Changes to funding of civil litigation claims
The combined impact of success fees and ATE premiums (together known as ‘additional liabilities’) was identified by Jackson LJ as one of the key…
Introducing changes to the way that civil litigation claims are funded is at the heart of the Jackson Final Report . . .
The combined impact of success fees and ATE premiums (together known as ‘additional liabilities’) was identified by Jackson LJ as one of the key drivers of disproportionate legal costs and he suggested a package of reforms to address this by introducing:
- The removal of recoverability of success fees and ATE premiums from defendants
- A cap for success fees under a claimant funded Conditional Fee Agreement (CFA) on a personal injury claim of 25% of damages other than future losses
- Damages Based Agreements as an alternative funding mechanism for claimants, where any costs recovered are offset against the DBA or contingency fee
- Qualified One Way Cost Shifting in personal injury cases, no matter how funded
- A 10% uplift on general damages, irrespective of the basis of funding
- Part 36 changes with a potential 10% reward sanction for claimants who match or exceed their own offer at trial
These recommendations are intended to function as an interlocking package of reforms. Under current CFA arrangements the claimant has little if any interest in the costs of his claim.
Going forwards, claimants will potentially have to pay for a success or contingency fee and/or for the purchase an ATE insurance policy, giving the claimant some financial skin in the claim and this should create a better balance between the parties. Subject to the 10% uplift, the removal of the recoverability of additional liabilities should produce lower claim costs for defendants.
- Via Regulations and updates to the Civil Procedure Rules, the changes to recoverability of success fees and ATE premiums together with the widening of Damages Based Agreements came into force on 1 April 2013.
- There are some exceptions. Additional liabilities will continue to be recoverable on mesothelioma claims pending a Government review into how these reforms would impact such claims and a consultation on a new way of handling such claims is also awaited. ATE policy premiums to facilitate the securing of expert evidence on liability and causation on clinical negligence claims will continue to be recoverable from defendants.
- The MoJ has confirmed that there will be a 25% cap on the contingency fee payable under a Damages Based Agreement for a personal injury claim, with the cap covering solicitor and barrister fees including VAT, applied to damages, other than future losses, after repayment of any CRU benefits. This mirrors the CFA cap for personal injury cases. The cap in Employment cases is retained at 35% with a cap of 50% for all other cases. The indemnity principle will apply to claims funded under a DBA