Jackson LJ sees the controversy generated by his civil justice reforms as a mark of their success – and there is more to come. But has the legal profession really adjusted to the new economics of costs?
THE LOW DOWN
Sir Rupert Jackson retired earlier this year seemingly assured that the second wave of his reforms will be introduced without substantial changes. His legacy will include fixed recoverable costs being extended to the whole of the fast-track and to certain multi-track claims up to a value of £100,000. Bringing in ‘Jackson II’ will represent a degree of vindication for the civil justice reformer who insisted his proposals only work as an interlocking whole, and ran the gamut of extreme unpopularity in promoting them. It was, perhaps, bad luck that his reforms, which reference ‘access to justice’, were ushered in by the same act that demolished civil legal aid. Jackson receives some praise for the flexible ‘maturity’ of his later work on costs, but might the government yet be responsible for mishandling its implementation?
Sir Rupert Jackson spent 10 years reviewing the costs of civil justice. ‘Whoever received that poisoned chalice was bound to make themselves extremely unpopular – unless they ducked every controversial issue,’ he said on the eve of his retirement from the Court of Appeal in March.
Legal costs in litigation were radically altered in April 2013 when the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 was enacted to implement Jackson’s proposals to speed up civil litigation and make it more cost-effective. From that point, the scale of change in civil justice was dizzying.
The Jackson reforms, enshrined in Part 2 of LASPO, abolished the recoverability of conditional fee agreement success fees and after-the-event premiums from opposing parties, and introduced fixed recoverable costs (FRCs) for certain fast-track personal injury cases. As David Greene, Edwin Coe senior partner and Law Society deputy vice-president, puts it: ‘It was a sharp tug on the leash for claimants, and their ability to bring proceedings.’
There was more to come. A second review published last July promotes the extension of FRCs for the winning party to all fast-track claims, and the creation of a new intermediate track for certain claims up to £100,000. Jackson argued: ‘Controlling litigation costs (while ensuring proper remuneration for lawyers) is a vital part of promoting access to justice. If the costs are too high, people cannot afford lawyers. If the costs are too low, there will not be any lawyers doing the work.’
In April, justice minister Lord Keen said the government will consult on Jackson’s proposals before introducing any changes. Reforms are unlikely to come into force before October 2019, most likely through secondary legislation.
‘The government’s line is that they are pressing ahead with it, but obviously they have got the Civil Liability Bill going through parliament at the moment,’ says solicitor Kerry Underwood – who assisted Jackson with the fixed-costs review.
There are other costs reform initiatives in the offing. Heeding Jackson’s advice, in early February the Department of Health and the Civil Justice Council (CJC) set up a joint working party to recommend a structure of fixed costs for clinical negligence claims of a value of £25,000 or less. It will report by the end of December.
Master of the rolls Sir Terence Etherton seemed swayed by concerns raised by the GC100 about the burden and cost of disclosure. ‘The cost of disclosure remains disproportionately high, particularly in the Business and Property Courts,’ he added.
The Disclosure Working Group, chaired by Lady Justice Gloster (vice-president of the Court of Appeal’s civil division from 2016 until her retirement in June) published its proposals to reform the disclosure process under the Civil Procedure Rules Part 31 in November. The new rules will abolish ‘standard’ disclosure, and instead differentiate between ‘basic’ disclosure (the standard method) and ‘extended’ disclosure to be granted on an issue-by-issue basis. The scheme is to be piloted across the Business and Property Courts in the Rolls Building and in Cardiff, Birmingham, Manchester, Leeds, Newcastle and Liverpool for two years.
Does the label ‘extremely unpopular’ still attach to Jackson’s work? ‘It could have been far worse,’ says Iain Stark, chair of the Association of Costs Lawyers (ACL). Jackson’s initial vision was that fixed costs could be applied to all claims up to a value of £250,000 but that was reduced to £100,000. ‘Most practitioners can live with a £100,000 limit,’ he says, particularly given the whiplash reforms and plans to raise the limit to £5,000 for RTA-related personal injury claims in the ‘small claims track’, where legal fees are not recoverable. The changes are to be introduced in April 2019 through the Civil Liability Bill and secondary legislation.
Jackson has recommended a new ‘intermediate’ track for debt, damages and other monetary relief claims up to £100,000 that can be tried in a maximum of three days, with no more than two expert witnesses giving oral evidence on each side. The intermediate track will have streamlined procedures and ‘a grid of FRC’ – or four levels of costs ascending with complexity. ‘It is not too difficult to envisage in the future that the limit could go beyond £100k,’ Stark says.
