On 1 April, the biggest changes to Court procedures in more than 10 years were introduced. Lord Justice Jackson’s reforms will have a profound effect on costs in Court cases, as they seek to make them more proportionate to the case.
“No win no fee” has meant that the losing party in court cases has often had to pay very high costs, but this will change. From now on, the success fee in a no win no fee arrangement can’t be recovered from the losing party.
To offset this measure, which will end no win no fee as we know it, a 10% increase in general damages has been introduced, and lawyers will instead be able to take a cut from any damages won by the claimant.
The following is a very brief summary of the reforms. You should take further advice from your own lawyers.
A new test has been written in to the Court rules that costs must be proportionate, allowing the Judge to cut down on high costs in cases that don’t warrant them.
No win no fee
In these types of cases, the claimant doesn’t pay their solicitor if they lose, but if they win, they pay an increased fee. This “success fee” can be 100% of the solicitor’s costs. This large fee is in practice paid by the defendant. The change from 1 April is that for no win no fee arrangements (Conditional Fee Agreements (CFAs)) entered into after 1 April, the success fee will no longer be recoverable from the defendant.
This will end no win no fee as we know it. Jackson LJ felt that these success fees were driving up costs and meant that the claimant had no stake in the level of costs run up by their solicitor, a situation which needed to change.
NB the change applies to agreements entered into after 1 April, not claims after 1 April.
Damages-based agreements (DBAs)
These are now permitted. Under a DBA, the lawyers' fees will be determined as a percentage of the damages recovered by the client. In personal injury cases, there will be a limit of 25% of the damages.
10% increase in damages
General damages will be increased by 10%. This is an across-the-board increase to compensate for the other changes. The Court has stated that “with effect from 1 April 2013, the proper level of general damages in all civil claims for (i) pain and suffering, (ii) loss of amenity, (iii) physical inconvenience and discomfort, (iv) social discredit, or (v) mental distress, will be 10% higher than previously”. Therefore the uplift will apply to damages of this type in personal injury cases, and also to the “disappointment” damages in holiday claims (not diminution in value or out-of-pocket expenses).
There’s no 10% uplift though if the claimant is using a no win no fee arrangement entered into before 1 April. So from 1 April you’ll be dealing with some “old style” cases and some “new style” cases.
Qualified one-way costs shifting (QOCS)
Also introduced on 1 April, this means that only the claimant can recover their costs. It applies to personal injury cases only. It means that if you defend a personal injury case and win, you don’t get your costs from the claimant.
This was brought in to stop the practice of the claimant taking out an expensive insurance policy to cover the defendant’s costs (which the defendant had to pay for anyway). Also, in most PI cases the claimant wins (e.g. 90% of road traffic accident cases) (although this is less true for holiday claims).
QOCS doesn’t apply – and therefore you do get your costs- if
- You’ve made a Part 36 offer and the claimant fails to beat it
- There were no reasonable grounds for bringing a claim
- The claim is fundamentally dishonest
QOCS only affects the defendant’s costs. The Claimant can still recover costs if they win as they do now.
Since 1 April the limit for a small claim has been increased to £10,000 (from £5,000). Personal injury limit remains at £1,000.
This is a very brief summary of a complex area. To find out more, you should consult with litigation lawyers. We can put you in touch with law firms that are ABTA Travel Industry Partners. This issue will also be discussed at our Travel Law Seminar in June, where there will be more advice on how it will work in practice and the effect on your case-handling.
ABTA Members should also refer to our guidance note: Complaints Arbitration and Court.