Legal Aid, Sentencing and Punishment of Offenders Bill

LA 88

Memorandum submitted by Carter- Ruck , Solicitors

1. Summary

1.1 The Bill will seriously impede access to the courts for all but wealthy individuals and companies.

1.2 There is much that is good about the current CFA and ATE insurance system. Over the past decade much positive work has been done to iron out problems associated with this system which now provides real access to justice.

1.3 There is wide agreement that the cost of High Court litigation is too high and that further reform is therefore necessary. However, to remove recoverability of success fees and ATE insurance altogether is not the answer as it will force a return to the bad old days where access to the courts was like access to the Ritz Hotel: open to anyone who could afford it.

1.4 In our view the changes currently proposed will largely destroy the real access to justice that the system has brought and fail to replace it with any system that is viable for most citizens of our country.

1.5 We would recommend that the CFA regime remains with recoverable success fees capped at a maximum of 50% of professional charges and a success fee is permitted between a client and his legal advisers capped at 25% of damages recovered. We also propose that the current proportionality test remains in place and is not altered in the manner currently being implemented by the Ministry of Justice. This would be in line with the recommendations of the three senior Costs Judges (see Appendix B).

2. Comments on Clause 41:

2.1 This clause if implemented (combined with other proposals such as changes to "proportionality of costs" being taken forward by the Ministry of Justice) would deprive most members of the public from access to legal representation. It is likely to make it uneconomic for lawyers (solicitors and barristers) to act for parties (whether claimant or defendant) in litigation under CFAs, except in very high value monetary claims. This runs a real risk of depriving litigants of their rights of access to the courts under Article 6 of the European Convention on Human Rights (ECHR).

2.2 Despite the core principle of access to justice, clause 41 of the Bill would severely diminish legal representation and, therefore, access to justice to most of those who:

a) are not eligible for legal aid;

b) are not sufficiently wealthy so that they can afford legal fees;

c) do not have the backing of insurance, a trade union or other such body; and/or

d) are not able or willing to conduct litigation themselves,

unless they have a claim for damages of such a size that a reasonable success fee can be paid from the compensation recovered.

2.3 It is likely to become very difficult for litigants to find solicitors (and counsel) who are prepared to act under a CFA where there is no material success fee to compensate for the risk of the litigation being lost. And in the case of defendants, where there is no prospect of recovering any success fee from damages recovered, it is likely to eliminate access to justice under CFAs altogether.

2.4 Carter-Ruck does a substantial amount of CFA work in the media field of law, professional negligence (with particular emphasis on financial mis -selling cases) and in more general commercial cases. If no success fee becomes recoverable, we will need carefully to consider the viability of our CFA scheme, except in high value claims.

2.5 As our client Dr Gerry McCann told the audience at the International Bar Association conference in Madrid on 6 October 2009:

"It is very important that ordinary people like ourselves do have legal representation. I’m not sure we could have gone through this without the CFA. This kind of arrangement should continue in the UK ."

2.6 The proposal to allow a lawyer to recover a success fee from their own client combined with an increase in damages of 10% is wholly inadequate. This is best illustrated by the Naomi Campbell v Mirror Group case where the damages recovered by Ms Campbell were £3500. An increase of 10% would result in that case in an additional sum in damages of a mere £350 . The introduction of DBAs will assist only in relation to high value claims.

2.7 The changes proposed to the Part 36 regime will also help, but only to a very limited extent (as to which we refer further below).

2.8 I n many cases the factual and legal issues will be such that it will be quite unreasonable to expect litigants to present their cases before the Court without legal representation, especially where the defendant has the benefit of expert and specialist legal advice.

2.9 The erosion of access to justice by the proposed clause may well result in the UK being in breach of Article 6 and its obligations to ensure that litigants must have "a clear, practical and effective opportunity" to go to Court ( de Geouffre de la Pradelle v France A 253-B (1992) para 34).

2.10 We therefore believe the Bill will have a serious adverse effect on Human Rights and this is not reflected adequately in the impact assessments.

