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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 his access 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 Lord Woolfs 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 action protocol, 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 and 4.2 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 a partner. Leading barristers have a wider spectrum. Tax silks come out on the top. When instructing 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 reaching 40,000 or 50,000 for more complex work.8 At this level, hourly rates up to 4,000 are routine. However these may be exceptional cases where tax expertise is involved. According to
1 2

Civil justice review Report para 1, Access to Justice FR Ch 7 Grainger & Others, The Civil Procedure: Rules in Action (2nd edn Cavendish, London 2000) xxxi 3 Access to Justice IR June 1995 Ch 25 4 Moorhead, Self regulation and the market for legal services (Cardiff Law School 2004) www.ccels.cf.ac.uk/archives/publications/2004/moorheadpaper.pdf 5 Rowland Williams, Saving Litigation (Williams, Hants 1999) 182 & 203 6 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.ece 8 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.9 The survey also reveals that more than two thirds (68 per cent) of businesses and companies that use City lawyers say that legal fees have risen by 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. The going 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 over 100,000.11 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 2005 there 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.12 The introduction of the new Civil Proceedings Fees Order revokes all previous fees order issued 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, detailed assessment 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 is 900, 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
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F. 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.ece 10 Ibid 11 A. J. Stitt, Mediation: a practical guide (Cavendish, London 2004) 7 12 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.stm 14 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 list15 of court fees which is payable 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 cost as 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 with Pre 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 fact that more than 90% cases nowadays settle before trail which ultimately saves the parties from cost of litigation.18 3.2 Conditional Fee or No Win No Fee Agreements Conditional fee agreements (CFAs) were introduced in 1995 and extended in 1998 to all civil litigation with the exception of family proceedings.19 The effect of CFAs on facilitating 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 civil litigations, CFAs have enabled tens of thousands of people to bring their claims who
service.gov.uk/publications/guidance/fees/summary_fee_changes_1204.htm 15 Ibid 16 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 State Pension 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.html 17 CPR 44.3.5(a), CPR 3.1(4), 3.9 (e), see also PD28, para3.2 and PD29, para4.2 18 Comments Reported in Arbitration Vol 51 No 4 November 1985 19 Department of Constitutional Affairs: Justice Rights & Democracy, http://www.dca.gov.uk/legalhelp/faq/litigation.htm 20 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 be stated 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.25 Funding in civil cases is available to anyone 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 rich enough 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 this the 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 success in 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 insurance service provides cover to full costs of litigation and is not dependent on CFA. The involvement 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 people have insured their homes, cars and credit cards through BEI and in most of the cases
21 22

Ibid 327 Elliott & Quinn, English Legal System (8th edn Pearson Education, Edinburgh 2007) 326 23 Law Society: Solicitors Firms 2003 Research findings, http://www.lawsociety.org.uk/aboutlawsociety/whatwedo/researchandtrends/researchpubs/view=researchpu bsarticle.law?PUBLICATIONID=255215 24 Access to Justice Act 1999 ss.4 & 5 25 Legal Services Commission, http://www.legalservices.gov.uk/aboutus/all_about_lsc.asp 26 Ibid 27 Slapper & Kelly, The English Legal System (7th edn Cavendish, London 2004) 610 28 Legal Services Commission, http://www.legalservices.gov.uk/aboutus/all_about_lsc.asp 29 Access to Justice Act 1999 s.8(2)(e) 30 After 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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insurance companies pay the legal costs arising out of any incident related to them.31 The only thing, which the party has to worry about, is the insurance premium that is generally high especially in cases involving, greater risk.32 Similar to the above mentioned services available to the litigants, prospects of success are important factors in order to benefit from the insurance services. 4. Is Mediation Cost effective? In the last decade mediation has developed in UK as one of the key dispute resolution processes. 33 There may be more than one reason for that, as it is generally asserted that mediation is not only time effective but cost effective. Apart from that the success rate in mediation is quite high. Among the cases which voluntary go for mediation, 70 to 80% settle. Even the mediations that are mandatory 40% cases settle.34 According to another survey, approximately 85% of all cases settle during mediation or shortly thereafter.35 The fee for a mediator varies from zero (volunteer mediators) to 10,000 for the most expensive mediator. Mostly its one day mediation and the cost is shared by both the parties. The total cost of mediation even if there is no settlement, therefore usually pales in comparison to the cost of litigation. 36 Lawyers and parties sometimes choose to mediate before the commencement of litigation. Early mediation provides an opportunity for resolution when costs are relatively low and before the parties are further polarized by litigation.37 Generally, parties can reduce their overall costs by two-thirds and studies show that mediated agreements are followed approximately 85% of the time versus only 55% of the time for judge rendered decisions. Therefore, parties who choose to mediate not only save a lot of money, they ensure the highest level of satisfaction, and therefore followthrough, with the agreement.38

31 32

Opcit (n22) pp 330 After the Event Insurance, http://www.ateinsurance.com/examples.html, see also The Judge: online insurance, http://www.thejudge.co.uk/oneoff/civil-litigation.asp 33 S. Hammer, Alternatives to Litigation on the Rise (Business Journal - April 3, 2003) 34 A. J. Stitt, Mediation: a practical guide (Cavendish, London 2004) 7 35 Susan m. Hammer: Dispute resolution Service, http://www.susan-hammer.com/about-mediation.php 36 Opcit (n34) 37 Susan m. Hammer: Dispute resolution Service, http://www.susan-hammer.com/about-mediation.php 38 Ibid

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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 London County 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 family mediation 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 two parties).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 justice reforms.43 The 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 to resolve 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 viable opportunity.47

Conclusion
There is no doubt on the point that cost of litigation is really high and mediation can be a better substitute for the litigants. Even if the mediation fails the option of litigation
39

Most 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-armsmediation-report-Genn-et-al.pdf> accessed 25th Nov 2007 41 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, 1/02 42 H. Genn, Mediation in Action: Resolving courts disputes without trail (Calouste Gulbenkian Foundation London 1999) 54 43 Marian Liebman (ed), Mediation in Context (Jessica Kingsley, London 2000) 180 44 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) 171 47 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 incur costs 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, after all 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 and payments 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 the mediation 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) at http://business.timesonline.co.uk/tol/business/law/article2013519.ece 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 2007 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, 1/02 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 T. Brown, Common sence tips for avoiding litigation (2004 Beirne, Maynard & Parsons, L.L.P.) http://library.findlaw.com/2004/Feb/24/133302.html Willey and Lorrie, ARBITRATE, DON'T LITIGATE! AVOIDING THE HIGH COSTS OF 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, London 2000) 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

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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

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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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