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78 Van Oppen v. Clerk to the Bedford Charity Trustees [1990] 1 WLR 235.
79 Reid v. Rush & Tompkins Group Plc [1990] 1 WLR 212.
80 Lewis, ˜Insurance and the Tort System™, 103“5. One US survey found that in 68% of the serious
cases in which no tort compensation was received, the reason was that there was no party at fault,
or that fault could not be proved, or that the claimant was guilty of contributory negligence
(which at the time was a complete bar to recovery in many US jurisdictions): Conard, Automobile
Accident Costs and Payments table 6.2, 210. The Harris 1984 Survey found that problems in obtain-
ing evidence and attribution of the injury to the claimant™s own fault were the two most frequently
cited reasons for abandoning claims (table 3.12), and the second and fourth most frequently cited
reasons (respectively) for not claiming at all (table 2.12).
81 See Morris v. Ford Motor Co. [1973] QB 792, 798 per Lord Denning MR.
252 Chapter 9

up resources which could be used for other, and perhaps more pressing, purposes.
Society™s resources are not unlimited, and money used for one purpose is unavail-
able for other purposes. Secondly, it has occasionally been argued that very high
damages awards might result in the failure of insurance companies.82 This, how-
ever, is a weak argument: properly regulated insurance companies should not go
bankrupt because damage awards are high. Premiums are ¬xed partly by reference
to the level of awards made by the courts; if awards go up, then premiums must go
up too. Unless awards are suddenly doubled overnight without warning, no insur-
ance company should be in trouble merely as a result of the high level of awards.
When insurance companies get into ¬nancial di¬culties, it is usually a result of a
sudden and unpredicted increase in the numbers of claims, or of bad management,
or of excessive competition in the insurance market leading to the setting of
premiums at unrealistically low levels.
Thirdly, it is sometimes argued that if liability insurance premiums rise too high
as a result of wide liability rules or generous damages awards, manufacturers of
goods and providers of services might not be able easily to a¬ord them, and might
go out of business, thus making their goods and services unavailable to consumers.
There are several problems with such arguments. First, while it is true, for example,
that there were large increases in the liability insurance premiums paid by many
professional groups, such as doctors and lawyers, in the 1980s, it seems that these
were the result of the dynamics of the insurance market rather than of changes in
the rules governing tort liability or the assessment of tort damages.83 Secondly,
while it is often alleged, for example, that rising insurance costs and increased risk
of being sued has a¬ected recruitment into and retirement from high-risk medical
specialties such as obstetrics, there is inadequate evidence of such a causal rela-
tionship.84 Thirdly, insurance premiums form a very small part of the costs of most
businesses, and injury costs would have to reach astronomical proportions before
premium rates caused serious ¬nancial trouble to most businesses. Fourthly, there
is an argument for saying, at least in some contexts, that if an industry cannot a¬ord
to pay adequate compensation for injuries it in¬‚icts, it should go out of business.
This last argument has to be treated with some care. In one case Lord Denning
took the view that no damages for future loss of income should be awarded to acci-
dent victims who are reduced to a state of permanent unconsciousness and have no
dependants.85 The defendant in the case was an NHS hospital. Obviously, the
resources available to NHS trusts are limited, and the more they have to spend on
meeting damages awards, the less there is available for their core functions. For


82 Fletcher v. Autocar Ltd [1968] 2 QB 322, 335 per Lord Denning MR.
83 P. Cane, ˜Liability Rules and the Cost of Professional Indemnity Insurance™ (1989) 14 Geneva
Papers on Risk and Insurance 347; R. Dingwall, P. Fenn and L. Quam, Medical Negligence: A Review
and Bibliography (Oxford, 1991), 13“18 (on the position in the USA). See also J.G. Fleming, ˜The
Insurance Crisis™ (1990) 24 U. of British Columbia LR 1.
84 Dingwall, Fenn and Quam, Medical Negligence, 51“5.
85 Lim Poh Choo v. Camden AHA [1971] 2 QB 691.
Tortfeasors and insurers 253

example, a ward may have to be closed to ¬nance a judgment.86 It does not follow
that victims of medical mishaps should not be awarded tort compensation, but the
case does reinforce the point that when resources are limited, tort compensation
may only be payable at the cost of some other desirable end. This general insight,
as we said earlier, is valid whoever bears the immediate cost of the tort award.
However, Lord Denning was alone in the view he took, and the House of Lords
rea¬rmed the decision of the majority awarding compensation for future loss of
income, e¬ectively on the ground that since income loss had been su¬ered, it
should be compensated for.87

9.8.2.3 Limited effect of practice of insurance
Despite the in¬‚uence of widespread liability insurance on the common law of torts,
it must be said that there has been no really deep-seated change such as might have
been expected if judges or law reformers had wished to rebuild the law on the foun-
dations of the liability insurance system. Had it been openly acknowledged that tort
damages are usually paid by liability insurers, that this system has come to stay and
that it is a good system on which to base a system of compensation for personal
injuries, one might have expected the basic criterion of liability for personal
injuries to change from fault to something like ability to insure cheaply and easily.
Such a shift would probably lead to the imposition of much stricter liability; and to
the extension of vicarious liability so that, for example, the owner of a car could be
held liable for the negligence of a passenger in opening a car door in the path of an
incoming cyclist;88 so that parents could be held liable for torts of their children;
and so that the organizer of a sporting events could be held liable for injuries caused
by participants in the event. Under the present law the car owner, the parent or the
sports organizer can only be held liable if they were personally at fault in some way;
but each is in a good position to insure against liability.
There are many areas of law and procedure in which the realities of insurance
and the tort system are ignored. First, and most obviously, the claimant must still
¬nd and, if necessary, sue a defendant who is legally liable even in cases in which
the case will be handled throughout by an insurance company on the tortfeasor™s
behalf. Except in road accident cases, the claimant cannot claim directly against the
insurer. If the claim cannot be settled without the commencement of court pro-
ceedings, a claim form must be served on the defendant or on a party authorized
by the defendant to accept service. If this cannot be done, and the court does not
waive the requirement for service,89 the claim may not proceed.


86 Dingwall, Fenn and Quam, Medical Negligence, 55“6.
87 [1980] AC 174.
88 The obligation to insure under the Road Tra¬c Act does not extend to a passenger in a car but
not using it: Brown v. Roberts [1965] 1 QB 1; comprehensive motor policies usually cover such
accidents, but the insurer has no obligation to indemnify a passenger who is not a party to the
policy.
89 A.A.S. Zuckerman, Civil Procedure (London, 2003), 4.51“2.
254 Chapter 9

Until quite recently, great di¬culty could arise where the defendant was a
company that had become defunct and had been removed from the Companies
Register before the action was commenced.90 If the action was commenced within
2 years of the company™s removal from the Register, an application could be made
to have the company restored to the Register for the purpose of being sued. But after
that, any action would fail for lack of a defendant, even if the company™s insurer was
still in existence.91 Fortunately, however, there is now no time limit on making an
application for revival of a company for the purposes of suing it for personal
injuries or under the Fatal Accidents Act 1976.92
A problem may arise where one spouse is injured in a road accident due to
the negligence of the other spouse, who is killed in the same accident. If the
surviving spouse wishes to claim damages against the insurance company, the
nominal defendant must be the representative (that is, the executor or adminis-
trator) of the other™s estate. This will often be the surviving spouse; but serious
legal di¬culties would arise if the surviving spouse were both claimant and
nominal defendant, and it is therefore necessary to obtain a special grant of rep-
resentation in such circumstances by which a third party is appointed adminis-
trator for the sole purpose of being defendant in the proceedings which the
spouse wishes to bring.93
Another kind of di¬culty arising from unwillingness to recognize the e¬ect of
liability insurance is to be found in the decision of Lister v. Romford Ice and Cold
Storage.94 In this case the House of Lords decided that an employee who negligently
injures another employee in the course of the former™s employment, and who
thereby renders the employer vicariously liable to compensate the injured employee,
is personally liable to indemnify the employer against this liability. The employee™s
liability arises from the fact that the employee has been guilty of a breach of con-
tract in negligently injuring the other employee. On the face of it the decision seems
sensible; but when it is appreciated that the employer was insured against the liabil-
ity, that the damages were paid by the insurance company, and that the proceedings
in the name of the employer and against the negligent employee were e¬ectively
brought by and for the bene¬t of the insurance company, the whole process begins
to look grotesque. But “ and this is typical of the way the English legal system tries
to come to terms with liability insurance “ the decision has proved of little practical
importance, because insurers have generally agreed that they will not take proceed-
ings of this nature without the consent of the employer.95 And in a case not falling

90 A particularly farcical example was Re Harvest Lane Motor Bodies [1969] 1 ch. 457.
91 Bradley v. Eagle Star Insurance Co. Ltd [1989] AC 957.
92 Companies Act 1989, s. 141. Of course, revival will be allowed only if the ordinary limitation
period for the action has not expired. The Law Commission has proposed that in such a situation,
the claimant should be able to sue the insurer alone without having to apply for revival of the
company: Law Com. No. 272, Third Parties “ Rights Against Insurers (2001).
93 Re Newsham [1966] 3 All ER 681.
94 [1957] AC 555.
95 See Atiyah, Vicarious Liability in the Law of Torts, 426“7.
Tortfeasors and insurers 255

within the terms of this agreement, the Court of Appeal has come very close to refus-
ing to follow the Lister case.96
Finally, two cases which illustrate strange e¬ects of the law™s refusal to pay atten-
tion to liability insurance. First, Chaplin v. Boys:97 the claimant was injured in a
road accident in Malta; Maltese law did not recognize claims for pain and su¬er-
ing, and the claim was brought in England. The question was whether damages
could be awarded for pain and su¬ering according to English law, and the House
of Lords ultimately held that they could. Nowhere in the lengthy judgments was
the question of insurance raised; but perhaps the strongest argument against
allowing such a claim is that in all probability the defendant™s third-party insur-
ance was taken out in Malta, and the premium ¬xed according to Maltese law. It
seems di¬cult to justify a decision that can result in an insurance company being
held liable to pay damages much higher than those on the basis of which the
premium is ¬xed.
Secondly, consider the case of Hunt v. Severs:98 the claimant was very seriously
injured in a motorcycle accident caused by the negligence of her partner, the
defendant (whom she later married). The claimant needed continuing care, and the
defendant was involved in providing it. The question was whether the claimant was
entitled to damages representing the value of the defendant™s services (6.2.3). The
House of Lords held that she was not, on the ground that if damages had been
awarded, the defendant would have paid twice over: once by providing the services,
and a second time by paying damages representing their value. This argument
ignores the fact that the damages would not have been paid by the defendant but
by his insurer; and, more importantly, that by denying damages the court was in
fact depriving both claimant and defendant of a certain amount of ¬nancial
support. It might also be argued that since, as Lord Bridge said, the purpose of
awarding damages for gratuitous care is to compensate the carer,99 the odd e¬ect of
making an award in respect of services rendered by the defendant would be that the
tortfeasor would receive damages in respect of the tort.100 Perhaps the strongest
pragmatic reason to allow recovery is so as not to discourage provision of care by
family members in preference to professional carers where this is felt to be more
appropriate.101