2.11 We attach (at Appendix B) a paper published by three senior Costs Judges concerning Jackson LJ’s proposals . Their concluding remarks are that " we do not agree with the proposals set out in the Report [of Jackson LJ] about success fees. The CFA regime has undergone many changes and improvements since implementation. Having taken a decade for these to have been achieved, now is not the time to make radical changes which give no guarantee that access to justice at reduced costs will be delivered under Jackson where it failed under Woolf. "

2.12 Conditional fee agreements have benefited many "ordinary people" who are current or former clients of Carter-Ruck

2.13 Many of the people who instruct us on CFAs are "ordinary people" who in the absence of a CFA would have no effective means of redress. At Appendix A we have provided four case synopses demonstrating how CFAs work for different causes of action. Some summary examples from the many cases for ordinary people we have conducted over the past few years:

2.14 In the media context , for example we have represented on CFAs:

· A Danish radiologist sued by US conglomerate GE Healthcare over allegations concerning one of its products.

· A junior estate agent falsely accused by the Daily Telegraph, Guardian, Independent and Daily Mail of having been arrested in connection with a terror plot to blow up trans-Atlantic airliners.

· An Army officer falsely accused by The Guardian of being responsible for the abuse of prisoners.

· A comprehensive school teacher, falsely accused in an internal Memorandum of inappropriate contact with female pupils.

· Kate and Gerry McCann.

· An unemployed woman falsely accused by a regional newspaper of attempted murder.

· A local councillor (disabled and on incapacity benefits) who suffered serial libel and harassment over several years by a multi-millionaire businessman who accused her of theft and corruption.

· A management consultant whom a local newspaper falsely alleged had been accused of raping a child.

· A junior PR worker whose privacy was grossly infringed when the Evening Standard published a photograph of and named her, wrongly stating that she had been raped.

· A junior naval NCO falsely accused by a regional newspaper of serious sexual assault and exposure.

· A soldier’s wife whose photograph was used by the Daily Mirror to illustrate a story about women being unfaithful to their husbands while serving in Iraq .

· A Tamil refugee falsely accused by The Sun and Daily Mail of eating during a hunger strike outside the Houses of Parliament, causing the police to waste a fortune of public money in policing his demonstration.

2.15 Many of our claimant clients in media related cases arrive in our office utterly distraught – often they are in tears – as a result of the actions of the press and the consequences, often devastating, of inaccurate and irresponsible articles about them. Often they are people of relatively limited financial resources and little to no understanding of the law in the area of media law, which is complicated. The overwhelming majority of people who bring libel proceedings against the press are looking primarily for an apology, costs and sometimes, but not always, modest damages.

2.16 In the commercial/ financial misselling context , for example we have represented on CFAs some 45 claimants who had lost huge sums as victims of a fraudulent scheme for the misselling of pension products. The defendant, a substantial bank, dragged out the litigation for several years. There is no way our clients could have achieved any compensation without the benefit of a CFA backed with ATE insurance.

2.17 Conditional fee agreements are available to, and of benefit to, defendants as well as claimants

2.18 It should also be remembered that CFAs are currently available and offered to defendants as well as to claimants. We represented on a CFA Professor Henrik Thomsen, a Danish radiologist sued by US conglomerate GE Healthcare over allegations concerning one of its products. We also defended Hardeep Singh, a journalist who was sued for libel by His Holiness Sant Baba Jeet Singh Ji Maharaj , again on a CFA basis. If success fees were no longer to be recoverable from the losing party, this is likely to end.

2.19 Our suggested proposal/compromise:

2.20 The CFA regime remains with recoverable success fees capped at a maximum of 50% of professional charges and a success fee is permitted between a client and his legal advisors capped at 25% of damages recovered.

2.21 We also propose that the current proportionality test remains in place and is not altered, as currently being implemented by the Ministry of Justice. This would be in line with the recommendations of the three senior Costs Judges (see Appendix B).

