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Many of Lord Justice Jackson’s recommendations will have a direct impact on the Bar’s way of life, warns Stuart Sime
Sir Rupert Jackson’s Review of Civil Litigation Costs: Final Report (“the Review”) was published on 14 January 2010. It will have profound effects on the conduct of litigation and the remuneration of lawyers. Without doubt it is the most important report in the area of civil law since Lord Woolf’s report on Access to Justice in 1996. Like the best reports in recent years (Lord Neuberger’s report on Entry to the Bar, 2007, is another example), Sir Rupert recognises that systemic problems cannot be cured by single big point remedies.
The terms of reference for the Review were to look into the rules and principles relating to costs and to make recommendations to promote access to justice at proportionate cost. Statistical analysis forming part of the Review found, for example, that in libel claims under conditional fee agreements (“CFAs”) claimant costs were on average 314 per cent of damages, and that in medium value clinical negligence cases claimant costs were 30 per cent of damages for self-funded cases but 75 per cent for CFA funded cases. It is not all areas that are affected by excessive or disproportionate costs, with the Commercial Court and the Technology and Construction Court (“TCC”) emerging very well from the Review.
The Review acknowledges that to tackle the underlying problems it is necessary to recognise that:
All these areas are therefore addressed in the Review.
Sir Rupert Jackson cannot be accused of shirking his responsibilities. The Final Report is a tour de force stretching to 557 pages with 10 appendices. Rather than repeating detail to be found in his Interim Report, which itself was about 600 pages long, the Final Report builds on the evidence from the Interim Report, buttresses it with further evidence, and then makes its recommendations. Each issue is analysed on the basis of evidence from experts and practitioners. Meetings were held around the country with interested organisations and groups of practitioners, and records were kept of votes taken at those meetings on all the main issues. The result is that the 109 recommendations are backed up by an impressive array of evidence, unlikely to be surpassed for many years. The recommendations have to be seen as a balanced package, covering everything from the initial retainer through the protocols to the litigation process, hearings and the assessment of costs.
An obvious danger is that implementation may be piecemeal, with the vision behind the Review becoming blurred. There is hope that an integrated programme will be achieved, because Sir Rupert Jackson has agreed to head the implementation of the Review’s recommendations, which are supported by the senior judiciary and Ministry of Justice, and that little change is needed to primary legislation. However, even as early as 19 January 2010 the Justice Secretary, Jack Straw, announced proposals to reduce CFA success fees in defamation cases from 100 to 10 per cent. This may portend a policy of cherry picking which will undermine the balance achieved in the Review.
In addition to controlling costs to ensure they are proportionate, general aims of the Review included:
Party and party cost orders
Costs orders on the principle that costs follow the event are referred to as “costs shifting” in the Review. Even this fundamental principle was considered, but Sir Rupert Jackson accepted the arguments of policy and principle underlying the rule, and concluded that it should be retained in civil proceedings (para 4.3.25 of the Review). In order to promote access to justice, the Review recommends that the principle should be modified to prevent parties recovering disproportionate costs and to protect vulnerable parties against adverse costs orders. Exactly who counts as being a “vulnerable party” is for further consideration, but they will be parties in asymmetric relationships, such as claimants in personal injuries cases, and probably individual litigants in housing, police, judicial review and defamation/privacy cases. The proposed protection will be something called “qualified one-way costs shifting”, which it is proposed will operate in much the same way as the cost protection rules in the Access to Justice Act 1999, s 11(1), that already exist for LSC litigants.
There are challenging times ahead for the Bar, which is going to have to adapt to a rapidly changing environment on funding of civil cases. A number of long-held fundamental principles of professional conduct have been challenged by Sir Rupert Jackson’s Review, which, when combined with the new landscape under the Legal Services Act 2007, mean that life at the Bar is going to be the subject of fundamental change. It will be essential for the Bar to work with these changes in order to compete in an increasingly difficult market, and it will have to lay aside some of its most cherished principles of professional conduct which are no longer seen to be viable in the modern world.
Indemnity principle
This is to be abrogated (recommendation 4). Under this principle (which arises when costs are being assessed) costs are disallowed to the extent that the receiving party (the winner) is not under an obligation to pay those costs to its lawyers. It lies at the root of most of the technical objections raised in satellite litigation over funding arrangements. Abolishing the indemnity principle is of fundamental importance as it opens the way to a whole range of funding options becoming effective.
