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A Guide To The Jackson Reforms And Civil Litigation Costs

Jackson: costs management an unwelcome shock to many

Sir Anthony (now Lord) Clarke, the then Master of the Rolls, commissioned Lord Justice Jackson to undertake a “fundamental review” of the costs of civil litigation in November 2008.

Under the terms of reference set by Sir Anthony, Jackson LJ was asked “to carry out an independent review of the rules and principles governing the costs of civil litigation and to make recommendations in order to promote access to justice at proportionate cost”.

Lord Justice Jackson, newly arrived at the Court of Appeal, took up the challenge with enthusiasm. He knew from the beginning that he would not be welcomed with open arms by litigation lawyers, and enjoyed reminding audiences, particularly towards his retirement from the bench in March 2018, how much criticism had been heaped upon his head.

However, his determination and single-mindedness have reshaped the civil litigation landscape and made those fundamental changes, particularly in the funding of personal injury cases, in the management of legal costs generally and the use of fixed costs.

Who is Sir Rupert Jackson?

Following his retirement, Sir Rupert now works as an arbitrator, adjudicator and mediator at 4 New Square, from where he practised as a commercial barrister before becoming a judge.

He was called to the Bar in 1972, and specialised in professional negligence, insurance and construction work. Sir Rupert became a Queen’s Counsel in 1987 and was a recorder from 1990 until 1998.

The following year he became a High Court judge and was in charge of the Technology and Construction Court from 2004 to 2007. He was appointed Lord Justice of Appeal in 2008.

Why were the Jackson reforms introduced?

In the introduction to his interim report, launched in May 2009, Jackson LJ said that despite the “general success” of the Woolf reforms, implemented by the Civil Procedure Rules (CPR) in 1998, the costs of civil litigation “continued to rise”.

The judge said this was due “in no small part” to the introduction of conditional fee agreements and to the changes in the way they worked following the Access to Justice Act 1999. The Act removed legal aid from personal injury cases, meaning that they would instead have to be run under conditional fee agreements (CFAs, colloquially known as ‘no win, no fee’). It also provided that a losing defendant would have to pay the claimant’s regular legal fees, an uplift on those fees of up to 100% (known as a success fee), and the cost of after-the-event (ATE) legal expenses insurance to cover the risk of losing the case and having to pay the defendant’s costs.

Jackson LJ said these developments were not based on recommendations contained in Lord Woolf’s report. “Instead they were consequential upon the retraction of legal aid and the government’s search (in some haste) for alternative means of funding litigation.”

He went on to say that the requirements of the CPR and pre-action protocols sometimes resulted in the “frontloading” of costs and had produced an “explosion” of satellite litigation on the “costs of costs”.

Jackson LJ said that, over the previous decade, there had been “mounting concerns” from insurers, who argued that the costs payable to claimant lawyers had become “ever more disproportionate” to damages paid to claimants – and from claimant lawyers, who protested about “massive costs” being run up as a result of “procrastination” by insurers”.

Jackson Reforms in 2010

Lord Justice Jackson’s final report was presented to the Lord Chancellor, Jack Straw, in January 2010. Some of his reforms were implemented by the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO), which came into force on 1 April 2013, and others by changes to the CPR:

Fixed recoverable costs (FRCs) were introduced for some personal injury cases worth up to £25,000, otherwise known as ‘fast track’ cases. Medical negligence cases were not included. A Civil Justice Council working group was set up in February 2018 to consider the introduction of FRCs for clinical negligence cases valued at up to £25,000.

Section 48 of LASPO ensured that the abolition of recoverability for CFA success fees and ATE premiums did not apply to mesothelioma claims until a review of the impact on these cases had been carried out. The government announced the end of the exemption for mesothelioma cases in December 2013, but the High Court held the following year in a judicial review that a consultation exercise held in the run-up to the decision had been inadequate and the exemption has remained. There was also an exemption for insolvency cases, but this was removed in 2016.

Jackson Reforms in 2017

In what he described as a ‘supplement’ to his original report, Lord Justice Jackson set out his plans to extend FRCs in June 2017.

Having called in a speech the previous year for FRCs to be extended to cases worth up to £250,000, Jackson LJ said he had restrained himself because of improvements made in costs management, particularly over the last 18 months.

He proposed “finishing the job” of introducing FRCs for all fast-track cases, a new fixed-cost ‘intermediate’ track for specified claims up to £100,000, and a voluntary pilot of a ‘capped costs’ regime for business and property cases up to £250,000, with streamlined procedures.