2.22 In support of our suggestion, we refer to the following :

a) In the view of the three senior Costs Judges there is no compelling reason why the maximum success fee should remain at 100%. To cap recoverable success fees at say 50% (or a higher figure if this can be incorporated into an expanded CPR 45) in cases that proceed to trial, would make a big inroad into the level of recoverable costs, without dismantling the whole system, but this does not appear even to have been considered by the MoJ .

b) English PEN and Index on Censorship (both well known to be protective of freedom of speech) oppose the principle that CFA success fees be made entirely irrecoverable from the losing party. They do not agree with 100% success fees and advocate a cap on recoverable success fees of 25% where there is a substantial tort.

2.23 Properly to understand the solution proposed above, the following needs to be appreciated:

a) Under the current test of "proportionality" costs recovered by the winner against the loser in litigation (known as "standard basis" costs) are normally 70% to 80% of the costs that the winner’s solicitor is entitled to charge his own client (known as "indemnity basis" costs). This difference between standard and indemnity basis costs, of 20% to 30%, is known as the "shortfall" in the winner’s costs which the winning party has always had to fund himself;

b) With a recoverable success fee of say 25% the winner’s solicitor does not recover 125% of the normal charges he is entitled to charge the winning party. In fact, because of the shortfall in the winner’s costs, the total costs, including success fee, recovered from the losing side will be the same as or less than the normal charges the winning party’s solicitor is entitled to charge his own client. With a recoverable success fee of say 50% the total costs including success fee recovered from the losing party will be 107% to 120% of the normal charges the winner’s solicitor is entitled to charge his client;

c) There needs to continue to be an element of recoverable success fee in order to make it economically viable for lawyers to act for clients on no win no fee agreements in order to provide people with access to justice, especially where the scope of legal aid is being so drastically restricted. An increase in damages of 10% is wholly inadequate to deal with this, as explained above at paragraph 2.6.

d) If the proportionality rules are changed in line with the proposals which the MoJ are currently taking forward the recovery rate of costs between parties to litigation is likely to be far lower than the current 70% to 80%. This will result in defendants using their commercial muscle to drag out litigation, make last minute settlement offers and then argue that costs are disproportionate and therefore irrecoverable.

3. Comments on Clause 42 – Damages-based agreements:

3.1 Generally speaking we think it would be helpful to have the Damages-based agreement option available as a means of funding a legal action alongside other funding methods. However the Bill does not address certain key issues relating to DBAs:

a) Concerning recovery of costs by a party on a DBA the Bill is silent but we agree with the so-called " Ontario model" i.e. that costs recovery should be on the conventional basis and not by reference to the DBA.

b) The Bill is also silent on the maximum percentage the lawyer can be paid. We believe that a maximum fee of say 40% should be permitted. This does not mean that the limit will always be sought and/or agreed to. This will depend on the size of the claim and market forces. The higher the limit, the lower the value of claim for which lawyers are likely to be willing to offer DBAs and the more access to justice will be assisted.

c) The Bill is also silent regarding funding of disbursements. They can be financed by the party, legal advisers and/or third party funders (as with CFAs), with an increased percentage permitted for the additional liability and risk.

4. Comments on Clause 43 -recovery of insurance premiums by way of costs:

4.1 This will also result in massive erosion of access to justice

4.2 There can be no real or effective access to justice if to sue a claimant must either:

a) Effectively put his or her house and/or pension and/or savings and/or financial security at risk (where the outcome of legal proceedings is never certain); or

b) Take out ATE insurance where the costs of the insurance (and unrecovered costs and/or success fees), are likely to render the litigation uneconomic if the case advances a material distance, with only the ATE insurance provider and legal advisers gaining. This would bring the administration of justice and legal profession into disrepute.

4.3 Owing to the expense of ATE insurance, to adopt this proposal would make all but very high value claims uneconomic. This in turn would destroy access to justice in relation to many/most claims. It would also make matters extremely difficult for defendants being sued, particularly where there is a significant inequality of arms.

