Reform of costs in civil litigation

In addition to the Consultation Paper on changes to legal aid, the Coalition Government has also published a consultation on changes to the system of costs in civil litigation, which take forward some of the proposals made by Lord Justice Jackson in his review of Civil Litigation costs published in January 2010.

Again the proposals in the Consultation are quite hard to summarise. The following is adapted from the MoJ Press release:

The central objective is “to reduce the spiralling costs payable by people who have been sued in ‘no win no fee’ cases. Defendants are currently liable for substantial additional costs while the claimant has no interest in restraining legal costs when deciding to bring a case. The consultation proposes that the claimant should have a financial interest in controlling costs incurred on their behalf, which would also lead to lawyers having to keep costs down in order to compete for business.”

In order to achieve this objective:

“The key proposal is to abolish recoverability of success fees and associated costs in no win no fee conditional fee agreements. Under the current regime, defendants must pay these additional costs (which can be substantial) if they lose. The proposal would mean that claimants (emphasis added) have to pay their lawyer’s success fee and will therefore take an interest in controlling the costs being incurred on their behalf.

“It is also proposed to allow damages-based agreements (also known as contingency fees) in litigation before the courts. These are another form of no win no fee agreement, under which lawyers can take a proportion of the claimants’ damages in fees. This would increase the funding options available to claimants.

“The consultation also seeks views on some of Lord Justice Jackson’s other recommendations, which are designed to balance the impact of these major changes, in particular to assist claimants. These recommendations include a 10% increase in general damages, and introducing a mechanism to protect the vast majority of personal injury claimants from paying a winning defendant’s costs (through qualified one way costs shifting).

“Other proposals would further encourage parties to make and accept reasonable offers, as well as introducing a new test to ensure that overall costs are proportionate. It is also proposed to increase the costs which can be recovered by people who win their cases without representation by lawyers.”

As with the Consultation Paper on legal aid, these proposals will be subject to a great deal of scrutiny, particularly by the legal profession. Their arguments may, as with legal aid reform, lead to changes in Government thinking. However, there is a good deal of consensus that the costs of civil litigation do need reform.

One of the issues not mentioned directly in the Press Release is the extent to which there should be greater promotion of ‘before the event’ insurance to cover potential costs in legal cases. Reductions in publicly funded legal aid may to an extent be replaced by increases in private funding. The problem with this outcome is that the very poorest cannot afford such insurance.

The Consultation Paper is at http://www.justice.gov.uk/consultations/jackson-review-151110.htm

The consultation is open until 14 February 2011.