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Jackson report: out with CFAs, in with contingency fees

14 January 2010

Lord Justice Jackson's eagerly anticipated report proposes radical changes to civil litigation costs rules, including the limiting of conditional fee agreements and the introduction of contingency fees.

The purpose of the review, commissioned in December 2008 by the then Master of the Rolls, Sir Anthony Clarke – now Lord Clarke of Stone-cum-Ebony – was to consider the apparent rise in the cost of civil litigation in England and Wales.

‘No win, no fee’ agreements, Jackson LJ says, have been “a major contributor to disproportionate costs in civil litigation”.

Under current recovery rules, both lawyers’ success fees and the after the event premium payable to insurers in CFA-funded cases are recoverable.

Jackson LJ’s recommendation is that both success fees and ATE premiums should cease to be recoverable from unsuccessful opponents.

CFAs would remain available but any success fees would be borne by clients. In practice, this means they would be paid out of any compensation award.

To make sure that successful personal injury claimants are properly compensated, awards for general damages for pain, suffering and loss of amenity would be increased by ten per cent, and lawyers’ success fees would be capped at 25 per cent of damages.

CFAs are likely to become less attractive as a result – with the possible consequence that access to justice would be reduced – and the introduction of contingency fees could go some way to compensating for the new rules.

Contingency fee agreements, widespread in North America but currently illegal in England and Wales, should be allowed, according to Sir Rupert. This would be subject to a reasonable amount limit. The terms of such agreements would also have to be regulated to protect clients’ interests.

Other major recommendations include the ban on referral fees for personal injury cases. These, Jackson LJ said, “add to the costs of litigation, without adding any real value to it”.

The recommendation comes as other initiatives are under way to reform referral arrangements, including the Solicitors Regulation Authority’ new, stricter guidance and the Legal Services Board’ consumer panel consultation.

One-way costs shifting should also be introduced for certain types of litigation where ATE insurance is prevalent. Under the suggested rule, unsuccessful claimants would not have to pay the defendants’ costs but defendants would continue to pay for successful claimants’ costs. This would be subject to the parties behaving reasonably and dependent on the parties’ respective financial positions.

Further recommendations include fixed recoverable costs for fast-track personal injury claims – and ideally for all types of claims – encouraging uptake of before the event insurance for small businesses, and further investigation into the possibility of setting up a conditional legal aid fund.

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