Civil Litigation Costs: Recent Developments

 

9th January 2009

Civil Litigation Costs Review

The Master of the Rolls, Sir Anthony Clarke, appointed Lord Justice Jackson at the end of 2008 to lead a comprehensive review of the rules and principles governing the costs of civil litigation and to make recommendations for promoting access to justice at proportionate cost.

The review commenced in January 2009 and the findings are due to be presented to the Master of the Rolls in December.  Sir Rupert Jackson will be assisted with the review by a small group of assessors who will meet on a monthly basis to discuss issues and findings.  The panel of assessors comprises: Senior Costs Judge Master Peter Hurst; Lord David Hunt of the Wirral; Mr Justice Cranston; Jeremy Morgan QC; Michael Napier QC; Colin Stutt and Professor Paul Fenn. 

The terms of reference for the review state that, amongst other things, it is to look into the effect of case management on costs, have regard to research conducted into CFAs and to compare the UK costs regime with other jurisdictions. 

One important issue which is expected to feature highly in the review is the rising use of third party funding for litigation. 

Further details of the review can be found here.

We will be posting regular updates on this site as and when information about the review becomes publicly available.

Civil Justice Council Contingency Fees Report

The Civil Justice Council (the “CJC”) published a research paper in November 2008 on contingency fees in the UK, see here.  The paper includes a detailed study of the contingency fee system currently used in the US. The research follows on from the CJC’s report published in June 2007 on “The Future Funding of Litigation – Funding Options and Proportionate Costs", see here.

The November 2008 paper looks specifically at alternatives to the current UK system of conditional fee agreements (“CFAs”) and in particular at fees based upon a proportion of damages recovered, which is prevalent in the US. Under the US contingency fees system, lawyers are paid nothing if they lose a case and they take a percentage of any damages recovered if the claimant wins.  In the US it is generally not possible to pass on the winner’s costs to the losing opponent.  The paper looks at different forms of a hybrid system whereby contingency fees are recoverable from the losing defendant.

The paper concludes by stating that whilst there is currently no pressing need to introduce any other type of costs system in England & Wales, the fears often associated with the US style contingency fee system are overstated.  It is also noted that contingency fees would be likely to introduce greater proportionality into the system but that they may have a significant impact on which cases are brought and thereby adversely affect access to justice for smaller value cases.   

Court of Appeal decision in C v W  [2008] EWCA Civ 1459

The Court of Appeal has recently delivered an important judgment on the assessment of the appropriate uplift on base costs payable under CFAs.  The decision was handed down on 19th December 2008 and can be found online here.

C v W concerned a personal injury claim following a car accident in which the claimant was a passenger in the defendant’s car.  The claimant’s solicitors agreed to act under a CFA providing for a success fee of 98% of the firm’s base costs.  The Defendant’s insurer’s admitted liability and an allegation of contributory negligence was not pursued.  In due course the claim was settled and the amount of the claimant’s base costs were agreed.  The only remaining issue between the parties was the claimant’s solicitors’ success fee. 

On a detailed assessment the District Judge allowed a success fee of 70%.  This was reduced to 50% on appeal.  The Defendant then appealed to the Court of Appeal on the basis that even 50% was too high and that a figure of 20% and not more than 30% was appropriate. 

The Court of Appeal, Lady Justice Arden, Lord Justice Thomas and Lord Justice Moore-Bick sitting with the Senior Costs Judge Master Hurst, reduced the success fee to 20%.  The key basis of the decision was that in cases where liability had been admitted the “risks” of the solicitor failing to recover any fee at all were minimal.  The only residual “risk” facing the solicitor in the present case was the claimant rejecting an offer of settlement on the solicitors’ advice and then failing to do better than the offer at trial.  The CFA, which was based on the Law Society’s standard form, provided that in such an eventuality the claimant did not have to pay any costs, including the success fee, for work done after receipt of notice of such an offer. 

Lord Justice Moore-Bick emphasised that in all cases “the success fee must reflect a reasonable and rational assessment of the risks facing the solicitor at the time when the agreement was entered into.”  Lord Justice Thomas observed that “for the CFA regime to operate more effectively then much better statistical information must be collected and made available to assist the better assessment of risk.”  He also gave consideration to whether a new regime could be devised for cases where liability is admitted and expressed a desire for such matters to be considered by Lord Justice Jackson in his civil litigation costs review.