30 March, 2011
Filed UnderLegal Costs
The recent lobbying by claimant organisations has paid-off as the Government has entirely abandoned plans to implement the Jackson costs reforms.
Oh … sorry. I had pre-prepared two different posts in advance of the announcement yesterday to deal with either eventuality.
Let’s start again.
The recent lobbying by claimant organisations has been a complete waste of time and money and the Government has announced plans to press ahead with the Jackson costs reforms virtually in full.
As the Response to proposals for reform of civil litigation funding and costs in England and Wales says: “The Government intends to implement the reforms to no win no fee conditional fee agreements (CFAs), proposed as a package of measures by Lord Justice Jackson”. The plans include:
• Abolish the general recoverability of the CFA success fee from the losing side. In future any CFA success fee will be paid by the CFA funded party, rather than the other side. 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. Maximum success fee to remain at 100%. – Yes. It’s really going to happen.
• Abolish the general recoverability of after the event (ATE) insurance premiums. 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 end of most of the ATE industry? There will probably be some left to pick up the pieces of ATE for own disbursements, unless solicitors decided to fund this risk themselves.
• There will be an increase of 10% in non-pecuniary general damages such as pain, suffering and loss of amenity in tort cases, for all claimants. – A small price to pay for defendants and insurers given the large savings that ending recover of success fees and ATE should bring.
• The recoverability of the self-insurance element by membership organisations, equivalent to the ATE insurance premium, will also be abolished. – Who would have guessed that a Conservative led government would be prepared to end this trade union gravy train?
• A regime of Qualified One Way Costs Shifting 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 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. This will not be extended beyond personal injury at this stage, so the normal costs shifting rules will continue to apply in other cases. – This is the bad news from defendant panel solicitors' perspective as there will no longer be higher hourly rates recovered in successfully defended CCFA funded cases. Also the worry for defendants that it may not be commercially sensible to defend many low value claims. Not immediately obvious as to whether costs shifting to apply if a claimant fails to beat a defendant’s Part 36 offer (although the next proposal would seem to imply it would). If two-way costs shifting continues to apply in relation to Part 36 offers then it may leave a market for ATE cover for this risk.
• Part 36 will be amended to equalise the incentives between claimants and defendants to make and accept reasonable offers. This will apply to all civil cases. In particular, it will be made clear that where a money offer is beaten at trial, by however small a margin, the costs sanctions applicable under Part 36 will apply. An additional sanction (equivalent to 10% of the value of the claim) will be introduced to be paid by defendants who do not accept a claimant's reasonable offer that is not beaten at trial. – The formal reversal of Carver v BAA.
• Damages-based agreements (DBAs/contingency fees) will be allowed to be used in civil litigation. Successful claimants will recover their base costs from defendants as normal 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. 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). – Unlikely to take off in personal injury claims but will be attractive to claimants in commercial disputes.
• 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. – It will be fascinating to see how this rule will be drafted if it is to avoid becoming the damp-squib that the current test of proportionality has become and is to avoid sparking-off enormous uncertainty and satellite litigation.
• The prescribed rates which successful litigants in person may recover from losing opponents will increase in line with inflation since they were set.
Changes to the CFA regime requiring primary legislation will follow as soon as Parliamentary time allows. Other changes will require changes to the Civil Procedure Rules or other secondary legislation. Further consultation will follow in due course, as appropriate. It is envisaged that the reforms will be implemented together, once the legislation is enacted, aside from the reversal of Carver v BAA and increases to recoverable fees for litigants in person which can be taken forward independently more swiftly.
Those hoping that a rebellion in Parliament might stop these proposals being brought in are likely to be disappointed if the initial reaction in the House of Commons is anything to go by. Some muted concerns, but broadly received cross-party support.
In addition, the Ministry of Justice is issuing a further consultation (closing date 30 June 2011) Solving disputes in the county courts: creating a simpler, quicker and more proportionate system which sets out, and seeks views on, proposals to reform the civil justice system in the courts in England and Wales. These include:
• Introducing a simplified claims procedure on a fixed costs basis, similar to that for road traffic accidents under £10,000, for more types of personal injury claim; exploring the possibility of extending the framework of such a scheme to cover low value clinical negligence claims; and examining the option of extending the upper limit of those simplified claims procedures to £25,000 or £50,000. The extension of the RTA PI Scheme to other areas of personal injury will not require a change in primary legislation and could be introduced by extending existing protocols or introducing new ones. A review of the existing scheme will be undertaken to decide if and when any extension should be introduced.
• Introduce fixed fees for fast track personal injury claims that fall outside the extended RTA PI process (for example where liability was not admitted).
• Increasing the upper jurisdiction threshold for small claims (excluding personal injury and housing disrepair) from £5,000 to £10,000, £15,000 or £25,000.
• Requiring all cases below the small claims limit to have attempted settlement by mediation, before being considered for a hearing.
• Introducing mediation information/assessment sessions for claims above the small claims limit.
How likely is it that these further proposals will see the light of day and is frantic lobbying going to help those worried about their jobs? Well, the Government has already made the difficult decision (which many believed would never be made) to scrap recoverability of success fees and ATE premium. These further proposals are, from their point of view, just further tweaking.
Would the last person to leave Costsville please remember to turn off the lights?