The Jackson Effect - One Year On

Article

12 June, 2014

The Jackson reforms were introduced in April 2013. It was intended that the reforms would radically overhaul the personal injury system. Over a year later, it is perhaps a little premature to assess the true impact of the changes. It is however fair to say with certainty that the reforms have dramatically changed the legal landscape for both defendants and claimants.

The key changes introduced in 2013 were:

  • 'No win no fee' CFA's, Success fees and ATE premiums no longer recoverable
  • Qualified One Way Costs Shifting (QOCS) - Defendant pays own costs even if they win at trial, unless there is fraud or dishonesty, there is no reasonable cause of action, or the claimant fails to beat a defendants part 36 offer
  • Contingency fees or 'Damages Based Agreements' (DBA's) introduced
  • 10% increase in General Damages for all cases settled after 1 April 2013 except where a CFA is already in force
  • Referral fee ban for personal injury claims
  • Changes to Part 36 - Defendant to pay additional 10% of damages if fails to beat claimants part 36 offer
  • Greater judicial enforcement of proportionality of legal costs e.g. costs budgeting
  • Fast track fixed fees introduced
  • Greater judicial power to punish those who fail to comply with orders

In this article, it is not possible to discuss the impact of all of the reforms introduced by Jackson. Instead, we intend to focus on those changes which have made the biggest splash in the defendant world over the past year.

Case Management

The reform which arguably has attracted the most attention and proven most controversial relates to the courts new powers of case management.

The Jackson reforms allow for more active judicial management and stricter enforcement of the court rules. The well publicised case of Mitchell v News Group Newspapers is the case brought by former Conservative Chief Whip against News Group Newspapers for defamation of character over the Sun's coverage of the 'Plebgate' affair. During the course of the claim, Mr Mitchell's solicitors failed to file a costs budget in time and as a result had been limited to a budget consisting of court fees only, opposed to the cost budget he filed at Court which was in excess of £500,000. The Master refused to grant relief from sanctions. It was made perfectly clear that in the new Jackson era a strict approach was to be taken by the Courts. An appeal followed and Lord Dyson found that the failings by Mitchell's lawyers were "not minor or trivial and there was no excuse for them".

This case is widely reported to have instilled a culture of fear amongst lawyers. Lawyers are afraid of being "Mitchelled" and the already overburdened Court system has been swamped with applications having the knock on effect of slowing down the legislative process. The new strict approach is being used tactically by claimant lawyers who are seeking to strike out claims on a procedural basis. Parties are less likely to co-operate and are actively seeking to catch one another out. This of course can be used to a defendant's advantage to press claimant solicitors to comply with directions and to speed claims along to a timelier conclusion.

There is a complaint that there has been a lack of consistency by the Court when interpreting their new powers of case management. As a result there has been (and will continue to be) a host of satellite litigation over whether for example a default is 'trivial'.

On 5th June an amendment was made to the CPR which allows parties to agree extensions of time, up to a maximum of 28 days without an application to the court. This has introduced an element of common sense back in to proceedings and will avoid the need to make unnecessary applications to the Court.

Cost Budgets

On the whole, the new requirement for parties to file costs budget has been widely received by defendants as a positive change, allowing better management of cases. Defendants are able to make more realistic reserves and the costs budget can provide an insight into the claimants approach to litigation. They can also provide an opportunity for the Court to rein in claimant solicitors costs from the outset. However, again the approach taken by the judiciary has been inconsistent and there is a lack of guidance as to how the process is to be approached. Lord Justice Jackson commented "budgeting is very much in the public interest. It takes time for costs management to bed in. Both practitioners and judges need to be comfortable with the process….Once this has happened; the overall effect will be to bring down the costs of litigation."

Proportionality

The Jackson reforms seek to address the issue of proportionality. The new test means that necessity will no longer be a justification for costs that are not proportionate. Defendants definitely stand to benefit from this new test. Hopefully the days of claimants recovering costs far exceeding the damages recovered are a thing of the past. Currently there is no case law for how this test should be applied so it remains to be seen how strictly the principle will be applied. Satellite litigation once again seems inevitable.

Fixed Costs and the Portal

Fixed costs and the use of the portal system inevitably will have a significant impact on claimant law firms and claimants are attempting to do everything they can to get out of the fixed recoverable costs regime. The issue was discussed at the Civil Justice Council. The following issues have been noted:

  • An increase in claims falling outside the fast track fixed recoverable costs, i.e. mesothelioma and NIHL cases.
  • Claimant firms are making allegations against more than one defendant, even when it was clear that there should only be one.
  • Defendants are seeing more claims for situational anxiety or psychological loss in low value claims. If challenged by the defendant, the claim automatically exits the portal.
  • Claimants are not providing all of the required information on the claims notification form, when this is brought to their attention, they then send a letter of claim instead rather than re-submitting the claim through the portal.

Whilst defendants are in the main supportive of the use of the portal to reduce costs, defendants will need to be pro-active in identifying claims which ought to be dealt with in the portal/ fast track, and be robust in avoiding attempts by claimants to have matters allocated to the multi track.

QOCS

QOCS applies to all cases excluding those where the claimant has a conditional fee agreement, or an insurance premium, that pre dates 1 April 2013. It is widely assumed that the QOCS will lead to a rise in the number of personal injury claims being brought since claimants do not have to pay the defendants costs if they loose. Therefore it is essential for defendants to make appropriate Part 36 offers at an early stage of the case, in order to retain some costs protection.

The Future

Prior to the introduction of the new rules, claimant firms rushed to take on as many cases as possible. As a result, the majority of the litigated cases we are currently seeing are pre April 2013 and are therefore still operating under the old regime. Moving forwards, it seems that the Jackson reforms will continue to create uncertainty, inevitably resulting in parties incurring additional costs and satellite litigation. As time goes on however, guidance from the higher courts will start to trickle down and it is hoped that there will be greater consistency in the Courts. A review of the reforms is planned for 2016-2018.

There is also still more change to come, we await clarification of the DBA's/ hybrid agreements and the Mitchell case. Three cases are listed before the Court of Appeal later this month which should provide some judicial guidance. The Government intends to reform whiplash claims by introducing a Panel of Accredited Medical experts to examine and report on whip lash. The effect of Jackson has definitely been to shake up the civil litigation system, whether the overall result will be the reduction of the cost of civil litigation remains to be seen!

If you have any questions in relation to this article please contact Sarah Wilkinson on 01254 222439 or email sarah.wilkinson@forbessolicitors.co.uk

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