Foil president Dan Cutts on the good, bad and ugly details of Lord Justice Jackson’s review of civil litigation costs

I was hoping for a gentle introduction to my role as Foil’s new president, however 584 pages of Jackson have rather disabused me of that notion.

An enormous amount of time and effort has gone into the report. Not just from the man himself but from Insurers and Insurance law firms in providing data, making submissions and attending mediations. The reaction from the claimant community has been swift and hostile. I think on the defendant side of the fence we have to be reflective and measured. Above all else Insurers need certainty to run their businesses and competing initiatives on costs and process or delay will not help.

Lord Justice Jackson has accepted that costs in personal injury litigation are disproportionate and the CFA “no win, no fee” agreements have been the major contributor this. He has also accepted that the defendants have paid a heavy price for the access to justice that CFA’s have provided.

As such, he has put forward a wide ranging package of measures. They are all interrelated and look at both driving out of cost and the improvement of behaviours whilst permitting Claimant solicitors to make a reasonable profit.

So, where does this leave us?

The report is simply a set of recommendations. They follow considerable consultation. However to progress they need to be taken up and adopted by the government. To implement Lord Justice Jacksons review will require nine Acts of Parliament. There will inevitably be a General Election and what is at his point in time “legal” may become “political."

It is my hope we get some clarity as to how this report slots in with existing costs and process initiatives. April will see the introduction of the Ministry of Justice motor process. Jackson has suggested this be monitored to see if it leads to costs being kept proportionate or whether costs in fact increase due to satellite litigation. Jackson has also suggested lawyers should not be permitted to pay referral fees and simultaneously the Legal Services Board Consumer Panel has sought to raise this as its first major project. Sooner or later all of these initiatives must be pulled together.

Many have mentioned Lord Justice Jackson’s review in the same breath as Lord Woolf’s Report from 1996. True there are similarities: both aim to reduce cost and both suggested a regime of fixed fees. Lord Woolf introduced the overriding objective – namely “saving expense” and “proportionality”, however evidently we need to learn from history. Expense has not been saved and litigation costs are not proportionate. This is because the scheme suggested by Woolf was modified (fixed fees removed) and supplemented – CFA’s were added.

The same mistakes will be made again if the various costs and procedural initiatives that are ongoing at present are not joined up and if the ultimate solution is not thought through and holistic.

Claimant solicitor’s costs are the mathematical product of three factors: the number of hours, the hourly rate and the success fee. Under our present system every one of those factors is said to be regulated. The number of hours is approved by District Judges, the hourly rate is set by the Advisory Committee on Civil Costs, and the success fees are set out in the Rules or assessed by District Judges. Yet, despite this regulation, costs have grown to be disproportionate. Where did Woolf’s “proportionality “ go ?

Lord Justice Jackson is suggesting that a Costs Council be established to look at reviewing fast track fixed costs and hourly rates.

In my opinion this body should be tasked with looking at the overall effect of all costs measures including the approach taken by District Judges and Costs Judges.

Unless we have a joined up approach we will repeat the mistakes made with Woolf.

Much will depend on how the various stakeholders adapt to any change. The framework within which personal injury claims are dealt with is “legal “ but the end result depends very much on how the claims industry – lawyers and insurers – react. Time has shown us that it’s as much about behaviours as it is rules.

Lord Justice Jackson has now given the claimant a financial interest in his or her own legal costs. The “success" element will now come out of damages and not from the insurer. This should drive better behaviours.

Until we get the Government reaction to Lord Justice Jacksons report we will not get certainty. The Insurance Industry needs and is entitled to certainty. Let’s hope that we get that, and soon.

Dan Cutts is president of the Forum of Insurance Lawyers (Foil) and director of insurance at Weightmans.