In December 2009 the Final Report by The Right Honourable Sir Rupert Jackson of the Court of Appeal was published titled “Review of Civil Litigation Costs: Final Report” otherwise referred to as “The Jackson Report”. The report attempts to address the issue of the “disproportionate” legal costs arising from court action when balanced against the damages awarded, which is considered to impede access to justice. Many of the changes are to commence as of April this year.
Although the reforms will affect all areas of litigation, the biggest impact will be on individuals suing other parties for compensation for injuries arising out of an accident that was not their fault, as the reforms particularly affects claims funded by a no-win, no-fee/conditional fee agreement (CFA). To understand the changes it is useful to have an understanding of the system by which a CFA operates.
If a solicitor agrees to take on a claim on a CFA then there is a risk involved as it means investing a lot of time and expertise and spending money on investigations to ultimately be unable to recover the cost of these if the claim fails. A matter can seem straightforward at the beginning but unfortunately there is no way of predicting the issues that will arise or the evidence that may be presented by the defending party. However, if your claim is successful your legal representative is entitled to recover your costs from the Defendant in addition to your damages award. Due to the risk involved in bringing a claim on a CFA your solicitor is also entitled to recover a success fee, which is a percentage increase in the costs agreed or awarded.
If court proceedings are commenced and your claim is not successful then often you will be liable to pay the Defendant’s costs and disbursements. If you do not have existing legal expense insurance your solicitor will obtain your authority to apply for an “After the Event” insurance policy. The costs of which varies according to the complexity of the matter, the likely damages to be awarded and the stage at which the claim concludes. Again, if your claim is successful then at present the premium will be recovered from the Defendant.
What are the Changes?
Following the inception of the changes in April any CFAs and ATEs entered into after this date will not be recoverable from the losing party and will be deductible from your damages award. To combat this The Jackson Reforms allows for a 10% increase in the damages awarded and a one way cost shift.
The one way cost shift means that the party bringing the claim will no longer be required to pay the Defendant’s costs if the claim is unsuccessful unless the court finds that the claim was unreasonably brought. This is intended to eliminate the need for an after the event insurance policy. The question being, when will a court consider a claim to be unreasonably brought?
As for the 10% increase in damages awarded to cover the success fee, the amount of costs is more dependent on the complexity of the issues that arise and the extent to which they are defended than the amount of damages awarded, therefore the success fee could far exceed any damages awarded.
It is unclear at present whether the changes will be beneficial to claiming parties; therefore if you are seeking to claim under a conditional fee agreement and you want certainty sign your documents now.