Success fees and ATE
While CFAs (including those with success fees) will continue, a key recommendation is that success fees and after the event (“ATE”) insurance premiums will not be recoverable from the losing party (para 10.4.20). The problems with the recoverability of success fees and ATE premiums lie in the abuses that have developed since 2000. The most telling example is the development of the “super-claimant” (described at para 10.2.9); a client with a package comprising a CFA, ATE insurance, and third party funding. Such a package enables a client to hedge much of the risk involved in litigation and to pursue a claim at relatively modest cost. Others include extortionate success fee percentages, which are hard to control on assessment, and the fact that CFAs are open to all litigants, even those rich enough not to need them.
Under the main proposals success fees will have to be met by the client rather than recovered from the other side. Secondary recommendations include capping the success fee to 25 per cent of damages in personal injuries claims (excluding the damages for future care and expense), and in effect ring fencing damages for pain, suffering and loss of amenity by increasing damages under that head by 10 per cent across the board. The Review recognises that the recommendation on abolition of recoverability may not be accepted, and paras 10.5.12–10.5.28 make detailed recommendations for controlling the amount that can be recovered, together with recommendations on overturning a number of the well known Court of Appeal decisions in the area.
A large number of the recommendations will have a direct impact on the Bar. Developing the previous point on CFAs, non-recoverability of success fees will mean that there will be a pressure on barristers taking cases under CFAs to do so without a success fee at all. Practitioners will be all too aware that if they do ask for a success fee, it will mean that the client will receive a reduced amount of compensation if the case is successful. Of course the 10 per cent increase in damages (which will apply also in nuisance, defamation and other claims in tort causing suffering to individuals) is proposed to ensure that lawyers can take a success fee without financial detriment to the client. Needless to say, the days of the 100 per cent uplift are numbered.
Contingency fees
It is recommended that contingency fees should be allowed, but they will not be recoverable from the other side (recommendation 14). It is recognised that they will need regulation, and funding by contingency fee will only be valid if the client receives independent advice from a solicitor (recommendation 15). This decision was made despite detailed submissions by the Association of Personal Injury Lawyers, the Personal Injuries Bar Association (“PIBA”), the Professional Negligence Bar Association, and the Commercial Bar Association, among many others. Members of the PIBA opposed the introduction of contingency fees by a vote of 316 to 5. It is stated in the Review that opposition by the Bar may have been tainted by a desire to preserve the existing CFA regime, but I do not believe that that is the underlying reason for the Bar’s objection. The Bar has opposed contingency fees for many decades, going back well before CFAs were even thought of. The key objection is that contingency fees, which give the lawyer an interest in the outcome of litigation, have a tendency to undermine the integrity of the independence that the lawyer has to bring when advising a client. The argument on this appears to have been lost, and the Bar is going to have to face up to a future where contingency fees, based on a percentage of the damages recovered, are a reality in contentious litigation. The Review recognises that if solicitors are allowed to enter into contingency fee agreements, then so should counsel. There will still be a choice, with counsel’s fees being payable either as a disbursement to be paid by the solicitors, or with counsel also on a contingency fee and entitled to a specified percentage of any sum recovered (see para 12.4.8 of the Review).
CLAF or SLAS
Contingent Legal Aid Funds (“CLAFs”) have been promoted by the Bar as an alternative method of funding litigation. The Bar Council’s CLAF group has produced a report which is available on the Bar Council’s website (www.barcouncil.org.uk/assets/documents/CFF%20Paper%202%20April%202009.pdf). A CLAF is a self funding scheme which requires seed capital, with funds being generated from successful cases, which are used to cover the costs of both sides in unsuccessful cases. A substantial preponderance of successful cases is necessary to ensure such a scheme is successful. Equivalent schemes in other jurisdictions tend to be relatively small scale. A variation on the theme is a Supplementary Legal Aid Scheme (“SLAS”), which runs in parallel with an existing legal aid scheme, but is available to litigants just outside the financial eligibility criteria, and is administered by the legal aid authority. There was more support for CLAFs than a SLAS, but the Review gave only muted support, doubting the financial viability of such schemes.