The profession appears less divided than when the first Jackson report came out in January 2010. Anthony Gold managing partner David Marshall, a claimant lawyer and one of Jackson’s 14 assessors along with Stark, says: ‘There was a lot of consultation, and very good discussion among the assessors as [Jackson] records in his report, and I think he listened quite carefully to views from across the spectrum, and tried to come up with an overall package that would deliver reform but was taking it sensibly and in stages.’
Yet there is a potential impact on firms’ business models – and access to justice. FRCs remove the need for budgeting and the assessment of costs at the end of the case. But as Marshall notes: ‘You have to plan for fixed recoverable costs cases differently.’
Based on the experience in the ‘fast-track’ where FRCs apply to personal injury claims up to £25k (and since April this year to holiday sickness claims), Marshall says: ‘The danger is that the economic incentive is potentially that you do as little work as you can get away with to get a result, whereas arguably the economic incentive in an assessed system is that you are pushed to do the most work that you can reasonably do. In a CFA environment particularly, it is very difficult not to do the work you need to do to win the case because you don’t get paid unless you do.’
Hence Jackson’s requirement that only cases suitable for a ‘streamlined procedure’ should be allocated to the intermediate track. Marshall says: ‘What you can’t do is just fix costs on the same process. The point must be that you streamline the process to reduce the work, which will reduce the cost.’
The same principle applies to Jackson’s other proposals, including a voluntary pilot of ‘capped recoverable costs’ (CRC) for business and property cases up to £250,000, with streamlined procedures and CRC up to £80,000. The pilot, to run for two years, has yet to start. ‘In business disputes, if the costs are large you could be gambling your business on a claim of that sort of size, whereas with fixed costs you know that you have got a limited downside if you are going to lose it,’ Marshall says. He points to the popularity of the Intellectual Property and Enterprise Courts, which have already adopted a simpler procedure for claims and costs are capped at £50,000.
A new electronic bill of costs became mandatory from 6 April – eight years after Sir Rupert Jackson recommended it should replace the traditional paper format as part of his civil justice reforms.
‘The great thing about it is that it does bring making calculations into the 20th century – not the 21st century – in the sense
that Excel is obviously very useful to filter and summarise, you make changes to numbers and it changes the whole thing,’ Anthony Gold’s David Marshall says. But the spreadsheet is ‘very complicated and it will take a bit of time for people to get used to it’. It also changes the way time must be recorded – by ‘phase’, ‘task’ and ‘activity’ – which Marshall describes as ‘counterintuitive’. It will take lawyers a while to get to grips with that, he argues. ‘Time will tell whether it is actually a better way of recording.’
Iain Stark, chair of the Association of Costs Lawyers, says: ‘What will have to happen as time goes on is that there has to be one universal electronic bill that we will all have to use because what we are seeing at the moment is different interpretations of the Practice Direction.’ Practitioners can choose between the old (paper) and new e-format for work done before 6 April. ‘You are going to have hybrid bills, old bills, new bills probably for at least three years.’
The CJC working group (Marshall is vice-chair), which is considering fixing costs in clinical negligence claims up to £25,000, is applying the same approach: ‘The terms of reference make it clear that we are both looking at the process and costs. We are looking at both sides of the equation.’
Costs and procedure had to be linked, particularly in clinical negligence cases, Jackson argued: ‘One cannot simply impose a grid of FRCs and leave all the other rules of procedure as they are.’
Greene is sceptical: ‘The concern of practitioners is that these rules won’t cut costs. If anything, they will increase [them] because what happens in civil justice is that reformers bring in procedural methods of seeking to cut costs, and budgeting is a classic example.’
Costs budgeting was part of Jackson’s wide-ranging package of civil reforms. But Greene says that budgeting has actually increased costs, not reduced them, because of the extra work it involves. Would fixed costs be better for claimants? ‘I don’t think we particularly object to fixed costs as long as they are flexible and they provide a sufficient return to allow claimants to bring their claims freely and easily. From a claimant’s point of view, if the fixed costs don’t provide the solicitor with a return, then they will have to charge the client.’
Greene says Jackson’s latest effort ‘shows a more mature flexibility to the needs on both sides’. It hardly helped that Jackson’s first reforms were enmeshed with cuts to legal aid and the huge increase in court fees, Greene observes.
