Shifting patterns

Claimants: unfinished justice

Unsurprisingly given the phenomenal effort, the Jackson report is an impressive, seemingly balanced and thoughtful contribution to the costs debate. It has held true to its objective of focusing on access to justice at proportionate costs across a wide range of dispute types while honing on key judicial concerns. Nonetheless, though highly authoritative, it remains but one vision and is non-binding. Moreover, it has largely ignored one key contributory factor '“ our adversarial system '“ and left one practical question wide open: will it be access to fair justice?

Presenting his report, Jackson LJ acknowledged it would disappoint some stakeholders, particularly where he saw no hope of compromise between radically different views. He identified libel and, surprisingly, aspects of chancery work as such areas but undoubtedly the stakeholders most concerned will be claimants and their legal advisers. The claimant costs associated with pursuing personal injury and defamation claims are particularly targeted. It is not insignificant that these have been subject to the most powerful lobbying by defendant self interests.

In the context of commercial cases lost to other jurisdictions, Jackson LJ declared that he did not want to live in a world where access to justice was crippled by costs. In looking at citizens' core rights, he might now ponder whether recommendations targeted at reducing the costs of enforcement of those rights will have the undesired result of jeopardising effective enforcement. He seems to have ignored equality in adversarial arms.

By over-benefiting the resourced defendant, we simply redefine who was crippled. We dig holes in the level playing field.

So, we have an array of recommendations to reduce the costs of enforcing rights against the wrongdoer. These include fixed costs for all PI cases in the fast track (the vast majority), abolition of referral fees for personal injury cases, an end to recoverability of success fees and ATE premiums in all types of disputes, and one-way cost shifting in personal injury disputes which would largely extinguish any insurable risk. But where are the fair justice safeguards that were at least implied in the brief? The deck has been restacked in favour of the paying party not just as to costs payable but as to prospects of success. Claimants' recoverable costs are their only resource, and their hands are being tied.

Access to justice

Some concerns about access to justice have been recognised and addressed. So, with ATE, which was created precisely to meet an access to justice deficit and is now to be sacrificed, a route over the void is suggested by the temptation of one-way cost shifting. But these, like other recommendations, are interlinked and one without the other is not an option. The glaring issue not squared off is inequality of resources above what is recoverable. Costs-restrained claimants will be outspent by resource-rich wrongdoers to the detriment of fair justice. What good one-way cost shifting then? And what if referral fees are not abolished but insurers who largely collect referral fees use those resources to further defend more vigorously against claimant lawyers whose fixed resources are referral fee depleted? The irony of the insurer's position was not lost on Jackson LJ, but instead the relatively innocent claims managers are singled out. One might have expected the chapters on court management to be bristling with solutions, but they are worryingly silent. David is truly to be left with a one shot sling.

And what of the weight of the shot to overcome Goliath's unrestrained bulk? The complexity of a matter is rarely linked to its value, yet in the fixed cost appendices that myth persists. Core essential cost is insufficiently reflected. The 'escape' mechanism is rarely used to date because it applies in a very restricted environment, but in the massively widened regime it will be severely tested.

The inclusion of disease claims will have surprised even the most hardened insurers. Piloting is surely essential to refine the robustness of the escape criteria in any extended practical environment. This is simple fairness.

Few of the recommendations work as standalones. We are presented with an interlocking jigsaw where we will be able to buy the missing pieces, but not recover the cost. If the access to justice at proportionate costs is to emerge, checks and balances are needed. Implementation is the key and may yet prove too tall an order. A piecemeal approach, not least 'easiest first', may herald disaster. The temptation to start with what can be achieved through rule amendments must be avoided. The hard issues must be tackled first. Most require either primary legislation or the cooperation of regulators.

What we have now is a route map to a new realism. We should move forward with a fair restructuring of the adversarial system and consequent reduction of legal costs.

Proportionality does not override justice even if it qualifies reasonable in the context of costs. So there is still much hard thinking to do and a vision of justice to define and work to.

