Introduction
According to “A Guide To The Jackson Reforms” (July 2013), these reforms are known by this name because it was Sir Rupert Jackson – a senior Court of Appeal judge – who was requested by Sir Anthony Clarke, Master of the Rolls, to carry out this review into the costs of civil litigation.
The article reports that the review was commenced in early 2009 and the report presented to Jack Straw (then the Lord Chancellor) in January 2010 – a year later.
Quoting a statement by Sir Rupert Jackson included in the article:
“In some areas of civil litigation costs are disproportionate and impede access to justice. I therefore propose a coherent package of interlocking reforms, designed to control costs and promote access to justice.”
Part of the reason the reforms were needed, according to some critics of the law as it existed prior to these reforms, was that there were too many so-called spurious claims. For example, it was alleged that although the numbers of car accidents had fallen in the previous four years, claims for whiplash injuries had risen by25 percent over the same period (Simon, March 2013). As a consequence, everyone’s insurance premiums have seen increases. It is said that garages and insurers routinely sell details of car accident victims to legal firms, who then encourage people to sue, on the basis of having nothing to lose if they are unsuccessful.
Simon reports that according to the Association of British Insurers, that situation is reflected in our insurance premiums to the tune of £2.7 million every day in increased insurance premiums.
It was also reported that in the previous five years, claims had cost the NHS £8 billion but only one third of that amount was the cost of damages – the rest (two thirds) was the amount of legal fees incurred. Simon also reports that the Law Society believe that the reforms will discourage people from suing because the returns will be less; also that fewer lawyers will want to take on cases on a no win, no fee basis, because their fees will of necessity be much lower.
This essay examines whether the Jackson Reforms have in fact satisfactorily resolved the issue of excessive costs of litigation, particularly in cases involving personal injury.
It should be noted here that (according to the above-referenced article) in order to implement the changes recommended by the Jackson review, the law had to changed. Accordingly, the Legal Aid, Sentencing and Punishment of Offenders Act of 2012 (LASPO), was passed so that the changes could be implemented in England and Wales.
As set out in “Main changes” (1 August 2013) – an article published by the Ministry of Justice – the main changes arising from the report were:
No win no fee agreements: For both types of cases (conditional fee agreements [CFAs] and damage-based agreements [DBAs]) payment to the lawyer is conditional on winning the case. The lawyer is not paid if the case is lost. Before the reforms, a lawyer winning a CFA case would typically charge an “uplift” or “success” fee on top of his basic charges. That fee would have been paid by the losing party as well as the winning party’s legal costs. This arrangement was particularly common in cases involving damage, especially personal injury cases.
As far as DBAs are concerned, they were formerly not allowed in civil litigation cases, but from the 1st April this year that has changed. Similar to CFAs, the maximum a lawyer can obtain is 25 percent of the damages in personal injury cases (with the same exclusions regarding future care and loss). However, a successful claimant may be required to pay any shortfall between the costs paid by the losing side and the DBA fee agreed. The lawyer can only claim the agreed DBA fee as a maximum.
Insurance: Exists in two versions – Before The Event (BTE) and After The Event (ATE). The BTE insurance is one taken out before the occurrence of an actionable event; often as an added feature of another insurance like home or car insurance. There were no effects on this insurance as a consequence of the Jackson reforms. In the case of ATE insurance, before April 1st 2013, the premium was payable by the losing defendant; after April 1st that is no longer the case. However, in personal injury cases, an alternative called Qualified One way Costs Shifting (QOCS) is now available.
Referral fees: This is an aspect of the reforms that applies particularly to personal injury cases. As a result of the Jackson reforms, referral fees are now banned.
Impact of the Reforms on Personal Injury Cases
The question whether the Jackson Reforms have resolved the issues of excessive costs for claimants in personal injury cases is perhaps yet to be fully determined, because most of the effects applied from April this year – just a few short months ago. However, there are those in the legal profession who – even before the legislative changes came into force – were foretelling difficulties and problems. For example, Bowman’s article: “Injured feelings: Jackson reforms” (2012-13) published in the Law Society Gazette, states that there is still controversy over whether the reforms will correct a system in which “claims and costs are out of control”, or whether they will hinder access to justice for those whom the “no win, no fee” system is their only way to seek redress of wrongs. The article states that one certainty is that the reforms will affect the business of many law firms, predicting in some cases that profit margins may be reduced by between 15 and 20 percent.
