Briefing on the Lord Jackson Report - published 14 January 2010

Lord Jackson's report on the escalating costs of litigation in England and Wales was published today, 14 January 2010. Arguably, one of Lord Jackson's most important objectives was to ensure that litigation becomes palatable again, by reducing costs and increasing access to justice.

Whilst Lord Jackson has made some innovative and revolutionary suggestions, in many cases the recommendations have been debated in legal circles before. In our view, the bottom line is that commercial litigation remains a difficult beast, which is difficult to predict or indeed restrain. Therefore, will Lord Jackson's recommendations have the desired impact on our commercial client's complex disputes? Undoubtedly, these suggestions will have some impact on low value litigation, although we question whether the impact will be as apparent in complex commercial disputes.

The report does, of course, provide clients with another opportunity to address the cost of litigation with their professional advisers and may well lead to innovative forms of funding for disputes.

Thomas Eggar LLP has reviewed the report with interest, and we highlight the key issues which we believe will be of importance to our medium to large corporate clients below. The firm will be preparing a full review of the entire report in which we will summarise all of the recommendations made by Lord Jackson, and the likely effect on our clients, within the next few weeks.

The key issues that arise from Lord Jackson's report are as follows:

Qualified One Way Costs Shifting

One way costs shifting (when the claimant loses both parties will be expected to bear their own costs, whereas when the defendant loses, the defendant will be expected to bear both parties costs) should apply. Lord Jackson suggests that further consultation needs to be done so as to establish which types of litigation would benefit from qualified costs shifting. He does, however, recommend that it would be suitable for personal injury, clinical negligence, judicial review and defamation claims. This is worrying for potential defendants who will be liable for costs even in the event that they are successful at trial. This is seemingly unfair, although Lord Jackson considers that this might actually significantly reduce the amount of overall costs defendant insurers are liable to pay overall. Interestingly, we consider that this system may well increase the number of claims being brought by claimants.

Fixed Costs

The Court will apply fixed costs to low value fast track litigation up to the value of £25,000. This is likely to be welcomed by the insurance industry who will benefit from the ability to predict the level of litigation costs. This may be welcome to potential litigants as law firms will now need to consider whether hourly billing is suitable for all types of litigation.

Costs Capping / Costs Management

Courts will be encouraged to ‘manage' the cost of litigation therefore having a greater impact on directions and proportionality of costs in relation to the value of a claim. Lord Jackson recommends that all lawyers and judges are trained on ‘costs budgeting' and that Courts take an increased interest in the budget of claims by asking for regular updates.

Reform of Procedural Rules

Certain procedural rules will be reformed so as to limit ‘lawyer time'. This includes the improvement and simplification of the disclosure process with an amendment to CPR 31 which will allow parties to use a ‘menu' system.

Of further interest is Lord Jackson's recommended amendment to CPR 36. He suggests that defendants are encouraged to accept Part 36 settlement offers by allowing the claimant to recover an enhancement of 10% in the event that the defendant fails to beat the offer.

Recoverability of Success Fees

Success fees and after the event insurance premiums should cease to be recoverable from the unsuccessful party. Further, Lord Jackson recommends the abolishment of after the event insurance with promotion instead, of before the event insurance for all SMEs.

Alternative Litigation Funding and Contingency Arrangements

Contingency fees (i.e. lawyers are entitled to charge greater fees in the event that a matter is successful) should be allowed for contentious matters. Lord Jackson recommends, however, that the difference between the contingency fee and a conventional fee should be borne by the successful party as opposed to the opponent.

A voluntary code for third party litigation funders should be established so as to ensure appropriate restrictions of a funder's ability to control the litigation.

Summary

Lord Jackson's recommendations are as revolutionary as expected and will certainly provoke discussion the legal and commercial world. We will aim to keep our clients regularly updated as to how Lord Jackson's report is received and how and when the recommended provisions are put into place. One concern, however, is that the report will generate a spate of speedy and permanent procedural changes which may be give rise to unintended consequences, similar to those that were seen after Lord Woolf's report and the first publication of the Civil Procedure Rules.

Thomas Eggar LLP
14 January 2010