The protestations may have come too late, however. The critics, who have now had time to examine further the 500-page document, will see that Jackson LJ anticipated such an attack and in the detail of the review has already responded.
Lawyers were invited to the Royal Courts of Justice (RCJ) earlier this month (14 January) to hear from the Court of Appeal judge how he had reached the conclusions.
“A lot of the claimant lawyers looked positively ashen when [Jackson LJ] said the recoverability rule would be banished,” says one lawyer. “We were shocked. He’s gone too far.”
Jackson LJ says his research, which is unquestionably extensive and detailed, uncovered “serious flaws” in the conditional fee arrangement process.
Queens Bench Division president Sir Anthony May summed up Jackson LJ’s thinking when he stated: “Is it right in principle that a losing party should have to pay an additional amount, in excess of the proper and reasonable costs of litigation, to cover the winning party’s lawyer’s costs of losing other cases on behalf of other clients?”
This goes straight to the crux of the matter. In abolishing the recoverability of the success fee, claimant lawyers say they will be unable to take on cases that are less likely to succeed in court.
“We just wouldn’t be able to afford it,” says one litigator. “The success fee pays for cases we lose.”
But Jackson LJ rejects such a notion. “No evidence has been produced during the costs review to demonstrate that success fees at the levels currently charged are necessary to cover the cost of ‘lost’ cases,” he states.
Jackson LJ also suggests that, by introducing a one-way costs shifting rule, the claimant would not be liable for the defendant’s legal costs if the claim was unsuccessful, but the defendant would be liable for the claimant’s costs if it was successful.
“The advantage of this solution is that costs protection can be targeted upon those who need it, rather than offered as a gift to the world,” Jackson states.
He also suggests that more emphasis should be placed on the merits of before-the-event (BTE) insurance – a product that is nominally enveloped into home insurance products for a relatively small amount.
Rocco Pirozzolo, senior legal expenses underwriter at QBE, says this could be disastrous.
“The biggest impact will be on the BTE model,” he says, explaining that, as an add-on product, many consumers choose not to purchase such a policy. “When you look at his objectives you can see that there’s been too much emphasis on proportionate costs and not enough on access to justice.”
For PI claimant firms the after-the-event (ATE) product would cover the cost of disbursements – a medical legal report can cost £600.
These costs are borne by the firm until the case is won and a success fee paid. Russell Jones & Walker PI head Simon Allen says that, if Jackson LJ’s recommendations are implemented, “all personal injury firms will have their profitability affected”.
The profit margin is already under the cosh, with insurers applying pressure on firms to cut costs. For fast-track road traffic accident claims, a new costs regime will come into force in April.
his has been enforced by the Ministry of Justice and coordinated by the Civil Justice Council, which has for some time been negotiating a costs deal between defendant and claimant lawyers.
Yet another war of words between the claimant and defendant legal markets is in the offing. This time round, however, the judiciary has pitched its flag firmly with the defendants.
The defendant’s perspective
Dan Cutts, president of the Forum of Insurance Lawyers and director of insurance at Weightmans
There were warnings before the Jackson report from both the executive and the judiciary that legal costs were too high. That Jackson LJ has sought to take costs out of the system should take no one by surprise. Claimants will now have an economic stake in their own costs if ATE premiums and success fees cease to be recoverable. This, coupled with fixed fees for lower-value cases, should drive efficiencies. Defendant lawyers have worked on fixed fees in this arena for at least 10 years. Jackson LJ claims that the majority of claimants will be no worse off given that he would increase general damages and cap success fees.
The claimant’s perspective
James Delany, director of litigation at risk transfer broker The Judge
If the aim of Jackson LJ’s recommendations is to propose a regressive system that favours the wealthy, then objective achieved. The much-used phrase ‘a level playing field’ will have reduced application, particularly outside PI. Consider the David v Goliath business dispute:
the claimant now looks certain to lose a considerable proportion of their recovery where they cannot afford to self-insure/finance their case, destroying the notion of putting the litigant back in the position they would have been but for the acts of the wrongdoer. Defendants will also recognise the difficulty this affords such claimants with modest claim values. By running up costs they can encourage settlement at undervalue as the claimant’s case runs the risk of becoming uneconomic the longer it continues. In the PI world solicitors for liability insurers have much to look forward to as regards one-way cost shifting, as the increased number of speculative cases brought against their clients soar.