Deans Court Chambers

A Summary of The Review Of Civil Litigation Costs: Final Report

 Lord Justice Jackson published the Final Report of his Review of Civil Litigation Costs on the 14^th January 2010.  A full copy can be found at www.judiciary.gov.uk/about_judiciary/cost-review/jan2010/final-report-140110.pdf.  The executive summary and his summary of recommendations (p. 463) provide a useful overview of Jackson LJ’s conclusions.  I set out hereafter a summary of the report, insofar as it relates to personal injury litigation. 

Funding 

Conditional Fee Agreements survive, but success fees will not be recoverable inter partes.  A lawyer may therefore enter into a CFA with a client, but any success fee agreed will be paid out of the client’s damages in the event of success.  Any perceived unfairness will be mitigated by:
(a)    a 10% increase on general damages;
(b)    a cap on the maximum amount which a client would be obliged to pay in success fees, of 25% of damages, excluding damages referable to future care or future losses;
(c)    an enhanced reward for Claimant’s Part 36 offers, wherein a Defendant who fails to beat such an offer will pay an additional 10% of damages (possibly less in claims over £500,000).
After the Event insurance premiums will not be recoverable inter partes.  In return, one way costs shifting will be introduced, whereby a Defendant will not recover their costs from the Claimant whether they win or lose.  It is concluded that it would be substantially cheaper for defendants to bear their own costs in every case, whether won or lost, than to pay out ATE insurance premiums in those cases which they lose.  The one way costs shifting is qualified by a safeguard akin to the old “Football Pools order”, in the following proposed terms:-        
Costs ordered against the claimant in any claim for personal injuries or clinical negligence shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including: (a) the financial resources of all the parties to the proceedings, and (b) their conduct in connection with the dispute to which the proceedings relate.        
This is intended to mean that successful Claimants will pay the Defendant’s costs if: (a) he has behaved unreasonably, including in declining a Part 36 offer which he fails to beat; (b) the Defendant is uninsured; or (c) the Claimant is conspicuously wealthy.
Contingency Fee Agreements would be lawful, so that a lawyer could agree that his fees will be a percentage of the client’s damages up to a maximum of 25% or a multiple of the ordinary fee.  Insofar as the contingency fee exceeds what would be chargeable under a normal fee agreement, that is borne by the successful litigant.  All contingency fee agreements to be countersigned by an independent solicitor to confirm that the client has been properly advised as to the terms of the agreement. 

Fast Track Costs
All costs in fast track PI claims to be fixed.  A full matrix of fees published in the report for RTA, public liability and employers’ liability (non-disease).  Matrix for disease claims still to be finalised.  Fees fixed for RTA claims without PI.  Fixed fee for each stage to include the cost of instructing counsel.  Enhanced costs for claims involving children and protected persons.  Complex cases expected to be allocated to multi-track and unreasonable conduct by Defendant expected to be met with indemnity costs, in each case to avoid unfairness.
Escape clause in identical terms to CPR 45.12/45.13 (fixed recoverable costs), i.e. additional costs available in exceptional circumstances and where costs on assessment exceed 20% more than the fixed costs. 
Discretion to order costs on interim hearings in addition to fixed costs.  Medical report fees to be fixed.
New scheme for quantum-only RTA claims under £10,000 endorsed, and recommendation to extend to other fast track claims. 

General Principles of Costs Assessment
Common law indemnity principle to be abrogated.  Costs payable to be determined by reasonableness and proportionality of work done, not by technical liability of client to his lawyer.
Concept of proportionality to be redefined, so that proportionality is considered after the reasonableness of the costs has been assessed, and to provide that costs are not proportionate merely because they were necessary.  This would reverse the effect of Lownds v Home Office [2002] 1 WLR 2450. 

Referral Fees
Referral fees to be banned, and the trade in personal injury claims to cease.  Likely to be enforced by SRA. 

Case Management and the Civil Procedure Rules
Standardised directions templates for cases of all values.
Mechanism for applying to Court pre-action to enforce compliance with the pre-action protocols.
Amendment to CPR 3.9 to provide that when considering giving relief from sanctions, the Court is to have specific regard to (a) the requirement that litigation should be conducted efficiently and at proportionate cost; and (b) the interests of justice in the particular case, and for the existing list at CPR 3.9(1) to be deleted, intended to encourage Courts to be more robust in respect of non-compliance with rules and orders. 
CPR 36.14 to be restored to its original wording, so that costs consequences depend on the Claimant failing to better an offer, rather than failing “to obtain a judgment more advantageous” than an offer.  Thus, even if the Claimant fails to beat the offer by a matter of pennies, the costs consequences will flow, and if he beats it by a matter of pennies, they will not.  This would reverse the effect of Carver v BAA plc [2008] EWCA Civ 412.
Parties seeking permission to instruct further expert evidence will be required to provide details of the cost of such an instruction. 
Judges to be encouraged to promote the use of ADR in PI claims, in particular mediation and JSMs.
New formats for form N260 (summary assessment of costs) and the Bill of Costs. 

Institutional Matters
The establishment of a Costs Council, to keep fixed costs under review.
Court fee income should be ploughed back into the civil justice system. 

Areas where No Recommendation Made§  
No requirement for a Contingency Legal Aid Fund at present, to be kept under review.
Limit for Small Claims Track to remain at £1,000 until inflation increases that figure to £1,500.
Before the Event insurance to remain voluntary, although take-up of this variety of cover to be encouraged.
Assessment of general damages to be conducted by Judges and not solely by a computer system, but:-         
working group to be established to find a common calibration for software used to assess general damages;
software to be available to Judges as a tool for assisting in the assessment, akin to the JSB guidelines;
insurers encouraged to use software calibrated in accordance with the recommendations of the working group, to avoid under-settlement.
Costs of Medical Reporting Agencies to remain recoverable. 

These are all, of course, recommendations only.  Almost all of the recommendations under “Funding” above would require primary legislation, as would the abrogation of the indemnity principle and the establishment of a mechanism for making an application pre-action to enforce pre-action protocols.  The remainder could probably be effected by a change in the CPR only. 

15^th January 2010
RICHARD WHITEHALL