Cost of Litigation

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LLM010 Civil Procedure

The high cost and costs of litigation have always been an important issue and number of

attempts has been made to reduce them.1 One of the important attempts was the civil

justice reform, which took place as a result of Lord Woolfs recommendations in hisaccess to justice report.2 Lord Woolf in his interim report discusses cost of

litigation as the most serious problem besetting the litigation system.3 Even after lord

Woolfs reform, the problem still persists.4

In fact there is an opinion that LordWoolfs reform has increased the costs.5 The continuous failed attempts to reduce the

costs have given rise to an opinion that the costs of litigation are indispensable under

the current procedure and they cannot be reduced.6

Whether or not, mediation is the only sensible option as compared to the cost and costs of

litigation, will be analysed by considering firstly, the lawyers and court fees. It will be

considered that how, certain options available to the litigants for instance Pre actionprotocol, Conditional fee agreement (CFA), Community legal service, Legal expense

insurance etc help the litigants in countering costs. The cost of mediation will also be

considered in the end in order to form a pragmatic opinion.

1. An Overlook on Lawyers Fee

When a party intends to start litigation, the first thing to do is to find a lawyer. There is

no doubt that every litigant prefers to engage a competent lawyer to deal with his case.After a litigant becomes known of the fees charged by the lawyers, even a committed

litigant has to review his decision to initiate litigation. There are almost 150,000

practising lawyers in England and Wales, up from 91,000 a decade ago. Last year, the top

100 City law firms employed 46,000 lawyers, generating 12.25 billion in revenues and4.2 billion in profit.7 Rates charged by the lawyers vary from law firm to law firm and

from case to case. For City firms, fees range from 600 an hour to 1,400 an hour for apartner. Leading barristers have a wider spectrum. Tax silks come out on the top. Wheninstructing the best tax silks for a conference that might last up to two hours, requiring an

additional four hours preparation, fees starts at a minimum of 20,000. According to one

instructing solicitor they very quickly escalate rewards from there, soon reaching40,000 or 50,000 for more complex work.8At this level, hourly rates up to 4,000 are

routine.

However these may be exceptional cases where tax expertise is involved. According to

1Civil justice review Report para 1, Access to Justice FR Ch 7

2

Grainger & Others, The Civil Procedure: Rules in Action (2nd

edn Cavendish, London 2000) xxxi3Access to Justice IR June 1995 Ch 25

4Moorhead, Self regulation and the market for legal services (Cardiff Law School 2004)

www.ccels.cf.ac.uk/archives/publications/2004/moorheadpaper.pdf5

Rowland Williams, Saving Litigation (Williams, Hants 1999) 182 & 2036

Ibid 62 & 86, see also MR Richard White, Torquay Litigation Conference (Gazette 19.11.1986)7

D. Carman, Are top lawyers worth their huge fees? (Times Online July 13 2008) at

http://business.timesonline.co.uk/tol/business/law/article4303609.ece8

Ibid

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the times survey the top lawyers in big City law firms, generally charge as much as

1,000 an hour for their expertise.9The survey also reveals that more than two thirds (68

per cent) of businesses and companies that use City lawyers say that legal fees have risenby 6 per cent to 10 per cent in the past year. Most companies questioned had experienced

charges of 500 to 700 an hour and a further 36 per cent had come across hourly rates of

more than 700, including 4 per cent that had encountered rates of more than 1,000. Thegoing hourly rate for a mid-level lawyer who has not yet reached partnership was put at

300 to 400 by a majority of the companies questioned by Legal Week magazine.10

The fee charged by the lawyers is obviously high and is the first pecuniary obstacle for

the intending litigants. Legal victories are sometimes hollow because the cost to both

sides of trying the case can exceed the amount of judgement. It is not unusual for

litigation to cost each disputant 50,000 and it is not unusual for it to cost each side over100,000.11 However there are certain aspects which facilitate the litigants to deal with

the litigation expenditures, which will be examined later.

