April 2013 was a month to forget for many lawyers due to arguably the most radical changes to the Civil Procedure Rules since 1998.
In January 2010 Lord Justice Jackson published his “Review of Civil Litigation Costs: Final Report” which contained a number of recommendations to reform civil litigation both generally and in relation to specific areas of litigation, the most affected of the specific areas being personal injury litigation. The crux of Lord Justice Jackson’s reforms was to deal with the costs associated with litigation, in particular the costs associated with personal injury claims. Although the focus of the reforms stem from reforming this area, they are by no means limited to this area and will have implications across all aspects of civil litigation.
The following comprises a brief summary of the key reforms taking effect in the post-April 2013 civil litigation regime:
Conditional Fee Agreements and Success Fees – these agreements, more commonly known as ‘no win no fee’ agreements, continue to be regulated as they were before April 2013. The major change in relation to these agreements is that the success fee (the uplift on solicitor’s base costs that reflects the risk in taking the case on a ‘no win no fee basis’) is no longer recoverable from the losing party. This means the losing party is now never liable for anything other than base costs (the actual costs incurred by the solicitors in pursuing the claim). The solicitor is still entitled to recover a success fee but this is payable from the client’s damages up to a maximum of 25% of general damages for PSLA (pain, suffering and loss of amenity) other than future losses and once all recoverable benefits have been deducted. The idea of a ‘no win no fee’ agreement is somewhat lost under the new civil litigation regime with the success fee now being recoverable from the client’s damages.
Damages-Based Agreements – previously known as Contingency Fee Agreements, these are now permitted in most types of civil litigation and are no longer limited to the funding of employment cases. The client agrees with the solicitor a percentage figure up to a maximum of 25% of PSLA and past losses for taking on the case. Costs can be recovered in the usual way in these matters.
ATE Premiums – after the event insurance premiums designed to protect clients from paying their opponent’s costs if they lose are no longer recoverable from the losing party. This means if a client takes out an ATE insurance policy to protect from the adverse costs risk, they are responsible for paying the policy premium and whatever stage premiums that apply. These are no longer recoverable in all aspects of civil litigation.
Qualified One-Way Costs Shifting (QOCS) – this is applicable to personal injury cases only and is designed to compensate for the fact that ATE premiums are no longer recoverable from the losing party. The basic principle under the new QOCS rule is that a successful Defendant will not be able to recover their costs from a losing Claimant in most cases – this is not an absolute rule and exceptions do apply.
Referral Fees – these are now banned.
Increase in General Damages – Simmons v Castle [2012] made it clear that with effect from 1st April 2013 there would be a 10% increase in general damages, presumably to represent the fact the solicitor’s success fee is now recovered from the client.
CPR Part 36 – this is now more potent for Claimants with a fourth sanction now available against a Defendant who fails to beat a Claimant’s Part 36 offer. This sanction takes the form of a monetary award of a further 10% of the damages awarded by the Court.
Costs Management – the Court will now be far more involved in managing the costs incurred by the parties in a litigated matter which is made clear by the new overriding objective which features the wording “at proportionate cost”. The introduction of costs budgets and sanctions for exceeding a budget means costs will have to be continually assessed as the litigation progresses. Sanctions for non-compliance with orders is taken more seriously under the new regime and it will be very important to think ahead in terms of how practical it will be to comply with the terms of any order.
There are many more changes taking effect under the new regime but these are the main ones which will have the most significant implications for civil litigation. The changes that were implemented on the 1st April 2013 are probably the most important changes since the introduction of the Civil Procedure Rules in 1998. It is therefore very important legal representatives get to grips with the changes quickly in order to best advise their clients.
