All questions

Court procedure

i Overview of court procedure

Civil procedure in England and Wales is governed by the CPRs and accompanying practice directions (PDs). These are supplemented by guides produced by different courts summarising particular procedures that apply in those courts. Court guides do not have the force of law but courts will generally expect compliance (and may punish non-compliance with adverse costs orders). These and other sources are available online on the Ministry of Justice's website14 and, with commentary, in The White Book published annually (with interim updates) by Sweet & Maxwell.

ii Procedure and time frames

Time frames and procedure for claims vary depending upon the court and division in which the relevant claim is issued and the nature of the claim itself. The commentary below is based on the procedure in the Chancery Division and is only a general summary.

Before even commencing a claim, a claimant should check whether a specific pre-action protocol applies to the type of claim being made (e.g., claims for professional negligence, media and communications matters and judicial review have specific pre-action protocols that should be followed). Where there is no specific pre-action protocol,15 the claimant will be expected first to write a letter before claim to the prospective defendant setting out in detail his or her claim and allowing the defendant a reasonable period in which to respond (what is reasonable may depend on the complexity of the allegations).

Following any pre-action steps, proceedings are started (and the court is treated as seised) on the date that the claimant issues a claim form in the relevant court. The claim form must then be served on the defendant or defendants within four months of issue (assuming the relevant defendant is within the jurisdiction) or within six months if the defendant is outside the jurisdiction (see Section III.vii). It can be served by a range of different methods, including handing it to the defendant in person or by post. The courts have wide discretion in this area. They have, for example, permitted service of an injunction to be made via the social networking site Twitter against an anonymous defendant who had impersonated the claimant's blog on that site.16 In 2019, the Intellectual Property Enterprise Court granted permission for a court order to be served through Instagram. The claimant must serve particulars of claim with the claim form or within 14 days of service of the claim form; the particulars set out the claimant's case, the relevant facts and basis for the claim in law as well as the remedy sought. Both the claim form and the particulars of claim must be verified by a statement of truth signed either by the claimant (or authorised signatory on behalf of the claimant where the claimant is an organisation) or the claimant's legal representative.

Assuming the defendant intends to defend the claim and acknowledges service by the appropriate court form, his or her response is by way of the defence, to be served within 28 days of receipt of the particulars of claim (assuming an acknowledgment of service has been filed – also note that this timescale can vary between different courts and in any event is subject to extension by agreement between the parties or by court order). The defendant should respond in the defence to each of the allegations made in the particulars of claim by either admitting it, denying it (with explanation) or putting the claimant to proof. Following service of the defence, the claimant has a right of reply in relation to any new issues or allegations raised in the defence, as well as a right to defend any counterclaim raised in the defence. From this point on, it is not expected that any further statements of case will be exchanged between the parties (unless permission to do so has been granted by the court).

Following the filing of the defence, the court will send a notice of proposed allocation to the parties (CPR 26.3(1)), which will provisionally allocate the claim to a 'track' and require the parties to provide further information about the claim in the form of a directions questionnaire. The court will then give appropriate directions as to the conduct of the proceedings and ensure that it is allocated to the correct track. The different tracks are used to ensure that the procedure adopted to trial is proportionate to the importance of the issues and amount at stake. Claims below £10,000 are generally allocated to the small-claims track and are dealt with quickly without many of the CPRs applying; for example, parties typically bear their own costs, most interim remedies are not available, there are limited disclosure obligations and witness statements are not normally exchanged before trial. Claims between £10,000 and £25,000 are generally allocated to the fast track, where the claim will still be processed quickly (trial will usually be set for a date within 30 weeks of the allocation decision) but more extensive preparation is permitted than on the small-claims track and interim remedies are available. The multi-track is reserved for the most important and high-value disputes, and the court will adopt a much more hands-on role in ensuring that the procedure adopted to trial is tailored to the requirements of the case.