2. Court Fees in Civil Litigation Process

After a litigant manages to engage a lawyer to pursue his case, then a litigant has to pay

number of court fees throughout the litigation process. The court fees vary, depending

upon the value of the claim and also the requirements of the case. From 4th January 2005there has been increase in the court fees. The Civil Proceedings Fees Order combines

Supreme Court (High Court) and county court fees into one Fees Order.12The

introduction of the new Civil Proceedings Fees Order revokes all previous fees orderissued for fees taken in the Supreme Court and County Court. The new order increases

most of the fees which include Increasing issue fees for claims over 50k, Insolvency

fees High Court and County Court, allocation for trial and listing fees, detailedassessment of costs fees, ancillary Relief and detailed assessment hearings fees etc.From 1 May 2008, fees for care proceedings increased from 150 per case to up to

4,825 as the government wants courts to be self-financing.13

As mentioned above that fees vary depending upon the value of a claim. For Money

claim in the high court as well as in the county courts, over 50,000 not over 100,000

the fee payable is 700, Money claim over 100,000 not over 150,000 the fee payable is900, over 150,000 not over 200,000 is 1,100, over 200,000 not over 250,000 is

1300, over 250,000 not over 300,000 is 1500 and for Money claim over 300,000 or

not limited the fee charged is 1700. For non money claims the fee charged is 400.14

9F. Gibb, Cost of top lawyers in the city soars to 1000 an hour (Times Online July 2nd 2007) at

http://business.timesonline.co.uk/tol/business/law/article2013519.ece10

Ibid11

A. J. Stitt, Mediation: a practical guide (Cavendish, London 2004) 712

The Civil Proceedings Fees Order 2004 [2004/3121 (L.23)], The Family Proceedings Fees Order 2004

[2004/3114 (L.21)],The Non-Contentious Probate Fees Order 2004 [2004/3120 (L.22)]13

http://news.bbc.co.uk/1/hi/uk/7403028.stm14

Her Majestys Courts Service, http://www.hmcourts-

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The litigation process is such that for every action there is a court fees required, similar to

the pay as you go phenomenon. There is an exhaustive list15of court fees which ispayable from filling the claim form to obtaining a judgement, which is all to be borne by

the litigants. It is worthwhile to know that there are certain circumstances where a litigant

is not required to pay court fee.16

3. Points Favouring Litigation in Terms of Costs

Before examining the cost effectiveness of mediation it is important to know that there

are certain points which diminish the cost and costs of litigation. It is quite possible that

in the light of these circumstances the litigation becomes a viable option in terms of costas compared to mediation.

3.1.The Costs and Cost of litigation in the light of Pre Action protocols

The Civil Procedure embodies Pre action protocols, non-compliance with which can

incur costs of the suit over a party and affect the amount of damages.17 Compliance withPre action protocols reduces the risk to pay the defendants costs if the case goes to trail

and lost, because it gives an impression to the court that the party has been attempting to

avoid litigation. Pre action protocol is one of the important factors contributing to the factthat more than 90% cases nowadays settle before trail which ultimately saves the parties

from cost of litigation.18

3.2Conditional Fee or No Win No Fee Agreements

Conditional fee agreements (CFAs) were introduced in 1995 and extended in 1998 to allcivil litigation with the exception of family proceedings.19 The effect of CFAs onfacilitating the parties in terms of costs of litigation, can be seen in PI cases where in a

survey conducted on cases that were not litigated at all, only 1% of the parties

mentioned that they did not bring claim due to the reason of costs.20 In all types of civillitigations, CFAs have enabled tens of thousands of people to bring their claims who

service.gov.uk/publications/guidance/fees/summary_fee_changes_1204.htm15

Ibid16

If a litigant is on Income Support, Working Tax Credit, where child tax credit is being paid or there is a

disability or severe disability element and the gross annual income taken into account for the calculation of

working tax credit is 15,450, Income based Jobseekers Allowance, Guarantee credit under the StatePension Credit Act 2002, in receipt of "Legal Help" from a solicitor or in receipt of a "funding certificate"

from the Legal Services Commission. http://www.compactlaw.co.uk/compactlaw_admin/fees2.html17

CPR 44.3.5(a), CPR 3.1(4), 3.9 (e), see also PD28, para3.2 and PD29, para4.218

Comments Reported in Arbitration Vol 51 No 4 November 198519

Department of Constitutional Affairs:Justice Rights & Democracy,

http://www.dca.gov.uk/legalhelp/faq/litigation.htm20

David Hume, Settlement of legal disputes: an assessment of recent reform measures (Vol 8 No 3, David

Hume Institute Edinburgh 2001) 6

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could not have afforded it previously.21 However it is noteworthy that the use of CFAs in

personal injury (PI) cases is higher as compared to other civil litigations.22 According to

the law society, 92% of the firms using CFAs, used it for PI cases.23 Therefore it can bestated the contribution of CFAs is limited mostly to the personal injury cases and not all

kinds of civil litigation.

