ECHR decision on Conditional Fee Agreements
February 10, 2011
In February 2001, the publisher of the Daily Mirror newspaper (‘MGN’) was sued by Naomi Campbell for breach of confidence and misuse of private information. At first instance, Ms Campbell was successful. The Court of Appeal overturned the decision in 2004 and subsequently, the House of Lords (as it then was) reinstated the first instance decision and Ms Campbell was awarded £3,500 in damages.
MGN was ordered to pay Miss Campbell’s costs of the litigation, in the sum of just over £1 million. £600,000 of this sum related to the House of Lords Appeal in which solicitors and counsel acting for Ms Campbell had acted on a CFA with a success fee.
MGN appealed to the House of Lords (the ‘Costs Appeal’) on the basis that it should not be liable to pay the success fee due to the huge disparity between the amount awarded in damages and the level of Ms Campbell’s costs. MGN argued that the disparity constituted an infringement of its right to freedom of expression under Article 10 of the European Convention on Human Rights (“Article 10”).
MGN was unsuccessful in the Costs Appeal, which was conducted by Ms Campbell’s solicitors on a CFA with a 95% success fee. The House of Lords found that the existing CFA regime, with success fees, was compatible with Article 10, even when used by wealthy litigants. MGN was ordered to pay the costs of the Cost Appeal, which were in the region of £250,000.
On 18 January 2011, the European Court of Human Rights (“ECHR”) found that the requirement that MGN bear the cost of the success fee was disproportionate and a violation of Article 10. MGN’s total costs liabilities were subsequently settled for £500,000.
Four “flaws” in CFAs were particularly noted by the ECHR:
1) The lack of a qualifying requirement for claimants entering into a CFA, so that CFAs can be used by wealthy individuals who are able to pay legal fees;
2) That there is no incentive on the claimant to control costs under a CFA;
3) Than an opposing party would often be “held to ransom” for early settlement due to the excessive costs burden being put on them;
4) That cases funded by CFAs could be “cherry picked” on the basis of their chances of success, which the ECHR considered indicated that recoverable success fees did not achieve the intended objective of providing access to justice to all.
Paying parties in non-defamation/privacy cases will want the principles in this case expanded to all civil cases. However this may prove to be difficult in cases not concerning Article 10, especially if the shield of Article 6 (Right to a fair trial) is used by CFA funded claimants.
The recoverability of CFA success fees was already under attack before the ECHR’s decision in Campbell –v- MGN. However, this decision may hasten the abolition of recoverability which was recommended by Lord Justice Jackson in his review of civil litigation costs. Solicitors will now need to consider alternative ways to fund claims on a basis that Claimants can afford.
Court of Appeal decision on the “date of knowledge” under s14A Limitation Act 1980
January 4, 2011
In personal injury cases proceedings must be issued at court within 3 years of the date on which the injury occurred or, if later (for instance, where the injury is latent), within 3 years of the date that the injured person had the knowledge required in order to bring the claim (s.14A Limitation Act 1980).
The ‘Atomic Veterans Litigation’ (Ministry of Defence v AB and others [2010] EWCA Civ 1317) concerned injuries alleged to have been caused by atmospheric nuclear tests that took place in the Pacific between 1952 and 1958. Claims were issued by a group of 1,011 ex-servicemen who claimed to have suffered injury through exposure to radioactive fallout. The Ministry of Defence denied liability.
Upon the making of a Group Litigation Order in favour of the Atomic Veterans, 10 lead cases were tried on limitation as a preliminary issue. The trial judge found in favour of the claimants in all 10 cases: five on the basis that the claimants did not have the relevant knowledge of the injury, for the purposes of s.14A, until less than 3 years before proceedings were commenced.
On Appeal it was held, in all but one of the five cases originally allowed to proceed under s.14A, that they were statute barred, as the claimants had relevant knowledge more than 3 years before the claims had been issued. On the question of what exactly constitutes knowledge, the Court of Appeal held that a claimant only needs enough knowledge for it to be reasonable to expect him to set about investigation. In this case the claimants sought to rely on the fact that they were awaiting the results of expert evidence as to the cause of their injuries before pursuing the claims. The Court of Appeal refused to allow them to do so, finding that time began to run for the purposes of s.14A when it was reasonable to the claimants to investigate, not when the result of that investigation was known.
Concurrent Evidence for Expert Witnesses
September 14, 2010
This firm has made clear that it supports those parts of Lord Justice Jackson’s review of civil litigation costs (“the Jackson Report”) that are aimed at reducing the cost of civil litigation as a whole, whilst opposing those parts of the Jackson Report that are aimed at shifting the burden of what costs remain from defendants on to claimants (see our comments at: http://tinyurl.com/2elzb39).
