The original text of this article appeared in the August 2016 edition of Litigation Funding.
At the time of writing, the citizens of this country are still watching with a mixture of glee, horror and apathy as the results of the Brexit referendum unfold, with the resignation of the Prime Minister, the implosion of the Labour leadership, the political assassination of Boris Johnson and the resignation of Nigel Farage all following in ten days.
Whether the Ministry of Justice is currently taking calls at the moment is unclear, but it is a reasonable expectation that many of the putative reforms to costs and civil justice, have now gone, in Mr Obama’s memorable phrase “to the back of the queue”.
This is a great pity, as hard questions of access to justice in this country, are now unlikely to be posed, and if they are posed unlikely to be answered, whilst the political classes concentrate on the fallout from the referendum. Yet the questions are pressing and will not go away.
The median income in the United Kingdom, is about £26,000. Most people do not have savings of any magnitude and many do not have savings at all. If a medical disaster strikes, medical treatment can be extremely costly. Even non acute interventions such as a knee replacement operation to ease the pains of old age, might cost £9500 or more.
Yet the costs of these treatments, are for the most part not paid for by the recipient. In this country, one of its most treasured arrangements, is the National Health Service. It delivers medical care free at the point of delivery: not free care, because it is not free but rather ensures that the costs of those in need are spread throughout the general population and paid for by taxation.
Despite periodic criticisms and reforms, the scheme works rather well, is accepted by the public and represents a logical way for the needs of the unfortunate few to be paid for by the many, without undue strain.
It represents a collective approach to funding sophisticated and costly professional services, which are of benefit to private individuals, but also form a type of public good.
There is a clear analogy to be drawn with the provision of legal services. These services too are costly and whilst they are of benefit to private individuals, yet the provision of legal advice and representation to ensure access to justice is also a type of public good. After all, along with defence of the realm and a sound currency, one of the most basic functions of the state, is the administration of law and order, possibly even more so than the provision of funded health care.
It is as unreasonable in the twenty first century, to expect an individual with median income and no savings, to expose himself to £10,000 of legal costs, as it is to expect him to fund his surgical operations.
It could also be pointed out that there is a constitutional aspect to facilitating access to justice: it is all very well for Parliament through legislation to provide its citizens with rights and causes of action, whether in respect of employment rights, housing rights, or freedom from discrimination, yet it is the lawyers who bear the brunt in ensuring the practical aspect of enforcing those rights.
Yet, over the last few decades, sight has been lost of this key concept: that in a sophisticated, post industrial society with a complex body of legal rules, there needs to be collective funding of legal services to make the system work.
Successive governments, have in fact, largely destroyed the Legal Aid system, so that large parts of the country are a Legal Aid “desert” and large numbers of cases do not qualify for public funding assistance.
Yet none of the ad hoc alternatives for funding of legal costs meet this need for the collective funding of legal services, spreading the costs across a large pool: CFAs depend on the willingness of solicitors to enter into them, BTE insurance is limited, lacking in range and often of inadequate scope, third party funding is largely limited to big commercial claims and the thorny consequential issue of liability for adverse costs, outside personal injury claims is ignored.
I would ascribe this problem to a failure in vision and a failure in courage: there are some things the state does do best and a properly resourced and comprehensive Legal Aid scheme, would not be in my judgment, an unnecessary luxury for our country. But post 23rd June 2016, this isn’t going to happen any time soon.
Accordingly, one of the more interesting proposals put forward this year by Jackson LJ, was to actually take forward a Contingency Legal Aid Fund (CLAF) some 40 years after it was first proposed. I understand a working group has now been formed to do so.
A CLAF in its purest form is a funding body, which backs cases, paying a claimant’s costs win or lose. It can be a private venture. A CLAF need not be backed or established or funded by the state at all, though that one would be one option.
