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On 1 April 2013, significant changes were implemented to the civil law of England and Wales in the form of legislation regarding the Civil Procedure Rules (CPR). The controversial Jackson reforms were in part inspired by the often cripplingly high and disproportionate costs involved in civil litigation. It was said that this prevented access to justice and thus needed to be addressed. This article will explain the major changes brought in by the reforms in three parts:
Part 1: Allocation, experts, disclosure and relief from sanctions
Part 2: Costs and damages
Part 3: Referral fees, conditional fee agreements (CFAs) and other liabilities.
First, the nature and justification for the reforms will be explored.
Whilst the reforms bring in specific changes surrounding damages and success fees in civil claims, the spirit of the reforms generally is that proportionality and costs must be at the heart of every stage of civil proceedings. Costs are not something which should be merely addressed once the case is over. Rather, the philosophy of the reforms is intended to prevent substantial, disproportionate and unnecessary costs before they are incurred.
The overriding objective of the Civil Procedure Rules reflects the general sense of how civil justice in England and Wales is to be imparted. Previously, the overriding objective simply stated that civil cases were to be dealt with ‘justly’. The new overriding objective reads as follows:
These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly and at a proportionate cost.
Furthermore, whilst Civil Procedure Rule 1.1 (2) (a)-(e) previously stipulated what was involved in ‘dealing with cases justly’, the reforms implement an additional clause of ‘enforcing compliance with rules, practice directions and orders’ (CPR 1.1 (2) (f) (as amended).
Given that by the very nature of the overriding objective it is mandatory for the court to consider it when interpreting any Civil Procedure Rule (or exercising any power courtesy of the Rules), for better or for worse proportionality of costs is now at the forefront of civil justice in England and Wales.
Courtesy of the new Rules, the small claims limit is now £10,000 (an increase from £5,000). As before, the financial value of any claim for damages for personal injuries must not be more than £1,000.
The reforms revoke Civil Procedure Rule 26.7(3), thus enabling the court to allocate a claim to a lower track than normal. The court has the power to do this without consent of the parties.
Allocation Questionnaires (Form N150) are abolished and are replaced by Directions Questionnaires. Once all parties have filed their Directions Questionnaires, the claim will be allocated to the appropriate track. Directions Questionnaires can be used to provide the court with further information which may be pertinent to which track the claim is allocated.
If a case requires multiple live experts evidence at trial, the witnesses will be able to give their evidence live as part of a panel. The judge in effect acts as a chair for the discussion between the experts. Advocates are not allowed to question the experts until the discussion has ended.
The procedure for disclosure in multi-track claims which do not involve personal injury has changed significantly. Unless the court orders otherwise, the following new rules apply in such claims:
Standard disclosure is unchanged for all fast track claims. Equally, multi-track claims for personal injury remain subject to standard disclosure.
Previously, the court had the power, upon considering the individual circumstances of a case, to grant a party relief from a court sanction. Civil Procedure Rule 3.9(1) gave examples of such circumstances, such as whether the application for relief had been made promptly. These circumstances are no longer relevant and have been replaced by the following:
On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need
(a) for litigation to be conducted efficiently and at proportionate cost; and
(b) to enforce compliance with rules, practice directions and orders.
The reforms introduce the notion of costs budgets. The amended Civil Procedure Rules glossary defines ‘budget’ as:
An estimate of the reasonable and proportionate costs (including disbursements) which a party intends to incur in the proceedings.
Costs budgets are to be more detailed than a costs estimate. They are to be endorsed with a statement of truth. In the event that a party does not file a costs budget when required, the new Civil Procedure Rule 3.14 provides that they will be deemed to have filed a budget which is comprised of court fees.
The new Rules significantly change Part 3 of the Civil Procedure Rules (‘The Court’s Case Management Powers’). A new section is added – ‘Costs Management’ – which will apply to all multi-track claims, other than those in the following courts:
Technology and Construction Court (where the value exceeds £2,000,000 at the first Case Management Conference)
Mercantile Court (where the value exceeds £2,000,000 at the first Case Management Conference)
Chancery Division (where the value exceeds £2,000,000 at the first Case Management Conference)
Admiralty Court
Commercial Court.
The court has a discretion to order that this provision does not apply to a claim if it sees fit. Equally, the court may order that this provision shall apply to a claim which falls outside the scope of this section.
In claims where the Costs Management section applies, all represented parties must file and share with the other side their costs budget. This must be done by the date given in the notice of proposed allocation or, if no date is given, at least seven days prior to the first Costs Management Conference.
