Progress report on Lord Justice Jackson's civil justice reforms
In public, Sir Rupert Jackson (pictured) is circumspect about the government’s implementation of civil justice reforms based on his report. In private, he could be forgiven for feeling disappointment over the execution of changes to which he has lent his name.
In addition to time spent on the lengthy report itself, commissioned by the previous government, Jackson accepted a role in promoting his own reforms.
This, Jackson did tirelessly. As a lightning rod for the reforms’ detractors, he has also ventured huge personal capital on their promotion as a package. In village hall-style roadshow meetings, and even at unrelated private events, he has been accosted by detractors in a way unfamiliar to a senior member of the judiciary.
No wonder then that Jackson’s supporters are unsettled by the government’s approach to the reforms’ implementation. As Don Clarke, president of FOIL (Forum of Insurance Lawyers) puts it: ‘FOIL’s position has always been that we support the Jackson reforms and that these should be introduced as an interlocking package.’
His concern is that piecemeal implementation that fails to appreciate the relationship of the reforms’ various pillars ‘smacks of government developing policy on the hoof, and in doing so, muddying the waters to the extent that it might lose sight of the overall objectives of the reforms’.
Where to go? Last year there was a point when Jackson must have felt the government position justified such a personal investment. The (by then coalition) government’s response to the consultation on the reforms barely conceded a point to critics, confirming support for Jackson’s substantial report in under 20 pages.
One would normally expect this to be the point at which lawyers, the courts and civil servants get on with trying to make the reforms work. As the Law Society’s head of law reform, Robert Khan, says: ‘While the Law Society strongly opposed many of the changes proposed by Jackson, with LASPO now on the statute book, we want to work with the Civil Justice Council and the Ministry of Justice to ensure the reforms work as well as possible for claimants and defendants.’
But while remaining keen on the themes of the package, the government has become a somewhat flakey agent of change when it comes to key relationships between their component parts.
The relationship between the small claims track limit, and the ‘vertical’ and ‘horizontal’ extension of the RTA (road traffic accident) portal is a case in point.
The portal is an online facility with its own protocol, agreed by claimant and defendant lawyers, which has standardised the process for RTA claims – including the submission of expert reports, claimant lawyer fee levels, and the timeframe for responding to claim and defence points. For low-value RTAs, it has cut legal costs and also the time cases take to conclude.
Although the portal had teething problems, so pleased is the Ministry of Justice with its operation in general, that it would like to raise the financial ceiling of RTA cases dealt with through the portal process (currently set at £10,000) and also extend the process ‘horizontally’ to apply to other personal injury cases.
But the government is also proposing to press ahead with raising the ceiling on cases dealt with through the small claims track – a route that would then compete with the portal. The portal assumes involvement of lawyers for both parties – the small claims court increasingly envisages parties being litigants in person, whose expertise would not allow for participation in the portal, or indeed any other protocol.
Clarke says it is ‘a little difficult to understand why the government has now decided to consult further on the small claims track limit and how, if at all, it dovetails with the current consultation on the extension of the RTA portal’. Especially so, he notes, when taking into account that Jackson made it clear in his report that he did not consider the time right to review the limit, and that in the consultation on ‘Solving Disputes in the County Court’ (issued in March last year), the government agreed with him.
It is an analysis shared by Spencers Solicitors partner John Spencer, who acts for claimants and has been critical of Jackson’s proposals in the past. ‘The government should either consult on the small claims court limit, then look at the shape of portal extension - or decide without consultation on the small claims limit, as it presses ahead with the portal extension,’ he says. There is, Spencer insists, no ‘logic’ here.
Meanwhile, Clarke says, there are two further holes in the government’s approach. First, the government has failed to include within either the original consultation or, it is understood, a further anticipated consultation a review of fixed fees and hourly rates outside the portal. This, he says, ‘heightens our anxiety that it is taking a piecemeal, rather than a holistic, approach to civil justice costs’.
Clarke also believes it should follow the recommendations of the Civil Justice Council and Jackson, and set up a costs council. He quotes the master of the rolls’ recent keynote address to the Association of Costs Lawyers annual conference: ‘One big push every 10 years or so to meet a crisis is neither a proper nor a sensible way to deal with the problem of litigation costs.’
