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Litigation Costs

The Irish system underpinning the recovery of costs in Irish litigation is derived from British practice and systems but lags behind developments there.

The basic principle is that the client is responsible for paying his or her costs and may only recover those costs in the event of winning. The corollary of the second leg of the prior sentence is that the client is responsible for ALL costs in the event of losing. That means that the client is liable for the costs of the winning defendant as well as his/her costs.

This is unfair, socially. It means access to justice is provided to rich people but not to poor people. “Poor” is a relative term. Litigation is a risky activity. If a plaintiff cannot afford to take the risks of litigating he/she is excluded from access to justice.

The court system, on its own, cannot fix this problem. Judges do not have access to funding to help “worthy” causes. Occasionally the court will make no order in relation to costs and each party will bear its own costs only, but the facts of the case will decide this. In principle, why should an innocent defendant be put to loss by a law suit without legal foundation? (This is individual justice, but the system is still a denial of justice, socially).

Who can afford to lose in litigation? Very few people, is the answer. Even rich people will avoid litigation because of the risks. In one sense they can afford not to litigate if the stakes are too small to justify the trouble. In another sense their wealth shields them from events causing them loss.

However, if they do litigate, they have an indispensable advantage in the self-confidence that life has usually given them.

Litigants need to be self-confident. They need to understand what they are doing and what the issues are. They need to understand that litigation is not like a lottery; you do not win by chance, you win (usually) because you should win.

It is possible that, in a sense, more losses occur in litigation because it was never started than because it was commenced and was lost. You can be defeated before you start by the deterrence of the costs of litigation. This is one aspect of the “access to justice” problem.

What is implied here is the need for new and easy methods to fund litigation. The Chief Justice referred to this, obliquely, in her speech launching the Law Reform Commission’s paper on Multi Party Litigation.

Many ordinary people venture into litigation without worry, but they do so as defendants. In that role they will often have the benefit of an insurance policy that indemnifies them from the loss of the claim and/or a liability to pay the costs of the litigation. (The courts ignore this fact, usually).

Typically, the litigation arises from alleged negligence in the driving of a motor vehicle. It was the State that produced this result. Third party liability insurance is compulsory for driving in public.

In effect, the State has ignored its obligation to provide access to justice by failing to facilitate group funding for plaintiff litigation. Insurance is a form of group funding. Many people pay for it, but few people need it. The premiums paid by the many fund the few.

In the UK they have now made provision for Damages Based Agreements (“DBA”), having previously made provision for Contingency Fee Agreements (“CFA”). DBA means that the lawyers get a share of the damages recovered by a plaintiff; CFA means that the losing defendant has to pay extra plaintiff costs where the plaintiff’s lawyers have, effectively agreed to waive all or part of their fees if the litigation is unsuccessful. (This is the modern source of the phrase “No Win, No Fee”). Ireland has not made any provision for CFA. The use of the phrase “No Win, No Fee” in Ireland is a potentially expensive error.

For Personal Injury actions in the USA, DBA is the method of funding. The plaintiff’s lawyers must win to get paid and they take a share (a very large share) of the damages to pay for what are often very high costs. (This explains what appear to be, and are, high PI jury awards in the US.

Plaintiffs getting DBA generally take the view that, say, 50% of something is better than 100% of nothing.

To justify the new costs approach the UK judiciary has decreed that from April 2013 every Personal Injury claimant in the UK will receive 10% more in damages than before. (This was originally mooted in conjunction with a judicial admission that PI damages in the UK were low.)

In Ireland, it is expressly forbidden for lawyers to charge by reference to a percentage of the plaintiff’s compensation. So, there is no DBA in Ireland.

In fact, given the good work of the Law Reform Commission’s paper on Multi Party Litigation, that issue is the bellwether of the State’s intentions in giving Ireland’s citizens access to justice.

No Multi Party litigation means insufficient access to justice for individuals.