Intermediate track cases were restricted to claims for “debt, damages or other monetary relief”, and claims for mesothelioma were excluded.

Jackson LJ recommended that the new track should be reviewed after four years and, if it was working well, it could be extended to cover monetary claims above £100,000 and claims for non-monetary relief.

The Ministry of Justice has expressed broad support for the proposals but has yet to make a formal decision on whether to take them forward.

Costs Budgeting

Costs budgeting was introduced for multi-track cases (cases worth over £25,000) from 1 April 2013 in the county courts and the High Court. Commercial cases with sums in dispute of over £2m were excluded. However, the limit was extended to cases worth less than £10m from 22 April 2014.

All parties (except litigants in person) are required to file and exchange budgets setting out their estimated costs for each stage in the proceedings. The budgets have to be filed not later than 21 days before the first case management conference.

Whether or not the court has made a costs management order, when making case management decision costs budgets and the costs involved in each procedural step are taken into account

When assessing costs on the standard basis, courts must have regard to a party’s last approved or agreed budget and not depart from it unless there is good reason to do so.

Lord Justice Jackson’s focus was on controlling costs before they were spent, believing that to be more effective than assessing of costs after the event. The jury is still out on whether costs management actually saves costs. Jackson LJ recognised that the main drawback of costs management was that the process itself was expensive, but he considered that the overall impact would be to bring down total costs.

The New Fixed Costs Regime

Lord Justice Jackson’s 2017 report set out a proposed grid of FRCs for fast-track cases:

Complexity Band
Stage:1234
Pre-issue £1,001-£5,000£104 + 20% of

damages

£988 + 17.5% of

damages

£2,250 + 15% of

damages + £440

per extra defendant

Pre-issue £5,001-£10,000£1,144 + 15% of

damages over £5,000

£1,929 + 12.5% of

damages over £5,000

Pre-issue £10,001-£25,000£500£2,007 + 10% of

damages over £10,000

£2,600 + 10% of

damages over £10,000

Post-issue, pre-allocation£1,850£1,206 + 20% of damages£2,735 + 20% of

damages

£2,575 + 40% of

damages + £660

per extra defendant

Post-allocation, pre-listing£2,200£1,955 + 20% of damages£3,484 + 25% of

damages

£5,525 + 40% of

damages + £660

per extra defendant

Post-listing, pre-trial£3,250£2,761 + 20% of damages£4,451 + 30% of

damages

£6,800 + 40% of

damages + £660

per extra defendant

Trial advocacy fee[1]a. £500
b. £710
c. £1,070
d. £1,705
a. £500
b. £710
c. £1,070
d. £1,705
a. £500
b. £710
c. £1,070
d. £1,705
a. £1,380
b. £1,380
c. £1,800
d. £2,500

[1]a. claim value up to £3,000; b. claim value £3,001 to £10,000; c. claim value £10,001 to £15,000; d. claim value £15,001 to £25,000.


He set out another proposed grid for intermediate track cases:

Stage (S)Band 1Band 2Band 3Band 4
S1 Pre-issue or pre-defence investigations£1,400 + 3% of damages£4,350 + 6% of damages£5,550 + 6% of damages£8,000 + 8% of damages
S2 Counsel/ specialist lawyer drafting statements of case and/or advising (if instructed)£1,750£1,750£2,000[1]£2,000[2]
S3 Up to and including CMC£3,500 + 10% of damages£6,650 + 12% of damages£7,850 + 12% of damages£11,000 + 14% of damages
S4 Up to the end of disclosure and inspection£4,000 + 12% of damages£8,100 + 14% of damages£9,300 + 14% of damages£14,200 + 16% of damages
S5 Up to service of witness statements and expert reports£4,500 + 12% of damages£9,500 + 16% of damages£10,700 + 16% of damages17,400 + 18% of damages
S6 Up to PTR, alternatively 14 days before trial£5,100 + 15% of damages£12,750 + 16% of damages£13,950 + 16% of damages£21,050 + 18% of damages
S7 Counsel/specialist lawyer advising in writing or in conference (if instructed)£1,250£1,500£2,000£2,500
S8 Up to trial[3]£5,700 + 15% of damages£15,000 + 20% of damages£16,200 + 20% of damages£24,700 + 22% of damages
S9 Attendance of solicitor[4] at trial per day[5]£500£750£1,000£1,250
S10 Advocacy fee: day 1£2,750£3,000£3,500£5,000
S11 Advocacy fee: subsequent days[6]£1,250£1,500£1,750£2,500
S12 Hand down of judgement and consequential matters£500£500£500£500
S13 ADR: counsel/specialist lawyer at mediation or JSM (if instructed)£1,200£1,500£1,750£2,000
S14 ADR: solicitor at JSM or mediation£1,000£1,000£1,000£1,000
S15 Approval of settlement for child or protected property£1,000£1,250£1,500£1,750
Total: (a) £30,000, (b) £50,000, (c) £100,000 damages[7](a) £19,150
(b) £22,150
(c) £29,650
(a) £33,250
(b) £37,250
(c) £47,250
(a) £39,450
(b) £43,450
(c) £53,450
(a) £53,050
(b) £57,450
(c) £68,450

