Stuart Evans gets to the heart of possible radical change to the way litigation is conducted as set out in the final Jackson Report on Costs
So, after an interim report of over 600 pages, we finally received the final report of the Civil Litigation Costs Review, running to some 584 pages. It is a wide ranging document; Lord Justice Jackson has taken the opportunity to seek the views not only of the Judiciary and practitioners, but also those involved in litigation on a day to day basis, including insurance companies and the Federation of Small Businesses to name but two.
It must be stressed that all of the recommendations in the final report are no more than that. Some recommendations, if adopted, can be implemented by changes to the existing Civil Procedure Rules and Practice Directions, others will require regulatory changes, and some will require primary legislation. In the current political climate, the latter will take some time to see the light of day, if the political will is there. Accordingly, even if each and every recommendation is implemented, it will take place incrementally, over time.
In broad terms, personal injury and fast track litigation will change dramatically, other higher value cases less so. We, along with funders and insurers, will continue to adapt to such changes as they arise, depending as ever on how the draftsmen interpret the intended changes and what the Judges make of them in the fullness of time.
So, if it happens, who will consider themselves as the beneficiaries, and who will be feeling the pinch?
The Winners
Defendants and their insurers will be most pleased, at least in respect of most personal injury claims. The radical recommendation is that the right to recovery of success fees and after the event insurance (ATE) premiums in litigation involving conditional fee agreements (also known as “no win no fee agreements” - CFAs) be abolished. This will mean that in cases where the Claimant is on a CFA (this now being the case with most personal injury claims), the success fee charged by the solicitor (sometimes as high as 100%) and the ATE premium would be borne by the Claimant, not the Defendant, thereby eating into any damages recovered. As the abolition extends to all types of civil litigation, this will inevitably curb such arrangements across the board, and be a disincentive to litigation funders, who presently look to recover these very items (which often involve substantial sums) from a successful Defendant.
The effect of this is intended to be mitigated by an increase of 10% in general damages in personal injury cases (covering pain and suffering, loss of amenity), and a recommendation of so called “qualified costs shifting”. This would mean that a Claimant should not be required to pay a Defendant’s costs if the claim fails (but the converse would not be true – the Defendant would have to pay for the Claimant’s costs if the claim is successful), in personal injury, clinical negligence, judicial review and defamation cases. This would be subject to a qualification of reasonableness and an assessment of a Claimant’s means. Satellite litigation on these aspects (something Jackson endeavours to avoid), is therefore almost inevitable. However, these measures will probably do little to off set the abolition of recovery of success fees and ATE premiums.
The Losers
For the reasons given, Claimants operating on a CFA regime will be hit by the reforms if they are ever implemented. This may hit insolvency practitioners, who often look for CFA solutions to pursue claims on behalf of insolvent estates. The qualified costs shifting rule may result in a minor flood of previously unmeritorious claims getting through for the four categories of cases mentioned above, and if extended this may result in an increase in litigation involving non-CFA type Claimants who were previously deterred by the risk of an adverse Costs Order.
Litigation funders may find little that positively benefits them from the recommendations (other than the proposed legalisation of contingency fee arrangements), and those involved in supplying ATE insurance to the market must be even more concerned. Intermediaries who currently charge referral fees in PI cases, which will now be banned, will also feel their wings have been clipped. The Jackson recommendations are certainly uncomfortable reading for the middle man.
Those largely unaffected
For SMEs or businesses involved in fast track litigation (being litigation involved in the sum of a maximum £25,000), implementation of a regime of relatively low fixed costs will mean that there is certainty in the amounts can be recovered in the event of success, or paid to the other side in the event of failure. On balance, given a survey carried out by the Federation of Small Businesses as part of the Jackson investigations, businesses just about prefer the certainty of knowing what they might have to pay if they lose, to the downside of more limited recovery if they win. So the fixed costs regime, which was an absolute certainty to be favoured by Jackson, may marginally boost those involved in fast track litigation.
In terms of litigation on the multi track, being litigation above £25,000, moving up to much higher values, there is little change that can be considered as radical as the abolitions mentioned above. There are some limited measures on the controlling of disclosure, and suggestions for improved ways of monitoring witness statements and expert evidence, along with the usual raft of suggestions concerning case and cost management, but none of these are ground breaking.
For solicitors, the proposed legalisation of contingency fees provides a potential opportunity. This will enable the solicitor to act on a no win no fee basis, based solely on the value of the damages recovered rather than the time incurred (as would be the case with CFAs). This should enable litigation to be conducted proportionately for cases where there is high confidence of success. The safeguard of clients taking independent advice on such contingency fee agreements is sensible.
For the Government, there is no call by Jackson for it to dip significantly into its own pocket. Suggestions of contingency legal aid funds, supplementary legal aid schemes, significant IT upgrading (long overdue) or better resourcing and staffing in the Court system all appear to have fallen away. This is perhaps not surprising given the substantial commitments the next Government will have to curb public spending, but it seems as a reminder that the burden of the cost of litigation is drifting inexorably further into the private sector.
Conclusion
All in all, for the type of commercial litigation we conduct at Rawlison Butler, these recommendations even if implemented may have only a moderate impact. The imposition of a fixed fee regime in the fast track should, on balance, be welcomed by businesses, and the legalisation of a contingency fee structure provides another instrument for consideration in the funding of an action, to ensure flexibility in the way we deliver value to our clients. In terms of the high value litigation we carry out, we shall continue to consult closely where appropriate with insurers and litigation funders to see how they will adapt their offerings going forward, should the Jackson recommendations come to fruition.
All of this is, of course, subject to the mercy of the drafter’s pen. There have been instances over the years where what finally appears in legislation, rule changes and Practice Directions does not always entirely match the intentions behind the recommendations being made. We must also not discount the fact that the Jackson recommendations will in any event be influential in judicial thinking over the coming years, and Judges will also be looking to use their inherent powers to try and ensure that litigation remains fair and proportionate for all.