96 Morris v. Ford Motor Co. Ltd [1973] 1 QB 792.
97 [1971] AC 356.
98 [1994] 2 AC 350. See also Hayden v. Hayden [1992] 1 WLR 986. The High Court of Australia has
decided otherwise: Kars v. Kars (1996) 187 CLR 354.
99 The House of Lords also held that damages representing the value of gratuitous services ren-
dered to the claimant are held on trust by the claimant and must be paid over to the carer.
100 But note that one e¬ect of the Law Reform (Husband and Wife) Act 1962, which reversed the
rule that one spouse could not be held liable in tort to the other, was to enable spouse-tortfeasors
to bene¬t indirectly from damages recovered by the claimant spouse. Such indirect bene¬t
will accrue in any case where claimant and defendant are part of the same domestic economic
unit.
101 The social security system also recognizes the importance of providing support for family
members who care for disabled relatives: 12.4.3.2.
256 Chapter 9

9.9 The Motor Insurers™ Bureau
The Motor Insurers™ Bureau (MIB) was set up by the insurance industry in 1946
under pressure from the then Ministry of Transport.102 It is a limited liability
company the members of which are insurance companies engaged in road tra¬c
insurance in the UK. It was established to provide redress, through a Guarantee
Fund, for people injured in road accidents by the negligence of uninsured103 and
untraced (˜hit and run™) defendants.104 All authorized insurers are required to
become members of the Bureau, and the Guarantee Fund is ¬nanced by levies on
the members of the MIB. Ultimately, the cost of the MIB™s activities is borne by
insured motorists generally. In 2004, the MIB received more than 63,500 new
claims, and settled more than 82,000 claims, paying out around £275.5 million in
compensation.
Most of the obligations of the MIB are contractual in origin, not statutory.105
There are two agreements between the MIB and the government: the Uninsured
Drivers Agreement and the Untraced Drivers Agreement. The former requires the
MIB to meet unsatis¬ed judgments, in respect of death, injury and property
damage,106 against identi¬ed motorists who should have been, but were not,
insured under the Road Tra¬c Act 1988. In this type of case, the MIB acts like an
ordinary insurance company. Certain conditions must be ful¬lled by the clai-
mant,107 including that of informing the MIB of the proceedings in question within
14 days of their commencement. In practice, the MIB does not normally require
the case to be fought to judgment but negotiates in the normal way with the
claimant or the claimant™s solicitor over the claim. If no settlement is reached, the
MIB will defend the proceedings on behalf of, and by agreement with, the unin-
sured defendant. But note that a claim can be made to the MIB only after court pro-
ceedings have been commenced. By contrast, the vast majority of tort claims are
settled without this step having been taken. The MIB provides claimants with free
legal expenses insurance.
Under the Untraced Drivers Agreement, the MIB is required to consider appli-
cations for compensation from victims of hit-and-run accidents. Initially, the MIB


102 R. Merkin ed., Colinvaux™s Law of Insurance, 7th edn (London, 1997), 433“46.
103 It is estimated that at least 5% of motorists are uninsured. In 2001, there were almost 267,000
convictions for driving without insurance: Department for Transport, Uninsured Driving in the
United Kingdom (2004).
104 The MIB also operates the Motor Insurers™ Information Centre, which holds information about
vehicles and insurance in order to facilitate claims in relation to road accidents.
105 But see Motor Vehicles (Compulsory Insurance) (Information and Compensation Body)
Regulations 2003, regs. 11 and 13.
106 Compulsory insurance against third-party property damage was introduced in 1987 as a result
of an EU Directive. It must cover damage up to a value of ‚¬ 1 million (about £670,000).
Originally, liability for the ¬rst £175 (later £300) worth of damage did not have to be insured,
but this concession was removed by a later EU Directive.
107 These conditions have been described as ˜very onerous™ and ˜excessive™; and the MIB has a repu-
tation for enforcing them quite strictly: P. Barrie, Personal Injury Law: Liability, Compensation
and Procedure (Oxford, 2005), para. 8.02.
Tortfeasors and insurers 257

was very reluctant to deal with this type of case on the ground that in the absence
of a defendant, and therefore of the possibility of a trial, the MIB could not contest
the claimant™s allegations on the issue of negligence or the amount of the damages
claimed. Yet in one way, the argument for holding the MIB liable is stronger in this
type of case. In the case of uninsured driving, the MIB pays out despite the fact that
no premium has been paid in respect of the liability-attracting conduct; but if the
˜hit and run™ driver was insured with a member of the MIB, a premium would have
been paid. In response to considerable pressure over a long period from several
sources, the MIB ¬nally agreed in 1968 to accept claims where no defendant could
be traced.108 Originally, compensation for property damage was not recoverable in
this type of case, so as to guard against the risk of car owners deliberately damag-
ing their own cars and then claiming that the damage was done by a hit-and-run
driver. But since 2003, the MIB considers claims for property damage provided the
o¬ending vehicle has been identi¬ed (even though the driver remains untraced).
Under the current procedure109 the MIB will investigate claims in such cases and
will, if satis¬ed that the claimant was injured in circumstances in which insurance
is compulsory under the Road Tra¬c Act 1988, o¬er compensation assessed on
normal common law principles. If the claimant refuses to accept the MIB™s deci-
sion, they may appeal to an arbitrator appointed by the MIB from a panel of
Queen™s Counsel maintained for this purpose. The arbitrator™s fee is normally paid
by the MIB, but the arbitrator can order the claimant to reimburse the MIB for part
or all of the fee if the arbitrator thinks there were no reasonable grounds for the
appeal. Not everyone is satis¬ed with this procedure, and attempts to circumvent it
and bring proceedings in court have been made, though without success.110 There
is something to be said for the view that a claimant should be able to have their
claim tried in the ordinary courts like the victims of all other road accidents. On
the other hand, why should a claimant be entitled to a judicial hearing when (e.g.)
criminal injury claimants who pursue their claims against the Criminal Injuries
Compensation Authority have no right to a judicial hearing?
In cases where the MIB accepts liability even though no defendant can be
identi¬ed, the issue of compensating the claimant is, of course, adjudicated upon
without the defendant being a party to the proceedings, or present. The purpose of
the insurance in this situation is simply and unequivocally the compensation of
the claimant, and not the protection of an insured tortfeasor. Nevertheless, the
claimant must still show that the injuries were the result of a tort committed by
the unidenti¬ed driver.
The MIB is only liable where insurance is required under the Road Tra¬c Act
1988. For instance, the MIB is not liable in respect of personal injury arising from
an accident not caused on a public road;111 nor for injuries to a person driving an

108 Hansard, 5th series, HC Debs, vol. 770, col. 93.
109 Which resembles that under the criminal injuries compensation scheme: 12.4.4.
110 Persson v. London Country Buses [1974] 1 All ER 1251; Clarke v. Vedel [1979] RTR 26.
111 Randall v. MIB [1968] 1 WLR 1900.
258 Chapter 9

uninsured vehicle at the time of the accident, even if the driver was not the owner
and the injuries were attributable to the negligence of the owner (e.g. in failing to
warn the driver that the vehicle™s brakes were faulty) and even if the driver is driving
the vehicle at the request and for the bene¬t of the owner.112
The statutory obligation to insure a vehicle extends to passengers in the vehicle
as well as to other road users. However, there are provisions in the MIB Agreements
designed to deny compensation to a person who voluntarily113 travels in a vehicle
that they knew or ought to have known was stolen, uninsured or being used for a
criminal purpose. In order to make these provisions consistent with EU law, the
words ˜ought to have known™ have been held not to extend to mere negligence.114
Moreover, it is clear that the statutory obligation to insure extends to non-
passengers who are injured as a result of deliberately, as opposed to negligently,
wrongful use of a vehicle.115 In other words, the mere fact that the vehicle is being
used for a criminal purpose does not put that use outside the scope of the insur-
ance requirement. While it is clear that the driver of a car may owe no duty of care
to a passenger who, at the time of the accident, is involved with the driver in a crim-
inal activity,116 the provisions of the MIB Agreements go much further than this in
denying passengers compensation. Their purpose, it seems, is to restrict compen-
sation to ˜deserving™ passengers.117 To the extent that these provisions deny com-
pensation in circumstances in which tort law would impose liability that falls
within the requirement to insure, they may be of no e¬ect.
The MIB is, in many respects, an anomalous institution, which operates partly
within and partly outside the legal system. In the ¬rst place, most of the obliga-
tions of the MIB are not statutory but arise under a contract with the Secretary of
State, and this contract cannot be enforced by the accident victim because of the
doctrine of privity of contract; although in practice courts do award declarations
of entitlement to recover from the MIB. In theory, no doubt, if the MIB broke its
agreement, the government might be able to get an order of speci¬c performance
requiring the MIB to comply with the agreement.118 In practice, however, it is
almost unthinkable that the MIB would violate the agreement, and if it did so
there is not much doubt that the whole scheme “ or some alternative “ would be
put on to a statutory footing. The result is that the MIB simply does not take the


112 Cooper v. MIB [1985] QB 575.
113 E.g. Pickett v. Motor Insurers™ Bureau [2004] 1 WLR 2450. Contrary to what Chadwick LJ said in
this case, the issue is not whether the passenger voluntarily accepted the risk of being injured,
because there is a provision in the Road Tra¬c Act 1988 (s. 149(3)) which prevents reliance on
the defence of assumption of risk by a negligent driver against the passenger.
114 White v. MIB [2001] 1 WLR 481. There are analogous but narrower provisions in the Road
Tra¬c Act 1988, s. 151(4).
115 Gardner v. Moore [1984] AC 548.
116 Ashton v. Turner [1981] QB 137 (the claimant and the defendant had committed a burglary and
the accident occurred during their getaway); Pitts v. Hunt [1991] 2 QB 24.
117 In much the same way that the Criminal Injuries Compensation Scheme is designed to help
˜deserving™ victims of crime: 12.4.3.2.
118 Beswick v. Beswick [1968] AC 58; Gurtner v. Circuit [1968] 2 QB 587.
Tortfeasors and insurers 259

privity of contract point and behaves as though it were legally liable to accident
victims.
Like liability insurance itself, the existence of the MIB may cast a shadow over
proceedings in court, but is rarely taken account of in the legal process except where
the MIB is directly involved. For instance, the o¬ence of driving a motor vehicle
while uninsured is still treated by the courts in precisely the same way as when it
was ¬rst created in 1930. Yet the existence of the MIB has changed the character of
the o¬ence altogether; instead of being an o¬ence which involves the risk of depriv-
ing accident victims of compensation, it is now an o¬ence more in the nature of tax
evasion. Similarly, in Cor¬eld v. Groves119 it was held that the action under Monk v.
Warbey for permitting an uninsured person to drive in breach of the Road Tra¬c
Act was una¬ected by the fact that the MIB would meet any judgment against the
uninsured driver.
On the other hand, courts do sometimes take a more realistic approach to the
existence of the MIB. In Gurtner v. Circuit120 the MIB applied to be made a party to
an action brought by a road accident victim. The claimant had been injured in an
accident by a motorist who was insured, but the insurance company was never
discovered and the driver had gone abroad and could not be traced. In such cir-
cumstances, it is possible for the claimant to obtain permission to dispense with
service of the claim form and then to obtain judgment by default against the
defendant for damages to be assessed. The di¬culty is that, unless the MIB is then
made a party to the case, there is nobody in a position to appear and contest the
claimant™s claim when the damages come to be assessed. The Court of Appeal
decided in these circumstances that the MIB should be made party to the case. The
court made an attempt to bring the MIB within the law, as it were, by stressing that
the MIB did have a legal obligation “ albeit an obligation only enforceable by the
government “ to meet any judgment awarded to the claimant, and accordingly that
the MIB had su¬cient ˜interest™ in the case to be made party thereto. On the other
hand, in Albert v. MIB121 Lord Dilhorne protested at the anomalous situation in
which the courts, who are the judges of legal rights and duties, are required to give
judgment against a person who is not liable in law.
Finally, it should be noted that there is no equivalent to the MIB to accept lia-
bility in cases where an employer fails to take out compulsory insurance under the
Employers™ Liability (Compulsory Insurance) Act 1969.