For multi-track cases subject to costs management under CPR 3.12, parties will be required to complete a costs budget in the form of a template known as Precedent H. Costs management applies (subject to the discretion of the court to apply or disapply the regime) to most multi-track cases commenced on or after 22 April 2014, except for proceedings where the amount of money claimed or value of the claim as stated on the claim form is £10 million or more.17 Parties subject to the regime are required to file and exchange budgets setting out estimated costs for each stage in the proceedings. These cost budgets must be approved by the court and effectively cap the amount that the winning party can recover from the losing party at the end of the proceedings unless it can demonstrate a good reason for departing from the budget.18 Changes were made to the relevant CPRs and PDs in 2020 to consolidate and streamline the rules around costs budgets, and a template Precedent T was introduced for making applications relating to proposed variations in a costs budget.

Cases on the multi-track may require one or more case management conferences (CMCs) at which the court will, usually after hearing submissions from the parties, give directions regarding the timetable for disclosure, exchange of factual witness statements and exchange of expert reports (if any), as well as indicating broadly when it expects the trial itself to be listed. For complex matters, it is not unusual for the period between the first CMC and the trial to be at least a year. Once listed, trial dates (across all tracks) are treated as set and only in exceptional circumstances will the court agree to postpone a trial.

CPR 25.1(1) contains a non-exclusive list of interim remedies available from the court, including interim injunctions and declarations, orders for delivery up of goods, orders freezing property, orders for the provision of information and search orders. Interim applications may be made without notice to the person against whom the relief is sought, although the applicant is under a duty to disclose fully and fairly all material facts to the court, even if they are adverse to its case. Overseas lawyers have been encouraged to note that practitioners within this jurisdiction bear this heavy responsibility and that ill-prepared applications are to be avoided.19

iii Court reform

In 2014, the Ministry of Justice announced that between 2015 and 2020, HM Courts & Tribunals Service (HMCTS) would oversee a series of reforms aimed at modernising and improving the efficiency of courts and tribunals. On 5 March 2019, HMCTS stated that it was extending the completion date of the reform programme to 2023. The programme involves substantial investment in digital technology to allow cases to be managed better, with less paper and fewer delays. This will allow a reduction in the number of court buildings, so generating further savings. Other separate but complementary steps to reform and rationalise court processes are also considered directly below.

Reform of the appeals process

Secondary legislation came into force on 3 October 2016, and is intended to reduce the time it takes for cases to be heard by the Court of Appeal. The Access to Justice Act 1999 (Destination of Appeals) Order 2016 simplifies the appeals process by ensuring that, in most cases, an appeal will lie to the next highest level of judge. In particular, appeals from a decision of a district judge in the County Court will generally lie to a circuit judge in the County Court (the next most senior judicial rung), while appeals from a circuit judge will lie to the High Court. In the High Court, appeals from a master will lie to a full judge of the High Court, and appeals from a High Court judge will lie to the Court of Appeal. The Civil Procedure (Amendment No. 3) Rules 2016 revised CPR Part 52 accordingly. The new Part 52 made two other important changes:

  1. the removal of the default right to renew, at an oral hearing, a failed paper application for permission to appeal to the Court of Appeal; and
  2. a clarification of the test for grant of permission to appeal in second appeals (i.e., appeals of appeals) such that a real prospect of success must be shown, or there must be some other compelling reason for the second appeal to be heard.
Shorter and flexible trial schemes

Two pilot schemes, one for shorter trials, the other for flexible trials, began in the Business and Property Courts in London in October 2015. After three years of piloting, both schemes became permanent on 1 October 2018. The objective of the schemes is to achieve more efficient trials in the context of commercial litigation. This was prompted, in part, by a recognition that comprehensive (and costly) disclosure is not always required for justice to be achieved. The shorter trials scheme is open to cases that can be tried in no more than four days – this means cases in which only limited disclosure and oral evidence is required, and in practice means factually complex or multiparty claims (including fraud and dishonesty claims) are excluded. The intention is that a trial will take place within 12 months of the issue of proceedings, with judgment to follow within six weeks thereafter. The first case directly commenced under the shorter trials scheme in March 2016 was National Bank of Abu Dhabi PJSC v. BP Oil International Ltd.20 A one-day trial took place eight months after issue and judgment was handed down two weeks after the hearing, on 18 November 2016. It is also worth noting that an appeal against the judgment was heard in July 2017, quicker than many comparable appeals.

