Plans to introduce a tough stance on "no win no fee"likely to spark opposition.
Contingency fees will be allowed and conditional fee agreements will remain but success fees and after-the-event (ATE) insurance premiums will be irrecoverable, is the verdict of the final Jackson Report.
Lord Justice Jackson published his eagerly-awaited 585-page Final Report into civil litigation costs this week, revealing a sweeping agenda of change to bring costs under control and make civil justice more accessible.
His recommendations include the introduction of US-style contingency fees, under which the lawyer is paid a percentage of the winnings or nothing at all.
Controversially, he recommends that success fees and ATE premiums be irrecoverable in conditional fee agreements, "no win, no fee" agreements—a move which will irk personal injury lawyers.
Trade unions, the Association of Personal injury Lawyers, and personal injury barristers and solicitors’ firms all expressed support for recoverable premiums in the run up to the Final Report, and may now mount a fierce campaign against their removal.
Jackson LJ argues, in chapter 4 of the Report, “The regime of ATE insurance with recoverable premiums is... an extremely expensive form of one way costs shifting."
“Even if one disregards that portion of the premium which is referable to own disbursements, the present ATE insurance regime is substantially more expensive for defendants than one way costs shifting."
Recommending his own version of one way costs shifting he observed: "It would be substantially cheaper for defendants to bear their own costs in every case, whether won or lost, than to pay out ATE insurance premiums in those cases which they lose."
To make up for the loss of recoverable success fees and ATE premiums, Jackson LJ recommends increasing general damages awards for civil wrongs by 10%.
Referral fees—fees paid to organisations that "sell" damages claims to lawyers—add nothing of value to the process and should be scrapped, he said. Fixed costs should be introduced for fast-track civil cases (those worth a value of £25,000 or less) to ensure certainty of legal costs.
"Before-the-event" (BTE) insurance should be promoted so that the general public are encouraged to take out legal expenses insurance, for example, as part of their household insurance. A Costs Council should be established to annually review fixed costs and hourly lawyer rates to make sure they are fair.
Jackson LJ said he believes his recommendations will reduce the costs burden on the NHS, which currently more than £140m per year, and reduce the costs of defending libel actions.
The Lord Chief Justice, Lord Judge, said: “The judiciary has been concerned for some time that the costs of civil litigation are disproportionate and excessive.
“Lord Justice Jackson’s fundamental review addresses these questions head on. I am extremely grateful to him for the enormous work and effort that he has brought to bear on this important, complex issue and for proposals which for the first time address the issue of costs as a comprehensive, coherent whole.”
The Master of the Rolls, Lord Neuberger, said: “The time for discussion and debate is over: it is now time for action. I hope that the Ministry of Justice will give these proposals the same enthusiastic and practical support which the Judges will give them.”
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