UK: Civil Litigation Costs – Lord Justice Jackson’s Preliminary Report

A decade on from Lord Woolf's ground-breaking reforms implemented by the Civil Procedure Rules 1998, there is no escaping the harsh fact that civil litigation is more expensive than ever.

Claimants are deterred from pursuing disputes by the high costs involved. Both they and defendants face a potentially huge financial exposure under our "loser pays" system.

This problem has been compounded, following the retraction of Legal Aid in recent years, by the introduction of alternative means of funding litigation. In particular, Conditional Fee Agreements ("CFAs") and After the Event ("ATE") insurance have spawned a "costs war" of their own over the recoverability of CFA success fees and ATE premiums from the losing party.

This was the context in which the Master of the Rolls asked Lord Justice Jackson to commence a fundamental review into civil costs in January this year and to make recommendations in order to promote access to justice at proportionate cost.

The Judge's recommendations will not be presented until December 2009 but, on 8 May, Lord Justice Jackson produced a preliminary report of his findings which runs to 653 pages plus appendices.

The report is clearly written and impressively comprehensive, encompassing all civil courts, including the Commercial Court, while recognising that there can be no 'one size fits all': different solutions will be necessary for different situations.

The report identifies and addresses the key questions and issues impacting upon the current costs of civil litigation:

  • In what circumstances should the losing party be required to pay costs to the winning party? This raises the key issue of so-called cost shifting.
  • How and in what circumstances should the amount of any costs payable by the losing party be reduced or limited? This raises issues of fixed costs, costs capping and costs management.
  • How can the procedural rules be improved so as to reduce the time lawyers need to spend in the conduct of litigation and its associated cost?

This note briefly summarises the main points emerging from Lord Justice Jackson's report under each of these headings.

Although the Judge expresses a number of tentative opinions in his report, he has been at pains to stress that his mind remains entirely open pending extensive further consultation in which he will now be engaged until the end of July.

Lord Justice Jackson will be talking about his proposals at a special seminar at BLG's offices on 11 June.

When Should Costs Be Recoverable?

Lord Justice Jackson's tentative view, based on feedback to date, is that cost shifting (that is the rule that loser pays) must remain in some form for litigation generally.

However the Judge observes that a number of areas of litigation, for example many tribunals, function perfectly smoothly without cost shifting and concludes that a 'no costs' regime may well be beneficial to both claimants and defendants in collective actions provided that appropriate incentives can be built into the rules to defer unmeritorious claims.

If there is not to be costs shifting in collective litigation then claimants' lawyers would have to take their fee out of the damages recovered, i.e. on what is called a contingency fee basis, which has not been allowed until now in England. Lord Justice Jackson summarises arguments for and against contingency fees in his report and seeks views upon how a contingency fee system might be regulated.

In some limited areas, specifically judicial review, environmental claims and, most importantly, personal injury litigation, the Judge raises the possibility of a system of 'one way cost shifting', that is the claimant receives its costs from the defendant if it wins but there is no order for costs if it loses. Although this system seems at first blush unfair to individual defendants, when seen in the round he thinks it is not necessarily so in practice because there would be no need for expensive ATE insurance to cover the defendants' costs, the premium of which is currently recovered by successful claimants from defendants.

While there is a risk that 'one way costs shifting' will encourage frivolous claims and the rejection of reasonable offers, Lord Justice Jackson's tentative view is that such risk is balanced by the risk which a claimant's lawyer faces under a typical 'no win no fee' CFA of recovering no costs if the action fails and by virtue of the disbursements payable by a losing claimant.

The Judge also invites feedback upon other potential forms of costs shifting, for example costs awards based solely on the reasonableness or otherwise of the parties' behaviour or triggered by a so-called 'Part 36' offer.

The recoverability since April 2000 of both a successful claimant's ATE insurance premium and its lawyer's CFA success fee from a losing defendant is controversial. As the Judge recognises, while promoting access to justice for claimants it has massively increased the cost burden upon defendants and their insurers. Lord Justice Jackson seeks comments upon various suggestions in the report as to how, if they were to cease to be recoverable, the access to justice of claimants could be preserved.

Limiting The Amount Of Recoverable Costs

Many, although not all, of the ideas explored in the report for limiting the amount of costs recoverable from the losing party concern personal injury litigation to which Part 6 of the Report is dedicated. Issues explored in this part of his report include the upper limit of the small claims track, the transaction costs of personal injuries compensation and the assessment of damages for personal injuries.

