The government suffered a setback in its programme of civil litigation funding reform last week, as the Administrative Court found that a review conducted by the Lord Chancellor into the exclusion of mesothelioma claims from funding changes introduced in April 2013 was insufficient and therefore unlawful.
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPO’) included provisions intended to reform the funding of civil cases by preventing successful claimants from recovering success fees and insurance premiums from unsuccessful defendants. However, section 48 of LASPO specifically exempted claims in respect of mesothelioma, a rare and debilitating asbestos-related cancer, until the Lord Chancellor carried out a review of the likely effect of the reforms in relation to mesothelioma claims.
The case was brought by Tony Whitston, chairman of the Asbestos Victims Support Groups Forum UK, against the Secretary of State for Justice and Lord Chancellor, Chris Grayling. The Association of British Insurers intervened in the case as an interested party to support the Lord Chancellor’s argument that his decision was lawful.
A ‘most pernicious disease’
Mesothelioma is a cancer that develops in the lining covering internal organs, most commonly the lungs but also around the abdomen and the heart. It is generally accepted that the disease is caused by inhalation of asbestos fibres, and most people diagnosed with mesothelioma have worked with asbestos in factories, construction or related industries.
The use of asbestos is now banned in almost all developed countries, including the UK, due to its association with mesothelioma, asbestosis, pleural thickening and lung cancer. The court described mesothelioma as the ‘most pernicious asbestos related disease’ due to its devastating impact and rapid progression.
The condition is almost always terminal, with an average life expectancy of one to two years after the onset of symptoms, although there have been cases in which mesothelioma victims have survived for several years after diagnosis and even gone into remission after surgery or other treatment.
Exemption from funding reforms
Amid mounting concern about the costs of civil litigation, in November 2008 the Master of the Rolls appointed Lord Justice Jackson to conduct a wide-ranging review of civil litigation costs. The ‘Jackson report’, published in January 2010, concluded that the recoverability of success fees and insurance premiums had had ‘unfortunate unintended consequences’ and these costs should therefore cease to be recoverable from the losing party in civil litigation.
Lord Justice Jackson proposed a package of ‘interlocking reforms’, many (but not all) of which were included in the November 2010 government consultation paper, Proposals for Reform of Civil Litigation Funding and Costs in England and Wales. Mesothelioma claims were not specifically referred to in the Jackson report, but the consultation paper did identify certain types of case – including industrial disease – in which abolition of recoverability might be problematic.
Following the consultation, the government decided to implement the success fee and insurance premium reforms in Part 2 of LASPO.
During the passage of LASPO through Parliament, Lord Alton in the House of Lords proposed an amendment to the draft bill to exclude mesothelioma claims from the civil litigation funding reforms. Although the amendment was initially overturned by the House of Commons, ultimately the government agreed that mesothelioma claims would be excluded pending a review by the Lord Chancellor.
For all other civil cases, sections 44 and 46 of LASPO mean that, from April 2013, successful claimants are no longer able to recover success fees or insurance premiums from defendants. Prior to LASPO, the unsuccessful party in personal injury proceedings would have to pay the award of damages, the successful party’s recoverable legal costs, any success fee and any after-the-event (‘ATE’) insurance premium paid by the successful party.
The review required by section 48 of LASPO
The Claimant, Mr Whitston of the Asbestos Victims Support Group Forum UK, argued that the exemption of mesothelioma claims ‘was enacted in recognition of the fact that cases involving mesothelioma constituted a special case’. The review provided for by section 48 of LASPO was therefore ‘required in order to produce a rational justification’ for removing this exemption.
The Lord Chancellor, supported by the Association of British Insurers, argued that section 48 was simply a ‘pragmatic exclusion of mesothelioma claims … pending a review into whether there was any proper or justifiable reason for so excluding them’. The parties effectively disagreed about whether the exclusion of mesothelioma claims was a principled or pragmatic decision.
Mr Justice Davis found that the meaning of section 48 is clear: it requires the Lord Chancellor to ‘carry out a review of the likely effect of removing the recoverability from the unsuccessful party of success fees and ATE premiums’. The precise nature of the review is not prescribed by LASPO, leaving the Lord Chancellor with a discretion as to how to conduct the review.