One recommendation aimed at reducing costs which is currently being trialled is the practice of more than one expert giving oral evidence to the court at the same time, known as concurrent evidence or, more colloquially, “hot tubbing”.
It is not clear at this stage whether the cost savings that will be made by the introduction of hot tubbing will justify the increased risk of a case collapsing due to a bad performance of an expert under pressure. The value of experts is, in our view, in their technical expertise, rather then their advocacy skills or their ability to outwit their counterpart in an artificially pressurised situation.
Litigation is already the highest-risk form of dispute resolution available. The high risk nature of litigation is responsible, at least in part, for driving the increased popularity of alternative dispute resolution, and it is inevitable that any measures which further increase the risk inherent in litigation will inevitably disourage potential litigations from using the process.
That being the case, we would question whether the proposed introduction of hot tubbing signals a loss of confidence in litigation itself. If so, it shouldn’t do: litigation remains a valuable and important form of dispute resolution which, in its present form, is capable of appropriately complementing other forms of dispute resolution, several of which (mediation, early neutral evaluation, adjudication, and of course negotiation) can be pursued alongside litigation.
On the basis of the above, we would be wary of any changes to the litigation process which increase the risk of litigation, unless the cost savings that would be achieved are so significant as to outweigh the negative impact of that increased risk.
FSA clarifies a policyholder’s freedom to choose their own lawyer
August 13, 2010
Following the European Court of Justice’s decision in Erhard Eschig v UNIQA Sachversicherung AG (C-199/08), the director of the Financial Services Authority’s insurance sector has written to all legal expenses insurers to clarify the scope of s6 of the Insurance Companies (Legal Expenses Insurance) Regulations 1990, which deals with the freedom of a policyholder to choose their own lawyer.
Eschig / the FSA have made clear that any provisions in a legal expenses policy which detract from, or qualify in any way, the freedom of a policyholder to retain a lawyer of their own choice, will be unlawful. Specifically, the July 2006 undertaking given to the FSA by legal expenses insurer DAS, pursuant to which the FSA had agreed that DAS was entitled to restrict a policyholder’s right to choose their own lawyer in exceptional circumstances, is longer acceptable as it contravenes the 1990 Regulations.
The FSA’s letter also confirmed that, contrary to the position taken by a number of legal expenses insurers, a policyholder’s right to choose their own lawyer arises before issue of Court proceedings.
The FSA has asked all providers of legal expenses insurance to inform the FSA by 30.09.2010 of the actions which they have taken to ensure that the terms of their legal expenses cover comply with the 1990 Regulations following the ruling in Eschig.
For a copy of the FSA’s letter, please click on the following link: http://www.fsa.gov.uk/pubs/other/lei_190710.pdf
Gibbon v Manchester City Council
July 26, 2010
Gibbon v Manchester City Council [2010] EWCA Civ 726, has clarified the use of Part 36 of the Civil Procedure Rules (“CPR”) relating to the offer and acceptance of settlements under the CPR. Part 36 was held by the Court of Appeal to be a “self contained code” which did not include any other law unless the CPR expressly included it. According to the Court of Appeal the CPR was specifically designed to be clear and certain so that ordinary people, with no legal training, could follow it without expert advice.
Part 36 allows a party to make multiple offers to settle for different amounts depending on how strong they feel their case is at that any given point in time. If an offer is rejected and the rejecting party fails to win a larger amount than that offer at trial they will have to pay the other side’s costs plus interest from 21 days after the date of that rejected offer. Under Part 36 offers remain on the table unless expressly withdrawn in writing and later offers do not revoke or amend earlier ones. This is in contrast to general contract law where only one offer can be valid at any one time. According to the Court of Appeal, the purpose of this multiple offer approach is to allow a party to leave various settlement offers on the table which, despite being initially rejected, can tempt the other side into acceptance later in the litigation process.
