Proposals to tackle civil-litigation costs payable by defendants in no-win no-fee cases have been outlined in a new consultation document issued by the Ministry of Justice.
The recommendations, which feature alongside suggestions on how to make civil litigation costs more reasonable and proportionate, are based on Lord Justice Jackson’s report on ways to reform the system in England and Wales.
Defendants are currently liable for substantial additional costs, while the claimant has no interest in restraining legal costs when deciding to bring a case. The consultation proposes that the claimant should have a financial interest in controlling costs incurred on their behalf, which would also encourage lawyers to keep costs down to stay competitive.
The key proposal is to abolish recoverability of success fees and associated costs in no-win no-fee conditional fee agreements (CFAs). Under a CFA, a lawyer will usually charge a success fee if they win the case, while the claimant will be expected to pay an after-the-event (ATE) insurance premium to cover them against the risk of having to pay the defendant’s costs.
As the current regime stands, both the success fee and the ATE insurance premium are recoverable from an unsuccessful defendant, but it is proposed that claimants should have to pay their lawyer’s success fee as this would encourage them to take an interest in controlling the costs being incurred on their behalf.
Justice minister Jonathan Djanogly said: “We want to reduce overall costs, ensure claimants have a financial interest in controlling legal costs incurred on their behalf, and deter avoidable, unnecessary, or unmeritorious cases.”
He stressed: “I want to strike the right balance between access to civil justice and ensuring that costs are proportionate, sustainable and affordable.”
Other proposals contained in the consultation paper include:
- Introduction of damages-based agreements (also known as contingency fees) in litigation before the courts. These are another form of no-win no-fee agreement, under which lawyers can take a proportion of the claimants’ damages in fees, and would increase the funding options available to claimants.
- A 10-per-cent increase in general damages, and introducing a mechanism to protect the vast majority of personal-injury claimants from paying a winning defendant’s costs.
- Introduction of a new test to ensure that overall costs are proportionate, and a proposal to increase the costs that can be recovered by people who win their cases without representation by lawyers.
In his recent review of health and safety, Lord Young of Graffham underlined his belief that the Government should adopt Lord Justice Jackson’s recommendations “as soon as possible”.
However, the Association of Personal Injury Lawyers believes the proposals are too heavily weighted in favour of insurance companies and negligent defendants, to the detriment of injured people.
The group’s president, Muiris Lyons, said: “The proposal to increase damages to offset the effect of this move is a white elephant for two reasons: first, damages are now too low in any event, as, in most categories, they have never been increased in line with Law Commission recommendations; second, the proposed increase will not always cover the costs to be borne by the injured person in any event, leaving him with a shortfall in his damages.
“Those who will be affected most are likely to be people suffering serious or catastrophic injury, where the damages involved are often very high.”
Head of policy development at solicitors Berrymans Lace Mawer, Alistair Kinley, said law firms will react to the proposals by adapting new business strategies, adding: “The most switched-on insurers and lawyers – claimant and defendant firms alike – will already be planning how to adapt their business models for the post-Jackson era.”
Lord Justice Jackson’s report, Review of Civil Litigation Costs: Final Report, was published in January this year. The consultation document is available on the MoJ’s website at www.justice.gov.uk/consultations/consultations.htm The closing date for responses is 14 February 2011.
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