Jury trial
Among the detailed recommendations dealing with the litigation process, which are aimed to reduce costs in different categories of case, is recommendation 67 that the retention of jury trial in defamation claims needs to be reconsidered. Despite the Bar’s long held belief in the importance of being tried by a tribunal of ones’ peers, the vulnerability of jury trial in civil defamation claims is obvious given the expense involved. v
Stuart Sime, BVC Course Director, City Law School
The terms of reference for the Review were to look into the rules and principles relating to costs and to make recommendations to promote access to justice at proportionate cost. Statistical analysis forming part of the Review found, for example, that in libel claims under conditional fee agreements (“CFAs”) claimant costs were on average 314 per cent of damages, and that in medium value clinical negligence cases claimant costs were 30 per cent of damages for self-funded cases but 75 per cent for CFA funded cases. It is not all areas that are affected by excessive or disproportionate costs, with the Commercial Court and the Technology and Construction Court (“TCC”) emerging very well from the Review.
The Review acknowledges that to tackle the underlying problems it is necessary to recognise that:
All these areas are therefore addressed in the Review.
Sir Rupert Jackson cannot be accused of shirking his responsibilities. The Final Report is a tour de force stretching to 557 pages with 10 appendices. Rather than repeating detail to be found in his Interim Report, which itself was about 600 pages long, the Final Report builds on the evidence from the Interim Report, buttresses it with further evidence, and then makes its recommendations. Each issue is analysed on the basis of evidence from experts and practitioners. Meetings were held around the country with interested organisations and groups of practitioners, and records were kept of votes taken at those meetings on all the main issues. The result is that the 109 recommendations are backed up by an impressive array of evidence, unlikely to be surpassed for many years. The recommendations have to be seen as a balanced package, covering everything from the initial retainer through the protocols to the litigation process, hearings and the assessment of costs.
An obvious danger is that implementation may be piecemeal, with the vision behind the Review becoming blurred. There is hope that an integrated programme will be achieved, because Sir Rupert Jackson has agreed to head the implementation of the Review’s recommendations, which are supported by the senior judiciary and Ministry of Justice, and that little change is needed to primary legislation. However, even as early as 19 January 2010 the Justice Secretary, Jack Straw, announced proposals to reduce CFA success fees in defamation cases from 100 to 10 per cent. This may portend a policy of cherry picking which will undermine the balance achieved in the Review.
In addition to controlling costs to ensure they are proportionate, general aims of the Review included:
Party and party cost orders
Costs orders on the principle that costs follow the event are referred to as “costs shifting” in the Review. Even this fundamental principle was considered, but Sir Rupert Jackson accepted the arguments of policy and principle underlying the rule, and concluded that it should be retained in civil proceedings (para 4.3.25 of the Review). In order to promote access to justice, the Review recommends that the principle should be modified to prevent parties recovering disproportionate costs and to protect vulnerable parties against adverse costs orders. Exactly who counts as being a “vulnerable party” is for further consideration, but they will be parties in asymmetric relationships, such as claimants in personal injuries cases, and probably individual litigants in housing, police, judicial review and defamation/privacy cases. The proposed protection will be something called “qualified one-way costs shifting”, which it is proposed will operate in much the same way as the cost protection rules in the Access to Justice Act 1999, s 11(1), that already exist for LSC litigants.
There are challenging times ahead for the Bar, which is going to have to adapt to a rapidly changing environment on funding of civil cases. A number of long-held fundamental principles of professional conduct have been challenged by Sir Rupert Jackson’s Review, which, when combined with the new landscape under the Legal Services Act 2007, mean that life at the Bar is going to be the subject of fundamental change. It will be essential for the Bar to work with these changes in order to compete in an increasingly difficult market, and it will have to lay aside some of its most cherished principles of professional conduct which are no longer seen to be viable in the modern world.
Indemnity principle
This is to be abrogated (recommendation 4). Under this principle (which arises when costs are being assessed) costs are disallowed to the extent that the receiving party (the winner) is not under an obligation to pay those costs to its lawyers. It lies at the root of most of the technical objections raised in satellite litigation over funding arrangements. Abolishing the indemnity principle is of fundamental importance as it opens the way to a whole range of funding options becoming effective.
Success fees and ATE
While CFAs (including those with success fees) will continue, a key recommendation is that success fees and after the event (“ATE”) insurance premiums will not be recoverable from the losing party (para 10.4.20). The problems with the recoverability of success fees and ATE premiums lie in the abuses that have developed since 2000. The most telling example is the development of the “super-claimant” (described at para 10.2.9); a client with a package comprising a CFA, ATE insurance, and third party funding. Such a package enables a client to hedge much of the risk involved in litigation and to pursue a claim at relatively modest cost. Others include extortionate success fee percentages, which are hard to control on assessment, and the fact that CFAs are open to all litigants, even those rich enough not to need them.
