Lord Justice Jackson -

Civil litigation costs:

Final Report
- Implications for the Defendant Community
Contents

Introduction 1
Implementation - Phases and timetable 1
Application 2
Financial impact 2
Table A - Principal recommendations 3
Table B - Impact by Line of Business 4

Appendix 1 5
Case management 5
CFA funding 6
Costs control 7
Fixed costs in the Personal injury
fast track 8
Fixed costs in litigation generally 10
General damages in personal injury –
Neutral calibration 10
Non-CFA funding 10
Pre-action protocols 11
Process and procedure 12
Qualified one way costs
shifting in personal injury litigation 12
Referral fees 13
Small claims limit (Personal injury) 13
Lord Justice Jackson was appointed to
carry out a fundamental review of the
costs in civil litigation in England and
Wales. On January 14 2010 he published
his final report. In a number of areas he
found costs to be both excessive and
disproportionate and has recommended
substantial changes. However, the road to
implementation will be long and winding
and it must be accepted that the litigation
environment mapped out within the report
may never be fully realised.
The report’s major focus is on personal
injury actions but the recommendations
impact all areas of civil litigation. The
recommendations with the greatest
potential impact are summarised at Tables
A and B. The recommendations are
explained in greater detail at Appendix 1.
Implementation – Phases and
timetable
The report is clear that the
recommendations are to be considered
an interlocking suite of reforms, requiring
implementation en bloc in order to have the
desired effect of promoting access to justice
at proportionate cost. However, there is no
guarantee that the litigation environment
envisaged by Jackson will be reached in its
current form, if at all.
The recommendations may be broadly
split into those that can be implemented by
amendment of the Civil Procedure Rules
(CPR) and those that will require primary
or secondary legislation. The CPR can
be amended relatively quickly, with those
measures potentially in place by the end of
2010.
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Passing primary legislation is a much
slower business. With a general election
taking place early this year and in the face
of competing demands on parliamentary
time the required legislation is unlikely to
come into force before mid-2012. That said,
the two major changes of rendering ATE
insurance premiums and a Success Fee
uplift irrecoverable from the paying party
require nothing more than the removal of
two legislative sections from the statute
books without having to draw up anything
to replace them.
The Ministry of Justice for its part has said
simply that it will “look at [the] package of
recommendations in depth and will set
out the way forward in due course”. The
Civil Justice Council has been tasked with
immediate non legislative implementation.
Council members met on 11 March 2010
specifically to explore approaches to
implementation.
The views of whatever Government is in
power following the General Election cannot
be known. However, in December 2009,
David Cameron delivered a speech in which
he criticised ‘compensation culture’ and
the “commercialising of lawyers’ incentives
to generate litigation, through the system
of enhanced success fees and referral fees
which have led to a growth in ambulance
chasing.” Given the current economic
climate and the Government’s own hefty
litigation bill through the NHSLA as well as
central and local government it seems that
the Jackson report is unlikely to be ignored.
The reforms are likely to be implemented
in phases:
• Phase 1 – fixed costs but to include
success fees and ATE recoverability.
Success fees are likely to be at tariff
figures of 12.5% motor, 25% EL
accident, variable % EL disease, 45%
PL accident. For completion circa.
Q4 2010.
• hase 2 – New decision engine for
P
personal injury damages tariff with
judicial calibration. Availability circa.
Q3 2011.
• hase 3 – Main reforms to include
P An uplift of 10% on the level of damages
irrecoverable success fees and ATE
insurance, uplift in general damages
of 10%, new Part 36 rules. For
implementation 2012 as primary
legislation is needed.
Application
It appears highly likely that the new
arrangements, if implemented as
recommended, will impact claims
made on or after the go live date. So all
claims intimated prior will be resolved
on the current costs rules. There is no
retrospective effect.
Financial impact
The claims community have set up an
internal review working party to explore
the implications of the Jackson reforms
generically and by class of business. The
next steps are to review the fixed fee
structures proposed by Jackson and put
these into the context of current claims
settlements and costs payable thereon.
Our initial view when presented with
Jackson’s report was that the changes
envisaged would produce a generally
favourable financial result for defendants.
However, upon further review we
have come to the conclusion that the
recommendations are in fact likely to prove,
at best, costs neutral. If implemented as
proposed they may provide savings by the
removal of success fees and ATE premiums
from a defendant’s liabilities but this must
be set against the significantly inflationary
effect of the proposed damages calibration
and judicial valuation uplift.
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awarded by the judiciary is likely to represent
an increase of something like 20% - 30%
on the level of damages that we currently
negotiate with claimants on unlitigated and
non-trial cases (the overwhelming majority
of settlements). Furthermore, the proposed
amendment of the Part 36 rules to increase
the penalty on defendants who fail to beat
a claimant’s offer will inevitably mean that
defendants’ own offers will have to be
increased somewhat in order to buy off
this risk.
Finally there is the implementation risk.
Fierce lobbying from those whose interests
are not served by a reduction in the costs
attributable to litigation is already underway
and with the reforms being introduced, at
the quickest, over a period of 2 years or
more there exists the nightmare possibility
that the process will stall half way through,
with the damages increases having been
implemented but without the counterweight
of the legislation required to remove
success fees and ATE.
We will be monitoring this situation
closely and adding our voice to industry
representations that aim to ensure as
smooth and painless a transition as
possible into the new litigation costs
environment. Further Bulletins will follow
as that environment takes shape.
Our thanks go to Simon Denyer and
DWF Solicitors for their considerable
assistance in providing material for
Appendix 1.
Table A - Principal recommendations

