Driving down the cost of litigation

The Jackson Review could lead to major reform of the costs regime for civil litigation. Clare Taylor assesses the implications for local authorities.

Unsurprisingly, ten years on from the far reaching "Woolf Reforms" (which resulted in an extensive overhaul and much needed reform of the English civil litigation system, now embedded as the "Civil Procedure Rules", Lord Justice Jackson has now been commissioned to review the costs of civil litigation.

Criticisms of the litigation system pre CPR were that it was too complicated, too expensive and it took too long. There was no requirement to exchange information in the early stages and there was no incentive to settle early, resulting in the prolonging of disputes and often injustice where the parties with the deeper pockets as opposed to the better case could tough it out for longer. The CPR introduced better case management powers for the court and require parties to act reasonably and exchange information prior to the issue of proceedings, with a view to settling early and avoiding litigation.

However, ten years on and serious questions are asked as to whether the CPR have really achieved their objectives? In part, yes – cases are probably much more likely to settle early on. But of those cases that make it into the litigation arena, are they resolved more quickly and cost effectively? Probably not. In fact, the system remains plagued by costs that are often completely disproportionate to the sums in dispute and the damages recovered.

The Jackson Review is a critical review of why litigation remains so expensive (despite Woolf's reforms ten years ago) and examines what can be done about it.

Jackson's preliminary report was published on 8 May 2009 and subject to subsequent public consultation. His final report is due to be published on 14 January 2010 and will contain recommendations for the reform of civil cost procedures. Although the contents of this final report are subject to speculation at this stage, the preliminary report gives a good indication of the likely direction for a number of these reforms.

Local Authorities – what does it mean to them?

Local authorities can find themselves in the civil litigation arena across a broad spectrum of matters including: County Court Proceedings; High Court Proceedings; Judicial Review Proceedings; Possession Proceedings; Enforcement Proceedings; Bankruptcy and Insolvency Proceedings; Housing Disrepair Claims; Injunctions and Fraud.

Jackson's review on costs will impact upon the whole of the civil litigation system and therefore applies equally across all of these areas.

Local public authorities are funded by taxes and are accountable for the way in which the authority is managed financially – they have to operate within strict annual budgets. This in turn places restrictions upon the amount of money available to deal with claims and litigation. Accordingly, any reform to make litigation more cost effective is to be welcomed and particularly by those in charge of spending the public's purse.

Jackson's preliminary report is lengthy, consisting of 64 chapters (and 30 appendices) reviewing all aspects of the current costs rules as well as considering procedural areas where costs problems consistently arise. As such, the report in its entirety is too lengthy for consideration here but some of the main areas of likely reform are worthy of note:

Likely areas of reform

Jackson has admirably been unafraid to challenge well established legal principles that have to date in some respects been untouchable and the report has great potential in the various proposals for reform that are outlined.

He challenges whether we should retain the overriding centuries-old principle that the loser should pay the winner's costs, and which is intended to deter the bringing of unmeritorious claims. It is not likely that this principle will be abolished in its entirety but it could be partially disapplied in certain areas. Can we justify the concept of the winning party recovering all costs reasonably incurred, when that looks increasingly out of step with other jurisdictions?

Jackson notes that in light of the potential adverse cost consequences of losing litigation, litigants try and protect themselves by expensive insurance. In looking at ways of funding litigation, litigants are often entering into conditional fee arrangements ("CFA's") i.e. no win, no fee. But the expensive insurance premiums and success fees charged by lawyers under CFAs has only increased the cost of litigation. Jackson questions whether we should abolish recoverability of ATE premiums and success fees and suggests an overhaul of CFA cases involving capping the success fees charged by lawyers. Consideration has also been given to alternative forms of funding by way of contingency fees or a “contingency legal aid fund” paid for through a proportion of each winning claimant’s damages.

There is a far-ranging breadth of type of civil litigation case and other legal commentators praise Jackson for accepting that in relation to costs, there is no 'one-size-fits-all' approach and advocate that in complex, high end commercial litigation cases, costs have to be looked at against the backdrop of the procedures and practice employed in those cases. As well as consideration of the various funding options available to litigants and their impact on the escalation of costs in litigation, Jackson has therefore also reviewed the litigation process itself and how that might be reformed with a view to reducing costs.

Procedures on evidence and disclosure (phases in the litigation that can be notoriously cost intensive) are reviewed. Jackson suggests that disclosure should be limited to the documents on which a party relies (with permission to seek specific disclosure from his opponent). The use of e-disclosure is also encouraged but within agreed limited boundaries. Jackson also suggests that witness statements should be scaled down to address only the issues in dispute  –seemingly obvious but unfortunately, in practice, not necessarily so. Cost sanctions would be imposed for the introduction of superfluous material.

In appropriate circumstances, it may mean the use of wasted cost orders against the legal advisers. Whilst this may sound harsh to us lawyers, this would ensure a fast reduction in the irrelevant material that is so often unfortunately produced.

Serious consideration has been given to controlling costs either by extending the fixed cost regime or by allowing courts to have greater case management tools, such as cost management orders, a benchmark or tariff of costs, and, in exceptional cases, cost capping.

Conclusion

Jackson's final report containing his recommendations is to be on 14 January 2010. Whilst the report was not government commissioned, it was commissioned by the Master of the Rolls.   The senior judiciary are therefore behind the review and will do what they can to ensure that the final recommendations are implemented. Other legal commentators note it will likely be published just before a general election and quite rightly point out that any new government in the current economic climate is going to face serious economic issues (particularly a large public sector deficit) and will therefore be looking for any areas where savings can be made. If Jackson's proposed reforms are implemented and they reduce the total amounts paid out in legal costs, this would have a positive knock on effect on the budgets of local government engaged in civil disputes and funded by the public purse.

Clare Taylor is a partner and heads up the Dispute Resolution and Litigation team in Pinsent Masons Manchester office.