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Sunday, 2 April 2017

DWP cast as serial litigant in 2012

This Kwug Blog editor has just come across the below New Law Journal article by way of a hyperlink in a January 2012 e-mail.(1) What the Department for Work & Pensions does nowadays is to change the law to suit its own standpoint, as in the case of people getting or not getting 'Personal Independence Payments' on mental health grounds.(2)

The article below is reprinted here by copy and paste from New Law Journal.(3)

Making the polluter pay

Date: 15 January 2012

Tom Royston makes no excuses for bad government decision-making

A serial litigant is trying the patience of judges across the nation. This litigant habitually refuses to settle cases or give serious thought to the weaknesses in his arguments. He loses a lot, of course, but it’s hard to know whether he appreciates the gravity of his situation, for he has virtually given up attending or being represented at the hearings.

Surprisingly, the judges are powerless to penalise him in costs, however unreasonable his behaviour. So there is no sign of the situation improving. His cases clog up the legal system in astonishing and increasing number, producing about 265,000 final hearings last year alone. To put that into context, all the county court non-family civil litigation in England and
Wales produces only 63,000 final hearings per year.

This litigant is the secretary of state for work and pensions (SSWP), and these cases are appeals against social security decisions, in the First-tier Tribunal’s social entitlement chamber. This article suggests that a significant number of benefit appeals could be avoided if that tribunal was given the power to award costs against public authority parties where they have behaved unreasonably.

Why are there avoidable appeals?

Bad decision-making is cheap
At my first social security tribunal, I represented an arthritic client subject to a government decision that he had no difficulty walking—so was not entitled to benefit—because he managed daily to walk his dog. The decision not only flew in the face of compelling evidence from the client’s doctors, it also ignored the fact that the client did not possess a dog.

That was no isolated case. One judge writes extra-curially of “decisions which are an affront to any sense of fairness or reasonableness” (Nick Warren, “The adjudication gap” [2006] 13 JSSL 110, 114).

Once a bad decision has been made, the SSWP frequently refuses to change it without the intervention of a tribunal. The proportion of decisions revised pre-hearing is not published, but a freedom of information request for sickness benefit reconsideration statistics in one area showed pre-hearing revisions in fewer than 4% of appeals. Yet half of all oral tribunal hearings eventually result in defeat for the government.

In any commercial setting, a litigator who only managed to settle one in 25 of their cases would not likely be long in their job. However, in the social security system, this tendency is not really the fault of the overworked decision-makers. Rather, it is a perversely economically rational outcome.
Losing tribunal hearings is cheap
The First-tier Tribunal is not a cheap system to run. Its judges are paid more than £100,000 a year; its medical members not much less. The average cost to HM Courts and Tribunals Service (HMCTS) of a social security appeal is £293. There is a further cost to the state in legal aid cases of at least £167, the social security fixed fee.

The amount spent by the SSWP defending an appeal, in contrast, is about £55 (HC Deb, 2 November 2010, vol 517, c794W). Therefore, where an unreasonable decision is made, his department may bear only around one tenth of the cost to the state of its consequences. The SSWP’s budget does make a contribution to HMCTS towards the cost of tribunals, but it bears no direct relation to the quality of his decision-making.
Losing cases no longer embarrasses the secretary of state
There has, in recent years, been a substantial decline in the proportion of First-tier Tribunal hearings where the SSWP is represented. The president of the social entitlement chamber has deprecated this: “There is a crucial gulf because the department [for work and pensions] does not know what goes on in the hearing and so is at a complete loss to understand where it may have gone wrong…It also has a bearing on the volume of appeals because the department loses the ‘embarrassment’ factor. [The SSWP] is absolved from someone going back to the office and [saying], ‘We made a mistake here. I felt very embarrassed trying to defend a hopeless decision’.” (Work and Pensions Committee, Decision-making and Appeals in the Benefits System (2009-10, HC 313)).

Budgetary pressures probably preclude any return to routine respondent appearances. Some alternative means must be found of restoring the “embarrassment factor”.

Can costs orders reduce appeals?

Costs rules have a normative effect on litigation behaviour
In the mainstream English legal system, the principle that costs follow the event is regarded as of “fundamental importance in deterring plaintiffs from bringing and defendants from defending actions they are likely to lose” (Roache v News Group [1998] EMLR 161).