Implementa- Potential
Inflation
Recommendation Defence perspective tion mecha- implemen-
direction
nism tation date

Fixed costs in personal injury Fast Model 1 could be implemented first featuring CPR Q4 2010
Track (claims up to £25,000). Model 1 success fees for Motor, EL and PL of 12.5%,
with Success fees; model 2 without. 25% and 45% respectively. Greater certainty as
Pre-trial costs in non personal injury to the eventual liability and aid accurate reserving.
cases capped at £12,000.
Part 36 – where a defendant fails An inflationary driver on damages spend. CPR Q4 2010
to beat a claimant offer - 10%
enhancement of damages.
Controls on the costs of litigation – Should help control the costs of litigation. CPR and Q4 2010
encouraging ADR, robust approach Practice
to costs management, controls on Direction
the costs of disclosure and witness
evidence.
A working party to consider a Universal adoption of Claims Outcome Advisor Stakeholder Q3 2011
“transparent and neutral” calibration or similar system. Should increase certainty, Working party
of judicial personal injury damages. reducing quantum arguments and speeding up
settlement but, given judicial involvement in the
working party, probably at a higher level than
presently.
Success Fee uplift to be irrecoverable A saving on claims costs. The fallback of success Legislation Q2 2012
from paying party. fees and premiums remaining recoverable is still
favourable.
ATE insurance premium to be Saving on costs. ATE premiums are often set at Legislation Q2 2012
irrecoverable from paying party a substantial proportion of a claim’s full value.
Judicial valuation of compensation for A significant inflation driver. Likely to mean an CPR - in Q2 2012
Pain Suffering and Loss of Amenity to increase on current negotiated settlement levels tandem with
be increased by 10%. of around 20% - 30%. legislation on
SFs and ATE
Fixed costs without success fees Fixed costs represent a saving on current costs CPR – in Q2 2012
(model 2). levels. tandem with
legislation on
Indemnity Principle to be replaced Successful defendants unable to recover costs SFs and ATE
by Qualified One Way Costs Shifting. from claimants who lose/abandon litigated
(Personal Injury litigation only). claims. Not a significant financial offset.

Encouraging greater take-up of BTE Could facilitate the bringing of claims and so lead None Ongoing
insurance (but not compulsory) to an increase in numbers. required

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Table B - Impact by Line of Business

Employers Public Professional

Recommendation Motor
liability liability indemnity

Fixed costs in personal injury Fast Track (claims up to

£25,000). Model 1 with Success Fees; model 2 without.
Pre-trial costs in in non personal injury cases capped at
£12,000.
Part 36 – where a defendant fails to beat a claimant offer
- 10% enhancement of damages.
Controls on the costs of litigation – encouraging ADR,
robust approach to costs management, controls on the
costs of disclosure and witness evidence.
A working party to consider a “transparent and neutral”
calibration of judicial personal injury damages.
Success fee uplift to be irrecoverable from paying party.

ATE insurance premium to be irrecoverable from paying

party
Judicial valuation of compensation for Pain Suffering and
Loss of Amenity to be increased by 10%.
Fixed costs without success fees (model 2).

Indemnity Principle to be replaced by Qualified One Way

Costs Shifting (Personal injury litigation only.)

Encouraging greater take-up of BTE insurance (but not

compulsory)

