The new funding arrangements from April fundamentally change the civil litigation landscape. Only some of these result from the Jackson costs report. Lord Justice Jackson did not recommend the serious cutbacks in legal aid enacted in the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 and S.I. 2013 265, but he did propose the abolition of the recovery of success fees, and after-the-event insurance premiums from the losing party, as part of his aim to make costs more proportionate. None of the changes are popular with claimant lawyers, who consider they will restrict access to justice, and reduce the damages to seriously injured clients in particular.

Conditional fee agreements and ATE (sections 58 and 58A of LASPO and S.I. 2013 No 689)

CFAs are still permissible but success fees are only recoverable from the unsuccessful party in insolvency proceedings, public and privacy proceedings, mesothelioma claims and clinical negligence (S.I. 2013 No 92 for after-the-event insurance premiums for expert fees only). In personal injury proceedings at first instance, the success fees are limited to 25% of the damages (excluding future pecuniary loss).

Success fees (up to 100% in cases that went to trial) and ATE premiums greatly increased the costs, particularly in personal injury claims, which the insurance industry alleged contributed to the rising costs of motor insurance. The former rules will continue to apply for funding arrangements entered into before 1 April 2013.

One plus is that new CFAs will not need to be disclosed to the other party before trial. There is also a 10% increase in general damages (announced by the Court of Appeal in Simmons v Castle [2012] EWCA Civ 1039 and amended in 2012 EWCA Civ 1288).

Damages-based agreements, LASPO S.58AA, S.I. 2013 No 609 and Civil Procedure Rule part 44

DBAs (in effect contingency fees) are allowed in all types of claim, enabling lawyers to receive a percentage of the client’s damages, not to exceed 25% in personal injury claims, or 50% in other claims (excluding counsel’s fees and VAT, and, in personal injury claims, future loss). Rule 44.18 provides that a DBA will not affect the making of any order for costs which otherwise would be made in favour of that party, whose costs will be assessed in accordance with rule 44.3. DBAs are unlikely to be attractive in personal injury claims with less than a 50% chance of success or a high costs to damages ratio, unless the claim can be settled early. Like CFAs, DBAs do not need to be disclosed pre-trial.

Qualified one-way costs shifting (QOCS) part 44

The abolition of recovery of success fees and ATE premiums is partly tempered by the implementation of QOCS. Jackson concluded that QOCS could be appropriate in defamation, professional negligence and possibly other claims, in addition to personal injury, but the government decided to only implement it for the latter initially. The QOCS rules at 44.13-17 and paragraphs 12.1-7 of Costs Practice Direction 44 apply except where a pre-commencement funding arrangement was entered into prior to 1 April 2013. The starting point (rule 44.13) is that when a personal injury claimant loses their claim at trial they are not liable to pay the defendant’s costs. Personal injury includes fatal accident claims, and clinical negligence claims, but not claims for professional negligence against lawyers arising from personal injury claims.

Rule 44.14 permits costs orders to be made and enforced against claimants, but the total must not exceed the recovered damages. Enforcement cannot take place until after conclusion of the proceedings, and costs orders cannot be treated as unsatisfied or entered on the register of outstanding judgments. The intention is that interim costs orders can be made in the usual way against a claimant who loses an application or fails to comply with a court order, to discourage claims being pursued in a disproportionate or reckless manner.

Rules 44.15 and 44.16

QOCS will not apply when the claim was struck out because there were no reasonable grounds to pursue it, or was an abuse of process, or because of the claimant’s conduct. Permission of the court to enforce a costs order is not required. But permission is required either when the claim has been found by the court to be fundamentally dishonest, or in a ‘mixed claim’, which includes a claim for the benefit of someone other than the injured claimant (other than a claim for gratuitous care), for earnings paid by an employer, or medical expenses, and/or when the claim is made for the benefit of the claimant but for other than the personal injury.

The intention is that sham accidents and other totally dishonest claims will lose the protection, but claimants who to a lesser degree exaggerate, will not. The court will normally direct that allegations of fundamental dishonesty will be determined at trial (and may do so where the claim is discontinued) (paragraph 12.4 of PD44). The court retains the power (new rules 44.2-44.4) to take into account conduct when deciding what costs to award to whom, and when assessing those costs.

The Costs PD provides some examples for mixed claims:a. subrogated RTA claims for vehicle disrepair, or credit hire of a replacement vehicle (where the beneficiary is the insurer); and b. spoilt holidays (with food poisoning as the personal injury element) or for disrepair to a property (for example, when dampness exacerbates asthma).

The intention behind a. is to prevent the real ‘driver’ of the litigation persuading the lay claimant to claim for a minor personal injury to bring the claim within QOCS. The rules expressly give the court the power to make costs orders against a person other than the claimant in those circumstances, but only against the claimant where the court considers it just to do so: that is, generally, the injured claimant will retain the QOCS protection for the injury element of the claim. Inevitably, there will be some satellite litigation with regard to the interpretation of these very new principles and rules.

Offers to Settle S.I. 2013 No 93 and CPR part 36

LASPO S.55 and the regulations provide for a defendant who fails to beat a claimant’s part 36 offer to pay a 10% increase in damages to a maximum of £75,000 (to encourage more settlements). Rule 36.14 (3)(d) provides that the additional amount is to be calculated by applying the % below to:(i) the damages awarded to the claimant where the claim is for, or includes money; (ii) the costs awarded to the claimant where the claim is only a non-money claim.

Amount awarded: Up to £500,000 %: 10Amount awarded: Above £500,000 and up to £1m %: 10 of 1st £500,000 and 5 of any amount above

The new rules apply only to part 36 offers made after 1 April 2013, whether in proceedings started before or after that date.

Increase in the small-claims track part 27

Some other non-Jackson changes were implemented on 1 April 2013, arising from the Ministry of Justice consultation paper Solving Disputes in the county courts. The (non-personal injury) small-claims limit increases to £10,000 for claims issued after 1 April (rules 26.6 and 27.1): the government originally proposed £15,000. Surprisingly, there is no increase in the fast-track limit. Parties can agree that the small-claims track rules apply in higher-value claims (PD 28(8)1.2) but the hearings will not normally last more than one day. Claims within the new limit will include some RTAs (mainly credit hire), debts and building disputes. In addition, there may be ‘unmet need’ cases where the claimant previously was reluctant to issue, because of the fast-track costs consequences, or to limit the claim to £5,000. The maximum recoverable costs of an expert in small claims also increases from £200 to £750.

Small-claims mediation: extension of the pilot in PD 51H

This was introduced in October 2012 at the County Court Money Claims Centre in Salford, to automatically refer to free mediation at AQ stage all small claims (then under £5,000) where both parties agreed to mediate. In the first three months, fewer cases were referred than anticipated, so the pilot has been extended for a further six months until October 2013, and to include small claims issued at the Northampton bulk centre, and through MoneyClaimsOnLine (MCOL). A future Benchmarks will cover the Jackson changes to case management, disclosure, witness statements, expert evidence and the RTA personal injury low-value claims protocol and rules.

District Judge Suzanne Burn sits at Bromley County Court. She is a district judge member of the Civil Procedure Rule Committee, and a civil tutor with the Judicial College. Read her first article on the Jackson reforms.