All Change on Litigation Funding…

These changes affect almost all aspects of contentious case funding and are therefore of interest to commercial and individual clients who are may become involved in disputes before the Courts in near future.

The highlights of the White Paper are as follows:-

• Abolition of the general recoverability of CFA “No Win No Fee” success fees from a losing party – lawyer’s success fees of up to 100% of the legal costs of an action brought under a CFA will in future be paid by the client and not an opponent. This will have a considerable impact on how legal cases are funded.
• Abolition of the general recoverability of “After the Event” legal expenses insurance premiums – all premiums will be paid by the client, except the costs of an expert’s report in clinical negligence cases which will remain recoverable.
• An increase across the board of 10% to non pecuniary damages in tort cases e.g. pain, suffering and loss of amenity in negligence cases.
• Damaged Based Agreements (DBAs) aka Contingency Fees, where lawyer’s fees are funded from a percentage of the damages awarded by the court, shall be lawful. It is not intended by Government that there be a requirement for claimants to take independent legal advice, as there is with say a compromise agreement.
• Personal Injury/Clinical Negligence: There will be a maximum cap of 25% on the amount of damages taken as a success fee in personal injury cases.
• Personal Injury/Clinical Negligence: “Qualified One Way Costs Shifting” to be brought in. In PI/CN cases a claimant will not have to pay defendant’s costs should the claim fail, but conversely the defendant would have to pay the claimant’s costs if they fail. This would be subject to conditions such as the parties’ conduct and their financial means.
• Part 36 offers: The rule in Carver v BAA (Part 36 offers and the definition of “beating an offer”) shall be abolished – if an offer is beaten by any amount the court must (unless it considers it unjust to do so) penalise the offeree.
• Part 36 offers: An additional sanction of 10% of the value of successful claim shall be payable by defendants who do not accept a claimant’s reasonable offer that they then fail to beat at trial.
• A change to costs assessments so that only reasonable and proportionate costs may be recovered from a losing party.
• The prescribed litigant in person costs rate shall be increased and shall continue to increase in line with inflation.

The changes which require primary legislation (e.g. CFAs and DBAs) will be enacted when Parliamentary time permits. The other changes that rely on secondary legislation and changes to the Civil Procedure Rules (e.g. changes to costs recoverability/shifting and Part 36 offers) will follow more swiftly. These changes will be discussed in more detail in the next Litigation Bulletin to clients.

Clients should seriously consider whether they need to take court action in a dispute before these major changes to the recoverability of costs from opponents come into force.

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