MR: fixed costs will open up litigation funding

The Master of the Rolls this week spoke out strongly in favour of Sir Rupert Jackson’s review of fixed recoverable costs and suggested that they would promote new routes for litigation funding.

Sir Terence Etherton was giving the LawWorks annual pro bono awards lecture on the topic of access to justice and said a key part of improving it were the continuing efforts to reduce the cost of litigation.

“The latest effort in this regard is the consultation being carried out by Sir Rupert Jackson on the question of setting the level of fixed recoverable litigation costs,” he said. “I have every confidence that he will devise a robust set of evidence-based recommendations, which will then be subject to detailed government consultation.

“The aim is straightforward: if we can set a fixed tariff of recoverable costs, litigants will be in a better position to predict their potential cost liability of a claim. And, with a fixed level of potential recoverability, there will be a closer relationship between solicitor-client costs and one that will align itself to the level of recoverability. Thus costs will come down as they will no longer be capable of being set on an hourly rate basis.”

He continued that setting and implementing a fixed recoverable costs regime “has a benefit over and above that of reducing litigation costs” – helping to promote new routes for litigation funding. “Funding is one of the most, if not the most, troubling issues where effective access is concerned,” he said.

With little prospect of a change in direction on legal aid, “this places an onus on us all to think of ways in which litigation funding can properly be secured for the very many low and middle income individuals and small businesses who are unable to fund litigation privately”.

Sir Terence said: “This is where fixed recoverable costs come into the picture. One alternative means of providing litigation funding is through the provision and use of before-the-event (BTE) legal expenses insurance. A number of countries rely on such schemes to provide the main source of litigation funding. Germany is a prime example…

“While we have BTE insurance here, it is not used as widely or as readily as it is in those jurisdictions. One of the reasons why this is the case is that we have not had a system of fixed recoverable costs. As Professor John Peysner has pointed out on a number of occasions, the success of BTE insurance in Germany is predicated on the symbiotic relationship it has with fixed recoverable costs. If we remove the stumbling block by introducing such a costs regime, we may be able to develop an across the board BTE insurance scheme that will work as well as that in Germany.

“To that end, the Civil Justice Council, which I chair, is just about to start work. It is going to examine what steps are needed to develop a properly viable BTE scheme.”

Sir Terence’s speech also highlighted the possibilities presented by the online court and the work being done on a contingent legal aid fund, while he said more use should have been made of CPR part 51, which allows practice directions to be made which modify the existing rules to allow innovative approaches to civil procedure to be tested. It has only been used 15 times since being introduced in 2001.

He went on to suggest that the large group of law graduates who have completed both the academic and vocational parts of their studies but cannot get a training contract or pupillage could be used by pro bono advice centres – in conjunction with local law firms – to advise and even represent litigants in person in court. This would give the students a way into practice and the LiPs better advice.

“They would have proper legal knowledge. They will have had skills training. They will be subject to professional regulation, and they should also be covered by the university or pro bono advice centres’ professional indemnity insurance. They will be at the start of the careers, but they will be under supervision. Far better such an approach than that provided by unregulated, uninsured, professional McKenzie Friends of unknown skill and training. And further to this, if the LiP’s claim succeeds, a pro bono costs award could then be sought…

“The benefit to the trainees would come from the fact that they would be able to gain experience commensurate to that of a training contract or pupillage, and for an equivalent period. They would gain entry into practice. And perhaps an increase in numbers of qualified lawyers practicing may, by increasing competition, result in legal fees becoming equally competitive.”


This post was posted in ACL e-Bulletin

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Costs News
Published date
08 Dec 2016

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