Civil Court Changes
The Civil Procedure Rules which were introduced in 1999 govern the litigation process in the English and Welsh civil courts from the County Court up to the Supreme Court.
They followed a lengthy consultation process which resulted in Lord Woolf's report and at the time were quite revolutionary. The old Rules of the Supreme Court and County Court Practice were relegated to history and the CPR applied in all of England and Wales' civil courts.
I remember being amazed that three quite large volumes could be replaced with one quite small book although, lawyers being lawyers, the new White Book is quite large again! One feature of the new procedural code was the introduction of the overriding objective of enabling the court to deal with cases justly.
This might not seem very radical given that justice is the purpose of the court system but it was interesting to see a breakdown of what was considered to be involved in dealing with a case justly. Not only was the definition concerned with ensuring that the parties to a dispute were on an equal footing and that disputes were dealt with expeditiously and fairly but additionally it included dealing with cases in ways which were "proportionate" to the value of the dispute, the importance of the case, the complexity of the issues and financial position of the parties. Most interestingly as a precursor to today's troubled economic environment dealing with the case justly also included allotting to the case "an appropriate share of the court's resources, while taking into account the need to allot resources to other cases".
Put simply, the Court is not a bottomless pit of money and resources and has to share out its time and funds between litigants in a proportionate and measured manner. The rules also brought in case management powers and different rules and procedures for different values of case. Subject to considerations of importance and complexity cases with a value up to £5,000.00 were placed in the small claims track whose procedure is a lot more simple and speedy than those of the fast track for claims of between £5,000.00 and £25,000.00 (originally £15,000.00) and the multi track for claims worth more than £25,000.00. The costs regimes differ in each track.
In the fast track the cost of preparation for and attendance at trial is limited. In the multi track there are no such limitations and costs are recoverable in full although in practice the winner usually has to meet between a quarter and a third of his legal bill.
In the small claims track the costs are fixed at a very low level with the result that it is not often viable for a litigant to instruct a solicitor. The winnings are swallowed up by the legal bill. This had been the cases even prior to the CPR. There was an arbitration/small claims procedure under the County Court Rules for claims up to £2,000.00 where similar costs restrictions applied.
It always struck the writer that there was some commercial sense in this but as a matter of allowing access to justice it was flawed. To the majority of people including businesses £5,000.00 is quite a lot of money. If it were owed to me, I would want to be able to sue for it. The fact that the claim would not be for as large a sum as that in a case suited to the fast track or multi track would not mean that the legal issues would be any less complex. This means that legal advice can often be necessary for the potential litigant even to appreciate that his case is worth running or defending. There is no scope for recovering the cost of that advice from the losing opponent or for having the solicitor draft the claim and present it in court in a way which makes it easy for the judge to understand.
Add to this the fact that most non-lawyers are quite bemused by what is required under the rules in any of the case management tracks, that the majority are filled with trepidation at the thought of setting foot inside a court room and that it is extremely difficult to remain emotionally detached about one's own case and we start to see a problem. People will not be less litigious through the culture change that the Justice Secretary wants to achieve. They will be less litigious because access to justice is expensive and difficult.
The preparation and presentation of a case in court is a specific legal skill. It is hard for a busy company director whose skill lies in making his business work to adapt to the different skill set of a trained advocate. Happily our District Judges are very good at dealing with litigants in person in the County Court but nevertheless they have to play the role of both judge and advocate in a great many cases. They have to identify legal issues from a heap of papers which have been produced by the parties with little understanding of what is relevant, what is peripheral and what has no bearing on the outcome at all. This must place intolerable pressure on the trial judges for a great deal of the time.
Conversely, a case in which all parties are represented by solicitors or counsel will usually be very much easier to hear because the advocates understand all of the issues, the legal principles and which pieces of evidence the court needs to know about. A skeleton argument on each side will also help the judge hugely. Agreement on facts is often possible when the advocates can see either that a fact does not need to be disputed or that it is incapable of dispute. I was gratified by a judgment in a recent case in which I appeared as advocate for the Claimant. A passage read:
"Both (the solicitor for the claimants and counsel for the defendant) have assisted the Court considerably, in particular by arriving at an agreed set of facts, and keeping their skeleton arguments admirably succinct." This was a difficult case on a point of law for which there seemed to be almost no case authorities to provide a definitive answer. The arguments had to be built from the ground up relying on common law and contractual principles as well as a certain amount of landlord and tenant based legislation in order to reach a conclusion. It was sufficiently complex for the trial judge to reserve his judgment, provide a draft around a week after trial and to hand down the final judgment after hearing further arguments a month later.
Importantly, the claim was for only a little over £9,000.00 as it was a test case for a group of lessees jointly claiming around six times that amount. If all had sued the case would have been fit for the multi track. As it was, we dealt with it swiftly and economically in the fast track. Costs, albeit slightly limited, were recoverable by my winning clients against the unsuccessful defendant.
Justice Secretary Kenneth Clarke is in the middle of a new consultation aimed at reducing the cost of litigation still further, making better use of the courts' limited resources and saving money on the justice budget. A part of this is a proposal to raise the small claims track limit to a massive £15,000.00. That is the level at which cases initially went from fast track to multi track.
The consultation paper can be found on the Justice website.
Its stated objective is to produce a "less litigious society and one where justice is affordable for those who do need to litigate." It will not escape the reader's attention that another consideration is the production of a "value for money system". The cost of running the civil and family courts in England and Wales was £619 million. Of this £507.2 million was provided by court fees. The implication is that a reduction in litigation would assist in saving the £111.8 million shortfall.
