The Jackson PI verdict

Lord Justice Jackson’s final report certainly lived up to expectations that it would be controversial. The range and scale of his report are breathtakingly ambitious and bold. We were told that there would be no sacred cows and so it seems!

Although the final report covers all areas of civil litigation costs, it is the field of personal injury practice that is most radically affected. Much existing practice and assumptions are set to change, if these recommendations are implemented.

As with any major revolution in the status quo, there are winners and losers: for some the report harbingers catastrophic change. In a sector largely polarised between individual claimants, their representatives and various legal service suppliers, on the one hand, and insurers and self insured corporations whose lot it is to pay for these claims – it is the latter group, and in particular the liability insurance industry, that appear to have most to gain. This is because the proposed reforms are intended to reduce legal costs to levels that are proportionate. This is primarily a cost cutting and efficiency exercise; one that is likely to produce a substantial saving to the insurers who fund the majority of our tort law compensatory system.

Astonishing innovation

Arguably the most astonishing innovation consists of a package of recommendations that involve the introduction of a one way costs shifting rule associated with the repeal of the statutory provisions which enable a successful party to recover the cost of an ATE legal costs insurance premium as well as the success fee from the losing party. At one stroke this would obviate the need for expensive after the event insurance against the risk of incurring an opponents legal costs, whilst at the same time delivering with apparent Olympian ease, vast costs savings to liability insurers’ reserves.

However, this could leave claimants personally liable for unrecovered disbursements an unsuccessful claim; a risk that would otherwise be covered by most existing ATE insurance policies.
Although provision is made for solicitors to charge their clients a success fee capped at 25% of general damages, this may in fact prove to be a nugatory concession.

The notion that solicitors will wish to advertise their services on the basis that client’s will bear part of the cost, is difficult to conceive. It seems likely that the larger practices with sophisticated case management systems will continue to run claims on the basis that, disbursements excepted, claimants will incur no liability for their solicitors costs.

If success fees become obsolescent, then it seems likely that we will witness a return to an hourly or fixed fee retainer. This engenders a sense of déjà vu: of a pre CFA legal funding regime that looks remarkably similar to that which pertained pre 1999 but one without the important safety net of public funding for claimants on a low income.

Farewell to the indemnity principle

Some recommendations will find broad support within the profession, such as the abolition of the absurdly anachronistic concept of the indemnity principle. As to the capping of solicitors costs through the imposition of fixed costs throughout the fast track, this is met by many claimant practitioners with a degree of resigned acceptance and by defendants with a sense of eager anticipation. Such a measure will constrain excessive cost building and introduce a degree of predictability that will help decision making. Subject to one important qualification, the fee levels prescribed are generally perceived to represent an adequate level of remuneration for running a simple and straightforward claim. Under the proposed scheme, if there are complexities or difficulties unsuited to the fixed costs, it will be possible to apply to exit the scheme.

The caveat is that these fees are generally perceived to be only sustainable for practices with modern case management systems whose resources and specialist expertise to enable them to deliver the necessary cost savings. This threatens the long term viability of many small generalist high street practices, that until recently featured so prominently in most high streets.

Probably the most controversial recommendation is the ban on referral fees. This has become a highly polemical topic and it threatens to impede access to justice for the industry’s many customers who find their services convenient.

The key questions that arise in the wake of this report are which reforms stand the greatest prospect of being implemented and when? At one extreme, certain reforms are exposed to the vagaries of the political process as they require primary legislation, whereas others can be implemented relatively quickly by amendments to the Civil Procedure Rules and the Pre Action Protocols. The ban of referral fees falls into the first category and the fixed fee regime the latter. The one certainty is that radical change is on the cards and our profession would be wise to respond positively and constructively where the proposed reforms are consistent with fair access to justice.

Nicholas Bevan, senior counsel at Bond Pearce LLP. Nicholas is a highly experienced personal injury solicitor and Fellow of APIL.

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