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Costs Reforms – April 2013

The implementation date for these reforms is April 2013 (the newly appointed Dyson MR recently denied that this date could be pushed back). Most of the points of principle have already been decided, but the implementing orders and regulations are currently being drafted and will be consulted on in due course.

The reforms may be summarised as follows:

1. CFAs: the recovery of success fees and ATE premiums from the losing side will be abolished, meaning that such fees and premiums will need to be paid by the receiving party. This is subject to a limited exception for ATE premiums relating to expert reports in clinical negligence cases.

2. A new cap on success fees of 25% of damages will be introduced in relation to personal injury cases.

3. Damages based agreements (DBAs), effectively contingency fees, will be allowed in all areas of civil litigation. DBAs will be subject to a cap by reference to the amount of damages: 25% in personal injury cases; 35% in employment tribunal cases; and 50% in all other cases under a DBA in civil litigation.

4. The Court of Appeal recently announced as follows in Simmons v Castle [2012] EWCA Civ 1039: “We take this opportunity to declare that, with effect from 1 April 2013, the proper level of general damages for (i) pain, suffering and loss of amenity in respect of personal injury, (ii) nuisance, (iii) defamation and (iv) all other torts which cause suffering, inconvenience or distress to individuals, will be 10% higher than previously”. This will not affect debt recovery claims.

5. There will be increased sanctions under CPR Part 36 and a new rule on proportionality.

6. New costs protection in personal injury claims (qualified one way costs shifting) will be introduced and the payment or receipt of referral fees will also be banned in personal injury cases.

7. The above summary does not refer to the “Ontario” model but it appears that this is what Jackson had in mind in relation to DBAs and the recent report of the Working Party on Damages Based Agreements confirmed that this is the model which will apply. The Ontario model provides that a successful claimant will recover its base costs from the defendant and will then be liable to pay those base costs to its lawyers, together with an amount required to bring the total up to the DBA fee (which will be a percentage of damages). The DBA fee is therefore irrelevant as to the costs which are recoverable inter partes.

The Ministry of Justice has recently set up a dedicated website in relation to the reforms. It includes the following summary.