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Forthcoming Changes in Civil Claims

Forthcoming Changes in Civil Claims. Nigel Teasdale, DWF. Introduction – life as we know it is changing.

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Forthcoming Changes in Civil Claims

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  1. Forthcoming Changes in Civil Claims Nigel Teasdale, DWF

  2. Introduction – life as we know it is changing Lord Justice Jackson’s key task was to address disproportionate costs in Civil Litigation, to make it cheaper and more efficient. His final report was issued in December 2009. His foreword read as follows:- “In some areas of Civil Litigation costs are disproportionate and impede access to Justice. I therefore propose a coherent package of interlocking reforms, designed to control costs and promote access to justice”. Jackson’s proposals were taken up and endorsed by Lord Young in his 2010 report on tackling the compensation culture (“Common sense, Common safety”). These reports resulted in a government programme of reform, the stated aim of which was to move towards a justice system which protects access to justice, encourages earlier and more efficient resolution of civil disputes, and reduces costs and disproportionate risk.

  3. Introduction – life as we know it is changing (continued) The reforms will be implemented in April 2013 through Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) together with associated Orders/Regulations and changes to the CPR. These are the most significant changes in civil litigation for over a decade. Notwithstanding the massive influence they will have on the way civil litigation is conducted there is still considerable uncertainty about specific content and when the various changes will take effect.

  4. Extension of RTA Portal • Linked to introduction of Fixed Costs. • The MOJ has proposed: • Extension of portal for RTA claims up to £25,000. • Introduction of portal for EL and PL claims up to £25,000.

  5. Introduction of Fixed Costs. • See attached tables. The MOJ has proposed: • Introduction of fixed costs for EL and PL claims up to £25,000 within the portal • Extension / re-assessment of the fixed costs for portal RTA claims valued up to £25,000 • This includes a reduction in the level of fixed costs for low value RTA portal claims (up to £10,000) from £1,200 to £500. • Fixed recoverable costs in RTA and EL / PL fast track claims (up to £25,000) pre-issue (outside the portals) and in litigated claims.

  6. Present Position • Following a statement by the Justice Secretary, Chris Grayling, before Christmas it was announced that the government are considering postponing the RTA portal extension. This followed action taken by the Association of Personal Injury Lawyers (APIL) to challenge the extension by way of Judicial Review. • On 25th January 2013 APIL and the Motor Accident Solicitors Society (MASS) announced they had launched a Judicial Review of the Justice Secretary’s decision to reduce the amount of fees payable for cases conducted through the RTA personal injury portal. • The Rules are due to be finalised on 8th March 2013 • The Judicial Review hearing is due to take place on 1st March 2013

  7. What is still needed? • No rules are available and responses are awaited to both the draft protocols consultation and the fixed recoverable costs consultation. The following are needed: • Portal costs • A start date for the new fixed portal costs for motor claims worth less than £10,000 (i.e. where there are already fixed protocol costs in place but plans to reduce them, there will need to be a date for the changeover). • A start date for fixed portal costs for motor claims valued between £10,000 and £25,000. Currently proposed for accidents on or after 6th April 2013 (see paragraph 1.1A(1) of the draft Motor Protocol). • A start date for fixed portal costs for EL/PL claims. Currently proposed for accidents on or after 1st April 2013 (see paragraph 4.1(i)(a) of the draft EL/PL Protocol) and in disease claims where no letter of claim has been sent before 1st April 2013 (see paragraph 4.1(i)(b).

  8. What is still needed? (continued) • Pre-issue fixed recoverable costs (non-Portal) • A start date for the new fixed recoverable costs (FRC) for motor claims up to £10,000 (i.e. where there are currently fixed recoverable costs in place but there will need to be a date for the changeover). • A start date for the new FRC in motor claims valued between £10,000 and £25,000. • A start date for the new FRC in EL/PL claims upto £25,000 • Fixed costs in litigated claims • A start date for all of the proposed fixed costs (Motor/EL/PL) as fixed costs in litigated claims are entirely new. • Clarity needed. Will implementation be dependant upon accident date or, for example, issue date? The latter would inevitably lead to a flood of claims being issued prior to the implementation date, and would have a huge impact on Court resources. Accident date may be more likely.

