Costs Revolution

By Richard Paremain

The Jackson Report Heralds a New World of Costs

The greatly anticipated Jackson report on Civil litigation has been published but amid many wide sweeping changes both claimant and defendant groups are claiming victory and defeat in even measure often at the same time. The main recommendations are:

  • No recovery of success fees and ATE premiums
  • Cap of 25 % on success fees as proportion of damages

  • Ten per cent increase in general damages

  • Qualified costs shifting in favour of the claimant

  • Extension of fixed costs across some smaller value claims

  • Backing for contingency fees subject to safeguards

  • Banning of referral fees

With insurance premiums and success fees not being recoverable, Lord Justice Jackson aimed to soften the blow for claimants by recommending a ten per cent increase in the level of damages and a 25 percent cap on the amount lawyers can deduct in success fees . Controversially he recommended a one way costs shifting,  which would mean that claimants would not have to pay defendants costs if they lost so long as their behaviour was reasonable and depending on their means.  

Speaking to journalists he said that his reforms could save very many millions of pounds, promote access to justice and allow lawyers to earn reasonable rates of remuneration. Claimants lawyers have commented that there is very little to help victims and that the suggestion that Ending the recoverability of success fees and After The Event insurance premiums will lead to costs savings is misleading. The costs will still be there but just shifted to the claimant who will have to pay the success fee and premium out of damages. Likewise, defendant lawyers pointed to the possibility that insurers may have to settle claims without merit where there is a risk that even if successful they will not get paid.

Many claims management companies could struggle due to the recommendation that referral fees should be banned. But banning them itself may prove problematic as pointed out by one eminent judge "there are many ways to show appreciation". As lawyers adjust to and take a detailed look at the proposals one thing seems certain, the relative calm of the last two years after many years of costs wars may soon be over. The more the rules change the more lawyers find ways of arguing about what the changes actually mean and how they should be implemented. Without clear detailed unambiguous drafting we look forward to many years of argument.