Lord Justice Jackson has published his final report as part of his review of the cost of litigation. The report, which runs to 557 pages, covers costs in all litigated matters but as expected a large section concentrates on costs in claims for personal injuries.

The recommendations and conclusions in relation to the personal injury aspects of his report are as follows:

PART 1: INTRODUCTION

Comments on litigation costs generally.

PART 2: FUNDING LITIGATION

CHAPTER 7. Legal Aid (P. 66)

It is impractical to expand legal aid, but it should not be cut from its present level.

CHAPTER 8. Before-The-Event Insurance (P. 71)

Considered whether it should be made compulsory for all drivers to purchase BTE.

Recommendation: Not desirable.

Preference: All BTE policies should allow client complete freedom to choose their own solicitor from the outset, not just (as at present) when Court proceedings are issued. Home owners should be actively encouraged to purchase BTE cover.

Comment: Allowing BTE policyholders to choose their own solicitor would change the whole nature of BTE insurance, and probably destroy it, in its present form at least.

CHAPTER 9. After-The-Event Insurance and how to deal with the liability for adverse costs (P. 80)

Recommendation:

1) The recoverability of ATE insurance premiums would be abolished. Protection against adverse costs would be achieved by limiting the Defendant’s ability to recover costs (see 2 below).

2) The normal position would now be that an unsuccessful Claimant would not pay the Defendant’s costs unless the Court decided that the Claimant could afford to do so, or the Claimant’s conduct of the action merited a costs award against them. If the Defendant applied for a costs order, the Claimant’s ability to pay should be assessed by the Court when the claim is concluded on a similar basis to Legal Aid. The Claimant, (most probably in a competitive market, the Claimant’s solicitor) would cover disbursements if the claim was unsuccessful (see Chapter 19 Para. 5.8) since an ATE policy just to cover disbursements would probably be impractical.  

Comment: Defendants would not know whether they were going to recover costs in a case. Claimants would need an (irrecoverable) ATE policy in case the Court gave leave to enforce costs against them. ATE insurers would pay out on orders enforceable against the wealthy, but would not have to pay out on unenforceable orders made against the poor!

If Main Recommendation not adopted : (if ATE insurance premiums remain generally recoverable and the Claimant remains liable for Defendant’s costs):

1) No ATE insurance premium to be recovered if liability is admitted within protocol period (so the Defendant has the chance to avoid it).

2) Any element of the ATE premium which provides for protection against the risk of the Claimant not accepting a good Part 36 offer should not be recoverable from the Defendant.

3) Cap premiums at 50% of damages awarded; and

4) If the Claimant breaches the terms of the ATE policy, the ATE insurer will no longer be able to avoid paying the Defendants costs, but can attempt recovery from the fraudulent/non complying Claimant (as with compulsory RTA insurance)

CHAPTER 10. Conditional Fee Agreements (P. 94)

Main Recommendation : The recovery of success fees should be abolished, and:

1) The level of general damages for pain, suffering and loss of amenity be increased by 10% across the board. The Claimant will use this to pay whatever (irrecoverable) success fee he can negotiate with his solicitor.

2) Cap success fees at 25% of damages, (excluding damages for future care or future losses).

3) Give an enhanced reward to Claimants who make a Part 36 offer which a Defendant fails to beat (an extra 10% damages ie an extra 20% overall - s ee Chapter 17 Para. 1.1).

Comment: 1) Would the additional 10% still be recoverable if the Claimant had a BTE policy? 2) If claimants cannot routinely negotiate (irrecoverable) success fees of 10% or less with their solicitors, then they will be left with less than 100% of their damages, so the Defendant’s costs saving will simply have been transformed into the Claimant’s loss.

If Main Recommendation not adopted: (ie. if Defendant remains liable for Claimant’s success fee):

1) Introduce fixed success fees in all areas

2) Introduce 2 stage success fees

3) The success fee should not be recoverable before the end of the protocol period (so the Defendant has the chance to avoid it).

