Is Loser-Pay Coming to an End in the UK?

I’ve always been fascinated by the way other countries handle payment of the winning side’s legal fees and expenses. Why? Partly for the scintillating dinner conversation it makes; partly because it has a serious impact on the way lawyers and parties approach litigation.

In the United States, the general rule as I understand it, is that all parties pay their own lawyers. If you win, unless there are exceptional circumstances, the other side does not contribute to your legal fees.

In the United Kingdom, the approach is different. There, the winning side is entitled to reimbursement of the legal fees for all steps that were necessary to the litigation, but not any steps that were unnecessary, or that were taken merely out of an abundance of caution.

In contingency fee cases, their approach seems to be that the award to the plaintiff is not used to pay the plaintiff’s legal fees and expenses. Instead, the plaintiff’s lawyers are entitled to double their fees and collect them from the losing side.

Recently, Ken Clarke, the UK’s Justice Secretary, told the BBC that he is considering the reform of that system so that part of the plaintiff’s legal fees will be paid out of the plaintiff’s award.

This marks a shift in thinking, since up until now, the UK has seen it as being wrong in principle that the plaintiff’s award of damages should be used to pay the plaintiff’s legal fees.

I certainly don’t favour the American approach, since in my view, it has contributed to a legal culture that encourages frivolous litigation.

I do admit, however, to being puzzled at the reluctance to have the plaintiff pay some costs out of the award of damages. In contingency fee cases, typically, the plaintiff pays nothing as the case progresses. Even file disbursements, such as the cost of medico-legal reports, are paid up-front and carried by the plaintiff’s lawyers.

The purpose behind this is to enable people who otherwise could never afford to retain a lawyer to prosecute a negligence claim. This is particularly true in bodily injury cases, where the plaintiff might need to take time away from work to recover, and hence, faces a significant income reduction during his recovery.

I have never had any significant difficulty in principle with having the loser pay costs in the UK tradition. I do believe that in Canada, where the lawyer’s contingency fees are usually taken from the plaintiff’s damage award, with recovery against the defendants for costs according to a tariff, is a very good approach.

If a lawyer’s fees are paid by the other side, there is always the danger that the lawyer’s loyalty to his client might come into question.

Doubling the plaintiff’s lawyer’s fees and collecting them from the defendant might produce the same unfortunate effect as the American approach, however, since no matter how frivolous the plaintiff’s claim, the best approach might just be to settle.

I would commend the Canadian approach to the UK Justice Secretary. Perhaps I’m biased, but so far, this country has successfully avoided the worst characteristics of the tort system in the United States, without any significant reluctance on parties to either bring claims or defend them.

We have a good thing going up here – one worth examining in countries who value and respect the rule of law.