Costs are, of course, central to the dividend Jackson’s reforms intend to deliver for the justice system. From what is currently known, the likely effect is mixed. As Rani Mina, commercial dispute resolution partner at Mayer Brown, explains: ‘On the face of it, these rules will have a limited impact on big-ticket litigation because they will not apply in the Admiralty or Commercial courts.’
But, Mina points out, some big-ticket cases are heard in courts where the costs management rules will apply. For example, BSkyB v EDSwas heard in the Technology and Construction Court, and at least one of the Berezovsky cases is being heard in the Chancery division. So, in general, she argues: ‘Litigation departments should be gearing up to ensure they get better at estimating costs as they may well be held to their costs budgets under the new rules.’
However, the new rules on costs management will only pan out as intended if the court exercises its discretion to make a costs management order in each case and judges review, interrogate and adjust costs budgets as appropriate. Mina predicts: ‘It is likely that some judges will take a more active interest in this area than others, at least initially, but over time such orders will become more common.’
One-way streetParticularly close interest has been paid to one aspect of Jackson’s reforms – qualified one-way costs shifting (QOCS). Under this model, in cases where the ‘loser pays’ costs rules would deter claims with merit, because of the initial outlay on experts’ reports before the likelihood of a win is evident, the claimant would be protected from paying the defendant’s costs.
While critics remain concerned about the grounds on which the protection of QOCS could be withheld or removed, the insurance market anticipates that changes here will be real. As Matthew Amey, director of litigation risk transfer broker TheJudge, explains, the effect on the after-the-event (ATE) insurance market will be profound. ‘For those insurers who specialise in personal injury, on the face of it, the reforms are devastating because the introduction of QOCS is designed to circumvent the need for ATE insurance in such cases,’ he says.
The long-identified risk is that few of the existing providers would be prepared to ‘live off the scraps left’ after the reforms. In practice, Amey says, some aspect of the market may yet survive depending on exactly how personal injury claimants could have an exposure to adverse costs. ‘Whatever the answer to this question, the amount of available premium here will drop dramatically, and that will lead to the withdrawal of interest from some existing providers.’
Despite insurers’ ambivalence, there is still considerable uncertainty about how the QOCS principle could play out. As Peter Smith, managing director of Firstassist Legal Expenses, says: ‘QOCS is obviously the latest hot topic, and it is disappointing that eight months after the Civil Justice Council’s experts meeting the MoJ has now passed this back to the CJC.’ The deliberations of that group are confidential and, as a CJC member, Smith is unable to comment further, though he does note: ‘Separately on QOCS, it is good to see the financial test proposals have been dropped.’
The situation for commercial cases, though, is different. The future for those insurers who concentrate on commercial claims is ‘not so bleak’, according to Amey. Recoverability has never been the principal driver for buying insurance. ‘Our experience in brokering ATE policies outside of England and Wales suggests there is real demand from corporates of all sizes for products that will help them hedge their risk in litigation and arbitration, even in a jurisdiction without recoverability of the premium,’ says Amey. That market, he adds, is still growing, ‘despite the shadow of LASPO’.
Taking a cutOf course, the Jackson reforms should usher in a funding option UK claimant lawyers have long argued would increase access to justice. Also known as contingency fees, ‘damages-based agreements’ would create an incentive for lawyers to take cases, based on the understanding they would take an agreed percentage of any award made to a successful claimant.
Mina believes the change will be significant: ‘The introduction of contingency fees is a huge change. Clients are increasingly interested in alternative litigation funding and we will be considering DBAs, along with all other funding options. There are potentially big rewards for law firms who are willing to take on big-ticket litigation under a DBA, but there are obvious risks as well. It is unlikely that anyone will take a case on a DBA unless the merits are very strong.’
The MoJ has asked the CJC to report on how DBAs might work. The funding, and related rewards, from running cases are, of course, only part of Jackson’s reforms. The overlapping issues of how cases that proceed are managed in court are of equal importance to the reforms’ success.
To contain the cost and length of proceedings, Jackson proposed the increased use of ‘hot-tubbing’ experts, the option of disclosure models that might reduce costs, and enhanced penalties for failure to accept settlement offers that are not subsequently bettered.
The first, ‘hot-tubbing’, is already being deployed in litigation. There is no consensus around the benefits of this trend, and it does not obviously favour claimants over defendants, or vice versa. It is, though, a strategic change in litigation practice.
