Lord Jackson has concluded that unsuccessful Defendants do pay too much in costs and it is a key recommendation in his report that the Claimantâ€™s success fee and insurance premium should cease to be recoverable from the Defendant.
Online PR News – 19-February-2010 – – For many years, Claimants have been able to pursue their claims on a â€śno win no feeâ€ť basis and because the Claimantâ€™s costs including the success fee and the insurance premium for the policy that is usually taken out to protect against the risk of having to pay the Defendantâ€™s costs and their own expenses are presently recoverable from the unsuccessful Defendant, the system enables Claimants to receive full and proper compensation.
This, however, is likely to change following the recent publication of a report by Lord Jackson on the costs of civil litigation. He was asked to report because of a perception that the cost of claims are too high. The powerful and wealthy insurance lobby in this country has campaigned long and hard to limit what they have to pay successful Claimants so that they can maximise shareholder profits.
Lord Jackson has concluded that unsuccessful Defendants do pay too much in costs and it is a key recommendation in his report that the Claimantâ€™s success fee and insurance premium should cease to be recoverable from the Defendant. It is a decision which I believe will restrict access to justice and leave most Claimants inadequately compensated.
I accept that Lord Jackson was faced with a difficult choice. Does he recommend changes that will substantially reduce the amount of costs which unsuccessful Defendants have to pay or does he recommend improvements to the current regime that will control costs but still allow Claimants access to justice and give them full compensation. Lord Jackson appears to believe that it is possible to reconcile these two aims. I disagree.
It does, however, seem that Lord Jackson recognizes that his recommendation will leave Claimantâ€™s inadequately compensated because to offset the cost to Claimants, he proposes that unsuccessful Claimants should no longer have to pay the costs of successful Defendants (one way cost shifting) and that the amount of compensation awarded for injury should be increased by 10% across the board.
It is envisaged in the report that if the successful Defendant cannot recover their costs from the Claimant that there will be no need for the Claimant to purchase an insurance policy but this ignores the fact that the policy doesnâ€™tâ€™t just protect the unsuccessful Claimant from paying the successful Defendantâ€™s costs, it also protects the unsuccessful Claimant from having to pay their own expenses incurred pursuing the claim such as medical report fees and court fees. These expenses can be quite substantial and in most cases the Claimant will still need to purchase insurance cover to protect against the risk of having to pay these expenses but in future, they will have to pay for the policy themselves out of their damages if they are successful or out of income or savings if they are not. I can see this deterring many Claimants from pursuing meritorious claims.
There are other potential problems associated with one way cost shifting. It will be qualified so if the Court decides that the Claimant has acted unreasonably then the power will exist to make a costs order against the Claimant. I donâ€™t know what type of behavior by a Claimant would trigger a different costs order but I do know Defendants and I have no doubt that they will seize every opportunity to argue at the end of a case that the unsuccessful Claimant should pay at least part if not all of their costs. We are likely to see the argument that as the Claimant was unsuccessful, it must have been unreasonable for them to bring the claim in the first place.
Also, what happens if the unsuccessful Claimantâ€™s financial situation changes in the future? Perhaps an inheritance or a lottery win? Are we going to see successful Defendants maintaining a database of Claimants who have brought unsuccessful claims with the aim of reviewing this regularly to determine if there is anyone they can pursue for their costs years later.
A prudent Claimant when faced with these possibilities may decide that the risk is too great to bear and not pursue their claim.
A modest increase of 10% in the level of damages will not offset the cost to the Claimant of paying the success fee and insurance premium (even if the level of success fee is capped) though in reality it is hard to imagine many firms marketing their services on the basis that Claimants will have to bear part of the cost of pursuing their claims through paying the success fee and it seems probable that firms will have to run cases on the basis that, expenses excepted, there will be no deduction from the Claimantâ€™s damages.
Sadly, the inevitable consequence of this is that firms will only pursue claims with good prospects of success. Without the success fee, there is no financial incentive for firms to pursue difficult or risky claims. Cherry picking by firms will mean that many Claimants will be denied access to justice and that is why I must conclude that only the insurance industry will benefit through increased profitability if success fees and insurance premiums cease to be recoverable from unsuccessful defendants. They must be delighted that their lobbying on this issue has been entirely successful.
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