Construction Disputes - Litigation Costs

Following an extensive review of civil litigation costs last year, Lord Justice Jackson's final report on costs has been published. As former head of the Technology and Construction Court, it is no surprise that some key recommendations are specific to construction disputes. In summary, the proposals are:

• Contingency fees (where a lawyer's fee is calculated as a percentage of any damages recovered, with no fee payable if the client loses) should be permitted.
• Success fees and "After the Event" ("ATE") insurance premiums in conditional fee agreements ("CFAs") should no longer be recoverable from unsuccessful opponents in civil litigation. Any success fee or such premium should be paid by the client, not the opponent.
• Lawyers should cut down on the quantity of evidence used in all legal submissions and witness evidence with cost penalties for unnecessarily long-winded documents.
• Changes to the rules governing Pre-Action conduct on the basis that it adopts an unsuitable, one size fits all approach, often leading to pre-action costs being incurred wastefully and unnecessarily.
• Positive efforts should be made to encourage the take-up of "Before the Event" legal expenses insurance by small or medium enterprises.
• A "menu" of E-disclosure options is made available for large commercial and similar claims, to enable disclosure to be tailored appropriately to avoid incurring costs unnecessarily.
• The amendment of the rules relating to settlement offers under CPR Part 36 to encourage defendants to accept offers made by Claimants by enhancing the Claimant's recovery by 10% where the Defendant fails to beat a Claimant's offer.

Permitting contingency fee arrangements in contentious cases is likely to be welcome change for many clients, enabling them to share their litigation risk with their lawyers. It is a radical move, however, and likely to lead to significant further debate before any such proposals are adopted. The proposals regarding success fees and ATE insurance are also likely to be viewed in a positive light by defendant corporations and by senior members of the judiciary, if not by ATE insurance providers. Despite the extensive review, however, the above proposals are currently only recommendations. Justice Secretary, Jack Straw has commented that he looks forward to considering the proposals in detail. The Ministry of Justice will consider the package of recommendations in depth and set out any proposed legislative changes in response in due course.

Lawyers Laurence Cobb, Andrew Weston, Alexander Underwood