A number of important reforms for civil litigation costs and funding are due for implementation on 1st April 2013 as a result of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012.
Most of the changes will have a major impact on the way that personal injury claims are pursued, but they will also affect commercial litigation.
At the present time, if a client has entered into a Conditional Fee Agreement (“CFA”), under which a success fee is payable to their solicitor if the claim is successful and in respect of which they have paid an insurance premium to insure against the possibility that the claim might be unsuccessful, it is possible to recover both the insurance premium and the success fee from the losing party. This regime will change with the new reforms, so that premiums and success fees will no longer be recoverable. Many of those who are uncertain about whether or not to pursue a claim may well be better off doing so now if the claim is one which can be funded under a CFA.
Damages-based agreements
The concept of Conditional Fee Agreements will be extended so as to include those in which the payment to the lawyer is calculated as a percentage of the damages awarded to the client (rather than as a percentage of the value of the time spent on the case). There will be a cap applied of 50% of the damages recovered. In these cases, costs will still be recoverable against the opposing parties but only on the conventional basis (i.e. on the basis of the time spent and disbursements) and not by reference to the actual fee paid by the client to the lawyer. There is scope for a big differential between the two.
Proportionality and cost management
In addition, the court will increase its emphasis on the management of the level of costs incurred by both parties. Pilots have been running for some time in certain areas and these regimes will be extended to all multi-track cases in the County Court, Chancery and Queens Bench Divisions. Alongside the costs management there is to be a new, tougher “proportionality” test which will apply to the assessment of costs and which will seek to ensure that the costs recoverable by successful parties are proportionate to the value of the claim, whatever the costs that have actually been incurred.
The proportionality changes seek to promote the notion that justice is more likely to be done if the litigation is handled cheaply than if every issue is investigated and argued between the parties.
Watch this space!