Memorandum submitted by Jonathan Steinberg

I understand your Committee has been commissioned to review (inter alia) the Conditional Fee Arrangement aspect of the costs rules and wanted to give some input into areas where there is potential for abuse which I am reliably informed weren't considered when the costs aspect of the Court Rules (CPR 48) was being drafted.

I have been admitted to the UK bar since 1976 and to the New York bar (as well as to the Federal bar) since 1983 and was for a lengthy period the only member of the UK bar to practice in litigation and commercial law both in a structured as well as in a fused legal system; and where contingency fees have 'always' been permissible. As such I have experience of how practitioners have become accustomed to having the CFA in their arsenal as well as how they can be used and possibly abused.  I should also mention that I am an active member of the American Society of Journalists and Authors, -  an organisation membership in which is carefully vetted by numerous internal committees according to strict criteria.

My experience was so significant that I have been authorised to speak for the UK government to the media in the US and been recommended by British Consulates to local law firms looking for input into the law behind cases being fought in local courts.       

After the Woolf Reforms to the legal system,  I made some recommendations which were adopted by the Lord Chancellor which had the effect of making the Court System more user-friendly.  I was also asked by the Lord Chancellor's Office to prepare a report which I sent to His Lordship's office for Sir David Clementi and I am pleased to note that the White Paper itself went considerably further than the Clementi proposals: The law which was ultimately implemented was in fact to a considerable extent based on the points I set out in my report on paragraphs 66-70 of the underlying Consultation Document "In The Public Interest'.

There are a number of costs points I feel ought to be brought to your attention on the subject of conditional fee arrangements:

1. There is a considerable imbalance which is probably impermissible under the European Convention (as well as under the level playing field rules of CPR 1) whereby litigants of different classes can recover fees at different levels under costs orders.  It is critical that any consideration of the conditional fee arrangement look into how any legitimate litigation undertaken by anyone who isnt wealthy or a largish corporation could conceivably get started?

1a  Notably,  legal aid is generally not available for defamation cases.  I use the word generally because it can still be made available in theory in appropriate cases by ministerial fiat.  However whatever the ministerial fiat, and even if there is an HRA aspect of the case, what isnt generally known about the system is that the Community Legal Services is so unused to funding legal aid cases in defamation that they can easily override any ministerial designation to grant legal aid in any particular case;    and in practice there is nothing which can be done about such refusal. Indeed the refusal then comes within the ambit of a general enquiry which will be outside the remit of your Committee: Certain judges in the High Court have been designated to review such decisions and those judges appear in the past to have had instructions NOT to take Human Rights arguments into consideration in judicial review of the CLS's administrative decision.  I have cases on record where they have said this. They simply do not write embarrassing judgments on the facts presented to them which will direct the CLS to grant legal aid.  The conditional fee arrangement is therefore the only way a member of the public can start litigation (or indeed defend it) without ruining himself or his company. 

1b  I utterly discount the suggestion that a member of the public can take action himself or herself as a litigant in person.  Such litigants can be and often are the subject of inherent abuse by the system and in practice it is extraordinarily difficult to get any judge of the High Court to take litigants in person seriously at any hearing or in any application they might make.  Hearings with litigants in person usually take place as a dialogue between the judge and the counsel for the represented party with the litigant in person being largely an emasculated observer.

It is not difficult to see a solicitor representing a newspaper taking action to run up the costs and render the litigation so difficult to pursue that ultimately a large number of justifiable cases can be defeated by a sort of practical solicitor abuse: The legal system treats solicitors as being in a completely different class of litigant from any other litigant and very significant percentages of judges simply will not accept any evidence which suggests that the solicitor is just trying to abuse the system to prevent his opponent from succeeding in litigation.  Actually this is hardly surprising where the solicitor is acting in the course of his everyday employment whereas the litigant in person will normally be like a 'fish out of water' in engaging in action through the court system. The solicitor's conduct is inevitable explained away by claiming that he is just fearlessly representing the interests of his client.  Infra, I will give an example in extremis of how this works in practice so that you can see that the Steel & Morris case was completely anomalous (and only applies where the litigant does not mind being declared bankrupt as a result of the litigation):

