Civil litigation reforms Jackson one year on Introduction 1 April 2013 saw a number of civil litigation reforms come into force. The reforms were spearheaded by Lord Justice Jackson and were heralded to be a new world order. We are now approaching the first anniversary of the implementation of the reforms and the question is, have we seen any benefit? To those who doubt the benefit of the reforms, Lord Justice Jackson commented in an article published by the Law Gazette that the process needs time to embed and that: litigation is a process, not an Eleusinian mystery. It is amenable to sensible budgeting and such budgeting is very much in the public interest. It takes time for costs management to bed in. Both practitioners and judges need to become comfortable with the process. Once this has happened, the overall effect will be to bring down the costs of litigation. Lord Justice Jackson also voiced his desire that fixed costs in the fast track were extended to non-personal injury cases as soon as practicable. The purpose of the reforms It was envisaged that the implementation of the reforms would create a quicker, simpler, and more proportionate system for the resolution of disputes resulting in a reduction in litigation costs and promoting access to justice.
The reforms The Jackson reforms were brought into force together with further reforms following the Ministry of Justice s (MoJ) Solving Disputes in the County Court consultation. The following reforms were brought into force: Reform Start date Success fees & ATE premiums no longer recoverable Conditional Fee Agreements (CFA) entered into on or after 1 from a losing defendant April 2013 Claimant can fund his claim via a CFA, paying a CFAs entered into on or after 1 April 2013 success fee to his lawyer Damages Based Agreements (DBAs) introduced as DBAs entered into on or after 1 April 2013 funding method for P.I. & commercial dispute claims Qualified One Way Cost Shifting (QOCS) in respect of Costs orders or liabilities arising on or after 1 April 2013 orders for costs made against a claimant in personal injury claims (subject to exceptions and transitional arrangements in respect of pre-april 2013 funding arrangements). To access our FAQ s in respect of QOCS, click here. 10% uplift on general damages (GDs) Settlements on or after 1 April 2013 save for cases with pre commencement funding arrangements i.e. before 1 April 2013 Part 36 claimant reward P36 offers made on or after 1 April 2013 Cost budgeting process Multi track cases commenced on or after 1 April 2013 Referral fee ban on personal injury cases No referral fees can be paid or received by a regulated entity on or after 1 April 2013 RTA PI Scheme : RTA Claims 1,000 10,000, Reduced fees payable on claim notification forms (CNF) reduced Stage 1 and 2 fixed fees submitted on or after 30 April 2013 RTA PI Scheme :extensions to cover RTA Claims For RTA claims, CNF submitted on or after 31 July 2013. For 10,000-25,000 (in addition to cases between casualty claims, accidents on or after 31 July 2013 and letter 1,000-10,000) and casualty claims 1,000 - of claim on or after 31 July for EL disease cases (some 25,000 exceptions) Fast track fixed fees to support extensions to low value Start triggers as for protocols above PI scheme. EL disease cases excepted. Small claims track limit increased to 10,000 for non Proceedings commenced on or after 1 April 2013 personal injury claims CPR 1 and 3.9 amended to reinforce the court s powers Proceedings coming before the court after 1 April 2013 to punish those that fail to comply with orders, judgments and practice directions
What s gone well? Whilst smaller firms have closed or pulled out of the personal injury market altogether, there has been a significant consolidation within the claimant market, seeing operational costs reduced and business models adapted to reflect the decrease in recoverable costs. Despite this consolidation, we have not seen an effect on access to justice. There has been an increase in the number of companies successfully applying for ABS licenses. DBAs are few and far between and something to be on the look out for, although this could be due to the confusion around whether or not you can have a DBA and a hybrid agreement. Costs have decreased in new world cases. The switch in recoverability of success fees and ATE premiums from defendants has seen a significant reduction in the costs being paid by insurers. One other positive step is that this has removed the 100% success fee that a claimant would have been entitled to claim in the event that a case proceeds to trial. Defendants may well allow more claims to run to trial, giving them greater access to justice than in the old regime. Claims continue to be successfully run through the portal, with the larger firms seemingly motivated to settle claims more quickly. What hasn t gone so well? In January, February, March, and April 2013 (the months leading up to the implementation of these reforms) the portal saw a significant increase in the volume of new CNFs being put onto the portal. There was an increase of 15.47% as opposed to the same period in 2012, an increase of 50,135 new CNFs. The level of general damages has increased as a result of the 10% uplift and the September 2013 increase in the JC Guidelines. According to portal data, the average general damages in RTA claims for the period May 2013 to January 2014 increased to 2,296.66, compared to an average of 2,007.22 for the same period a year earlier, an increase of 12.61%. The ban on referral fees being paid or received by regulated entities has merely seen a change in practice by those regulated entities. There is evidence of new and unique ways of circumventing the ban being employed by claims management companies (CMCs) and claimant firms, such as an increase in the cost of medical report fees and by labeling referral fees as marketing and advertising fees. New larger one stop shop firms, such as Quindell and Slater and Gordon, have come onto the market to maximise savings in operational costs and increase referral into the law part of those firms. We are seeing law firms with their own credit hire arm, their own credit repair network, their own medical reporting agencies and even their own treatment providers. Is this really providing service to the injured claimants or is it maximising the money the firm can make from their client? Are these claims really run with the client s best interests at heart? Special damage claims are being claimed to boost the level of damages recovered by the claimant. Claims for rehabilitation and psychiatric referrals are increasing, not always with justification. This is being looked at by the Transport Select Committee as this can add hundreds, if not thousands, of pounds to a claim and provide claimant firms with a lucrative source of income.
