May 19 2009
On May 8 2009 an interim report was published in a year-long review of civil litigation costs.
The master of the rolls, Sir Anthony Clarke, appointed Lord Justice Jackson to lead a fundamental review of the rules and principles governing the costs of civil litigation. The objective is to produce recommendations "in order to promote access to justice at proportionate cost". The review began in January 2009 and a final report is expected by the end of 2009, after which the Ministry of Justice will accept or reject its recommendations.
The author emphasizes that the preliminary report is intended to provide a basis for discussion during the consultation period, and that he will not make up his mind about the issues identified in the report until the end of the consultation.
Accordingly, the report mainly identifies issues and options on which views are sought, rather than setting out an opinion. It invites readers to submit comments on the issues raised by July 31 2009.
Key points from the consultation which could affect the conduct of major commercial litigation include the following.
The report expresses disagreement with the ministry's policy of full-cost pricing, whereby litigants pay for the court service they receive. It suggests that it is wrong in principle that most or all of the costs of the civil justice system should be shifted from taxpayers to litigants.
The report states that recommendations in the final report must encompass all civil courts, including the Commercial Court, but it recognizes that "one size does not fit all". For example, it states that submissions and discussions have given the impression that court users generally wish to maintain the existing regime of recoverable costs in major high-value litigation (eg, commercial, chancery, mercantile and construction cases). The report mentions that if this impression is confirmed during the consultation process, it would be inappropriate to introduce a form of fixed costs or similar measures into high-value business litigation.
The report invites views on whether cost shifting (or recovery of costs) should be abolished in specific areas, although it tentatively concludes that cost shifting must remain in some form for most litigation.
The report suggests that the abolition of cost shifting in the context of collective actions merits serious consideration. However, it observes that proper incentives would have to be built into the rules in order to deter the commencement of unmeritorious collective actions.
Non-recovery of costs by defendants
The report invites views on whether there should be a presumption of one-way cost shifting - whereby the claimant, but not the defendant , could recover its costs - in certain types of claim. It suggests that this should be seriously considered for personal injury litigation.
Alternatives to the 'loser pays' principle
The report proposes the consideration of alternative forms of cost shifting which are more directly based on encouraging early resolution of claims. For example, there might be no presumption that costs would be ordered, but the court would have jurisdiction to award costs based on the parties' conduct, particularly in light of whether they made reasonable attempts to settle the proceedings.
Costs protection for individual litigants
The report invites views on whether the rules should introduce some form of cost protection in favour of individual (rather than corporate) litigants. Costs orders against individual claimants (and perhaps also defendants) would be strictly regulated (eg, according to the individual's means or the size and nature of the claim).
Conditional fee agreements and contingency fees
At present, a successful party can recover from its opponent: (i) the success fee - or the uplift on the solicitor's basic costs, which cannot be more than 100% - payable under a conditional fee arrangement; and (ii) the premium taken out to cover potential liability for an opponent's costs, known as 'after the event' insurance.
The report invites views on the appropriateness of the levels of success fees and premiums in different types of litigation, and asks whether these fees and premiums should remain recoverable. It also invites views on whether contingency fees should be permitted, allowing a lawyer to be remunerated by way of a share in the client's damages. If so, the report asks whether the losing party should pay costs on a conventional basis or should also be liable for the contingent element of the fee.
The report puts forward various proposals for enhanced costs management by the courts - for example, requiring parties to file detailed costs estimates or budgets at regular intervals and providing for the court to make various types of cost management order. However, it states that the indications received so far suggest that costs management would have no place in most Commercial Court cases.
Summary assessment of costs
The report sets out various options, including (i) replacing summary assessment with provisions encouraging judges to order an interim payment on account of costs, or (ii) introducing a provisional assessment of costs which would become final unless either party applied for detailed assessment.
Part 36 offers
The report suggests that serious consideration be given to a rule change to reverse the Court of Appeal's decision in BAA v Carver,(1) which allows a wider interpretation of whether a judgment in favour of a claimant is more advantageous than a defendant's Part 36 offer. The report considers that the decision introduces an unwelcome degree of uncertainty into the Part 36 process and puts unreasonable pressure on claimants to accept offers which are not quite high enough.
The report identifies methods for controlling the costs of e-disclosure - for example, by parties paying greater heed to the provisions for early discussion of issues that may arise and agreeing on keyword searches. It asks for feedback on whether a particular approach to e-disclosure has saved or wasted costs in particular cases.
The report advances wide-ranging options for the reform of disclosure generally, including:
The report notes that an option which merits consideration for burdensome cases only is the use of disclosure assessors, who would be experienced lawyers appointed to assist the court in relation to disclosure.
Witness statements and expert reports
The report identifies various ways of reducing the costs associated with witness statements, including:
The report also includes a number of proposals on expert reports, suggesting the sequential exchange of expert evidence on liability as standard and a presumption that quantum experts should be instructed on a 'single joint' basis.
The report discerns a need for a radical rethink of pre-action protocols due to a concern that some protocols generate more costs than they save. It sets out a number of points for consideration, including whether:
Docket system for judges
The report recommends that a docketing system be introduced for civil litigation, whereby cases would be assigned either to one judge or to a combination of a judge and a specified master or district judge.
The report sets out various options for addressing the costs associated with trial, including (i) increased judicial control of the evidence or timetable, and (ii) submission of written openings in advance of trial with no duplication in oral openings and a cap on the length of written openings.
The report deals with fundamental issues and if some of the more radical ideas and options are implemented, it will have a dramatic impact on the future of commercial litigation. It is important for all court users to engage in the consultation process.
A full copy of the interim report is available at www.judiciary.gov.uk/about_judiciary/cost-review/preliminary-report.htm.
For further information on this topic please contact Sonya Leydecker, Anna Pertoldi or Maura McIntosh at Herbert Smith LLP by telephone (+44 20 7374 8000) or by fax (+44 20 7374 0888) or by email (firstname.lastname@example.org or email@example.com or firstname.lastname@example.org).
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