1. Costs and funding
The big news in relation to costs and funding is of course the long-awaited implementation of the Jackson reforms, now set for April 2013. The reforms are being implemented through a combination of measures including legislation (the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which was passed in May – see this post on our "litigation notes" blog), regulations and rule changes. Over the year there have been various announcements clarifying aspects of the reforms, although much of the detail is still awaited. The changes being introduced under the Act include:
- Removing the restrictions on contingency fees or “damages-based agreements” (DBAs) for civil litigation (subject to a 50% cap on the amount of damages that can be taken as a contingency fee in non-personal injury claims, excluding employment tribunal cases where a 35% cap applies – see post).
- Abolishing the recoverability of conditional fee agreement (CFA) success fees and after the event (ATE) insurance premiums (though this change will be delayed until April 2015 for insolvency cases – see post). To assist claimants to meet the additional costs and risks arising from this change, there will be a 10% increase in general damages which will apply to all civil claims for non-pecuniary loss (eg. pain and suffering, loss of amenity, physical inconvenience and discomfort, mental distress) where judgment is given after 1 April 2013, subject to a carve-out for cases where the claimant has entered into a CFA before that date and therefore continues to benefit from a recoverable success fee (see post).
- Introducing additional sanctions for defendants who fail to accept a claimant’s reasonable Part 36 offer to settle (namely an additional payment of 10% of damages, or 10% of costs for non-damages claims, but this will be tapered down for claims over £500,000 so that the maximum sanction is likely to be £75,000 – see post).
In May a new rule and practice direction were published to implement Lord Justice Jackson’s recommendation to introduce judicial “costs management” procedures (see post). The new provisions will apply to all multi-track cases commenced on or after 1 April 2013 in both the county court and the High Court, save for the Commercial Court (unless the court orders that they should apply in a particular case).
May also saw judgment delivered in what is thought to be the first costs management pilot case to proceed to detailed assessment (see post). The court held that there was no good reason to depart from the approved costs budget in circumstances where the claimant’s costs had exceeded the budget by approximately £270,000 but neither the defendant nor the court had been kept informed of the overspend. An appeal against the decision was heard earlier this month and judgment is awaited.
The courts have been busy dealing with arguments on various aspects of legal professional privilege, including when parties are entitled to claim either legal advice privilege or litigation privilege and when privilege may be lost.
In relation to legal advice privilege, which applies to confidential communications between lawyer and client for the purposes of giving or obtaining legal advice:
- The Supreme Court is currently grappling with the question of whether the privilege should continue to be restricted to lawyers, or whether it should be extended to tax law advice from accountants. The appeal on this issue in the Prudential case was heard in November (see post), and judgment is expected sometime in the first half of 2013.
- There has also been renewed debate on the question of who counts as the “client” for these purposes, following a decision of the Hong Kong Court of First Instance from late 2011 which we reported on in February (see post). There the court found that the “client” was restricted, on the facts of the case, to the two in-house lawyers and the Board of Directors of the relevant organisation, applying the controversial 2003 English Court of Appeal decision in Three Rivers. We understand that the Hong Kong court’s decision was appealed, but no information is available as to the status of the appeal so it may be that the case has been settled.
- The High Court has held that a client’s contact details were protected by privilege, where they had been communicated in confidence to enable the client to seek and receive legal advice (see post).
Turning to litigation privilege, in March the Competition Appeal Tribunal addressed for the first time the question of whether litigation privilege is available for competition investigations (see post). The tribunal found that litigation privilege could be claimed for notes of third party witness interviews conducted during an OFT investigation, at a stage where the OFT had issued two “Statements of Objections” alleging infringements of the Competition Act 1998 and the appellant was contesting the OFT’s case. However, the ruling leaves a number of issues unresolved. Although it demonstrates that competition investigations can in some circumstances be regarded as “sufficiently adversarial” to amount to litigation, it remains untested whether litigation privilege will be available for all such investigations and at what stage it might arise in a given case.
And on the question of when privilege may be lost, a tribunal decision from May gives a reminder of the limitations of the principle of collateral waiver, or the “cherry-picking rule” (see post). Under English law, the principle only comes into play where privileged material is deployed in proceedings; it has no application outside that context. And where the principle applies, the waiver extends only to documents which go to the same issue for which privilege was originally waived – though of course privilege should never be waived lightly, as the precise impact will often be difficult to predict in practice.
To help navigate the sometimes difficult issues relating to privilege, in May we published our “Handy client guide to privilege” with a decision tree and practical tips, as well as links to more detailed information and articles which are updated regularly.