Financial List

In October 2015, the High Court introduced a specialist Financial List for the determination of claims by judges with expertise in the financial markets. There are three criteria for inclusion (only one of which needs be fulfilled). A claim must:

  1. relate to banking and financial transactions where £50 million or over is in issue;
  2. require particular judicial expertise in the financial markets; or
  3. raise issues of general importance to the financial markets (see CPR Part 63A).

In Property Alliance Group Ltd v. Royal Bank of Scotland plc,21 following a contested application to transfer existing proceedings to the Financial List, the Master of the Rolls (the second most senior judge in England and Wales) clarified that when deciding whether to transfer a case to the Financial List, CPR 30.3 and the overriding objective must be taken into account. The instant case was transferred to the Financial List even though the total value of the claim was £29 million (below the £50 million indicative threshold). This was because, in circumstances where the issues in the case were of broad significance for the market and a judgment would affect other proceedings already issued or in contemplation, it was desirable that it be dealt with by a judge of the Financial List in order for the resulting judgment to carry appropriate weight and respect in the financial markets.

The Financial List initiative included a two-year pilot financial markets test case scheme, which was extended in May 2017 for a further three years until 30 September 2020. It has now been incorporated into PD 63AA on a permanent basis. This permits the court to decide cases that raise issues of general importance to the financial markets in relation to which immediately relevant authoritative English law guidance is needed, even where there is no current cause of action between the parties to the proceedings. The expedited Financial Conduct Authority v. Arch Insurance (UK) Ltd and others [2021] UKSC1 test case was the first case to be heard under this scheme.

Witness statements

The wording of the statement of truth that must be signed by a witness when approving the witness statements was amended with effect from 6 April 2020 to include a clear warning that proceedings for contempt of court may be brought against those who give a statement of truth without an honest belief in its truth. In addition, witness statements (including the statement of truth) provided by non-English speakers must now be prepared in the witness's own language and be accompanied by an English translation. The process of preparation of the statement, and the date of the translation, must be stated. As of April 2021, witness statements in the Business and Property Courts must comply with PD 57AC, which contains detailed guidance on best practice and requires witnesses and solicitors to declare their compliance with the best practice principles contained in the practice direction.

iv Digitisation following the covid-19 pandemic

A key focus of the reform process has been the digitisation of the courts. Prior to the outbreak of the covid-19 pandemic and the consequent lockdown restrictions, a number of key developments were already being trialled in England and Wales, including:

  1. a new electronic filing and case management system (CE File) in the Business and Property Courts in London and seven other cities. Since 1 July 2019, the system has also become mandatory for professional users in claims issued in the Queen's Bench Division since 1 January 2019;
  2. the online civil money claims pilot scheme running from August 2017 to November 2023, which tests an online process for unrepresented claimants to start money claims with a value of £10,000 or less;
  3. the County Court online pilot, operating from September 2017 to November 2022, by which legally represented claimants can issue certain money claims online at the County Court Money Claims Centre;
  4. a video hearings pilot scheme (PD 51V) was commenced on 30 November 2018, which covers applications to set aside County Court default judgments heard at either the Birmingham or Manchester Civil and Family Justice Centres. The pilot scheme tests a procedure for these applications to be heard by the court via video link. Members of the public may access a hearing by attending the court in person, where the proceedings are projected on a screen; and
  5. the Courts and Tribunals (Judiciary and Functions of Staff) Act 2018, which permits judges to delegate a range of work to court staff (such as granting an extension of time or issuing a summons) received Royal Assent on 20 December 2018, with some provisions coming into force on 20 February 2019.