119 [1950] 1 All ER 488.
120 [1968] 2 QB 587.
121 [1972] AC 301.
10

Trials and settlements




Settlement is so pervasive that is has been argued that in civil litigation those cases that
result in contested hearings are to be considered as deviant . . . The conduct of nego-
tiations and the path to settlement are largely dictated by court procedures. There is no
separate settlement procedure. Settlement is achieved by preparing for trial “ going
through the ritualistic procedures determined appropriate for adversarial contest in
open court. Parties who want peace and want it on good terms have no alternative . . .
but to prepare for war.1


10.1 The importance of settlements
The vast majority of tort claims are settled by negotiation and agreement between the
claimant and the defendant™s liability insurer, or, occasionally, the defendant person-
ally, usually through the agency of solicitors on both sides.2 This process has been
memorably called ˜litigotiation™.3 The Pearson Commission estimated from its
various surveys that 86% of cases are settled without the commencement of legal pro-
ceedings (i.e. a claim form); 11% are settled after the commencement of proceedings
but before the case is set down for trial; 2% are settled after setting down; and 1% are
settled at the door of the court or during the trial, or are actually disposed of by trial.4
Many other surveys and studies con¬rm the general pattern of these ¬gures.5
On the basis of these facts, the tort system could be regarded as an administra-
tive process handled by insurance adjustors and solicitors incorporating a ˜right of
appeal™ to a court of law. Looked at from this point of view the system may be said
to resemble the social security system more closely than might be thought at ¬rst
sight. This latter system is run by an administrative process in which there is a right

1 H. Genn, ˜Access to Just Settlements: The Case of Medical Negligence™ in A.A.S. Zuckerman and
R. Cranston eds., Reform of Civil Procedure: Essays on ˜Access to Justice™ (Oxford, 1995), 406 (foot-
note omitted).
2 D.R. Harris, D. Campbell and R. Halson, Remedies in Contract and Tort, 2nd edn (London, 2002),
ch. 24.
3 M. Galanter, ˜Worlds of Deals: Using Negotiation to Teach About Legal Process™ (1984) 34 Journal
of Legal Education 268, 268
4 Pearson Report, vol. 2, table 124.
5 Winn Committee Report, paras. 116“18, 123 and Appendix 8; T.G. Ison, The Forensic Lottery
(London, 1967), Appendix C, table 11; Harris 1984 Survey, 112.


260
Trials and settlements 261

of appeal to tribunals established under statute. But there are important di¬erences
apart from the obvious one that the ˜appellate™ tribunals for the tort system are the
ordinary courts, while for the social security system they are statutory tribunals. In
particular, social security administration is in the hands of the State and is handled
by civil servants; on the other hand, the tort administrative machine is privately run.
One consequence of this is that the object of the administrators who run the social
security system is (or, at any rate, should be) to see that every claimant gets what they
are legally entitled to receive; and the purpose of the appeal procedure is to put right
mistakes. In the tort system, by contrast, the administrators are not concerned to see
that the claimant gets what is legally due: insurers are primarily concerned to settle
cases for the lowest ¬gure they can induce the claimant to accept.
In this light, the right of ˜appeal™ to the courts should be seen not so much as a
mechanism to put right the mistakes of the adjudicators, but as a weapon to
induce the administrators to behave reasonably. This is why such a large propor-
tion of cases in which proceedings are commenced, or even in which preparations
are made for trial, are never tried; and this is why a former Chief Justice of Ontario
once said that ˜the judicial process is . . . used for other than judicial purposes . . .
as a threat to bring about an adjustment rather than as a means of adjudication™.6


10.2 Obtaining legal assistance and ¬nancing tort claims
There is nothing to prevent an individual claimant attempting to negotiate a set-
tlement personally, and a certain number of claimants do so.7 In this event the
negotiations will probably be conducted by experts on one side and a complete
novice on the other; and less reputable insurance companies may take advantage of
an unrepresented claimant.8 In such cases, any settlement reached may be seriously
inadequate, and it has been suggested that there should be a power to review such
settlements within, say, 12 months.9 Settlements made on behalf of children (even
by quali¬ed lawyers) require the approval of the court in any event, and very few
people have the necessary skill or expertise to bring a case before the court for
approval without legal advice; it is also unlikely that such approval would be given,
unless the court was satis¬ed that the amount had been regarded as satisfactory by
an experienced solicitor or barrister.
How might a person who wishes to make a tort claim go about ¬nding suitable
assistance to do so? A trade union member might in the ¬rst instance approach his
or her union.10 Large numbers of claims for damages arising out of industrial

6 J.C. Mc Ruer, ˜The Motor Car and the Law™ in A. Linden ed., Studies in Canadian Tort Law
(Toronto, 1968), 312.
7 The Harris 1984 Survey found that 8% of personal injury claimants recovered damages without
the help of a lawyer: 81“2.
8 JUSTICE, Report on the Trial of Motor Accident Cases (London, 1966), 2; Harris 1984 Survey, 82.
9 JUSTICE, ibid., 3.
10 Assistance in making and defending claims is also o¬ered by the motoring organizations (the AA
and the RAC) and, sometimes, by employers as a fringe bene¬t for senior employees.
262 Chapter 10

accidents are handled by trade unions. Many of the larger unions do not con¬ne
their assistance to workplace injury and ill-health. Some assist with road accidents
occurring while travelling to and from work; others assist with all road accidents;
some decide whether to assist in each case individually. There are also variations in
the practice of unions as regards the securing of legal assistance. Some unions
simply pass the case on to solicitors; others handle the case in the ¬rst instance
themselves, but pass it on to solicitors if litigation becomes necessary, or if the case
raises particular di¬culty. Some make preliminary investigations into the facts, and
send the case on to solicitors only if they think there is any prospect of success in a
common law claim. In all cases, the expense is borne by the union.
For people who have no union to turn to, there are various options apart from
approaching a solicitor directly. Possible ¬rst points of contact include a Citizens
Advice Bureau or a legal referral service, such as Accident Line, which is endorsed
by the Law Society (the solicitors™ professional association). Of major signi¬cance
are claims management companies (CMCs). The CMC sector of the legal services
industry is largely a product of abolition of legal aid for most personal injury claims
in 2000. It has recently been estimated that there are some 400 CMCs handling
about 500,000 claims (including personal-injury claims) a year.11 CMCs are legal
services brokers who often operate on a no-win, no-fee basis to arrange for the
claimant the various services “ of solicitors, medical experts, litigation insurers and
so on “ needed to achieve settlement of the claim. Yet another possible source of
assistance in making a claim is a claims assessor (CA). Unlike CMCs, CAs conduct
negotiations on behalf of claimants. They typically operate on a no-win, no-fee
contingency basis “ i.e. on the basis that if the claim succeeds they will be entitled
to a percentage of the amount recovered.12 That percentage is not regulated by law.
Because they are not legally quali¬ed, CAs are unable to issue legal proceedings on
behalf of a claimant or to represent the claimant in such proceedings. We will
discuss later the likely impact of this on the dynamics and course of settlement
negotiations.
Despite the existence of these various alternative avenues of assistance in making
claims, it is probably still the case that most personal-injury claims, and especially
the largest and most serious and complex, end up in the hands of quali¬ed lawyers.
The ¬rst issue to be decided in relation to any claim is whether it is worth pur-

11 Compensation Bill Final Regulatory Impact Assessment (2005), para. 2.9. See generally Depart-
ment for Constitutional A¬airs, The Report of the Lord Chancellor™s Committee to Investigate the
Activities of Non-Legally Quali¬ed Claims Assessors and Employment Advisers (2000). ˜CMC™ is an
umbrella term covering various types of operator: Boleat Consulting, The Claims Standards
Council (December 2005), paras. 1.8“1.24. Marketing practices and other activities of CMCs have
generated considerable publicity and unease. Two of the leading CMCs collapsed, one in 2002 and
the other in 2003. In November 2005 the Compensation Bill was introduced into Parliament to
enable the creation of a regime to regulate providers of claims-management services (solicitors,
of course, are already quite heavily regulated).
12 It is illegal for quali¬ed lawyers to operate on a contingent as opposed to a conditional fee basis.
But expert witnesses and forensic accountants, for instance, may do so: R (Factortame) v. Secretary
of State for Transport, Local government and the Regions (No. 8) [2003] QB 381.
Trials and settlements 263

suing at all. Most personal injury claims are funded on a no-win, no-fee basis. In
practice, this means that if the solicitor thinks that the claim is hopeless, the client
will probably pay nothing for an initial assessment of the claimant™s case. Solicitors
who belong to the Accident Line referral scheme o¬er a free exploratory consulta-
tion. Legal aid may be available for a medical negligence claim, but only if the
claimant meets the statutory means test. In that case, the cost of assessing the
strength of a medical negligence claim may be met in the form of Investigative
Help. Investigative Help may be initially refused if the Legal Services Commission
(LSC) concludes that it would be more appropriate for the applicant ¬rst to use the
NHS Complaints Scheme. Since the Complaints Scheme does not handle negli-
gence claims, Investigative Help is likely to be refused on this ground only in rela-
tively minor cases where it is unclear what went wrong, or if the applicant is not
seeking compensation, but only wants an explanation or an apology, for instance.
If the solicitor decides that the client has a claim worth pursuing, the next issue
is how to fund the claim. In practice, there are three main possibilities.13 The client
may have a legal expenses insurance policy (also called ˜before-the-event™ (BTE)
insurance) that covers the claim.14 Secondly, if the claim is one for medical negli-
gence, the claimant may (depending on their income and capital wealth) qualify for
legal aid (technically, ˜community legal service funding™). But only solicitors who
have a contract with the LSC can provide publicly funded legal services; and in prac-
tice, this means ¬rms that specialize in medical negligence work. Thirdly, the solic-
itor may handle the claim on a no-win, no-fee basis, and in that case will probably
make a conditional fee agreement (CFA) with the client.15 The basic rules about the
costs of litigation is that the loser must pay the winner™s legal costs as well as their
own. Typically a CFA will stipulate that if the claim fails, the client will pay nothing
to their lawyer except, perhaps, some out-of-pocket expenses (˜disbursements™); but
in the event of success, that the solicitor will be entitled to remuneration calculated
on a fee-for-service (typically hourly) basis, plus an additional amount “ called an
˜uplift™ or ˜success fee™ “ calculated as a percentage of that remuneration. To cover