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Appendix 1
Detailed analysis and comment
Case management
In recent years a number of the larger court
centres have been developing specialisation
of judges in multi track cases. Where
practicable, cases should be allocated to
judges who have relevant expertise; as far
as possible, a case should remain with the
same judge; case management directions
for each type of multi track case of common
occurrence should be standardised;
and case management conferences and
other interim hearings should be used as
effective occasions for case management,
not just formulaic hearings that generate
unnecessary costs.
Enforcement of rules and directions – the
courts should also set realistic timetables for
cases and not impossibly tough timetables
in order to give an impression of firmness.
Courts at all levels have become too tolerant
of delays and non-compliance with orders
and the balance needs to be redressed. On
an application for relief from any sanction
imposed for a failure to comply with any
rule, practice direction or court order, it is
recommended by Jackson that the list of
factors to be considered by the court in
CPR rule 3.9 be repealed and replaced by:
“(a) the requirement that litigation should be
conducted efficiently and at proportionate
cost; and (b) the interests of justice in the
particular case.” This does not preclude
the court taking into account all of the
matters currently listed but it simplifies the
rule and signals a change of balance. It is
also recommended that, if and in so far as
time allows, judges or clerks on their behalf
should contact parties at appropriate stages
in order to enquire what progress has
been made in complying with orders and
directions.
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Comment: It remains to be seen whether
this change in the rules will bring about the
change Jackson is seeking. Lord Woolf
started with the same aims in his Access
to Justice report and those aims were
continued by the draftsmen of the CPR,
but once the CPR were in force the Court
of Appeal often offered escape routes from
the sanctions that would otherwise have
applied.
Court of Appeal guidance – the criticisms
of the Court of Appeal for giving inconsistent
guidance are not accepted. However, the
Master of the Rolls should designate two
lords justices to be called upon to consider
issues concerning the interpretation
or application of the CPR to promote
consistency of guidance.
Alternative dispute resolution – both
mediation and joint settlement meetings
have achieved a satisfactory resolution of
many disputes, including personal injury
claims. These are under-used and there
should be a campaign to ensure that all
litigation lawyers, judges and the public
are properly informed of how ADR works
and the benefits it can bring. A handbook
should be prepared, explaining what ADR is
and giving details of all reputable providers.
However, it should remain non - mandatory
for all proceedings.
There is a widespread belief that mediation
is not suitable for personal injury cases – this
is incorrect. Mediation is capable of arriving
at a reasonable outcome in many personal
injury cases, and bringing satisfaction to
the parties in the process. However, it is
essential that such mediations are carried
out by mediators with specialist experience
of personal injuries litigation.
Witness statements and expert evidence
– to curb the problem of over long
statements, case management measures
and costs sanctions should be used. No
rule change is required - all that is required
is effective use of the existing rules:
• MC – in appropriate cases (i.e. where
C
proportionate to do so) the best way
to avoid wastage of costs occurring
is for the court to hear argument at
an early CMC about what matters
need to be proved and then to give
specific directions relating to witness
statements and the nature and scope
of any expert evidence.
• osts sanctions – these should be
C
applied against the party responsible
for adducing overlong or irrelevant
statements. An adverse costs order
could (in the case of an otherwise
successful party) be that the party is
not to receive its costs of preparing
the statement, or (in the case of an
otherwise unsuccessful party) that the
party is to pay its opponent’s costs on
an increased basis.
• osts estimate - a party seeking
C
permission to adduce expert evidence
should provide an estimate of the costs
of that evidence to the court.
• nnex C practice direction pre-
A
action conduct – this currently
provides guidance on instructing
experts applicable to all cases, except
those where a specific protocol
contains provisions about instructing
experts. One size does not fit all and
this should be repealed.
• oncurrent evidence – in a procedure
C • Claimant solicitors will face a change of
developed in Australia whereby
opposing experts give evidence
concurrently (known as “hot tubbing”),
the experts meet pre-trial to identify
where they agree and where they
disagree. At trial, experts in the same
discipline are sworn in at the same
time and the judge chairs discussion
between the experts. The pre-trial
document recording the matters upon
which the experts disagree serves as
the agenda. Counsel can put questions
to the experts and the experts can put
questions to each other. This should
be piloted, but only in cases where the
parties, experts, lawyers and the judge
all consent. If the results are positive,
consideration should be given to giving
the judge the power to direct that the
concurrent evidence procedure be
used in appropriate cases.
CFA funding
Success fees and ATE insurance
premiums – these should cease to be
recoverable from unsuccessful opponents
in civil litigation. Lawyers will still be able
to agree CFAs with their clients, but any
success fee will be payable by the client,
most likely out of the damages awarded to
them. ATE can still be taken out by parties if
they choose to do so at their own expense.
These recommendations, if accepted,
would require primary legislation.
Comment:
• Opposition to these reforms is to be
expected from a number of interest
groups which may delay or even
prevent implementation
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• The amount of success fee which
culture with costs pressure from clients lawyers may deduct be capped at
- on a CFA, the client will have a direct 25% of damages, excluding any
financial interest in his solicitors keeping damages referable to future care or