In relation to disclosure, we are awaiting implementation of the new rule to implement Lord Justice Jackson’s proposal for a “menu” of disclosure options, which was approved by the Civil Procedure Rule Committee at the end of last year (see post). The disclosure “menu” will apply in multi-track cases other than personal injury /clinical negligence cases from April 2013. It will replace the presumption in favour of standard disclosure with a more flexible approach whereby the court must decide what order to make “having regard to the overriding objective and the need to limit disclosure to that which is necessary to deal with the case justly”.
With regard to the extent of a party’s disclosure obligations, in January the Court of Appeal considered what documents can be said to be in a party’s “control” and took what might be seen as a surprisingly broad view (see post). The Court of Appeal went so far as to say, albeit obiter, that a document may be within a party’s control even if the party has neither physical possession of the document, nor a right to possession of it, nor a right to inspect or take copies of it. This arguably contrasts with the well-known House of Lords decision in Lonrho v Shell which focused on the existence of a “presently enforceable legal right” to obtain the document.
This year has also seen two interesting decisions in relation to Norwich Pharmacal orders. In November the Supreme Court clarified the approach the courts should take in deciding whether to grant such orders in the face of competing data protection rights, and in particular in determining whether the grant of the order satisfies the requirement of proportionality (see post). And in June the High Court held that Norwich Pharmacal orders cannot be used to order the provision of evidence for foreign proceedings, as opposed to the provision of information as to the identity of persons and other details about them so that proceedings can be brought in a foreign state which is permissible (see post). The decision is however subject to appeal.
4. In-house lawyers
In May the Court of Appeal considered when a former employed lawyer might be restrained from acting adverse to a former employer in order to protect the employer’s confidential information (see post). The court was divided over the applicable principles and in particular whether the onus should be on the lawyer to establish that there was no real risk of disclosure or misuse, as would be the case for a private practice lawyer under the principles established in the well-known Prince Jefri Bolkiah case. Two of the three judges expressed the view (though one described it as “tentative at best”) that the Bolkiah principles did not apply to this situation and it would be up to the former employer to satisfy the court that an injunction was appropriate.
In September the Court of Justice of the European Union ruled that in-house lawyers cannot represent their client companies in proceedings before the EU courts (see post). The decision means that companies and other organisations (other than EU member states and institutions) must instruct external lawyers to act on their behalf in the EU courts, but does not affect the ability of in-house counsel to represent their client companies in proceedings before the English courts.
5. Expert witnesses
Late last year the Civil Procedure Rule Committee approved an amendment to CPR Part 35 which provides that parties seeking permission for expert evidence should (a) provide the court with an estimate of the costs of that evidence and (b) identify the issues the evidence will address rather than just, as currently, the field in which expert evidence is required (see post). These changes implement recommendations by Lord Justice Jackson and will come into force next April.
We are also expecting changes to the Part 35 Practice Direction. In January an interim report on the Manchester pilot of concurrent expert evidence (which is known colloquially as “hot-tubbing” and involves hearing evidence concurrently from the experts in a particular discipline) recommended that this technique should be incorporated into the Practice Direction as an optional procedure to be adopted at the direction of the judge (see post). In July the Civil Justice Council published revised guidance for the instruction of experts to give evidence in civil claims, which was to be considered by the rule committee and annexed to the Practice Direction in due course (see post). We have not yet seen draft amendments to incorporate these recommendations, but we expect they are likely to be included in next April’s rule changes.
There have also been a couple of noteworthy judgments relating to expert evidence. In March the Court of Appeal confirmed that permission will only be granted for a change of expert where a party has “good reason” for the change (see post). The mere fact that the expert has altered his view is not enough, and permission may be particularly difficult to obtain at a late stage of an action. In July the High Court arguably extended the case law on when a party may be required to disclose a privileged expert report (see post). Previous cases had established that where a party wants to change experts it may have to disclose the previous report as a condition of obtaining permission. In this case the court went further and held that, in some circumstances, a party might have to waive privilege in other reports of its chosen expert as a condition of relying on that expert’s evidence.
6. Offers to settle / Part 36 offers
This year saw a string of cases regarding the costs consequences of settlement offers which fall outside of CPR Part 36 and therefore do not attract the costs sanctions which, in the case of a valid Part 36 offer, the court must apply “unless it would be unjust to do so”.
- In June the Court of Appeal held that the court was not entitled to apply the Part 36 costs consequences “by analogy” to award indemnity costs and enhanced interest where a party failed to beat an opponent’s settlement offer which was not made under Part 36 (see post).
- In July however the High Court went on to award indemnity costs against a defendant who had failed to accept a claimant’s Part 36 offer that was withdrawn before trial and so did not carry the usual Part 36 costs consequences (see post). The court recognised that it could not simply apply Part 36 by analogy, but held that the defendant’s conduct was sufficiently unreasonable to justify an award of indemnity costs outside of the Part 36 regime.
