What Jackson means for the public sector

Lord Justice Jackson’s much-anticipated review extends to some 584 pages, which highlights the complexity of the issues the judge has had to consider. As David Knapp, Claire Petts and David Abraham explain, a number of his proposed reforms will require primary legislation from Parliament and, as a consequence, implementation will not be swift.

The following sets out in very short form the reforms proposed by Lord Justice Jackson most likely to affect the public sector:

IN

• Fixed fee for lower value cases
• One way cost shifting
• Contingency fees
• Increased compensation awards
• Computer generated settlements

OUT

• Recoverable success fees
• Recoverable ATE premiums
• Referral fees
• The indemnity principle
• Disproportionate costs

Fixed fees

Jackson proposes a fixed costs regime for all cases allocated to the fast track which will be the great majority of cases valued up to £25,000. The proposals should lead to a reduction in the cost of personal injury claims but we enter a word of caution. Jackson proposes allocating set costs for each stage of a personal injury claim. These are described by Jackson as cumulative. As a consequence, should a claim settle for £15,000 in damages it would appear from his proposals that the fixed costs will still potentially exceed that sum. More detail is required.

One-way cost shifting, recoverable success fees and recoverable ATE premiums

These three proposals have to be read as one. Jackson believes that if defendants in personal injury and clinical negligence claims give up their entitlement to costs when they are successful in litigation, claimants should also lose their right to recover success fees on top of base costs and insurance premiums in respect of defendants’ costs.

The rationale is that success fees and ATE premiums would be no longer necessary. There is, however, an obvious tension here. In motor claims, the vast majority of cases cannot be defended on liability. Contrast that with highways trip claims where robust and effective teamwork between local authorities and their solicitors has seen a number of claimant solicitors withdraw from this field of work. We submit those solicitors will return to this area if they are not at risk as to costs.

In between those positions are the NHSLA (many of whose excellent submissions were cited with approval by Jackson) who, on balance, considered that one-way cost shifting will be to their benefit although, proportionately, they defend more liability cases than motor insurers do.

These proposals may not meet with favour from everyone. However, in order to be implemented, the proposals will require primary legislation from Parliament which is unlikely to be forthcoming in the near future.

Contingency fees and increased compensation awards

Jackson considers that it is desirable that as many funding methods as possible are made available to litigants, including contingency fees. However, he recommends that costs should only be recoverable against paying parties on the conventional basis, i.e. the paying party should not have to pay any contingency fee.

Jackson believes that successful claimants should not be out of pocket. As a consequence, he proposes an increase in awards for general damages of 10% to pay for such fee agreements. A substantial argument can be expected as a consequence, not least because in large claims the damages for pain and suffering form only a relatively modest part of the overall award.

Indemnity principle

This is the common law principle that a party cannot recover more in costs from its opponent than it is obliged to pay its own lawyers. This principle has been subject to much attack through expensive satellite litigation. Repeal of the indemnity principle will clarify the situation.

Referral fees

These costs paid to “claims farmers” have attracted much criticism. Their proposed abolition has been praised in the initial media commentary upon the report. However, our understanding is that abolition will require primary legislation and there are also competition law issues. The satisfaction expressed by some may be premature.

Disproportionate costs

Jackson has specifically criticised a well-known decision of the Court of Appeal in the case of Lownds. Summarising the complicated judgment very briefly, the Court said that a successful claimant could justify disproportionate costs so long as they were necessary. Jackson has taken the positive approach that proportionality must be applied more rigorously to costs. A reasonably straightforward amendment to the Civil Procedure Rules is proposed, reversing the Lownds case.

Computer generated settlement

Jackson was impressed with the IT systems used by a number of insurers which produce valuations of general damages of claims based upon the medical reports being inputted into the system. He is of the view that such software should be used more widely so long as appropriate safeguards are put in place, namely representatives from the claimant’s side are also allowed access to the software. (A number of claimant solicitors have complained that the software used by insurance companies produces excessively low offers.) It clearly makes sense for, if possible, the appropriate software to be developed so that litigation is avoided where there is comparatively little between the parties insofar as the valuation of general damages is concerned.

Miscellaneous

1. Jackson has proposed an additional incentive for defendants to consider settlement via Part 36 of the Civil Procedure Rules. He proposes that if a claimant makes an offer to settle which is not accepted by the defendant and at trial the claimant beats his/her own offer, then 10% should be added to the claimant’s recovery of damages. In a multi track case, the consequences could be expensive for a defendant.
2. Jackson has rejected increasing the small claims limit of £1,000 in personal injury claims. This will be subject to review later.
3. It is proposed that the pre-action protocol period for consideration of a Letter of Claim be extended from three months to four in clinical negligence claims. It is respectfully submitted that a period of six months would be of greater assistance to all parties.
4. Jackson has made various suggestions with regard to the pre-action protocols. He has expressed concern as to the costs incurred and whether there should be a relaxation of certain Directions.
5. It should be noted that, in general, Jackson considers that the disclosure, witness statements and expert evidence provisions within the Civil Procedure Rules are working satisfactorily.

In summary

It is important to note that whilst some proposals such as fixed fees can be brought in relatively simply, more fundamental reforms such as one-way cost shifting, ATE premiums and success and referral fees will require primary legislation. It is unlikely, therefore, that the amount paid out to those solicitors acting on behalf of successful claimants will reduce significantly in the near future.

Many of the proposals should be welcomed by the public sector and it is to be profoundly hoped that Jackson’s proposals will not be implemented in a piecemeal fashion. However, having regard to the general concern about the state of the public finances, any proposals that potentially reduce expenditure from the public purse should be welcomed by whoever wins the next election. As a consequence, whilst reforms of the legal system are rarely a priority for any government, it is just possible that the Jackson proposals may be the exception to that rule.

David Knapp, Claire Petts and David Abraham are partner, associate and head of costs respectively at Barlow Lyde & Gilbert.