In response to the need to work remotely during the covid-19 pandemic, HMCTS has made several changes to these pilots. For example, judges have been given greater powers to give directions for cases included in the online civil money claims pilot, and a new mediation feature has also been added. HMCTS has been clear that although these changes were expedited as part of the courts' response to the covid-19 pandemic, they build on changes made as part of the ongoing reform programme, and will remain in place for the duration of the pilot scheme. The County Court online pilot has also been expanded to all professional applicants.

Throughout 2020, and with the exception of the temporary suspension of jury trials, the courts of England and Wales have continued to function, with the majority of hearings being conducted via telephone or videoconferencing software. It was confirmed in Huber and another v. X-Yachts (GB) Ltd and another 22 that parties and their representatives are permitted to attend hearings held entirely remotely outside the jurisdiction, subject to certain safeguards. The use of remote or hybrid hearings is governed by the Coronavirus Act 2020 and PD 51Y, with accompanying guidance issued by HMCTS and the individual courts directly. This guidance also covers issues around, for example, electronic communications with the court and the preparation of electronic instead of paper bundles.

v Class actionsPre-October 2015

The concept of class actions has been a part of English civil procedure for some time, but does not bring with it many of the characteristics that would, for example, be familiar to a US lawyer. CPR Part 19 sets out the framework for representative actions, where one person brings (or defends) a claim as a representative of others who share the same interest in the claim;23 and group litigation orders (GLOs),24 where claims brought by parties that give rise to common or related issues of fact or law are managed together.

Represented persons are not formally parties to the proceedings and are therefore not subject to disclosure obligations or liable for costs (therefore leaving the representative liable for any costs). They do not have to opt in to be represented, although they can apply to the court to opt out. By contrast, parties to claims covered by a GLO are fully fledged parties and are likely to have to pay their share of the common costs of the litigation if they lose. The Court of Appeal confirmed the High Court's rejection of a US-style class action brought against British Airways by two flower importers who sought to bring proceedings as representatives of all direct and indirect purchasers of airfreight services affected by an alleged cartel.25 The Court upheld the first instance decision to strike out the representative element of the claim as it was not in the interest of justice to bring an action on behalf of a class of claimants so wide that it was impossible to identify members of the class before and perhaps even after judgment. This opposition to US-style class actions has been strengthened by the government's decision to remove provisions in the Financial Services Bill (enacted as the Financial Services Act 2010), which would have extended the options for collective actions in the financial services sector to include opt-out actions.

Orders made in a representative action are binding on all represented persons and may be enforced, with the court's permission, against any other person. Judgments issued in claims subject to a GLO are binding on every party entered on the group register (which will have been established pursuant to the GLO).

A single claim can be selected from any set of similar claims (including those governed by a GLO) to be advanced as a test case. There is power for the court to order this in accordance with their case management powers under CPR 19 or the parties can agree a test case. An example of a test case was the bank charges litigation, where thousands of customers' claims in the County Court were stayed pending the outcome of the Office of Fair Trading's claim.26

Although there have been some high-profile cases involving representative actions and GLOs27 (see Lloyd v. Google LLC, discussed in Section II), class-action proceedings of any kind are still relatively uncommon in England and Wales, in part because of the risks of adverse costs orders against unsuccessful claimants and, more generally, the costs of commencing and maintaining proceedings. Parties are increasingly able to mitigate these risks through the increased availability of after-the-event insurance, third-party litigation funding, conditional fee agreements and damages-based contingent fee arrangements with lawyers who are willing to share the risks with their clients in return for a share of any damages (see Section III.xi).