Fraser Whitehead is a senior litigation partner at Russell Jones & Walker Solicitors and chairs the Law Society Civil Justice Section

Defendants: a compelling case for change

Lord Justice Jackson's final report provides a glimpse of a new world where claimants' access to justice is no longer provided at any cost but also where the approach to litigation is likely to be radically altered.

The report is a fearless, unwavering review of civil legal costs together with a set of radical recommendations for reform that embrace not only fundamental principles of whether the loser should pay all but also damages and procedure.

Success fees

The reforms that introduced recoverable success fees and ATE premiums created an uneven playing field. The would-be claimant became a formidable opponent, insulated against the prospect of paying any costs. The reforms permitted an untrammelled pursuit of a claim by a litigant. The consequence of such a system has been spiralling legal costs, foremost in the guise of success fees.

Jackson LJ does not accept that access to justice at any cost serves the greater social benefit and therefore proposes to remove the recovery of success fees altogether. Instead what is proposed is a regime where a solicitor can enter into an agreement which includes a success fee which may be deducted from the claimant's damages but capped at 25 per cent of the damages (excluding future losses).

What are the consequences of such changes beyond the obvious reduction in legal costs? It is arguable that there is too much 'fat' in the system as a consequence of success fees and there remains, without that element, sufficient profit for the claimant lawyer. It is not necessarily the case that claimants will have difficulty finding solicitors willing to take on their claims under the new regime.

ATE insurance

There is a simple but startling analysis behind Jackson LJ's recommendation to remove the right to recovery of ATE premiums and, to avoid the risk of an uninsured claimant having to meet a defendant's costs, to introduce 'qualified' one-way cost shifting. He considers that the cost to defendants of having a right to recover their costs in the event that they successfully defend a claim exceeds the overall benefit achieved.

Some defendants may well be concerned that, without the prospect of recovery from a losing claimant, they may question whether to defend a case, at cost, or at all. A further concern is that such an amendment would encourage the pursuit of unmeritorious claims. However, if one accepts that the pursuit of claims is lawyer driven and that the proposed changes to success fees would create a more prudent set of claimant lawyers, those concerns may be allayed.

A likely result of the removal of ATE is an increased use of BTE which so far has been chronically under-used considering its prevalence.

Fixed costs

The report considers the issue of fixed costs in fast-track litigation. It is not surprising to see that Jackson LJ has recommended that the costs recoverable for all fast-track personal injury cases should be fixed. He would like to see a procedure which is shorter and more streamlined than that proposed under the current Ministry of Justice reforms.

Procedural changes

Jackson LJ proposes rule changes that will permit a judge to stand back and make significant reductions to the overall costs where these far outstrip damages, reversing the effect of Lownds v Home Office.

The report also proposes removing the uncertainty caused by Carver v BAA (see further comments, page 14) and, more radically, providing an incentive for claimants to make part 36 offers on the basis they stand to gain ten per cent more in damages if the offer is not beaten. Under the present system, there is no real incentive for claimants to enter into negotiation and this proposal is therefore cautiously welcomed.

Implementation

Defendants in personal injury claims will welcome these reforms, which include what will be seen as a long overdue overhaul of the present CFA/ATE regime, but equally will be concerned whether and when the proposals can be implemented, in particular in RTA claims where they pay out the most in terms of ATE premiums but receive the least in terms of benefit.

As recognised by Lord Justice Jackson, many of the changes would require primary legislation. Given that the government is a significant compensator, there is some incentive for reforms to be moved forward. However, with a general election looming it is unlikely that anything will happen quickly. We wait with interest to see whether the impetus created by Jackson LJ is maintained. In the meantime, it is clear that anyone looking at civil legal costs from now on cannot ignore this substantial report.

Looking at the proposed changes to recovery of success fees, defendants will agree with Jackson LJ that there is far too much 'fat' for claimants' solicitors in the system at present and that there remains, without that, sufficient profit for them. Claimants' solicitors may well argue that removal of success fees will compromise the delivery of access to justice but defendants will point to there being a reasonable profit for those solicitors who operate with prudence in relation to which claims they take on. A potential downside for defendants is the introduction of one-way costs shifting, and some will consider that this will result in significant losses.

