The cost of bringing litigation is under greater scrutiny than ever after the Master of the Rolls Sir Anthony Clarke appointed Lord Justice Rupert Jackson to conduct a year-long review.
The cost of bringing litigation in England and Wales is under greater scrutiny than ever before after the Master of the Rolls Sir Anthony Clarke appointed Lord Justice Rupert Jackson to conduct a year-long review into legal costs.
With Jackson LJ, who has already visited the Civil Justic Council’s (CJC) costs forum to set out his review timetable, preparing to travel around the country to meet those involved in the process, the review will be no small task. But according to CJC chief executive Robert Musgrove, a review at this point was inevitable.
“It’s natural timing now that the Woolf reforms are 10 years old,” he says.
There are concerns that Jackson LJ will hear horror stories of a costs war when he meets with the defendant lobby. Consideration will be given to abolishing the practice of costs-shifting altogether in favour of a US-style contingency fees model.
Claimant lawyers are expected to counter-argue that, while there are problems with the current claimant system, this stems mainly from defendant lawyers using technical points of law to dispute costs orders.
“The possibility of abolishing the costs-shifting rules is becoming a real option,” says one CJC insider. “I can’t believe that someone who’s considered all the arguments will change the rules. It will deprive middle England of being able to bring a claim and give defendants the option of outspending the opposition.”
The CJC is about to publish an academic study into the contingency fees model. There is much scaremongering about the use of fees, which some suggest would allow cases to be sold to the highest bidder.
“It’s a distasteful system,” says a source. “It means you’re effectively bartering with clients and you have to strike a deal with them. You’re asking, ‘how much am I going to make from this case?’”
Musgrove says what is needed is a “balanced view” and that “sensible consideration” needs to be given to the alternative model in case other funding options, such as the after-the-event (ATE) insurance model, fail.
At the same time, the Ministry of Justice (MoJ) has commissioned an academic study into the ‘no win, no fee’ model. Helping to author the study is Professor Richard Moorhead of Cardiff University, who also authored the contingency fee study.
“It’s a review for review’s sake,” says Beachcroft strategic litigation partner Andrew Parker of the conditional fee arrangement review. “It’s a substitute for the lack of decision-making in the personal injury claims review.”
Meanwhile, an independent group has been appointed to research costs-capping in personal injury (PI) claims – an extension of the earlier process review.
For defendant PI lawyers, exaggerated costs are a bone of contention. When the MoJ failed to reform the PI process earlier this year (The Lawyer, 28 July), insurance giants Norwich Union (NU) and Zurich came out fighting.
In the summer (11 August) ;Zurich ;UK technical claims manager Steve Thomas told The Lawyer: “We’ve decided to take court action to stamp out this behaviour and reduce unnecessary claims costs.”
One CJC source says: “NU and Zurich are running the costs war as a strategy. Is it a strategy which aims to break the PI claims process? What’s a little concerning is that it’s in their interest to rack up the challenges.”
The source claims that this will effectively “create the perception of a costs war which doesn’t exist”.
There is another option, a further source suggests, outlining how the judiciary should be more involved in costs-capping on any case where legal fees are spiralling. “The judge knows the costs and should use their powers to cap them,” the source says.
Litigation lawyers have broadly welcomed Jackson LJ’s civil litigation costs review. Jackson LJ is considered to be “bright, focused and committed to meeting all stakeholders”, according to one lawyer.
Yet the sector is split over how it proposes to fix a system that nobody is prepared to say is broken. What is needed is clarity.
But Jackson LJ will not report back until the end of 2009 and a general election is due before June 2010. Before this, the Legal Services Act is expected to bring in a new wave of competition to the sector – effectively pushing costs down.
Before any legislative change can be formulated, consulted on and finally passed through government, market forces will take over and the litigation landscape will have once again changed.
Litigation costs review
The year-long review was launched last week
(3 November). The Master of the Rolls Sir Anthony Clarke appointed Lord Justice Rupert Jackson to chair the review, which will look at legal costs in litigation. It follows a series of criticisms levelled at lawyers by insurers and the judiciary about the spiralling costs associated with bringing a claim in the English courts.
Contingency fees study
The Civil Justice Council (CJC) commissioned senior costs judge Peter Hurst and Professor Richard Moorhead of Cardiff University to conduct a study into the use of contingency fees in foreign jurisdictions. Contingency fees are generally used only in employment cases, while in personal injury the conditional fee arrangement (CFA) model is favoured. It is understood that the report will say the use of contingency fees without the costs-shifting model used in CFAs will help mitigate the threat of litigation around legal costs.
Litigation funding regulation
Instigated in response to the growing number of cases being funded by third parties who make a return on their investments, the CJC is preparing to present the Government with a code of conduct for the third-party funding sector to abide by voluntarily. This has been devised by a series of CJC stakeholders, including the funders themselves, lawyers, insurers and legal expenses insurers.
‘No win, no fee’ academic review
Launched in June, the study was commissioned by Justice Minister Bridget Prentice and will examine the use of CFAs. Professor Moorhead, who also led the contingency fees study, will work alongside Paul Fenn of Nottingham University Business School and Neil Rickman, a professor of economics at the University of Surrey.
Commissioned by the Civil Procedure Rule Committee, the costs-capping study chaired by Russell Jones & Walker partner Fraser Whitehead will look at proposals to amend part 44 of the Civil Procedure Rules by inserting rules on costs-capping orders.