The court may, at any time, make a costs management order. This concerns the parties’ costs budgets. The order will record the extent to which the parties agree upon the reasonableness of their opponent’s budget. The order will further record the court’s opinion and any amendments to the budgets which have not been agreed. In respect of costs which have already been incurred, the court may offer no approval, but may comment on whether or not they are reasonable. If budgets are revised by the court, they must then be filed and served with the changes.
Subsequent to the making of a costs management order, the court will thereafter control the parties’ budgets in respect of recoverable costs. If significant developments in the litigation require an amendment to the budgeted costs, parties must revise their budgets. Such amendments must be agreed with the other side and be approved by the court at a Costs Management Conference.
As the name suggests, costs capping orders cap in advance the amount of costs recoverable by any party. Applications for a costs capping order must be supported by reasons and must include the applicant’s costs budget. They will only be granted in exceptional circumstances. It is thought that the other safeguards against high costs which the reforms bring will be adequate in protecting parties against high and disproportionate costs, without the need for frequent capping orders.
The test for the court to apply when considering a costs capping order is as follows:
These orders can be revised, but only if there is a material and substantial change of circumstance, or if there is some other compelling reason to vary the order.
Awards for general damages are to be increased by ten per cent. This increase applies to all judgments given on damages from 1 April 2013, unless the claim is being brought under a conditional fee agreement entered into before this date.
This increase in general damages will apply to all claims for:
Pain and suffering
Loss of amenity
Physical inconvenience
Social discredit
Mental distress.
Inter partes costs are those costs which the winning side recovers from the losing party. Given that the ethos of the Jackson reforms is to ensure recoverable costs are proportionate, the new Rules insert the following in relation to standard basis assessment:
Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably and necessarily incurred (CPR 44.3(2)(a)).
CPR 44.3(5) provides guidance as to what is considered proportionate:
Costs incurred are proportionate if they bear a reasonable relationship to –
(a) the sums in issue in the proceedings;
(b) the value of any non-monetary relief in issue in the proceedings;
(c) the complexity of the litigation;
(d) any additional work generated by the conduct of the paying party;
(e) any wider factors involved in the proceedings such as reputation or public importance.
Given that parties now have to submit costs budgets, the new Civil Procedure Rule 3.18 provides that, in relation to inter partes costs, a party may not recover more than the amount stipulated in their last agreed costs budget unless there is a ‘good reason’ for the court to order otherwise.
The following changes only apply to Part 36 offers made by claimants on or after 1 April 2013. In claims where a claimant beats their own Part 36 offer to settle, under the new Rules they will now receive an extra award. This award will be equivalent to ten per cent of their damages, or ten per cent of their recovered costs if they are not seeking damages.
For claims in which damages are above £500,000, this additional award is capped. The maximum award is £75,000 relating to damages of £1,000,000.
The Ministry of Justice has previously stated that there is no universal definition of what a referral fee is. However, generally speaking, referral fees are payments service providers such as solicitors make to other agencies in return for recommending their services, or referring clients to them. Sections 56-60 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) abolish referral fees for legal services. It has been suggested that this has been implemented in an effort to curb the ‘compensation culture’.
The most common type of CFA is commonly described as a ‘no win, no fee’ arrangement. In these arrangements, the fees for the legal services provided in relation to the claim are only payable if the case is won. Given that by entering into a CFA, a legal adviser risks not being paid for work done on the client’s case, a ‘success fee’ was commonly charged by legal advisers. These were fees charged in addition to the standard fees if the case was won.
Courtesy of Section 44 LASPO, whilst solicitors are still entitled to agree to success fees of up to 100 per cent, in personal injuries claims, success fees are now subject to a cap of 25 per cent of damages recovered, excluding future loss. This effectively protects a claimant’s damages by ensuring that he does not have to pay an unwarranted amount in legal fees.
In addition, Section 46 LASPO states that insurance premiums are now irrecoverable. Meanwhile, Section 47 renders notional premiums irrecoverable. These provisions only apply to those conditional fee agreements and premiums taken out after 1 April 2013. They do not apply to the following claims:
Insolvency proceedings
Publication and privacy proceedings
Diffuse mesothelioma claims.
In claims involving clinical negligence, there is limited scope to recover the costs of an insurance premium. Such premiums may only be recovered if it relates to insurance against having to instruct an expert report on causation or liability. The cost of the report itself may not be recovered.
Rebecca is hoping to develop a broad civil practice, before specialising in civil actions against the Government.