2. Your Committee for its own purposes should know precisely how this position is skewed in favour of parties who are represented by looking at how solicitors are themselves treated by the Courts because there is this further ill which some form of no-win-no-fee system combats:  I am drawn to wonder how it can conceivably be justified that (for example) when representing themselves in litigation, solicitors can pay themselves their costs at their opponent's expense often at around three hundred pounds an hour under costs orders whereas litigants in person can only recover  £9.25 under an identical costs order in the same case.  This is particularly pertinent in view of a final paragraph said in the Court of Appeal by Lord Justice Goldring only this week, commenting on how little judges do to alleviate this form of abuse:

1. A final observation

33. What happened in this case exemplifies much that is wrong with our civil justice system. The costs involved dwarf the damages. The trial took far too long. It was virtually 12 months after it began that it finished. The advocates appear to have lost all sense of proportion in their conduct of it. Mr. Moffett, for example, cross-examined Mr. Peakman for some two days (albeit the judge himself appears to have asked many questions during the course of that cross-examination). The judge should not have allowed such a cross-examination to take place. He should not have permitted the case to take, in all, 8 days. I am afraid that it is clear that overall the judge failed to exercise that degree of control over these proceedings which he should have. The CPR gives him wide powers in that regard. Unfortunately he did not exercise them.

I don't think it states the position too strongly that it is almost unheard of for a judge to exercise any degree of restraint over costs and I have had cases where in extremis, judge have themselves drawn out the costs to punish one litigant who they didn't like: By drawing out the case prior to making no ruing on the facts or law of hearings they had caused to run over numerous days by demanding argument on which they weren't going to rule.  (Obviously no Master exercising his case management powers can have any control over this. And -on this point- I have had cases where there was flagrant practical abuse by solicitors in, for example,  filing large numbers of full ring-files of papers for 5 minute case management hearings where there could have been no conceivable reason for doing so save to allow them to claim costs of preparing those ring-files).  Please note my continued use of the word practical. By this I mean such abuse as could not possibly be the subject of any complaint to any regulatory authority.

2a.  But there is considerable scope for general abuse in these rules independently of how the judge governs his court room procedures:  A solicitor can represent himself in litigation solely for the costs he can recover out of the case when work is a bit slow in his office because he knows that he will be able to argue that his opponent can only recover at such a ludicrously low figure.  I make this statement for two reasons: firstly the Costs  Office does not in practice usually allow litigants in person to recover their costs at much more than the  £9.25 figure whatever losses they can show; secondly because there is an equally HRA-impermissible 'costs capping' rule which says that whatever the actual financial loss, even if it be proven beyond all reasonable doubt to the Costs Office, no amount can ever be recovered at a rate which is more than two thirds of what the Costs Master thinks a solicitor would have charged. 

While this concept may have been justifiable before the Woolf Reforms which were designed to make justice accessible to all litigants, one wonders what possible justification can there be for such a rule today?  I can see that before the CPR, it was arguable that a litigant should have obtained the services of a solicitor rather than spend his own time on the case if he charges his time at more than a solicitor;  but surely this argument no longer exists if the reforms were intended to make court more accessable to litigants in persons. It is absolutely critical that lay clients and counsel have in their arsenal unrestricted access to conditional fee arrangements to combat this potential abuse on the part of solicitors representing either the Press or any client who could be prejudiced by this. 

Also please note that this applies whether the case arises in the general defamation arena or otherwise.  If there is going to be any review of the CFA system as the Press now seems to want, it has to be reviewed in the light of necessary and politically unacceptable solutions which involve extension (extensive extension) of legal aid to correct the imbalance between litigation involving the wealthy/large corporations and those who cannot afford to pay the huge costs involved.

2b.  There is a further problem with the CPR which has not often surfaced which can be seen in the example to which I have referred.  When it has, it has carefully been brushed under the carpet in cases where it was not raised as a major issue in the case: As the example of an instance where I encountered it, I once had occasion to write to Master Gordon Saker in a case in which I was not involved in any capacity. 

It had been brought to my attention that an unscrupulous solicitor had identified a former client who had revealed to her solicitor that she was in financial difficulties arising as a result of her employment situation.   She had of course originally consulted that solicitor for this very reason.  The firm of solicitors had been negligent in advising her and was keen that she not notice this or hold the firm to account and that she just pay their bill and go away. She was reluctant to pay for negligent advice.   So they instituted proceedings against the former client, using the confidential information gained while they were in a position of fiduciary towards her that she was impecunious and couldn't afford to defend those proceedings. This particular firm 'uses' a former partner solely to extract fees and costs out of clients.

