Lord Justice Jackson’s recommendations should be implemented speedily
‘Access to Justice entails that those with meritorious claims (whether or not ultimately successful) are able to bring those claims before the courts for judicial resolution or post-issue settlement, as the case may be. It also entails that those with meritorious defences (whether or not ultimately successful) are able to put those defences before the courts for judicial resolution or alternatively, settlement based upon the merits of the case.’
So says Lord Justice Jackson in his recently published Review of Civil Litigation Costs (paragraph 2.3). The essence of his report is that the last round of government reforms in this area did not improve access to justice, has hugely increased the cost of litigation, has given rise to satellite litigation, and has given an unjustified advantage to claimants able to instruct lawyers willing to undertake the case pursuant to a conditional fee agreement and with the benefit of after-the-event (ATE) insurance. He recommends a package of reforms which seek to redress the balance, reduce the public and private costs of litigation, and increase access to justice.
For many years during my career as a litigation solicitor practising in London, access to justice for those unable to afford it was granted by the much wider availability of civil legal aid and, in particular, for commercial matters. Jackson agrees that this was a system which worked well and was ultimately cheaper, but is realistic in accepting that the present economic situation means that there is no possibility of any government restoring a proper civil legal aid system. Instead, Jackson has gone for a variety of measures aimed at reducing the cost of civil litigation.
The boldest and most controversial of Jackson’s proposals is the abolition of the ability of claimants to recover success fees and ATE premiums from a defendant. This ability has been a powerful weapon in the armoury of claimants since its introduction by the 1999 reforms. It has forced defendants to settle potentially unmeritorious cases rather than face defeat and the consequence of meeting solicitors’ costs at twice the normal rate, together with a very substantial insurance premium. It has also increased the burden on the public purse of litigation, as the NHS and local authorities have faced a huge increase in the costs payable to successful claimants. My own firm and its publishing clients have faced the problem in the arena of defamation and privacy cases, in which wealthy celebrities take no risk in proceeding against newspapers by shielding behind after the insurance policies, and those newspapers face meeting huge claimants’ costs bills unless they settle very early. We have been at the forefront of calling for this element of Jackson’s reforms (see the Naomi Campbell v MGN case). This reform walks hand-in-hand with the welcome proposal to abrogate the indemnity principle.
It is almost certainly the case that, if success fees and ATE premiums are no longer recoverable from defendants, the scheme will wither and die. Claimants will not be prepared to agree high mark-ups on their solicitor’s fees if they are going to eat into any damages recovered from a defendant. In relation to damages for personal injury, Jackson recommends a 10% increase in the award of general damages but this will be insufficient to meet the problem. Similarly, insurance companies will have to reduce their premiums significantly if they are to be paid by the client and are not recoverable from a hapless defendant.
So what does Jackson propose to put in the place of the current system? He calls for an increase in the availability and take up of before-the-event (BTE) legal expenses insurance. Such insurance is available to private individuals tied to motor or household contents policies.
Solicitors are professionally bound to advise their clients to check whether they have such insurance available for a case, although one suspects that many don’t. However, most companies are completely unaware, outside the specialist field of libel insurance, that such insurance exists and would regard the cover as a luxury. Furthermore, the level of cover and the restrictions on the policy make them unattractive. One suspects that as the insurance industry moves out of the ATE sector, it will rush to expand the neglected BTE sector.
The proposal that an insured will be free to nominate his own solicitor at the earlier stage of writing a letter before action rather the commencement of proceedings is very welcome. However, the government needs to engage with the industry at an early stage to ensure that premiums are affordable and that the limits upon cover are realistic.
The other controversial Jackson proposal is the introduction of full-blown contingency fees so that a solicitor can, in return for agreeing not to charge fees unless the case is successful, share in his client’s damages. Jackson recognises that such a change will require considerable regulation, requiring in particular a cap on the amount of the success fee and ensuring that a client is separately advised as to the terms of the contingency arrangement.
It seems unlikely that the manner in which damages are calculated in this country, which tends to lead a low level of recovery, will lend itself to such a reform. Clients will be reluctant to agree to a sufficiently high percentage to go to a solicitor for the latter to agree to take on a case upon a contingency basis. It will only be cases in which the level of damage is high compared with the amount of work that the solicitor is required to undertake in which the system will work well.
The other controversial Jackson proposal is the abolition of the principle that a successful defendant should automatically be able to recover his costs from the claimant – so-called one-way costs-shifting. This idea is intended to help plug the gap left by after-the-event insurance so that a claimant can launch proceedings knowing that he can do so without an adverse costs order. In order to protect defendants from unmeritorious claims or actions by wealthy litigants intended to bully a defendant, the court would still have the power to make costs orders against claimants in the event that a case has unreasonably been pursued or where the claimant clearly has the means to meet a costs order.
Interestingly, Jackson makes no clear recommendations in relation to third-party funding. Obviously, funders and those litigating against a party with the benefit of funding should know where they stand if a funded case fails. Jackson recommends that third parties should potentially be liable for the full amount of adverse costs, subject to the discretion of the judge. He also shies away from statutory or judicial regulation of funding arrangements and plumps for a voluntary code of conduct.
He also makes a number of useful suggestions for reform across a wide range of issues, including recoverability of costs in fast track cases, none of which appear controversial.
There will no doubt be a period of debate on these proposals and it may be that they will not be high up the list of priorities of any new government this summer. Broadly, most solicitors will welcome these proposals and there is a need for early implementation to avoid a period of uncertainty.
Davenport Lyons partner Roger Billins is the author of Solicitors Duties and Liabilities (Second Edition) published by The Law Society