4) Any element of a success fee which provides for protection against the risk of the Claimant not accepting a good Part 36 offer should not be recoverable from the Defendant.

5) No success fee for detailed assessment of costs.

Final Fallback Recommendation: (if none of the above is adopted)

ATE would not be recoverable, but success fees could be recovered. The perceived advantage is that market forces would cause ATE insurance premiums to fall.

CHAPTER 11. Third Party Funding (P. 117)

Recommendations :

1) Organisations which provide money in order for Claimants to pursue (normally large) cases, do not need to be regulated by the government at present, but this should be reviewed if this practice becomes more common.

2) Subject to the Court’s discretion, third party funders should normally be liable for all adverse costs.

CHAPTER 12. Contingency Fees (P. 125)

Recommendations :

1) Both solicitors and counsel should be permitted to enter into contingency fee agreements with their clients, but only normal costs would be recoverable from the opposing party, so in a successful case, if the agreed contingency fee was more than the costs recovered, the client would pay the difference.

2) Regulation needed to ensure the deal is clearly explained to clients and other funding methods explained. There should be a maximum percentage which can be charged, and payment of disbursements needs to be carefully worked out.

3) Contingency fee agreements should not be valid unless the client has received independent advice from another solicitor.

Comment: The cost and practicality of obtaining independent advice on every instruction is questionable.

PART 3: FIXED COSTS

CHAPTER 15. Fast Track Fixed Costs (P. 146)

Recommendations :

Until Defendants are prevented from recovering their costs, and success fees and ATE premiums are made irrecoverable (See Chapter 17 Para. 1.4):

1) Recoverable costs on the fast track should be fixed for all personal injury cases.

2) Some other common types of cases (eg. RTA claims not involving personal injury) would also have fixed costs for each stage in the litigation process (different amounts for different types of case), with discounts for early admissions of liability and a 12.5% success fee (100% at trial). The recommended sums are at Appendix 5.

3) For all other cases there should be a cap of £12,000 (£13,500 in London)

4) Levels should be reviewed annually

CHAPTER 16. Multi Track Fixed Costs (P. 169)

Recommendation :

Multi track costs should not be fixed at present, apart from Bankruptcy and Winding Up proceedings.

PART 4: PERSONAL INJURY LITIGATION

CHAPTER 18. Fast Track Lower Limit (P. 178)

Recommendation :

The Fast Track lower limit of £1,000 should not be raised at this stage.

CHAPTER 20. Referral Fees (P. 194)

Recommendation :

Referral Fees should be banned. They should be defined as “ any form of payment or other consideration to a party for introducing clients to a solicitor” in order to make sure the ban is not flouted.

If Main Recommendation not adopted: (ie. if referral fees are not banned):

They should be capped at £200.

Comment: It is hard to now un-invent the activities which claims management companies undertake. The ban is likely to cause all referral companies to simply become in-house marketing departments of their local solicitor firm, with their salary costs becoming that solicitor’s overhead.

CHAPTER 21. Assessment of Personal Injury General damages (P. 207)

A working group should create software to provide a uniform calculation of general damages.

CHAPTER 22. Personal Injury Litigation Procedure (P. 216)

Recommendation:

The current new procedure for RTA claims under £10,000 due to start in April/May 2010 should go ahead, and the costs savings should then be reviewed ( Para 4.4)

Comment: If the new RTA procedure is introduced in mid 2010 and perhaps 18 months is allowed to test/assess the result, it may be that consideration of any change which would affect RTA cases is at least 2 years away.

CHAPTER 23. – deals with Clinical Negligence

CHAPTERS 24-34 – deal with specialised proceedings (housing, nuisance, defamation etc.)

CHAPTERS 35-43 – deal with detailed proposals for disclosure, case management, court administration etc.

CHAPTER 44 45 – deal with assessment of costs.

The full 557 page report can be accessed by clicking here.