4.4 The proposal is not in line with Sir Rupert Jackson’s recommendations

4.5 The abolition of the recovery of ATE was suggested by Sir Rupert as part of a package of reforms which included Qualified One way Costs Shifting yet QOCS is being proposed only in personal injury cases.

4.6 This means that in non personal injury cases the claimant is left in the worst possible situation: without the benefit of QOCS and with no recoverable ATE premiums.

4.7 This will effectively kill off access to justice in the majority of non personal injury claims.

4.8 The need to protect parties from adverse costs orders

4.9 Enabling parties to litigation effectively to protect themselves from costs risk is the single most important development that has facilitated access to justice in all sorts of cases. This applies to many categories of cases. For example:

a) Defamation and privacy cases (involving Art 8 ECHR fundamental rights);

b) Professional negligence cases of all types, including financial mis -selling, legal and accounting negligence; and

c) Breach of contract claims.

4.10 In all these cases, claimants normally face a very well resourced (both in terms of finance and expertise) defendant. Absent ATE, or some other provisions to protect them from adverse costs orders, claimants in such cases will be denied access to justice if ATE premiums are not recoverable. This is except in very high value claims and for the very wealthy.

4.11 The position is no less important for defendants who face adverse costs risks (through no choice of their own) from litigation being brought against them. We see no reason in principle why there should not be one way costs shifting in favour of a defendant. The case of Professor Henrik Thomsen (to which we refer above) would be an example of where QOCS might appropriately be applied in favour of a defendant.

4.12 Our suggested proposal/compromise:

4.13 ATE premiums for this risk should remain recoverable, provided either:

a) 42 days notice of an intent to take out ATE insurance has been served, thereby to give the opposing party the opportunity to agree not to recover costs or to limit the costs they can recover so as to eliminate/reduce the need for insurance; or

b) the risk is removed through the introduction of a legally certain regime of one way costs shifting or other such provisions (note: the regime proposed by Jackson LJ is not legally certain and is a recipe for costly satellite litigation).

5. Comments on Clause 44 - recovery where body undertakes to meet costs liabilities:

5.1 We do not support this. It assumes that trade unions and other membership organisations are sufficiently wealthy so as to be able to afford the substantial costs risks of litigation. If this provision is implemented the practical effect is that many such organisations will feel unable to provide such benefits. They will, therefore, no longer offer them. Then, if a member wishes to bring or defend a claim, absent a viable ATE insurance system, he will not be able to do so without putting any home he has and/or other savings at risk.

6. Comments on Clause 51 - payment of additional amount to successful claimant – and on offers to settle:

6.1 Such a proposal should encourage the making and acceptance of what are termed "Part 36 Offers", which should in turn aid settlement.

6.2 In paragraph 11, we would suggest "non-monetary claim" is defined to mean "a claim for a benefit other than an amount of money, including without limitation the vindication of the claimant’s reputation".

6.3 The current Part 36 regime also works to the disadvantage of claimants in libel proceedings where a claimant makes a reasonable Part 36 offer early on in the action. In such cases defendants, as a practical matter, can escape the costs and interest consequences of their failure to accept the claimant’s earlier offer, by accepting it late on in the proceedings, although by then they may well have substantially aggravated the damages and will certainly have increased the costs of the action.

6.4 We suggest that this is addressed so that a defendant can once again only accept Part 36 offers within 21 days of the making of the offer without the leave of the court. Thereafter, if a defendant wishes to accept the Part 36 Offer, the court should have power to order an additional payment of damages and costs to compensate the claimant for the defendant’s failure to accept the Part 36 Offer within 21 days of the offer first being made.

September 2011

Legal Aid, Sentencing and Punishment of Offenders Bill

Appendix A to memorandum submitted by Carter- Ruck , Solicitors

EXAMPLES OF CASES RUN ON ‘NO WIN - NO FEE’ BASIS

Case Synopsis: Negligent miss-selling of financial products

A class action by 45 individual claimants against two multi-national Banks for their part in the negligent miss-selling of a pension product that the claimants had purchased. The claim concerned a failed UK pension liberation scheme and offshore trust and administration services and was worth in excess on £20 million.

