Lord Justice Jackson was appointed by the Master of the Rolls, with the support of the Ministry of Justice, to consult and conduct a wide ranging review into civil costs, to establish how the current costs rules operate and the effect of case management. The much-heralded extensive preliminary report was published on Friday, 8 May 2009.  

The review has a wide ambit. The preliminary report considers methods of funding claims but also looks at the litigation process itself, including consideration of methods of disclosure, witness statements and expert evidence, case management (including ADR) and trials.  

Fundamental questions  

Lord Justice Jackson stresses that he has not formed a final view on any topic and states “The issues in this Review are both complex and intractable – there are no simple answers.” Looking at this from a liability claims perspective:  

  • Costs shifting – should the costs shifting rule (i.e. that the losing party pays the winning party’s costs) be abolished or modified? Lord Justice Jackson sets out the tentative conclusion that costs shifting in some form must remain for the generality of litigation. Worryingly, Lord Justice Jackson seems in favour of a “One Way Costs Shifting” rule which means that when the defendant loses, he pays the claimant’s costs, but when the claimant loses, each side bears its own costs. At first blush this appears inherently unfair but it seems Lord Justice Jackson is keen to scrap After the Event Insurance (and the resultant premiums) and this would be a way of avoiding the need for this particular litigation expense (the claimant would no longer need to insure against the risk of having to pay the defendant’s costs). The statistical analysis (based on figures provided by one insurer), which culminated in this radical proposal, revealed a surprising conclusion: that favourable costs orders against claimants were obtained in only 0.1% of total notified claims. Two issues occur. Firstly, our view is that it would be unwise to rely upon figures provided by one insurer (not all insurers may have the same claims handling ethos) and secondly how do you filter out unmeritorious claims?  
  • Fixed costs – should the existing range of fixed costs be extended? The report states that there appears to be a strong case for some method of applying fixed costs in fast track personal injury cases at all stages, with a matrix approach being proposed. Lord Justice Jackson therefore points out that it would be sensible for the reforms proposed by the MOJ to the claims process to be considered in tandem with the reforms adopted following completion of his costs review. If this point is taken on board this may lead to a further delay in the implementation date for the new claims process beyond the current date of April 2010. However, it may mean that a new claims process has a wider ambit than that proposed at present (RTA claims up to £10,000 only).  
  • Personal injury claims (1) – (i) should claimants ever suffer deductions from damages in order to cover their own legal costs, for example any costs disallowed on assessment; and (ii) can the high costs of processing personal injury claims be reduced? In relation to the small claims track limit, the report sets out the options (to include increasing the limit to £5,000) and the safeguards that would be needed for claimants if an increase was made, but does not reach any conclusions.  
  • Personal injury claims (2) - the report also addresses whether the assessment of general damages in fast track cases can be made simpler and more predictable in lower value claims, through the use of a points system or a “Colossus type” software system, which Lord Justice Jackson considers has proved effective overseas. Whilst software systems have undoubtedly become more sophisticated over the years, would this work or would we simply see satellite litigation with claimants seeking to distinguish their claim for general damages from the “system”?  
  • Controlling the costs of “heavy” litigation – how can the costs of complex civil claims such as commercial, chancery, high value professional negligence cases etc be controlled. Costs management by the courts, including the use of costs capping, is discussed.  
  • Recoverability of additional liabilities – (i) should success fees and ATE premiums continue to be recoverable? (ii) if yes, should this recovery be subject to restrictions? and (iii) if no, how should access to justice be secured for claimants? In relation to CFAs, he considers that the decision to make success fees and ATE premiums recoverable has promoted access to justice for claimants but has massively increased the costs burden for defendants. He asks how the interests of claimants could be protected if success fees and ATE premiums ceased to be recoverable, which is the case in other jurisdictions. He invites debate on these issues, but there is a clear indication that he is leaning towards retaining CFAs but scrapping ATE insurance (in conjunction with the “One Way Costs Shifting” rule discussed above).  
  • Assessment of costs – should the current mechanisms for detailed assessment and summary assessment be reviewed?  
  • Funding and access to justice – consideration of costs shifting, ATE insurance, CFAs and alternatives to these. There is overwhelming support amongst solicitors for banning referral fees in personal injury cases.  

Conclusion

Lord Justice Jackson’s preliminary report raises fundamental questions both in relation to the currently accepted methods of funding claims and the claims process itself. In terms of the impact this has, much will depend how interested parties respond and comment on the consultation document, how radical he is in his final conclusions and the extent to which these are then implemented.  

It is particularly positive for defendants and insurers dealing with liability claims that there is a clear acceptance that the costs currently being incurred by claimants’ solicitors are too high, and that proposals are being considered to address this both in terms of methods of funding and the claims process itself. However, some of his preliminary “answers” would fundamentally change the way in which litigation is funded and managed, potentially to the detriment of defendants.  

The final report is expected in December 2009.