Martin Partington: Spotlight on the Justice System

In November 2010, I noted here that the Government had issued a consultation on reforming some of the rules relating to fees and costs in civil litigation, which had been recommended by Lord Justice Jackson. The Government announced on 29 March 2011, that in the light of response to the consultation, it intends to make a number of important changes to the relevant rules and regulations.  The timetable for implementation is not stated; as some of the changes need legislation, this will not happen overnight. These decisions also need to be seen in the light of further proposals for changes to the civil justice system, announced on the same day, and which are considered in my next blog entry.

The changes are detailed and difficult to summarise. In outline,  the Government intends to :

• Abolish the general recoverability of the Conditional Fee Agreement success fee from the losing side. (This proposal returns the position to when CFAs were first allowed in civil litigation in England and Wales in the 1990s.) In future CFA success fees will be paid by the CFA funded party, rather than the other side. The Government thinks that this change will give individual CFA claimants a financial interest in controlling the costs incurred on their behalf.

• Abolish the general recoverability of after the event (ATE) insurance premiums. In future any ATE insurance premium will be paid by the party taking out the insurance, rather than the other side. Again, this returns the position to that which existed in the 1990s.

• Introduce a package of associated measures recommended by Lord Justice Jackson (set out below). (The one exception relates to expert reports in clinical negligence cases. These expert reports can be expensive. There need to be a means of funding them to ensure that meritorious claims can be brought by those who cannot afford to pay for these reports upfront. To address this, the Government intends to have a tightly drawn power to allow recoverability of the ATE insurance premiums to cover the cost of expert reports only in clinical negligence cases. The details would be set out in regulations.)

The associated measures in the package

• In tort cases, there will be an increase of 10% in non-pecuniary general damages which compensate for pain, suffering and loss of amenity.
• Claimants who have been compensated for personal injury should have their damages protected from having too much deducted by their lawyer as a success fee. In personal injury cases, there will be a cap on the amount of damages that may be taken as a success fee. The cap will be set at 25% of the damages other than those for future care and loss. This will help protect claimant’s damages generally, and will specifically protect those relating to future care and loss. Special damages for future care and loss, which can run into many millions of pounds in the most catastrophic injury cases will be protected.
• The maximum success fee that a lawyer may agree with a client under a CFA will remain at 100% of base costs. However, in personal injury cases this would be subject to the 25% cap on damages (other than those for future care and loss) as described above.
• The recoverability of the self-insurance element by membership organisations, equivalent to the ATE insurance premium, will also be abolished. Some trade unions and other membership organisations self-insure in this way.
• A regime of Qualified One Way Costs Shifting (‘QOCS’) will be introduced for personal injury cases, including clinical negligence. This means that an individual claimant is not at risk of paying the defendant’s costs should the claim fail (except in limited prescribed circumstances), but that the defendant – which typically in personal injury cases is a relatively well-resourced body – would have to pay the individual claimant’s costs should the claim succeed. The exceptions will be: (i) on behaviour grounds – where the claimant has acted fraudulently, frivolously or unreasonably in pursuing proceedings – so a reasonable claimant will not be at risk of paying the other side’s costs on behaviour grounds; and (ii) on financial means grounds – only the very wealthy would be at risk of paying any costs. The Government will continue to discuss with stakeholders how the rules should be drafted, including whether any minimum payment to a successful defendant’s costs should be payable by the losing claimant in order to prevent speculative claims. QOCS will not be extended beyond personal injury at this stage, so the normal costs shifting rules will continue to apply in other cases.
• Part 36 of the Civil Procedure Rules (offers to settle) will be amended to equalise the incentives between claimants and defendants to make and accept reasonable offers. This will apply to all civil cases, and the Government will discuss the details with stakeholders in due course.
• Damages-based agreements (contingency fees) will be allowed in civil litigation. DBAs are another type of ‘no win no fee’ agreement, but the lawyer’s fee is related to the damages awarded, rather than the work done by the lawyer. DBAs will provide a useful additional form of funding for claimants, for example in commercial claims. Successful claimants will recover their base costs (the lawyer’s hourly rate fee and disbursements) from defendants as for claims, whether funded under a CFA or otherwise, but in the case of a DBA, the costs recovered from the losing side would be set off against the DBA fee, reducing the amount payable by the claimant to any shortfall between the costs recovered and the DBA fee. DBAs will be subject to similar requirements for parties to the agreement as for CFAs. For example, the amount of the payment that lawyers can take from the damages in personal injury cases will be capped (at 25% of damages excluding for future care and loss).
• A new test of proportionality in costs assessment will be introduced. This will mean that only reasonable and proportionate costs may be recovered from the losing party. This would act as a long stop to control the costs of activity that is clearly disproportionate to the value, complexity and importance of the claim.
• The prescribed rates which successful litigants in person may recover from losing opponents will increase in line with inflation since they were set. These rates have not been increased since the mid-1990s. Business representatives in particular have supported this change, for those cases in which business people represent themselves in court.

Links to all the details can be found at http://www.justice.gov.uk/consultations/jackson-review-151110.htm