Field Fisher Waterhouse response to the Ministry of Justice Consultation Paper

Our response to the Ministry of Justice Consultation Paper CP 13/10 BY EMAIL: privatefundingbranch@justice.gsi.gov.uk Rt Hon Kenneth Clarke QC MP Lord Chancellor and Secretary of State for Justice 102 Petty France London SW1H 9AJ 14 February 2011

Dear Lord Chancellor

RESPONSE TO THE MINISTRY OF JUSTICE CONSULTATION PAPER CP 13/10

I write on behalf of Field Fisher Waterhouse who practice in the fields of Personal Injury and Clinical Negligence Law, and who are therefore stakeholders in the proposed reform of civil litigation funding and costs both as lawyers and as representatives of our clients who are often very seriously injured through no fault of their own and require access to justice.

We are also responding separately to the government’s Legal Aid Consultation Paper (MOJ CP 12/10).

Conditional Fee Agreements and Success Fees (pages 18-29)

We note the government’s provisional view that recoverability of such success fees should be abolished and this is supported by the Jackson Review.

We do have some concerns in relation to this. We report that (contrary to the Jackson View) this firm does undertake risky cases and largely the success fees are not “windfalls” because they are used to pay for cases which do not proceed. This is particularly the case in the industrial disease area (we have a significant practice in which we recovered around £13million damages in 2010). Many enquiries are received, some are investigated and “dropped” at any early stage but others are taken on beyond issue of proceedings and are unsuccessful (Only this week an asbestosis case was withdrawn a few days before trial). This is replicated in our clinical negligence and our (high value) personal injury cases. Without these success fees it would be economically impossible for us to continue to act for all the Claimants whose case we investigate now. This will clearly restrict access to justice for those who receive serious injury through no fault of their own.

We do not think that the increase in general damages by a factor of 10% will “compensate” for this.

We would urge the government to maintain the present system where success fees are largely fixed and allow solicitors to take on cases which are risky thereby ensuring access to justice for severely injured clients who are often the lowest socio-economic groups in society already.

In response to the questions posed on pages 28-29 of the Consultation Paper we submit:-

Question 1

We consider that success fees should continue to be recoverable from the losing party.

Question 2

For the avoidance of doubt, we consider that success fees should be recoverable in road traffic accident, employer’s liability and clinical negligence cases.

Question 3

No comment. We do not act in judicial review cases.

Question 4

We consider that the fixed success fee regime works well. We do not consider that recoverability of success fees should be limited to 25% of the damages in all cases. It is important to emphasise that the costs of personal injury and clinical negligence litigation are largely determined by the actions of the Defendant solicitors. They drag cases out. There should be an incentive for Defendants to settle as early as possible and the “staged” recoverable success fee should continue to be supported by the government so that the Defendants understand that the earlier cases are concluded the lower the success fee and overall costs are likely to be. If the government enacts a rule which limits success fees to 25% of the damages, the Defendant will have no incentive to settle cases early and solicitors and barristers will not be remunerated properly. Risky cases will not be pursued.

Question 5

We consider that the success fee should be recoverable from the Defendants in all cases. It is not appropriate to limit this to particular categories of personal injury case.

Question 6

The fixed success fee regime works well. Consideration could be given to extending this to other types of cases (e.g. clinical negligence cases).

Question 7

We agree that the limit of the success fee which lawyers should charge on a case should remain at 100%.

Question 8

We consider that compensation for Claimants in personal injury cases is sacrosanct. In other words, the courts award damages to Claimants for the losses suffered and there is no excess available to Claimants to pay success fees. (Indeed the rule in Roberts v Johnston forces Claimants to “borrow” the actual costs of accommodation from other heads of damages). In many respects the quantum of damages recovered by the Claimant is not relevant to the amount of success fee. The present system recognises this because the success fee is based on costs not damages.

Question 9

Not applicable.

Question 10

Not applicable.

After Event Insurance Premiums (Consultation Paper Section 2.2, pages 30-35)

We agree with the Law Society view that ATE premiums are a major contributor towards legal costs over which solicitors have no control. We also agree that the ATE insurance market is largely unregulated and presumably allows ATE insurance companies to make substantial profits.

We consider that the Qualified One Way Cost shifting suggested by Lord Justice Jackson in his report would ameliorate the position and drive ATE insurers out of the market (see below).

We also agree with Lord Justice Jackson’s response to the government paper that the Claimants’ own disbursements should be claimable under a newly formed Legal Aid system where those disbursements could be repaid by successful claimants (with some interest) at the end of the case. With appropriate management this disbursements funding could be self funding.

Our responses to the questions on page 35 of the Consultation Paper are as follows:-

Question 11

We agree that ATE insurance premiums should no longer be recoverable from the losing party in personal injury litigation subject to the introduction of Qualified One Way Cost shifting and a Legal Aid system to take care of disbursements.

Question 12

Not applicable.

Question 13

Not applicable.

Question 14

We suggest that if the Qualified One Way Cost shifting and, or our proposal for Legal Aid funding of disbursements are not taken up then the government should consult with ATE insurers to ensure that there is a product to cover Claimants’ disbursements in personal injury and clinical negligence cases at reasonable cost. In these circumstances the premium should be recoverable from the Defendants.