Collective proceedings for breaches of competition law

Section 47B of the Competition Act 1998 as amended came into force on 1 October 2015. It creates a genuine class action regime for the first time in the UK, allowing private individuals to seek collective redress for breaches of competition law. The regime operates in the Competition Appeal Tribunal (CAT) only. It accommodates follow-on damages claims, where a breach has already been established by a regulator, and stand-alone claims, where a claimant must prove breach itself. Claims that would raise the same, similar or related issues of fact or law may be pursued as collective proceedings; they are initiated by a representative of the class of affected persons and it is for the CAT to authorise that representative and make a CPO permitting the proceedings to be continued. That order will also specify whether the proceedings are to be opt-in or opt-out. This places the UK in a minority in the EU (which typically does not support opt-out claims) and may potentially make the UK a more attractive place for large groups of claimants to commence claims.

In mid-2016, an application was made to commence a £14 billion follow-on claim against Mastercard for damages arising from the EU Commission's 2007 decision that Mastercard's European Economic Area (EEA) multilateral interchange fees breached Article 101(1) of the Treaty on the Functioning of the European Union. The CPO application was made by Walter Merricks, former Chief Ombudsman of the UK Financial Ombudsman Service, on behalf of approximately 46 million customers on an opt-out basis. At first instance, the CAT refused to grant the CPO, in a judgment dated 21 July 2017.28 The CAT considered the commonality requirement and confirmed that it was not necessary for an applicant to show that all of the issues that would arise on an individual claim would be common to every other individual's claim. However, the CAT found that the expert methodology put forward by Mr Merricks on the assessment of damages of all the claims was not suitable as it did not satisfy the test set out by the Supreme Court of Canada in Pro-Sys Consultants Ltd v. Microsoft Corp29 (at paragraph 118):

the expert methodology must be sufficiently credible or plausible to establish some basis in fact for the commonality requirement. This means that the methodology must offer a realistic prospect of establishing loss on a class-wide basis so that, if the overcharge is eventually established at the trial of the common issues, there is a means by which to demonstrate that it is common to the class (i.e. that passing on has occurred). The methodology cannot be purely theoretical or hypothetical, but must be grounded in the facts of the particular case in question. There must be some evidence of the availability of the data to which the methodology is to be applied.

The Court of Appeal overturned this decision in a judgment dated 16 April 2019,30 stating that the CAT ruling had been too narrow. The Court of Appeal agreed that Pro-Sys Consultants Ltd v. Microsoft Corp provided the correct guidance on the proper approach to claims for aggregated damages. However, the CAT had placed too heavy a burden on the proposed representative at the certification stage, who should not be required to demonstrate more than that the claim had a real prospect of success. The CAT had effectively conducted a mini-trial in requiring detailed specifications as to what data would be available for each relevant retail sector during the infringement period. The CAT had also wrongly directed itself that an aggregate damages award had to be distributed on a compensatory basis; the rights of individual claimants could be vindicated by obtaining the aggregate award itself.

On 25 July 2019, permission was granted for Mastercard to appeal to the Supreme Court. Judgment was handed down on 11 December 2020, and the majority largely upheld the Court of Appeal's decision.31 This was on the basis that the Supreme Court interpreted suitability as a relative concept and noted that the CAT should have asked itself whether a claim is 'suitable to be brought in collective proceedings rather than individual proceedings, and suitable for an award of aggregate rather than individual damages'. Second, the Supreme Court emphasised that the courts should not deprive claimants of a trial merely because of challenges relating to the quantification of harm, this being a 'fundamental requirement of justice [. . .] often labelled the “broad axe” [. . .] principle'.