13 We can safely ignore the possibility that a personal-injury claimant will ¬nance the claim out of
their own pocket. This is possible, of course, but must be extremely rare. There is, generally, no
reason why a benefactor should not agree to ¬nance a claim out of charity or generosity, provided
their motivation is to help the claimant pursue what the funder perceives to be a genuine case. If
the claim fails, the funder will not be liable for the defendant™s costs (although the claimant will
be): Hamilton v. Al Fayed (No. 2) [2003] QB 1175.
14 Since about half of all tort claims arise out of road accidents, it is signi¬cant that BTE insurance
is commonly provided as a component of comprehensive motor insurance. It is also commonly
available as a component of household contents insurance policies. ˜Free-standing™ legal expenses
policies are available, but they are expensive, partly because free-standing BTE insurance su¬ers
from a serious problem of ˜adverse selection™, which means that many people who want to buy it
are people likely to make a claim on the policy in the near future because they take out the insur-
ance in anticipation of legal trouble. This problem can be ameliorated to some extent if the insur-
ance is sold to groups through a trade union, employer or trade association, rather than directly
to individuals. Like legal aid, legal expenses insurance may cover the cost of defending claims.
15 Unions which handle a large number of claims on behalf of members may make a ˜global CFA™
with a lawyer under the Collective Conditional Fee Regulations 2000.
264 Chapter 10

the risk of having to pay the defendant™s costs in the event of failure of the claim,
the claimant may purchase ˜after-the-event™ (ATE) insurance. If the claim actually
succeeds, in addition to compensation, the claimant will recover from the defen-
dant(™s insurer) not only their solicitor™s remuneration, but also disbursements, the
success fee and the ATE insurance premium.16 In the event of failure, the ATE
insurer pays the defendant™s costs, and the ATE insurance premium may be reim-
bursed or waived. Normally, a client with BTE cover should be referred to the BTE
insurer before being o¬ered a CFA with ATE insurance.17
As a means of funding personal injury claims, BTE insurance bears certain
similarities to public funding, in that the insurer, like the LSC, will decide whether
the claim is worth pursuing (according to criteria laid down in the BTE in-
surance policy or the Funding Code, respectively), and will exercise a certain
degree of control over the conduct of the proceedings. The major di¬erence
between BTE insurance and public funding is that if the claim succeeds, the recip-
ient of legal aid, but not the BTE policy holder, may have to reimburse the funder:
the LSC has what is called a ˜statutory charge™ over the compensation awarded to
the claimant. If the defendant(™s insurer) pays all the claimant™s solicitor™s fees and
disbursements in addition to compensation, the claimant will be in e¬ectively the
same position as a BTE insurance policy holder. Otherwise, the lawyer must
deduct from the compensation such of the costs as are not paid by the defendant,
and repay these to the LSC. A legally aided claimant may also be required to make
a contribution to the cost of the case while it is in progress; such contribution is
set o¬ against the statutory charge. In this respect, the recipient of legal aid is also
worse o¬ than the claimant who enters a CFA with their lawyer and takes out ATE
insurance. In that case, if the claim succeeds, the defendant(™s insurer) will pay all
the claimant™s legal costs, including the lawyer™s success fee and the ATE insurance
premium.
The option of funding claims by CFAs was ¬rst introduced in 1995. Before
that, lawyers were allowed to handle cases on a no-win, no-fee ˜speculative™ basis,
but they were not allowed to charge a success fee. The main reason for introduc-
ing conditional fees was to improve ˜access to justice™ “ i.e. to facilitate the funding
of claims made by the increasing proportion of the population who did not
satisfy the means test for legal aid eligibility, but who were not a¬„uent enough
to fund the claim out of their own pockets and were without BTE insurance.
Once CFAs were up and running, legal aid was withdrawn for most personal
injury claims18 in 2000, chie¬‚y to reduce legal aid expenditure19 and to transfer
the cost of funding such claims from the taxpayer to liability insurance premium

16 But claimed costs can be challenged in costs proceedings on the basis that they are unreasonable,
and in this way courts can regulate success fees and ATE insurance premiums.
17 Sarwar v. Alam [2002] 1 WLR 125.
18 Except medical negligence claims; certain other types of personal injury claim, such as those based
on allegations of sexual assault or child abuse, or serious wrongdoing by public o¬cials and
bodies; and complex multi-party cases of public importance.
19 Although only a relatively small proportion of the total was spent on personal injury claims.
Trials and settlements 265

payers.20 In fact, this move meant not only a transfer of the cost of funding
claims, but also an overall increase in cost resulting from the addition of success
fees and ATE insurance premiums to the costs bill.21
The market for ATE insurance really only started to develop in 2000 when the
premium, along with the success fee, was made recoverable from an unsuccessful
defendant. It seems that ATE insurance is available, at least at a reasonable cost, only
in relation to claims that have a signi¬cantly better than even chance of success. The
O¬ce of Fair Trading has said that a signi¬cant number of claims are made without
the bene¬t of ATE insurance. In that case, the lawyer bears the risk of having to pay
the defendant™s costs in case the claim fails and the client is unable to pay. In
theory, the new system of funding personal injury litigation should make it easier
for people who would not have been eligible for legal aid to make claims. However,
one quali¬cation should be made. Whether or not a claim will be publicly funded
depends partly on its chance of success, but also partly on its value and importance
to the claimant and to the public more generally. By contrast, the lawyer™s decision
whether or not to handle a case on a no-win, no-fee basis (with or without a CFA),
and an ATE insurer™s (or, for that matter, a BTE insurer™s) decision whether or not
to underwrite the claim, is likely to depend solely, or at least primarily, on its chance
of success. For the lawyer or private insurer, the decision whether to invest in a claim
is a commercial one based on their own ¬nancial interests. As a result, it may be
more di¬cult for a seriously injured claimant of modest means22 to ¬nd funding
for a relatively high-risk claim under the new regime than it was under the old.
Generally, the new regime is more likely to facilitate straightforward accident
claims than di¬cult and speculative illness and disease claims.23
How is the success fee calculated? By statute, the success fee cannot be more
than 100% of the ˜basic fee™.24 For road accident and work accident (but not illness)


20 The abolition of legal aid for most personal-injury negligence claims was a hotly contested policy.
On behalf of potential claimants it was said that the poorest in society, who would qualify for legal
aid, would not be able to a¬ord the up-front premium for ATE insurance. On behalf of potential
defendants, it was said that conditional fees, in conjunction with costs insurance and the liability
of losing defendants to pay the claimant™s lawyer™s success fee, would take too much of the risk out
of litigating and would put claimants in too strong a bargaining position, analogous to that
described under the former system as ˜legal aid blackmail™. It was also pointed out that CFAs could
not replace legal aid for defendants; although this was not a big issue in the personal-injury area,
where almost all claims are made against insured parties or parties who would not qualify for legal
aid.
21 Recent years have also witnessed growth in car-hire arrangements under which payment of the
hiring charges is deferred until damages are recovered. The House of Lords has held that the cost
of the credit thus extended (as opposed to the hire charges) is not recoverable as damages from a
tortfeasor: Dimond v. Lovell [2002] 1 AC 384.
22 A seriously injured person who could no longer work might well, for that very reason, have
quali¬ed for legal aid.
23 According to recent research, in around 80% of CFA cases (other than clinical negligence claims)
there is no (signi¬cant) dispute about liability; and in around 85% no (signi¬cant) dispute about
the causation: P. Fenn et al., The Funding of Personal Injury Litigation: Comparisons Over Time and
Across Jurisdictions (DCA Research Series 2/06, February 2006), para. 5.1.
24 Courts and Legal Services Act 1990, s. 58(4)(c).
266 Chapter 10

cases (except small claims)25 there are ¬xed success fees.26 If the claim is settled
after the trial has started or is concluded by judgment, the success fee is 100%. In
cases settled earlier than this the ¬xed success fee is much less “ 12.5% in motor
accident cases. These ¬gures no doubt re¬‚ect the fact that the success rate of road
and work accident claims is high, and that only the most di¬cult go to trial. For
other types of case, the level of success fees is not regulated. The concept of the
basic fee is itself a bit problematic, because lawyers™ fees are not tightly controlled,27
and there is not much price competition amongst solicitors. The success fee is, of
course, designed to compensate the lawyer for cases that fail, for which no remu-
neration is received. Because the overall success rate of personal injury claims is
high, the success fee charged in any particular case by a lawyer who handles a
signi¬cant number of personal injury claims should be relatively low, re¬‚ecting the
relatively low risk of failure of such claims as a class. But lawyers, especially those
who handle relatively few personal injury claims, might calculate the success fee
for any particular claim according to their estimate of the likely success of that
claim, especially if it is considered to have a less-than-average chance of success.
Because of the complexity of the economics and dynamics of CFAs, it may be quite
di¬cult for the average client to assess the reasonableness of the terms being
o¬ered by the lawyer under a CFA.
It can be seen, then, that the market in personal injury claims is characterized
by a diversity of service-providers and of funding arrangements. Competition
amongst providers has increased considerably in the past 10 years, and policy-
makers have become increasingly concerned about consumer protection in this
environment. There is a common view that for every tort claim made, another
two or three could be made. There is also a view (but little hard evidence) that
recent developments have not only made it easier to make a tort claim than it was
before the introduction of conditional fees and the abolition of legal aid for most
personal injury claims, but have also increased the amount of tort claiming.
Whether signi¬cant increases in tort claims are a good idea must be a matter for
personal opinion. But if we stand back and survey the scene in a wider perspec-
tive, we can at least say that government policy in the past decade has been to shift
¬nancial costs of disability from the public purse to private pockets. Measures
have been introduced not only to expand ˜access to justice™ for the disabled via the
tort system, but also to increase levels of tort compensation (e.g. reduction of the
discount rate: 6.2.1), and to reduce the amount spent on social security payments
and NHS services provided to tort victims (15.3). In the 1970s it seemed possible
that public policy might be nudged in the direction of placing less and less
reliance on the tort system to provide support for the disabled. At the beginning
of the twenty-¬rst century it seems clear not only that the tort system is here to