Finally, defendants dismayed with the limited scope of the MoJ reforms will be encouraged by the opportunity to debate and lobby once more in relation to a wider fixed fee scheme. We wait with interest to see whether the impetus created by Lord Justice Jackson is maintained. In the meantime, it is clear that anyone looking at civil legal costs from now on cannot ignore this substantial report.

Raj Patel and Saqib Khan are solicitors at Kennedys (www.kennedys-law.com)

Clinical negligence: naive suggestions

We have an adversarial system in this country, and nowhere is this more apparent than in the section of the Jackson report relating to clinical negligence claims.

Jackson inevitably kicks off with costs, quoting the statistic that in the year 2008/09 damages of £312m were paid to claimants, but costs of £39m were paid to defendant solicitors and £103m were paid to claimant solicitors (NHSLA (National Health Litigation Authority) figures).

He takes several pages to summarise the competing and often diagonally opposite views of claimants and defendants on the various issues relating to costs, the general thrust being that claimant solicitors charge excessive rates and front load their claims before issuing proceedings which leads to 'excessive enrichment of legal advisers'. From claimants come the accusation that defendants and in particular the NHSLA delay sending medical records, delay before responding to letters of claim and frequently do not address the real issues until the trial is looming.

General recommendations

So, with the battle lines drawn what changes are recommended? All clinical negligence cases will be swept up in the general recommendations:

• The success fee under conditional fee agreements and the cost of after the event insurance premiums no longer to be claimable against defendants. These are to be borne by the claimant or deducted from compensation in successful cases.
• The abolition of referral fees which 'add to the cost of litigation without adding any real benefit to it'.
• Sanctions to be available to claimants who make part 36 offers to settle (entitling them to a ten per cent uplift in costs if the defendant does not beat their offer).
• One-way costs shifting: for certain types of litigation an unsuccessful claimant will not be required to pay the defendants costs, but the defendant will still have to pay the costs of a successful claimant.
• General damages should be increased by ten per cent to ensure that claimants are properly compensated.

And for clinical negligence cases he suggests the following changes:

• Financial penalties for health authorities which fail to provide records on time.
• Time for responding to a letter of claim increased to four months.
• NHSLA to instruct independent experts on liability and causation during the currency of the letter of claim.
• The defence organisations and NHSLA to nominate a senior officer to investigate claims by claimant solicitors of failure to address issues.
• A limited stay for settlement negotiations where the defendant offers to settle without admission of liability.
• Case management directions to be harmonised across England and Wales with the same judge handling the case throughout.
• Costs management: he suggests a limit on the costs of investigating a claim and preparing for trial: a threshold figure of £15,000 at each stage (total £30,000 to trial).
• The 2006 NHS Redress Act should be activated by the drawing up of regulations.

Changing attitudes

Parts of the report are to be welcomed. I have never been a fan of referral fees, and I do find the level of some ATE insurance premiums positively alarming. One-way costs shifting will go a long way to removing the deterrent effect of adverse costs orders against would-be litigants. It should also encourage more claimant solicitors to take cases to trial, knowing that it is only their fees that are at stake.

Inevitably we will see a return to part of the claimants' compensation being eaten up in costs. That used to be the position before success fees were claimable against defendants. There is some merit in forcing a greater involvement of clients in costs issues. However, I do not consider that his modest recommendation of an increase in damages by ten per cent goes nearly far enough. Levels of damages are already too low, and a more appropriate figure should be 25 per cent.

But if success fees cannot be claimed against defendants in winning cases, how will the preliminary screening be paid for? It is acknowledged among claimant solicitors that approximately 50 per cent of clinical negligence claims that are initially taken on do not result in a settlement. That is because a case has to be fairly far advanced before a proper assessment of its merits can be made. Jackson naively suggests that the solution is simple: charge the clients for the initial screening, and those that cannot afford it will get legal aid. Where has he been these last few years? Legal aid financial criteria are now so tight that only the poorest will qualify '“ and then there is the uphill struggle of persuading the LSC to grant a certificate. Many years of television advertisements from claims farmers have introduced a culture where claimants expect to pay nothing before they receive their fat cheque in compensation. A lot of hard work will be needed to undo that attitude and persuade clients that they should stump up several thousand pounds in preliminary investigation of their cases. I suspect the result will be an increase in cherry picking '“ and only the best cherries at that. Result: a reduction in access to justice.