There are various models within the Before The Event insurance market applying quasi-dba s which, instead of claiming a percentage of damages as costs, apply a policy excess which is limited to a percentage of the claimant s damages. We still expect to see competition in this market and it may well be that, as time marches on, these percentage deductions are negotiated away. Anecdotally, the move away from the recoverability of success fees and ATE premiums from defendants has seen claimant solicitors seeking higher damages to try to help their clients to mitigate the impact of their success fees which are now being paid out of the claimant s damages. Whilst costs are decreasing in the new world, costs on old world claims are increasing as firms look to maximise their recovery. QOCS has resulted in an increase in speculative claims as there is no penalty for a claimant simply having a go to see if a settlement is possible. There is also evidence of CMC s trawling old referrals and presenting claims which may at one time been assessed to have no reasonable prospects of success, as there is no risk now in them chancing a claim (on the basis of no pre-commencement funding). QOCS is also fuelling a rise in litigation as the risks of running a claim to trial are significantly reduced for claimants. However, in the portal, stage 3 litigation has increased month on month since the implementation of the reforms by 35.79% (May 2013 Jan 2014) when compared with the same period a year earlier, an increase of 5,138 claims reaching stage 3. There has been an increase in requests for pre-med offers to the insurance industry. We would urge caution when considering pre-med offers as there is a propensity for the claim to be bogus or inflated due to the speed of settlement. The reforms were intended to curb CMC activity and to control claims spend and, to a certain extent, they have been successful. However, the market has seen an increase in CMCs and law firms diversifying their business models to acquire more lucrative types of case such as disease claims, particularly noise induced hearing loss (NIHL) claims, property claims, and even professional negligence claims against other lawyers (claims brought on the basis that previously settled claims were settled low and that the representing lawyer was negligent in putting their fees before the client s damages). Quindell have reported new business figures for Q1 of 2014 at 480 million and are advertising for 300 NIHL handlers. Will we see the cost savings of the reforms eroded by this sort of activity? The decisions of the Court of Appeal in the cases of Mr Andrew Mitchell MP v News Group Newspapers Limited [2013] EWCA and Durrant v Chief Constable of Avon & Somerset Constabulary [2013] EWCA demonstrate how the courts will interpret the amendments to CPR 1 and 3 and the robust, and perhaps harsh, stance that the courts are now expected to take against those parties failing to comply with orders, rules, and practice directions. It is therefore imperative that you work with your defence solicitor to ensure adherence to any relevant directions and other key dates as failure to comply could see your claim/defence struck out and costs awarded against you. What next? Although we have seen a lot of changes as a result of the reforms, it is too early to say with any great certainty where the changes will ultimately take us. There is clearly more work still to be done. Lord Justice Ramsey is applying a fail quickly test meaning that if a reform is going to fail, it needs to do so quickly so that it can be rectified.
There are also other reforms still to come: The credit hire portal and rules are still to be finalised although that looks likely to await the conclusion of the Competition Commission investigation into the private motor insurance market; The Competition Commission s review into the private motor insurance market continues with the Financial Conduct Authority (FCA) becoming increasingly involved; More information is awaited from the MoJ following its whiplash consultation and its view that there should be independent medical reporting panels; The government is still to decide upon its deferred decision in respect of the increase in the small claims track limit for personal injury claims, although we no longer expect a decision to be made in this parliament; The Civil Justice Council (CJC) Rules Committee is set to approve an amendment to the rules which will allow parties to agree simple time extensions of up to 28 days for compliance with certain requirements (such as serving witness statements). The amendment is seen as a way of reducing the pressure on courts due to the significant delays caused by an increase in the number of applications for extensions of time and relief from sanctions following the Court of Appeal decision in Mitchell. The amendment will apply to all civil litigation matters and is expected within the next few weeks. The CJC, at their conference on 21 March 2014, indicated that they would be reviewing the effectiveness of the reforms in 2016 which may lead to additional reforms being implemented. Lord Faulkner stated at the CJC conference on 21 March 2014 that he will be making an announcement shortly to clear up the confusion in relation to the DBA/hybrid agreement point. As we approach the anniversary of the implementation of the reforms it is a useful time to reflect whilst keeping an eye on our opponents. The ability to respond quickly to our opponents ever-changing tactics is key to successfully realising all of the benefits available. Ensure you agree a strategy with your defence solicitor to direct efforts and resource into defending appropriate cases. To stay up to date with developments, please visit www.solvingdisputes.com To discuss any tactics or difficulties you are facing, please contact us. We can help facilitate real and valuable solutions to specific situations, or assist you in the formulation of your higher level strategies. You can e-mail your usual Weightmans contact or you can e-mail us at solvingdisputes@weightmans.com Weightmans LLP March 2014 This update does not attempt to provide a full analysis of those matters with which it deals and is provided for general information purposes only. This update is not intended to constitute legal advice and should not be treated as a substitute for legal advice. Weightmans accepts no responsibility for any loss, which may arise from reliance on the information in this update. The copyright in this update is owned by Weightmans 2014 Data Protection Act Pursuant to the Data Protection Act 1998, your name may be retained on our marketing database. The database enables us to select contacts to receive a variety of marketing materials including our legal update service, newsletters and invites to seminars and events. It details your name, address, telephone, fax, e-mail, website, mailing requirements and other comments if any. Please ensure you update our marketing team with any changes. You have the right to correct any data that relates to you. You should contact James Holman, our Data Protection Officer in writing, at 100 Old Hall Street Liverpool L3 9QJ.