Another one bites the dust

With the failure of yet another group action – this time the army veterans' claim against the MoD – the costs argument is overshadowing the real issues. Are defendants being given an easy way out? Jon Robins reports

The three Ds – disappointed, dismayed and devastated, is how Trevor Ward, senior partner at Manchester firm Linder Myers, sums up the range of emotions he feels as a result of the judgment last week that brought to an abrupt halt the potential claims of some 2,000 former servicemen and women in the High Court for psychiatric injuries resulting from the stress and trauma of combat. No doubt many claimant lawyers will share his feelings at the collapse of yet another group action.

“I'm devastated. Not for myself – we've tried to do a good job, it's failed, and yes, I'll have sleepless nights about that,” Ward says. “But I'm devastated for those people who were relying on what they considered to be a just judgment coming out of this. They have nowhere else to go.”

A large section of the claimants who served in the Falklands, Northern Ireland, Bosnia and the Gulf War were barred under a statutory immunity that applied up to 1987, while other subsequent claims were defeated because of 'combat immunity', which the judge found still applied for activities that took place well away from any live military action. Mr Justice Owen also looked closely at 15 'lead' cases, and in only four of these did he decide that the Ministry of Defence (MoD) was in breach of its duty of care. But he concluded that such cases “turned on their own facts, and do not demonstrate a systematic failure on the part of the MoD”.

So the vast majority of the veterans' cases look set to join a dismal roll call of failed group actions, which includes last year's oral contraception pill (OCP) litigation, which dramatically fell apart last year following 44 days of legal argument and the contributions of 10 epidemiologists. Both actions represent an achievement of sorts in this increasingly difficult area of the law insofar as they at least made it to the courtroom door. The veterans' action has the unique distinction of being the only big multiparty action in recent years to survive a full trial, in this case six months in the High Court.

For 4,000 people who have found themselves hooked to the antidepressant Seroxat, the prospects of getting that far seem pretty remote after a recent decision to remove public funding.

In the wake of the OCP ruling, Martyn Day, senior partner at Leigh Day & Co, who represented nearly 100 women in the action, declared flatly that “the system just doesn't work” for these most groundbreaking of cases. Of course, the long list of disastrous group actions can be traced back to the failed Norplant contraceptive litigation, Day's (and Irwin Mitchell's) attempts to take on the tobacco companies in 1999 and, of course, the notorious benzodiazepine tranquilliser cases, which swallowed up £30m of taxpayers' money without seeing the inside of a courtroom.

“It's a real worry that judges just don't seem to like these cases,” Day says. “I'm of the view that our judges have been very conservative and the consistent failures, together with the costs, could effectively mean that they end up just never being pursued.”

Ward, who like Day is a veteran of multiparty actions, does not share such a pessimistic view. “It's difficult to get these cases off the ground because so much preparation has to be done, and getting funding has become more and more difficult,” he acknowledges. But there should and “probably always will be funding” for those cases that are in the public interest and are “proven to be of reasonable merit”. The problem, he adds, is getting there.

“The other difficulty is that it remains to be seen how many more cases the Lord Chancellor's Department and the Treasury are going to allow to be lost,” Ward continues. “We didn't anticipate we'd lose this, but it's a big sting for the taxpayer's purse.”

Even the mention of the benzo fiasco elicits a scream of mock horror from Ward. He is at great pains to point out how carefully managed the MoD Post-Traumatic Stress Disorder (PTSD) case was. From the outset, specific generic issues were broken down between the parties – such as the state of knowledge of the MoD about PTSD, whether there was an effective treatment available at the time, the nature of the duty of care owed on discharge from the forces – and it was agreed that costs were to follow the success of each individual issue.

“In theory we could win one issue, and if 90 per cent of the costs of trial revolved around that issue, we might lose the trial but win on costs,” he explains. A large part of the MoD's £3.5m estimated costs and the claimants' £5.5m costs was spent on the treatment issue, which took a month of the High Court's time, and was won by the claimants. “It might be that the costs consequences aren't that drastic for the Legal Services Commission [LSC],” Ward adds.

The claimants also agreed at the onset of the action not to publicise it and concentrate energies on identifying issues for the trial. As a quid pro quo, the defendants agreed a 'limitation holiday' to allow later claims to join the action without being statute barred. Some 1,700 potential claimants signed up to what was called 'register two' and they, according to Ward, were just “names on a list” who did not sign up to any costs-sharing order.

There remains the possibility of an appeal, as the claimants dispute parts of the judge's findings – in particular as to what the military should have known and should have done to relieve its responsibilities. “We'll have to stand back and carefully consider whether, aside from being disappointed and dismayed by some of the judge's comments, in reality those points are capable of being overturned, or they are so wrong as to be the subject of an appeal,” Ward adds.

In fact, last week saw a double blow for claimants as a controversial costs ruling in the multiparty action concerning organ retention sent shockwaves through the profession. The defendants had asked for costs (excluding those in the Alder Hey scandal) to be capped both retrospectively from February 2003 and up until the trial next January. The claimant firm Alexander Harris Solicitors estimated that from February it had incurred costs of £1.45m, and would expect another £1m to get to the end of trial. An average hourly rate of £155 per hour was agreed.