Experienced expert witness Thayne Forbes, joint managing director of IP valuation specialists Intangible Business, says: ‘Hot-tubbing can be an effective way to keep costs down in litigation, hearing evidence from expert witnesses concurrently rather than consecutively.’ However, he cautions, reducing costs is only one aspect the solicitor running the case should be thinking about. ‘There are tactical issues to consider as well,’ he adds.
Putting all experts into the ‘hot tub’ at the same time can reduce the proper control the instructing solicitor has of the project overall, as the process is more ‘interactive and conversational’ than interrogative, and therefore harder to prepare for and manage. For the solicitor managing the dispute, the expert witness is just part of the process to be deployed, Forbes says. ‘Putting them in the "hot tub" may lessen their effect, or cause [expert testimony] to go off in a direction inappropriately unhelpful to the case,’ he adds.
If the litigation is purely about money, Forbes argues, then the possibility of reducing expert witness costs to keep them in proportion by ‘hot-tubbing’ witnesses will have significance in the balance of all things to be considered. He concludes: ‘The solicitor running the case may prefer to use the full-length process to reveal each layer of evidence slowly and deliberately, with each expert witness taking their time to set out the facts and issues as they see them.’
When experts interact, he cautions, the outcome ‘often has far more to do with force of personality’.
On proposals for e-disclosure, there is also work to be done if the Jackson reforms are to pay a dividend. Rob Jones, legal consultant at Kroll Ontrack, says Jackson created ‘a lot of excitement about e-disclosure, and a collective feeling among lawyers and judges that everyone must learn more about how to manage e-disclosure effectively’.
Yet, Jones notes, it is difficult to ignore the type of issues that frequently occur in e-disclosure management that are widely reported on when a judgment is published. ‘Although a lot of work has been done to pave the way for e-disclosure matters since the Jackson reforms, more needs to be done to bring the judiciary and practitioners up to date with training, and consider whether the wider judiciary has sufficient interest in the mechanics of e-disclosure itself,’ he says. However, those judges ‘who may be viewed as lone voices in the wilderness’, and who appreciate the importance of the technicalities involved with e-disclosure, are spreading their influence. The Judicial College, he adds, is training all judges on costs management and e-disclosure costs that are likely to feature far more prominently in the future.
What is needed now, Jones argues, is training focused on how to scope and prepare cost estimates for e-disclosure projects. ‘Budgeting is a universal concept, but given the complexity of litigation and e-disclosure, this is not something one can work out on the back of an envelope and hope for the best; it is a professional skill and has serious consequences,’ he says. Preparing a robust budget for e-disclosure means ‘skilling up on how to design proportionate approaches to e-disclosure, and how to handle the metrics, variables, unknowns and contingencies involved’.
Closing argumentsOther key uncertainties also preoccupy litigators whose practice, and clients, will be affected by the Jackson reforms. As Firstassist’s Smith puts it: ‘Claimants and defendants are both concerned by how much uncertainty there still is as to how the reforms will work… There is no evident overall plan as to what needs doing and who will do it. It is imperative that what is introduced does work properly.’
The effect on cartel actions is one concern, Smith notes: ‘One of the early signs of the impact of the Jackson reforms will be in the area of cartel actions – claims brought against participants of anti-competitive cartels.’ The current consultation paper on the subject recognises the difficulty individuals and businesses have in bringing ‘cartelists’ to account. Such cases are expensive and hard-fought. ‘Under LASPO, the ending of recoverability of both success fees and ATE premiums will make it harder for such claims to be brought,’ Smith says, ‘even though the government recognises the current difficulty in bringing cases’. Abolishing the obvious way to fund such cases, he argues, and then asking how it can be made easier to bring these cases, ‘does suggest a lack of consistent thinking’.
Spencer also notes the irony that reforms, welcomed in their original form by the insurer-lawyers’ lobby, are going ahead, at a point when a Competition Commission response is awaited to an OFT reference based on concerns that insurers are skewing the RTA market.
Unexpectedly, implementation of Jackson’s reforms has managed a feat he could not have envisaged when he read the government’s response to the consultation on his report’s proposals. The execution of the reforms package has united claimant and defence lawyers in concern over the coherence and timing of the changes – many are set to be in place by April 2013.