25 I.e. claims worth less than £1,000.
26 CPR Part 45.III and IV.
27 Except that costs are ¬xed for road accident claims where the agreed damages do not exceed
£10,000: CPR Part 45.II. There are also ¬xed costs for some trials under CPR Part 46.
Trials and settlements 267

stay, but that it will become an increasingly important part of society™s provision
for the disabled.
We have noted that the abolition of legal aid did not apply to medical
negligence claims. This is because such claims may be very complex and expen-
sive to prepare;28 and the chance of success may be di¬cult to calculate.29 Medical
negligence claims may, of course, be handled under a CFA without legal aid,
even if the claimant quali¬es for legal aid.30 But whereas the possibility of CFA
funding is normally taken into account in deciding whether to grant legal aid, it
is ignored in medical negligence cases, except multi-party (or ˜group™) actions.
Most multi-party actions are personal injury claims, arising, for instance, out of
major transport accidents, or from the adverse e¬ects of the use of drugs or other
products. Unless such an action relates to medical negligence it will not, as such,
qualify for legal aid. However, legal aid can be granted if a multi-party claim
raises signi¬cant issues of wider public interest “ and most such claims have the
potential to do so. It is likely that not all of the parties to a group claim will be
¬nancially eligible for legal aid. But so long as some of them are, the criterion for
funding is whether it is reasonable for the issues raised by the litigation to be
pursued with the support of public funding.31 However, the LSC can, and nor-
mally will, require a contribution to the cost of funding a multi-party action
not only from the parties who are ¬nancially eligible for legal aid but also from
those who are not.
The fact that some of the parties to a group action may be publicly funded and
others not may cause serious funding problems. In the Opren litigation,32 which
concerned the alleged side-e¬ects of a drug for the treatment of arthritis, about one-
third of the 1,500 or so claimants did not qualify for legal aid. A fully legally aided
claimant was chosen to launch a ˜lead action™, which was designed to decide issues
relevant to the settlement of a large number of the other claims. The judge in charge
of the proceedings decided that the costs of the lead action should be borne rateably
by all of the a¬ected claimants, even those who did not qualify for legal aid. The
Court of Appeal held that this order was within the judge™s jurisdiction.33 One result
of the order was that many of the claimants who did not qualify for legal aid could

28 According to the National Audit O¬ce, in 65% of medical negligence claims settled for £50,000
or less, costs exceed compensation: Handling Clinical Negligence Claims in England (2001),
Executive Summary, para. 14, paras. 2.20“21.
29 In 2003“4, almost 50% of legally aided medical-negligence claims went no further than initial
investigation. Of the balance, 64% were successful.
30 Although CFAs are relatively rare in medical negligence cases: Department of Health, Making
Amends: A Report by the Chief Medical O¬cer (2003), 71; Fenn et al., The Funding of Personal Injury
Litigation, para. 5.2. By contrast, about 90% of non-medical personal injury claims are funded by
CFAs: ibid., para. 5.1.
31 The LSC has power to waive eligibility limits, but this may not result in an increase in overall
funding.
32 See generally National Consumer Council, Group Actions: Learning from Opren (1988);
M. Mildred and R. Pannone in M.J. Powers and N.H. Harris eds., Medical Negligence, 2nd edn
(London, 1994), ch. 14.
33 Davies v. Eli Lilley & Co. [1987] 1 WLR 1136.
268 Chapter 10

not a¬ord to continue their actions. Another was to discourage even legally aided
claimants: in the majority of the Opren claims, the compensation payable was likely
to be so small that a very large proportion of the amount recovered would have been
repayable to the Legal Aid Board.34 The Opren claimants were, in the end, bailed out
by a private benefactor who agreed to pay their costs.35 This was, of course, before
the days of conditional fees; and now, it is possible that non-funded group members
may have BTE insurance, or may be able to make conditional fee arrangements.
Indeed, the LSC™s overall aim in multi-party actions is to achieve a mix of public and
private funding, the private funding being provided by CFAs with ATE insurance or
by some other insurance-based arrangement.
Because they are typically very costly36 and legally complex, and may be highly
speculative, multi-party claims are likely to be handled only by quali¬ed lawyers.
CMCs and CAs operate primarily in the road accident, and to a lesser extent in the
work accident, sectors of the personal injury claims market. In practice, therefore,
the only practical options for funding multi-party actions are legal aid or CFAs. But
it is only very large law ¬rms with the capacity to raise signi¬cant amounts of
capital and which specialize in such litigation that are likely to be willing to handle
multi-party claims,37 especially since ATE insurance may be di¬cult to obtain, and
very expensive if it is available. On the other hand, a feature of multi-party claims
that may make CFAs possible is that typically several or many ¬rms of lawyers are
involved, and they can share the cost of preparation among themselves.


10.3 The course of negotiations
Settlement negotiations lie at the heart of the tort system.38 How well such negoti-
ations are handled will obviously depend partly on the skill and experience of the


34 Legal Aid Act 1988, s. 16(6). Under the so-called ˜statutory charge™ over damages recovered, a suc-
cessful assisted party must repay to the Legal Aid Board any required contribution which remains
unpaid, plus any costs not recovered from the other party (see n. 21). If a legally aided litigant
loses, they may be ordered to pay an amount on account of costs to the Legal Aid Board (Legal
Aid Act 1988, s. 17). Orders for costs can be made against the Board itself only in narrowly de¬ned
circumstances (s. 13).
35 Only one of the Opren lead actions (in respect of 338 claims) was successful. In that case the defen-
dant was ordered to pay all the claimant™s costs and not just a rateable proportion: ˜Successful Lead
Action Plainti¬ Costs in Group Litigation™ (1993) 12 Civil Justice Q 4.
36 An extreme example of the cost of drug-related claims is the litigation surrounding the use of a
group of tranquilliser drugs called ˜benzodiazepines™. This was funded by legal aid in the 1990s,
and about £40 million was spent on preliminary research and development before legal aid was
withdrawn on the ground that the claims were unlikely to succeed.
37 For a negative assessment (prompted by withdrawal of public funding for a claim arising out of
use of the MMR vaccine) of the possible role of CFAs in any but the strongest multi-party claims
see M. Day and J. Kelleher, ˜Lessons from MMR and the Future of Group Litigation Funding™
[2005] JPIL 98.
38 For sociological studies of the settlement process see H.L. Ross, Settled Out of Court: The Social
Process of Insurance Claims Adjustment, 2nd edn (Chicago, 1980); H. Genn, Hard Bargaining
(Oxford, 1987). These studies need to be read with care because they relate to a system with very
di¬erent funding arrangements than are currently in place in Britain.
Trials and settlements 269

negotiator, who may be a solicitor, a claims assessor, some other representative of
the claimant or (exceptionally) the claimant personally. Most solicitors do not
handle many personal injury claims on behalf of claimants. On the other hand,
there are ¬rms that specialize in this type of work. They can join a Law Society
panel of personal-injury specialists; and only specialist ¬rms have contracts with
the LSC for legally aided personal-injury work. Larger specialist personal injury
¬rms usually play a leading role in handling group claims. There is an Association
of Personal Injury Lawyers (APIL), which is an interest group and lobbying orga-
nization.39 On the defendant™s side, personal injury claims are almost always dealt
with by a lawyer or an insurance company employee with a great deal of specialized
experience in handling such claims. There is a body called the Forum of Insurance
Lawyers (FOIL), a counterpart to APIL.
In an extremely in¬‚uential article published in 1974,40 US scholar Marc Galanter
distinguished between participants in legal processes on the basis of whether they
were ˜one-shotters™ or ˜repeat-players™. In terms of this distinction, the typical per-
sonal injury claimant is a one-shotter, while the typical defendant “ in the guise of
a liability insurer “ is a repeat-player. Galanter™s basic argument was that repeat-
player defendants have various (unfair) advantages over one-shotter claimants in
the litigation process. Galanter™s analysis has provided the conceptual framework
for academic studies of the tort settlement process over the past 30 years, which, in
their authors™ opinions anyway, have tended to con¬rm Galanter™s thesis. By con-
trast, those who argue that we now live in a ˜blame™ or ˜compensation™ culture main-
tain that developments over that period have turned the tables, and that the
advantage now lies with claimants to an extent that threatens economic prosperity
and the value of personal responsibility. Where the ˜truth™ lies is partly a matter of
perspective and interpretation; and the opposing sides of the debate predictably
argue for very di¬erent ˜reforms™ of the tort system. What follows is an attempt to
give an account of the settlement process on the basis of what we know about its
operation.

10.3.1 Individual claims
In the typical case involving a single personal injury claimant and a single defen-
dant, the ¬rst step is for the ˜claimant™ (meaning, in the normal case, the claimant™s
representative) to write to the potential defendant or the defendant™s insurers
asking whether the defendant admits liability. Few, if any, insurers would admit lia-
bility at this stage, whatever the circumstances. The most common practice would
be for the insurer to write a standard letter denying liability, but asking on what
ground it is suggested that the defendant was negligent.41 At this stage, if not before,
the claimant™s representative will probably start collecting evidence in the form of

39 Barristers have their own Personal Injury Bar Association.
40 ˜Why the “Haves” Come Out Ahead: Speculations on the Limits of Legal Change™ (1974) 9 Law
and Society Review 95.
41 JUSTICE, Report on the Trial of Motor Accident Cases, 5.
270 Chapter 10

witness statements, photographs, medical reports and so on. Litigation procedures
(embodied in the CPR supplemented by ˜Pre-Action Protocols™) have recently been
changed to encourage as many cases as possible to be settled without the com-
mencement of court proceedings. This puts a premium on early collection of evi-
dence to establish the strength and value of the claim. It is widely believed that the
consequent need to collect evidence earlier than used to be the case has increased
the average cost of settling personal injury claims by a process of what is called
˜front-loading™. Under the old regime, parties were likely not to start collecting evi-
dence assiduously until it was clear that no satisfactory settlement was likely to be
reached. Now, evidence collection is seen as part of the process of achieving early
settlement rather than as the ¬rst step in preparation for trial in case settlement
negotiations break down.
An important aspect of the tactics of settlement is the selective disclosure to the
other side of evidence that indicates the strength of the discloser™s case. Parties are
not entirely free to decide what to disclose and when. Pre-action protocols impose
disclosure obligations, and these may be backed up by court orders for pre-action
disclosure. In complying with disclosure obligations, each party will do their best to
maximize the chance of a settlement favourable to their interests by discovering as
much as possible about the other™s case while revealing as little as possible about
their own.42 Information is power, and e¬ective negotiating involves a certain
amount of blu¬ and counter-blu¬. Each party will want some evidence up its sleeve,
which can be used as a bargaining chip at a later stage if negotiations drag on.43
Sometimes, the course of negotiations, especially in road accident cases, may be
a¬ected by criminal proceedings taken in a magistrate™s court; or in fatal accident
cases, by a coroner™s inquest.44 Although in legal theory the outcome of a civil case
is largely una¬ected by what may have been decided by magistrates or a coroner, in
practice, such proceedings may be of the greatest importance. It is not merely the
result of the proceedings that matters, but the evidence which emerges, the wit-
nesses who appear and the way in which they give their evidence. In a simple road
accident case, for instance, in which the only question is which of two motorists was
responsible for a collision, the prosecution of one of the motorists for careless or
dangerous driving may provide something like a dress rehearsal of a civil action.
Naturally, therefore, insurers usually wish to represent a defendant who is prose-
cuted for an o¬ence as a result of the accident from which the claim arises; and
insurance policies usually provide that the insurer will secure proper legal repre-
sentation for the conduct of the defence in any such proceedings.
In some cases the defendant will accept full or partial liability and any dispute
will be largely, if not entirely, about the amount of damages. In such a case it is
sometimes necessary to wait and see how the claimant™s injuries develop so that
medical prognosis may become more certain. This tends to contribute to the delay
42 JUSTICE, Report on the Trial of Motor Accident Cases, 9“10; Genn, Hard Bargaining, ch. 7.
43 Winn Committee Report, para. 131¬.
44 Winn Committee Report, 209.
Trials and settlements 271