This means the threshold that a proposed class representative needs to overcome when applying for a CPO has been significantly lowered. Following the Supreme Court decision (discussed in detail in Section II), the CAT reconsidered and certified Mr Merricks' application.

vi Representation in proceedings

Any person who is not a child nor lacks capacity as a result of an impairment or disturbance of the mind has the right to begin and carry on civil proceedings without professional representation. The courts generally seek to accommodate litigants who represent themselves in proceedings.32

vii Service out of the jurisdiction

As a general rule, where a defendant is outside England and Wales, he or she can only be served with the claim if the English court has given the claimant permission. The claimant's application for permission must meet three tests. First, it must demonstrate (to the standard of a good arguable case) that the claim falls within one of the 'gateways' in PD 6B paragraph 3; for example, it is in respect of a claim made in contract where the contract was made in England. Second, it must persuade the court that England is the proper place to bring the claim. Third, the claimant must show that each cause of action in the claim raises a serious issue that ought to be resolved by a trial. If the court grants permission to serve out, the defendant, once served, can challenge jurisdiction by making an application under CPR Part 11; the burden will be on the claimant to show that permission was properly granted.

The court's permission is not required for service of the claim form or other documents out of the jurisdiction where the parties have agreed that their disputes will be resolved by the English court, but not limited to disputes covered by choice of court agreements within the scope of the 2005 Hague Convention on Choice of Court Agreements (2005 Hague Convention), and the defendant is a party to an exclusive choice of court agreement conferring jurisdiction on that court within the meaning of Article 3 of the 2005 Hague Convention. Separately, CPR 6.32 makes specific provision for service without permission in Scotland or Northern Ireland.

viii Enforcement of foreign judgments

Before the end of the transition period, judgments of the courts of EU Member States, Iceland, Norway and Switzerland were enforceable in the UK (and vice versa) in accordance with a streamlined process set out in EU law. The Withdrawal Agreement provides that judgments in proceedings started before 1 January 2021 in the EU and the UK will continue to be enforceable in accordance with EU law.

Judgments for a sum of money in proceedings started in the EU on or after 1 January 2021 are enforceable in England and Wales in accordance with the common law rules that apply to all countries with which the UK has no reciprocal enforcement arrangement (including, e.g., the United States). The judgment creditor issues a claim in debt in the English court in respect of the sum due under the foreign judgment. Summary judgment will usually then be sought on the claim and the resulting English court judgment enforced against the defendant or judgment debtor.

An exception applies where the judgment in question was in proceedings founded upon an exclusive jurisdiction agreement within the scope of the 2005 Hague Convention. The UK, EU, Singapore, Mexico and Montenegro are party to the 2005 Hague Convention. Where it applies, a relevant foreign judgment may be enforced in England and Wales upon its registration with the English court. This requires an application to the Queen's Bench Division of the High Court pursuant to the process set out in CPR 74. Article 9 of the 2005 Hague Convention sets out limited grounds upon which a judgment debtor can resist enforcement.

Judgments for a sum of money from certain Commonwealth countries and other countries that have reciprocal enforcement agreements with the UK may be enforced pursuant to the Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933 by making an application for registration to the High Court. Once registered under the relevant Act, the judgment is enforceable as though it were a judgment of the English court. A separate procedure applies for enforcing judgments from Scotland and Northern Ireland, under the Civil Jurisdiction and Judgments Act 1982 and CPR 74.

ix Assistance to foreign courts

Again, the position in relation to assisting foreign courts in collecting evidence in civil or commercial matters has changed as of 1 January 2021, at the end of the transition period following the UK's withdrawal from the EU. Previously, courts of EU Member States (other than Denmark) could request that the English courts take evidence on their behalf or grant permission for the requesting court to take evidence in England directly under the EU Taking of Evidence Regulation.33 The grounds for refusing the application were limited (for instance, where a witness has a right not to give evidence under English law or the law of the requesting Member State), and the court was required either to comply with the request or refuse to do so within 90 days. However, this procedure no longer applies between the UK and EU Member States, and so requests will proceed under the 1970 Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters (1970 Hague Convention). Generally, the English court will exercise its discretion to assist the foreign court; however, the court will not make orders for pretrial discovery or general disclosure, or require a witness to do anything he or she would not be required to do in English civil proceedings. Austria, Belgium and Ireland are not signatories to the 1970 Hague Convention, and requests for judicial assistance from and to these countries will need to be in the form of letters rogatory sent to the relevant national court via diplomatic channels.

x Access to court files

As a general rule, members of the public may obtain copies of statements of case and judgments or orders made in public without the permission of the court.34 Parties or any person mentioned in a statement of case may apply to the court in advance for a pre-emptive order restricting the release of statements of case to non-parties.

