16 Mar 2015

Finding fault with Lord Faulks: What rising court fees mean for Access to Justice

Litigation funder Nick Rowles-Davies questions the mindset of Lord Faulks when deciding to raise court fees by 600 per cent and calling litigation an 'optional activity.'

Magdanatka Magdanatka

Euphemistically called ‘enhanced court fees’, Lord Faulks’ argument for the five per cent levy on all money claims that go to court over £10,000, rests on the premise that it will save £120 million for the government. This money will support court services in England and Wales as a matter of financial necessity. Cost-efficiency, he says, is no longer enough; it is time for ‘those who use the courts’ to contribute to the courts.  

However, he also claims it will make little to no impact on demand for legal services. Nor will the levy damage access to justice. Yet with this levy resulting in fees rising by up to 600 per cent, Faulks’ views seem to reflect his disconnect from the reality of the legal system, and in business in general. A disconnect that becomes more concerning with his problematic assertion that litigation is ‘very much an optional activity’. 

The queue of businesses which would disagree with this bizarre notion would stretch out of the High Court and along The Strand many times over, I would have thought. The impact on ordinary people could be enormous. 

In fact, whilst it might make sense for ‘wealthy businesses and individuals fighting legal battles [to] pay more in fees to ease the burden on tax payers’, as justice minister Shailesh Vara said in support of Faulks, in actuality these changes are much more complex. Framing his argument as a boon to the everyman rather than the increasing price of justice, Vara disguises their impact upon civil justice – access to justice. 

The changes are in this sense more similar to those unrolled for Employment Tribunal application fees, which have been noted as having caused a 79 per cent reduction in applications. If a similar result occurred in the civil courts, it would be hugely damaging to access to justice and our legal heritage, to the UK’s status as the dispute capital of the world, and to a justice system that has already undergone serious transformations in the last few years. Such a reduction in issued cases would also have a significant effect on the revenue that Faulks seeks to bring in by the rise in the fees.

Edward Peter Lawless Faulks QC, became Minister of State for Justice in December 2013, in the aftermath of the Jackson Reforms. The reforms resulted in changes in how lawyers approach cost management and litigation funding. And it is these reforms that Faulks seems to be ignoring. 

To raise fees, just two years after the Jackson Reforms and when solicitors are still very much learning to get to grips with them, is quite unbelievable. Faulks mentioned the process of recoverability from the other side and also suggested that solicitors may feel able to “provide assistance with upfront costs.”

The lack of reference here to the various forms of funding which exist is concerning.

The Jackson Reforms effectively rubber stamped litigation funding as a means of providing access to justice. 

It is important to state here that litigation finance is not a cure-all mechanism for the fee rises. However, it could result in increased activity at the lower end of cases in terms of damages. 

Third-party litigation funding has become almost universally familiar to private practice lawyers as a tool to help their clients finance the rising costs of litigation. As demonstrated by the results of Burford Capital’s inaugural UK litigation and arbitration funding barometer, an impressive 90 per cent of private practice lawyers and 58 per cent of corporate clients claim to be aware of litigation finance, with 38 per cent  of in-house and private practice lawyers stating that they recommend third-party funding as an option to all clients regardless of the complexity or value of their case. 

Faulks’ mistake in not to raise litigation funding, whilst seemingly putting the burden of costs onto law firms, is therefore similar to that of Lord Woolf, whose comments last year failed to consider how litigation funding might provide a mechanism by which banks could be sued. 

He too demonstrated a concerning lack of awareness of alternative finance options, let alone the primary reasons that lawyers said triggered their client’s need for litigation finance. The Burford Capital survey showed 65 per cent of private practice lawyers said their clients used litigation finance in 2014 because they couldn’t otherwise afford to pursue claims, with a further 14 per cent needing funding in order to prevent cash-flows bleeding out through their legal case and therefore preserving resources for other areas of their business. 

Understanding the legal landscape and how it has metamorphosed in the wake of Lord Jackson’s reforms should be integral, and should include comprehending the value of litigation finance. Faulks seems to have chosen not to consider this. 

Consequently, whilst litigation finance is currently important to lawyers and litigants, against the backdrop of Faulks’ handiwork outside finance for claims affected by the changes is likely to become a necessity. 

Faulks’ disquieting exclusion of litigation finance only accentuates his apparent unawareness of the current issues already facing lawyers and their clients, especially as the majority of lawyers and C-level corporate executives now stating that they are not only aware but would consider using litigation finance. 

Considering the fact that the Jackson Report actually stated that "the current level of court fees is too high" (3.1), Faulks’ ignorance is only further impacted. It seems he, and the House of Lords, have lost sight of what it wants to do. 

Yet, despite this, ‘enhanced fees’ have been rolled out. 

Whether or not this is something we can afford to see come into place, or that we want to see, remains a confused and alarming situation. For whilst governments have to make tricky decisions, including unpopular ones, it would be good to think the decision makers are at least men and women who are fully engaged and informed on the continuing pressures on legal budgets in the UK and where we are in the financial recovery process. 

Nick Rowles-Davies is Managing Director of Burford Capital (UK) and author of Third Party Litigation Funding. 

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