3.3 Legal Services Commission (LSC)

The commission has introduced a service known as Community Legal Service. It is a

government run service and one of its functions is to give legal aid to those persons who

are less able to litigate on their own finances.24 Each year the LSC helps more than two

million people to deal with their legal problems.25Funding in civil cases is available toanyone who qualifies, provided that the case is within the scope of the scheme. 26

One of the major criticisms on the service is that it has no solution for the people who are

not poor enough to be eligible for the funds provided by the service and are not richenough to bear the heavy costs of litigation by themselves. In fact the service gives no

solution to the middle class who constitute majority of the UK population.27 Besides thisthe service provides funding to those litigants who have higher chances of success in the

case.28 It has been expressly mentioned in the criterion of eligibility of service that if the

services are sought by the individual in relation to a dispute, the prospects of his successin the dispute would be considered.29

3.4 Legal Expenses Insurance

There are number of insurance companies and bodies which offer insurance cover for

litigation and large number of litigants take advantage of this service.30

The insuranceservice provides cover to full costs of litigation and is not dependent on CFA. Theinvolvement of insurance companies to bear the expenses of litigation has given rise to a

new era of civil litigation funding. The insurance companies have so much involved in

litigation funding that in fact they litigate instead of the parties. In UK 17 million peoplehave insured their homes, cars and credit cards through BEI and in most of the cases

21Ibid 327

22Elliott & Quinn,English Legal System (8th edn Pearson Education, Edinburgh 2007) 326

23Law Society: Solicitors Firms 2003 Research findings,

http://www.lawsociety.org.uk/aboutlawsociety/whatwedo/researchandtrends/researchpubs/view=researchpu

bsarticle.law?PUBLICATIONID=25521524Access to Justice Act 1999 ss.4 & 5

25Legal Services Commission, http://www.legalservices.gov.uk/aboutus/all_about_lsc.asp

26Ibid

27Slapper & Kelly, The English Legal System (7th edn Cavendish, London 2004) 610

28Legal Services Commission, http://www.legalservices.gov.uk/aboutus/all_about_lsc.asp

29Access to Justice Act 1999 s.8(2)(e)

30After the Event Insurance, http://www.ateinsurance.com/examples.html, The Judge: online insurance,

http://www.thejudge.co.uk/oneoff/civil-litigation.asp

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It is noteworthy that the number of courts and organisations run mediation schemes, most

of which are voluntary mediation schemes.39 Some mediation schemes make a

token charge or no charge at all. This is the situation in the Central LondonCounty Court mediation scheme40 (where there is a charge of 25 per party, and in

the Court of Appeal ADR scheme.41 Many local mediation schemes are also free,

being run by charitable organisations with the use of volunteers. Some familymediation organisations in the not for the profit sector make special

arrangements for couple who cannot afford to pay.

Many of the mediation organisations provide trained mediators on a commercial basis.The rates charged depends on the amount of money involved in the dispute or complexity

of a case and on how long the mediation is likely to take. In some cases there is an hourly

fee, in others a flat rate, for instance 700 for a days mediation (shared between twoparties).42

There had been active consideration of mediation by the courts after the Civil Procedure

Reforms in 1999, which followed on the footsteps of Lord Woolfs report on civil justicereforms.43The reforms resulted in the introduction of rules, which provide for the courts

to encourage the parties for the use of mediation in cases, which they deem appropriate44

and when determining the costs, the courts should consider efforts made by the parties toresolve the dispute.45 In number of cases the courts have punished the parties which failed

or refused to follow the mediation process.46 Bearing in mind the cost effectiveness of

mediation and threat to pay costs of the suit the mediation seems to be the most viableopportunity.47