A key area of the problem for the legal profession is that the presiding judge will have the power to limit the scale of costs, which is seen as applying a “downward pressure on costs.” Bowman’s article suggests that law firms may be forced to withdraw from that type of business or to “consolidate” (driving the smaller firms out of the market).
In contrast to that negative view, a report published by Nottinghamshire County Council in February 2013 entitled “Personal Injury Claims: Jackson Reforms to the Civil Justice Procedures”, stated that in respect of claims settled in the previous 12 months, had just half of them been settled under the proposed new regulations, the Council would have seen a saving of circa £250,000. (It is presumed though that the statement was made from the perspective of the Council as a defendant).
Solley (July 2013) added to the voices of doubt about the efficacy of the Jackson reforms in his article published in the Global Legal Post, a UK-based legal digest. Admitting that there had been “extensive consultationat all levels”, he reports that the essence of the reforms is an “overriding objective of enabling the court to deal with cases justly and at proportionate cost.” In respect of the proportionality of costs, this now affects not only the costs recovered from your opponent in court but also to managing the costs accrued by both sides. According to the article, the changed regulations will mean that the legal representatives on both sides must collaborate, including in advance of the actual case, in order to agree budgets, which if they are exceeded can be curtailed by the judge.
In addition to the collaboration between lawyers, any barristers involved will have to record their time more carefully and justify their fees – a new departure according to Solley. This new era of cross-court cooperation will be difficult for some to adjust to. In his concluding remarks, Solley affirms that he and many others believe that the reforms will actually increase litigation costs, as well as in all probability reducing the actual recoverable costs for the winning claimant, making their victory somewhat of an empty one.
But now we are almost six months down the road from the April 1st start date, what evidence is there that those reforms have been successful (or not)? The vast majority of the discussion and opinion on the subject comes from those involved in the legal profession, and it has already become apparent from researched material that by and large that body of the population stands to lose as a consequence of the Jackson reforms. We have seen that the numbers of cases are expected to fall considerably and that because of the changes in fees structures, profits and fees are likely to be much lower, making that type of business much less attractive to legal firms. For those reasons, it is difficult to find published opinion that has good things to say about the Jackson reforms.
Having said that, an article published by Ford & Warren Solicitors: “The Jackson Reforms – The main changes” (June 2013) appears to offer opinions that show no great evidence of bias on the subject. Below are summaries of some of the points made in their article:
- Insurers may save more from reductions in success fees and ATE premiums than they will pay out as a result of a 10 percent increase in damages limits.
- The legal market has experienced a shake-up due to the ban on referral fees.
- The requirement for costs budgeting should reduce costs.
- The new rules will encourage people to consider litigation as a last resort. Greater judicial influence will help control costs.
- Strict compliance with court rules will reduce delays and thus lower costs.
- The change to “success fee” rules is likely to reduce costs for claimants.
- DBAs are less likely to be used as the capped damages limit may well be exceeded in hourly rate costs.
- The ban on referral fees is likely to cause smaller firms to cease Personal Injury business, or larger firms to close PI departments.
- The fixed recoverable costs rules are likely to reduce claimant costs.
- The costs budgeting requirements may or may not be a major issue; it is too early to say. However, some solicitors may find ways to circumvent the rules.
- The tougher rules imposed by the courts mean that solicitors must comply with court directions and meet deadlines, or risk having cases thrown out.
- Proportionality of costs – central to the reforms – is being observed. Costs considered disproportionate risk being disallowed.
Conclusions
Having researched a considerable amount of published material on the subject of the Jackson reforms (in addition to that referenced in this essay), two points have become clear. They are that a) Almost all the published opinion and information originates from legal firms or entities having a legal involvement (such as the Law Society Gazette); and b) Because the reforms clearly disadvantage law firms involved in Personal Injury cases (in terms of lower fees and profits) it is most unlikely to expect much support for the reforms from those sources.