Under the main proposals success fees will have to be met by the client rather than recovered from the other side. Secondary recommendations include capping the success fee to 25 per cent of damages in personal injuries claims (excluding the damages for future care and expense), and in effect ring fencing damages for pain, suffering and loss of amenity by increasing damages under that head by 10 per cent across the board. The Review recognises that the recommendation on abolition of recoverability may not be accepted, and paras 10.5.12–10.5.28 make detailed recommendations for controlling the amount that can be recovered, together with recommendations on overturning a number of the well known Court of Appeal decisions in the area.
A large number of the recommendations will have a direct impact on the Bar. Developing the previous point on CFAs, non-recoverability of success fees will mean that there will be a pressure on barristers taking cases under CFAs to do so without a success fee at all. Practitioners will be all too aware that if they do ask for a success fee, it will mean that the client will receive a reduced amount of compensation if the case is successful. Of course the 10 per cent increase in damages (which will apply also in nuisance, defamation and other claims in tort causing suffering to individuals) is proposed to ensure that lawyers can take a success fee without financial detriment to the client. Needless to say, the days of the 100 per cent uplift are numbered.
Contingency fees
It is recommended that contingency fees should be allowed, but they will not be recoverable from the other side (recommendation 14). It is recognised that they will need regulation, and funding by contingency fee will only be valid if the client receives independent advice from a solicitor (recommendation 15). This decision was made despite detailed submissions by the Association of Personal Injury Lawyers, the Personal Injuries Bar Association (“PIBA”), the Professional Negligence Bar Association, and the Commercial Bar Association, among many others. Members of the PIBA opposed the introduction of contingency fees by a vote of 316 to 5. It is stated in the Review that opposition by the Bar may have been tainted by a desire to preserve the existing CFA regime, but I do not believe that that is the underlying reason for the Bar’s objection. The Bar has opposed contingency fees for many decades, going back well before CFAs were even thought of. The key objection is that contingency fees, which give the lawyer an interest in the outcome of litigation, have a tendency to undermine the integrity of the independence that the lawyer has to bring when advising a client. The argument on this appears to have been lost, and the Bar is going to have to face up to a future where contingency fees, based on a percentage of the damages recovered, are a reality in contentious litigation. The Review recognises that if solicitors are allowed to enter into contingency fee agreements, then so should counsel. There will still be a choice, with counsel’s fees being payable either as a disbursement to be paid by the solicitors, or with counsel also on a contingency fee and entitled to a specified percentage of any sum recovered (see para 12.4.8 of the Review).
CLAF or SLAS
Contingent Legal Aid Funds (“CLAFs”) have been promoted by the Bar as an alternative method of funding litigation. The Bar Council’s CLAF group has produced a report which is available on the Bar Council’s website (www.barcouncil.org.uk/assets/documents/CFF%20Paper%202%20April%202009.pdf). A CLAF is a self funding scheme which requires seed capital, with funds being generated from successful cases, which are used to cover the costs of both sides in unsuccessful cases. A substantial preponderance of successful cases is necessary to ensure such a scheme is successful. Equivalent schemes in other jurisdictions tend to be relatively small scale. A variation on the theme is a Supplementary Legal Aid Scheme (“SLAS”), which runs in parallel with an existing legal aid scheme, but is available to litigants just outside the financial eligibility criteria, and is administered by the legal aid authority. There was more support for CLAFs than a SLAS, but the Review gave only muted support, doubting the financial viability of such schemes.
Jury trial
Among the detailed recommendations dealing with the litigation process, which are aimed to reduce costs in different categories of case, is recommendation 67 that the retention of jury trial in defamation claims needs to be reconsidered. Despite the Bar’s long held belief in the importance of being tried by a tribunal of ones’ peers, the vulnerability of jury trial in civil defamation claims is obvious given the expense involved. v
Stuart Sime, BVC Course Director, City Law School
Many of Lord Justice Jackson’s recommendations will have a direct impact on the Bar’s way of life, warns Stuart Sime
Sir Rupert Jackson’s Review of Civil Litigation Costs: Final Report (“the Review”) was published on 14 January 2010. It will have profound effects on the conduct of litigation and the remuneration of lawyers. Without doubt it is the most important report in the area of civil law since Lord Woolf’s report on Access to Justice in 1996. Like the best reports in recent years (Lord Neuberger’s report on Entry to the Bar, 2007, is another example), Sir Rupert recognises that systemic problems cannot be cured by single big point remedies.
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