Civil Justice Reforms

The new reforms will take effect as from the beginning of April 2013 and new amendments to the Civil Procedure Rules have been published by the Ministry of Justice.

Among the changes are a rise of the small claims track limit to £10,000 although cases allocated to the fast track before the changes come into force will remain there.

Another important change is that success fees under conditional fee agreements and the premium for any insurance policy to protect a client from costs are for the most part no longer going to be recoverable from a losing opponent. This make no win-no fee arrangements deeply unattractive. The solicitor has to wait until the end of the case to find out whether or not any fee is payable.

The client has to pay the success fee and the insurance premium out of the damages. The success fee is important for the solicitor. It reflects the risk taken of not being paid at all and is supposed to provide a mechanism for balancing out wins and losses. However, on a high risk case the success fee can be up to 100% of the usual bill and that will come from the client. Only in very high value cases can I see it being viable for the client.

I have already written article about this which can be seen on the articles page.

We also face new cost budgeting rules for multi track cases (typically claims in excess of £25,000). The solicitors on each side must calculate their likely fees for each stage of the litigation and try to agree them.

They will have to be filed with the Court for approval and, once approved, will usually be the sole basis on which costs are allowed against an unsuccessful opponent. The new regime has been tested in a pilot scheme for defamation cases and has already caused some controversy.

In Henry v Newsroup Newspapers the Claimant, an employee of the Harningey Council who had been involved in the cases of Baby P and Victoria Climbie, sued for libel in respect of articles published in The Sun newspaper. The case was settled on terms that she would receive an undisclosed sum and her costs.

The problem was that her actual costs were budgeted at £381,305 which was much less than than the £650,137 which she claimed. Disclosure had been very expensive as a result of the Defendant’s conduct in the litigation. The budget for disclosure was £11,250 but the actual costs of disclosure were £87,556.

Newsgroup had served several additional lists of documents, requested additional disclosure from the Claimant and asked questions about the disclosure already provided. All of this took the Claimant’s solicitors substantially over the budget. Additionally, Newsgroup had been robust in its defence of the claim throughout.

The problem was that the Claimant’s solicitors had not alerted the Court to the problem by seeking approval of a revised budget and had not notified the Defendant’s solicitors of the increase in costs.

Senior Costs Judge Hurst seems to have accepted the Claimant’s criticisms of the Defendant’s conduct but nevertheless allowed only the budgeted costs. The rules in the pilot scheme were mandatory and could be departed from only with good reason.

On appeal, the Claimant was successful in overturning this decision. All of the work done by her solicitors was found to be reasonable. The circumstances in which more had to be done than had been allowed for in the budget justified a departure from the rules.

The rules, as published will be a lot more demanding than those under the pilot scheme and I foresee a lot of problems in the future if solicitors do not keep a careful eye on how much they are billing and how that compares with an approved costs estimate.

It should not be too difficult because we are already under an obligation to keep client’s informed of the costs which they are incurring as we go along and it is not a lengthy exercise to compare the running total with the approved budget.

Even so, the lesson is clear. We will have to spend a lot of time and money in anticipating how much time and money we are going to have to spend on a fast track case. If we find that we have underestimated, we will have to spend further time and money in going back to the court to seek approval of an amended budget.

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