Are you sitting comfortably? In a recent road traffic personal injury case three claimants recovered, respectively, £400, £600 and £1,000. Their solicitor’s costs? Wait for it: £80,000!

The claimants had, it must be said, very slightly exaggerated their original claim – but to no more than £5,000. More significantly, the defendant, through his insurers, had accused the claimants of a dishonest claim (an allegation that was unsuccessful). The matter had found its way to the Court of Appeal on the question of costs. Nevertheless, it is a matter of considerable concern when the amount recovered bears absolutely no relation to the costs involved in doing so, a phenomenon that the courts are experiencing on an increasingly frequent basis.

There is nothing new in this. Readers may recall my article on neighbour disputes in which I mentioned a dispute over a strip of land whose value was practically nil but where the costs came to over £37,000. That is by no means the only example of a gross mismatch in relation to costs. In a case in which a defendant sought to set aside a statutory demand in respect of a debt of £40,000, his lawyer’s costs were claimed at £400,000. In a more recent case, a house purchaser sued a developer and recovered £15,000; his costs were £200,000. Lord Justice Rix, giving the judgment of the court, observed:

“In the circumstances, it is very sad indeed that, as we are told, so much has been spent on these proceedings. There certainly were opportunities for settlement but unfortunately they were not taken. Of course, it takes two to settle. But the litigants seem to have been prepared to commit themselves to costs without considering carefully enough the rationality of doing so.”

However, there is one significant difference. In the cases I’ve just mentioned, the question of costs only affected the pockets of the parties involved. However, in the road traffic case the claimants and the defendant were insured and that means, ultimately, the costs are likely to find their way to of each of our pockets. Insurance companies are not charities and it is perfectly natural and proper for them to seek to maximise the return for their shareholders. If that means eventually passing on the costs they have to pay out by way of increased premiums for policyholders then so be it. The fault is not theirs – it is in the amount of costs in the first place.

When the Civil Procedure Rules were introduced in April 1999, one of the most important matters they were supposed to tackle was that of the escalating costs of litigation. It is now widely acknowledged that, in that regard, they have not been a success. Costs continue to rise out of proportion to the sums recovered. The Civil Justice Council, which is responsible for proposing changes in the rules, has only been able to push through relatively minor changes as far as costs are concerned.

Any major change to the way costs are dealt with still seems a long way off. In the US, each side is expected to pay their own costs whether they win or lose. In some other countries the amount of costs is fixed in relation to the amount recovered.

In this country we are still stuck with system that rewards costs to the winner but with no really effective control over the amount of those costs, which is no disincentive to litigants and their lawyers to incur disproportionate costs in the first place. Until we have such a system of control, escalating costs are going to continue to come out of the pockets either of the individuals involved or, more worryingly, from the rest of us.

Stephen Gerlis is a district judge at Barnet County Court

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