Since the introduction of the new civil rules there has been a dramatic drop in litigation. Lord Woolf has said that the issue of proceedings has reduced by 35% while insurance company Iron Trades reports a 54% drop.
So where has it all gone? Various options are being bandied about. The Government maintains the reforms are having the desired effect of forcing lawyers to resolve claims without clogging up the courts, while critics say lawyers are simply avoiding a court system that is in a mess.
So what's really going on ? It's true that claimant solicitors are more reluctant to issue proceeding. They are wary of getting caught up in the "Woolf whirlwind" – not complying with any of the protocols and getting penalised as to the costs.
This comes as no surprise. Many claimant solicitors made it quite clear they had no intention to enter into litigation during the first three months of Woolf. Add to this August – a traditionally quiet month in the litigation calendar – and the shortfall to then is easily explained.
As a result, many believe claimant solicitors are now sitting on a whole stack of claims. If so, what are they waiting for ?
For starters they're waiting to see how the new rules are working. It's still only early days and they know the importance of getting their house in order. They are wary of making mistakes and incurring cost penalties. This is a natural reaction to something radically new – and the Woolf reforms are certainly that.
One of the biggest wake-up calls for lawyers has been that they no longer have the luxury of dictating the pace of litigation. The effect of the new regime is to transfer control over timetables to the court for a "hands-on approach" rather than the old practice of allowing the parties to agree directions or extensions of time. This has come as something of a culture shock and will take some getting used to.
Recent case law backs this up. Control, at least of the litigation timetable, has largely been taken out of the hands of the parties and placed it in the hands of the courts. It also reinforces the message that timetables are there to be adhered to. Claimant solicitors are well aware of this. They have been reluctant to commence litigation under the new regime until they have gauged the attitudes of the courts to case management.
Furthermore, claimant solicitors appear obsessed with checking their cases again and again before issuing. They know only too well that once the action is commenced there is little time available for preparation during the proceedings themselves. They know a fully prepared case can put the defendant on the back foot and at early disadvantage.
The advent of the pre-action protocol is already playing a major role in reducing litigation for personal injury claims. The pre-action protocols are a set of guidelines which have the status of rules and come into play before proceedings are issued. The whole basis is to get rid of claims before issue – and they're working. The protocols provide a mechanism whereby the claimant's solicitor must set out the full nature and extent of the claim and provide documents in support prior to issue. This has enabled insurers to properly address claims and settle at the earliest opportunity. At last it seems that insurers are being given a fair crack of the whip.
Part 36 offers have also contributed to the falling levels of litigation in recent months. Claimants have been making competitive Part 36 offers which are being accepted by insurers. This is further proof that we are now operating in an age where claimant solicitors and defendant insurers are working together. Insurers are taking Part 36 offers seriously as increased costs and penalty interest can result in failure not to accept.
The general inefficiency of many claimant solicitors (and lack of resources for insurers) is also playing a part. For all the hype, training and education in some quarters have been sadly lacking. Some firms are still struggling to come to terms with the new rules. They are learning as they go along and are not confident – or competent – to enter the new style litigation fray.
To sum up, although the fall in litigation since the introduction of the reforms may appear drastic, closer examination reveals it is not totally unexpected. While litigation may not return to previous levels – largely as a result of the pre-action protocols – expect the issue of proceedings to steadily rise over the coming months.
What the Woolf reforms have emphasised is that the courts expect legal representatives and insurers to work together to achieve proportionality with legal costs. The provision for joint experts is the classic example. The protocols encourage a culture of openness and co-operation which can only lead to more pre-issue settlements. Claimant solicitors know that there is little benefit in spinning out cases through the courts where the principle of proportionality dictates that they may not be able to recover the costs doing so.
Fixed fees are also just around the corner which will further reduce any incentive to attempt cost building in litigation and litigate matters to trial.
The climate is changing to promote an early settlement culture. The claimant receives the damages cheque quickly, the solicitors receive proportionate costs and the insurance claims handler clears another risk from the desk. The key phrase is "win to win!"