bulletin
Government gives backing to Jackson reforms
17 November 2010
The Government has, this week, published its consultations on
Lord Justice Jackson's recommendations for costs in civil claims
and, simultaneously, the future of Legal Aid with potential cuts of
£350m. The scope of the Jackson Green Paper is narrow, with a focus
on funding and a particular emphasis on personal injury claims.
Speaking last week in Birmingham, Jackson described ATE as ‘an
expensive form of one way costs shifting’, the Conditional Fee
Arrangements regime as ‘inadequately targeted’ and discussed
experiences of lawyers he had met in other jurisdictions who
considered, we are ‘mad’ to operate the funding regime we do.
It appears the Government agrees with many of these criticisms
and sees an opportunity to address the imbalances which often exist
between claimants and defendants’ cost risk. In particular, the
Government’s recommendations are focused on reducing the burden on
defendants, including public bodies, to create a more equal
division of litigation risk between parties to claims.
Conditional Fee Agreements and success fees
In January, Jackson proposed that success fees and Conditional
Fee Agreements (CFAs) should not be recoverable against the losing
party. He points out that this was the position in England and
Wales prior to 2000 and that it remains the way CFAs are operated
in other jurisdictions, including Scotland. Jackson recognises the
need to protect claimants against excessive liabilities and
proposes that the current cap of 100% of success fees should be
maintained, with a lower cap on personal injury claims of 25% of
damages (excluding future care and future losses).
The proposal raises additional difficulties where a claimant is
seeking some form of relief other than damages, for example
specific performance in relation to housing repairs, or judicial
review. The Government moots the possibility of retaining the
recoverable success fee in these classes of claim, with a cap
(perhaps 25%) to limit defendant’s liabilities.
Jackson’s proposals on CFAs have proved some of his most
controversial. Claimant bodies argue that they breach a principle
that claimants should be entitled to receive 100% of their damages.
Jackson and others point out that, if this has become a principle
of our legal system at all, then it is a very recent introduction
and does not mirror practice in many other jurisdictions. Jackson
argues in any event that, taken in conjunction with his other
recommendations (for example an increase in General Damages and
stricter Part 36 penalties), the proposals ought not to leave
claimants in a worse position than they are at present.
Jackson considers that the removal of recoverable success fees
is essential if the risk of litigation is shared fairly between the
parties and is also an important step towards encouraging claimants
to shop around for legal services and create a competitive market
amongst claimant’s solicitors to provide services at attractive
fees. The Government has indicated its support for reform in this
area, both prior to the consultation, and within the document.
After The Event insurance
The primary recommendation in the Green Paper is that After The
Event (ATE) insurance premiums should no longer be recoverable from
the losing party. A strong concern is raised in the paper that ATE
premiums are self insured and that as a result defendants bear the
costs in all cases. Further, that there is an issue as to whether
ATE premiums are overly generous to insurers.
Lord Justice Jackson recommended that the recoverability of
premiums ought to be abolished and, that to protect vulnerable
parties, one way cost shifting ought to be introduced.
One issue that did not come out in the Jackson report but, which
is looked at here, is the question of what happens in relation to
claimant’s disbursements and who should be responsible for payment
of the same. Various options are mentioned including that the
claimant ought to pay, that limited ATE insurance could continue in
this very narrow instance or that the claimant’s solicitors could
pay. What is rejected is any suggestion that this ought to be
picked up via public funding. The ATE insurer’s response will be
interesting on whether they would be prepared to stay in the market
for disbursement only funding.
The implication is that by introducing one way cost shifting,
the most vulnerable are assisted in that they are no longer at risk
on costs orders. However one way cost shifting is only recommended
for certain types of claim (see below). Further, in the Ministerial
Foreword, the Ministers highlight the fact that bringing litigation
has become “disproportionate and unaffordable” for many litigants
and businesses, particularly small businesses. However, no
solutions appear in the report to deal with this.
It should be noted that the “fall back” provisions from the
Jackson report also appear in the Green Paper and are also up for
debate.
10% increase in General Damages
Within his report, Jackson took up a recommendation of the Law
Commission, made some years ago, to increase General Damages. He
suggests that a modest increase of 10% in damages for pain,
suffering and loss of amenity would counter-balance the financial
loss posed to claimants if success fees were to become
irrecoverable.
The Government proposes a more narrowly defined increase,
whereby an element of recoverability would be retained, but this
would be limited to 10% of General Damages (where awarded). This
would restrict the payment of additional damages to claims funded
by CFAs and Damages Based Agreements.
In many respects, Jackson’s original proposal was a compromise
intended to limit the extent to which changes in funding would
reduce sums recovered by Claimants. However, Jackson has made use
of a broader proposal for reform made by the Law Commission at a
time when it saw General Damages as inadequate. Jackson therefore
adopted a principled approach, even if he was doing so for
pragmatic reasons.
The Government’s proposal is much more focused upon compromise
and has little regard to principles of damages. The Government is
concerned that privately funded claimants would benefit from a
windfall in the form of increased General Damages if awards were
increased across the board. The counter argument likely to be
raised is that if claimant’s are prepared to put their own money at
risk in order to fund litigation then they ought to be compensated
for the risk.
