LSLA

London Solicitors Litigation Association

The Ministry Of Justice Consultation Paper (NO. CP13/10): Proposals For Reform Of Civil Litigation Funding And Costs In England and Wales

Introduction

1. The London Solicitors Litigation Association (“LSLA”) was formed in 1952 and represents the interests of a wide range of civil litigators in London. It has some 1,000 members throughout London among all the major litigation practices, ranging from sole practitioners to major international firms. Members of the LSLA Committee sit or have recently sat on the Civil Justice Council, the Civil Procedure Rules Committee, the Law Society Council, the Law Society Civil Litigation Committee, the Commercial Court Users Committee, the Commercial Court Long Trials Working Party, the TCC Users Committee, the Chancery Users Committee and the Supreme Court Costs Group, to name but a few. Representatives from the City of London Law Society and the City of Westminster and Holborn Law Society also sit on the LSLA Committee. As a consequence, the LSLA has become the first port of call for consultation on issues affecting civil and commercial litigation in London and it has, on many occasions, been at the forefront of the process of change.

2. We refer to the Joint Response to the Proposals put in by the LSLA today, together with the Commercial Bar Association, the Chancery Bar Association, the London Common Law and Commercial Bar Association, and the City of London Law Society. That Joint Response is limited to the field of higher value or substantial commercial / business litigation in the High Court. It makes no comment on other fields of litigation, including lower value commercial / business litigation in the High Court or in the County Court. If separate considerations are to be applied to higher value or substantial commercial / business litigation in the High Court on the one hand, and lower value commercial / business litigation on the other, then careful thought will need to be given as to how to draw the dividing line.

3. In this Response by the LSLA we provide some additional comments to those in the Joint Response, in terms of lower value commercial / business litigation, and also in the area of Damages Based Agreements. We do not, however, comment on any other areas of civil litigation (including, in particular, personal injury litigation).

Section 2.1 – Conditional Fee Agreements and Success Fees

Q1 – Do you agree that CFA success fees should no longer be recoverable from the losing party in any case?

4. With regard to higher value or substantial commercial / business litigation in the High Court, please see the Joint Response.

5. With regard to lower value commercial / business litigation, there is a substantial concern that prohibiting recovery would impede access to justice. Further consideration should be given (i) to the extent to which prohibiting recovery of CFA success fees might affect access to justice not only for claimants but also for defendants in lower value commercial / business litigation, and (ii) to the criteria (such as a claim figure of £250,000) for classifying commercial / business litigation as either higher value or substantial on the one hand, or lower value on the other. In lower value cases of all types, access to justice becomes a more important issue.

Q3 - Do you consider that success fees should remain recoverable from the losing party in cases where damages are not sought, eg. judicial review, housing disrepair (for which the primary remedy is specific performance rather than damages)?

6. With regard to higher value or substantial commercial / business litigation in the High Court, please see the Joint Response.

7. With regard to lower value commercial / business litigation, we repeat our comments in paragraph 5 above. We make no comment on other areas of litigation.

Section 2.2 – After the Event Insurance Premiums

Q11 – Do you agree that ATE insurance premiums should no longer be recoverable from the losing party across all categories of civil litigation?

8. With regard to higher value or substantial commercial / business litigation in the High Court, please see the Joint Response.

9. With regard to lower value commercial / business litigation, we repeat our comments in paragraph 5 above. We make no comment on other areas of litigation.

Q14 – Do you consider that ATE insurance premiums relating to disbursements only should remain recoverable in any categories of civil litigation? If so, which?

10. With regard to higher value or substantial commercial / business litigation in the High Court, please see the Joint Response.

11. With regard to lower value commercial / business litigation, we repeat our comments in paragraph 5 above. We make no comment on other areas of litigation.

Section 2.3 – 10% increase in General Damages

Q19 – Do you agree that, in principle, successful claimants should secure an increase in general damages for civil wrongs of 10%?

12. With regard to higher value or substantial commercial / business litigation in the High Court, please see the Joint Response.

13. No, not for lower value commercial / business litigation. Lord Justice Jackson’s proposal is intended to apply first and foremost to personal injury cases, upon which no comment is made in this response. However, the Paper refers to “other civil wrongs” without defining what wrongs are being included. In our view, it would be wrong in principle to add 10% to the damages awarded in a commercial case. There is no evidence that doing so would improve access to justice in such cases, and it would be contrary to the compensatory principle for the law of damages.