Question 15

If a disbursement scheme is necessary (see question 14) through ATE insurers then recoverability should be allowed for all “reasonable disbursements” (i.e. those which are presently recoverable on the standard basis and may need to include Counsel’s fees).

Question 16

We would expect recoverability of ATE premiums (if required) for disbursements to be limited to Conditional Fee cases (e.g. we would not expect it to apply to Legal Aid cases in clinical negligence claims).

Question 17

Please see our answer to question 11 above.

Question 18

If the government accepts our response to question 11 then the self insurance element by membership of organisations will not need to be recoverable pursuant to Section 30 of the Access to Justice Act 1999.

The 10% Increase in General Damages (Consultation Paper Section 2.3, pages 36-39)

We agree with Lord Justice Jackson’s view that general damages are already too low. If the government accepts the Jackson proposal that the increase in general damages is to help pay for the costs of recoverability of success fees (which we do not agree with) then the increase needs to be very substantially higher. In addition, this could be dealt with by imposing significant sanctions on Defendants where they fail to beat Claimant Part 36 Offers which could help to fund success fees (see below).

In response to the questions on page 19 of the Consultation Paper we say as follows:-

Question 19

We consider that successful Claimants should receive awards of higher general damages in any event. We do not consider that 10% will compensate a Claimant for the loss of recoverability of success fees.

Question 20

We do not consider that an increase in general damages should be limited to CFA Claimants and, or Legally Aided Claimants. It would be unfair and unworkable to adopt such a scheme. If an increase is going to be made it needs to be made across the board.

Part 36 Offers (Consultation Paper Section 2.4, pages 40-45)

Part 36 Offers should be the bedrock of the English civil litigation system. In other words, either the Claimant or the Defendant should be able to make an offer which if beaten at trial will have serious consequences to either the Claimant or the Defendant.

We have noted the views of Lord Justice Jackson in his response letter to the Lord Chancellor (14 January 2011). We consider his proposals in respect of the percentage increase in damages to be acceptable (subject to the proviso below).

However, we do not agree that there should be a discretion to the court to award less than the sums Lord Justice Jackson proposes at 5.3 of his paper. It is precisely because the court have had such discretion that Claimants’ Part 36 Offers are largely unused in the present system. Most Claimants think that in the end the courts will not award a sufficient sum to the Claimant if he successfully beats a Part 36 Offer.

We also consider that Part 36 Offers on liability should have the same effect. It would be absurd not to give an increased award in these circumstances. The purpose of a Part 36 Offer on either side is to try to settle the case without a trial. This must be encouraged in liability issues as well as quantum issues.

Our response to the questions set out on page 45 of the Consultation Paper are:-

Question 21

We agree to the proposal that an additional payment equivalent to 10% increase in total damages

where a Claimant obtains judgment at least as advantageous as his own Part 36 Offer.

Question 22

It should apply to liability and quantum cases.

Question 23

Yes.

Question 24

This proposal should apply to all cases no matter what the value. We consider that a cap is probably

necessary and would support the Jackson view that this should be a maximum of £75,000.

Question 25

We support the Jackson formula with the proviso as above.

Question 26

We agree that the decision in Carver should be reversed.

Question 27

No.

Qualified One Way Cost Shifting (Consultation Paper Section 2.5, pages 46-57)

We agree with the Jackson principle that a losing Defendant would continue to pay a winning Claimant’s costs but a losing Claimant would only pay a winning Defendant’s costs where, and to the extent that, in all the circumstances it is reasonable to do so. We agree with the Consultation Paper which proposes:-

“A presumption that the Claimant would not be liable to pay the Defendant’s costs, unless – on

application by the Defendant made as early in the proceedings as possible – orders that financial

circumstances are such that the Claimant should be liable for the costs.”

This would enable the parties to understand the relevant position on costs from the outset of the case and would ensure that Claimants know their real liability for costs from the earliest point in the litigation.

Our response to the questions posed on pages 56-57 of the Consultation Paper are:-

Question 28

Yes we agree.

Question 29

Yes. Please see above.

Question 30

No. We consider that should only apply to personal injury and clinical negligence cases.

Question 31

The financial status of the Claimant.

Question 32

QOCS should apply to all Claimants, however funded.

Question 33

QOCS should apply to all Claimants in personal injury and clinical negligence cases who are largely individuals. The proposal that the Defendant should make an application at the beginning of the case to change the presumption means that this can be dealt with on an individual basis.

Question 34

We do not agree that the Claimant should be responsible for a fixed amount of costs in any event as suggested in the government’s consultation paper. As above, if the Claimant is of reasonable financial status then he will know at the beginning of the case that he is likely to be liable for the Defendant’s costs. If this be the case then he may be able to obtain some form of insurance.

Question 35

Not applicable.

Supplementary Legal Advice Scheme

We agree with the principle of a supplementary legal advice scheme.

Alternative Recommendations on Recoverability

We have considered the two alternative packages proposed by the government. Neither reflects our

views and we would not welcome the introduction of either of those packages. Questions 36-39 are

therefore not considered.

Proportionality of Costs

We agree with the principle of proportionality of costs as set out in Lord Woolf’s Access to Justice

Report. Our response to the questions at page 69 of the Consultation Paper are as follows:-

Question 40

Yes.

Question 41

Not applicable.

Question 42

Not applicable.

Question 43

We agree that this would be a helpful refinement.