As the Gazette's sister publication, Litigation Funding, celebrates its fifth anniversary, top figures in the industry held a roundtable discussion to examine the key issues it covers.

This is an extract of the debate that appeared in the April issue of Litigation Funding

The first five years of Litigation Funding have tracked a tumultuous period in the law.

Eleven key figures in the field gathered at the Law Society in London for the 90-minute roundtable discussion looking forward to the funding of litigation over the next five years.

Chaired by Litigation Funding's editorial consultant, Michael Napier, the other participants were:

- The Master of the Rolls, Lord Phillips of Worth Matravers (chairman, Civil Justice Council);

- Nigel Cooksley QC (chairman, Bar Council conditional fee agreement working party);

- Tony Guise (immediate past president, London Solicitors Litigation Association);

- David Hartley (director, Accident Line);

- Mark Humphries (head of advocacy, Linklaters);

- David Marshall (president, Association of Personal Injury Lawyers);

- Claire McKinney (president, Forum of Insurance Lawyers);

- Professor John Peysner (chairman, Civil Justice Council costs sub-committee);

- Georgina Squire (chairwoman, Law Society's civil litigation committee), and;

- Kerry Underwood (author of No Win, No Fee, No Worries)

There were also three observers: Robert Musgrove (secretary to the Civil Justice Council), Kevin Roussell (Department for Constitutional Affairs) and Gary Barker (Law Society head of practice development).

Lord Phillips: It is plain that there is a complete difference between the larger cases, which one might say can justify the adversarial process and can justify quite a considerable expenditure of cost, where what is really needed is a fairly sophisticated approach, perhaps tailored to the individual case, and the mass of small litigation where the defendant is almost inevitably insurance-backed or is public authority self-insured.

It may be that one ought to be looking at completely different ideas in relation to the two types of litigation.

I was thinking the indefensible.

Why is it so awful to suggest that the insurance companies take over, basically, the very small cases? I am going skiing in a fortnight's time and I am insured against injury.

If I have an injury, I will make a claim against the insurance company.

There will be a claims assessor who will be concerned to ensure the claim is genuine or bogus and how much it is worth.

What is so different if you have a road accident?

In principle, liability is involved.

In practice, if liability is accepted, what if one had a new breed of independent adjudicators? Anybody who was injured in this kind of situation, would simply go to an adjudicator who would be independent, would look at the case and then contact the insurance company and say, 'This looks like a genuine one.

Our view at the moment is so-and-so.

What do you think?' The case would not go near a lawyer, although the adjudicator might well be one.

John Peysner: I do not think that a contingency legal aid fund (CLAF) is viable for smaller or individual cases.

The costs of setting up the system just does not work.

That is the lesson that we have learnt from legal aid.

There is one area where it might be helpful: group actions.

In Canada, and particularly in Ontario, there is a very interesting system at work, where from this year, probably, the ordinary case, particularly personal injury (PI) cases, will be handled on a contingency fee basis.

Bigger cases will be handled on a class-action basis, operating through a CLAF which will take a cut of the winning cases and recycle that money to support, particularly, the disbursements of new cases.

These are the cases where you need barristers, where you need that specialised legal advice.

It may be that in the ordinary run-of-the-mill case, barristers who do that work will need, slowly, to move into solicitors' firms.

Michael Napier: Nobody has mentioned the 'loser pays' rule.

Does it follow that if contingency fees arrive, the rule must go and is that a route we should go down?

John Peysner: I do not think it is inevitable.

You can have all sorts of systems whereby the contingency element, for instance, may be partly recoverable.

You can have combinations of contingency plus loser pays.

You may have a situation where a winning lawyer earns a bit of a contingency and a bit of party-and-party costs.

David Marshall: Are we trying to improve the system or to come up with something completely new? The current system is fault-based.

The Master of the Rolls is right to say, certainly in motor cases, that the vast majority succeed.

When you move across to things like employers' liability and so on, there are quite a lot of battles in proving fault.

Everybody who has looked at no-fault systems says they are unworkable, partly because of cost.

Far more claims are brought, partly because you get rid of accountability.

When one has a fault-based system with a burden of proof and a claimant, I do not think you can get rid of lawyers altogether.

There are ways of dealing with costs and keeping the fault-based system which are asked to come to a solution rather than saying, 'Let's have a new system of tribunals'.

So far as conditional fees and damages are concerned, the injured person did not ask to be in litigation.

He/she has been injured through somebody else's fault.

Damages in this country are purely compensatory.

In countries where contingency fees have worked, such as the US, you usually have some element of punitive claim and also significantly higher damages for pain, suffering and loss of amenity.

Recoverability in principle is good, but you need to look again at the whole question of damages if you are going to take significant chunks of them away from injured people, be it the contingency fee or the recoverable success fee.

Kerry Underwood: The Department for Work & Pensions in its paper on employers' liability floated the idea where effectively in low-band PI claims you would not expect a lawyer to be involved in the settlement, but the lawyer would check it, as in employment cases with a compromise agreement.

That is a statutory concept.

It is in the employer's interest to have it signed off and a custom has grown up that the employer pays the employee's fee to have it checked by the solicitor or, indeed, the barrister.

That is a potentially workable model in low-value PI claims.

They would then contribute somewhere between 500 and 750 plus VAT to the claimant's lawyer or barrister to check that and say 'Yes'.

Furthermore, it protects the bar.

It is only reasonable that the bar should be able to offer that service direct to the public.

There would be many solicitors, in any event, who would want to send the papers direct to the bar to check it.

It would help the young and newly qualified bar, but, and it is a big proviso, those settlements should be dealt with very, very quickly - within weeks rather than months.

If that system does not work, I would suggest a contingency fee scheme but that the claimants run the risk of costs as well because there has been an attempt to effect a mediation which has not worked.

The value, for what it is worth, of the claim should be 5,000 or less to fall within that scheme.

Nigel Cooksley: I was interested in the suggestion by the Master of the Rolls that, at first sight, seems attractive.

For the reasons that David gave, it probably has to be restricted to road traffic rather than to employers' liability cases.

Where I disagree with David is that I do not see why it is inconsistent with the fault-based system.

Why cannot an adjudicator in small, simple and low-value claims consider liability as well?

David Hartley: One of the issues the idea of an adjudicator brings out is that once upon a time we had an adjudicator, and he was called a district judge.

To get to that position is almost saying the Woolf reforms have not produced the desired outcome for the smaller-value cases.

Once you have liability issues going to an adjudicator, there has to be a detailed investigation.

Michael Napier: If it is right that costs are increasing dispropor-tionately, what could be done?

Georgina Squire: If there could be more guidance and more expectation of accurate budgeting, that would help enormously in larger-level cases because there is an impression that it does not really matter how much I spend so long as I can get a settlement [because] I will recover my costs.

The other major improvement would be to attach cost recoveries to pre-action work.

There is no automatic right [to costs] for a defendant who receives a letter of claim, does a huge amount of investigation on a highly complex or, indeed, less complex matter, convinces the claimant that there is no merit in their claim by way of letter of response, and then that is it - just silence.

Kerry Underwood: Why do you not say in those circumstances: 'Fine.

Deny.

Issue'?

Georgina Squire: You have to investigate properly and make sure that there are grounds for denial.

Tony Guise: In my experience, a protocol letter will cost, on average, about 20,000 to prepare [with] similar levels of costs for dealing with the reply.

John Peysner: Perhaps in commercial cases you should only be allowed to open up the protocol if you put a deposit in against the other side's costs if you withdraw it.

- For information on Litigation Funding, tel: 020 7320 5830.