The position in Australian and England and their fellow travellers, and in every European country that I’ve had anything to do with (and that’s about 3 or 4 jurisdictions) is that legal costs are in the discretion of the court, but usually the loser pays.
The amount the loser pays is objectively decided: it bears no direct relationship to the amount the winner has spent. It is awarded on a particular scale, the details of which are beyond the scope of this post.
So the concern that corporations could make litigation against them unattractive under a loser pays system by making it known that they will use many and expensive lawyers, thus making the potential downside too heavy if you lose against them, is baseless.
The next thing people have suggested in this thread is that “loser pays” makes litigation unattractive to little guy litigants unless they are 100% certain they will win because the cost of losing is too high.
Litigation is very expensive. The average person cannot afford to pay for litigation at all. They can only afford to litigate by convincing a lawyer to “spec” the action, ie take their fees out of an eventual favourable judgment. So either way, a “little person” can only afford to litigate if they are 100% certain they will win. Loser pays makes little difference in that respect.
Loser pays is a good system for at least four reasons.
Firstly it is just. If a court decides that person A has done something wrong and should pay person B damages for person B’s loss, surely it is just that person A pay the costs that person A has put person B to by refusing to pay without litigation?
Secondly, the non-loser pays system means that an otherwise perfectly valid claim can be non viable only because the cost of recovery will exceed the damages obtained. eg I should pay you damages of $10,000, but I know it will cost you that much to recover from me, so I just thumb my nose at you and there’s nothing you can do.
Thirdly, loser pays encourages wrongdoers to settle more than non-loser pays, and discourages the wronged from seeking full redress. Little Man takes on Big Corporation. BC knows it’s probably in the wrong, but it also knows that it can afford the pain of legal fees more than LM and that the longer it drags things out, and the more complications and hurdles it introduces, the less will eventually be left over after LM pays his lawyers by way of damages. So BC just drags it out till LM can’t take any more and settles for less than he should. Contrast that with loser pays. The more BC drags it out, the more it increases not only its own legal fees but the legal fees it will eventually have to pay to LM. And LM can feel reasonably comfortable knowing that the big bills his lawyer is racking up will ultimately be covered by BC
Fourthly, the playing field can be tilted in LM’s favour in some ways. Don’t underestimate the bargaining position that having no assets gives you. LM owns an old car and rents a house. BC has millions in assets. LM can gaily issue lawsuits safe in the knowledge that if the worst happens, and he gets hit with a massive judgment for costs he can just say “too bad how sad, you can’t get blood from a stone”.
I don’t understand how anyone can seriously argue that loser-doesn’t-pay is anything other than an unjust barrier to access to the courts.