In the event, the review was conducted as part of a wider consultation opened in July 2013 about proposals to reform the procedure for mesothelioma claims, which had ‘no immediate connection’ with the civil litigation costs provisions in LASPO. The court found that this method was, in theory, permissible.
The process ‘did not enable a proper review’
In his judgment, Mr Justice Davis acknowledged the test for a lawful consultation process: the question to be answered being whether, on an objective basis, the process has been ‘so unfair as to be unlawful in all the circumstances’. Evidence concerning the responses to the review would be relevant, but not determinative, of whether it satisfied section 48.
The review asked respondents whether they agreed that sections 44 and 46 of LASPO should be brought into force in relation to mesothelioma claims in light of the other proposed reforms set out in the consultation paper. It did not, however, invite consultees to assess the likely effects of sections 44 and 46 of LASPO on mesothelioma claims, as section 48 required.
The court found that ‘viewed as a whole the consultation document objectively was not in such terms as would provide the Defendant with what he needed for his review’. The process ‘did not enable a proper review of the likely effect of sections 44 and 46 on mesothelioma claims’.
Indeed, in its response to the consultation, the Law Society had said it did not consider the review would ‘produce the detailed data and analysis required to make a satisfactory assessment’, as required by section 48.
The use of a consultation exercise per se to carry out the review was not an inappropriate means of fulfilling the duty; however, ‘the nature of this consultation meant that it did not permit the Lord Chancellor to do so’. Mr Justice Davis further found that this ‘is not a case in which the procedural failing was minor or technical in nature’, perhaps with the Ministry of Justice press office’s response to its last defeat in the courts in mind.
In terms of relief, Mr Justice Davis said his ‘preliminary view’ is that he should ‘make a declaration that the Lord Chancellor has failed to carry out a review as required by section 48’ and therefore that sections 44 and 46 of LASPO cannot be brought into force in relation to mesothelioma claims. It is now for the Lord Chancellor to ‘carry out a proper review’.
‘An opportunity to take a new approach’ – reaction to the judgment
Responding to the judgment, Tony Whitston called on the government to ‘see this judgment as an opportunity to take a new approach based on justice for victims of big financial institutions. The old plans were rooted in a culture of secret deals with insurers and flawed consultations which excluded the victims of asbestos. Now is the time for a change’.
Mr Whitston’s solicitor, Richard Stein of Leigh Day, said the judgment sent ‘a clear message to the government that it has to conform with the laws of the land and cannot ride roughshod over the interests of mesothelioma sufferers and their families to benefit the insurance industry’.
Adrian Budgen, head of Asbestos-Related Disease Litigation at Irwin Mitchell, who represents victims of mesothelioma across the country, welcomed the judgment and said it is important that any further review ‘only takes place after sufficient time has elapsed for the LASPO changes in non-mesothelioma cases to be properly assessed’.
‘No reasonable Lord Chancellor’
This case marks the latest in a series of damaging defeats in the High Court for the Lord Chancellor, following the successful judicial reviews of exceptional funding guidance, the residence test and the criminal legal aid consultation. It is difficult to escape the conclusion that Chris Grayling, far from respecting his responsibility to uphold the rule of law, is incapable of acting in accordance with it.
In this case, Mr Justice Davis was forthright in his criticism: ‘No reasonable Lord Chancellor faced with the duty imposed on him by section 48 of the Act would have considered that the exercise in fact carried out fulfilled that duty.’ The judiciary have now determined in several cases that Mr Grayling has not conducted himself as a reasonable Lord Chancellor.
In fact it is possible that there may be even further bad news for Mr Grayling and the government in the near future, with challenges to judicial review reforms and the domestic violence gateway for legal aid currently progressing through the courts.
The first non-lawyer to hold the office of Lord Chancellor in over 400 years has become a serial loser in the Administrative Court, found to have acted unlawfully in reducing access to justice time and again. Many charities, campaigners, lawyers and victims of Mr Grayling’s reforms will hope that his losing streak continues.