Curbing litigation costs

SUCCESS fees, claims farming, after-the- event insurance premiums – it has long been recognised that some legal firms routinely milk the system for high profits. In the context of healthcare, excessive legal fees cost the NHS and taxpayers many millions of pounds each year. To mutual indemnity providers such as MDDUS it means higher payouts and greater upward pressure on the subscription fees paid by doctors and dentists. In 2008 Lord Justice Rupert Jackson was asked to undertake a fundamental review of excessive civil litigation costs in England and Wales. His report, published in 2010, outlined a raft of reforms that could provide “significant cost savings”.

Lord Jackson was educated at Christ’s Hospital and Jesus College, Cambridge, and called to the Bar in 1972. He was appointed a Deputy High Court Judge in 1999 and a Lord Justice of Appeal in 2008. He lives in Surrey with his wife who is a prominent local solicitor.

What prompted the review of civil litigation costs?

RJ: The former Master of the Rolls, Anthony Clarke, asked me to undertake a fundamental review of the rules and principles governing the costs of civil litigation. His request reflected his concern about the growing problem of costs not being proportionate to the value of the sums at stake in a claim, and in some cases dramatically exceeding it. There was also a concern about the growth in satellite litigation on the issue of costs rather than the substance of a case.

Your report covered the broad range of civil litigation. What is driving up legal costs for defendants in clinical negligence cases?

RJ: I found some common factors in the dramatic rise in costs, to which clinical negligence was by no means immune – the scale of success fees, referral fees and afterthe- event insurance premium recoverable from losing defendants being key drivers. Another feature that I received many complaints about directly in relation to clinical negligence was the very high preaction costs such cases have been incurring – I made general and specific recommendations to address this.

Who are the winners and losers in the current system?

It is always difficult to provide a broad answer on that as cases are won and lost on their merits. There are clearly a number of beneficiaries of the current system given the dramatic rise in costs, and not all of those are adding materially to the process – for example payments are made by solicitors via referral fees to ‘buy’ cases from third parties who add no value. The losers will not just be those who face paying disproportionate costs, but the system as a whole and the public at large – for example through facing much higher insurance premium payments.

What are conditional fee arrangements (CFAs) and how do they contribute to excessive costs in civil litigation?

RJ: CFAs, often called ‘no-win, no-fee’ cases, are agreements between a lawyer and client whereby in cases where the lawyer wins, they are able to charge a success fee. This and certain other costs of pursuing the case are then currently recoverable from a losing party. Clients have no financial stake in the setting of such costs, which have often been extremely high – I received no evidence in the Review to suggest the current levels of success fees charged were necessary to cover the loss of income from cases lost under CFAs for which solicitors forego fees.

Critics of the reforms say that abolishing success fees and after-the-event insurance premiums will discourage lawyers from taking on difficult cases even when claimants might have a legitimate case. How do the reforms answer that?

RJ: My reforms form a coherent package which taken together provide a remedy to the current ills of high costs. The proposal to increase general damages by 10 per cent is the key counterweight to the abolition of recoverability – an academic economist has forecast that a majority of claimants will be better off under these reforms. Clearly law firms – like judges – will need to adapt to the new costs regime. I have recognised the unique high early costs in clinical negligence claims and pressed hard for legal aid to continue to be available to fund disbursements, but that is a matter for Government to determine.

Do the reforms provide more encouragement to settle cases early out of court?

RJ:My final report looked at alternate dispute resolution (ADR), and is strongly in favour of its greater use as a means of reducing costs. I think my reforms will encourage ADR in the sense that clients will have more of a stake in keeping costs down, and there is a reduced profit incentive for solicitors in cases running to full trial. Sometimes a patient is seeking an apology or a course of treatment rather than compensation, and ADR is highly suited to resolving those disputes.

Does the need for often detailed expert evidence inhibit the use of ADR?

RJ: Early stage detailed expert evidence can make ADR more difficult in terms of people becoming overly wedded to their case, which they feel expert testimony is strongly supporting, and there is more material to disagree over than in other areas of law. However, equally, expert evidence may prove that neither case is without contrary interpretations and that litigation is more risky, which may encourage parties to seek ADR.

How would fixed costs for so-called “fast track” cases under £25,000 help reduce costs in clinical negligence cases?

RJ: Fixed costs in the fast track would help to reduce costs by providing a ceiling and certainty on the costs of conducting litigation, especially in an area like clinical negligence where there is a danger of a proliferation of expert witnesses being produced. Having greater clarity on known costs means that both parties are better placed to make assessments of their prospects, and to see the value of mediation in resolving disputes.

What are the implications if litigation costs are allowed to continue to rise?

RJ: My own view is that the current growth rate of civil litigation costs is unsustainable. For all the criticisms of my reforms, there are very few people who would not agree that costs are disproportionately high, and that something must be done to address them. To use a clinical analogy, everyone agrees the patient is ill, it is just the treatments they cannot agree on.

What is happening now with the proposed reforms?

RJ: The major reforms to abolish recoverability of success fees, after-theevent insurance premiums and referral fees are all contained in a Bill currently before Parliament as they require primary legislation. They are a matter for Parliament to resolve. However, with 109 recommendations in total there are many areas that the judiciary and others can take forward, and these are being pursued through the use of pilots, drafting of new court rules and training of judges.

I have been asked by the senior judiciary to continue to play a major role in implementation, as far as my judicial sitting duties permit. I am giving a series of lectures available on the judicial website (www.judiciary.gov.uk) to help the professions prepare for the new costs landscape, and I attend a great many events as well as liaising with other bodies to drive the reform process along.

Have the last two years of debate been tough?

RJ: I have had to develop something of a thick skin, as many specific and general reform proposals have not found favour with a number of groups. I recognise that some of the criticisms are founded on strongly held conviction and principle and not just on commercial self-interest. No two people would have come up with the same package of proposals, but having looked exhaustively at this issue for a full year and been exposed to all of the arguments and evidence produced, I am confident my conclusions and recommendations are sound and will address the problems I was asked to tackle. Like all judges I thrive on well-conducted arguments, although normally I am able to sit back and adjudicate rather than be on the receiving end!

 Interview by Jim Killgore, editor of MDDUS Summons