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Government backs contingency fees

16 November 2010

Justice secretary Ken Clarke gave his full backing to Lord Justice Jackson’s report on civil litigation costs in a statement to the Commons yesterday, including the introduction of contingency fees.

Clarke said the government supported the “key proposal” to end recoverability of success fees and ATE insurance premiums. In addition, success fees in personal injury cases would be capped at 25 per cent of damages.

He said the government would also be “seeking views” on the introduction of qualified one-way costs shifting, to protect unsuccessful personal injury claimants from paying the other side’s costs beyond what the court considered to be reasonable, and a ten per cent increase in general damages.

In its consultation paper on implementation of the Jackson report, the government went further than Jackson LJ in its support for contingency fees.

The lord justice said that contingency fees should be regulated through an extension of the Damages-Based Agreements Regulations 2010 and that litigants should be entitled to advice from an independent solicitor before agreements are signed.

Ministers said in the consultation paper that since the 25 per cap on fees as a percentage of damage in personal injury cases would also apply to contingency fees, they did not believe that further regulation is necessary.

Costs shifting would apply on a conventional basis in contingency fee cases, so that fees charged on a normal hourly basis could be recovered from the defendant.

The consultation paper also suggests that qualified one-way costs shifting could be extended beyond personal injury to other areas of civil litigation, such as defamation and judicial review, where actions were brought by individuals and possibly not-for-profit organisations.

In an oral statement to parliament on the legal aid green paper and the Jackson report, Clarke said he was “convinced by Sir Rupert's argument that achieving proportionate costs and promoting access to justice go hand in hand”.

He said the government had already accepted the recommendations of Lord Young’s report on health and safety, which endorsed the Jackson report.

Clarke said that if claimants had to pay success fees themselves they would “take an interest in controlling the costs being incurred on their behalf”, which would also reduce the “disproportionate costs burden” on defendants.

“I believe that these changes would improve access to justice overall by allowing necessary cases to be brought, while deterring purely speculative claims and making access to justice more meaningful for defendants.”

APIL president Muiris Lyons said the only people to benefit from the restriction in conditional fees were negligent defendants and insurance companies.

“The proposal to increase damages to offset the effect of this move is a white elephant for two reasons: first, damages are now too low in any event, as, in most categories, they have never been increased in line with Law Commission recommendations; second, the proposed increase will not always cover the costs to be borne by the injured person in any event, leaving him with a shortfall in his damages.

“Those who will be affected most are likely to be people suffering serious or catastrophic injury, where the damages involved are often very high.”

A spokesman for the Association of British Insurers said the association had long campaigned for reform to the legal process to make it simpler, less complex and more cost efficient.

“We believe Lord Justice Jackson’s recommendations will help deliver this, which is why we support their implementation,” he said.

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