News analysis - Jackson report: In decent proposals

His final report is "clear and comprehensive", "thorough and fair", "imaginative and realistic in its proposals" — these were among the descriptive compliments paid to Lord Justice Jackson by the Master of the Rolls, Lord Neuberger. The report is, in every respect, the fundamental review of our system of costs that Sir Rupert Jackson was commissioned to undertake.

There will be an immediate focus on the major proposals, including the plan to abolish recovery of after-the-event insurance premiums and success fees. This and some other proposals would need primary legislation, but there are many other recommendations that would not require the approval of parliament and could be introduced rather sooner. To quote the Master of the Rolls again, the time for discussion and debate is over and it's time for the hard work of implementation to begin.

Interlinked proposals

With so many recommendations it would be tempting to treat the list as a menu — selecting some items while leaving others in abeyance. Cleverly, Sir Rupert has linked a number of proposals together, such that for every reform that defendant insurers might favour in their own interests, there is a balance in the public one. Conversely, claimant solicitors will find that if reforms are resisted that do not suit their purposes, there may be consequences.

Take fast-track costs in personal injury cases for instance. The report contains two alternative tables, each setting out a matrix of fixed fees for all fast-track accident claims, with a commitment to add figures for employers' liability disease cases within a few months. The figures are based on detailed analysis of data from both sides and are intended to reflect the average costs incurred now, with some adjustments for inflation and for efficiency savings. Insurers may feel this leaves them only marginally better off, but the simple act of fixing the numbers will surely lead both to greater certainty in pricing and to savings in frictional costs incurred by both sides.

Many claimants' solicitors have long opposed fixed costs. However, the report makes it very clear that, in recommending the small claims limit for PI cases should not be increased — except for a planned adjustment for inflation when appropriate — this decision will have to be reviewed if fixed costs are not implemented quickly. The threat is clear: oppose the fixed costs and the limit will have to go up substantially.

Similarly with recovery of success fees and ATE premiums, there is a package of interlinked proposals, designed to produce an outcome in the public interest. For example, most claimants would recover more damages (net of payments for costs) than now, although some would recover less; claimants would have a financial interest in the level of costs incurred on their behalf, both as to the level of success fee and the amount of costs spent to which it is applied; claimant solicitors would still be able to make a reasonable profit; costs payable to claimant solicitors by liability insurers would be significantly reduced; costs would be more proportionate, as defendants will no longer pay success fees/ATE premiums.

General damages rise

This is why the report recommends an increase in general damages, broadly assessed to reflect the saving to insurers of not paying success fees and premiums. The concept of 'qualified one-way costs shifting', by which the winning claimant's costs are met but the winning defendant's costs are rarely recoverable — save where a Part 36 offer is not beaten — is essential to protect claimants, so that they no longer need to be sold ATE. The proposed abolition of referral fees and the consequent adjustment downwards of hourly rates are very much part of the same equation. As a total package, this is quite difficult for any interest group to oppose.

Perhaps the key to understanding the compelling logic of these proposals is to consider the point made above: claimants would have a financial interest in the costs spent in their name. One of the biggest criticisms of conditional fees has been that the claimant has no interest in controlling the amount of time spent, the rate charged or the success fee set. At a stroke, the claimant would be interested in all these; the effect is to create a true market, in which conscientious and competent solicitors will compete on price and on service — not on the relationship with or payment to an intermediary.

Softer recommendations

Some ideas are more free standing, such as the request that work should continue on developing a transparent and independent software system for valuing injury damages. Here the recommendation is softer in tone: this is one area where consensus will be needed to make progress.

Of course the report is much, much broader than just PI claims, but the numerous challenges over costs and the volume of PI claims make this an inevitable focus — at least initially. The past 10 years has also shown that where PI claims lead in creating costs problems, other fields of litigation typically follow. The same logic may well apply to the solutions.

Early reactions to the report will focus on winners and losers but the report needs to be read as a whole and for what it is: a very thorough, unbiased assessment of the problems and the solutions, based wherever possible on reliable data.

Although no changes will be immediate, the report cannot be ignored. There is a strong message of judicial intent backing the findings: measures will be taken to implement these proposals as fully as can be achieved. Sir Rupert will have a role in the implementation of these plans. And, given his track record so far, no one should doubt his ability to deliver.

Andrew Parker is head of strategic litigation at national commercial law firm Beachcroft and  one of Lord Justice Jackson's assessors.