Litigation Landscape in 2013

We previously reported on a number of key changes to litigation funding envisaged by Lord Justice Jackson in his Review of Civil Litigation Costs. Our article can be viewed here.   As detailed in that article, the proposed changes are sweeping, not least in relation to the possible methods open to litigants in order to fund potential claims. As such the reforms warrant further review in anticipation of what is ahead in 2013.

Conditional Fee Agreements

One of the best-known of the reforms is that success fees under Conditional Fee Agreements (“CFAs”) (otherwise known as “no win, no fee” agreements) and After the Event (“ATE”) Insurance premiums, both of which at present are recoverable from the losing party in an action, will no longer be so recoverable. Instead, such costs will be the responsibility of the successful party.

“Qualified One-Way Costs Shifting”

There will be a multiplicity of other changes, however. Arguably one of the most significant will be the introduction of “Qualified One-Way Costs Shifting” (“Shifting”).

The paradigm rule in litigation costs has long been that “the loser pays the winner’s costs”. This means that the unsuccessful party in litigation is usually ordered to pay some or all of his successful opponent’s legal fees and other related expenses. This applies whether the Claimant or Defendant has come out on top. There are, of course, exceptions to this general rule.

Shifting will see this balance tilted in favour of Claimants. Once introduced, a Claimant will not be ordered to pay the Defendant’s costs if his claim fails. In contrast, a Defendant would have to bear the costs of the Claimant should the claim succeed. It seems the only exception to this rule will be where the Claimant has in some way acted fraudulently, frivolously or unreasonably in bringing or conducting his claim.

However, shifting will only apply to certain types of claim. The Jackson Report proposed Shifting primarily with personal injury and clinical negligence cases in mind. However, on 29 November 2012, Lord Justice Leveson published his eagerly awaited Report on the Culture, Practices and Ethics of the Press. The report makes a number of recommendations on how damages and litigation costs should be reformed in media-related disputes. One of these proposals is the introduction of Shifting to these types of claims.

Damages-Based Agreements

Another significant change will be the introduction of Contingency Fee Agreements in civil and commercial litigation. These are also known as “Damages-Based Agreements” (“DBAs”). Under a DBA, the amount of a solicitor’s fees will be linked to the damages awarded, by reference to an overall percentage.

DBAs are presently available for those wishing to bring claims in the Employment Tribunal. It has not, however, been open for litigants before the courts to use such agreements as a way of funding their legal costs. The proposed reforms will change this position.

Conclusion

The much-vaunted reforms are presently still very much subject to change. The implementation of many elements of the Jackson Report will require amendments to the Civil Procedure Rules 1998. Further, many aspects of the changes will only come into force as the relevant parts of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 are brought into force by the government. This will likely occur in tranches.

It is currently anticipated that many of the changes will come into effect in April 2013. Crucially, the changes in respect of CFAs and ATE insurance premiums are likely to be introduced at this time. Those seeking to take advantage of the current regime in respect of such funding mechanisms should not, therefore, delay before seeking legal advice.

However, when and if the reforms will affect any given claim very much depends on the nature of the proposed claim in question. For example, the government announced on 24 May 2012 that insolvency proceedings will be exempted from the changes to CFAs and ATE premiums until 2015. It is vital, therefore, that potential litigants seek advice at the earliest possible stage as to the funding options available to them.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 020 7404 0606 and ask for your usual Goodman Derrick contact.