Whilst many details are still yet to be published, the Government and Judiciary have committed to the April 2013 deadline for implementation of Lord Justice Jackson’s wide ranging review in 2010 of civil justice reforms as part of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO).
The draft proposals deal with a wide range of topics including the introduction of damaged-based agreements (DBAs), changes to Conditional Fee Agreements (CFAs), and a change in respect of a defendant having to pay an additional sum to a claimant where the defendant fails to beat a claimant’s Part 36 offer.
Key elements to the Jackson Reforms
The following outlines some of the most important aspects of the proposed civil reforms. Success fees and After the Event Insurance (ATE) will cease to be recoverable from the losing side under section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LAPSO”) (with limited exceptions).
Recoverability of success fee and After the Event Insurance Premiums
Recoverability of success fees will cease for conditional fee agreements entered into after the 1 April 2013, but will stay for existing CFAs. As such, it is, the date of the contract or “retainer” between client and Solicitor which is determinative; not the date of the accident or of the issue of proceedings.
Regulations to implement the 25% cap on success fees for personal injury cases (excluding damages for future loss and care) have been drafted and have been sent out for a brief consultation to interested parties. Once finalised, these will be laid before Parliament for approval and it is expected this will be brought into effect on the same date.
Premiums for policies taken out after the implementation date will no longer be recoverable. This arguably implies that provided a policy was taken out in proceedings before 1 April 2013, any subsequent policy in the same proceedings will have a recoverable premium. Whether a new premium with a new insurer is allowed, it does seem likely that the wording of LASPO will allow further staged premiums under a policy taken out before 1 April 2013.
10% increase in general damages
Lord Jackson proposed a 10% uplift in awards for general damages to balance the non-recoverability of the success fee or premium. This will apply to contract as well as tort claims and the types of damages covered are extended to include pain and suffering, loss of amenity, physical inconvenience and discomfort, social discredit, mental distress, or loss of society of relatives. The Court of Appeal recently decided against retrospective application of the uplift in the case of Simmons v Castle (number 2)  EWCA and held that 10% increase in general damages will not apply to claimants who entered into a CFA before 1 April 2013.
Enhanced damages for beating a claimant’s own Part 36 Offer
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% of the value of the claim or, for non-damages claims, 10% of costs. This is incorporated in Section 55 of LASPO. This has required statutory enactment as it amounts to a fundamental change in the law of damages whereby it is being used as a penalty for litigation behaviour.
A draft Order detailing the nature of the penalty (10% of damages up to £50,000, plus 5% between £500,000 and £1 million, with a cap at £1 million) has been published for consultation. It is likely the Order itself will be made before April 2013 but it will require new rules of Court before becoming effective.
Costs Protection in personal injury claims: Qualified one way cost shifting (QOCS)
A system of QOCS in personal injury cases will be introduced so that claimants will in general not have to pay towards a defendant’s costs in the claim fails but the defendant will continue to have to pay the claimant’s costs if the claim succeeds. It will be available for all claimants whatever their means – there is to be no financial test to determine eligibility.
Claimants who lose will not have to contribute towards defendants’ costs as long as they behaved appropriately. However, QOCS protection will be lost if the claim is found to be fraudulent, the claimant has failed to beat a defendant’s CRP Part 36 offer to settle but only up to the value of damages awarded; or the case has been struck out where the claim discloses no reasonable cause of action or where it is otherwise an abuse of the court’s process.
Damages based agreements
Damages based agreements will now be allowed in civil disputes. These are contingency fees which the lawyer can take a percentage of the damages (where any costs recovered from the opponent are set against the contingency fee). This is a fundamental change to the law which is enacted by Section 45 of LAPSO.
The Government has now produced draft Regulations on detailed implementation for consultation. These include a cap of 25% of general damages and past loss for personal injury cases, 35% for employment and 50% for all other claims. Implementation is also likely to be in April 2013.
The Introduction of an extended fixed costs regime
Lord Justice Jackson recommended that fixed costs be extended to all personal injury claims both pre and post litigation up to a value of £25,000.
The Ministry of Justice is proposing fixed costs in the RTA portal of £500 for claims up to £10,000 that settle in Stage 2, and a fee of £900 for employment liability and public liability claims. The Government have then set out a matrix in the form of “Jackson Table B” from Jackson’s final report detailing fixed costs both pre and post litigation for cases that exist the portal process.
The Government are also consulting on the level of the Small Claims Track (SCT) and how medical evidence is obtained for whiplash claims. The consultation which closes on 8 March 2013, will consider whether the SCT limit for RTA personal injury claims should be increased to £5,000 and how medical experts should be engaged in the whiplash process.
Small claims limit
The Government has already announced that the small claims limit generally will rise from £5,000 to £10,000 in April 2013. It is intended to go up to £15,000 in due course.
Extending the “portal”
The Government have said that they will be extending the RTA portal – a web based system for recording and dealing with low value road accident claims. This is to include (vertically) road accident cases up to a value of £25,000 and to include (horizontally) employers’ liability and public liability claims.
The Government have also announced that they will be reducing the fixed costs allowed for portal claims. However, despite consultation in Spring 2012, they have not yet announced what the new costs will be, nor the costs for cases in the extended portal. New claim notification forms are required but have not yet been published.
There is some suggestion however, as to whether the IT is capable of supporting the extended portals. As a result, the vertical and horizontal expansion of the portal may now be delayed beyond April.
Draft rules on costs budgets were presented by Mr Justice Ramsay at a Law Society event held in May 2012. If implemented in this form, they would apply to all multi track cases issued after 1 April 2013.
There will be a new rule of proportionality to control the cost of activity that is clearly disproportionate to the value, complexity and importance of the claim.
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.
Change is coming – the claims process, costs regime and many rules will dramatically alter from 1 April 2013.
Although many details are yet to be finalised, reform is now moving at a considerable pace with announcements from the Government coming rapidly. Indeed, the President of the Law Society Lucy Scott-Mocrieff wrote to Justice Secretary Chris Grayling arguing that implementation of the changes should be delayed to give the legal profession more time to get to grips with them.
She said, “there is no fiscal urgency to make the reforms quickly and every reason for them to be implemented to a timescale that can be managed by all. The new regime represents the most significant change to the civil justice system since the Woolf reforms in 1999. It will radically affect the way in which legal advice and representation is funded and involve major changes to the rules. The legal system will need take time assimilate the changes if they are to be implemented smoothly”.
Much more detail is expected in the next two months which will determine the landscape of this area from April 2013 onwards.
Magrath LLP can provide advice on this area and the upcoming wide-ranging effects in this area. Please contact us by e-mail at [email protected] for further details or speak to your usual Magrath contact.