their fee to a minimum - the greater the future losses.
base costs the greater the success fee
and the more damages will have to be • he reward for making a successful
T
deducted. Claimants’ solicitors have claimant’s offer under CPR Part 36
of course been in this position before (i.e. an offer which the defendant fails
i.e.pre-2000. to beat at trial) be enhanced by an
award of an additional 10% of any
• It is anticipated that lower success fees damages (possibly less than 10% in
will be agreed, with success fees in claims over £500,000).
the order of 0 - 20% becoming more
common. Comment:
• The increase of 10% will be to general
• One area of concern may be a potential
damages as currently set in judicial
rise in the number of unmeritorious
awards Will judges react to the
claims where it may be necessary to
perceived current low levels by starting
make a commercially sensible nuisance
to make higher awards before any
offer and pay costs rather than incur
official change or will current levels of
the higher overall costs of winning the
PSLA awards be maintained? In any
case which will then not be recoverable
event it is likely to be the case that the
because of the changes to the costs
newly calibrated level of damages will
shifting rules. There is a question mark
be more than 10% higher than that at
over whether Jackson’s proposals
which defendant insurers settle the vast
for deterring frivolous claims and
majority of their claims at present since
applications (see below) will be enough
most settlements are achieved before
to do so. However, with lower success
the claim reaches a judge and typically
fees on offer, claimant solicitors may
at lower levels than judges apply.
be more wary of taking on weaker
cases and so they are less likely to be
• The Part 36 proposals could be
pursued in the first place.
perceived as almost penal in nature
but they are intended to encourage
If the above is accepted, in order to assist
defendants to settle where a well
individual (but not corporate) claimants in
judged Part 36 offer has been made.
meeting the success fees out of damages, it
Claimants will need to be adept at
is recommended that:
making early, well judged offers and
Defendants to carefully consider these
• he level of general damages for
T
as before.
pain, suffering and loss of amenity
be increased by 10% across the
board.
Fallback proposals: Control
of Success fees and ATE
premiums
If it is concluded that it is not possible to
turn back the clock to a pre-April 2000
regime, the level of recoverable success
fees and ATE premiums will need to be
rigorously controlled. These proposals could
be achieved by a change to the CPR:
Success fees
• ixed success fees should be
F
introduced where CFAs are commonly
used.
• here should be a period in which
T retainer or prevent recovery of base
the defendant has the opportunity to
admit liability before a success fee is
chargeable or recoverable, particularly
in those cases governed by pre-action
protocols.
• ny element of a success fee which
A The Indemnity principle – this prevents
provides for protection against the risk
of the claimant not accepting a good
Part 36 offer should not be recoverable
from the paying party.
• here a two-stage success fee model
W for Part 36 risks;
is applied and a Part 36 offer is made
and not beaten at trial, the receiving
party should be limited to the level of
success fee that applies at the last
date when he could have accepted the
offer. So for example, in an RTA case
with 12.5% success fee for the period
up to trial and 100% at trial, a claimant
who proceeds to trial and does not
beat a pre-trial Part 36 offer is limited
to a success fee of 12.5% and is not
entitled to 100%. This would overturn
the decision in Lamont v Burton
[2007 CA].
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• ixed recoverable success fees should
F Costs control
not apply to assessment proceedings
Proportionality - ‘Proportionate costs’
and no success fee should be
should be redefined in the CPR by reference
recoverable, overturning Crane v
Canons Leisure [2007 CA]. to value, complexity, conduct and any wider
factors such as public importance. The fact
• here a fixed success fee is claimed
W that costs were reasonable and necessary
by the receiving party, the paying party should not necessarily make them
is entitled to be shown evidence that proportionate. This will allow a judge to
a CFA was in place for the material stand back and make significant reductions
period so as to justify the charge of to costs where they far outstrip damages.
a success fee. Where the claimant
could have used other funding which Comment: This is effectively a comment
would not have resulted in a CFA being on the failure of the test proposed by Lord
used, that should be a valid reason for Woolf in Lownds v Home Office [2002] CA
disallowing any claim for a success fee, to control costs by way of proportionality.
but should not otherwise invalidate the The Lownds test has been said by paying
parties to have been of very little benefit in
costs. This would amend the effect of controlling costs. Adopting the approach he
Kilby v Gawith [2008 CA]. follows throughout the report, Lord Justice
Jackson cuts through the problem and
ATE premiums recommends a more radical approach that
will be welcomed by insurers.
If these remain recoverble:
• o ATE premium should be recovered
n a party recovering more by way of costs
if liability is admitted within the protocol from an opponent than it is obliged to pay
period; to its own lawyers and in recent years has
generated extensive satellite litigation. This
• o ATE premium should be recovered
n should be abolished and in its place CPR
Rule 44.4 be amended so that the court
will allow “reasonable amounts in respect
• remiums should be capped at 50%
p of work actually and reasonably done.”
of damages awarded; and
• i n cases where the ATE insurer is
currently entitled to avoid the policy,
recovery from the insurer should
be allowed with rights against the
policyholder preserved.
Summary and detailed
assessment
Summary assessment - this procedure
generally works well, and should be
retained:
• Guideline hourly rates - the new Costs
Council should review and revise
the GHRs. Insurers will welcome the
pointer that the aim of the GHR should
be to reflect market rates for the level
of work being undertaken, rates which
an intelligent purchaser with time to
shop around for the best deal would
