Lord Justice Jackson has now published his much anticipated final report on civil litigation costs. 

In an attempt to improve access to justice and control costs, the report proposes changes in a number of key areas.  We set out below details of the proposals which will particularly impact on disputes involving parties within the public sector.

Costs shifting

The Jackson Report has indicated that litigation should be subject to "qualified one way costs shifting".  This means that even if a claimant loses, it will be unlikely to have an adverse costs order made against it.  The shift is "qualified" in the sense that in deciding costs the court will take into account the claimant's means and their conduct in proceedings.  Accordingly, a corporation bringing proceedings for commercial purposes is more likely to have to pay a successful defendant's costs.  It is envisaged that the categories of litigation affected will be:

  • judicial review;
  • clinical negligence claims;
  • personal injury; and
  • defamation.

Judicial review

In the context of judicial review proceedings qualified costs shifting means that, if a claimant obtains permission to bring judicial review proceedings, then he or she is unlikely to have an adverse costs order made against them even if they lose the substantive hearing.  The rationale for these changes is that judicial review proceedings are brought in the public interest and once the court has determined that a case is arguable then it would be contrary to the public interest for a claimant to be discouraged by the risk of adverse costs. 

It is likely that the costs shift will not usually take place until permission is granted, so that costs will be awarded against unsuccessful claimants that do not get permission.  Jackson LJ has also proposed that the position is made clearer on costs where a reconsideration is offered after proceedings have been issued.  In these circumstances,  if the claimant followed the judicial review pre-action protocol process then the claimant will recover his or her costs of preparing and issuing proceedings.
 
From our extensive judicial review experience we recognise that most cases do not obtain permission or, if they have merit, are settled at an early stage.  It is also often the case that an unsuccessful claimant has limited resources so cost recovery is problematic in any event.  However, when the new rules do come in then it may encourage more challenges as the costs risk for claimants will be reduced.

Defamation

Our public sector clients are seeing increasing numbers of defamatory statements being published via electronic means, in particular on the internet.

The Jackson Report has recommended that, assuming that CFA success fees and after the event insurance premiums become irrecoverable (as outlined above), the following changes should be introduced to the current regime in an attempt to reduce the costs involved:

  • the general level of damages for defamation and breach of privacy claims should be increased by 10%;
  • qualified costs shifting should be introduced (such that any costs ordered against a claimant will be reasonable having regard to all the circumstances, including the financial resources of all the parties and the parties' conduct during the proceedings);
  • the defamation pre-action protocol should be amended so that claimants are, prior to issuing proceedings, obliged to set out in a letter of claim the meaning they attribute to the words complained of (currently the protocol states that "it is desirable" for the claimant to identify the meaning complained of); and
  • the retention of jury trials in defamation cases should be reconsidered (on the grounds that jury trials are particularly costly and it is easier to appeal a reasoned judgment than a jury verdict).

Other proposals

The Jackson Report is a vast document and sets out a wide number of proposed changes to the civil costs regime.  Other proposals which are likely to be of interest to those within the public sector include:

  • CFA success fees and "after the event" insurance premiums should cease to be recoverable from unsuccessful opponents.  CFA agreements are "no win, no fee" agreements (whereby the client only pays its solicitor if the case is won, but on the basis that if the case is indeed won the fees paid will be "uplifted").  Previously this uplifted element was recoverable from the losing party.  After the event insurance covers a claimant in the event that it loses and has to pay the other side's costs.  Previously the insurance premium was recoverable from the losing party.  A combination of a CFA and after the event insurance has enabled some claimants in the past to effectively remove the risk of having to pay legal fees at all, perhaps encouraging litigation.  However, the Jackson Report proposes that the uplift element of CFA success fees and after the event insurance premiums should no longer be recoverable from the losing party, meaning the winning party will have to pay them (out of damages if desired).  This may discourage some would be litigants.  However, it is envisaged that the additional costs incurred by claimants under this proposal will be offset by a combination of one way costs shifting, a 10% increase in the level of damages awarded for personal injury, nuisance, defamation and any other tort causing suffering to individuals, increased awards under the part 36 settlement regime, the option to enter into contingency fee arrangements and, it is anticipated, a general reduction in the level of CFA success fees being charged by lawyers.
  • The Jackson Report proposes an additional incentive for defendants to accept claimant's offers to settle.  Where a defendant fails to beat a claimant's offer to settle made under part 36 of the Civil Procedure Rules, the claimant's damages should be enhanced by an additional 10% recovery.  At the moment, whereas a defendant who fails to beat an offer is penalised by having to pay a greater proportion of the claimant's costs, the level of damages payable is not affected.  However, this proposed change would place defendants under greater pressure to settle as a 10% increase in damages could be substantial.
  • A tighter regime for case management is likely to be introduced.  This would include limits on content and length of witness statements, allocating cases to judges with relevant expertise, ensuring cases remain with the same judge wherever possible, standardising case management directions and ensuring case management and other interim hearings are used more cost effectively.
  • Substantial parts of the 'Practice Direction - Pre-Action Conduct' are likely to be repealed as complying with its requirements often results in increased costs for all parties. 
  • Contingency fees (where the lawyer is only paid if the claim is successful and is paid out of the settlement sum or damages awarded) could be allowed for contentious matters, provided that the unsuccessful party is only required to pay an amount for costs reflecting what would be a conventional amount (with the balance to be borne by the successful party) and the terms of contingency agreements are regulated.

Some of the proposals in the Jackson report will require primary legislation but the judicial review changes could be made by a straightforward change to the Civil Procedure Rules, so it seems likely that these changes will be implemented fairly quickly.  It is also likely that the proposals in the Jackson Report will be relied upon in support of costs arguments before any changes are formally implemented.