Conclusion

There is no doubt on the point that cost of litigation is really high and mediation can be abetter substitute for the litigants. Even if the mediation fails the option of litigation

39Most of the court based mediation schemes are voluntary in nature, however ARM scheme that slightly

attempted to exceed the voluntary reference to ADR does not produce significant results.40

H. Genn and Others, Twisting arms: court referred and court linked mediation under judicial pressure,

2007, Ministry of Justice, Research Series 1/07, p 34, < www.justice.gov.uk/docs/Twisting-arms-

mediation-report-Genn-et-al.pdf> accessed 25th Nov 200741

H. Genn, Court-Based ADR Initiatives For Non-Family Civil Disputes: The Commercial Court and The

Court of Appeal, 2002, Lord Chancellors Department, Research Series, 1/0242

H. Genn, Mediation in Action: Resolving courts disputes without trail(Calouste Gulbenkian Foundation

London 1999) 5443

Marian Liebman (ed), Mediation in Context(Jessica Kingsley, London 2000) 18044

CPR 1.4 (2)(e)45

CPR 44.5(3)46

Cable & Wireless v IBM[2002] 2 ALL ER (comm.) 1041, Cowl v Plymouth City Council[2002] 1 WLR

803,Dunnett v Railtrack[2002] 1 WLR 2434,Leicester Circuits Ltd v Coates Brothers [2003] EWCA Civ

333, [2003] All ER (D) 331,Royal Bank of Canada Trust Corporation Ltd v Secretary for Defence [2003]All ER (D) 17147

A. J. Stitt, Mediation: a practical guide (Cavendish, London 2004) 7

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remains there. Though the mediation may be costly in general but as compared to

litigation it is much economical. Under the civil procedure the courts have to offer

mediation to the litigants if they deem it fit for the case and non compliance can incurcosts on the refusing party, keeping it in mind the mediation becomes more feasible

option. So far the cost of litigation is concerned, the insurance cover as well as CFA may

facilitate the litigants but these options are available when a party has a strong case, afterall everyone is doing business. CFA are mostly successful in personal injury cases, where

as civil litigation is a vast subject including number of other kinds of disputes. The

lawyers fee touch the sky limits with no guarantee of the outcome of a case andpayments of heavy court fees for every little requirement of the proceedings is an heavy

economic obstacle for a litigant. Though the Lord Woolf reform has increased the pre

trail settlement rate but it has done little to reduce the actual cost of litigation, which has

given rise to the assertion that cost of litigation is inequitable. Keeping it all in mind themediation process seems to be the only viable option which is a cost effective and a one

day play. Where fee of a mediator is shared by both the parties or in some cases

voluntary mediation can even provide for dispute resolution without incurring any cost.

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Word Count: 2478

Bibliography

Articles and Research papers

S. Hammer, Alternatives to Litigation on the Rise (Business Journal- April 3, 2003)

David Hume, Settlement of legal disputes: an assessment of recent reform measures

(Vol 8 No 3, David Hume Institute Edinburgh 2001)

D. Carman, Are top lawyers worth their huge fees? (Times Online July 13 2008) at

http://business.timesonline.co.uk/tol/business/law/article4303609.ece

F. Gibb, Cost of top lawyers in the city soars to 1000 an hour (Times Online July 2nd

2007) athttp://business.timesonline.co.uk/tol/business/law/article2013519.ece

H. Genn and Others, Twisting arms: court referred and court linked mediation underjudicial pressure, 2007, Ministry of Justice, Research Series 1/07, p 34, accessed 25th

Nov 2007

H. Genn, Court-Based ADR Initiatives For Non-Family Civil Disputes: The CommercialCourt and The Court of Appeal, 2002, Lord Chancellors Department, Research Series,1/02

H. Genn, Mediation in Action: Resolving courts disputes without trail(Calouste

Gulbenkian Foundation London 1999)

Jonathan Brodgen,Are the Civil Procedure Rules Delivering? (2001)

Law Society: Solicitors Firms 2003 Research findings,

http://www.lawsociety.org.uk/aboutlawsociety/whatwedo/researchandtrends/researchpub

s/view=researchpubsarticle.law?PUBLICATIONID=255215

M.Zander, Will the Revolution in the Funding of Civil Litigation in England Eventually

