Mr. David Mack:

I thank the committee for inviting me to talk about the issue of legal costs from the perspective of the State Claims Agency, SCA. I will begin with the role of the SCA legal costs unit and then make specific comments on third-party legal costs in personal injury cases.

The legal costs unit was established in the SCA in 2013 to deal with third-party costs arising from certain tribunals of inquiry, namely, the Mahon, Moriarty, Morris and Smithwick tribunals. Its remit has been extended to include third-party legal costs of the State and certain State authorities.

This means the legal costs unit deals with third-party legal costs of these State authorities regardless of whether they arise during the SCA's claims management work or involve other legal costs incurred by the State authority concerned. The legal costs unit carefully examines the legal costs submitted by the representatives of plaintiffs, before negotiating to cut the State's bill for legal costs by as much as possible. If it cannot reach an acceptable agreement, it refers the case to a legal costs adjudicator, subject to a right of appeal to the High Court. The legal costs unit has successfully achieved significant savings for the State. I have attached a summary of our results in 2017 and 2018 and the position up to the end of November 2019 as an appendix to this opening statement.

While we are aware of the significant level of public dissatisfaction with legal costs, our view is that large sections of the legal services market work effectively. We believe that in terms of the remuneration of solicitors or barristers, legal costs are generally non-controversial in areas like probate, conveyancing, company law, acquisitions and mergers, and commercial disputes. The introduction of the lawyer-client terms and conditions agreement mandated under section 150 of the Legal Services Regulation Act 2015 is likely to enhance relationships and competitive fee structures in these areas. The common denominator driving the smooth working of these areas of law is pure economic market forces. In short, consumers have never been more empowered and equipped to shop around, and indeed they do so in respect of certain categories of legal costs expenditure in which there is a direct contractual liability to meet the cost of the service rendered.

It would be a mistake to say the entire market for legal services is functioning as competitively as it should. Personal injury litigation is the great outlier in this regard, largely due to the widespread take-up of no-win, no-fee retainers. It cannot be disputed that such terms facilitate access to justice for those who would not otherwise have the means. In basic terms, the injured party may not have the financial resources to fund litigation but has a good case which the solicitor is keen to take. However, the costs are ultimately paid by a third-party insurer or indemnifier and there is no incentive on the plaintiff to shop around or to seek value with regard to the fees charged. It was made clear in the 2005 report of the legal costs working group, which was known as the Haran group, that the problem with this is that the person paying the piper "is not in a position" to call the tune. This model does not work unless the defendant or potential indemnifier for damages and costs has sufficient resources and there is a good prospect of success with the claim.

It is worth noting that excessively high legal costs in personal injury litigation were flagged during an earlier pressure point in the mid-1980s. This resulted in the introduction of certain measures to alleviate the problem. One such measure, section 5 of the Courts Act 1988, was enacted to end the practice of briefing two senior counsel and one junior counsel in personal injury cases. The Bar Council, as it was then known, held a meeting of members which resolved that not more than one senior counsel and one junior counsel shall seek to recover brief fees on a taxation of party and party costs in personal injuries actions. An undertaking in these terms was provided to the then Minister for Industry and Commerce and the relevant statutory provisions were left in abeyance. The undertaking has since been withdrawn unilaterally by the Bar of Ireland on the grounds that it is anti-competitive. To date, the impact by way of increased claims for the numbers of counsel brief fees has been limited to a small number of catastrophic injury claims. However, in a written ruling delivered in one such case, the taxing master opined that claims for two senior counsel and one junior counsel are likely to become more frequent as the precedent for such representation becomes more established.

The legal costs provisions introduced under the Legal Services Regulation Act 2015 are to be welcomed and have the potential to reduce litigation costs. For example, the modification of the costs-follow-the-event rule provided for in section 169 of the Act will enable the court to carve out costs orders that do justice between the parties. The new court rules contained in Sl 584/2019 will be also of assistance to paying parties with capacity to make lodgments or tender against legal costs liabilities with a view to avoiding some of the costs of adjudication. These measures were identified by the Haran group as necessary to reduce costs. There are good reasons to believe they will achieve this aim. The Haran group also advocated a three-pronged approach for reducing legal costs, involving the replacement of the taxation of costs system, the introduction of enhanced and meaningful lawyer-client written retainers and an overhaul of court processes with a view to increased efficiency. Progress has been made in all three areas. The newly appointed chief legal costs adjudicator brings a vast amount of experience in legal costs knowledge. He has undoubted expertise and is well placed to improve the operation of the rules for all parties by way of practice directions, protocols and other informal guidelines. The new four-phase bill of costs, which replaces the traditional lump sum approach, is aimed at providing more transparency in the process. Transparency in costs claimed is an area in which further work could prove beneficial.

The legal costs landscape in England and Wales has been undergoing major transformation in recent years. As these reforms remain ongoing, it may be too soon to draw conclusions about their overall effect. I draw the committee's attention to two initiatives: proportionality and costs management. Under the principle of proportionality, no more should be payable than if the litigation had been conducted in a proportionate manner. The so-called Lowndes test indicates that if global costs are disproportionate, individual items should not be allowed unless it is established that they were necessarily incurred and reasonable. A more radical approach evolved whereby a final costs figure was effectively guillotined if the outcome was deemed to be disproportionate to the issues litigated. In recent times, there has been a move away from the guillotine approach towards the original Lowndes test, as enunciated in 2002. Section 17 of the Courts Act 1981, as replaced by section 14 of the Courts Act 1991, is an example of an earlier Irish experience with this principle. The rule was generally unsuccessful because the prevailing view on the adjudication of costs was that the statutory cap had no application in respect of negotiated settlements or consent orders where the onus was placed on the paying party to make express provision for the limitation as a term of the settlement. Furthermore, increases in the jurisdiction of the courts have rendered the 1991 provision redundant.

Proportionality can be of particular use in some lower-value claims in which the costs claimed and allowed can exceed the damages awarded. In England and Wales, cost management is inextricably linked to case management as an overriding principle of the civil procedure rules. A cost-budgeting approach is regularly used in the UK courts at a preliminary phase of proceedings and is prospective in nature. The parties apply to the court for approval of a litigation budget which is enforced with liberty to increase the amount fixed for costs in limited circumstances only. Such a system can have benefits for larger claims in which case management directions are currently an issue. I hope my remarks have been helpful to the committee. I am happy to assist the committee with any further queries it may have.