negotiate. GHRs can only be guidelines
or starting points. The judge doing
the summary assessment should
move up or down from those rates, as
appropriate. Existing anomalies to be
looked at:
— Is there any justification for paying
“City” rates to firms of solicitors
based in the City of London but
not doing “City” work? Jackson
believes “City” rates should only be
paid for heavy commercial work.
— What reductions should there be
in hourly rates for personal injury
work, if referral fees are banned or
capped, as recommended?
— With Jackson noting typical
defendant rates often half those
of claimant solicitors, what
factors justify higher rates for
claimant solicitors than those
paid to defendant firms and what
allowance should be made for
those factors?
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Detailed assessment – changes are
recommended including:
• ill of costs - a new format for bills
B
of costs should be developed and
a package of measures to improve
proceedings should be adopted. This
may take some time to develop.
• rocedure – reforms to procedures
P further data collection and time for
ought to be made in the near future
including provisions for interim
payments, shorter points of dispute
and reply, Part 36 offers, provisional
assessment and guideline hourly rates.
Costs management - the judge should
decide in any individual case whether to
adopt costs management as an adjunct
to case management. This course would
be appropriate in any case where there
appears to be a risk of costs becoming
disproportionate either to the sum at stake
or to the complexity of the case. A pilot of
costs management is proposed for multi
track clinical negligence litigation. When the
results of the pilot are known, consideration
should be given to drawing up a scheme for
costs management of all “heavy” personal
injury cases, both pre-issue and post-issue.
Court fees – the current level of court fees
is too high. It is recommended that there
be no further increases, save in line with
RPI rate of inflation and that fees should be
ploughed back into the civil justice system.
Fixed costs in the personal
injury fast track
The costs recoverable for all fast track
personal injury cases should be fixed by
October 2010. These reforms, if they
find favour with the Lord Chancellor
and the Master of the Rolls, could all be
implemented rapidly by the Civil Procedure
Rule Committee, without any need for
primary legislation.
• wo alternative matrices are proposed
T
for RTA, EL accident (ELA) and PL
accident (PLA) claims.
• or EL Disease claims there will be
F
written submissions.
• he proposed fixed costs would not
T
apply in a case where a party acts so
unreasonably that the court makes an
order for indemnity costs against that
party.
Escape clause - the escape clause in the
existing fixed recoverable costs scheme
applies where (a) the court considers that
there are exceptional circumstances and
(b) upon assessment the costs turn out to
be at least 20% higher than the fixed costs.
It is recommended that a similar escape
clause be incorporated in the new fixed
costs regime. There should be no further
escape clauses - if a case is of particular
complexity, it may be allocated or re-
allocated to the multi-track. If a party acts
unreasonably (as opposed to presenting
its case in the normal way and losing) the
court can override the fixed costs regime by
making an order for indemnity costs.
The matrices - of fixed costs for adoption
in RTA, ELA and PLA cases can be found
in appendix 5 to the report at pages 538
and 539. The difference between the
two matrices is that the second (table
B) incorporates an allowance for early
admission of liability. If table B is adopted,
where the defendant admits liability within
the protocol period, discounts of £250
pre-issue or £500 post-issue (i.e. where
quantum only proceedings are issued) will
apply at each stage. As a consequence
of this discount being available, the fixed
costs in table B have been inflated by
£50, to take into account the fact that in a
proportion of these claims the discounted
figure will be paid. This is designed to
influence behaviour, so that defendants
are incentivised to admit liability at an early
stage, thereby increasing the chance of
early settlement.
Example
EL claim between £5,000 and £10,000 in
value:
• ost issue, pre-allocation:
P of damages will, of course, be known. The
£3,175 + 20% of damages
• ost allocation, pre-listing: rises to
P date when the offer should have been
£3,875 + 25% of damages
• ost listing, pre-trial: rises to
P will then recover his fixed costs up to the
£4,775 + 30% of damages
• Trial fee as before
• Add success fees as before
Medical reports and other disbursements
- the sums recoverable for obtaining
medical reports and records should be
capped at the levels currently specified
in the Medical Reporting Organisation
Agreement. (This agreement, dated 2nd
April 2009, was made between liability
insurers and “compensators” and MRO and
provides for capped recoverable costs in
respect of certain expert medical reports
in RTA, EL and PL claims where general
damages do not exceed £15,000.) These
should be regularly reviewed by the new
Costs Council (see below). Prompt steps
should also be taken to secure the fixing of
other disbursements.
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Defendants’ costs - the same fixed
costs regime should apply when costs are
recoverable by defendants as when costs
are recoverable by claimants. Where the
defendant wins on liability, the damages
which were in issue must be assessed for
the purpose of ascertaining the fixed costs
to which the defendant is entitled. This
figure should be the pleaded value of the
claim, or its apparent value on the basis
of the facts pleaded. In the absence of
agreement between the parties, the court
when making an order for costs against
the claimant should state what damages
were in issue. Where the defendant wins
on quantum, in cases where the claimant
fails to beat a defendant’s offer, the amount
court is likely to order (a) the defendant
to pay the claimant’s costs up to the
accepted and (b) the claimant to pay the
defendant’s costs thereafter. The claimant
relevant date. The defendant will recover
his fixed costs (from the matrix) for the
period between the date when his offer
should have been accepted and the date
of judgment. There can then be a set off
between the two sums of fixed costs which
each party is entitled to recover.
