Lord Justice Jackson, in his Review on Civil Litigation Costs, proposes radical changes to the costs regime and the litigation process itself, which, if implemented, are likely to have a significant impact upon professional indemnity insurers. His principal aims are set out at the beginning of the report, including:
- The majority of personal injury claimants receiving more damages
- Claimants having a financial interest in the costs being incurred by their solicitors
- Costs payable by insurers being reduced and becoming more proportionate
- Allowing solicitors to make a reasonable profit
In practice, it remains to be seen whether these objectives can be achieved, or whether it is an attempt to square a circle. The review appears to be tailored towards reducing costs in personal injury cases, but the proposals would be implemented across the board.
The most radical proposals relate to costs. It is proposed as follows:
- CFA uplift and ATE insurance premium to be irrecoverable
- One way costs shifting, so that an unsuccessful claimant does not have to pay the defendant's costs
- Referral fees to be banned
- Part 36 changed to reward a successful party who beats a Part 36 offer with an additional 10% on damages
- In personal injury claims, increasing damages by 10%
- Introducing contingency fees and encouraging the uptake of BTE insurance and third party funding
- Fixed costs in fast track cases (primarily for personal injury claims), but not in multi-track cases for the time-being
- A Costs Council will be set up to review the level of fixed costs
As if recognising that this might be difficult to implement, Jackson suggests a compromise option, whereby CFA uplifts and ATE premiums would be more tightly controlled.
The proposals are likely to meet with stiff opposition from claimants' solicitors, whose business models rely upon the current methods of funding. It is difficult to envisage exactly how some proposals would work in practice, such as one way costs shifting, which appears unfair to uninsured defendants.
- Abolishing the general pre-action protocol, but leaving the professional negligence pre-action protocol unaltered, observing that the majority of cases settled within the protocol period.
- Altering the pre-action protocol for construction and engineering disputes to prevent disproportionate costs being incurred.
- Permitting the parties to apply to the court for directions as to compliance with the protocols. This last proposal, if implemented, may only serve to increase satellite litigation.
In terms of the litigation process itself, the recommendations include:
- Stricter case management, with standard directions and fewer pointless hearings. The entire directions for the case should be drawn up as early as possible. Judges will contact the parties to enquire how they are getting on in complying with directions. Judges should be less tolerant of delays or non-compliance with orders.
- In large cases, Lord Justice Jackson recommends that a menu of disclosure options should be available, so as to reduce the cost of making disclosure. He considers that solicitors need more training in relation to e-disclosure.
- The controlled use of witness statements (under the existing rules).
- An estimate of the costs of the expert evidence is to be provided to the court.
- "E-working" to be expanded and consideration given to a new IT system and training for judges and court staff (without regard for lack of funding).
- Standard costs management procedures to be introduced, with the training of solicitors and judges in costs budgeting.
- No CFA uplifts to be recoverable in assessment proceedings, and new software to be developed for producing bills of costs for assessment proceedings.
- Surprisingly, no recommendations were made for any rule changes to encourage the parties to mediate.
- In practice, it remains to be seen whether there is any funding available for some of these radical changes, which will involve significant investment in IT with no budget available at present.
- If implemented in full, the measures would destroy the current litigation funding edifice upon which claimant solicitors rely, though it is not clear whether the proposed procedural changes would, in fact, result in costs savings.
- If CFAs and ATE insurance premiums are abolished then, on the face of it, this would be good news for professional indemnity insurers fed up with facing huge costs bills. However it is quite possible that the reforms will be watered down and a compromise found so that CFAs and ATE insurance remains, but kept under tighter control.
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