Queen’s legendary lead guitarist,
and astrophysicist, recently fell victim to what he understandably describes as
the “absurd proportionality rule”. In short, he ended up with a recovery of
around 20% of his actual costs of a ‘successful’ action against a noisy
neighbour. He describes the detail of it at his blog, The scam of 'proportionate' legal costs and makes some heartfelt
observations that resonate loudly with me.
At some time in our lives many of
us will become involved in a civil court action. We’re not talking here about
criminal offences which are dealt with by magistrates and Crown Courts but
claims for money, compensation, injunctions, restitution etc handled by our
County and High courts.
We’ve probably all done a spot of
DIY around the house and garden. Law is no different in that you’re entitled to
run your own case – as a litigant in
person – and many more people are being forced to do so at present. But as
with anything else you’re more likely to get the best results if you hire an
expert, somebody who litigates for a living.
If you do engage a lawyer, you’ll
need to pay them for their services and litigation can be expensive. What makes
for a happy ending is being able to recover your legal costs, or the majority
of them, from your opponent. Loser pays
is a basic rule that has been a cornerstone of civil justice in this country
for hundreds of years.
Of course that has to be subject
to controls. It can’t be an open cheque book for those who can afford it to spend
lavish amounts on the priciest solicitors and barristers they can find and use
that enhanced threat to their advantage in the litigation. Courts use a process
of assessment to ensure if necessary
that the costs a winning party may recover at the end of the litigation are
reasonable.
“Reasonable” isn’t defined on a
whim. Costs judges have to exercise discretion and decide what they think is
right in all the circumstances of the case but they must do so in accordance
with established principles drawn from earlier cases. They’ll hear argument
from both sides – those paying and those receiving – before deciding all the
items in issue.
So far so good.
Good enough, many would say. If for example your legal spend is many times the sum you eventually recover or reasonably thought you would recover, then it’ll take some explaining to persuade a costs judge that your bill is reasonable, surely?
Good enough, many would say. If for example your legal spend is many times the sum you eventually recover or reasonably thought you would recover, then it’ll take some explaining to persuade a costs judge that your bill is reasonable, surely?
Nevertheless, in 1998 along came
Lord Harry Woolf with what was to be the first of many shake-ups of the rules
and introduced the new concept of proportionality
in response to these concerns. The Lord Chief Justice himself presided over a
Court of Appeal that delivered a landmark judgment in 2003. It was in the case
of Lownds v The Home Office.
The facts of the case are
unimportant in this context. The focus of the judgment was on the successful
claimant’s costs which ultimately added up to more than five times the value of
the compensation that the defendant was ordered to pay. The court set out the
approach to be taken in applying the new rules on proportionality.
In short there was to be a global
assessment first. Did the amount claimed appear disproportionate having regard
to various features of the case including notably the amount that the claimant
had pursued and/or won? If so, the court must then look at the winner’s bill
item by item applying a stricter test than normal.
To be allowed, each element of
the costs claimed would have to be shown to be both reasonable and necessary. It was a game-changer.
I was involved in a lot of costs
litigation last decade, some of it high profile, and largely in the context of personal
injury cases funded by conditional fee agreements. For those of us in that
arena the most important passage in the Lownds
judgment was at paragraph 39:
“In deciding what is necessary the conduct of the other party is
highly relevant. The other party by co−operation can reduce costs, by being
uncooperative he can increase costs. If he is uncooperative that may render
necessary costs which would otherwise be unnecessary and that he should pay the
costs for the expense which he has made necessary is perfectly acceptable.
Access to justice would be impeded if lawyers felt they could not
afford to do what is necessary to conduct the litigation.”
This was absolutely crucial, as
anyone who has ever been involved in litigation against an opponent with deep
pockets understands. Without that safeguard a party to litigation who can
afford to lose is able to fight a war of attrition against a party that can’t.
Or as Brian May puts it,
Liability insurers are particularly
prone to what I heard described in the Court of Appeal in 2003 as ‘behavioural
issues’. As a matter of policy and business ethos, they make life difficult,
not just for the claimant in one particular case but to deter others whose
lawyers will know that the same risks face them and their clients if they dig
in and fight for a fair result in the face of daft offers and spurious
arguments.
All’s well that ends well if the
claimant lawyer’s assessment is right and ultimately the loser is made to pay
for “that which he has made necessary”.
But in 2013, the man seen by many
as the nemesis of our civil justice system, Lord Justice Rupert Jackson, was to
turn it upside down. The rule change introduced in April that year reversed the
process.
Now the costs judge on a
contested assessment is required to assess the reasonableness of the items
claimed and then consider
proportionality. If it looks too much in the circumstances, then the court has
to cut the total allowed to a figure that looks and feels right.
So, everyone may spend days in
some cases debating and arguing to reach a figure that is reasonable having
regard to all the features of the case, including the losing party’s behaviour,
and then slash it because – well – it still looks too much.
It’s a licence to insurers and
other faceless corporates to print money to fill a war chest.
In an article I wrote for the
Solicitors Journal in 2012 I examined how this would destroy Equality of arms – such an important
principle of our – any – justice system. It generally takes around three years
for the impact of such changes to be seen in the bigger cases that may then
reach the spotlights of the superior courts so we’re starting to see the
evidence of how momentous and potentially unfair this rule change will prove to
be.
It means that the risk of a
Pyrrhic victory in any successful case rises sharply especially against a corporate
opponent where individuals are rarely held responsible for the sort of arrogant
and lawless behaviour one Lord Justice described as ‘an insouciance to their
obligations….that leaves one quite breathless” in the case of Brown-Quinn and others v Equity Syndicate Management
Disturbingly this is just one
more ingredient in a poisonous concoction that is killing off our justice
system. The growing imposition of fixed costs regimes is severely restricting the
amounts that deserving litigants may recover from a wrongdoer against whom they
have no other (legitimate) recourse. Mediation simply isn't an answer - you can't Speak softly without carrying a big stick.
Still, the greedy insurance companies bay
for an increase in the limit below which virtually no costs are recovered by
the innocent victims to Five grand.
In consequence, numbers of claims
are falling. We’re not talking about fraudulent or frivolous actions but justifiable
claims that people can’t afford to run even if they rightly assume that they’ll
win. Lawyers who would effectively fund deserving claims with decent prospects
can’t afford to do so, because even if they win, they’ll lose.
As litigation shrinks, so does
the system. Courts close, law firms go bust, able people get out. The
government speeds the process by hiking the fees, closing provincial courts,
starving the ones left of resources. It’s the Road to Ruin.
The trouble is that for most
people these are just the cries of self-interested lawyers – ‘fat cats’
starting to feel hungry. Actually, there are many of us who are motivated by
pride in something that we made our vocation and the desire to champion weaker
members of our society. Soon, though, there will be No more heroes.
Justice is an entitlement of
everyone in our society. It’s the state’s duty to provide it and make it
accessible when it is needed. Right now, it’s under immense pressure.
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