However, Mr Justice Gage, advised by senior costs judge Peter Hurst, took issue with the firm's suggestion that it needed 3,410 hours on the cases. “On strictly generic issues, [the claimants'] figure represents a substantial overestimate of what is fair and reasonable and proportionate,” the judge ruled. In what was described as a “novel procedure”, he capped the total budget to £506,500 and the fees at £271,250 on the grounds that 'prospective budget setting' came under the court's case management powers.

Such judicial thinking represents a “fairly sinister development”, reckons Mark Harvey, a partner at South Wales firm Hugh James and secretary of the Association of Personal Injury Lawyers (Apil). “The defendant generally has deeper pockets than the claimant and my concern is that it's like a David-and-Goliath contest and then taking the sling off David,” he continues. The judgment is all the more extraordinary, he argues, in light of the recent inability of parties to agree on the relatively simple issue of establishing the level of fixed fees in low value road traffic cases. “To start doing this in complex group actions just seems completely wrong,” he says.

Alexander Harris partner David Harris, representing the claimants in the action, explains that they agreed to the approach on the basis that the idea of a costs cap was specific to this litigation. “It was not to be taken by us that there was a power of the court to make such an order – although I think there probably is – or that it should be treated as some form of precedent for any other case,” he says. “But it's clear to me that this ruling isn't just going to have repercussions in group cases – it goes for multitrack cases as well.”

Harris acknowledges that the figures his firm initially quoted for generic costs were “unfortunate”, and explains that they represented the greatest possible sums they might have expected to recover, as distinct from what they expected to.

Claimant lawyers see the prospect of such costs applications being routinely used as another weapon in the defendant armoury that, in the case of the big drugs companies and the likes of the MoD, is already massively disproportionate.

“The defendants are using every single opportunity to attack costs anyway,” argues Day at Leigh Day. “We have seen that in the CFA [conditional fee arrangement] debate and now here it is in relation to group claims. The judges seem to feel you should have some magic idea about what exactly these costs are going to be in cases that are very difficult to judge. The pressure on claimant firms in these areas is getting more and more intense at a time when few cases succeed anyway.”

At the moment all eyes are on the progress of the Measles, Mumps and Rubella (MMR) group action linking the vaccine with autism. Alexander Harris is advising 800 families in an action over MMR. In terms of public funding, this is the largest publicly-funded case since the benzo case and the families will not only have to take on the might of the drugs companies but Government policy as well.

According to Harris, funding is not such a problem, as the case predates the 1999 reforms of the legal aid system. However, the imbalance between claimants and defendants will, of course, be huge. “There was one case management conference where the defendant had 62 lawyers in court and we reckon that there were 42 in the last one,” he reports. “The wealth and power of these drugs companies is just beyond belief.”

Of course, not all group actions fail. Harris points to his firm's own success against GlaxoSmithKline, the manufacturer of Myodil, which caused a painful and debilitating back disorder, as well as the victory by Newcastle upon Tyne firm Deas Mallen for more than 100 people infected with the hepatitis C virus through blood transfusions, who won compensation totalling millions of pounds in March 2001. “But the fact is that there have been two big cases that have gone to trial and lost recently and that's depressing,” he adds. “It's going to make the Legal Services Commission even more controlled in their financial expectations.”

“I was astonished that they didn't win,” says Hugh James's Harvey of last week's High Court ruling against the veterans. But he also points out that, away from the product liability cases and the complexity of PTSD-style cases, group actions are won on a regular basis. In fact, according to Harvey, his practice has yet to lose one. He counts among his successes actions on behalf of miners suffering respiratory diseases and vibration white finger; two recent nuisance actions for claims relating to waste pits; he recently successfully represented passengers on an ill-fated Britannia Airways flight that crash-landed in Gerona Airport in September 1999; he is heading up the Seroxat action and, despite the LSC having pulled the plug, he is expecting to issue a letter of claim in the next few weeks.

“The great problem remains in relation to the defendants' ability to recover costs, because no matter how keen a firm is, if our client is faced with the prospect of those costs – and in the OCP litigation costs were in the region of £10m – you can't possibly expose clients to that,” says Harvey. The already nervous legal expenses insurance market is not likely to touch such claims. As Harvey says: “There still remains a great question mark over the most complex cases. It's quite clear that the Government has no intention to provide the safety net of legal aid, despite the fact that it said there would be.”

The risk for law firms using conditional fees in this area was vividly illustrated by Leigh Day's and Irwin Mitchell's attempts to sue the tobacco companies. “No win, no fee, and possible bankruptcy,” was how Day memorably described his funding mechanism of choice for that ill-fated action. At the end of the day, his firm faced costs estimated to be in the region of £2.5m. He would not commit to such a case again without the backing of insurance. According to Day: “It was a really traumatic experience knowing that the clients faced bankruptcy even though they were impecunious people. I wouldn't go through that again.”

As for Day's response to the latest events, he says: “The landscape for group actions is pretty gloomy and these dark clouds which have been gathering overhead just keep getting worse and worse.”