The new rules are to be introduced in April 2013 as part of an overall idea to cut the costs of litigation. They are the result of an extensive inquiry into the costs of litigation carried out by Lord Justice Jackson. Hence they have become known as the Jackson Reforms.
This becomes part of the Overriding Objective rather than as a subheading. To that end a new CPR rule 44.4(5) is to be introduced. This rule will state as follows:
44.4(5) Costs incurred are proportionate if they bear a reasonable relationship to:
(a) the sums in issue in the proceedings;
(b) the value of any non-monetary relief in issue in the proceedings;
(c) the complexity of the litigation;
(d) any additional work generated by the conduct of the paying party; and
(e) any wider factors involved in the proceedings, such as reputation or public importance.
Proportionality will apply throughout proceedings including before and afterwards.
Contingency fee agreements – DBA
Contingency fee agreements or ‘damages based agreements’ (DBA) – will be a funding option in all types of civil litigation. Under a DBA, a lawyer’s fee is calculated as a percentage of the damages recovered, with no fee payable if the client loses. Costs recovered from the losing party are used to pay part of the contingency fee. In personal injury claims there will be a 25 per cent cap on the amount of damages, excluding damages for future care and loss, that can be taken as a lawyer’s contingency fee. In all non-personal injury claims (excluding employment tribunal cases) there will be a 50 per cent cap on the amount of damages.
Conditional fee agreements – CFA
The success fee paid to a party’s lawyer under a conditional fee agreement and the premium for after the event insurance will no longer be recoverable from the losing party. Litigants will still be able to enter into CFAs and take out ATE insurance but will have to pay these costs themselves. Success fees in personal injury cases will be capped at 25 per cent of the damages, excluding damages for future care and loss. The cap will apply to net damages after DWP benefit recovery.
ATE in Clinical Negligence cases
The exception to the Rule – A limited exception will apply to clinical negligence cases where ATE insurance premiums relating to expert reports on liability will remain recoverable and there is a moratorium concerning mesothelioma claims, because of difficulties where victims cannot trace their insurers.
Premiums and success fees will continue to be recoverable where the policy or CFA is entered into before April 1, 2013.
QOCS (Qualified one way costs shifting)
LJ Jackson proposed a system of qualified one-way costs shifting to replace the claimant’s protection from adverse costs currently offered by ATE insurance and CFAs. The concern was that such insurance offered a licence to claimants to sue with very little risk as to costs. It will be available for all claimants whatever their means – there is to be no financial test to determine eligibility.
QOCS only applies in personal injury claims and not, for example in professional negligence claims.
Under QOCS, if the claimant wins his action, the defendant pays both sets of costs. However, if the claimant loses, QOCS protection will be lost only if:
(1) the claim is found to be fraudulent;
(2) the claimant has failed to beat a defendant’s CPR Part 36 offer to settle but only up to the value of damages awarded;
(3) the case has been struck out where the claim discloses no reasonable cause of action or
(4) where it is otherwise an abuse of the court’s process.
QOCS protection will be lost in part, and subject to the court’s permission, in two instances, and these are as follows:
(1) if an otherwise successful claim includes an unsuccessful non-personal injury element (e.g. housing disrepair or costs of credit hire in arranging an alternative vehicle), and there is an order for costs against the claimant of that unsuccessful element, the claimant is liable for all the defendant’s costs of that unsuccessful element to the extent that it is just and fair;
(2) where the claim, or an element of it, is made for the financial benefit of someone other than the claimant (e.g. a credit hire claim in respect of the financing company), an order for the defendant’s costs of the claim, or that element, may be made, and enforced, against that person/organisation.
Defendants who do not accept a claimant’s reasonable offer which they fail to beat at trial will be subject to an additional sanction equivalent to 10 per cent of the value of the claim or, for non-damages claims, 10 per cent of costs plus an extra 5 per cent of any costs awarded above £500,000. This cannot exceed Â£75,000 in either case. The object of this is to encourage parties to take Part 36 more seriously.
Ban on referral fees
The payment and receipt of referral fees in personal injury cases will be banned and any breaches will be subject to enforcement action by the regulators. The SRA is currently consulting on how the ban will be implemented.