The long anticipated and fiercely debated Jackson reforms to litigation funding finally became law in England and Wales in April 2013.
Whilst it is too early to say what the impact of the reforms will be on litigation - and PI claims in particular - from a Scottish perspective, the reforms are a fascinating insight in an attempt to gain control of the runaway train of litigation costs in England, and contain traps for the unwary insurer dealing with claims in Scotland.
The salient features of the Jackson reforms are well-known:-
- The success fee element in CFAs can no longer be recovered from the paying party;
- ATE premiums are no longer recoverable from the paying party;
- There has been an increase in general damages of 10%;
- Qualified one-way cost shifting has been introduced in PI cases;
- Damages-based agreements have been introduced, allowing a claimant's solicitor to share the award - to a cap of 25%.
There are other, more technical reforms to the rules around disclosure and Part 36 offers, which are outwith the scope of this article.
From a Scottish perspective, the crucial point to note is that the Jackson reforms do not apply in any shape or form. Indeed, in many respects, Jackson mirrors how litigation has always been funded in Scotland.
Whilst CFAs - more commonly called speculative fee agreements - are possible in Scotland, the success fee (or uplift) element in such an agreement has never been recoverable - nor, indeed has any element of what a solicitor and his or her client agreed would be the solicitor's fee.
Likewise, whilst Scottish claimants can and do source ATE cover to protect against adverse cost awards, the ATE premium has never been recoverable from the unsuccessful party. It is always a cost borne by the party taking out the cover.
Given this position, the 10% increase in general damages does not apply in Scotland, and here lies the trap for the unwary. When considering the value of claims in Scotland, there is a dearth of authority, reflecting the modest size of the jurisdiction and the limited number of claims fought - of any type. As a consequence, the JSB - or now Judical College - guidelines are an early port of call. In addition, English cases are often used. Whilst English authorities and the Guidelines will remain a very useful tool, it should always be borne in mind that the 10% increase in general damages does not apply. It was introduced to reflect the non-recoverability of the success fee, which has never been recoverable in Scotland.
Qualified one-way cost shifting was the quid pro quo for the non-recoverability of ATE premiums. Under cost shifting, unless a claim has been brought unreasonably, even an unsuccessful claimant will not require to meet the successful defendant's costs. In Scotland, ATE premiums have never been recoverable and one-way cost shifting never applied. There is a review into litigation funding (the Taylor Review) currently being undertaken and one-way cost shifting is being considered. Removing the discipline imposed by the risk of having to meet costs in the event of failure would be a significant step. Even watering down the risk by applying a subjective judgement of whether or not it was reasonable to pursue the claim might lead to an increase in frivolous cases being brought, fewer cases being settled and higher levels of settlement - none of these welcome by defenders. However, until there is a change in the position here, there is no one-way cost shifting and claimants carry the risk of having to meet costs in the event that their claim in unsuccessful.
Jackson came about, at least partly, as a result of the unforeseen (or overlooked) consequences of the removal of legal aid from civil claims for damages and the introduction of CFAs as a means of funding litigation. In Scotland, for the moment, Legal Aid is still available for damages claims, though eligibility, legal aid rates and overall caps on the level of expenditure severely limit the utility of public funding as a means of pursuing claims. As a result, other funding methods - principally speculative fee agreements - have become increasingly popular, even within the restricted costs recovery regime in Scotland.