The government and judiciary have firmly stuck to the line that they will implement the Jackson reforms to civil litigation costs and funding in April 2013. The judiciary have interpreted this to mean 1 April. The Ministry of Justice apparently think that they have the wriggle room of an extra month until 30 April to deliver on their promise. But with only 6 months to go, many holes remaining in the implementation plans and a new ministerial team, many commentators took the view that postponement was unavoidable. This now looks like wishful thinking. On 4 October 2012 the Ministry of Justice published a plan setting out progress so far, new policy decisions and a clearer timetable.

One difficulty in getting to grips with implementation for both practitioners and officials is that several different bodies and legislative routes are required.

Recoverability of success fees

Success fees will cease to be recoverable from opponents as costs under section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”) (other than a possible temporary exception for mesothelioma). The implementation date will be fixed by order of the Lord Chancellor. This is achieved by publishing the Commencement Order in the libraries of the two Houses. Little notice is required, nor is there likely to be any opportunity for further parliamentary debate.

Recoverability of success fees will cease for conditional fee agreements entered into after the implementation date, but will stay for existing CFAs. The date of the contract or “retainer” between client and solicitor is determinative; not the date of the accident or of the issue of proceedings.

Regulations to implement the 25% cap on success fees for personal injury cases have been drafted and have been sent out for a brief consultation to interested parties this month. Once finalised, these will also be laid before Parliament for approval and no doubt will be brought into effect on the same date.

10% increase in general damages

This is to be dealt with by the judiciary because damages for personal injuries are not traditionally set by Parliament. The Court of Appeal sought to implement this in Simmons v Castle [2012] EWCA Civ 1039. My article published in Solicitors Journal dealt with this decision. However, on application by the Association of British Insurers, the Court of Appeal revisited their decision on 10 October 2012 in Simmons v Castle (Number 2) [2012] EWCA Civ 1288.

The Court also heard representations from the Association of Personal Injury Lawyers and the Personal Injury Bar Association. The Court decided that the 10% increase would not apply to any claimant who brought the proceedings under a conditional fee agreement entered into before 1 April 2013. This excludes claimants who have the benefit of recoverability of success fees from the 10% uplift in damages.

Enhanced damages for beating a claimant’s own Part 36 Offer

The enhanced penalty of an uplift in damages if a claimant beats their own offer to settle at trial is incorporated in s55 of LASPO. This did require statutory enactment because it was a fundamental change in the law of damages to use them as a penalty for litigation behaviour.

A draft Order detailing the nature of the penalty (10% of damages up to £500,000, plus 5% between £500,000 and £1 million, with a cap at £1 million) has been published for consultation this month. It is likely the Order itself will be made well before April 2013, but will require new rules of court before becoming effective. It seems possible that the Rules Committee will opt for a similar implementation formula as the Court of Appeal used in Simmons.

Recoverability of after the event insurance premiums

Again, this is governed by LASPO and the implementation date will be fixed by order of the Lord Chancellor. Premiums for policies taken out after the implementation date will no longer be recoverable (except for limited exception for clinical negligence policies). However, LASPO s46(3) reads:

“The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings who took out a costs insurance policy in relation to the proceedings before the day on which this section comes into force.”

This (the use of “a” not “the”) arguably implies that provided a policy was taken out in these proceedings before 1 April 2013, any subsequent policy in the same proceedings will also have a recoverable premium. However, it may be that in s46(3) “a policy” is held to mean “the specific policy”. If so, then premiums will not be recoverable.  I have not been able to find any reference in Hansard where Parliament shed any light on their intentions in debate.

Whether or not a new premium with a new insurer is allowed, it does seem likely that the wording of LASPO will allow further staged premium under a policy taken out before the implementation date. Similarly, a premium for top-up cover in a case where a policy has already been issued by the same insurer is likely to be recoverable. Some of these provisions will, however, no doubt be challenged in satellite litigation by insurers after implementation.

Qualified one-way cost shifting

I discussed this in my blog:http://blog.anthonygold.co.uk/2012/07/what-is-qocs/.

