Examination of Witnesses (Questions 20-30)
RT HON
LORD PHILLIPS
OF WORTH
MATRAVERS AND
JUDGE PETER
HURST
6 DECEMBER 2005
Q20 Dr Whitehead: So in terms of
making sure that that regulation goes hand in hand with expanding
services, could one, for example, provide means to cap legal costs
to ensure proportionality of legal costs under CFA?
Lord Phillips of Worth Matravers:
Capping legal costs is something that certainly could be done
by regulation or by statute. It is something that can be done
by the judges if an application is made at an early stage.
Q21 Dr Whitehead: What discretion
does the judge actually have in that respect?
Lord Phillips of Worth Matravers:
I think this is just the moment for me to pass the ball to Peter
Hurst because this is just the kind of thing he does.
Judge Hurst: Section 51 of the
Supreme Court Act 1981 gives the court full power in relation
to costs, and that power was interpreted as giving the power to
make a costs capping order in the organ retention litigation which
is reported as AB and Others v Leeds Teaching Hospital.
Mr Justice Gage in that case was persuaded that he had the power
to make a cost-capping order and, as far as I know, that was the
first time that power was used. It was subsequently used in the
Ledward group litigation. Mr Ledward was a consultant who was
alleged to have assaulted a number of his patients and they, having
recovered damages, brought a subsequent action against the hospital
authority for negligence in not controlling the activities of
their consultant, and the NHS LA were very concerned about the
level of the costs and Mrs Justice Hallett, as she then was, was
again persuaded to make a cost-capping order. In a more recent
case, King v Telegraph Group Ltd, which was a defamation
case, there was an application for a cost-capping order but it
was only made two weeks before trial, and Lord Justice Brooke,
with whom the other members of the court agreed, refused to make
such an order but in so doing he confirmed that what the two first
instance judges had done in those other two cases was permitted
by the Act and the Rules.
Q22 Dr Whitehead: There is however
an issue, I think, of the whole taking root of uplifts in terms
of uplifts being charged in order to take account of the fact
that the costs may not be recoverable by a lawyer if they lose
the case. Are there mechanisms or should there be mechanisms to
ensure that those uplifts are actually proportionate to the risks?
Judge Hurst: Yes, there is a mechanism.
The lawyer, when taking on the client and signing the client up
to the CFA, has to explain to the client what it involves, and
also has to prepare a risk assessment at that time, because it
is very easy at the end of a case to look back and think it was
actually a very easy case or a very difficult case, but the lawyers
have to enter into these agreements at an early stage and so they
have to record their risk assessment. At the end of the case,
if the costs are not agreed, the matter is assessed by judges
like me up and down the country, district judges and cost judges,
and there may be tremendous arguments about the level of the success
fee and the costs judge has really a very difficult task because
he or she has to put himself or herself in the position of that
solicitor right at the beginning of the action and say, "Was
this a reasonable and proportionate figure to arrive at?"
So there is that control. If I can put this rider on it, it is
very difficult at the end of the case to actually control the
costs that have already been spent and so, as Lord Phillips has
said, there is the cost-capping power, which is not extensively
used at the moment but I suspect it will be. In the more expensive
cases there is that power which would control costs from the outset.
The difficulty with cost-capping is, like everything else in the
law, it is extremely expensive and so for modest claims, it is
really not a sensible option.
Q23 Dr Whitehead: Is there not a
sense though that the culture of uplifts could be in danger of
becoming something like a general tax on the whole method of doing
things and as such, perhaps beyond the mechanisms that you have
described in order to maintain proportionality?
Judge Hurst: Yes. You say the
culture of uplifts. This is the system we have of access to justice.
We used to have Legal Aid; now essentially in personal injury
we do not have that. Liability insurers are now finding that they
have to pay not just the base costs, not just the damages, but
also the uplift, which can be up to 100%, and probably an after-the-event
insurance premium, so the liability insurer's expenditure has
gone up significantly. The way they deal with that, obviously,
is by adjusting the premiums, so there may very well be a knock-on
effect. I am not in a position to give you figures but there may
well be a knock-on effect.
Q24 Chairman: If that is what the
liability insurers do, does that mean that, in the absence of
Legal Aid, you have lost the mechanism that would otherwise drive
down costs and discourage cavalier costs in the form of either
excess fees or unnecessary processes and disbursements?
