Civil litigation costs

In May this year, Lord Justice Jackson’s preliminary report on the review of civil litigation costs was published. MPS broadly welcomes this review as we have called for fundamental reform of the current system for some time.

The context of Lord Justice Jackson’s year-long review is that litigation costs have escalated to such a degree that it is proving to be a barrier to many people seeking legal redress.

The preliminary report highlights areas for consultation and proposes possible areas for reform. The report focuses on, among other aspects, the “loser pays” principle, fixed costs for more cases, and the impact on costs of pre-action protocols and “no win, no fee” arrangements.

MPS has, for some time, argued for reform in the area of legal costs and, as the leading provider of indemnity for doctors and dentists worldwide, was in a unique position to provide hard data comparing clinical negligence claim costs worldwide to the first phase of the Jackson Review.

A summary of our key points made in our first phase submission is outlined below.

• Disproportionate costs
  
  A particular concern is that of all the jurisdictions MPS deals with, England and Wales is the one where damages form the lowest percentage of total payment, and claimants’ costs represent the highest percentage of total payments, for low-value medical claims. MPS would suggest that there is something very wrong with a system where (in relation to damages for medical negligence of under £10,000) only 26% of total indemnity payments reach patients as damages, with the remainder going towards legal fees and disbursements.
  
  
• “Loser pays” principle
  
  MPS, along with many other respondents, did not want cost shifting – the principle where the loser pays the winner’s costs – to be abolished altogether. It is an important deterrent to unmeritorious claims and the alternative, of increasing damages to allow for costs, could reduce transparency and cost control even more. We would instead prefer to see alternative solutions including restricting costs recovery to scales reflecting value and complexity.
  
  
• “No win, no fee”
  
  Conditional fee arrangements (CFAs), where a claimant only pays his/her lawyer’s fees in the event of a successful outcome, are widely seen as a primary driver escalating costs. Lawyers charge a “success fee”, which in many cases doubles the lawyer’s usual hourly charge. The “success” uplift is often agreed before a defendant even knows about a claim and has been given the chance to indicate whether it intends to defend it or not. Similarly, a substantial premium to cover the “risk” of having to pay defendants’ costs (the "ATE premium”) will have been agreed at the same time, well before any such risk arises.
  
  Claimants’ costs will be recovered from paying defendants, so claimants themselves never have to pay their own costs and have no incentive to restrain them. MPS argued, in its response to the review, that CFAs give claimant lawyers an unhealthy stake in prolonging a client’s claim and withholding information that would assist early resolution. MPS has called for the courts to play a more active role in managing cases to control the costs incurred. MPS also wants the recoverability of ATE premiums to be reconsidered.

The review is set to publish its findings by the end of this year and we would hope that these important issues are given serious consideration by the government.