This is not dealt with by LASPO as the extent to which litigants are responsible for each other’s costs are traditionally dealt with by rules of court. Ultimately these are made by the Civil Procedure Rules Committee. Proposed amendments to the Civil Procedure Rules are then laid before Parliament approval as statutory instruments.

As QOCS are a new concept, the Rules Committee will implement them only once matters of policy have been determined by the Ministry. In this case, they emerged from the recommendations of Lord Justice Jackson’s review. Detailed technical matters were put before a Civil Justice Council working group in the autumn of 2011. The working group was then reconvened in the summer of 2012. Written ministerial statements have set out some policy decisions about potential exclusions and the extent of potential liability. Draft rules are in preparation. But until the rules are published, a few key policy decisions as to the extent remain uncertain.

It is unclear how the new QOCS regime will dovetail with the end of recoverability of premiums for after the event insurance.

Damages based agreements

These are contingency fees where the lawyer can take a percentage of the damages, but based on the “Ontariomodel” (where any costs recovered from the opponent are set against the contingency fee). This is a fundamental change to the law which is enacted by section 45 of LASPO.

The government has now produced draft Regulations on detailed implementation for consultation. These include a cap of 25% of general damages and past loss for personal injury, 35% for employment and 50% for all other claims. Implementation is also likely to be in April 2013.

Extending the “portal”

The government have said that they will be extending the RTA portal – a web-based system for recording and dealing with low value road accident claims – “vertically” to include road accident cases up to a value of £25,000 and “horizontally” to include employers’ liability and public liability claims.

The government also announced that they will be reducing the fixed costs allowed for portal claims. However, despite consultation in Spring 2012, they have not yet announced what the new costs will be, nor the costs for cases in the extended portal. New claim notification forms are required and have not yet been published. There is some doubt as to whether the IT is capable of supporting extended portals from April.

Fixed costs in the fast track

Cases that are not concluded in the portal but which are not valuable or complicated enough to enter the Court “multi-track” will proceed in the “fast track”. Lord Justice Jackson recommended that costs for the fast track be fixed. But no further research on the amount of the fixed costs has been undertaken since then until this month.

Fixed costs will be set by rules of court. However, such a fundamental change to the system of costs would normally be undertaken only after a period of consultation. It may be that the Ministry has taken the view that the consultation at and around the time of theJacksonreport was sufficient. Representative bodies for lawyers may take a different view.

Small claims limit

The government has already announced that the small claims limit generally will rise from £5,000 to £10,000 in April 2013. It is intended to go up to £15,000 in due course.

Personal injury claims where the general damages are likely to exceed £1,000 are presently exempted from the small claims track. However, the government has announced that there will be a consultation on raising this to £5,000 “shortly”. Assuming that this is published before the end of October 2012, and has the usual three-month consultation period, no decision could be taken by government before March 2013 at the earliest.

Although the rules required to raise the limit are straightforward, it seems very unlikely that this could be implemented in April 2013 if proper process is followed. However, any decision arising from the consultation process could probably be implemented by the summer of 2013.

Costs budgets

Draft rules on cost budgets were presented by Mr Justice Ramsay at a Law Society event held in May 2012. If implemented in this form, they would apply to all multi-track cases issued after 1 April 2013.

The form to be used for costs budgets is still subject to consultation and has not been published in its final form. Formal costs budgets are a significant change to litigation practice. Notwithstanding the lack of final detail, practitioners should begin their preparations for budgeting now.

Proportionality

Lord Justice Jackson also proposed significant changes to the rule on “proportionality” of costs. In particular, he recommended the abolition of the Lownds “necessity test”. Normally a Court Rule of this sort would be supported by detailed Practice Direction setting out how the Rule is to be applied. This is so that it can be understood by both practitioners working under it and the judiciary implementing it. This was the recommendation of the Civil Justice Council working group and also its subsequent “experts forum”. Unfortunately, this recommendation has been ignored by the Rules Committee who apparently will proceed with the new Rule as drafted by Lord Justice Jackson with no supporting substantive Practice Direction.

It also remains unclear when the new rule on proportionality comes into effect. Is it to apply to contracts of retainer after the implementation date? Or to proceedings issued after the implementation date? If the latter, cases which are currently being run under the current rules would retrospectively be governed by the new rule. This cannot be fair or in the interests of justice.