He then, rather than let the proceedings take their course and risk a counterclaim for negligence, started to ramp up the costs and threaten her with the usual arguments about 'knowing every trick in the book' in litigation and suggesting that if she didn't stop the proceedings by paying up immediately and in full and now including all costs he had incurred, he would ruin her.  He was of course correct in knowing that this was an overpowering argument because he knew she was unemployed!   It was at this stage that the researcher brought the case to my attention and (seeing an MO in the solicitor's conduct), I wrote to the Master.

Instead of ignoring the letter or telling me I had no locus standi (which I of course didn't) he noticed what was happening and that the victim was being victimised and that his Office was being used, possibly illegally,  to further this end. He asked his staff to put the defendant in touch with me, -  before one particularly expensive hearing, -  while the solicitor was busy building up his billable hours for which he could obtain costs orders in the SCCO. Ultimately the situation was resolved (when she did go to see another solicitor).

3.  But it is troubling that the government is now taking action to look into precisely how conditional fee arrangements work to see if they should be limited in some way where damage awards are already low enough in UK courts.

Even more troubling is the fact that the committee which has been commissioned to look into this is a largely academic committee with  little or no real world experience of how the system works in practice and which seems to be relatively impervious to outside ideas;     while the press is so insistent on protection by the government from the vicissitudes of the CFA system that in addition, your Committee has been commissioned to look into specifically how the CFA system can work against media outlets which have infringed on civil liberties or human rights! (I assume your Committee has no interest in instances where the media outlet has not so infringed as those cases will presumably be won by the media outlet whether it be fought under a CFA or otherwise?)

Conclusion

There are a number of problems with the costs rules which exist independently of the general rule that the winning party pays the losing party's costs and I think it appropriate that you be apprised to them in any general review of the system. Thankfully a reform for which I had been fighting for a lengthy period (the institution of the CFA system) has now rendered the legal system more accessable to the public,  as opposed to only to a small number of parties who can afford to litigate.

Nevertheless it is important to remain vigilant to the shortcomings in a system where those exist.  After all, the CFA does do a considerable disservice to certain classes of litigant, -  large corporations and the wealthy;    who have always considered the Courts to be their domain and  can afford to threaten their opponents with bankruptcy.  It will remain in peril while (as Ron Thwaites QC put it in an article recently) 'finance-enabled' litigants control the media and are in a position to keep gnawing at any government with their agendas. I am glad to note that a Committee is being set up to review whether the present system serves the public interest or ought perhaps to be extended to cover instances where legal representation still isn't available to parties prejudiced by any aspect of media law.

My recommendations which were adopted by the Lord Chancellor (pursuant to the Clementi Report) because the Law Society had shown that it was incapable of self-regulation went as far as suggesting a government body to regulate the legal profession. One wonders if it is necessary for the PCC to either be replaced by a new body with proper enforcement powers. Or whether if it is shown that it's investigations are diligently carried out, it should be given enforcement powers of its own which can in certain instances supplant the powers of the Courts: This would prevent any argument that the CFA doesnt work in the interests of the  media from succeeding?  I don't seriously think that there is any argument that CFAs don't work in the interests of the public.

I can well understand that newspapers will have considerable difficulties where members of the public who wouldn't have access to the Court System suddenly do find themselves able to (for example) protect their reputations from organisations whose primary interest lies in selling newspapers or garnering advertising revenue from Internet sites. 

To put it bluntly and while seeing the situation from both sides, if a hypothetical newspaper has fired their sub-editors (who should be doing the fact checking for them) through loss of normal circulation income, I can well see that they wouldn't want 'just anyone' to take action against them if legal problems arise as a result of this supposed 'economy'. 

I am not sure that the solution to this problem is (for example) abolishing or abridging the CFA system to prevent people or companies prejudiced take action to redress damage which results. 

My personal view is that the public should be empowered to take action by promulgation of even more enabling legislation to spur solicitors to take on more cases under CFAs so that (not just) defamation cases can be pursued where appropriate.

 

November 2008