The dramatic reforms proposed by Lord Justice Jackson in his review of civil litigation costs, published nearly a year ago, are a step closer to implementation following the publication of the Ministry of Justice's Consultation Paper on the Proposals for Reform of Civil Litigation Funding and Costs on 15 November 2010.
The MOJ Consultation Paper covers Lord Justice Jackson's primary recommendations relating to the reform of the Conditional Fee Agreement (CFA) regime, namely that success fees and after the event (ATE) insurance premiums should no longer be recoverable from the losing side. It also covers two alternative packages of recommendations should the primary recommendations not be implemented, which propose more rigorous control over the recoverability of success fees and ATE premiums; as well as Lord Justice Jackson's recommendations on contingency fees or damage-based agreements (DBAs).
Lord Justice Jackson's proposals for the abolition of recoverable success fees and ATE premiums followed from his conclusion that current CFA arrangements impact disproportionately on defendants and do not encourage claimants to control costs incurred on their behalf. However, in order to balance the financial implications of such major reforms for claimants, he suggested additional reforms, also covered by the MOJ Consultation. These include: increasing the level of general damages by 10 per cent to help towards paying the success fee; strengthening Part 36 offer arrangements to encourage parties to make and accept reasonable offers; and introducing qualified one-way costs shifting in personal injury claims (whereby successful claimants would recover their reasonable costs, but successful defendants would not recover theirs).
In this Consultation, the Government has signalled its support for the radical reforms proposed in Lord Justice Jackson's primary recommendations. It believes that these proposals should lead to significant costs savings while still enabling those who need access to justice to obtain it. The Government also accepts Lord Justice Jackson's assessment that the current arrangements, particularly the CFA regime, impacts disproportionately on defendants.
However, the Government has acknowledged that there are some concerns regarding the consequences of abolishing the recoverability of CFA success fees. The Consultation therefore reopens a number of questions raised in Lord Justice Jackson's review regarding the retention of recoverable success fees and ATE insurance premiums in various types of cases, but subject to greater control.
In order to increase funding options available to claimants, Lord Justice Jackson also recommended that solicitors and barristers should be permitted to enter into DBAs in civil litigation cases. However, he proposed that costs should be recoverable against the opposing parties on a conventional hourly rate basis and not by reference to the contingency fee. The Government has stated in the Consultation Paper that it agrees that allowing DBAs would give litigants greater choice in deciding the most appropriate funding method for their case and they could increase access to justice for claimants if CFAs become less attractive. The Government also indicates that it sees no reason why qualified one-way costs shifting should not apply to DBA cases. The Consultation Paper invites detailed comments upon these proposals.
The MOJ has also provided short updates in the Consultation Paper in relation to a number of Lord Justice Jackson's other recommendations which do not form part of the Consultation. These include referral fees (currently the subject of a consultation by the Legal Services Board), costs and case management (reform of which is being led by the judges), and the recoverability of fixed fast-track costs. In tandem, the MOJ has also published a consultation on the reform of Legal Aid in England and Wales, and has emphasised that it will be looking at reform of civil litigation funding "in the round".
The deadline for responding to this Consultation Paper is 14 February 2011, and the Government expects to publish a paper summarising the responses in spring 2011. However, primary legislation will be required to implement Lord Justice Jackson's primary recommendations on CFAs and such legislation could only be taken forward when the Parliamentary timetable allows.
A step has clearly been taken on the path to implementation of Lord Justice Jackson's reforms. However, the Government recognises the importance of assessing the impact of these proposals and is continuing to gather data on the recommendations during the course of the very extensive Consultation. There are therefore quite a few more steps to go before any significant changes will be made in the area of civil litigation funding.
A copy of our briefing note in relation to Jackson's report is available here to download.
The consultation is available here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