Judge Hurst: No, I do not think
so. The Woolf reforms, the Civil Procedure Rules, are designed
to prevent those sorts of abuses, and my perception is that they
work extremely well in that regard. The Legal Aid system—and
it still exists in part—is very strictly controlled and
solicitors are quite simply not allowed to run up enormous bills,
and the case management powers of the court are such that the
court can control what the parties do. You may be familiar with
the overriding objective of the Rules, which is that the case
is dealt with justly, which includes dealing with it proportionately.
That objective overrides the whole of the Rules, so every aspect
of litigation is governed by that objective.
Q25 Jessica Morden: Do you think
that the media are disproportionately disadvantaged by people
using CFAs in libel and privacy cases because of the costs involved?
Lord Phillips of Worth Matravers:
I think there can be a real problem. The problem arises in part
because the costs of defamation actions seem to be so enormous,
for a start. There are some claimants' solicitors who are prepared
to undertake to act in defamation actions on a conditional fee
basis, with uplift. Defamation actions are quite speculative,
and if you are giving an uplift that reflects the risk, it may
be quite considerable. If they do not take out after-the-event
insurance, and the litigant himself has no significant means,
the publisher who is being sued is on the horns of a dilemma.
If he fights the case and wins, he will have incurred very substantial
costs and will not be able to recover them. It may be cheaper
to settle at the outset, even if he thinks he has a strong case,
and so there is I think a potential problem there. I am not sure
that it would be solved by saying the claimant must take out after-the-event
insurance against the risk of losing, thereby in effect ensuring
that the defendant will get his costs if he wins, because the
premium for such insurance cover would again be enormous and I
suspect the publishers, when they lost, would be complaining at
the quite inordinate, they would say, bill of costs that they
were then called upon to pay.
Q26 Jessica Morden: In a recent judgment,
the House of Lords made reference to the possibility of primary
legislation. Do you think that would be a way forward or do you
have any other suggestions to help solve the situation?
Lord Phillips of Worth Matravers:
The law lords in that case drew attention to this problem. It
is not a problem that it is very easy to solve if you are going
to have access to justice for a claimant who has been defamed
who does not have much money. It is not easy to work out a system
which will ensure access to justice for that claimant without
exposing the defendant to a situation where he may not be able
to recover the costs. Who is going to pay the costs if the claimant
fails?
Q27 Chairman: You have referred to
the potentially very high costs in defamation actions. Is that
not an illustration that the mechanisms that Judge Hurst described
as perhaps working in other areas of the law just do not work
here and the cash register just rings up and up as those practising
in the area know that they can charge more and more?
Lord Phillips of Worth Matravers:
The remedy must be to apply at an early stage for a cap on the
costs.
Q28 Chairman: There is an issue here,
is there not, particularly for smaller periodicals and perhaps
regional publications, that the ability to engage in investigative
journalism could be severely circumscribed?
Lord Phillips of Worth Matravers:
There is an issue here. Of course, defamation is one area where
there never was Legal Aid.
Q29 Chairman: That makes me ask the
question really. Is that a reason that there has not been anything
else to hold down the costs?
Lord Phillips of Worth Matravers:
I do not know. I think in the past you very often had libel actions
in which each side was quite well-heeled. There are small publishers
but there are also big publishers, newspaper magnates, and very
often a defamation action would be by a claimant who had no difficulty
in finding the costs because otherwise he would not be suing.
He could not get Legal Aid, he could not agree no win, no fee
because that was unlawful, so if you had a claimant it must be
somebody who had quite a lot of money to fund the litigation,
therefore he would probably have the money to meet the costs of
the defendant if the claim failed. The difference now is that
the claimant can get support on a no-win, no-fee basis.
Q30 Barbara Keeley: Lord Phillips,
moving on to the NHS Redress Bill, obviously, as it is currently
drafted, do you think it will achieve its aim of removing people
from the court process?
Lord Phillips of Worth Matravers:
The Bill really does no more than open the door to an alternative
scheme to litigation. It builds in the possibility of safeguard
for the claimant in the form of some kind of impartial legal advice
being provided. I believe that it ought to be possible for hospitals
to run a scheme which will encourage those who have claims against
them to negotiate and to settle them without expensive litigation.
The Committee suspended from 5.12 pm to
5.36 pm for a fire alarm
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