the legal aid fund due to the failure of certain high profile group actions, such as that brought in relation to the use of Benzodiazepines in the 1990s.

Higher stakes

By the Access to Justice Act 1999, the CFA was greatly extended in its scope and effect. First the proceedings to which it applied were widened to include all civil proceedings (excluding family cases) and, secondly, the principle of full recoverability was introduced so that both the success fee (up to 100 per cent) and the contingent premium payable for ATE insurance (usually very expensive) became recoverable, under an order for costs, against the losing party. These new CFAs, referred to by Jackson as ‘Style 2 CFAs’ (See sections 27 and 28 of the Access to Justice Act 1999 and the Conditional Fee Agreements Order 2000 (SI 2000/823) and Regulations 2000 (SI 2000/692) led to a proliferation of legal challenges. 

The stakes became very high. If technical reasons, usually associated with the form of the agreement and whether it was compliant with the regulations, could be found so as to render it unenforceable against the losing party, then insurers were not slow to make the argument in further prolonged, complex and expensive satellite litigation; the cost of costs!

As Jackson put it, the introduction of the Style 2 CFAs led to a cultural shift in the role of CFAs as the core vehicle for funding civil litigation, with strong views being expressed on both sides: first, as to whether they should exist at all or indeed were ethical and, if they did, as to how they should be structured.

At about the same time, radical reforms to civil procedure were recommended by Lord Woolf in his ‘Access to Justice Report’ published in 1996, and introduced in the Civil Procedure Rules (CPR) in 1999.

The underlying intention of these wide ranging reforms was to offer appropriate procedures, at reasonable cost, to deal with cases quickly and justly, to make the system intelligible and responsive to the needs of court users and to introduce as much certainty as possible. It introduced the notion of court controlled case management, directed at fixing timetables, limiting disclosure obligations and scrutinising the need for and scope of expert evidence. It imposed pre-action protocols. Parties were required to enter into correspondence and exchanges of information as to their respective positions, before any action was started.

Once an action was started, the CPR placed obligations on the parties in terms of the nature of their case statements. These were to be far more detailed and specific. The court, rather than the parties, was to control the timetable for procedural steps in the action.  It is now hardly disputed by anyone with the requisite experience of the practical operation of the CPR that they have, albeit unwittingly, contributed to a significant rise in the cost of civil litigation.

Even Lord Woolf himself when addressing members of the London Solicitors Litigation Association in October 2009, is reported saying that lawyers “had made an industry of some aspects of the reforms which had been designed to speed up the court process”. He even attacked the judiciary for ineffective case management and the government for failing to provide the necessary information technology. He looked to the profession to embrace the costs saving procedural changes to be introduced by Lord Justice Jackson.

Was there not a degree of naivety in Lord Woolf’s noble aspiration that those in the business of conducting litigation, with targets to be met in terms of their own billing and the profitability of their firm, in a highly competitive professional environment, would buy into the notion that the CPR should be construed so as to make litigation quick, easy and cheap? The unpalatable truth is that much, if not all, litigation always was and remains a battle between opposing parties, in which legitimate, if not always laudable, tactics 

are often deployed by each party, with a view to securing a tactical advantage, whether in a negotiated settlement or at a contested hearing.  

Legislative vandalism

Lord Woolf’s reforms did not fail in their objective, just because they fed the voracious appetite of lawyers to maintain and increase their profits but, at a more fundamental level, because they failed to account for basic human nature in the way people are likely to behave in the course of a dispute that is sufficiently serious to warrant court proceedings.

The RSC were by no means perfect but they had been honed, refined and construed by the courts, over many years, leaving few areas that had not been judicially considered. Much, if not all, this learning was jettisoned in what some consider to have been an act legislative vandalism. The old rules allowed the parties to litigate at their own pace. If they wanted to let sleeping dogs lie, the courts had no interest in kicking them into life. Equally, if an action went into abeyance for so long as to impair the ability to have a fair trial then, if the delaying party sought to reactivate it, he was likely to have his claim struck out. The courts did not manage cases, their role was simply to make decisions in those cases where and when they were called upon to do so, by the parties. The management of the litigation was left to those who had the greatest familiarity with it, namely the parties and their lawyers, only when there was an active dispute in the proceedings, would the court be called upon to resolve it.

Economically viable

The key recommendations in Lord Justice Jackson’s December 2009 report find expression in Part 2 of the equally gargantuan Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) (Sections 44 to 62) which amends sections 58, 58A, 58AA, 58B and 58C in the 1990 Act. Jackson was keen to get rid of the extra costs, whereby the success fee and ATE premium were recoverable from unsuccessful defendants, often more than doubling their exposure. They are no longer to be recoverable. Any success fee has to come out of the claimant’s damages, with a cap to be set at 25 per cent of his general damages. The courts are going to compensate the claimant to some extent, by increasing the quantum of those general damages across the board by 10 per cent. 

To protect individual litigants, in qualifying cases, they are to have immunity against having to pay the costs of a successful defendant, akin to that formerly given to legally aided parties. At the same time, a new form of funding is to be made lawful, namely a third party litigation funding agreement (see section 58B of the 1990 Act as amended by the 2012 Act). This sets up the means whereby a funder can carry on business by providing litigation funding to a claimant, in a manner equivalent to the old legal aid fund, but paid for by means of a payment, by the litigant, to the funder in certain specified circumstances, yet to be defined by new regulations. This new scheme will undoubtedly require careful underwriting, as well as a significant contribution from the legal profession, probably by way of a discount on the level of their basic fees.

All the new proposals, set out in LASPO provide for their detailed implementation by the introduction of regulations, which at the time of writing have yet to be promulgated. 

Where does this leave the profession? The return of an old Style 1 CFA, with an uplift limited to 25 per cent of the usually modest damages awarded for pain and suffering and loss of amenity, is not an attractive offering for those instructed in the more difficult claims, principally the bar, who as sole practitioners, are unlikely to receive any reward for taking on the substantial risk of losing and receiving no fees at all nor for the inevitable delay in the actual payment of any basic fees earned, even if the claim is successful.

The litigation funding scheme may be the answer, if the regulations are framed in such a way as to enable funders to run a viable business by underwriting claimants’ costs and do not expose a funder to the risk of having to pay the costs of any successful defendant. Under such a scheme, those lawyers, who can be relied on to provide responsible advice as to meritorious and economically viable claims, applying the old private client test, may find that funders will come to trust their judegment and thus they may obtain non-contingent funding for their work, albeit at a discounted rate.

So, it looks like civil litigators, both solicitors and counsel, may have to work harder for less money. I guess that is what the powers that be are looking to achieve. Whether, in the light of what has gone before, that intention will be fulfilled remains to be seen. 

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