If the claimant succeeds in his case, the costs funded by the CLAF are recovered from the losing party to the litigation and in addition, the claimant pays over to the fund a proportion of the compensation recovered from the losing party. The fund is self financing, funding the costs and its own overheads out of the recoveries made in successful cases. It is not a panacea: claimant’s necessarily lose part of their compensation as part of the terms of the funding, and it can only apply to money claims.
Of critical importance, is what provision is made in respect of adverse costs, should a funded claim be lost. Unless a CLAF is established on a statutory footing, with similar provision for qualified one way costs shifting such as Legally Aided litigants have under the Access to Justice Act 1999, or personally injury claimant’s, through the QUOCS scheme established under part 44 CPR, then a claimant who proceeds with the backing of the fund will necessarily face the prospect of adverse costs orders in the usual way.
Because it would be unsatisfactory for individual claimant’s to face potentially ruinous claims for costs, and indeed render the whole notion of access to justice through litigation illusory as such claimants would drop their cases, rather thanshoulder such a risk, it would be a necessary part of the scheme, that the fund itself pay any adverse costs, either through self insurance, or through the purchase of ATE cover: in effect reinsurance and catastrophe level insurance.
That is the broad model of a CLAF: variations of it can be proposed, so that for example the fund might only fund disbursements, or disbursements and adverse costs, and require lawyers to work on the basis of a Conditional Fee Agreement (CFA).
In such a case, the fund would work as funder of last resort, providing only pump priming the necessary level of capital investment, but also ensuring that an added layer of robustness is brought to the decision making, by aligning its interests with those of the lawyers.
Although the concept of such a scheme has been lauded, with various proposals put forward in 1978, 1997 and 2011, the scheme has never been take forward because it would represent a poor relation to CFAs with recoverable success fees and ATE insurance with recoverable premiums. In a post LASPO 2012 world, such considerations have faded away: there is now a real and measurable funding gap and proper cases, affecting individuals failing to come forward.
If for example, you have a meritorious claim for disability discrimination in respect of the provision of goods or services under the Equality Act 2010 to litigate in the County Court, you may, just may, be able to find a lawyer willing to take your case under a CFA: but it is most unlikely that you will find any ATE insurer willing to back the case. If you do, it will be at a ruinous premium and if for example substantial disbursements such as expert fees are also required, the case in all probability is going nowhere.
Varieties of CLAFs, have been established in countries such as Hong Kong and Australia, with the latter in particular in its various states of South Australia and Western Australia, having different criteria and funding different elements of litigation, with Victoria, Tasmania and the Northern Territory, all having more limited schemes, which fund disbursements only.
In his keynote address at the Solicitors Costs Conference on 2nd February 2016 “The Case for a CLAF” Jackson LJ postulated that the Law Society, CiLEX, and the Bar Council, could promote the establishment of a CLAF as not for profit third party funder: in effect, a third party funder which does not concentrate on big ticket commercial litigation, or jury actions in the USA, but rather supports the individual claims of citizens and consumers.
It would have professional administration, and it’s own secretariat of lawyers to assess which cases were suitable for funding. The actual funding itself he suggests, could come from government (very unlikely) the National Lottery (unlikely)….or the lawyers! If individual barristers or solicitors bought bonds, which carried a coupon, then funding could be raised that way.
In fact, the funding options are perhaps rather wider than Jackson LJ suggests: there is little doubt that if people are prepared to crowd fund litigation, solar panels, and carbon credits, then there may well be an appetite for an investment of this nature.
Moreover, as the fund would only be concerned with damages actions where recovery of costs is made it could require as so many BTE insurance companies do, that the lawyers work on a CFA, aligning their interests with the fund, and spreading its funds further, by concentrating on funding disbursements such as expert fees, and acting as insurer of last resort for adverse costs. It is this latter point, which I identify as the real barrier to access to justice, which such a fund could address. Given that we are now moving towards a 0% interest rate world, if you have a spare few thousand quid to invest, there could be worse investments to place it in.