The case took over four years to reach conclusion and only settled two weeks into the 12-week trial on confidential terms.

The Claimants were represented on ‘no win – no fee’ agreements by their solicitors and their junior and leading Counsel, coupled with After the Event (ATE) insurance totaling £6.5 million, believed to be a record for a commercial case.

One Client has commented;

"Before we found solicitors willing to act on our behalf on a no win-no fee basis an individual on the other side of the litigation told me that he wasn't bothered about our claim because he knew he could out-resource us.

 

The man in the street needs to have access to the law or else he becomes disenfranchised from society. No win-no fee agreements provide such access to justice and seeing how they work in practice has restored my faith in the law as a force for good to allow ordinary people to protect their rights and which deters corporate bullying of individuals.

 

If we had not had ‘no win - no fee’ legal representation I would have lost my entire life savings and my home. I would have been declared bankrupt in my late fifties without any form of pension despite having worked and saved all my adult life. In the circumstances it would not have been inconceivable that my marriage would also have ended and it is important to remember how far the fabric of life and society and the lives of innocent parties are affected when access to justice is taken away from the ordinary person."

Case Synopsis: Breach of Privacy

The Claimant was a glamour model who had appeared in newspapers, magazines and websites and appeared in music videos, television commercials and on reality television shows. In 2007 the News of the World published an article containing the most sensitive and private material about her in hard copy and online. The Newspaper did not tell the Claimant how it obtained her private details nor did it seek her permission or warn her about what it intended to do. As a result of the newspaper breaching her privacy, the Claimant’s modelling work dried up and she suffered considerable financial difficulties.

Unsurprisingly, the story was picked up by other newspapers and magazines who republished the Claimant’s most sensitive and personal details throughout the media and online as a result of the News of the World’s wrongdoing. In addition to stalling her career publication also caused the Claimant considerable distress and indignity. As a consequence of publication the Claimant endured humiliating ridicule and threats of violence from strangers, both on the street and online, including messages posted on her ‘myspace’ website telling her to watch her back, threatening to throw acid in her face and gloating that she would not get any more work. The Claimant suffered panic attacks and grew afraid to leave her home.

Shortly after proceedings were issued the Newspaper sought to negotiate a settlement and the Claimant agreed to settle her claim for £50,000 in compensation and the payment of her legal costs and disbursements. The settlement, thought to be one of the largest settlements in a privacy action at that stage reflected the gross nature of the Newspaper’s breach of privacy.

The Client has commented;

‘The Newspaper knew very well that it was publishing the most sensitive personal details about my life and that the publication of those details was an unlawful invasion of my privacy. There was no public interest in these details being published. The newspaper published because it assumed that, as a model just starting out in my career, there was no way that I could afford to sue and without the availability of a no win – no fee agreement I wouldn’t have been able to.

I don’t think people realise the psychological impact it has on you to have the most private and confidential facts of your life published to the world in a newspaper and across the Internet. You feel isolated and powerless. As a result of the publication I was mocked and humiliated and no longer able to find work.

When the Newspaper realised that I could sue, because I had solicitors and a Barrister acting for me on a ‘no win – no fee’ basis, and that I was prepared to do so, it settled the claim quickly knowing that it was in the wrong. It was only when the Newspaper accepted that fact that I was able to begin rebuilding my life."

Case Synopsis: Libel

In early 2009 the Sri Lankan army attacked Tamil communities in the north of Sri Lanka. These events caused Tamils resident in the United Kingdom to join together in mounting a spontaneous demonstration outside the Houses of Parliament. The demonstration commenced on 7 April 2009 as part of which the Claimant, a Tamil refugee, embarked on a 23-day hunger strike. After the hunger strike concluded, the Claimant was kept in hospital for 5 nights to recover.

On 9 October 2009, the ‘Daily Mail’ published false and defamatory allegations about the Claimant that he had been secretly eating takeaway burgers throughout his hunger strike and caused the police to waste a fortune in public money. The allegations were repeated by the ‘Sun’ newspaper on line. Neither Newspaper made any attempt to contact the Claimant before publication to verify the truth of the allegations before deciding to publish them.