The right of access does not extend to documents attached to statements of case, witness statements, expert reports, skeleton arguments and correspondence between the court and the parties, although members of the public may obtain access with the court's permission. In Cape Intermediate Holdings Ltd v. Dring (for and on behalf of Asbestos Victims Support Groups Forum UK),35 the Supreme Court confirmed that the default position was that the public should be allowed access not only to the parties' written submissions and arguments, but also to documents that had been placed before court and referred to during the hearing. The court will carry out a fact-specific balancing exercise, considering on the one hand the purpose of the open justice principle and the potential value of the information in question in advancing that purpose, and on the other any risk of harm that its disclosure may cause to the maintenance of an effective judicial process or to the legitimate interests of others.

xi Litigation funding

Historically, the common law rules against maintenance (support of litigation by a disinterested third party) and champerty (where the supporting party does so in return for a share of the proceeds) prevented the funding of litigation by anybody who was not party to the relevant litigation. Today, these restrictions are much narrower, and third-party funding has become accepted as a feature of modern litigation; the UK has more specialist litigation funding companies than any other jurisdiction.

Case law and practice are still developing in this area, but the approach of the courts has so far been to uphold such arrangements provided they contain no element of impropriety that impairs the integrity of the litigation process. Relevant factors in this assessment include:

  1. the nature of the funder's involvement in the litigation (control of the litigation must not be ceded to the funder);
  2. the nature of the relationship between the funded party and the solicitor and the extent to which the funded party can make informed decisions about the litigation (this should be a genuine and independent relationship);
  3. the amount of profit the funder stands to make (it has been held that 25 per cent may not be excessive);36
  4. whether there is a risk of inflating damages or distorting evidence;
  5. whether the funder is regulated; and
  6. whether there is a community of interest between the funder and the funded party.

Lord Justice Jackson recommended in his final report on civil litigation costs, published on 14 January 2010, that a voluntary code should be drawn up to which all litigation funders should subscribe. The Code of Conduct for Litigation Funders was launched on 23 November 2011.37 The Code contains provisions concerning effective capital adequacy requirements, restrictions upon a funder's ability to withdraw support for ongoing litigation and restrictions on a funder's ability to influence litigation and settlement negotiations. It is enforced by the Association of Litigation Funders.38 Third-party funders may also be potentially liable for the full amount of adverse costs, subject to the agreement between the funder and the litigant. The Court of Appeal considered the basis and extent of funders' liability to a successful opponent in Excalibur Ventures LLC v. Texas Keystone Inc and others.39 Indemnity costs were awarded against the funded claimants on the basis that their 'spurious' claims had been pursued to trial despite having 'no sound foundation in fact or law'. The Court of Appeal dealt with the issue of whether third-party funders could be made liable on the same basis as an unsuccessful party. Agreeing with the trial judge that the litigation was 'egregious' and a 'war of attrition', the Court of Appeal held that a funder should 'follow the fortunes' of the funded party. A funder seeks to derive financial benefit from the pursuit of a claim just as much as the funded litigant. It cannot avoid any downside that may instead arise. In any event, in the matter of liability for indemnity costs it was not appropriate to seek to differentiate between a party to litigation and those who stand behind that party purely on that basis; that would be to misconstrue one of the tests for indemnity costs, which requires a court to consider the character of the action and its effect on the successful party (and not any other party). In the past, funders have enjoyed protection from unlimited costs liability, which has been subject to the Arkin cap, which limits a funder's adverse liability to the amount of its investment.40 However, the recent case of Chapelgate Credit Opportunity Master Fund Ltd v. Money and others shows that professional funders cannot necessarily rely on the Arkin cap, as the Court of Appeal dismissed a funder's appeal against an order holding it liable for all the respondent's costs from the date of entry into its funding agreement with the claimant, emphasising instead the court's inherent jurisdiction to make costs orders.41