8
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Lead to Contingency Fees? (DePaul University Chicago, April 2002),

www.lse.ac.uk/collections/law/staff/zander/depaul.cont.pdf

Moorhead & Pleasence,After Universalism: Re engineering Access to Justice (Backwell

2003)

Moorhead, Self regulation and the market for legal services (Cardiff Law School 2004)

www.ccels.cf.ac.uk/archives/publications/2004/moorheadpaper.pdf

S.Baish, Six Factors to Consider for a Successful Litigation Strategy (September 10,

2005), http://www.gklaw.com/publication.cfm?publication_id=422

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LITIGATION(Entrepreneurial Executive 2005)http://findarticles.com/p/articles/mi_qa5528/is_200501/ai_n21364454

Books

A. J. Stitt, Mediation: a practical guide (Cavendish, London 2004)

Elliott & Quinn,English Legal System (8th edn Pearson Education, Edinburgh 2007)

Grainger & Others, The Civil Procedure: Rules in Action (2nd edn Cavendish, London2000)

Marian Liebman (ed), Mediation in Context(Jessica Kingsley, London 2000)

O Hare & Browne, Civil Litigation (12th edn Sweet & Maxwell, London 2005)

Rowland Williams, Saving Litigation (Williams, Hants 1999)

Slapper & Kelly, The English Legal System (7th edn Cavendish, London 2004)

Yarrow & Others,Nothing to Lose? Clients experiences of using conditional fees?

(Nuffield, London 1999)

Cases

Callery v Gray [2001] 1 WLR 2112

Gaynor v Central West London Buses Ltd[2006] EWCA Civ 1120

9
http://www.lse.ac.uk/collections/law/staff/zander/depaul.cont.pdfhttp://www.gklaw.com/publication.cfm?publication_id=422http://www.lse.ac.uk/collections/law/staff/zander/depaul.cont.pdfhttp://www.gklaw.com/publication.cfm?publication_id=422


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Cable & Wireless v IBM[2002] 2 ALL ER (comm.) 1041

Cowl v Plymouth City Council[2002] 1 WLR 803

Dunnett v Railtrack[2002] 1 WLR 2434

Leicester Circuits Ltd v Coates Brothers [2003] EWCA Civ 33, [2003] All ER (D) 331

Royal Bank of Canada Trust Corporation Ltd v Secretary for Defence [2003] All ER (D)171

Statutes

Access to Justice Act 1999

Access to Justice Final Report 1996

Access to Justice Interim Report 1995

Courts and Legal Services Act 1990

Civil justice review Report 1988

Civil Procedure Rules

Websites (Websites accessed in July 2008)

ADRnow:Exploring alternatives to the courts,

http://www.adrnow.org.uk/go/SubSection_40.html

After the Event insurance, www.ateinsurance .com

Davies Arnold Cooper (Law Firm), www.dac.co.uk/whatsnew/uploads/Thecostpart1.pdf

Department of Constitutional Affairs:Justice Rights & Democracy,

http://www.dca.gov.uk/legalhelp/faq/litigation.htm

Find Articles, http://findarticles.com/p/articles/mi_qa5528/is_200501/ai_n21364454

Free Law Suit, www.freelawsuitmoney.com accessed March 2008

Google Search Engine, www.google.com

Hampshire Trust:Private Bankers, http://www.litigationfunding.co.uk

10
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Her Majestys Courts Service, http://www.hmcourts-service.gov.uk

Legal Services Commission, http://www.legalservices.gov.uk

Ministry of Justice, www.justice.gov.uk

The Judge: online insurance, http://www.thejudge.co.uk/oneoff/civil-litigation.asp

The Law Society:Paying for legal services,

http://www.lawsociety.org.uk/choosingandusing/payingforservices/nowinnofee.law

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http://www.thejudge.co.uk/oneoff/civil-litigation.asphttp://www.lawsociety.org.uk/choosingandusing/payingforservices/nowinnofee.lawhttp://www.thejudge.co.uk/oneoff/civil-litigation.asphttp://www.lawsociety.org.uk/choosingandusing/payingforservices/nowinnofee.law


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