of negotiating settlements. Where (as happens in a signi¬cant proportion of cases)
there is a possibility of a ¬nding of contributory negligence if the case goes to trial,
much of the negotiations may involve trying to agree on some percentage deduc-
tion to be made from the ¬gure agreed upon for damages.45
It will be recalled that the burden of proof in a tort action normally rests on the
claimant. The Harris 1984 Survey found that the most commonly given reason for
abandoning tort claims after making them was di¬culty in obtaining evidence.46
There may have been no witnesses to the accident, or the witnesses may have dis-
appeared; or they may be reluctant to make statements especially if they fear that
this may lead to being called to give evidence at a trial. Although it is possible to
subpoena a witness to compel them to appear and give evidence in court, few
lawyers would be willing to take the risk of calling a witness ˜blind™, that is, without
the person having previously made a statement which gives some idea of what they
may be expected to say in evidence.
Problems with witnesses are not the only di¬culties a claimant may face.
Physical evidence (such as allegedly defective tools or equipment) may ˜disappear™
after an accident and the scene of the accident (such as a roadway or a building site)
may change rapidly, making it very di¬cult to ascertain the conditions prevailing
at the time of the accident. In some cases, di¬culties of proof are inherent in the
very nature of the claim. This is particularly so in relation to claims which arise not
out of traumatic accidents but out of the contraction over a period of time of a
disease or illness as a result, for example, of exposure to some process or substance
or of taking some drug. Problems of proof increase with the passage of time, and
the symptoms of illnesses and diseases often do not appear until years after the
events that started the process leading to the symptoms.47 The aetiology of many
diseases and illnesses is imperfectly understood, and there is often more than one
possible cause. In cases such as this, obtaining evidence may be an extremely time-
consuming and costly exercise with an inconclusive outcome.
The settlement process involves, in economic terms, a ˜bilateral monopoly™
because the claimant can ˜sell™ their claim to only one potential buyer “ the insurer “
and the insurer can ˜buy™ the claim from only one potential seller “ the claimant.
Thus the claimant cannot, as it were, ˜shop around™ to get good value for the claim.
How long the bargaining process goes on depends on a number of factors: the
e¬ciency, skill and experience of the claimant™s representative; the time needed to
collect evidence; whether it is necessary to wait and see how the claimant™s medical
condition will develop; the number of issues in dispute; and whether the parties and
their representatives take a confrontational or a co-operative approach to the settle-
ment process.48 On the whole, defendants and insurers have less to lose by delay than
claimants. One of the incentives given to defendants to settle sooner rather than later

45 Harris 1984 Survey, 91“2; Genn, Hard Bargaining, 120“1.
46 Harris 1984 Survey, table 3.12.
47 J. Stapleton, Disease and the Compensation Debate (Oxford, 1986), 29“30.
48 On these di¬ering approaches see Genn, Hard Bargaining, 38“52.
272 Chapter 10

is the fact that pre-trial interest is payable on damages awards; although it is not clear
what impact this has on the settlement of cases which do not go to trial.
The type of representative the claimant has may also a¬ect the course of the
negotiations. For instance, because claims assessors are not quali¬ed lawyers and
cannot initiate or conduct court proceedings on their clients™ behalf, it may be
argued that they will be less able to take a robust approach to negotiation and will
be more likely to settle earlier and for lower amounts than a quali¬ed lawyer would.
But this argument has been said to ignore several facts.49 One is that a claims asses-
sor has an incentive to hold out for a higher o¬er because their remuneration is typ-
ically calculated as a percentage of the compensation recovered. Another is that
insurers know that if the claims assessor does not achieve a settlement acceptable
to the client, the claim might be handed on to a lawyer, thus increasing the insur-
ers™ costs. Finally, it is said, claims assessors may have an advantage over quali¬ed
lawyers for clients who are prepared to trade o¬ the size of the settlement payment
against speed of resolution. In the absence of empirical evidence, it is impossible to
assess the validity of these various arguments.
However, an important issue raised by such arguments concerns whether the
claimant and their representative have the same aims and motivations or whether,
on the contrary, con¬‚icts of interest may arise between them. The aim of the defen-
dant and the defendant™s insurer in the settlement process is usually the same: to
minimize the amount paid out to the claimant.50 For this reason, insurers tend to
exploit to their own advantage any inexperience or ineptitude on the part of the
claimant™s representative, any weaknesses in the claimant™s case and any uncertain-
ties in the law. By contrast, the interests of the claimant and their representative may
be in con¬‚ict: the best move for the representative may be to settle quickly,51 while

49 Department for Constitutional A¬airs, The Report of the Lord Chancellor™s Committee to Investigate
the Activities of Non-Legally Quali¬ed Claims Assessors and Employment Advisers (2000), para. 80.
50 Genn, Hard Bargaining, 50“2. But insurer and insured may not agree on the best strategy to
achieve this aim. For instance, in product liability and medical negligence cases the insurer may
want to settle early, and thereby minimize expenditure on legal services and experts™ reports; while
the insured may wish to spend money on having the claim properly investigated and rigorously
resisted so as to minimize any damages paid in the hope of protecting their commercial or pro-
fessional reputation. (I owe this point to a private communication from Chris Hodges.) For a
speci¬c example of this phenomenon, see ˜Compensating the Bullied™ [1996] New LJ 1787. But for
the contrary suggestion that the insured may wish to settle quickly while the insurer may wish to
hold out see J. Lowry and P. Rawlings, Insurance Law: Doctrine and Principles, 2nd edn (Oxford,
2005), 338.
51 J. Peysner, ˜Finding Predictable Costs™ (2003) 22 CJQ 349, 368. Under a CFA the lawyer has an
interest in the success of the claim but not in the amount of the settlement. This is because the
success fee is related to the amount of work the lawyer does, not the amount of compensation. It
is said that conditional fees reward ine¬cient lawyers and those who deliberately do unnecessary
work. By contrast, an e¬cient, honest lawyer may have no incentive to hold out for a higher set-
tlement unless this will require more work; but a lawyer with a tight cash-¬‚ow may not be able to
a¬ord to do extra work. Some people think that contingent fees are preferable to conditional fees
precisely because they tend better to align the interests of lawyer and client “ provided the lawyer
cannot take too great a proportion of the compensation. See R. O™Dair, ˜Legal Ethics and Legal
Aid: The Great Divide™ (1999) 52 Current Legal Problems 419; M. Zander, ˜Where are We Heading
with the Funding of Civil Litigation?™ [20xx] CJQ 23. See also Better Regulation Task Force, Better
Trials and settlements 273

the client™s best interest may lie in pressing the claim and possibly commencing
proceedings to put pressure on the defendant. Rejection of an insurer™s o¬er
commonly leads to a second increased o¬er being made,52 and in some cases the
process can be repeated several times.53 However, the Harris 1984 Survey found that
the ¬rst o¬er was accepted in about two-thirds of cases where an out-of-court set-
tlement was reached.54 The di¬culty and uncertainties of litigation and fear of
lengthy further negotiations are, no doubt, potent factors in explaining the high
level of acceptance of ¬rst o¬ers.55 Many personal-injury claimants will have had no
previous experience of making a legal claim, and may ¬nd the whole process bewil-
dering or even frightening. The emotional stress generated by having been injured,
and then by having to engage in disagreeable haggling, often produces a desire to
settle as quickly as possible, even if at an unreasonably low ¬gure. The insurer, who
is experienced in the process and not emotionally involved, can a¬ord to ˜sit it out™.56
The imbalance of bargaining power which seems to a¬ect the settlement of
many personal injury claims may be overcome by interposing a third party between
the two negotiating parties. One way of doing this is, of course, to have the claim
adjudicated by a court, but the expense and di¬culties associated with this course
mean that it is very rarely pursued except in cases that raise complex and disputed
issues of fact or law, or in which much is at stake ¬nancially. Another avenue for
facilitating (fair) settlements without recourse to courts is ˜alternative dispute res-
olution™ (ADR) “ arbitration, conciliation and particularly mediation.57 ADR tech-
niques are, by and large, only available in the private sector58 and only in the context
of family disputes can legal aid be obtained for mediation.59 If a successful party in

Routes to Redress (2004), 4.5; Tackling the ˜Compensation Culture™: government Response to the
Better Regulation Task Force Report, ˜Better Routes to Redress™ (2004), response to recommendation
5. Signi¬cantly, perhaps, ¬xed costs for motor-accident claims under CPR Part 45.II contain an
element calculated as a percentage of the damages recovered. It has been suggested that ¬xing costs
in cases where damages are agreed may discourage settlement by claimants™ lawyers: Peysner, ibid.,
368“9.
52 Pearson Report, vol. 2, para. 402.
See Harris 1984 Survey, 101“4 for some information about the relative amounts of ¬rst, second
53
and third o¬ers.
54 Ibid., 104.
55 See generally ibid., 93“112. See also J. Macfarlane,˜Why do People Settle?™ (2001) 46 McGill LJ 663,
who suggests three main factors a¬ecting propensity to settle: (1) the expectations the parties
bring to the process; (2) whether the dispute is understood to be about principle or resources; and
(3) how fair the parties think the settlement process is.
56 Genn, Hard Bargaining, 121“3. But for criticism that Genn treats defendants as a group as more
homogeneous than they actually are see R. Dingwall et al., ˜Firm Handling: the Litigation
Strategies of Defence Lawyers in Personal Injury Cases™ (2000) 20 LS 1.
57 For a brief account of such techniques see P. Cane, Tort Law and Economic Interests, 2nd edn
(Oxford, 1996), 358“66. See also H. Genn, Mediation in Action: Resolving Court Disputes Without
Trial (London, 1999).
58 R. Williams, ˜Should the State Provide Alternative Dispute Resolution Mechanisms™ (1987) 6 Civil
Justice Q. 142.
59 The legislation authorising CFAs does not apply to private arbitrations; but it has been held that
a CFA for an arbitration which is consistent with the statutory rules governing CFAs for court pro-
ceedings is perfectly legitimate: Bevan Ashford (a ¬rm) v. Geo¬ Yeandle (Contractors) Ltd (in liq.)
[1998] 3 All ER 238.
274 Chapter 10

a personal-injury claim unreasonably refused to take part in an ADR process, they
may be penalized by having an order to pay costs made against them.60 However, it
seems that use of ADR in the personal injury context is very rare.61 A court may
encourage parties to resort to ADR, but cannot force them to do so.
The hallmark of arbitration is that the parties agree to be bound by the decision
of the arbitrator, but the procedure followed by the arbitrator tends to be less formal
than court procedure and more in the control of the parties. Arbitration is most
suitable for more di¬cult or complex cases, and for this reason o¬ers relatively little
advantage in terms of cost or delay over adjudication by a court, because such cases
require much the same amount of preparation whether they are heard by a judge or
an arbitrator.62 Mediation and conciliation are non-binding procedures designed to
facilitate agreement between the parties. Such techniques are probably most suitable
for straightforward, low-value claims and would probably not be very attractive to
either party to a personal injury claim which was even moderately di¬cult or in
which the amount at stake was more than a few hundred pounds.63 But simple, low-
value claims are the most easily settled anyway. Another serious source of worry
about the suitability of such consensual techniques of dispute resolution in personal
injury cases is that they may not work well unless the two parties are of roughly equal
bargaining strength64 “ which may often not be the case in personal injury cases.