Khan, for example, believes, there are ‘likely to be severe problems with the timing’. And as Clarke concludes: ‘The last thing anyone wants in the early days of the LASPO act coming into force is a series of costs wars and judicial reviews because of a desire to rush in reforms which have not been properly thought through. Such a situation would not benefit claimants, defendants or insurers, and would put in jeopardy the real prize, which is access to justice for all in a more streamlined and efficient civil justice system.’
- A free event, ‘Mitigating LASPO – the role of the Society and the profession’, will be held at the Law Society on 20 July, 9.45am-4.45pm For more information or to register, Email Charlotte Bloxham.
Contingency fee agreements
Contingency fee agreements – ‘damages based agreements’ - will be a funding option in all types of civil litigation. Under a DBA, a lawyer's fee is calculated as a percentage of the damages recovered, with no fee payable if the client loses. Costs recovered from the losing party are used to pay part of the contingency fee. A Civil Justice Council working party is considering the implications of DBAs, not least whether there should be a limit on the recoverable percentage.
Conditional fee agreements
The success fee paid to a party's lawyer under a conditional fee agreement and the premium for after the event insurance will no longer be recoverable from the losing party. Litigants will still be able to enter into CFAs and take out ATE insurance but will have to pay these costs themselves. After heavy lobbying the Government agreed to delay the reforms in relation to mesothelioma cases, because of difficulties where victims cannot trace their insurers. A likely outcome of these changes is that litigants will negotiate down success fees and insurers will reduce ATE premiums.
Jackson proposed a system of qualified one-way costs shifting to replace the claimant's protection from adverse costs currently offered by ATE insurance and CFAs. Under QOCS, if the claimant wins his action, the defendant pays both sets of costs but if he loses, he will only pay the defendant's costs if it is wealthy or has acted unreasonably in pursuing proceedings. During debates on the bill, the government made clear that QOCS would only apply in personal injury claims and not, for example in professional negligence claims.
A voluntary code of conduct for independent third-party funders has been in place since November 2011.
A new rule on disclosure has been approved. Shortly before the first case management conference, each party will serve a report, describing the documents likely to be relevant to the matters in issue and their location, and estimating the broad range of costs that could result from standard disclosure. The court will be able to direct the parties to agree a proposal on disclosure that enables the case to be tried fairly, based on a list of options available under a ‘menu’ of disclosure options in the new rule.
‘Hot-tubbing’ of expert witnesses
A rule has been approved to make ‘hot-tubbing’ an option under the Civil Procedure Rules. This practice involves both sides’ expert witness appearing in court concurrently, with the judge asking each expert their views on a particular aspect of the expert evidence. Following a pilot currently ongoing in the Manchester court, a rule has been approved to make hot-tubbing an option under the CPR.
New rules have been approved to improve judicial case management, so that:
Standard case management directions for all types of common cases will be used where possible. A working group is already working on this.
Case management conferences will only be held where where they would serve a useful purpose and will involve serious discussion about the issues in the case. Otherwise, the judge will, having seen the parties' proposed (ideally agreed) directions on paper, issue case management directions in writing. The entire timetable for an action will be drawn up as early as practicable in the action, subject to change if necessary.
Two Court of Appeal judges will consider any issues on the interpretation or application of the CPR.
The CPR will require courts to take a tougher approach to breaches of the rules. So far as possible, judges should monitor (by phone or email) the parties' progress in terms of complying with orders, to pre-empt the need for sanctions.
Costs management involves each party, early in the proceedings, producing an estimate of how many hours are likely to be spent – and by which seniority of lawyer – on each stage of their action from pre-issue of the claim until trial. The budgets are then approved by a judge at a hearing, if proportionate to the remedy being sought. If not, the judge can amend them, for example by reducing the amount of hours to be spent on a particular task. Budgets may be updated during the life of the action. The case will then be managed by reference to the approved budgets and, when assessing the costs liability of the losing party, the court will generally adopt the finally approved budget. Costs budgeting pilots are being carried out in a number of courts and, on the basis of interim feedback, Jackson has concluded that the pros of costs management outweigh the cons. The CPR committee has approved drafts of rules to introduce costs management in all but heavy Commercial Court cases.
Jackson LJ advocated greater use of docketing, ie the assignment of a case to one judge throughout its life. Docketing is being piloted in Leeds and, if deemed a success, a national docketing system will be drawn up.
Charlie Clarke-Jervoise is professional support lawyer at Hogan Lovells