Happy Anniversary to the Jackson Reforms: Two Years Today

The title to this piece is perhaps a little unfair. Not all of the significant upheavals we have seen in the world of costs in the last couple of years were part of the recommended proposals in Lord Justice Jackson’s final report, which is itself more than 5 years old, and contrary to those recommendations the changes have been somewhat piecemeal. However, 1 April 2013 came to be described as ‘J-day’, and so today is a good day to look back and take stock.

Costs budgeting

Costs budgeting was one of the reforms that was met with most resistance (and there were lots to choose from) but it has now become an established feature of litigation on the multi-track. Much of the early case law surrounded relief from sanctions, but we are starting to see guidance in relation to more substantive issues: such as the impact of budgets on indemnity basis costs assessment and interim payments; the test on appealing a costs management order; and the appropriate use of contingencies.

Are they worth it though? Budgets increase the costs of litigation, and whilst that might be offset by savings in assessment costs in cases which proceed to trial if the budgets are used as the basis for summary assessment, it must not be forgotten that most cases settle. If a case settles shortly after the costs management order is made, the budget will have achieved virtually nothing given that incurred costs do not fall under the remit of the budgeting process. Even in cases which settle nearer to trial, the lack of a new bill format which separates the costs incurred phase by phase renders the budget of limited utility on detailed assessment save on outlying cases where the costs claimed are clearly significantly over or under budget.

Fixed recoverable costs

Of course, fixed recoverable costs on the fast track were an unimplemented part of the Woolf proposals and had been on the cards for years. They still have not been implemented across the board on the fast track – yet – but they do apply to personal injury litigation. There are provisions for escaping the fixed costs in exceptional cases, and perhaps in the future we will see guidance in relation to what makes for an ‘exceptional case’. This will lead to increased confidence amongst solicitors to apply for greater than fixed recoverable costs where appropriate.

Part 36

Part 36 is due to change again, but the big change from J-day - introducing an additional 10% of the damages awarded on the first £500,000 and 5% of the remainder up to a cap of £75,000 - seems to have been accepted with little criticism and has gone some way to balancing up the previous situation, where Defendant’s offers had more ‘teeth’ that Claimant’s offers.

However, the rules remain one-sided in situations where an offer is accepted late, rather than is not beaten: the Defendant gets much the same as they would at trial, whereas the Claimant obtains little or no benefit.

Assessment

Provisional assessment is undoubtedly cheaper than detailed assessment for a case that goes all the way – costs are after all capped at £1500 in provisional assessment whereas detailed assessment costs are only limited by reasonableness and proportionality. It would, however, merit a follow-up study to see if this is the case over all.  Certainly the impression gained anecdotally is that far more cases head to provisional assessment because it is worth the risk, and we did predict this as an unintended consequence (NB the £1500 cap has since been qualified to exclude VAT and court fees, but the conclusions still follow).

Provisional assessment is supposed to be undertaken within 6 weeks of the request for assessment. In practice it seems that you can expect to double that and then some, and undoubtedly the judiciary is in urgent need of greater resources.

The outcomes on provisional assessment are variable to say the least, and it is not unheard of to see judges allowing less than the sum offered by the Paying Party or more than that conceded by the Receiving Party.

The introduction of Part 36 into the assessment procedure has been a success, as Receiving Parties finally gain a real advantage from making an offer they subsequently beat.

Proportionality

There is a new rule, but has it made any real difference? The lack of any higher court guidance in relation to a proportionality test which is now two years old means that everybody is still as much in the dark as to what this means in practice as they were when the proposals first emerged.

Qualified one-way costs shifting

It is probably too early to tell with this provision, as it does not apply where additional liabilities continue to be recoverable. Much was made at the time of introduction of the ‘fundamental dishonesty’ exception, which was a phrase new to English law and therefore of uncertain application. It has been used, but with insufficient regularity to consider whether it is working. That has not prevented wider adoption of the concept.

Damages Based Agreements

Does anybody use these? No? We’ll move on then.

Additional Liabilities

Recoverability has ended. However, there are still a significant number of cases in run-off, enough for significant disputes over fixed success fees, more disputes over fixed success fees, and disputes over whether the entire regime was ever compatible with human rights. Expect these battles to continue for some time yet!

Legal Aid

Certainly not a Jackson proposal, who opposed any cuts to legal aid funding. The promised ‘exceptional funding’ safeguard is arguably little more than a fig leaf, and the impact of the cuts on access to justice has been heavily criticised from all angles – not least by the courts and the National Audit Office.

Relief from sanctions

We went on a fantastical journey there and back again. Fortunately common sense prevailed, and the courts are able to take a rounded view which does not excessively promote procedural compliance over the justice of the individual case.

Court fees

Also not a Jackson proposal, and not 2 years old, but court fees have been substantially raised to above cost, running counter to the thrust of the reforms which were supposed to reduce the burden of litigation.

Overall are the Jackson reforms a success?  You decide – as ever we would be interested in your thoughts.