10.3.2 Group claims
Individual claims are the bread-and-butter of the tort system. Group (or ˜multi-
party™) claims are rare; but because of their high public pro¬le and special charac-
teristics, they deserve separate discussion. Group claims tend to be complex both
because of the numbers involved,65 and especially if they raise di¬cult issues of fact

60 Halsey v. Milton Keynes General NHS Trust [2004] 1 WLR 3002; Dunnett v. Railtrack Plc [2002] 1
WLR 2434.
61 In 2003“4 neither side proposed ADR in 96% of publicly funded medical negligence cases:
Department of Constitutional A¬airs, A New Focus for Legal Aid: Encouraging Early Resolution,
Discouraging Unnecessary Litigation (2004), para. 4.20.
62 S. Hirst and A. Morrish, ˜Arbitrary justice™ [1991] New LJ 1696.
63 This conclusion is supported by the results of a mediation pilot scheme set up at the Central
London County Court: see H. Genn, The Central London County Court Pilot Mediation Scheme:
Evaluation Report (Lord Chancellor™s Department, 1998). A sample of parties litigating in the
court were o¬ered the alternative of mediation. In 91% of the personal injury cases in which an
o¬er of mediation was made, both parties rejected it, as opposed to 80% for all types of case.
Reasons for rejection included that complex evidence was involved in the case, that there were
di¬cult disputes over fact and/or law, and that the case would be likely to settle anyway (this last
reason is re¬‚ected in evidence in the report showing a very high rate of settlement of personal
injury cases in which mediation was rejected “ higher than in cases which were mediated). The
median settlement ¬gure in mediated cases was signi¬cantly lower than in non-mediated cases.
In most mediated cases, the claimant ended up paying his or her own legal costs.
64 See Genn, ibid., para. 7.7.5.
65 The largest group claims are very large indeed: there were over 250,000 claimants world-wide in the
Dalkon Shield litigation. In the British benzodiazepine litigation there were some 15,000 claimants
(of whom 5,500 commenced court process), 6 ˜lead ¬rms™ and 1,553 ˜feeder ¬rms™: C. Hodges, Multi-
Party Actions (Oxford, 2001), ch. 22. For some examples of medical-negligence group claims see
Department of Health, Making Amends: A Report by the Chief Medical O¬cer (2003), 61.
Trials and settlements 275

or law (as in cases concerning the side-e¬ects of drugs); and so they demand a
higher level of organizational skill and e¬ciency than do individual claims. Often
many ¬rms of solicitors are involved; but it is now common for a small number of
specialist personal injury ¬rms (˜lead ¬rms™) to form a steering committee to nego-
tiate with the defendant(s) on behalf of all the claimants and their solicitors, and to
handle matters common to the group as a whole. The other ¬rms (˜feeder ¬rms™)
deal with matters relating to their own clients personally.66 Legal aid funding
arrangements re¬‚ect this division of labour, and although it can produce con¬‚icts
between the steering committee and the ¬rms not represented on it,67 this way of
proceeding gives the claimants as a group a bargaining strength which a ¬rm acting
for an individual claimant could probably never achieve.68 Group claims often
attract considerable media attention, and use of the media by both claimants and
defendants to attract public support and to in¬‚uence the course of settlement
negotiations has become a standard feature of group claims.69 The media may also
be used to advertize for potential claimants. This can be advantageous to defen-
dants as well as to claimants because it increases the chance that all potential claims
can be dealt with in one set of negotiations. On the other hand, it may unrealisti-
cally raise the expectations of potential claimants and, it is argued, have various
other undesirable consequences.70
So far as collecting evidence is concerned, group claimants may be assisted by
the fact that disasters in which many people are killed or injured are frequently fol-
lowed by a public inquiry which will investigate how the accident was caused and
who was to blame.71 The ¬ndings of such inquiries can profoundly a¬ect the course
of negotiations. But they can also be a source of frustration and delay, especially if
a number of di¬erent inquiries take place: public inquiry, police inquiry, inquest
and so on. The Marchioness pleasure boat case prompted calls for a simpli¬ed
inquiry process involving just one inquiry,72 possibly with adjudicative powers.73 It
should be noted, too, that the sorts of group claims which tend to raise the most
di¬cult factual issues “ namely those involving defective products or drugs “
normally do not trigger any sort of public inquiry.74

66 W. McBryde and C. Barker, ˜Solicitors™ groups in mass disaster claims™ [1991] New LJ 484. Cases
involving groups of defendants also lend themselves to this approach on the defendants™ side.
67 See ˜Herald tragedy victims unhappy with lawyers™ [1988] New LJ 656.
68 The claimants may also be assisted by the formation of a support group which can help maintain
the morale of the claimants and can interact with the professional steering committee.
69 D. McIntosh, ˜Defending trial by media™ [1990] New LJ 1224; P. Allen, ˜Plainti¬s and the media™
[1990] New LJ 1530. In the tobacco litigation, an attempt by the defendants to prevent the
claimants™ lawyers talking to the media was unsuccessful: Hodgson v. Imperial Tobacco [1998] 2 All
ER 672.
70 For a generally negative assessment see Hodges, Multi-Party Actions, ch. 6. The accusation that
advertising for claims may raise unrealistic expectations has also been made in relation to CMCs.
71 On disasters generally see C. Wells, Negotiating Tragedy: Law and Disasters (London, 1995).
72 P. Allen, ˜The New Marchioness Enquiry™ [1992] New LJ 44.
73 S. Sedley, ˜Public Inquiries: A Cure or a Disease™ (1989) 52 Modern LR 469, 477.
74 This is an aspect of the all-pervading preference in the law (and in other social contexts?) for
assisting victims of traumatic accidents as opposed to victims of disease and illness.
276 Chapter 10

E¬cient solicitors can achieve positive results for groups of claimants in a rela-
tively short time. For example, the Piper Alpha oil rig settlement (£100 million) was
reached in less than 2 years. Speedy results depend crucially on co-operation by the
defendant(s) and on whether there are disputed issues of law or fact. Victims of
large-scale accidents are often cushioned from the worst ¬nancial e¬ects of delay
by receiving payments from charitable funds established in the wake of the dis-
aster.75 Such payments are not set o¬ against tort damages, and so represent a real
advantage to claimants in such cases, which is not enjoyed by the typical personal-
injury claimant. Defendants facing group claims may also be prepared to make very
prompt interim payments, and this is another respect in which group claimants
may be better o¬ than individual claimants.
Solicitors representing groups have made creative use of the courts in assisting
the settlement process. Until quite recently, the only formal mechanism for dealing
with group actions was the ˜representative action™, in which one party sues as repre-
sentative for a group.76 In such an action, the court™s decision binds all the repre-
sented parties even though there is no mechanism for ensuring that all those parties
are noti¬ed of the action or wish to be represented in it. The representative action
is of limited use because the court can only decide issues common to the claims of
all the represented parties. English courts have taken the view that because the
assessment of tort damages is a highly individualized matter, it will not normally be
possible to make a single assessment in relation to all the claimants; and so it is not
possible for group personal-injury claims to take the form of a representative action.
One way around this would be for a court to award a global sum of damages, which
could then be divided up amongst the claimants, according to the facts of each par-
ticular claim, by an arbitrator, for example. But English courts have no power to do
this. The US ˜class action™ is more ¬‚exible than the representative action, but it has
been relatively little used in personal injury actions even in the USA.77
The representative action has now been supplemented by the mechanism of the
˜group litigation order™ (GLO) under CPR Part 19.III. A GLO can be made in rela-
tion to claims that give rise to ˜common or related™ issues. Once the order is made,
a register of claims is established. Judgments and orders of the court in relation to
˜group issues™ are binding on all parties to claims on the register. In this respect, the
GLO regime di¬ers from both the representative action and what, in other juris-
dictions, is called the ˜class action™ “ under those regimes, court decisions can bind


75 After the Piper Alpha oil rig explosion, e.g., over £45 million was raised; and more than £10 million
was given after the Hillsborough stadium disaster. The Red Cross publishes a manual to assist in
the launching of appeal funds after disasters (˜Disaster appeal scheme™ [1991] New LJ 1215).
76 See generally R. Mulheron, The Class Action in Common Law Systems: A Comparative Perspective
(Oxford, 2004), ch. 4.
77 J.G. Fleming, The American Tort Process (Oxford, 1988), 240“4; ˜Mass Torts™ (1994) 42 American
J. of Comparative Law 507, 516“8; C. Harlow and R. Rawlings, Pressure Through Law (London,
1992), 124“32; American Law Institute, Enterprise Responsibility for Personal Injury (Philadelphia,
1991), vol. II, ch. 13; D.R. Hensler et al., Class Action Dilemmas: Pursuing Public Goals for Private
Gain (Santa Monica, CA, 2000).
Trials and settlements 277

members of the represented group or the de¬ned class who have not ˜opted in™ to
the claim.
Before the introduction of the GLO procedure, English lawyers developed
strategies to deal with group claims. These included choosing one or more cases
from the group as ˜lead™ or ˜test™ cases for submission to trial in order to have
disputed issues resolved with a view to using the result as a basis for settling other
similar cases. This technique is still possible under the GLO regime. The judge
assigned to such GLO litigation plays an active managerial role in getting cases
ready for trial, for example by imposing a cut-o¬ date beyond which claims may
not be added to the register. The GLO technique is most suitable for resolving issues
such as duty of care and causation, but less so for dealing with disputes about
assessment of damages. A course sometimes followed is for the defendant(s) to
make a settlement o¬er to the group as a whole and for a judge to be asked to act
as an arbitrator to divide it up amongst the claimants. Alternatively, a formula may
be adopted and a judge asked to arbitrate individual cases in which the claimant
challenges the application of the formula to their case.78
This type of approach to group claims has clear advantages for claimants. But it
does rely heavily on the co-operation of the defendant(s), as well as on a high degree
of cohesion within the claimant group. Also, each claimant sacri¬ces a degree of
¬‚exibility in achieving a settlement tailored to their own particular needs; and some
claimants may ¬nd this sacri¬ce unacceptable. On the other hand, the risks for an
individual making a claim alongside a group claim are bound to be great, at least
in cases where there is any dispute as to liability.
So far we have viewed group claims in terms of their advantages to claimants.
Grouping of claims may also be good for defendants (despite the power which
claimants derive from concerted action) because it enables them to deal with a large
number of claimants in one exercise with the hope of bringing the whole matter to
a close rather than having to ¬ght many individual claims over a long period. On the
other hand, there is some reason to believe that the phenomenon of group litigation
may create a situation where product manufacturers (in particular), faced with large,
well-organized groups of claimants and the prospect of extremely expensive and
lengthy legal battles with attendant bad publicity and loss of customer goodwill, may
calculate that it makes commercial sense to settle even quite doubtful claims at rela-
tively generous compensation levels.79 For instance, although more than US$3 billion

