1. Working party recommends no cap on contingency fees for commercial cases

The working party set up to consider fundamental issues relating to the planned introduction of contingency fees, or “damages based agreements” (DBAs), published its report and recommendations on 3 August 2012. The key recommendations affecting commercial clients are:

  • There should not be a cap on the level of contingency fee that can be charged in commercial cases. Opinion was split as to whether there should be a cap for consumer / small business claims – if there is to be such a cap, it was agreed that the cap should be 50%.
  • Lawyers should not be liable for adverse costs where they act under a DBA, unless they agree to indemnify the client for adverse costs liability. This is consistent with the position where lawyers act under a conditional fee agreement (CFA).
  • Partial DBAs should be permitted, where the lawyer receives for example a reduced hourly rate as the case proceeds plus a contingency fee in the event of success.
  • There should be no obligation to notify opposing parties where a lawyer acts under a DBA. The working group envisages that the current notification requirements for CFAs and after-the-event (ATE) insurance will be removed once the additional costs for such arrangements are no longer recoverable from an opponent (another change being introduced to implement the Jackson reforms).

Click here to read more.

2. Herbert Smith New York

Our New York office opened for business on 4 September 2012. The office will initially operate as Herbert Smith New York. On 1 October 2012, the official launch date of our merger with leading Australian firm Freehills, it will become part of the Herbert Smith Freehills international network. The New York office will focus solely on complex cross–border disputes work in the following three areas:

  • International arbitration;
  • Anti-corruption and cross-border investigations;
  • Litigation capability to support the investigations and arbitration offering and to handle the US end of cross-border litigation for network clients.

Click here to read our press release about the new office.

3. New guidance for instruction of expert witnesses

The Civil Justice Council has published revised guidance for the instruction of experts to give evidence in civil claims. The new guidance, which replaces the June 2005 protocol, will be considered by the Civil Procedure Rule Committee and is expected to be annexed to the relevant Practice Direction (PD35) in due course.

There is little difference in substance from the previous version of the guidance. As before, it does not apply to experts who are instructed only to advise, rather than to prepare evidence for use in proceedings, but does apply if an advisory expert is later instructed for the purposes of the proceedings. A few points that are new include:

  • The new guidance states that where an advisory expert is later approached to act as an expert witness “they will need to give careful consideration as to whether they can accept a role as expert witness” bearing in mind the need to ensure there is no conflict between their advisory role and their duties to the court as an expert in proceedings.
  • It requires that the experts’ joint statement should include an express statement that the experts have not been instructed to avoid reaching agreement on any matter within their competence.
  • The new guidance notes that the court may require experts to provide an estimate of their charges, and that the expert’s fees and expenses may be limited by the court.
  • It states that those instructing experts should seek to agree, where possible, the details of the instructions for the experts, which should include any difference in the factual material that is to be considered by the experts. The previous guidance included such a provision for parties instructing a single joint expert, but not where separate experts were instructed.
  • There are specific provisions relating to the sequential exchange of expert reports, for example to clarify that in such cases the defendant’s expert’s report should seek to focus only on material areas of difference with the claimant’s expert’s opinion.

As in the previous version of the guidance, there is an express prohibition on retaining experts under conditional fee or contingency fee agreements, as this may compromise the fundamental requirement of independence and objectivity.

4. Strict approach to witness protection orders

The High Court has refused to order that the identities of certain witnesses should be protected and that their evidence should be heard in private: Cherney v Deripaska [2012] EWHC 1781 (Comm). The court accepted that it had the power to make such orders where necessary to protect the interests of a witness but, for most of the witnesses concerned, concluded that there was not sufficient evidence to show that there was a real risk of violence against them.

The decision suggests that very compelling evidence will be needed before the court will agree to make a witness anonymity order or sit in private to protect witnesses. It seems that orders will not necessarily be granted where a witness faces danger because of giving evidence; the question is whether any danger would be reduced by the orders sought. Where the witnesses’ identities have already been published, or are known to the relevant parties, it may be difficult to obtain an order.

The Court of Appeal granted permission to appeal, but the appeal was refused following a hearing on 5 September. Click here to read more.

5. Supreme Court clarifies “commercial purposes” exception to state immunity

The Supreme Court has clarified the scope of the exception to immunity under the State Immunity Act 1978 for property held by a state which is “in use or intended for use for commercial purposes”, an issue that has important practical implications both for states and for parties seeking to enforce judgments against assets held by states: SerVaas Incorporated v Rafidain Bank and others [2012] UKSC 40. The decision confirms that the origin of the property against which execution is sought is irrelevant to the question of whether it is held for commercial purposes.  In this case, the assets could not be said to be in use for commercial purposes and were therefore held to be immune from execution. Click here to read more about the decision on our arbitration blog.

6. Privy Council rules on the liability of state-owned corporations for debts of the state

A recent Privy Council decision clarifies the principles regarding enforcement of state debts against state-owned entities. Creditors of states are unlikely to be able to enforce against the assets of state-owned companies save in “quite extreme circumstances”: La Générale des Carrières et des Mines v FG Hemisphere Associates LLC [2012] UKPC 27. Click here to read more about the decision on our arbitration blog.

7. Two recent decisions on the consequences of settlement offers which fall outside Part 36

Two recent High Court decisions illustrate that:

  • A defendant’s offer to settle made outside the Part 36 regime may lead to a similar result as a Part 36 offer, although it will not carry automatic costs consequences: Brit Inns Limited (in liquidation) v BDW Trading Limited [2012] EWHC 2489 (TCC). Click here to read more.
  • The court may award indemnity costs to penalise unreasonable behaviour, including an unreasonable failure to accept a settlement offer: Walter Lilly & Company Limited v MacKay [2012] EWHC 1972 (TCC). That includes a Part 36 offer that has been withdrawn so that it does not carry the usual Part 36 costs consequences. Click here to read more.

8. Court of Appeal confirms 10% increase in general damages

The Court of Appeal has confirmed a 10% increase in general damages for: pain, suffering and loss of amenity in respect of personal injury; nuisance; defamation; and all other torts which cause suffering, inconvenience or distress to individuals: Simmons v Castle [2012] EWCA Civ 1039.

This implements a recommendation from Lord Justice Jackson’s final report, aimed at assisting claimants to meet the additional costs and risks arising from his recommendation to abolish recoverability of conditional fee agreement (CFA) success fees and after-the-event (ATE) insurance premiums (being implemented under the Legal Aid, Sentencing and Punishment of Offenders Act 2012).

The timing of the increase is however somewhat uncertain. The court originally stated that the increase should apply to all cases where judgment is given after 1 April 2013. The Association of British Insurers (ABI) has however applied to the Court of Appeal requesting it to reconsider the timing, arguing that the increase should instead apply:

  • where a claimant enters into a CFA or takes out an ATE insurance policy after 1 April 2013; and
  • in all other cases where the letter of claim or the proceedings are served after that date.

The application is to be heard by the Court of Appeal on 25 September.

9. New Master of the Rolls and new Supreme Court President from 1 October

Lord Dyson has been appointed as the next Master of the Rolls, with effect from 1 October. He will succeed Lord Neuberger, who is to become the new President of the Supreme Court from the same date when Lord Phillips steps down from the role. It is not yet known who will fill the vacancy left by Lord Dyson on the Supreme Court bench.

Lord Dyson was appointed to the Court of Appeal in 2001 and has been a Justice of the Supreme Court since April 2010. Lord Neuberger was appointed to the Court of Appeal in 2004, became a Law Lord in 2006 and then Master of the Rolls in 2009.  

10. Other contentious publications