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Published On: April 8, 2015 | Blog | 0 comments

Can it be said that litigation is an optional activity?

Further reforms to address the alleged costs of litigation went through on the 9th March 2015. These reforms introduced “enhanced” court fees whose aim is to tackle the cost to the state in providing a court service. This was one of the final acts of Lord Chancellor Grayling at the end of the 2014-15 Parliamentary session and the dissolution of Parliament ahead of the General Election.

The effect of the enhanced courts fees means that some court users, particularly those seeking to recover debts of over £10,000 and those seeking damages in an unspecified amount at the outset which is to be assessed by the court, will see court fees rise by up to 600%. The hike means they will have to pay upfront up to £10,000 for the privilege of claiming money that is due to them.

The “enhanced” fees are far above the cost of administering the proceedings itself and are intended as a fund-raising measure to assist the government in raising £375 million for modernisation of the court system over the next five years. The Lord Chancellor is given power to raise fees in this way under section 180 of the Anti-social Behaviour, Crime and Policing Act 2014, an act passed by the current government.

The Civil Justice Council carried out a consultation in December 2014 before the fees came into force. They expressed “extreme concern” about their impact. Their concerns where 1) the impact on some groups, including small and medium businesses and low income individuals, “hereby undermining equality before the law”  and 2) the risk of “changing the cost structure of a market with such importance to the UK economy”.

The committee stated that the research on the impact of the fees made for “stark reading” including only 18 telephone interviews with court user organisations. They said “it is a matter of grave concern that the Ministry is contemplating such a significant reform, and one that carries with it potentially far-reaching and damaging consequences for access to justice, on such a poor evidence-base.”

They concluded that “a more staggered, proportionate, approach is suggested, if this policy is to be pursued.” This was entirely ignored by the government in passing the statutory instrument.

Lord Chief Justice Lord Thomas set a letter to Lord Chancellor Grayling that was signed by other Senior members of the judiciary in which they warned of the disproportionately adverse effects of increasing the fees to the level proposed, issues raised include:

  1. Large upfront costs may well affect the appetite of individuals and small to medium-sized business to litigate.  This runs the risk of potential unscrupulous debtors taking a relaxed view to payment of debts where they know their  creditor is potentially unable to upfront the relevant fees to claim the money from them.
  2. Changes could also lead to a further increase in the numbers of self-represented litigants as claimants seek to cut legal costs elsewhere in order to meet the new fees. This comes with unwelcome consequences for the overall efficiency of litigation.
  3. Even claimants who have no problem paying the increased upfront fees, and the claim is for an unquantifiable amount of damages at the outset, face time and money spent on satellite litigation on costs. Where the losing party is required to pay the winner’s costs there will inevitably be arguments that an over-valued claim led to a high issue fee.
  4. The increased fee might be completely disproportionate to the damages ultimately recovered at the end of the case. This could be the case where the valuation of the claim for damages is not clear at the start of the case.

In the House of Lords debate on the 5th March 2015 the impact on access to justice was weighed against the government’s justifications. Lord Faulks set out the government’s reasons for the hike in fees. Requiring the users of the court to pay far above the costs of their case for access to justice was one of many “necessary difficult choices” in the current economic climate. In his assessment choosing to litigate in order to recover debts or to seek damages where a party had suffered loss was “very much an optional activity”. He concluded that the government had initially had plans to charge “twice the figure of £10,000” but had changed its mind after consultation.

Lord Pannick who sits as a crossbencher in the House of Lord responded that the rise in court fees “will do incredible damage to the legal heritage.” He stated that “Mr Grayling is undermining basic access to justice in the courts, by seeking to make money from small businesses which simply want to enforce their contractual rights and from victims of personal injury seeking to obtain compensation from the wrongdoers. That is not a legal heritage of which anyone could be proud.”

He referred to Lord Grayling’s recent attendance of the Global Law Summit celebrating the 800th anniversary of the Magna Carta. The Magna Carta, dating from 1215, is known as the ‘Great Charter of Liberties’ and guarantees the constitutional principles of the rule of law and access to justice. Lord Pannick stated that “If you wrap yourself in Magna Carta, as Mr Grayling sought to do last week at the Global Law Summit, you are inevitably and rightly going to invite scorn and ridicule if you then throw cold water over an important part of our legal heritage.”

In reference to the allegation that litigation was an “optional activity” he stated “for many people—those suing for debts or to recover compensation for personal injury—litigation is often a necessity to keep your business alive or to maintain any quality of life. The Minister is absolutely right that there are already many impediments to access to justice. That is surely no justification—no excuse—for the state to erect further high barriers.”

Lord Beecham, who sits on the Labour bench, referred to the City of London law firm Fieldfisher’s response to the enhanced fees. They concluded that the fees “tips the balance further in favour of the Government and corporate interests in whose interests it is to delay, frustrate and deter access to justice and access to compensation.”

Crossbencher Lord Brown of Eaton-under-Heywood statedIt is bad enough that the courts should be required to be self-financing at all. The justice system properly exists for the benefit of society and the economy as a whole.” He referred to the fact that users are not required to contribute to other public services other than by way of taxes, such as the NHS and schools. He concluded that “there has long been objection to the basic principle of full cost recovery. To put that aside, the order for enhanced fees goes altogether further. In a real sense, it is selling justice—apparently contrary to Magna Carta, although now sanctioned by Section 180.”

His objection was “not just in abstract constitutional terms, but because it must inevitably carry with it reputational consequences. Frankly, it sullies the overall image of British justice, no part of which should be open to criticism as a profit-making enterprise.”

All three concluded that the deterrent effect on litigation that the enhanced fees would inevitably have, would make it most unlikely that the charges will produce the anticipated needed funds that the Government sought to raise. A short sighted reform at high cost to foundational principles of this country.

The Lord Chancellor Grayling has responded to the letter from Lord Thomas and defended the implementation of enhanced court fees. His position is that concerns as to access to justice are addressed by court fee remission schemes for those on very low income. This of course does not take into account the fact that the largest proportion of those affected, both businesses and private individuals, will not be eligible following the means assessment for court fee remission. Mr. Grayling said he promised to monitor the impact on access to justice.

The Law Society have termed the rise in court fees a “flat-tax on justice” and stated that the government does not legally have power to interfere with constitutional principles in the manner it has in order to raise fees for the purpose of departmental savings. They have issued a pre-action letter ahead of commencing judicial review proceedings of the decision to introduce enhanced court fees.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

David Wedgwood

Head of Civil Litigation Joint Head of Court of Protection

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