The majority of the recommendations made by Jackson LJ in his 2010 'Review of Civil Litigation Costs' have now been implemented. They fall into five key areas, all of which came into effect in April 2013.
- Costs
- Funding
- Case management
- Disclosure
- Part 36
In the July issue of CirculaR, we examined the issue of costs management in civil litigation. In this issue, it's the turn of Funding.
Key points: From 1 April 2013
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Changes to the funding landscape have been afoot for a while. CFAs were introduced in 1990 in a fanfare of "justice for all". Suddenly, impecunious litigants were able to bring claims without risk of financial ruin. However it was felt that claimants' ability to litigate risk-free was inequitable, that lawyers were 'cherry picking' cases, and that it was not thought fair that even extremely rich litigants could place the entire costs burden on the opposing party.
Conditional Fee Agreements (CFAs)
A CFA (sometimes called a "No Win, No Fee") is an agreement between lawyer and client which means that the lawyer receives nothing if the case is lost, but receives the normal fees plus an agreed success fee in the event that the case is won. For CFAs entered into before 1 April 2013, the fees and the success fee would be paid by the losing party.
Post 1 April 2013, it's all change. CFAs have not disappeared; however (with the exception of insolvency and defamation/privacy proceedings) it is now no longer possible for successful litigants to recover success fees from the losing party.
After the Event Insurance (ATE)
Litigants may be able to insure the risk of adverse costs by taking out ATE. This used to be a no risk strategy, because the premium would only be payable if the policyholder was successful, and even then it would be paid by the losing party.
Under the new costs regime, premiums have to be funded by the policyholder.
Damages Based Agreements (DBAs)
DBAs are, in effect, contingency fees by the back door. In other words, the losing client does not pay its own legal fees, but the winning client gives an agreed percentage of the winnings to its lawyer. Previously such agreements were only allowed in tribunal work, but they are now permitted in all contentious business in accordance with the new Damages Based Agreements Regulations 2013 (the Regulations).
Points to note
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The Regulations set out the requirements with which a DBA must comply in order to be enforceable.
Problems with the Regulations
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Again, this is an area we will be keeping a close eye on, but until the Regulations are re-drafted or clarified, the message is "proceed with caution".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.