What can we expect 2015 to bring in terms of the way litigation is funded?
The big event looming close on the horizon is, of course, the Supreme Court hearing in Coventry v Lawrence, listed for 10-12 February. The court will be ruling on whether the pre-Jackson regime, which allowed claimants to recover from defendants both the cost of after-the-event insurance premiums, and success fees under conditional fee agreements, was actually lawful.
If the court decides it wasn’t, then government could be compelled to shell out millions in compensation to the defendant insurers who footed the bill for these additional liabilities.
Will Lord Neuberger and the other Supreme Court judges seriously go that far? I’ll stick my neck out and predict that no, they won’t. The court has made its point about the shocking state of legal costs and its disapproval of the old regime.
But that regime has already been replaced, and these are difficult economic times – as anyone who works in our underfunded court system knows only too well. It would be a bold, if not foolish, move to force the government to spend large amounts of public money in providing what is effectively a windfall to defendant insurers.
Beyond Coventry, what else lies in store? The ATE industry has been artificially buoyed by the bulge of pre-Jackson cases still making their way through the system. But as time passes, these pre-Jackson armbands will deflate, and we will finally see whether - without recoverability - the industry will sink or swim.
Will Part 36 risk and disbursements cover provide enough of a meal to sustain the ATE insurers? Much depends on the solicitors’ profession and its attitude to taking out cover at the outset of cases.
In the commercial sphere, what about third-party funding? The sector suffered some reputational damage last year following events that affected funder Argentum. But for the big cases, the appetite for funding is still strong and growing, and there is room for the relatively small funding market to expand further.
For lower-value cases, I have written before about the efforts of funder Augusta, which is seeking to make it financially viable to fund smaller cases, through streamlined processes, clever use of IT, and cheap ATE. The model needs volume to succeed, so much will rest on how well the funder manages to get its message across to litigators, or better still, directly to clients.
In personal injury, late last year we saw the launch of a new, niche funding solution from Claim Finance, focused specifically on providing funding and ATE for clinical negligence claims. Clin neg is one of the few areas where recoverability remains to some extent (for disbursements cover), and where the number of claims seems to be rising.
So we may see further activity in this area.
What else is coming up? A big change for litigators, but one that few are actually aware of, will be the introduction of new ‘J-codes’ for time recording. The codes are the first step towards the long-term aim of harmonising the systems used for costs budgeting, costs management, summary assessment and detailed assessment. The J-codes were published by the Jackson steering committee in September.
There was no consultation on the codes, which surprised some, but there is plenty of costs expertise on the steering committee, which is chaired by the very highly regarded costs barrister Alex Hutton QC. J-codes are something that law firms should start thinking about sooner rather than later – and we’ll be looking at these in the February edition of Litigation Funding.
Back in 2013, it was an overdue costs budget that sparked the Mitchell fiasco, prompting the reign of chaos that lasted until the Court of Appeal’s Denton retreat last year. No doubt 2015 will hold plenty of change and challenge for litigators. But let’s hope it will not be quite as eventful as the last two years.
Rachel Rothwell is editor of Litigation Funding