Richard Barr is a consultant with Scott-Moncrieff Harbour and Sinclair who carries out claimant clinical negligence work. He can be contacted by email: richard.barr@paston.co.uk

Defamation and privacy: common sense

Lord Justice Jackson's recommendations in respect of costs in defamation cases are to be found in Chapter 32 (page 319 to 329). As expected, he concentrates (as he does throughout his report) on seeking to achieve a greater degree of balance and fairness in controlling costs and in trying to create a more level playing field for both claimant and defendant. Necessarily, one of his real concerns is the CFA and the abuse the has arisen since its introduction in relation to success fees and after the event (ATE) premiums which are at present recoverable from a losing party.

Abolish success fees and ATE

The recommendation by English Pen and Index of Censorship (EPIC) that success fees and ATE premiums in CFA's should cease to be recoverable is endorsed by Jackson LJ, but in order to ensure claimants have access to justice other measures are recommended by him in their place (paragraph 1.7).

In return for his proposed abolition of the success fee and the recovery of ATE insurance, Jackson LJ proposes special measures which would result in a general level of damages for defamation/breach of privacy being increased by ten per cent as from the date that CFA/success fees cease to be recoverable (paragraph 3.13). A fall back position to that would be that there would be fixed success fees, staged ATE insurance premiums and so forth.

On the question of ATE insurance premiums and adverse costs, he comments that the present system for achieving costs protection for claimants is, in his view, 'the most bizarre and expensive system that it is possible to devise' (paragraph 3.8).

Accordingly, he proposes the same regime for defamation for breach of privacy cases as he proposes for personal injury and judicial review cases, namely one that is modelled on section 11(i) of the Access to Justice Act 1999. If such recommendations were accepted, costs ordered against a claimant would be proportionate to what was reasonable to have to pay according to the financial resources of the parties and the conduct of the matter. In making such recommendation, Jackson LJ is seeking to address the very real difficulty of litigation between parties where there is not a level playing field; e.g. a wealthy claimant taking advantage of the CFA and ATE insurance in order to litigate at the expense of the other side. In effect, the proposal amounts to a means test with regard to the award of costs and in that way the rich would not be able to abuse the system.

Tightening up protocol and case management

With regard to pre-action protocol, he recommends that there should be a strengthening of the protocol, so that, instead of being invited to state the meaning of the words complained of, there should be an obligation to identify the meaning. This is important as the pre-action protocol is voluntary and there are only recommendations as to procedure. By introducing a requirement, this would have a significant effect because if that requirement were not followed the defendant would be entitled to make an application accordingly.

Inevitably, with regard to case management and cost management, there is a recognition that significant improvements need to be made in monitoring costs by pro-active case management and early resolution procedure which Jackson LJ commended for consideration.

Consider abolishing jury trial as of right

He recommends that the existing rule with regard to trial of defamation actions set out in section 69 of the Senior Courts Act 1981 be repealed, so that, rather than an action being tried by a jury as of right, an action should now be tried by a judge alone save in special circumstances. Jackson LJ recognises that if costs are now regarded as a serious impediment to access to justice, there is undoubtedly an argument for saying that trials should be by judge alone. It merits serious consideration.

There is nothing revolutionary in Lord Justice Jackson's report in relation to costs in defamation..It is necessary to deal with CFA and ATE abuse and it is handled in a common sense way and there is little to complain about. They amount to taking steps to ensure better housekeeping by the courts and better, quicker and more immediate control of costs to ensure fairness and proportionality. Indeed, the 'buzz' words in the defamation recommendations, as with the rest of the report, are perhaps 'balance', 'proportionality' and 'pro-activity'.

Rod Dadak is head of defamation at Lewis Silkin LLP. Contact: rod.dadak@lewissilkin.com. This is a longer version of the article published in Solicitors Journal 154/2, 19 January 2010