10 things you need to know about the law
May 27, 2010
1. If you have a small claim against a financial services professional:
Financial Ombudsman Service: www.financial-ombudsman.org.uk
Part XVI of the Financial Services and Markets Act 2000: www.opsi.gov.uk/acts/acts2000/ukpga_20000008_en_19#pt16
2. If your insurer refuses a claim unfairly:
Chapter 8 of the FSA’s Insurance Conduct of Business Sourcebook: www.fsahandbook.info/FSA/html/handbook/ICOBS/8/1
3. If you have a claim for less than £5,000:
The Small Claims Court: www.hrothgar.co.uk/YAWS/framecpr/part27.htm
4. If your employer has treated you unfairly:
Employment Tribunal: www.opsi.gov.uk/si/si2004/20041861.htm#sch1
5. If you’ve bought something that doesn’t do what it says on the tin:
Unfair Contract Terms Act: www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/1977/cukpga_19770050_en_1#pt1-ch1-pb4-l1g9
6. If you’re being strong-armed by someone who’s provided you with a poor service:
The Unfair Terms in Consumer Contracts Regulations 1994: www.opsi.gov.uk/si/si1994/Uksi_19943159_en_1.htm
7. If you need free general advice:
Citizens’ Advice Bureau advice Guides: www.adviceguide.org.uk/
8. If they can’t help, try Delia Venables’ really useful website: www.venables.co.uk/individualorg.htm
9. If you want to find a solicitor to make a claim:
Professional negligence: www.fenchurchlaw.co.uk
Insurance: www.fenchurchlaw.co.uk
Commercial disputes: www.fenchurchlaw.co.uk
Employment: www.josephsuttonsolicitors.com
Personal injury & clinical negligence: www.priceandslater.co.uk
10. When all is lost and you just need a good laugh: www.buglear-bate.co.uk
Solicitors liable for failing to advise on ATE
May 14, 2010
Adris v Royal Bank of Scotland plc [2010] EWHC 941 (QB) has held that a solicitor is under a duty to advise its clients on the availability of After the Event insurance. Further, if a solicitor fails to provide such advice its clients are unable to take effective decisions and the solicitor is therefore acting without instructions. A non party costs order was made against the solicitor in this case, and it will be liable for costs on a joint and several basis with the Claimants against whom any costs order will be made. To the extent that the Claimants pays any costs at all, they would be wise to consider a professional negligence claim against the solicitor.
The ATE insurance market is mature and developed in this country and the level of press coverage afforded it recently (notwithstanding the level of knowledge a competent solicitor should be in possession of in any event) means that there can be no excuse for failing to advise clients on the risks of litigation and the methods of mitigating that risk. This case only refers to ATE insurance but BTE insurance on household/commercial policies may also be available. Third party funding is only suitable for a small minority of cases but this too should be considered.
Financial Services Act 2010 – class actions removed
April 26, 2010
The Financial Services Act 2010 received Royal Assent on 08.04.2010, being amongst the last few pieces of legislation rushed through parliament before it was dissolved.
One of the most interesting and controversial parts of the bill had been the introduction of collective actions for consumers allowing them to bring American style class actions against financial services firms, including banks and insurers as well as smaller firms providing financial advice.
However, these proposals received stiff opposition from Tory peers and the government dropped the measures in order to see the bill through parliament.
What has been included in the Act though is an amendment to previous legislation which now allows the FSA to draw up consumer redress schemes where it considers there has been “widespread or regular failure” from financial services firms and that as a result consumers have lost, or may lose, money. Previously such schemes had to be approved by the Treasury before being implemented.
Appetite remains high amongst the Labour party though for such class actions and redress schemes and it has been suggested that the proposals would be looked at again in the new parliament. How they would fare in an increasingly likely hung parliament is difficult to predict though.
Third Parties (Rights Against Insurers) Act 2010
The Third Parties (Rights Against Insurers) Act 2010 which received Royal Assent on 25.03.2010 has amended previous legislation governing the relationship between insurers and claimants. Its intention is to make it easier, quicker and cheaper to make a claim against the insurers of insolvent defendants.
The previous Act required a claimant to establish an insolvent defendant’s liability before being able to pursue a claim against insurers. This meant issuing proceedings against the defendant before being able to issue (separate) proceedings against the insurer. The 2010 Act now allows claimants to issue proceedings directly against the insurer in which all issues, including the defendant’s liability, can be established.
Insurers are now no longer entitled to rely on conditions in the policy made impossible by the insured’s insolvency or terms which render the policy ineffective due to the insured’s insolvency. The insurer is still though entitled to rely on defences against the claimant which it could have used against its own insured.
Quinn Administration Confirmed
April 16, 2010
Quinn Insurance has dropped its opposition to the appointment of administrators today and, as a result, Grant Thornton has been confirmed as administrator of the company by the Irish High Court. In our view this is classed as an Insolvency Event under the SRA’s Qualifying Insurer Agreement. Unless the SRA waives the Event under 19.1 of the Agreement then firms of solicitors holding professional indemnity insurance with Quinn will be required to obtain alternative cover within 28 days. The impact will be significant as firms may well see premiums soar. It is possible that some will not be able to obtain alternative quotes at all in which case the Assigned Risks Pool will be the only option if the firm wishes to continue to trade.
The SRA explicitly states that it does not vet or approve the qualifying insurers and a hard look should be taken at the advice given to firms by their insurance brokers.
