Battle lines are drawn on civil litigation costs shake-up
If the insurance industry needed any reassurance about the government’s commitment to the Jackson Review agenda, it got it with the timing of this week’s announcement on civil litigation costs.
Ministry of Justice officials admitted that they had to sift through more than 600 separate announcements en route to the publication of this week’s Jackson Review 'next steps document'.
But barely six weeks after the conclusion of the consultation exercise, justice secretary Ken Clarke QC was in the House of Commons presenting the government’s thinking on how it will implement Lord Justice Jackson’s recommendations.
By contrast, his predecessor Jack Straw sat on the report that he had commissioned for nearly six months without even responding. The drive on litigation costs has been given added momentum from the highest level of government by chancellor of the Exchequer George Osborne, who flagged up the crackdown on ‘no win, no fee’ lawyers in his Budget speech.
Too fast, too furious
For opponents, the quick pace looks more like a rush.
Nigel Muers-Raby, chairman of the Consumer Justice Alliance, says: “We would question the speed at which these changes seem to be happening. While we recognise this new government want to make an impact, have they really had enough time to review all the submissions they’ve received or is this simply a case of pushing ahead with their own agenda?
"We would urge ministers to seriously consider the proposals that have been put before them prior to detrimentally shaking up the legal system.”
The government’s reform package, first unveiled last November, has survived almost entirely unscathed, despite the deep hostility it has sparked from the likes of the CJA.
The only significant concession to opponents surrounds the recoverability of after-the-event insurance premiums. Generally, under the government’s proposals, claimants will not be able to recoup the costs of ATE premiums from defendants if they win a case.
But the MoJ has decided to make an exception for the costs of expert witnesses in clinical negligence cases, which it has accepted would be hard to fund without the safety net offered by ATE insurance.
Reasons to celebrate
Broadly however, the insurance industry can feel pleased with this week’s announcement.
Under the package, announced this week, the government is proposing to:
• stop unsuccessful defendants being forced to pay claimant lawyers’ success fees and ATE insurance premiums;
• allow damages-based agreement, under which lawyers are recompensed by taking a slice of their clients’ damages instead of a fee;
• introduce a 10% uplift in damages; and
• bar successful claimants from paying winning defendants’ costs.
Head of costs at lawyers Hill Dickinson, Paul Edwards, describes the moves to restrict success fees and ATE premiums as “the bluntest and most effective tool that can be used to drive down costs”.
Principal costs lawyer at Cost Advocates, Jonathan Lord, applauds the government’s steadfastness in the face of what he describes as “some serious lobbying from opponents of reform”.
Referral fee woes
The fly in the ointment for many is the government’s decision to kick referral fees into touch pending the introduction of new business structures for law firms.
CS2 lawyers director John Spencer says: “In his report, Lord Justice Jackson unfortunately ignored evidence that such insurer behaviour substantially increases costs. The MoJ proposals are guilty of the same oversight. I believe that a more comprehensive approach is needed to tackle a system that has resulted in a ‘merry-go-round’ of warped incentives and profiteering.”
But Lord agrees with junior justice minister Jonathan Djanogoly, who believes that fees will come down in line with costs as a result of the changes being mooted by
“If referral fees drop significantly as a result of the rest of the proposed reforms, the government may be able to get away with not having to do anything about them.”
Justice for all
And Lord backs Clarke’s argument that access to justice is a two-way street. “The bar to recovery of success fees and ATE premiums will be welcomed by liability insurers," he said.
"Those who preach that those reforms will hinder access to justice should remember that a defendant is also entitled to justice; they should not be required to pay disproportionate lawyers’ fees in claims they decide to settle, or be forced into settling unmeritorious claims out of fear of the punitive costs associated with going to trial where there is always the risk that the Judge may find against them. “
Edwards, meanwhile, agrees that the proposed rules will focus claimants’ minds on the need to curb costs.
“Giving the claimant an interest in the costs of the litigation is a huge step forward. The offset to these changes is a proposed increase in general damages of 10%, but we believe that in quantum terms this will be a price worth paying for costs overall to become proportionate once again.”