In some limited types of litigation - uncontested, Road Traffic and Employers' Liability cases and the trials of fast track (less than £25,000) cases - the costs, or certain elements of them, are currently fixed and predictable. The idea of fixed costs is that the successful claimant recovers a fixed fee from the defendant and does not claim any "top up" from its own client. Lord Justice Jackson expresses the view that a comprehensive fixed costs system should be introduced for all fast track cases and invites comments upon a draft matrix of such costs which is included in the report.

The Judge goes on to consider whether a fixed costs regime might be introduced for cases above the fast track, allowing the lawyer of the recovering party to look to its own client for any shortfall of fees. He concludes that the answer depends upon the type of litigation concerned. In major high value litigation and personal injury litigation (where there are particular concerns over the fees of a claimant's lawyer being deducted from damages) he comes down against the introduction of fixed costs. But his tentative view is that a fixed costs regime may suit small business disputes and disputes between small and medium-sized enterprises.

Aside from any amendments to the present fixed costs regime, another approach to limiting the amount of recoverable costs lies in the cost management powers of the court contained in the Costs Practice Direction to the Civil Procedure Rules. Lord Justice Jackson argues for a more effective and direct application of the court's costs management powers, in conjunction with its ability to impose cost capping in exceptional cases, as a means of controlling costs. This could involve, for example, exchanging budgets at every case management hearing. The Judge seeks input as to how draconian any form of cost management by the courts should be. For example, should the costs of each stage in the litigation process be capped in business disputes?

Procedural Changes

In a section of his report entitled "Controlling the Cost of Litigation", Lord Justice Jackson considers how various aspects of the Civil Litigation process might be made more efficient and thus reduce costs.

A major one of these is the vexed subject of disclosure of documents in respect of which the Judge advances 10 different proposals for consideration. These include the use of experienced lawyers as paid "disclosure assessors" to review the documents of all parties in heavy cases and to advise the judge as to which documents he should see; and the limiting of disclosure to documents which are relied upon by either party (with the ability to seek a specific Disclosure Order), akin to the IBA rules. He also considers ways and means of improving the process of e disclosure and thereby reducing its cost.

As to witness statements, Lord Justice Jackson outlines a number of possible reforms to reduce costs, including:

  • Cost sanctions against parties who adduce irrelevant evidence.
  • Witness summaries rather than detailed statements to be provided in advance of trial, supplemented by oral evidence in chief.
  • Confining witness statements to matters not within the documents which have been disclosed.
  • Making witness statements subject to a maximum length.

Specifically in relation to expert evidence, Lord Justice Jackson reviews various problems with the current process, including a failure by experts to identify the correct issues and timetabling difficulties. The Judge specifically invites comments upon four proposals:

  • Sequential exchange of expert evidence on liability to become standard. _ A presumption that all quantum experts will be instructed on a single joint basis.
  • A rule that parties will be unable to recover the cost of expert reports which are not relied upon.
  • The giving of evidence by opposing experts concurrently, known colloquially in Australia as "hot tub".

The Judge concludes that there is a need for a radical re-think regarding "Pre-Action Protocols", a major current concern being that these protocols tend to generate more costs than they save. He intends to look critically at all 11 pre-action protocols during the consultation stage of the project, describing this issue as raising some of the most "intractable questions" of his review.

One aspect of case management which attracts strong endorsement from Lord Justice Jackson is the "docket system" whereby a Judge is assigned to a case from its commencement right up to trial. While commenting that it is difficult to operate such a system in England and Wales because of the way the judiciary is organised, he concludes that any structural reforms which facilitate this arrangement are likely to reduce the costs of civil litigation.

In terms of the trial itself, Lord Justice Jackson comes out strongly in favour of so-called "chess clock" agreements under which each side has a specified time in which to present its case.

Conclusion

Lord Justice Jackson's preliminary report is to be admired for its thoroughness and its clarity of expression. It is to be hoped, contrary to some recent indications in the press, that the proposals for change which emerge from this project will receive the backing they need to become law.

The Judge is now proceeding with vigour to the consultation phase of the project and seeks further feedback on the matters raised in his report by the end of July.

It is in the interests of everyone involved in civil litigation and affected by its cost, particularly those who use the courts on a regular basis, to participate in Lord Justice Jackson's project and to contribute to what may prove to be a major overhaul of the civil litigation process in England and Wales.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.