Section 2.4 - Part 36 Offers

Q21 – Do you agree with the proposal to introduce an additional payment, equivalent to a 10% increase in damages, where a claimant obtains judgment at least as advantageous as his own Part 36 offer?

14. With regard to higher value or substantial commercial / business litigation in the High Court, please see the Joint Response.

15. No, not for lower value commercial / business litigation. In such cases no additional incentive is needed for parties to attempt to settle. This is borne out by the fact that the vast majority of such cases settle before trial, and that Part 36 offers are commonly made by both claimants and defendants.

Q26 – Do you agree that the effect of Carver should be reversed?

16. Yes. The uncertainty introduced by Carver impedes the ability to assess risk and advise clients accordingly.

Section 2.5 - Qualified One Way Costs Shifting

Q28 – Do you agree with the approach set out in the proposed rule for qualified one way costs shifting (QOCS) (paragraph 135-137)? If not, please give reasons.

17. With regard to higher value or substantial commercial / business litigation in the High Court, please see the Joint Response.

18. No, not for lower value commercial / business litigation. QOCS is clearly aimed primarily at the field of personal injury and clinical negligence. We do not comment on QOCS in relation to those areas. However, we do not consider that it would be desirable or appropriate for QOCS to be introduced in commercial cases, or in defamation cases.

19. The principle of two way costs shifting (whereby the losing party pays the winner’s costs) has long applied to civil litigation in England and Wales. In our view, it is a strength of the court system in this country. It assists in obtaining a just outcome to a case, so that the winner is reimbursed for at least some of its costs. It also acts as a deterrent to parties bringing unmeritorious claims or making unmeritorious interlocutory applications. Commercial cases are different to personal injury cases, where the defendant for practical purposes is nearly always an insurance company; there is also not the same overwhelming majority of cases won by claimants in commercial cases - unlike in personal injury litigation where claimants almost always succeed.

Q30 – Do you agree that QOCS should be extended beyond personal injury? Please list the category of case to which it should apply, with reasons.

20. With regard to higher value or substantial commercial / business litigation in the High Court, please see the Joint Response.

21. No, we do not agree that QOCS should be extended beyond the field of personal injury.

Section 2.8 – Proportionality

Q40 – Do you agree that, if Sir Rupert’s primary recommendations for CFAs are implemented, a new test of proportionality along the lines suggested by Sir Rupert should be introduced?

22. With regard to higher value or substantial commercial / business litigation in the High Court, please see the Joint Response.

23. No, not for lower value commercial / business litigation.

Q41 – If your answer to Q40 is no, please explain why not and what alternatives would you propose to achieve the objective of ensuring that costs are proportionate?

24. It is unfair to penalise a winning party for taking steps which are necessary under the CPR (for example, completing electronic disclosure or preparing detailed witness statements) in order to win the claim, and where that party’s costs are reasonable in amount - even if that means that the costs are disproportionately high, compared to the value of the claim. The way to reduce costs would be to simplify the litigation procedure in lower value cases, and for judges to use their case management powers more extensively.

Section 2.9 – Damages-Based Agreements

Q45 – Do you agree that lawyers should be permitted to enter into Damages-Based Agreements (DBAs) with their clients in civil litigation?

25. Whilst we have some reservations, on balance we agree that DBAs should be allowed in civil litigation, particularly if the recoverability of CFA success fees is abolished. Now that the principle of lawyers being paid for litigation work contingent upon a successful outcome has been accepted (as for CFAs), it is difficult to see what objection there can be in principle to DBAs.

Q46 – Do you consider that DBAs should not be valid unless the claimant has received independent advice?

26. No. It is not currently necessary for clients entering into CFAs to be advised to obtain independent legal advice as to the terms of the CFA (although they are free to take such advice if they wish). We do not see that the position should be any different for DBAs. Moreover, obtaining advice from a second law firm as to the terms of the DBA is unlikely to be of much use in practice unless the independent adviser (who will presumably need to be paid by means of a traditional charge out rate or fixed fee) reviews the case in a similar level of detail to the first set of advisers. This will lead to additional delay and expense, and will entail duplicating at least some of the first law firm’s work.

Q48 – Do you agree that, if DBAs are allowed in litigation, costs recovery for DBA cases should be on the conventional basis (that is the opponent’s cost liability should not be by reference to the DBA)?

27. Yes, for higher value or substantial commercial / business litigation in the High Court – in which there is no reason why the losing party’s liability to pay costs should depend on the funding arrangements entered into by the successful party. Indeed, we would tend to adopt that view for all commercial litigation.

London Solicitors Litigation Association

14 February 2011

Response from: 
LSLA