The Implementation of Jackson
The Government’s implementation of Lord Justice Jackson’s recommendations: what is proposed and what does it mean for defendants?
The Lord Chancellor, Kenneth Clarke, has recently announced that the Government was “committed” to enacting the Jackson proposals. This announcement follows a consultation with the Ministry of Justice. Our clients want to know what this means for them.
What changes will particularly affect personal injury claims?
- The recovery of success fees from losing parties is to be abolished
- Success fees are to be capped at 25% of damages
- ATE premiums will no longer be recoverable from the losing party (with minor exceptions)
- “One way costs shifting” is to be introduced
- New tests for the proportionality of recoverable costs are to be brought in
- Part 36 is to be amended to level the playing field for defendants and claimants
- General damages are to be increased by 10%
- Damages based agreements will be approved for funding, in other words the claimant will be accountable for a proportion of his or her own legal costs calculated using his/her general damages.
When will the changes come in?
The announced changes require an Act of Parliament for implementation and a bill is yet to be published with the detail but informed commentators suggest that implementation will be next year.
What does it mean for defendants?
There is a clear shift in policy on the part of the government endorsing Lord Justice Jackson’s view that costs need to be reined in.
If success fees are no longer to be borne by claimants there are two other potential payees; the claimant him/herself or the solicitor representing him/her.
We have seen CFAs and ATEs become more and more sophisticated over the last 15 years and it will be interesting to see where success fees go from here.
A 10% increase in damages will not cover the success fee deduction. Will we see claimant’s solicitors taking the decision to reduce the success fee applied to 10% of general damages, or will we see claimants’ solicitors taking the decision to work purely for base costs in the way that they did prior to the implementation of CFAs?
Will we see claimants’ solicitors entering into CFAs without ATE cover and agreeing to indemnify their clients for the defendant’s costs if they lose?
This is a dilemma they will need to address because the lack of any accountability for legal costs is a principle now well-established in the public domain and we think it likely that claimants will shop around before going to the solicitor on their high street.
Whatever decisions are made by claimants’ solicitors the net effect for those funding the defence of a claim should be positive for any claim not subject to the predictive costs regime. Modest personal injury claims are likely to absorb a 10% increase in general damages without too much difficulty and will feel the benefit of no success fee which often make costs disproportionate to the claim.
More significant claims usually include a significant percentage of special damage which will not be subject to the 10% increase and will avoid significant success fees.
The biggest winners for those indemnifying claims are likely to be public liability insurers who are still regularly presented with 100% success fees in occupiers’ liability claims.
We think it unlikely claimants will lose out in the medium term as competition between claimant firms continues. In reality we may be back to where we were in 1994 albeit without legal aid but with better rates and cash flow for claimant firms; only time will tell.
What next?
The Government has announced a consultation on reforming civil justice in England and Wales. The consultation opened on 29 March 2011 and will remain open until 30 June 2011. The Government has confirmed its commitment to an overhaul of the Civil Justice system which it hopes will enable people to “deal with their problems quickly, effectively and at proportion cost”.
The consultation paper is available for viewing on line at:
http://www.justice.gov.uk/consultations/solving-disputes-county-court.htm
There is a detailed questionnaire at this link seeking your views. If you want your opinion to count then here is your opportunity.