The Jackson reforms: winners & losers (2)
Date: 02 September 2011
Authors: Dominic Regan
Issue: Vol 161, Issue 7479
Categories: Opinion, Costs
Some claimant lawyers are enthralled by Jackson. Really. Clause 42 of the Legal Aid Bill provides for outright contingency fees or, as we are now to call them, damages-based agreements. On my recent visits to talk at major city firms like RPC, Ince & Co and Allen & Overy I detected real excitement at this opportunity. Those handling substantial claims can only benefit from this reform. Such arrangements are commonplace elsewhere in the world. I also understand that the government is not going to require the solicitor concerned to send the client off to seek independent advice before entering into an agreement, as Lord Justice Jackson proposed. I have not heard a word of dissent from anyone, which is remarkable. It is a done deal.
Disaster
Many, particularly in the injury field, see Jackson as a disaster. Despite bleating from some insurers they must be secretly thrilled at the forthcoming reforms. Road traffic insurers are likely to be the great winners. We already have a fixed costs road traffic accident portal in place. The threshold for claims within it is going to rise to £25,000. Fixed costs are coming in pretty much every area of fast-track injury work. This will have two consequences. The first is the imposition of proportionality albeit as seen by the rule makers. Regardless of the amount of work undertaken there will be a tariff figure for the task, a sum inevitably lower than that which one would expect to recover today. Also, the costs of costs will evaporate for there will be no detailed assessment. All this and the end of the obligation to pay additional liabilities means happy days for the defendant camp.
Biggest losers
The big losers are those dependant upon the extra income generated by success fees. Whether it is high volume work or massive claims, as in Motto v Trafigura [2011] EWHC 90201 (Costs) where the fee claimed was £40 million, a whole stream of income will disappear. I explained in my previous article that while one will have the right to ask the client to contribute it is not inevitable that they will. Let us never overlook the risk that solicitors may abandon claimants altogether if the numbers do not stack up as we have already seen in the legal aid fiasco, something which looks like it will get much worse.
Government departments such as the Ministry of Defence are inevitably on the wrong end of claims. The excellent annual claims report, just published, written by Jef Mitchell, demonstrates how almighty their outgoings are as a result of the current funding regime.
The losing party has yet another reason to celebrate. They will, post reform, remain liable to pay base costs to the winner but these will either be arbitrarily capped, by fixed fees or, if at large, will be suppressed by another planned change in the law.
Debating Lownds
The leading authority on proportionality, for standard costs are to be proportionate, is Lownds v Home Office [2002] 4 All ER 775. Lord Woolf MR sitting with the senior costs judge as his assessor concluded that if a step in a claim was one that could be described as reasonable to take then, inevitably, the cost of it was recoverable. Not necessarily, said Sir Rupert in his final report. What Lownds missed was the relationship between the value of the claim and the cost of any particular step. For example, in a case worth £100,000 to interview witnesses at a cost of £3,000 would appear proper. Were the claim only worth £3,000 then that level of expenditure is out of kilter and disproportionate. The government agrees with the Jackson analysis and will kill Lownds off.
Long-term plans
The Association of Costs Lawyers has some members who think their entire profession will be eradicated. I think not. The long-term plan is that every multi-track claim will be subject to stringent costs management at the outset as we have at present in the Birmingham pilot scheme which is to be extended in October to every mercantile and construction court in the land. Parties are required to submit thorough breakdowns of proposed expenditure which the judge will examine. Is the spend realistic and proportionate? Getting the estimate right is crucial and I see a clear role for costs lawyers to prepare the initial estimate and updates as may be required.
Biggest winner
Apart from those named in my opening paragraph, I can think of an eclectic bunch who I consider will thrive, including specialist firms like Blackhouse Jones that concentrate on haulage industry litigation and Fox Hartley in Bristol that are experts in product liability. Of the big national firms, Berrymans are roaring with an explosive growth in challenging apparently fraudulent claims and Kennedys are getting it right too; any firm with the wisdom to send partners to Harvard Business School, has the foresight to outrun the competition. Thompsons has embraced the provisional costs pilot in the north east.
The greatest winner of all though is Sir Rupert Jackson. No one can deny that his reports are masterful in their detail and analysis. Understandably, those who are likely to be adversely affected are profoundly unhappy. I would be in their shoes. All attempts to undermine or derail his key proposals have been swatted away. He has secured the backing of the Prime Minister, Lord Young and even the European Court of Human Rights, a body which delivers decision beyond the comprehension of this reader, quoted the final Jackson report with approval in the Campbell case at the start of this year (MGN Ltd v UK [2011] All ER (D) 143 (Jan)). It is only a matter of time before he goes up to the Supreme Court.
Professor Dominic Regan provides in-house training on both Pt 36 and Jackson reforms. With thanks to Jill Robinson of Epiq for assistance.
E-mail: krug79@gmail.com. Website: www.profdominicregan.blogspot.com
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