Nonetheless some admissions of positive effects of the reforms have been found. Nottinghamshire County Council believes the reforms will reduce their claims costs considerably, for example. Also, it is generally felt that insurers will save money due to the effects of the ban on referral fees, although that saving may be to some extent cancelled out by the allowed increase in damages limits.
There is also some consensus of opinion that frivolous claims for personal injury will be less likely under the new rules, partly because law firms will in all probability only take on “safe” cases now that their fees will be lower.
An unknown factor at this relatively early stage – just a few months after the 1st April 2013 date when the reforms came into effect – is whether some of the agile minds in the legal profession will find loopholes to circumvent any of the new rules, or “wrinkles” that will allow them to avoid the loss of fees and profits that otherwise might be the case.
At this stage, determining the answer to the central issue that is the objective of this essay – whether the reforms have satisfactorily resolved the issue of excessive costs of litigation, particularly in cases involving personal injury – is difficult. From all the published material reviewed, opinions are mixed (though as has already been stated, there is considerable bias involved). However, the Ford & Warren article discussed earlier does suggest that claimants’ costs will be lower, although it has also been predicted that payouts will be less for the winning parties because they will have to bear costs that they did not prior to the reforms being implemented.
On balance, it would appear that costs have been capped by these reforms, though it seems the rules may not yet be perfect, and perhaps will be subject to future amendment in the light of actual experience. In short, the situation regarding costs for personal injury cases has been improved by the Jackson reforms (though not to everyone’s liking), but may not yet be improved sufficiently to be able to say that the situation has been satisfactorily resolved.
References
“A Guide To The Jackson Reforms.” (July 2013). Bott & Co. Solicitors. Retrieved from http://www.bottonline.co.uk/articles/guide-to-jackson-reforms
Bowman, Catherine. (2012-13). “Injured feelings: Jackson reforms.” The Law Society Gazette. Retrieved from http://www.lawgazette.co.uk/68720.article
“Main changes.” (1 August 2013). Ministry of Justice. Retrieved from http://www.justice.gov.uk/civil-justice-reforms/main-changes
“Personal Injury Claims: Jackson Reforms to the Civil Justice Procedures.” (February 2013). Nottinghamshire County Council. Retrieved from http://www.nottinghamshire.gov.uk/DMS/Document.ashx?czJKcaeAi5tUFL1DTL2UE4zNRBcoShgo=b7NbLOceO%2BrMU6h1Re7IKS8t%2FNfRAcMe2RCcHaKcEd7lshA6zmRYYA%3D%3D&mCTIbCubSFfXsDGW9IXnlg%3D%3D=hFflUdN3100%3D&kCx1AnS9%2FpWZQ40DXFvdEw%3D%3D=hFflUdN3100%3D&uJovDxwdjMPoYv%2BAJvYtyA%3D%3D=ctNJFf55vVA%3D&FgPlIEJYlotS%2BYGoBi5olA%3D%3D=NHdURQburHA%3D&d9Qjj0ag1Pd993jsyOJqFvmyB7X0CSQK=ctNJFf55vVA%3D&WGewmoAfeNR9xqBux0r1Q8Za60lavYmz=ctNJFf55vVA%3D&WGewmoAfeNQ16B2MHuCpMRKZMwaG1PaO=ctNJFf55vVA%3D
Simon, E. (March 2013). “End of ‘no win, no fee’ lawsuits.” The Telegraph. Retrieved from http://www.telegraph.co.uk/finance/personalfinance/consumertips/9959646/End-of-no-win-no-fee-lawsuits.html
Solley, T. (July 2013). “The Jackson reforms: Is it still a case of wait and see?” The Global Legal Post. Retrieved from http://www.globallegalpost.com/blogs/global-view/the-jackson-reforms-is-it-still-a-case-of-wait-and-see-74372495/
“The Jackson Reforms – The main changes.” (June 2013). Ford & Warren Solicitors. Retrieved from http://www.forwarn.com/news/db.asp?PageName=the-jackson=reforms-the-main-changes