Employers’ liability disease cases - it is
not accepted that these cases are a special
category, which should be excluded from
the fixed costs regime. However, some
do have complicating features, which
necessitate allocation to the multi-track
despite the fact that the damages claimed
fall within fast track limits. It is proposed
that Professor Fenn continues his collection
and analysis of data and provides that
material to the claimant and defendant
representatives from the CJC for facilitative
meetings by 31 March 2010. They will then
have until mid May to submit their written
observations which Jackson will then
consider and then recommend a matrix of
fixed costs. Again, this could potentially be
in place by October 2010.
RTA cases not involving personal injury
– these should have a separate set of fixed
costs. The main heads of claim are usually
vehicle damage and cost of hire. Proposed
costs:
• f or claims resolved pre-issue - £626
plus 4% of damages
• f or claims resolved post-issue -
£1,583 plus 9% of damages.
• i f case goes to trial - the trial advocacy
fee in CPR Part 46 should be added to
those fixed costs.
Comment: There are potential costs
savings here for insurers. However, if the
above recommendations are accepted,
Jackson himself comments that the rules
to implement them will need to be drawn
with care, in order to prevent opportunities
for satellite litigation. It will also be necessary
to watch closely how those rules operate
in practice.
Assuming a regime of fixed costs for
personal injury claims is put in place by
October 2010 and then at a later date,
success fees and ATE premiums become
irrecoverable and the payment of referral
fees is banned or capped, how should
these reforms be integrated? Jackson
puts forward a ‘roadmap’ which both rule
makers and the legislature might consider
following:
• ll provisions in the rules entitling
A in person should be increased to £20 and
parties to recover success fees will
be repealed including the provisions
regarding recoverable success fees
in the rules and matrices concerning
recovery of fixed costs. Solicitors
will be free to advertise the levels of
success fees which they will charge
and will compete upon the basis of
which solicitors are charging the lowest
success fees to clients, rather than
which solicitors can pay the highest
referral fees.
• here should be an easy mechanism
T Colossus and Claims Outcome Advisor
available for clients to resolve any
disputes or complaints over deductions
from damages e.g. a simple arbitration
service.
Fixed costs in litigation
generally
Costs cap - the report proposes a limit of
£12,000 on the pre-trial costs that can be
recovered in any non-personal injury Fast
Track case unless an order for indemnity
costs is made. This sum to include
counsel’s fees, experts’ fees, disbursements
and all other pre-trial outlays.
Costs council - if a fixed costs regime is
adopted, a Costs Council should be set
up to review the fixed costs matrices and
overall upper limit for fast track fixed costs.
It could also set Guidelines Hourly Rates for
summary and detailed assessments (which
should come into effect on 1 April each
year) and give guidance upon recoverable
fees for counsel and experts.
Litigants in person – if all costs in the fast
track are fixed, then the amount recoverable
by litigants in person in fast track cases
should never be more than two thirds of
the level of fixed costs that would have
been recovered if they had been legally
represented. The hourly rates for litigants
10
1796-Special Technical Bulletin – March 2010
Comment:
reviewed periodically.
• This should remove an area of dispute/
extra costs.
Fixed costs outside the fast track – it is
premature to introduce fixed costs for lower
• Jackson envisages that such calibrated
value multi-track cases for the time being
software systems are likely to be more
but this should be considered further after
widely used and to carry greater weight
evaluation of the fast track regime.
in negotiations.
General damages in personal However, he stresses that in contested
injury – Neutral calibration cases, the judge will still consult textbooks
and law reports, as now. The judge will
The two main software systems currently
be free to have regard to the computer
used by insurers in England and Wales are
generated figure but any figure for general
damages derived from textbooks, law
(COA). There is also a recently launched
reports or software systems can only be a
online quantum assessment tool, “SMART
starting point - the judge will then adjust that
Evaluate” which is currently being piloted by
figure as necessary, in order to take account
a number of law firms.
of the particular features of the case.
Calibration - Jackson believes it should
Non CFA funding
be possible to produce a transparent and
“neutral” calibration of existing software
Jackson envisages several methods of
systems to assist in calculating general
available funding in addition to CFAs:
damages, which could encourage the early
settlement of claims. A working group
BTE insurance – there is no
should be set up by the CJC consisting of
recommendation that motorists or any
representatives of claimants, defendants,
other potential defendants be compelled
the judiciary and others to take this matter
to take out BTE on behalf of those they
further. The calibration should accord
might injure. However, positive efforts
as nearly as possible with the awards of
should be made to encourage the take up
general damages for PSLA up to £10,000,
of BTE insurance by householders as an
which would be made by the courts if
add-on to household insurance policies.
cases were litigated. Jackson believes that
There is also an indication of support for
the presence of two district judges on the
making an amendment to Reg. 6 Insurance
working group should enable a reasonable
Companies (Legal Expenses Insurance)
view to be taken of the data derived from
Regulations 1990 to provide that the
settled cases.
insured’s right to choose a lawyer arises
when a letter of claim is sent on his or her
Format of medical reports - if a particular
behalf to the opposing party – however,
format of medical report would assist in the
before any such amendment is considered,
effective use of properly calibrated software
the effect upon BTE insurance premiums
tools, the working group should also give
must be considered.
guidance on how medical reports should be
prepared.
Comment: A number of BTE insurers
receive referral fees and the proposed