[1]£3,000 if there is a counterclaim and defence to counterclaim. The rules may need to specify how costs are split between claim and counterclaim.
[2]£3,000 if there is a counterclaim and defence to counterclaim. The rules may need to specify how costs are split between claim and counterclaim.
[3]If the receiving party did not prepare the bundle, subtract:(a) £500 for a Band 1 case, (b) £750 for a Band case, (C) £1,000 for a Band 3 case, and (d) £1,250 for a Band 4 case.
[4]In this table “solicitor” includes a representative of the solicitor’s firm.
[5]To be halved if attendance is for half a day or less.
[6]To be halved if attendance is for half a day or less.
[7]Assuming a one day trial in Band 1, a two day trial in Band 2, and a three day trial in Band 3 and 4. For all bands, it is assumed that there was no counterclaim, that the receiving party prepared the trial bundles, that there was unsuccessful ADR and that there was no approval of settlement for a child or protected party.

What Claims are Affected by the Jackson Reforms?

Under the 2017 proposals, all fast-track cases would be placed into four bands of complexity, band 1 being the least complex and band 4 the most:

The criteria for the new intermediate track cases would be:

Impact of the Jackson Reforms

The impact of Sir Rupert’s final report in 2010, as implemented in LASPO, on the personal injury market has been massive and the shockwaves are still being felt.

Claimant firms have been hit not only by the restrictions on conditional fees but by the limits on fees they can charge on smaller personal injury cases under the RTA portal.

The woes engulfing Slater & Gordon, caused very much by its disastrous purchase of Quindell, have taken centre stage, but many claimant firms have either shrunk in size or closed. Recent examples include national firm Simpson Millar, which made over 90 redundancies earlier this year, and the Nesbit Law Group. Based in Bury, this law firm entered administration in July. Its owner, Alan Nesbit, was director of the Association of Regulated Claims Management Companies.

Insurers have clearly benefited from the changes, the debate focusing on whether the savings they have made have been passed on to the consumer. The Institute and Faculty of Actuaries estimated in 2015 that LASPO had cut legal fees for whiplash claims by 65%. However the Association of Personal Injury Lawyers has questioned the record of insurers in passing on savings and accused the government of being “seduced by empty promises”.

Consumers have lost a section of their damages (generally the maximum 25%) in low-value personal injury cases, and those with more complicated or difficult to prove cases may well have struggled to find a lawyer.

A bigger change for claimants and their lawyers may come as a result of the Civil Liability Bill, which will introduce a tariff scheme of fixed damages for whiplash claims where injuries last up to two years, at significantly lower levels than are presently awarded. The bill will also create a new system for determining the personal injury discount rate – an amount taken off awards for the most serious cases to reflect the fact that the money will be invested – almost certainly reducing compensation awards in the most serious cases.

In March 2018, the Association of British Insurers said 26 leading motor insurers, with 86% of the car insurance market, had pledged to pass on to consumers in the form of lower premiums the £1.2bn of savings projected from these reforms.

The government wants to implement the discount rate change in April 2019 and the whiplash reforms a year later.

Expected Next Developments

In April this year, justice minister Lord Keen said in a speech that “legal costs remain disproportionate in many areas of civil litigation and it is now time to consider the extension of FRCs”.

Lord Keen said that, in the light of Sir Rupert’s 2017 report, the government was “considering the way forward, including how best to deal with differences between types of civil litigation” and would hold a consultation before implementing any changes. This means change is unlikely to happen for a year at least.

Meanwhile, the former lord justice, far from returning to a quiet life as an arbitrator, has thrown down the gauntlet once again on fixed costs – this time for arbitration.

In June this year, Sir Rupert called for costs budgeting to tackle the “high level of costs” in arbitration.

“I therefore invite people to consider the benefits of introducing costs budgeting/costs management into arbitrations, at least for lower-value claims. This regime, although controversial at first, now works well in the English courts.”