What price, justice?: Jackson's cost review

It took a year of deliberation and consultation, but Lord Justice Jackson has now released his recommendations for promoting access to justice at proportionate cost in England and Wales. His final report is wide-ranging and, if implemented, will have a significant effect on construction disputes.

The proposals relate to court rules, but also affect arbitrations subject to English procedural law and alternative forms of dispute resolution. They have little impact upon adjudications, which usually lack inter-party costs recovery, but are relevant to enforcement proceedings (the costs of which are attracting growing judicial concern).

The key recommendations are on contingency and conditional fees for disputes work. A conditional fee is where, say, a claimant pays an extra 50% on a base hourly rate of £200 for a win (that is, £300 per hour) and 50% less for a loss (£100 per hour). Uplifts of up to 100% are permitted.

Parties litigating and arbitrating like conditional fees because, if they win, the loser pays the uplift (the extra £100 per hour). If they lose, their costs are reduced (they pay only £100 per hour). However, they may also have to pay the winner’s costs unless they are insured against that risk.

Contingency fees differ from conditional fees in that although they are also payable if the client obtains a defined “win”, they are calculated as a proportion of the sum recovered. For example, a claimant might pay 10%, say, of its recovery.

As I predicted last year (16 October, page 49), Jackson proposes legalising contingency fees for solicitors in litigation and arbitration to bring them into line with conditional fees. The winner, as usual, would be awarded its costs, but the loser would only pay costs reflecting a conventional sum, with the winner bearing the difference. Many would welcome a move to have solicitors’ fees reflect their success more closely than a conditional fee, with its entire uplift dependant on a single result.

Jackson also suggests making conditional fee uplifts and “after the event” insurance premiums irrecoverable from unsuccessful defendants. Conditional fees would still be permitted, but any uplift would be payable by the client, with the loser paying the base rate. This would usually mean winning claimants paying uplifts from their recovered damages.

He also proposes piloting ‘hot tubbing’ if all parties consent. This is almost as interesting as it sounds: it entails opposing experts giving evidence concurrently, often without the parties’ lawyers intervening

Conditional fees are rarely agreed for construction disputes. This recommendation (which will have most impact on personal injury claims) will only reduce their use. But defendants will not be exposed to disproportionate liability for uplifts and “after the event” insurance premiums.

Jackson recommends amending the construction disputes pre-action protocol, which requires parties to explain their cases and do their best to avoid litigation. Jackson wants to reduce the cost of protocol compliance and a review of whether to keep the protocol at all after 2011. He also proposes pre-action applications to allow courts to police the protocol.

Jackson suggests judges take a more “hands on” approach to case management to keep costs down. He also floats the idea of allowing courts to set cost budgets. There is a cost involved with the courts examining the parties’ budgets and giving directions accordingly; as with the protocol, though, a balance must be struck between incurring costs to avoid greater costs, if success is sufficient to merit it.

For the Technology and Construction Court, Jackson suggests that cases worth under £25,000, where the trial needs less than a day, should proceed on a fast track. They would have a streamlined procedure, a cap on pre-trial costs of £12,000 and (potentially) fixed costs. Defendants and, to a lesser extent claimants – who have the burden of proof – would benefit.

Jackson notes the vital role of alternative dispute resolution in settling cases. Instead of making it mandatory for all cases he prefers greater promotion of ADR, particularly for low value cases. Although ADR’s advantages are well known to most, it is still under-used.

Jackson advises beefing up settlement offer rules. For instance, where a defendant rejects a claimant’s offer, but fails to do better at trial, the claimant’s recovery should be enhanced by 10%. He also proposes piloting “hot tubbing” if all parties consent. This is almost as interesting as it sounds: it entails opposing experts giving evidence concurrently, often without the parties’ lawyers intervening. Watch this space!

The senior judiciary backs Jackson’s recommendations and the courts may implement some of the proposals themselves. Our next government will hopefully invest the time and money needed to enact the rest.