abolition of referral fees is likely to increase
the BTE element of the insurance premiums
and may make this element prohibitively
expensive or stifle the take up of BTE.
Contingency fees – these should be per-
mitted i.e. fees which (a) are payable if the
client wins and (b) are calculated as a mul-
tiple of the ordinary fee or a percentage of
the sum recovered. The defendant will only
be liable for the ordinary fee, the balance
being paid out of the claimant’s damages.
These agreements should also be regulated
and should not be valid until countersigned
by an independent solicitor to ensure proper
advice has been given as to the most ap-
propriate funding arrangement. Personal
injury litigation should not be exempted.
However, the cap on deductions from
damages should be the same for CFAs and
contingency fee agreements. It is recom-
mended that no contingency fee deducted
from damages should exceed 25% of the
claimant’s damages, excluding damages
referable to future costs or losses.
Self funding schemes – these had been
proposed as means of funding litigation in
the event that the present regime for CFAs
is changed. However, there is no strong
indication of financial viability of either a
Contingency Legal Aid Fund (“CLAF”) or
Supplementary Legal Aid Scheme (“SLAS”)
but the use of these as forms of legal fund-
ing for civil litigation should be kept under
review.
Legal aid – no recommendation for the ex-
pansion of legal aid but a plea for no further
cutbacks in availability or eligibility.
11
1796-Special Technical Bulletin – March 2010
Third party funding – in principle this is
beneficial and should be supported – it
is most readily obtained for high value
cases with good prospects of success.
Regulation is not currently required but
it is recommended that (i) a satisfactory
voluntary code, to which all litigation funders
subscribe, should be drawn up. This
should contain effective capital adequacy
requirements and should place appropriate
restrictions upon funders’ ability to with-
draw support for ongoing litigation; (ii) the
question whether there should be statutory
regulation of third party funders by the FSA
ought to be re-visited if and when the third
party funding market expands; (iii) third party
funders should potentially be liable for the
full amount of adverse costs, subject to the
discretion of the judge.
Pre-action protocols
General protocol - substantial parts
of the 2009 Practice Direction – Pre-
Action Conduct (PDPAC) should be
repealed as it often leads to pre-action
costs being incurred unnecessarily. Cost
sanctions will apply to curb unreasonable
behaviour. This will not absolve parties
from the obligation to conduct sensible
pre-action correspondence. For the
avoidance of doubt, Jackson proposes
that the PDPAC should contain a provision
along the following lines: “In all areas of
litigation to which no specific protocol
applies there shall be appropriate pre-
action correspondence and exchange of
information.”
Personal injury and clinical negligence
- the majority of personal injury claims and
a substantial minority of clinical negligence
claims are resolved during the protocol
period. The CJC is intending to conduct a
review of pre-action protocols during 2010.
Professional negligence – the report
recommends that the existing protocol be
retained without amendment.
Enforcement - there are serious problems
of non-compliance and both claimants and
defendants (or their insurers) are culpable.
The remedy is for primary legislation to
permit applications to be made before
proceedings have been commenced, in
respect of breaches of pre-action protocols.
The remedies which should be available
upon such application should be any of the
following directions:
• hat the parties are relieved from the
T
obligation to comply or further comply
with the protocol.
• hat a party do take any step which
T
might be required in order to comply
with the protocol.
• hat the party in default do pay such
T
costs as may be summarily assessed
by the court as compensation for
losses caused by that default.
• hat the party in default do forego
T
such costs as may be specified in the
event that it subsequently secures a
favourable costs order.
• I f the case is in the fast track, that the
fixed costs regime do cease to apply to
that case.
Comment:
• Is this a dangerous proposal with
potential to generate, rather than
save costs? This is a completely new
procedure which even Jackson himself
stresses must not be allowed to “get
out of hand.” Jackson recommends
that the Court of Appeal take an early
opportunity to give firm and consistent
guidance to stamp out frivolous
applications under the new provision
and pre-action conduct which makes a
mockery of the protocols.
• This addition would need primary
legislation and may therefore, even
if accepted, take some time to be
implemented.
Process and procedure
MOJ new process for RTA claims - the
MOJ’s new process for handling personal
injury claims arising out of road traffic ac-
cidents where the amount in dispute is up
to £10,000 and liability is admitted, should
be monitored to see whether it leads to
costs being kept proportionate, or whether
costs in fact increase due to satellite litiga-
tion. Jackson has concerns about the
sheer complexity of the new process. There
should be discussions between claimant
and defendant representatives, under the
CJC, to develop a simpler and shorter pro-
cess for all fast track personal injury cases.
Personal Injury Multi-Track Code – this
code for handling personal injury claims
above £250,000 was agreed between APIL,
FOIL and a number of insurers and has
been piloted since July 2008 and has just
been extended. One of the underlying aims
is to focus on rehabilitation of the injured
claimant, agreed timetables and case plan-
ning that promotes resolution by negotia-
tion rather than trial and it has worked well.
However, it should remain a voluntary code.
12
1796-Special Technical Bulletin – March 2010
Part 36 offers - CPR 36.14 should be
restored to its original wording so that costs
consequences depend on the claimant
failing to better an offer, rather than failing
to “obtain a judgment more advantageous”
than an offer. So, even if the claimant fails
to beat the offer by a matter of pennies,
the costs consequences will flow and if he
beats it by a matter of pennies, they will not.
This reverses the effect of Carver v BAA plc
[2008] CA.
Medical reporting organisations – the use
