Posted 27th February 2010
Lord Jackson's report on the escalating costs of litigation in England and Wales was published 14 January 2010
Lord Jackson's report on the escalating costs of litigation in England and Wales was published 14 January 2010. Arguably, one of Lord Jackson's most important objectives was to ensure that litigation becomes palatable again, by reducing costs and increasing access to justice.
The report provides clients with another opportunity to address the cost of litigation with their professional advisers and may well lead to innovative forms of funding for disputes.
The key issues that arise from Lord Jackson's report are as follows:
Qualified One Way Costs Shifting
One way costs shifting (when the claimant loses both parties will be expected to bear their own costs, whereas when the defendant loses, the defendant will be expected to bear both parties costs) should apply. Lord Jackson suggests that further consultation needs to be done so as to establish which types of litigation would benefit from qualified costs shifting. He does, however, recommend that it would be suitable for personal injury, clinical negligence, judicial review and defamation claims. This is worrying for potential defendants who will be liable for costs even in the event that they are successful at trial. This is seemingly unfair, although Lord Jackson considers that this might actually significantly reduce the amount of overall costs defendant insurers are liable to pay overall. This system may well increase the number of claims being brought by claimants.
The Court will apply fixed costs to low value fast track litigation up to the value of £25,000. This is likely to be welcomed by the insurance industry who will benefit from the ability to predict the level of litigation costs. This may be welcome to potential litigants as law firms will now need to consider whether hourly billing is suitable for all types of litigation.
Costs Capping / Costs Management
Courts will be encouraged to ‘manage' the cost of litigation therefore having a greater impact on directions and proportionality of costs in relation to the value of a claim. Lord Jackson recommends that all lawyers and judges are trained on ‘costs budgeting' and that Courts take an increased interest in the budget of claims by asking for regular updates.
Reform of Procedural Rules
Certain procedural rules will be reformed so as to limit ‘lawyer time'. This includes the improvement and simplification of the disclosure process with an amendment to CPR 31 which will allow parties to use a ‘menu' system.
Of further interest is Lord Jackson's recommended amendment to CPR 36. He suggests that defendants are encouraged to accept Part 36 settlement offers by allowing the claimant to recover an enhancement of 10% in the event that the defendant fails to beat the offer.
Recoverability of Success Fees
Success fees and after the event insurance premiums should cease to be recoverable from the unsuccessful party. Further, Lord Jackson recommends the abolishment of after the event insurance with promotion instead, of before the event insurance for all SMEs.
Lord Jackson's recommendations are as revolutionary as expected and will certainly provoke discussion the legal and commercial world. The report may generate a spate of speedy and permanent procedural changes which may be give rise to unintended consequences, similar to those that were seen after Lord Woolf's report and the first publication of the Civil Procedure Rules.
Government responses so far:
Justice secretary Jack Straw said: ‘Lord Justice Jackson’s proposals… are designed to reduce the costs of civil litigation overall. Those costs have risen too high, and that is a bar to proper access to justice.’ He said that the government is ‘actively assessing’ the proposals.
Shadow justice minister Henry Bellingham hailed the report as a ‘remarkable magnum opus’ and highlighted Jackson’s criticism of referral fees and the practices of claims management companies.
Neither the current nor any post-election government is obliged to implement the recommendations made in the report, which was commissioned by the then Master of the Rolls Sir Anthony Clarke, rather than the Ministry of Justice.
Paul Rowen, Liberal Democrat MP for Rochdale, said that ‘ordinary men and women’ will lose out if the proposals, especially those on litigation costs for industrial personal injuries, are implemented. Straw denied this
Bellingham asked Straw for a ‘cast-iron guarantee’ that there will be ‘no special exemptions or cosy deals for the trade unions’ when it comes to referral fees and claims management matters. Straw said: ‘I am not intending that there should be any cosy deals with anybody in the implementation of the report. I fully understand the objections raised by Lord Jackson about referral fees.’
The publication of Jackson’s report followed a yearlong review of civil case costs. Jackson recommended that success fees and after-the-event insurance premiums should no longer be paid by the losing party in personal injury cases, and instead be replaced with contingency fees. Jackson recommended that winning parties should receive a10% uplift in their damages award to compensate, and solicitors’ success fees should be capped at 25% of damages. Jackson also said that lawyers should not be allowed to pay referral fees for personal injury cases.
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