The wrong target

Like everyone else involved in the field of personal injury litigation, I was anxious to find out what conclusions Sir Rupert Jackson had reached and what recommendations he was making in his final report. Like many others, I began with the executive summary and my heart sank when I saw that he stated as part of his first recommendation: 'Conditional fee agreements... have been the major contributor to disproportionate costs in civil litigation'¦' He then goes on to cite success fees and ATE premiums as the two key drivers.

That may be the case in other fields of litigation, such as libel, but, with all due respect to Sir Rupert, it cannot possibly be right so far as personal injury litigation is concerned.

Yes, there was a problem in relation to success fees when CFAs were first introduced, but, in the vast majority of PI cases, success fees are now fixed by the rules (see CPR 45.15-26). These success fees were worked out by the very statisticians engaged to assist Sir Rupert on the basis of data provided by all the relevant stakeholders. They were designed to be costs neutral so as to cover the costs of losing cases but no more. I represented the Bar at a series of meetings over many months at which the success fees now prescribed by the rules were agreed by all parties on the basis that they would be subject to review if fresh data showed that they were too high or too low. So far as I am aware, no one has raised any issues on these figures to date. One only has to look at CPR 45 to see that the success fees prescribed are not high. Some 98 per cent of PI cases settle. Further, the success fees agreed were designed to take account of the huge number of claims that solicitors investigate but do not proceed with. This is usually because the case is unmeritorious or it could be that the proposed claimant is discovered to have BTE insurance and the claim has to be passed to a panel firm. The most common types of case involve RTAs and accidents at work. The success fees applicable in these cases respectively are 12.5 per cent and 25 per cent for settled cases and only 100 per cent if the case goes to trial. No case goes to trial unless both sides think that they can win, so there has never been any issue that 100 per cent is appropriate for the small number of cases going all the way to trial from either defendants or the judiciary.

Unfortunately, the citing that success fees are a major driver of disproportionate costs has had a knock-on effect in relation to a number of the complex remedies that Sir Rupert recommends to cure a problem which in fact does not exist in PI '“ at any rate since fixed success fees came in.

Of course, the CFA regime is not perfect. The Personal Injuries Bar Association warned the government in 1998 what would happen after Lord Irvine's infamous speech in Cardiff in which he announced the withdrawal of legal aid in PI. We had years of chaos and satellite litigation. However, after numerous different sets of regulations, the government then took the bold step of repealing all the regulations on CFAs and effectively deregulating them. Since then, and the imposition of fixed success fees, the system has bedded down and it is at least workable. There are still some technical challenges, but most relate to CFAs entered into under the old regulations and the Court of Appeal has shown that defendants will now need an almost unanswerable case before they are likely to succeed on a technical point.

Reduced access

Rather than achieve the stated objectives of controlling costs and promoting access to justice, many of the measures recommended by Sir Rupert will simply transfer most of these costs from defendant tortfeasors to claimants and/or their solicitors and result in reduced rather than increased access to justice.

One example of this is the recommendation that we revert to the pre-2000 regime whereby success fees will be payable by claimants rather than defendants. Sir Rupert seeks to mitigate the effect on claimants by recommending that general damages be increased by ten per cent and the success fees be capped at 25 per cent of damages, excluding any damages referable to future care or future losses. However, this not only drives a coach and horses through the current fixed percentages regime which had industry-wide agreement, it is also unworkable in practice '“ a potential driver of bad behaviour and a disincentive to lawyers taking on challenging cases.

The vast majority of cases settle for a round figure with no breakdown as to what is past and future loss or general damages. Who is going to decide what proportion of the settlement sum should be included in the 25 per cent? The defendants will not be interested and the claimant's lawyers will have a huge conflict of interest so will not be able to do it either. Will there have to be a breakdown of all settlements and approval by the court? Further, there will be no incentive to claimant's lawyers to reach an early settlement as the longer the case lasts, the more that can be attributed to past loss on which the success fee can bite. Sir Rupert's recommendation was no doubt to protect such heads of claim as future care costs, but it does not even do that. The sum still has to be paid from the damages and if the money has been spent on past losses then it still comes out of the pot and impinges on what is left. Claimants will view it as a tax on the wheelchair that they have had to buy or on the gratuitous care that their family have provided.

With regard to ATE premiums, Sir Rupert recommends one-way cost shifting so as to avoid the need for such a premium. The idea is that it would be cheaper for defendants not to recover their costs in cases that they win than to pay for the ATE premiums in cases that they lose. However, removing the profit element in ATE premiums from the general costs burden does not take into account the claimant's own disbursements which will still have to be paid for, win or lose.

It is highly unlikely that the ATE industry, having had their business model destroyed by these proposals, would be prepared to stay in the market just for the claimant's own disbursements.

Even in low-value claims, court fees, medical reports and other disbursements are likely to reach four-figure sums and, even if there is only the slightest risk of a claimant losing, many claimants will understandably not wish to proceed on that basis.

Surely, this is hugely detrimental to access to justice. Further, what about adverse costs orders and part 36? Is the claimant to have an entirely free run, taking all manner of bad points secure in the knowledge that he or she will not have to pay the defendant's costs? Surely not. Issue-based costs orders are now firmly entrenched in the system so no claimant can ever be wholly confident that there will never be a costs order against him or her.

I am also far from convinced that fixed costs throughout the fast track will be effective in controlling costs or promoting access to justice. On the basis of the CJC mediations which had been running parallel with the Jackson process last year chaired by assessors of Sir Rupert, it appears that these fixed costs are going to be calculated on the basis of historical fees paid. Thus, if costs are simply averaged out across the board, the lawyers will end up getting overpaid for the easy cases and underpaid for the difficult ones. This may provide an element of certainty but will not result in a saving of costs and will make solicitors even less inclined to take on the more challenging cases than they are now.

The Personal Injuries Bar Association is also very concerned about Sir Rupert's recommendation that, in fast-track cases, solicitors should simply be paid an additional £100 in RTA cases and £225 in employers' liability cases to enable them to instruct the Bar. This is despite the fact that the Ministry of Justice has stated that it is keen to preserve the current position of the Bar so that counsels' fees will be recoverable as a disbursement and the unanimous agreement at the CJC mediation on the 30 October 2009, presided over by two of Sir Rupert's assessors, that counsel should continue to be paid as a disbursement. One wonders what the point is in attending these costs forums if such agreements are simply going to be ignored.

Nevertheless, despite the reservations that I have about a number of Sir Rupert's recommendations, I do recognise that there are some very sensible suggestions and I admire the huge amount of work that has gone into this inquiry which has taken place in such a tight timescale. However, to rush to implement the package as a whole without further consultation and a detailed analysis of the effect of these recommendations in different areas of the law would be a huge mistake.

Copyright & permissions