of these is sanctioned by para 2.15 of the
protocol and has expanded since Wool-
lard v Fowler (in which Senior Costs Judge
Hurst held that fees paid to an MRO were
recoverable as a disbursement under the
fixed recoverable costs scheme):
• ROs have had the overall effect of
M litigation
controlling costs of obtaining medical
evidence and at the moment, no
change in the rules is recommended to
reverse the effect of Woollard v Fowler.
• owever, the effect of MROs upon
H costs if the claim is unsuccessful, but
costs must be kept under close
scrutiny, possibly by the new Costs
Council. If ever it appears that their
involvement is increasing the costs
of the process, serious consideration
should be given to rule change.
• irect communication should always
D is a reasonable one for him to pay
be allowed between a solicitor and
any medical expert whom the MRO
instructs on behalf of that solicitor and
this should be dealt with in the MRO
Agreement, when it comes to be
renegotiated in March 2010.
Medical reports in fast track cases –
paragraph 2.14 of the protocol is intended
to promote the use of one medical expert
only in lower value personal injury cases.
Concerns have been expressed that this is
not working effectively. There is force in the
proposal that the defendant should have a
limited period in which to put questions to
the claimant’s expert. There is also force
in the proposal that the defendant, having
approved the claimant’s choice of medical
expert, should not then instruct a separate
expert without good reason. However no
separate recommendations are made as
the CJC is about to embark upon its own
review of protocols.
Rehabilitation - rehabilitation is an essential
part of the overall cost of the compensation
process and all stakeholders involved in per-
sonal injury claims are urged to support the
Rehabilitation Code but no specific recom-
mendations are made.
Qualified one way costs
shifting in personal injury
In return for ATE insurance premiums not
being recoverable, Jackson proposes one
way costs shifting: where the claimant will
not be required to pay the defendant’s
the defendant will be required to pay the
claimant’s costs if the claim is successful.
However, this should be qualified by a
safeguard:
• costs ordered against the claimant shall
not exceed the amount (if any) which
having regard to all the circumstances
including (a) the financial resources of
the parties to the proceedings and (b)
their conduct in connection with the
dispute to which the proceedings relate.
• This is intended to mean that a
successful claimant will pay the
Defendant’s costs if (a) he has
behaved unreasonably (including
the pursuit of frivolous and fraudulent
claims and in declining a Part 36
offer which he fails to beat) or (b) the
Defendant is uninsured and not self
insured or (c) where the Claimant is
conspicuously wealthy.
Jackson proposes qualified one way costs
shifting for bodily injury claims and believes
that this may, subject to consultation, be ex-
tended to certain other types of claims but
does not propose it applying to commercial
disputes. There is therefore no proposal that
one way costs shifting apply in professional
negligence claims.
Referral fees
Lawyers should not be permitted to pay
referral fees. If this is accepted, it could be
implemented by primary legislation, which
would prohibit anyone from buying or selling
personal injury claims or the Solicitors’ Code
of Conduct could be amended, so that
solicitors are prohibited from paying referral
fees. If not accepted, referral fees should be
capped at a more modest figure, say £200,
to reflect normal marketing costs.
Comment:
• This proposal could be difficult to
implement with parties finding a way
around any ban.
• If referral fees are removed, where does
that leave current fixed costs which
clearly allow for a substantial referral
fee – will fixed costs levels need to be
renegotiated?
13
1796-Special Technical Bulletin – March 2010
• The landscape will change dramatically
in or after 2011 when Alternative
Business Structures come into being
but Jackson does not believe that the
existence of a ban upon referral fees
could be a serious fetter upon their
operations.
Disbursements – these are paid for by
clients, claimant law firms or external
funders. This will not change with any of the
Jackson proposals, whether qualified one
way costs shifting applies or not. Currently
many disbursements are covered by an
ATE policy so that if the Claimant loses, the
ATE insurer pays the disbursement. ATE
insurance could therefore still remain as a
funding option for claimants to insure the
claimant’s own disbursements whether
there is qualified one way costs shifting or
not. If ATE premiums become irrecoverable
and the claimant chooses not to take out an
ATE policy, disbursements will have to be
met by the client or by the solicitor.
Comment: Jackson himself has
commented: “Claimant solicitors may see
fit to re-allocate some part of the referral
fees saved towards paying disbursements
in unsuccessful cases.” However, in
motor cases, the risk of not recovering
disbursements is very low - there will be
a large windfall for claimants’ solicitors if
referral fees are banned and the fixed costs
regime remains at the same levels.
Small claims limit (Personal
injury)
The upper limit for personal injury claims on
the small claims track in respect of general
damages is currently set at £1,000 and
there has been no increase since 1999.
Despite Jackson noting considerable force
in the arguments for raising the limit, if a sat-
isfactory system of fixed costs is introduced,
the small claims limit will not be increased
until inflation warrants an increase to £1500.
However, if fixed costs are not introduced
or the process reforms prove unsatisfac-
tory, the question of raising the limit more
substantially should be revisited at the end
of 2010.
Comment:
• Looking back over the period since
the £1,000 limit was set in 1999 and
applying the same inflationary trends
going forward, this could arise in
around 2017.
• An increase in the small claims limit
would pose a serious threat to the
business model of most claimant
solicitors’ firms. If they oppose Jackson
root and branch, as they will be
tempted to do, they risk the raising of
the SCT limit which may have greater
impact on claimant firms in the decade
ahead.
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1796-Special Technical Bulletin – March 2010
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