The Times has published on its website an article by Carter-Ruck senior partner Andrew Stephenson concerning the government’s proposed changes to litigation funding and their potential impact on access to justice.


‘One law for the rich’
by Andrew Stephenson

In the final days of the Labour Government, last year an attempt was made to rush through Parliament a Statutory Instrument to reduce the maximum success fee recoverable in “no win, no fee” cases from 100% to 10% of the lawyers’ charges. The Merits Committee in the House of Lords expressed reservations with this proposal “on the grounds that it may imperfectly achieve its object”. The provisions were criticised in debate in the House of Lords and finally baulked at the committee stage in the House of Commons. Those who opposed the measure were not seeking to defend existing practice; it was widely accepted that there was a case for reform. The objection to the Statutory Instrument was that it risked causing greater injustice in some cases than it would remedy in others.

Obscurely tucked away in the Legal Aid, Sentencing and Punishment of Offenders Bill presently before Parliament are proposals to amend the Courts and Legal Services Act 1990 which are equally open to objection.

1. “Success” fees for lawyers acting on a “no win, no fee” basis under Conditional Fee Agreements (CFAs) will no longer be recoverable from an opponent, but be limited to a percentage of the damages awarded.

Where claims are contested, lawyers who offer CFAs take on the risk that they will be paid nothing for their services. If it becomes uneconomic for them to accept this risk, individuals who do not have the means to pay the lawyers as the case proceeds will be left unrepresented. If the percentage of damages allowed is too high, claimants will be deprived of a substantial part of the compensation to which they are entitled; if it is too low, the lawyers will not accept the risk. In either event, lawyers would only be willing to act on a CFA for claimants if the anticipated amount of damages is very large; and lawyers will not be willing to act on a CFA for defendants at all.

2. Parties to litigation in certain cases will not be able to recover the cost of “After the Event” (ATE) insurance.

ATE insurance is taken out, usually by claimants, so that the litigant is covered if he loses the case and an order for costs is made against him. Without insurance, litigants may risk losing all that they own. ATE insurance is expensive, because of the level of costs of a contested case, and the risk the insurer takes. If the cost of insurance is not recoverable, in effect it would also have to come out of the compensation to which the claimant is entitled; that is if, by then, there is any left.

In media-related cases (defamation and breach of privacy) the amount of the award of damages is notoriously difficult to predict. Besides which, the priority for most claimants in these cases is not the money, but to obtain an apology or to prevent publication of material. Although, on rare occasions, six-figure awards of damages have been upheld in defamation cases, most cases are settled for far less than this. In Naomi Campbell’s contested privacy case, which went up to the House of Lords, the damages awarded to her were £3,500. Given the risks involved, this would plainly not be a sufficient sum for any lawyer to contemplate acting for a claimant on a CFA, or for a claimant to contemplate seeking ATE insurance, if the success fee and the cost of insurance have to be financed out of the damages.

Nor is it just media-related cases where the problem will arise. My firm, for example, deals with cases where individuals have been mis-sold investment plans, pension products and the like. In some cases the losses suffered may not in themselves be large, when compared with the cost of contested High Court litigation; they can nevertheless be devastating for the individual, for whom the investment may constitute a major part of his life-savings.

It is the availability of CFAs which has enabled individuals to assert their legal rights against wealthy, powerful organisations. People like Kate and Gerry McCann, and Parameswaran Subramayan, the Tamil hunger striker, have been able to defend their reputations against serious libels. Simon Singh, who was sued by the British Chiropractic Association and Henrik Thomsen, the Danish professor sued in London by the US, UK and Norwegian GE Healthcare companies, are two who have benefitted from CFAs in the defence of their freedom of expression. If the provisions of the Legal Aid, Sentencing and Punishment of Offenders Bill were to become law, it is doubtful that in future lawyers will be willing to act in these cases.

Access to justice is itself a fundamental right. It demands that litigants must have a clear, practical and effective opportunity to present their cases before a court. There is wide agreement that the cost of litigation in this country is too high, but the problem will not even begin to be solved by adjusting the rules of recoverability of costs. This latest proposal is not the answer. What it will do, without question, is work to the advantage of those with the deeper pockets, who are able to afford the best legal representation.

Andrew Stephenson
Partner, Carter-Ruck
(acted for Henrik Thomsen)
6 September 2011

The above was published on The Times website on 8 September 2011

Additional Reading
Read the article on the Times’ website
Henrik Thomsen case
Kate and Gerry McCann case
Parameswaran Subramanyam case

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