In tribunal litigation, permitting a hopeless decision to proceed to tribunal costs the SSWP little or nothing. In contrast, scrutinising it pre-hearing costs money. It is rarely economically rational for the SSWP to expend resources making the right decision in the first place, or to investigate later settlement.

If losing carried costs risks, the balance would shift. It would become economically rational to investigate settling. The “embarrassment factor” of facing a costs award might also be influential. Fewer cases would proceed to hearing. So costs powers would tend to reduce the volume of appeals.
The rationale for costs orders applies to public bodies, not natural persons
If costs orders encourage rational litigation, why not make unreasonable individual appellants liable too? This would be neither effective nor just—for three reasons:
  • First, lay appellants are in an inferior position to government decision-makers when attempting rational litigation decisions in the “enormously complex” field of social security law (Kerr v DSD [2004] UKHL 23, [2004] 4 All ER 385). The threat of costs, potentially ruinous to a low-income individual’s finances, could cause nervous appellants with good cases to withdraw. Yet it might well be inadequate to modify the behaviour of unreasonable appellants.
  • Second, costs risks work best against serial litigants (insurers, government, large companies), because they can learn from repeated experience. Most social security appellants are one-time litigants.
  • Third, many social security appeals concern means tested benefits. Appellants are generally extremely poor. Costs awards would often be unrecoverable, or expensively slow to recover.

How tribunals costs powers could work

The kinds of costs which would be covered by orders

While most of the expense of mainstream civil litigation is lawyers’ fees, it is rare for appellants to pay for legal representation in social security cases.

The major cost of unnecessary tribunal litigation is the cost of holding the hearings. In civil proceedings, losing defendants pay this indirectly, by compensating the claimant for having paid court fees, but social security tribunals do not charge fees.

The potency of reform would be considerably weakened if there were no way of making unreasonable public authority parties pay such costs, for in the many cases where an appellant does not seek advice, the hearing cost is the only financial cost to anyone.

One solution might be to introduce fees for public authority respondents’ submissions to a tribunal, reimbursing them where the respondent is found to have acted reasonably. This model is increasingly popular in modern dispute resolution schemes. A similar arrangement is employed by the legal services ombudsman.
Tribunal costs orders consistent with speed and informality

The advantages of the tribunals system have long been said to include “cheapness, accessibility, freedom from technicality, [and] expedition” (Gillies v SSWP [2006] UKHL 2, [2006] 1 All ER 731). None of these are words one might associate with the worst excesses of civil costs litigation, which “[fill] one with despair”, as lamented in Carver v BAA [2008] EWCA Civ 412, [2008] 3 All ER 911. Is there a risk of importing that plague? No.

The social security costs orders could justly be “rough and ready”, since they would usually be redistributing money around different agencies of the state, or state funded bodies. The principal “cost” awarded would be the “case fee” paid to the tribunal, not the victorious party’s legal costs. So reform would not encourage “those looking for profit rather than justice”, to borrow the words of Ken Clarke.

The tribunals system already has experience in making costs orders without sacrificing its traditional strengths. Three of the six First-tier Tribunal chambers have costs powers. So does the employment tribunal. They have not experienced substantial problems with satellite costs litigation.

In addition, it is not proposed that costs orders would become the rule. Costs powers would be modelled on those of the other chambers, directed at unreasonable conduct only. Losing a case would by no means automatically produce a costs penalty.

Reform not revolution

This is reform not revolution. It will not eliminate bad government decision-making. But it could bring a degree of market discipline to an area where government decision-makers have a perverse financial incentive never to settle litigation.

There would be a saving to the public purse. Fewer appellants would have to undergo the stress and inconvenience of litigation. It would also draw social security tribunal procedure into closer alignment with that of other courts and tribunals. And the changes suggested above should not require primary legislation.

The SSWP might not be keen, for it would transfer to his department costs presently borne by others. But can it really be desirable for departmental sectionalism to prevail over the broader interests of the state and its citizens?

Tom Royston, Kirklees Law Centre


  1. https://www.newlawjournal.co.uk/content/making-polluter-pay
  2. http://www.disabilitynewsservice.com/pip-cuts-will-be-debated-and-voted-on/ 
  3. https://www.newlawjournal.co.uk/content/making-polluter-pay

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