  9. Qualified One Way Cost Shifting (QOCS) • Put simply – where a Claimant loses a personal injury case, he/she will not have to pay the Defendant’s costs. • Integral part of the full reforms package. Designed to offset the non-recoverability of ATE premiums. • QOCS open to all – no financial eligibility test although restricted to injury claims. • Protection includes cover for discontinued claims and appeals in injury claims. • QOCS protection will be lost if:- • C found to have been “fundamentally dishonest”. • C fails to beat a Defendant’s Part 36 offer (see further comments on Part 36). • Claim struck out where it discloses no reasonable cause of action or is otherwise an abuse of the Court’s process.

  10. Qualified One Way Cost Shifting (QOCS) (continued) • Rules received 12th February. • Changes to CPR • Applies to all claims after 1 April where the Claimant has NOT entered into a pre-commencement funding arrangement • What will constitute fundamentally dishonest on the balance of probabilities?

  11. Part 36 Sanctions • Section 55 LASPO 2012 • The Offers to Settle in Civil Proceedings Order 2013. • Laid before parliament on 22nd January 2013. • Precise rules to be set out in Rules of the Court published 12th February 2013. • Coming into force for P36 offers after 1 April 2013 but not before. • Where a Claimant secures Judgment which is at least as advantageous as a previous offer to settle made by the Claimant (in other words where the Defendant does not accept an offer made by the Claimant and the Claimant subsequently beats that offer) the Court may order the Defendant to pay an additional sum to the Claimant. • That additional sum for claims up to £500k will be 10% of the damages awarded, for claims up to £1m it will be 10% of the damages up to £500k and 5% of the balance, for claims over £1m it will be 7.5% of the damages up to £1m and in any event is capped at £75,000.

  12. Part 36 Sanctions (continued) • Link with QOCS and reduced impact of a Defendant’s Part 36 offer. • There is an exception to the QOCS rule where a Claimant fails to beat a Defendant’s Part 36 offer. In those circumstances, the Defendant’s costs (following expiry of the acceptance period) will be paid by the Claimant. Those costs will be recovered from the Claimant’s damages and interest albeit the Defendant will be limited to recovering costs up to the level of the damages and interest received by the Claimant. • C does not face prospect of having to pay costs out of own pocket but may choose to insure against the risk of paying defence costs out of his damages. • Effectiveness of Part 36 offers increased for C and reduced for D. • Part 36 Rules ‘trump’ QOCS.

  13. ATE Premiums • ATE premiums will no longer be recoverable from Defendants if a Claimant succeeds. • Section 36 LASPO 2012. • In force on 1st April 2013. • ATE premium still recoverable from the Defendant pursuant to a costs order in favour of a party to proceedings who took out a costs insurance policy in relation to the proceedings before 1st April 2013. • Link to QOCS. • Limited exception for clinical negligence cases.

  14. CFAs/Success fees • Section 44 LASPO 2012 • The Conditional Fee Agreements Order 2013. Draft laid before Parliament. • No news yet on the Conditional Fee Agreements Regulations. These may no longer be issued. • In personal injury cases, success fees payable under a CFA are no longer recoverable from a Defendant in respect of CFAs entered into after 1st April 2013. • Success fees still recoverable from Defendant in respect of CFAs entered into before 1st April 2013. • CFA success fees still recoverable by solicitor from own successful client. Still calculated on percentage of base costs and in personal injury cases, now subject to a cap of 25% of damages for PSLA and pecuniary loss (excluding future pecuniary loss) net of any CRU deduction, and inclusive of VAT. 25% cap applies at first instance only.