Solicitors (and sometimes barristers) acting for clients with the benefit of third-party funding will typically be required, as a condition of that funding, to enter into some form of contingency arrangement in respect of their fees. Two structures, both permitted only insofar as they comply with regulations, predominate:

Conditional fee agreements

Conditional fee agreements (CFAs) are defined in Section 58 of the Courts and Legal Services Act 1990 as agreements between a lawyer and a client by which the lawyer's fees and expenses, in part or in whole, are payable only in specified circumstances (meaning, usually, victory for the client either at trial or by way of settlement). At its most basic, a CFA will provide that a losing client has no liability for its lawyer's fees (no win, no fee) while a winning client will be required to pay its lawyer for work done on the case and, in addition, a success fee intended to compensate the lawyer for the risk it took of earning nothing at all.

As the market has developed, more sophisticated variants of this model have emerged. For instance, a client may agree to pay its lawyer throughout the life of the case, but on the basis of a discount to the lawyer's usual hourly rate. If the client loses the case, it will have no further costs liability to its lawyer. If the client is successful, it will be liable to top up the lawyer's fees to the full hourly rate and, in addition, pay a success fee calculated by reference to the full hourly rate. Regulations set out the form and permissible limits of a CFA. For instance, any success fee may not exceed 100 per cent of the fees that would have been payable to the lawyer had there been no CFA in place.

Under CFAs entered into before 1 April 2013, a winning party could recover any success fee payable to its lawyer from its losing opponent (in addition to the ordinary fees for which the client was liable to its lawyer). Reforms introduced following Lord Justice Jackson's report on civil litigation costs abolished the recoverability of success fees.

Damages-based agreements

Damages-based agreements (DBAs) are a species of contingency fee arrangement in which the amount payable by the client to the lawyer in the event of a successful outcome is calculated as a percentage of the damages received. Arrangements of this kind, in which the contingent payment is expressly linked to the level of the client's recovery, were outlawed in all but employment disputes until Section 45 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 was brought into effect. DBAs are only valid if they comply with the requirements set out in the Damages-Based Agreements Regulations 2013.42

Contingency fee arrangements do not protect a party to litigation from the risk of adverse costs liability. In other words, a losing claimant with the benefit of a CFA may not have to pay anything to its lawyer, but it will, in the ordinary course, remain liable to pay a large part of the winning party's legal costs. Funded claimants (and sometimes those funding a claim from their own resources) will typically seek to insure against that risk. A large market has grown up for such after the event (ATE) insurance (so named because it is usually taken out once a cause of action has arisen and been formulated). Before the Jackson reforms of 2013, ATE insurance premiums were recoverable from a losing party. The end of recoverability does not appear to have significantly reduced the availability of ATE insurance, and it is frequently offered in conjunction with third-party funding of a party's own legal costs. The liberalisation of the regime for third-party funding and the corresponding development of a market for professional funders is making it easier for claimants to commence and maintain proceedings, particularly in relation to class actions where there can be very many claimants and such funding options represent an opportunity to spread the funding risk.

xii Bill of costs

In October 2015, as part of the Jackson reforms, a voluntary pilot scheme was introduced at the Senior Courts Costs Office with a view to establishing a new mandatory model form electronic bill of costs based on uniform task-based time-recording codes. This was aimed at reducing the time and expense of drawing up a bill of costs by aligning it with the time-recording technology used in practice. On 6 April 2018, the electronic bill of costs scheme became mandatory in the Senior Courts Costs Office and the County Court. CPR 47 and the associated PD were amended accordingly.