The damage caused to the Claimant by publication of the libels was substantial, in part, because the articles alleged that supporting evidence was caught on camera by a police surveillance team and that police surveillance teams had observed the Claimant eating. The Metropolitan Police Superintendent who was in charge of the police operation in Parliament Square subsequently confirmed that the police did not see the Claimant eating and that these allegations were false.

Both Newspapers were invited to apologise and compensate the Claimant for the harm done. Both Newspapers ignored that invitation. The Claimant had no means to vindicate himself and no ability to fund a legal claim against the Newspapers and so the Claimant’s solicitors and Barrister agreed to act on a ‘no win – no fee’ basis and proceedings were issued. Eight months after publication both Newspapers finally agreed to set the record straight and apologise in their Newspapers and by way of a statement in open court as well as payment of substantial damages and his legal costs including disbursements.

On the day that the statement in open court was read out the Claimant said:

"I am relieved that this matter is now resolved and I can start to rebuild my life again. The past 8 months have been an unbearable strain on my life, to the extent that at times I have even contemplated taking my own life. As a result of the lies that the Newspapers published about me, and through no fault of my own, I have lost friends, been shunned by family members and completely ostracised from the Tamil community.

I felt I had a responsibility to all those who had supported me during the hunger strike, and were sullied by association with me, to take legal action against both newspapers to prove that the allegations that were published were false.

Now that both newspapers have declared that the allegations are completely untrue and apologised, I sincerely hope that those people will accept the newspapers’ apologies and understand that I have done nothing wrong. My sacrifice during the 23-day hunger strike was real and for the sake of my fellow Tamils who are suffering in Sri Lanka.

I would like to thank all those who have stuck by me through this nightmare and have not doubted my integrity."

Case Synopsis: Professional Negligence

In late 2000, the Claimant, intending to secure funds for his retirement, invested the proceeds of the sale of his successful estate agency business in an Enterprise Investment Scheme run by a private bank. The funds, a large six-figure sum, were invested in the EIS but the investment was disastrous, leaving the Claimant with very significant losses. The Claimant instructed the Defendant firm of solicitors to make a claim against the bank and the managers of the investment. A claim was prepared, but the Defendant solicitors failed to serve proceedings within the prescribed period.

Not only had the Claimant lost most of his savings, but he had lost the opportunity to sue the bank for those losses. The Claimant had wasted precious funds on the Defendant's legal fees and had insufficient funds to pursue an entirely new, and very much more complicated, claim. Resources to defend that claim were not an issue for the Defendant firm, which was insured.

Solicitors and Counsel agreed to act on a "no win, no fee" basis, coupled with After the Event insurance. The Defendant firm vigorously disputed quantum, which turned on the assessment of the merits of the original claim against the bank, and expert accountants were instructed. Following protracted negotiation, the case finally settled in September 2010 and the Claimant recovered a six-figure sum in damages.

Case Synopsis: Breach of Contract

The Claimant was an advertising salesman who had been employed by the Defendant in the United Kingdom. The Defendant was a publisher of specialist trade publications and organised trade exhibitions across Europe.

By an agreement the Claimant was appointed as a sales agent of the Defendant for various European territories in respect of the Defendant’s products. In breach of express terms of the agreement the Defendant failed to pay the Claimant for outstanding commissions that the Claimant had earned.

The Claimant made attempts to negotiate with the Defendant for the payment of the outstanding commissions but those negotiations were unsuccessful. The commission earned by the Claimant was the sole source of revenue for the Claimant and his wife.

The Claimant had no alternative but to sue for breach of contract if he was to recover the sums owed to him but he did not have the financial resources to fund litigation. A fact that would not have been lost on the Defendant.

The Solicitors and Barrister agreed to accept instructions on a ‘no win – no fee’ basis and proceedings were issued. The case was eventually resolved on the basis that the outstanding sums owed to the Claimant were paid to him along with his legal costs and disbursements.