From 1 April 2013, changes to the way in which litigation in England and Wales can be funded will see a reduction in the legal costs a losing party has to pay its opponent.
The changes are part of the proposals put forward by Lord Justice Jackson in 2010 and enacted in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO). His proposals aim to address the spiralling costs of civil litigation and counter the "have a go" litigation culture perceived to have resulted from the ability of claimants to litigate costs free with the aid of conditional fee agreements (CFAs) and after the event (ATE) insurance which covers the legal costs of a winning opponent.
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The combined effect of such funding is that many claimants currently pay nothing if their claim fails, but are able to pass on the cost of the insurance policy and the CFA success fee (of up to 100% of the lawyer’s costs) to the defendant if they are successful. The funding changes being brought in by LASPO seek to redress the balance and ensure that the winning party has some interest in the costs being incurred in bringing the claim. The main changes will be:
– Although a client and its lawyer can still enter into a CFA with a success fee (still up to 100% in non-personal injury cases), the success fee will no longer be recoverable from the losing opponent. The client will have to pay that success fee itself if it succeeds.
– Similarly, although ATE insurance will still be available, the premium incurred will no longer be recoverable from the losing opponent, but will be payable by the insured party.
– Damages-based agreements (DBAs), also known as contingency fees, will be available to fund civil litigation for the first time. The lawyer’s fees will be an agreed percentage of the client’s recovered damages. This can be up to 50% in non-personal injury claims.
Crucially, payment will depend on recovery; if there is no recovery, the lawyer will not receive its fee.
In scenarios above, the losing party will generally only be liable for the winning party’s reasonable costs as agreed between the parties, or assessed by the court. It will not be liable for any additional success fee, insurance premium or DBA fee. Those will be payable by the winning party, thereby reducing the damages ultimately recovered and bringing an end to costs-free litigation.
Comment
It is anticipated that these changes will bring a substantial reduction in the number of consumer claims against motor finance companies -such as product mis-selling claims – where many claims have been brought regardless of merit because there were no costs consequences to the claimants in doing so. From 1 April 2013 that will no longer be the case. Win or lose, claimants will now have to put their money where their claim is.
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By GlobalDataGreg Standing is a partner in Wragge & Co’s motor finance litigation team