  15. CFAs/Success fees (continued) • Exclusions in respect of • Diffuse mesothelioma claims. • Publication and privacy proceedings. • Insolvency proceedings. • General rule – for CFA entered into before 1st April 2013, old rules apply and Claimant recovers success fee from Defendant but not the 10% increase in PSLA damages (see later).

  16. 10% Increase in General Damages • Rationale – to offset the end of recoverable success fees, the idea being that an increase of 10% on general damages will cover the payment of a success fee to the Claimant’s own solicitors from those damages. • Simmons v Castle [2012] EWCA Civ 1288 – following ABI representations and review by the Court of Appeal: • Claimants who have entered into a CFA or had the case taken on under a CCFA before 1st April 2013 will be entitled to recover a success fee from the losing party but will not receive a 10% uplift on general damages. • Claimants entering into a CFA on or after 1st April 2013 will receive a 10% uplift on general damages but will not be entitled to recover a success fee from the losing party. • Latest edition (11th) of Judicial College Guidelines recently published. • Blanket 10% increase inappropriate, particularly when market forces may mean that Claimant’s advisors will not in fact be recovering a success fee?

  17. Damages Based Agreements (DBAs) • Section 45 LASPO 2012 comes into force on 1st April 2013. • The Damages Based Agreements Regulations 2013 laid before Parliament – set out the mechanics of new provisions. Essentially – Claimant’s Solicitor entitled to a percentage of damages recovered as a contingency fee. • In practice, successful Claimant will recover base costs from losing Defendant but will be responsible for paying his/her own solicitor the difference between the costs recovered from the other side and the agreed percentage of damages (capped at 25% of damages). • Costs which the defendant is asked to pay cannot exceed the amount of the contingency fee. • Notably in personal injury cases, the 25% cap:- • Is to be calculated by reference to general damages for PSLA and damages for pecuniary loss other than future pecuniary loss i.e. excluding damages for future loss.

  18. Damages Based Agreements (DBA’s) (continued) • Notably in personal injury cases, the 25% cap:- • Is to be calculated by reference to general damages for PSLA and damages for pecuniary loss other than future pecuniary loss i.e. excluding damages for future loss. • Is net of any sums recoverable from the CRU. • Is net of any costs recovered from opponent. • Counsel’s fees are included within the cap. • Is inclusive of VAT. • The cap is 35% on damages in employment cases and 50% on damages in all other cases. • The defendants will want disclosure of the terms of the DBA and to apportion agreed damages to future losses upon which the contingency fee will not bite.

  19. Proportionality • Current test (Lownds –v- Home Office [2002] CA) – assessment at outset as to whether costs appear disproportionate, following which the Court considers whether costs meet the tests of “necessity” and “reasonableness”. • New test will involve Court assessing proportionality after having already assessed whether costs were reasonably incurred, reasonable in amount, or both. If costs are still disproportionate (having regard to factors such as value/importance of claim and complexity) then Court able to reduce further to a “proportionate” sum. • Proportionality will now override both reasonableness and necessity. Disproportionate costs will not be recovered even if they were necessarily incurred in order to win the case.

  20. Proportionality (continued) • New Rule 44.4(5) – costs incurred are proportionate if they bear a reasonable relationship to: • The sums in issue in the proceedings; • The value of any non-monetary relief in issue in the proceedings; • The complexity of the litigation; • Any additional work generated by the conduct of the paying party; and • Any wider factors involved, eg. reputation or public importance. • Commencement date is 1st April 2013

  21. Costs Budgeting • With a couple of exceptions, will apply generally to all multi-track cases commenced on or after 1st April 2013, unless Court orders otherwise. • Draft rules 3.11 to 3.18 together with PD3E and new form precedent H. • Rationale – control costs and robust approach to costs management. • Follows successful pilot schemes. • Significant aspects will include:- • Obligation to exchange detailed cost budgets at allocation stage. In default the budget will comprise applicable court fees only. • Court may make Costs Management Orders (CMOs) and presumption in favour of doing so. Already happening. • At conclusion of case, a judge on Detailed Assessment will not depart from the approved budget unless good reason to do so.

