UK: Review Of The Cost Of Civil Litigation

Last Updated: 19 May 2009
Article by Liam O'Connell, Julian Bailey and Caroline Cummins

Last Friday, Lord Justice Jackson published his "Preliminary Report", as part of his year-long review of the cost of civil litigation in England and Wales. The 600 page Report (not counting the Appendices) is bursting with facts and opinions gleaned from a huge range of sources. The Report is intended to set the scene for a consultation exercise which will take place over the summer months.

About the Preliminary Report

  • Terms of reference. Lord Justice Jackson has been tasked with making recommendations to reform the civil justice system to ensure that the cost of going to court is proportionate to the amount or issues in dispute
  • Scope of the Preliminary Report. As stated above, the Report is intended to set the scene for the forthcoming consultation exercise. It is not a final report making recommendations for law reform. The Report is packed full of facts and figures relating to the present cost rules, the amount of civil litigation taking place, what lawyers earn, academic research on the question of costs, how litigation is funded, existing fixed cost regimes and how they may be extended, the practices developed by different specialist forms of litigation to suit their particular needs, methods of controlling costs and methods of assessing costs. The report also contains comparative studies of other costs regimes across the world. There are some tentative suggestions for possible reforms, but Lord Justice Jackson has said that he has an open mind
  • Next steps. From May to July 2009, there will be a public consultation on the cost of civil litigation, and between September and December 2009 Lord Justice Jackson will write his Final Report, containing recommendations for law reform

Some Points Arising from the Preliminary Report

1. One size does not fit all

  • One of the terms of reference for the review is "Establish the effect case management procedures has on costs and consider whether changes in process and/or procedure could bring about more proportionate costs". Thus, Lord Justice Jackson's review necessarily goes beyond the simple "how much?" into a review of the Civil Procedure Rules more generally, including ideas for rationalising the disclosure process and the review of litigation funding. He says that if one thing has emerged clearly for him, it is that "one size does not fit all". The series of chapters relating to the practice of specialist courts, including ideas for their reform, is just one section of the Report that reveals the ambition and energy of this review.

2. "No win, no fee" agreements

  • Lawyers who act under conditional fee agreements ("CFAs"), which include "no win, no fee" agreements, receive an uplift on their base fee if they win the case. The complaint that is often made about these agreements is that where a lawyer is acting in a case that has a high chance of succeeding, the lawyer will get an unmerited windfall through the uplift in fees at the expense of the defendant
  • Lord Justice Jackson says in his report that CFAs should exist in some form, but the question is what form they should take. We can expect that there will be much lobbying for abuses of CFAs to be curbed, however at this stage it seems unlikely that "no win, no fee" agreements face extinction. Indeed it is possible that US style "contingency fees" (where the lawyer takes a percentage of damages recovered) may become legal in this country as a result of this review

3. After-the-Event ("ATE") insurance

  • ATE insurance is used in a number of situations, but commonly it is used where lawyers are acting under a "no win, no fee" agreement. The insurance covers the claimant against the risk of having to pay the other side's legal costs if the claim fails. If, however, the claim succeeds, the claimant will usually be allowed to recover the cost of the ATE premium from the defendant. It forms part of the claimant's recoverable legal costs
  • Lord Justice Jackson's report asks whether ATE insurance should continue to be recoverable from the unsuccessful defendant. If it were not, the whole business model of "no win, no fee" litigation would change. One idea floated by the Preliminary Report that could compensate for the irrecoverability of ATE premiums (and permit "no win, no fee" lawyers to continue to deploy their business model) is the introduction of "one way cost shifting". This is where the claimant does not pay the defendant's costs if unsuccessful, yet the defendant is required to pay the successful claimant's costs
  • Lawyers who act on a "no win, no fee" basis can and do fulfil an important role, because they provide legal representation to people with meritorious claims, but without the means to afford a lawyer. If there were "one way cost shifting" for certain types of claim, e.g. personal injuries, a meritorious claimant would not need ATE insurance and this would reduce the cost of litigation, but still allow a claimant of little financial means to obtain access to justice

4. Collective Actions

  • The Preliminary Report expresses the tentative view that there should be no cost shifting in collective actions, just like in "class actions" in the United States. It also suggests that contingency fee agreements be allowed for collective actions, so that lawyers would take a cut of any damages awarded. A concern, however, is that lawyers could earn an obscene windfall by taking too large a share of the damages. But there are ways of dealing with this, including for the court to supervise contingency fee agreements to make sure that lawyers' fees are not excessive
  • If this change were to be implemented we could see could see an increase in collective actions, brought by claimants' lawyers in the knowledge that no costs penalty is faced if the action fails. This could mean that more unmeritorious claims will be brought, but it could also mean that more meritorious claims are made, as the "barriers to entry" into the litigation playing field will have been lowered.

CMS Cameron McKenna LLP, and its affiliated CMS firms, had a close involvement with the Preliminary Report, which included Julian Bailey assisting Lord Justice Jackson in the preparation of six chapters of his Report concerning the laws of overseas jurisdictions. Lord Justice Jackson visited the CMS offices in Cologne and Paris, and received input from offices in the Netherlands, Spain and Italy on the laws of those countries.

We anticipate issuing future Law Now bulletins in relation to detailed aspects of the Report including those aspects relating to the practice of specialist courts.

A full copy of Lord Justice Jackson's report may be downloaded via a link from the following website.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 12/05/2009.

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