The Government’s proposal also opens the door to inventive
claimants who will look for opportunities to get around the
proposals. For example, it may be possible to use a discounted fee
agreement to privately fund a claim whilst, at the same time,
securing the benefit of increased General Damages.
Part 36 offers
The Green Paper suggests the reform of Part 36 of the CPR. The
proposal is that if a claimant succeeds in obtaining an award at
the same level or more advantageous than his own offer then his
award ought to be increased by 10% and this is proposed in relation
to all damages.
In conjunction with this, there is the suggestion that Carver v
BAA plc ought to be reversed so that a much more straightforward
test is applied at trial namely “has the claimant managed to obtain
a more advantageous judgment at trial than that on offer?”. We will
then at least be spared the tedious arguments that we encountered
in Carver as to who should pay the costs based on a view taken on
£51! We believe that this will at least bring certainty to this
area of law and this is to be welcomed.
Qualified one way costs shifting
The Government proposes a scheme of qualified one way costs
shifting (QOCS) whereby in most cases an unsuccessful claimant
would only bear their own costs. A defendant, even where successful
in defending a claim, would not be able to recover. The proposals
are similar in many ways to the Legal Aid shield.
Jackson’s reasoning is that qualified one way costs shifting is
already in place, in effect, via ATE insurance. Whilst under the
present scheme, defendants may recover their costs from an ATE
insurer on success they are ultimately paying for the privilege
through the premiums recovered by Claimants in other cases.
Under a QOCS scheme, Judges will be able to award costs against
a claimant where this is justified by their conduct (for example,
where they behaved unreasonably or bring a frivolous/fraudulent
claim) or where claimants are ‘conspicuously wealthy’.
Defendants would also recover their costs where they have made a
Part 36 Offer and subsequently bettered it. Critics point out that
this would open a door to defendants to make minimal offers in
claims they defend, with a view to securing costs protection.
The Government supports introduction of QOCS for individuals
bringing personal injury claims or defamation claims under a CFA.
It seems the Government does not consider it necessary that
privately funded claimants should have the benefit of QOCS and the
Government also expresses reservations as to the appropriateness of
this approach for judicial review claims.
What else does the Green Paper consider?
Supplementary Legal Aid Scheme (SLAS)
– this will be looked at as part of the legal aid consultation but
the suggestion is that, from the cases to which legal aid will
continue to be applicable, a percentage of the general damages
obtained would be given to a SLAS to help fund other cases.
Proportionality – it is recommended
that there ought to be a new test of proportionality of costs
adopting the Jackson proposed definition. There is a danger that
there will be satellite litigation in relation to this.
Contingency fees/Damages Based
Agreements – there is a proposal that they ought to
be allowed in litigation going forward.
Litigants in person – this is worth
noting as a large increase is proposed by way of hourly rate to
successful litigants in person from £9.25 per hour to £20 per
hour.
Lord Justice Jackson’s other proposals
These are touched upon in the Green Paper with an update given
and an indication as to where these proposals may go. The most
important are:
Referral fees – the government will
announce its views upon publication of the LSB ’s report into the
same.
Fixed recoverable costs in the fast
track – the Government is reviewing this in
conjunction with the new motor process. It aims to bring in a new
extended process by April 2012 with a consultation proposed.
Costs Council – the proposed
establishment of the Costs Council has been put on hold.
Costs and case management – this will
be looked at by a Judicial Steering Group.
Before The Event insurance – the Green
Paper states that the Government “supports” Lord Jackson’s views on
BTW insurance and that it would “welcome a change in culture”. Lord
Young will be consulting with the insurance industry on stand alone
policies for both individuals and small businesses.
Third party funding – it is noted that
there is presently a consultation on a self regulatory code and
that this expires on 3 December 2010.
Predicable damages – the CJC is
setting up a working group with a pilot scheme to be developed by
June 2011.
The Legal Aid consultation
This consultation has already attracted media attention due to
its aim to deliver savings of £350 million from the annual Legal
Aid budget by 2015. In fact this amounts to a relatively modest
saving of 17% against the £2 billion per annum Legal Aid bill, and
many of the measures proposed relate to efficiency rather than a
reduction in availability of Legal Aid.
Many of the proposals within the consultation focus upon
criminal and family Legal Aid. For most categories of civil claim,
Legal Aid is already a relatively rare method of funding.
The main focus in civil claims is upon a tightening of
eligibility criteria so that contributions towards claims are
required for any Claimant with £1,000.00 or more in disposable
capital. The Government also aims to squeeze the fees charged by
both legal advisors and experts.
The Legal Aid Consultant forms an important back drop to the
Government’s work on Jackson’s recommendations. If Legal Aid
criteria are tightened the Government must ensure, in order to
comply with its international obligations, that adequate access to
justice is maintained.
At the same time, as established Legal Aid practices become less
able to rely upon this source of work they will look elsewhere to
find funding for their clients. Under the new regime, impecunious
claimants may be some of the first to take advantage of slackening
of the rules in relation to damages based agreements in litigation,
as this will offer the opportunity to tie costs liabilities to
receipt of damages.
Responses to both
consultations are due by 14 February 2011.
talk to us
save to PDF
The content of this bulletin is provided for the purposes of
general interest and information. It contains only brief summaries
of aspects of the subject matter and does not provide comprehensive
statements of the law. It does not constitute legal advice and does
not provide a substitute for it.