Satellite litigation over Jackson reforms inevitable, industry leaders told

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By Legal Futures

2 November 2011

Jackson: lawyers leave no stone unturned when it comes to arguing about costs

Satellite litigation over the Jackson reforms is inevitable – and may not be a bad thing, a gathering of the leading figures in legal costs and funding heard this week.

The expert workshop on the technical aspects of implementing the Jackson reforms also urged the government not to introduce any financial eligibility criteria or minimum payments from claimants as part of qualified one-way costs-shifting (QOCS).

There was otherwise only limited consensus during the workshop, held in London on Monday by the Civil Justice Council (CJC), which also looked at the proposed new rules on proportionality and on sanctions for a defendant failing to beat a claimant’s part 36 offer.

Legal Futures had exclusive access to the event, which was held on a Chatham House basis and so we are unable to identify speakers. The expert working group set up by the CJC at the request of the Ministry of Justice to consider the options produced a 100-page report which was the basis for the discussion.

Despite repeated calls to keep the new rules as simple as possible, there was widespread recognition that satellite litigation is likely – although one policymaker suggested that in a limited way it can be helpful in clarifying what the changes mean in practice.

In a paper prepared for the event – which he did not attend – Lord Justice Jackson acknowledged that litigation would follow the reforms. “One lesson from the costs war is that lawyers leave no stone unturned when it comes to arguing about costs,” he wrote.

On QOCS, which is currently restricted to personal injury, the Jackson report proposed that those who are “conspicuously wealthy” should not benefit from costs protection – meaning they would still have to pay the defendant’s costs if they lost. The government agreed in its response, although used the phrase “very wealthy”.

The idea floated at the workshop that a simple income test – such as those who pay the higher or top rate of tax – could be used was met with widespread opposition, summed up by the catchphrase “QOCS for all or no QOCS at all”, coined by one senior claimant solicitor.

“If ever there was a recipe for satellite litigation, it would be the introduction into QOCS of an eligibility test,” he said. “It will be an absolute disaster area and should not be contemplated.” He said the number of very wealthy people who would benefit would be small.

On part 36, Lord Justice Jackson recommended that where a defendant fails to beat a claimant’s offer, he should have to pay a penalty equivalent to 10% of damages. At the event, there were strong arguments on both sides as to whether the sanction should relate to damages or to costs, although a majority of the working group favoured a costs-based sanction.

The working group put forward four possible approaches to proportionality, and the one that found most favour was a hybrid in which both reasonableness and proportionality are considered at the same time whenever an time or category of costs is being assessed or budgeted.

Delegates at the event expressed disquiet at the news that the proposed 10% uplift in damages is being dealt with by the judiciary, with no news of whether there will be any consultation over how it will be done.

There was also concern that while the new personal injury regime may create uncertainties that solicitors would want to lay off to after-the-event (ATE) insurers, there was no guarantee that an ATE market would exist after the reforms are introduced.

The working group will now refine its proposals before submitting them to the Ministry of Justice for consideration by ministers.

The plan is for the Legal Aid, Sentencing and Punishment of Offenders Bill to receive Royal Assent by April with implementation on 1 October 2012, but delegates were told that this is a very tight timetable.

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