Review of Civil Costs - The Jackson Report

Lord Justice Jackson was asked to perform a review of Civil Costs by the senior judiciary in 2009 as they were concerned about the cost of civil justice, in particular how the costs were often disproportionate to the value of the issues involved. The final report was presented in January 2010 and the main findings and recommendations were as follows:

  • The costs system should be based on legal expenses that reflect the nature/complexity of the case
  • Success fees and after the event insurance premiums should not be recoverable in no win, no fee cases
  • General damages awards for personal injuries and other civil wrongs should be increased by 10%
  • Referral fees should be scrapped
  • Claimants should only make a small contribution to defendant costs if a claim is unsuccessful (as long as they have behaved reasonably)
  • There should be fixed costs for "fast track" cases (with a claim up to £25,000)
  • A Costs Council should be established to annually review fixed costs and lawyers' hourly rates
  • Lawyers should be allowed to enter into Contingency Fee Agreements
  • "Before the event’ legal insurance should be promoted

The costs review is the most important legal review since the Woolf reforms were introduced in 1999. It arises from ongoing disputes over costs and, arguably, ongoing attempts by the insurance industry to reduce the bill they have to pay.

The system allows the Court to look at the costs incurred in proportion to the issues in a case. Normally a party who is entitled to recover their costs must show that they are reasonable in amount and any doubt is exercised in favour of the person who will have to pay. Where the Court feels the costs are disproportionate to the issues, it must also be shown they were necessarily incurred. A party who fails to act reasonably and causes an unnecessary increase in costs has nothing to hide behind.

The advantage of a system where costs are recoverable if you win, is that it is supposed to deter parties from unreasonably defending claims. In personal injury litigation, fixed fee structures were introduced on the basis that the insurance industry would be able to deal with claims efficiently and they have not. Despite this the Government is currently looking at extending the model.

With the reduction in availability of Legal Aid (now known as Public Funding), Conditional Fee Agreements (colloquially known as “no win, no fee” agreements) have become a common method to fund cases. The sting for a losing party is that the winning party is then entitled to recover a success fee on top of normal costs. In the worst case this could double the costs.

It cannot be denied there were problems with Conditional Fees (CFA’s). The success fees on winners are supposed to pay for losers. The viability of the system is based upon good risk management by lawyers. This makes the lawyers the gatekeepers for access to justice. If they are not satisfied with your prospects they will not take the case on a “no win, no fee” basis. If you cannot afford to fund the claim and cannot bring the claim yourself, then no claim will be made.

The problems with the old CFA regime arose because some firms would only take the guaranteed winners and pocket the success fees without running any cases that might lose. This skewed the statistics, meaning average costs were increasing, as there are fewer losers.

Under the new regime, any success fees will now be paid by the client and not by the other side (the defendant). While this may make the client more aware of what is being done in their name, for the majority of clients they use solicitors because they do not know understand the legal system and so wish to pass all decisions on. That is unlikely to change.

The fixed fee structure was also extended, intending to push lawyers away from conducting difficult or complicated cases which are uneconomical to run in a fixed fee regime. In personal injury claims covered by the current fixed fee regime there is a tendency to “dumb-down” the level of legal representation and provide the minimum service possible to achieve an acceptable result. In every case that we take over from other solicitors we find items of losses (often considerable ones) that they have not been identified or told the client they can claim for.