  22. Costs Budgeting (continued) • Detailed budgeting, a proper understanding of the costs being incurred, and an ability to explain them likely to assume central importance during case management stages moving forward. • Henry v News Group Newspapers Ltd [2013] EWCA Civ 19. • C’s appeal allowed (!) • There was good reason in this case to depart from the C’s costs budget notwithstanding a failure by C to comply with the practice direction. • Perhaps unexpected decision given timing and context but concerned with a claim on the facts under the defamation pilot and CA emphasised the forthcoming costs budgeting rules differ in some important respects from those under scrutiny here. Obiter comments at Para 28 of the Judgment seek to repair some of the damage….. • Do not expect this decision to be a sign of things to come….

  23. Referral fees • Referral fees are to be prohibited. • Sections 56 - 60 LASPO 2012. • The act prohibits the payment and receipt of referral fees in personal injury cases by “regulated persons”. • Solicitors • Barristers • Claims management companies • Insurers • A “referral” will be the provision by a person (other than a client) of information that a regulated person authorised to provide legal services would need, to make an offer to the client to provide legal services. • A referral fee can be any form of consideration other than reasonable hospitality.

  24. Referral fees (continued) • The ban refers to legal services that relate to a claim or potential claim for damages for personal injury or death, or any other claim arising out of circumstances involving personal injury or death. • Enforcement by SRA and FSA. SRA handbook/guidance still awaited. • Concern that ban may be unenforceable and risk of practice being driven underground. • Grey area between referral fees and marketing/advertising fees. • Satellite litigation? • Is it a referral? • Is there a payment? • Is the payment for the referral?

  25. Raising of Small Claims Track Limit for Whiplash Claims • Consultation document issued in December 2012 on a proposal to increase the Small Claims Track limit for RTA personal injury cases from £1,000 to £5,000. • An attempt to tackle fraudulent and exaggerated whiplash claims and to build upon the Jackson reforms. • Consultation closes on 8th March 2013. • Proposes two models for medical evidence; • Accreditation scheme - only reports from accredited doctors or medical reporting organisations submitted using a standard form would be accepted as evidence in disputed claims; or • A national contract arrangement whereby the Government would create a national framework contract and medical organisations would bid to become an approved supplier under the contract, possibly on a geographical basis.

  26. Raising of Small Claims Track Limit for Whiplash Claims (continued) • Claimants argue that such proposed changes will inhibit access to justice, and mean that accident victims with justified claims will either not challenge unreasonable offers by insurers, or fail to claim “proper” damages for their injuries. APIL have issued a formal response arguing that the proposals will “cripple access to justice for vulnerable people”. • The move creates substantial controversy particularly against the backdrop of a previous consultation in April 2007 which found no reason to increase the threshold from £1,000, a conclusion which was echoed by Jackson in his 2009 review of civil litigation costs. • The consultation closes just 14 working days before the planned implementation date for the Jackson reforms. • The Secretary of State for Justice in response to a judicial review commenced by APIL is said to now be considering raising the SCT limit to £15,000 for all claims!

  27. Raising of Small Claims Track Limit in Non-Injury Cases • Increase from £5,000 to £10,000 from 1st April 2013. • This will apply to proceedings issued after 1st April. There is likely to be an influx of claims issued before 1st April 2013 to avoid the SCT and associated costs consequences. • Link to consultation on raising the SCT limit from £1,000 to £5,000 in whiplash RTA claims. • Due to increase again to £15,000 in April 2014…

  28. Key Dates • 1st March 2013 – Judicial review hearing on the decision to extend the Portal and the level of fixed fees • 8th March 2013 – closure of consultation on raising small claims track limit in whiplash claims to £5,000 • 8th March 2013 – Rules for the new proposed Portal • 1st April 2013 – ‘J Day’ when most reforms are implemented • Unknown date – Portal reforms implemented

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