This is to be achieved by increased pressure on potential litigants to use mediation and other forms of alternative dispute resolution to settle their cases. Coupled with this there are plans to reduce the cost of litigation for the parties to a dispute by raising the small claims limit allowing them to litigate without fear of having to pay the other side's costs. The case to which I refer above would have qualified for the fast track under the proposed new regime and the claimants would either not have run it or would have done so as litigants in person. They would have faced extreme difficulty in formulating and arguing the legal issues.
The defendant instructed very senior counsel whose arguments were extremely persuasive. In view of the amount at stake and the comparative wealth of that defendant it is quite likely that counsel would have been instructed notwithstanding the unavailability of costs in the small claims track. How can that be just?
I can only comment from my experience as a litigation solicitor for the last 22 years but in my view the proposals are misconceived.
The present costs regime is a strong incentive for parties to settle their disputes. Many defendants put forward unmeritorious arguments in an attempt to avoid paying what they owe. If the idea is to save money, what better incentive can there be for them to see sense than the threat that if they persist they will have to pay not only what is owed but the claimant's legal costs of getting it?
Because the new regime will result in many more litigants acting in person I foresee it putting a huge amount of additional strain on court resources and on the judges who hear the cases because they will not have the assistance of legally trained advocates in getting to the root of the problem and identifying the legal principles involved.
Despite wanting to dissuade people from litigating, the proposal to exert more pressure on parties to mediate is unlikely to succeed. The CPR has stressed the need for parties to try to mediate and settle cases since 1999 to very limited effect. Many mediations have little to do with the legal position and are aimed at producing a result which is not too unpalatable for either side. Is that just?
The CPR also attempted to reduce costs by the creation of pre-action protocols for certain types of case such as professional negligence, personal injury, and building and technology disputes. The parties often have to go through a lengthy and expensive round of correspondence, disclosure and inspection before issuing a claim. Compliance with the protocols can often be as expensive as litigating the case. It is fair to say that some protocol work does produce a settlement but for the most part it seems to "front load" the costs by forcing the lawyers to deal with steps which would otherwise only be necessary after a claim has been issued and a defence filed. If no defence is filed or if the one of the parties is able to strike out the claim or defence on the basis that it has no reasonable prospect of success, those steps will never be necessary but we have to take them under the protocol. Ironically, the sanction for failure to follow the protocols or for acting in a non- protocol compliant way is in costs. A sanction which will not be available if costs are not at large.
However, the full and frank exchange of information and documents is akin to the processes of disclosure and service of witness statements after the issue of a claim but those steps still have to be taken if the case does not settle short of litigation with the result that the client suffers the cost of two lots of work intended to achieve the same thing.
This has some part in the rising cost of litigation since 1999.
Add to this the proposition that most mediation is funded by the parties to it and, again, usually involves the instruction of solicitors and counsel in any case with issues of law and we see that these attempts to reduce costs are counterproductive.
My views are as follows:
1. Lawyers are needed for legal disputes. We may cost money but we earn it. We appreciate our duties to our clients and to the court. We understand how the system works. We assist our judges and we have a duty to act in the best interest of our clients. We also have a professional obligation to maintain professional indemnity insurance so that if we get it wrong the client will not lose. These are benefits which litigants will not have if they are unable to instruct a lawyer to run their case.
2. For the more obstinate defendants, it is the service of the claim form which forces them to instruct a solicitor and it is often at that stage that they are made aware of their true position and are thus prompted to settle.
3. I do not see the justice in forcing a wronged party to have to meet the whole of his legal bill with the exception of a very small amount of fixed costs (usually valued at no more than half an hour of the lawyer's time charges). Why should he not be able to get his costs or the bulk of his costs from the wrongdoer who forced him to incur them?
4. As a society we are probably more litigious than we were. This is because we have a heightened appreciation of the remedies available to us through the court system. Very few people litigate because they want to. The instruction of a lawyer to conduct litigation is by its nature a "distress purchase" rather than a wilfully selected luxury.
People should not be forced to take cases through the small claims track without any chance of recovering costs simply because it is the only commercially sensible way to deal with it. Nor should they be forced to spend money on a mediation in which the opponent may or may not have a real wish to settle the case on a legally sound basis and in which he certainly knows that he only has his own legal bill to face if he is not successful.
Litigation is about obtaining justice as much as it is about economics and we already see too many cases where the small claims track costs regime prevents people from pursuing what is legally right and just.
5. Put simply, British justice is the envy of the world and the foundation for a great many of the legal systems in the civilised world. It protects the individual from unlawful interference with his personal and financial rights, it entitles the business man to pursue money which he has earned and on which he relies to survive and to keep his employees paid and for the winner of a case the litigation also carries the very important vindication of his conduct and reputation which can be almost as important as the financial outcome of the case. I think that £118 million, whilst not insubstantial, is a fair price to pay for our system. If the Government wants to save money it can think about raising the court fees further and testing the moral and financial resolve of potential litigants in that way. If a claimant is serious and knows that he can recover those fees from opponent he will probably accept this.
6. Costs are an important way of controlling the parties to a dispute. The lawyers can use the threat of costs to promote reasonable behaviour. The court can make costs orders to punish unreasonable behaviour. Loss of the costs regime in claims for fairly high amounts deprives everybody of these tools.
I urge all professionals to submit a completed consultation questionnaire to the Honourable Justice Secretary and I respectfully urge Mr. Clarke to think carefully about his proposals.