As ACL chair, Stark is concerned that the extension of FRCs ‘will be detrimental to our profession’. Fixed costs will remove the need to prepare the costs budgets and to attend costs management conferences – both an important source of income for costs lawyers. But Stark is also as a partner at Weightmans, a leading defendant personal injury firm, and from that perspective can see a positive: ‘Our clients… like transparency and certainty, and fixed costs gives that.’
Underwood, a claimant personal injury lawyer, says: ‘The problem is that in any case, potentially there comes a point when you are well into [it] and actually what you are really carrying on for is the issue of costs, not the substantive case.’
Underwood argues that FRCs ‘massively increase’ access to justice due to certainty: ‘Fixed costs in personal injury have been extremely profitable for firms who understand the system… Legal costs are so easily predictable, compared to almost any manufacturing process. I would have fixed costs for everything tomorrow,’ he says, adding that the government should ‘bite the bullet’ and do it.
Alistair Kinley, BLM’s director of policy and government affairs, is more cautious. ‘From a defendant/insurer lawyer’s perspective, fixed [costs] have been effective. The extension, certainly across the personal injury fast-track, is a logical, sensible incremental change and to a huge extent a long-unfinished business from not just the first Jackson’s report but also the Woolf reforms.’ But he adds: ‘With regard to the intermediate track, there is maybe more room for discussion.’
For Kinley, ‘homogeneity is suited to being treated by fixed costs, and the further you go up the value banding, the less likely cases are homogeneous.
‘It would be interesting to see what areas the government will focus on in its five-year review [of LASPO],’ Kinley says, pointing to the extension of qualified-one-way-costs shifting (in his first report Jackson had recommended that QOCS be used for all judicial review claims); and the proportionality test, among the areas of interest. The government commenced this review at the end of last month.
In his farewell speech, Jackson said that the profession was becoming ‘impatient’ for guidance from the Court of Appeal on how his proportionality test for costs should operate.
But Marshall notes: ‘Proportionality has been sidestepped a bit by the way that courts are interpreting the budgeting rules. Once you have got your budget, it is quite hard for either side to work much away from that.’
He adds: ‘The only real argument is on what was incurred before the budget.’ In his supplemental report last year, Jackson said that the control of costs incurred before the first costs and case management conference (CCMC) – that are not subject to budgeting – was an area that needed reform. His solution required primary legislation.
For Underwood, waiting for a judgment on proportionality from the CA is ‘a red herring’. FRCs are not fixed in the sense that ‘one size fits all’, but vary, depending, for example, on the size and type of claim and the point at which a settlement is reached. ‘That is proportionality,’ he says. ‘No court has managed to deal with proportionality in 750 years [since the Distress Act 1267, still in force], the only way to deal with it is fixed costs.’
Law Society past president Joe Egan has said: ‘We still have reservations that introducing fixed recoverable costs without robust empirical evidence will negatively affect access to justice. This is work that should be done during the Ministry of Justice consultation period and prior to implementation.’
So, what’s next? Jackson says past experience suggested that the government would accept most of his proposals, further arguing that they were ‘backed up by evidence and supported by reasonably full argument’ and followed ‘wide consultation’.
Unlike Jackson’s first review, which involved policy decisions, the supplemental report is ‘almost a technical document dealing with the levels of fees proposed for fixed costs’, Underwood says. ‘It’s taken as a given that the government, the opposition and the judiciary support the concept of extending the range of fixed fees, and the report gives very specific details. That’s why there hasn’t been a great rush to consult. It will be almost a formality.’
How any consultation will tally with the full review of LASPO remains unclear.
The MoJ promised a review of LASPO once it had been in place for five years, and this began at the end of June, kickstarted with a seminar organised by the CJC in which the finest minds of the costs world gathered together to discuss the effect of the reforms. This was somewhat pre-empted by the ministry’s decision to rush out its own initial assessment of the reforms’ impact the day before the event; which included an assessment of DBAs at odds with Jackson’s own (Gazette, 9 July). But lawyers will have plenty of opportunity to influence the government’s final assessment through an online survey seeking feedback from practitioners, open until 24 August (see tinyurl.com/ya2pj6wl). While wholesale changes to the reforms would seem unlikely, it is certainly a chance for the government to iron out some wrinkles, and the final outcome of the review is promised by the end of the year.
Marialuisa Taddia is a freelance journalist