Litigation’s most radical change for 10 years

Stephen Clarke outlines the changes to Civil Procedure Rules.

Following widespread dissatisfaction with the rising cost of litigation, Lord Justice Jackson was asked to review the position. His year-long review ended in January 2010 with his final report. The vast majority of the proposals in that report have now been adopted by the government and the majority will be implemented on 1 April 2013.

Many of the changes to the Civil Procedure Rules (CPR) may appear technical and only relevant to solicitors and others dealing with the practise of commercial litigation. In fact, taken together, they are the most radical change in civil litigation for at least a decade and will have a fundamental (and in some cases perhaps unintended) impact on access to the litigation process for parties trying to resolve their dispute through the courts.

The major areas of reform are clustered around the stripping away of processes which have driven up legal costs. The most significant points are:

● Claimants who have signed up to Conditional Fee Agreements (often called “no-win no-fee”) will no longer be able to recover their fees (sometimes up to 100%) if successful — they will have to pay their own solicitors if they are successful in their claim. In addition, if they have paid insurance premiums to cover the risk of losing, then those insurance premiums will also not be recoverable in the event that they win. This ends the almost risk-free litigation that could be previously achieved through a combination of no-win no-fee arrangements and after-the-event insurance.

Damages Based Agreements

● Rather than recovering their fees from the other party, the claimant’s solicitors will be able to negotiate to take a part of the “winnings” as their fee (up to a total of 50%). Such agreements will be known as Damages Based Agreements (DBAs) and although they are really just a different type of no-win no-fee agreement, there has been concern that they will give rise to the same “ambulance chasing” culture that exists in the US.

● In addition, the reforms will promote strong costs management by the court. To comply with the rules, the parties will need to prepare “litigation budgets” and these will normally have to be approved by the court (see panel, right). At the end of the litigation, the amount of costs the winning party can recover will be looked at in conjunction with the budgets that were initially produced to calculate the recoverable costs. In addition, for lower value, less complex cases, there will be a fixed costs regime which will limit those costs. The overall aim of this is to keep legal costs proportionate to the amount in dispute.

Appropriate disclosure

● Disclosure is the process whereby parties in litigation are allowed to see relevant documents from the other side. This is a laudable idea in theory but, because of the large amount of documents that can be involved, the costs of such a process can be huge. Under the reforms, the parties will have to agree with the judge at the beginning of the case what disclosure is appropriate to that particular dispute and how much it will cost.

● Part 36 of the CPR is a mechanism to encourage parties to reach early agreement by encouraging offers to settle. Under the amended rule greater incentive will be given to claimants to make early offers to settle cases because if defendants refuse offers, and then do not “beat them” in the court, the court will add an extra 10% to the damages (if the amount awarded is £500,000 or less). Smaller extra percentages will be awarded for larger amounts of damages.

It is not totally clear what the effect of the reforms will be on the litigation landscape as insurance companies, for example, may develop products which are themselves based on the damages recovered. But there is little doubt that the combined effect of the reforms will provide a challenge for both lawyers and businesses who are trying to receive financial support for bringing their claims. It should be noted that damages based assessments have been allowed in adjudication for some time and a number of construction solicitors have already experienced some of the unusual conflicts and dynamics that they can bring.

Stephen Clarke is partner and head of construction at Clarke Willmott [email protected] Tel: 0845 209 1303

Getting costs under control…

… the changes will curb expert witness excess

It has long been known that costs in civil litigation are under review but the speed at which changes to the Civil Procedure Rules (CPR) have been enacted means there is a great risk of confusion among solicitors and expert witnesses alike.

The thrust of the changes – which formally come into effect on 1 April – means that the CPR now focus on time and money.

The intention behind the amendments is to speed up proceedings and reduce the costs of litigation, which will have an impact on expert witnesses.

A new section governing costs management for multi-track cases is introduced in Part 3 of the CPR. Litigants will now need to produce a costs budget setting out their anticipated legal fees including those generated by expert witnesses.

Once upon a time litigation was something of a gravy train for expert witnesses. Now, Part 35 of the CPR dealing with experts has been amended meaning that experts will need to work for a fee that is in proportion to the overall costs of the litigation and justify their existence.

Expert witnesses will need to be able to produce a budget and an estimate for their costs to their instructing solicitors. Under the new costs management provisions parties will be encouraged to agree the budgets where possible and that means experts will need to understand how to budget and the importance of accurate time recording to substantiate their claim.

The new rules have teeth as the court may make a costs management order and if it does so it will control the parties’ budgets in respect of recoverable costs.

Other changes that will indirectly affect experts include Part 26, where the upper limit for the small claims procedure in civil cases has been increased from £5,000 to £10,000, meaning that more cases will be dealt with as a small claim, where the use of expert witnesses is restricted.

The full ramifications of these amendments to the CPR are still being processed by the legal profession but what is clear is that the days of using a piece of string to calculate experts’ fees are well and truly over.

By Mark Solon, solicitor and managing director of Bond Solon Tel: 020 7549 2549, email: [email protected] www.bondsolon.com