78 By far the largest group claim in Britain to date was brought against British Coal in respect of res-
piratory diseases and vibration-related conditions contracted by miners. Once liability had been
established by court judgment, a Claims Handling Agreement was established (and approved by
the court) to deal with hundreds of thousands of claims and distribute billions of pounds of com-
pensation. The Agreement set up an internal disputes procedure, but otherwise there was no right
of appeal. The only judicial involvement was by way of approving the broad design of the
Agreement.
79 In a case where the costs are likely to be very high and any damages awarded very modest, the court
may prevent the action proceeding if the defendant so requests: AB v. John Wyeth & Brother Ltd
[1994] PIQR P109. But normally the defendant is left to fend for itself and settle for the best terms
it can negotiate with the claimants.
278 Chapter 10

is being paid in the world-wide silicone breast implant litigation, the evidence of
causal link, between implants and the more serious symptoms complained of, was
very weak. Closer to home, in 1996 Lincolnshire Health Authority agreed to pay
about £500,000 to families of victims of the child murderer, Beverly Allitt, for post-
traumatic stress disorder despite signi¬cant legal doubt as to its liability.80 It is surely
a bizarre development of the tort system that generous compensation payments may
be made in response to very weak claims when it seems that, for a variety of reasons,
many individuals with strong tort claims receive nothing from the tort system, and
when disabled people who cannot make even a weak argument that they should
receive tort compensation must content themselves with much less generous forms
of support through the social security system and so on.
In the USA, the tobacco industry has agreed to pay about US$360 billion over
25 years to public health authorities to cover the costs of treating smoking-related
illnesses, despite the lack of any clear basis for legal claims against cigarette manu-
facturers and the general lack of success of claims by smokers in the US courts. In
the UK, the industry resisted a similar settlement with the NHS on the ground that
because cigarettes are much more heavily taxed in the UK, smoking ˜pays its way™
in terms of health-care costs.
Where, for whatever reason, a defendant is prepared to accept responsibility to
compensate for widespread illness or disability, it may be possible and commer-
cially sensible to establish a ˜domestic™ administrative compensation scheme along
the lines of the industrial injuries scheme, which is examined in chapter 13. For
instance, British Nuclear Fuels Ltd has long run a compensation scheme for its
employees who contract certain radiation-related illnesses.81 Such arrangements
avoid costly litigation and promote good industrial relations.


10.4 When negotiations break down
If the parties cannot reach a settlement, what happens next is considerably
in¬‚uenced by the operation of rules about legal costs.82 If a case goes to trial, the
basic rule is that the unsuccessful party pays the costs of both parties. For a claimant
backed by a union, a BTE or ATE legal-expenses insurer or some other ¬nancial
benefactor, this rule presents no disincentive to litigation. For a legally aided
claimant, the rule may not be too intimidating: if the claimant loses, their liability
for costs will be limited to any contribution required under the legal aid regulations,

80 The Times, 28 November 1996.
81 B. Leigh, ˜The Radiation Worker Compensation Scheme: Managing the Risk of Civil Liability
through Voluntary Arrangements™ in R. Baldwin ed., Law and Uncertainty: Risks and Legal
Processes (London, 1997), ch. 11.
82 The discussion in this and the following sections is primarily relevant to individual claims. In
group claims, trials are better understood as an integral part of the settlement process rather than
as a last resort. So far as concerns the time taken to resolve group claims and the amounts recov-
ered, there are too few such claims and they are too diverse to make generalization possible or
desirable.
Trials and settlements 279

plus the amount of any order for costs made by the court against the claimant.83 If
the claimant wins, such of the costs incurred by the LSC as are not recovered from
the other party will be a ¬rst charge on the damages recovered.84 Since costs will nor-
mally be awarded to a successful claimant against an unsuccessful insured party,
costs should not prove a serious disincentive to a publicly funded party.
So far as insurers are concerned, the court does have power to order the LSC to
pay the costs of a successful, unaided party who has been sued by a publicly funded
claimant, and this power can be exercised for the bene¬t of an insurer.85 But since
such an order can be made only if the court is satis¬ed that otherwise the success-
ful party will su¬er severe ¬nancial hardship, it is highly unlikely that the power
would be exercised in favour of an insured party. Trade unions sometimes pay the
costs of a successful defendant where they have acted for the claimant, but they have
no obligation to do so (the obligation rests on the claimant), and sometimes do
not.86 The MIB never claims costs.87 An order for costs may be made against an
unsuccessful self-¬nanced claimant for the bene¬t of an insurer, but such an order
may well prove unenforceable unless the case was brought under a CFA and the
claimant has ATE insurance. So whether it wins or loses, an insurer may end up
paying its own costs. For the insurer, the question is whether the chance of winning
and the value to it of a decision in its favour outweigh the risk of losing and having
to pay the claimant™s costs as well as its own.
The balance of these considerations can be altered by the making of what is called
a ˜Part 36 o¬er™ or, in other words, a formal o¬er to settle. Until 2000, only a defen-
dant could make such o¬ers, the chief rationale of which was to enable defendants
to limit their potential costs liability in cases where the only real dispute concerned
the amount of damages payable.88 Now, either party can make a Part 36 o¬er.89 The

83 An order for costs can be made against a legally aided party, but only for such amount as is rea-
sonable having regard, amongst other things, to the resources of all the parties to the action.
A legally aided party who sues an insured defendant is unlikely to be ordered to pay much, if any-
thing at all.
84 For more on costs see A.A.S. Zuckerman, Civil Procedure (London, 2003), ch. 26. One might intu-
itively expect that the smaller the damages recovered, the greater would the costs be as a propor-
tion of the damages. But the amount of work entailed in any particular tort claim bears no
necessary relationship to the likely compensation, and data contained in the Harris 1984 Survey
(128“30) reveals no consistent relationship between costs and the amount of compensation.
However, a solicitor should, especially at this reasonably late stage in the process, be able to give a
claimant some idea of the total costs likely to be incurred if the case goes to trial so as to help the
claimant assess what their ultimate liability for costs will be.
85 Davies v. Taylor (No. 2) [1973] 1 All ER 959.
86 Ison, The Forensic Lottery, Appendix C19; KU, ˜Liability of Trade Unions for Costs in Personal
Injury Actions™ (1986) 5 Civil Justice Q 30.
87 JUSTICE, Report on the Trial of Motor Accident Cases, 59.
88 Zuckerman, Civil Procedure, 827“8. Research suggested that under that regime, o¬ers to settle did
not increase the chance of settlement but did reduce the amount of the settlement: B.G.M. Main
and A. Park, ˜The Impact of Defendant O¬ers into Court on Negotiation in the Shadow of the
Law: Experimental Evidence™ (2002) 22 International Review of Law and Economics 177.
89 But not in relation to a claim made in the small claims jurisdiction of the county court (see n. 96).
O¬ers analogous to Part 36 o¬ers can be made in cases that do not fall within CPR Part 36, but
the consequences of making such an o¬er are for the court to decide.
280 Chapter 10

chief rationale for allowing claimants to make Part 36 o¬ers (and an additional
reason for allowing defendants to do so) is to promote early settlement: by making
a Part 36 o¬er, one party can put considerable pressure on the other to accept the
o¬er and settle the claim before the trial begins.90 Suppose the defendant makes a
Part 36 o¬er to settle for £X (and makes a ˜payment into court™ of that amount),91
but the claimant does not accept the o¬er. If judgment is given for the claimant at
trial, but for less than £X, the claimant will be liable for their own and the defen-
dant™s costs as from the latest date on which the o¬er could have been accepted.92
Conversely, suppose that the claimant makes an o¬er to settle for £Y, but the defen-
dant does not accept the o¬er. If judgment is given for the claimant at trial for more
than £Y, the claimant will normally be entitled to additional interest on the whole
amount of the judgment as well as an enhanced award of costs.
In the rare case in which the claimant or the defendant will, for some reason, end
up paying their own costs personally (i.e. where they are not backed by legal aid,
costs insurance or some other source of funding), the making of a Part 36 o¬er by
the other party dramatically raises the stakes. Although the costs and interest sanc-
tions may seem a reasonable way to encourage settlement and discourage trials, the
underlying assumption that a party “ especially a claimant “ who disagrees with the
other side™s assessment of value of the claim, was unreasonable to continue the case
after the o¬er was made, may not be justi¬ed. In many cases damages are extremely
di¬cult to assess, and even experienced counsel may be unable to advise precisely
about the amount likely to be awarded at trial.93 Nevertheless, the costs and inter-
est sanctions will normally be applied, and need to be if the system is to achieve its
functions of saving costs and encouraging early settlement. But the court has a dis-
cretion not to apply the appropriate sanction if doing so would be unjust in the
light of the respective behaviour of the parties in conducting the litigation.94
Assumptions underlying the CPR Part 36 regime are that settlement is prefer-
able to trial and that earlier settlement is preferable to later settlement. From some
points of view, these assumptions are undoubtedly valid. Other things being
equal, the administrative costs of resolving a claim are likely to be less if it is settled
out of court than if it goes to trial; and the earlier it is settled, the lower the costs
are likely to be. Furthermore, if the proportion of tort claims going to trial
increased by only a few per cent, the court system would be put under great strain.


90 For the position once the trial has started see Gaskins v. British Aluminium [1976] QB 524.
91 Once money has been paid into court, it is available to satisfy the claim even if the defendant sub-
sequently goes bankrupt. The government has proposed (inter alia) that the requirement of
payment into court be removed in most cases: DCA, Part 36 of the Civil Procedure Rules: O¬ers to
Settle and Payments into Court (Consultation Paper 02/06, January 2006).
92 Finlay v. Railway Executive [1950] 2 All ER 1969. The claimant, having lost, will also have to bear
the whole of their own costs. In calculating how much C has been awarded, social security bene¬ts
which have to be paid over to the Compensation Recovery Unit (15.3) are ignored: McCa¬erey v.
Datta [1997] 1 WLR 870.

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