- In September another High Court decision illustrated that a defendant’s offer to settle made outside the Part 36 regime may well lead to a similar result as a Part 36 offer, although it will not carry automatic costs consequences (see post).
Overall these cases suggest that the courts are more likely to apply costs sanctions similar to those that apply under Part 36 in respect of defendants’ non-Part 36 offers than claimants’ offers. However, in any case where an offer falls outside Part 36 the court has a wide discretion as to costs and therefore the implications of the offer will be much more difficult to predict than if it were validly made under Part 36.
There have also been cases during the year which illustrate the difficulties that can arise for the application of Part 36 in the context of split trials (see post) and counterclaims (see post). We understand that the first of these issues has been reviewed by the Civil Procedure Rule Committee and is likely to be addressed in rule changes to be published shortly (which will also reflect the additional sanction for claimants’ Part 36 offers referred to under “Costs and funding” above).
Government and judicial encouragement of mediation has continued apace throughout this year. A new Court of Appeal mediation pilot started in April whereby personal injury, clinical negligence and contractual claims worth £100,000 or less, where permission to appeal has been granted, will automatically be recommended for mediation (see this post on our ADR blog). In February the government announced that it would take forward plans for automatic referral to mediation for all small claims, and in October a six-month pilot commenced at the County Court Money Claims Centre for claims of £5,000 or less where the parties have indicated that they agree to mediation (see post). In March Lord Justice Jackson confirmed that an authoritative mediation handbook for use by judges and litigators is being prepared, as he had recommended, and is planned for publication in 2013 (see post).
There have however been a couple of judgments in which the courts have defended a successful party’s refusal to mediate. In April the Court of Appeal held that where a party reasonably believed it had a watertight case, that might well be a sufficient justification for a refusal to mediate (see post). In October, the High Court adopted a similar approach (see post). Of course, a decision to refuse mediation should never be taken lightly, as the court may impose costs sanctions where it find the refusal to have been unreasonable.
For more developments relating to mediation and other forms of alternative dispute resolution you can visit our ADR blog which was launced in October.
Earlier this month the Council of the EU adopted the final text of a new Regulation to replace Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Brussels Regulation) – see post. The reforms will make significant changes but will not apply until early 2015.
In November there was a significant decision of the French Cour de Cassation which cast doubt on the effectiveness of unilateral jurisdiction clauses in France (see post), adding to the list of jurisdictions in which unilateral clauses are known to be potentially problematic (including Russia, Poland and China).
There have also been a couple of decisions in the long-running West Tankers dispute relating to the interplay between court proceedings and arbitration in the European context – which will remain an issue pending implementation of the Brussels Regulation reforms in two years’ time. In January the Court of Appeal upheld the High Court’s decision to enforce a declaratory arbitral award under section 66 of the English Arbitration Act 1996 which allows a judgment to be entered in the terms of the award – in this case, a declaration of non-liability (see post). This decision provides a possible alternative to an anti-suit injunction, which the ECJ ruled out for member state courts in its 2009 ruling in this case. In April the court found that an arbitral tribunal was wrong to decline jurisdiction over a claim for equitable damages for breach of an obligation to arbitrate (see post). The judgment illustrates that a party facing parallel proceedings in breach of an arbitration agreement should consider amending its claim to include a claim for damages and/or a declaration for an indemnity as soon as the respondent brings parallel proceedings.
In the insolvency context, in October the UK Supreme Court refused to enforce a US judgment made in insolvency proceedings against English resident defendants (see post). It held that the usual common law rules apply to the enforcement of judgments in personam made in foreign insolvency proceedings, namely that that a foreign judgment should not be enforced unless the defendant was present in the foreign jurisdiction or otherwise voluntarily submitted to the proceedings in its courts.
9. Class actions
In April the government published its consultation on competition law private actions, including radical proposals for a new “opt-out” collective action for competition claims on behalf of both consumers and businesses in the Competition Appeal Tribunal (see post). This is a significant departure from existing procedures for multi-party litigation in England and Wales, which generally require potential claimants to make a positive decision to opt in to the proceedings. The government’s response to the consultation is expected imminently.
The government has made it clear that it does not support a generic collective redress mechanism which would apply to all sectors. However, if proposals for a new form of action are successfully implemented for competition law claims, it may make it more likely that similar initiatives will be brought forward for other sectors.
EU action on collective redress has long been anticipated but is making slow progress. In February the European Parliament adopted a resolution in response to the Commission’s 2011 consultation “Towards a coherent European approach to collective redress” (see post). That resolution took a markedly less negative approach to the question of EU action in this area than had previously been the case but, importantly, continued to oppose an “opt-out” mechanism.
The European Commission’s work programme for 2012 listed “An EU framework for collective redress” for the fourth quarter of the year. This was described as a horizontal initiative covering several policy areas, with the aim of improving “the enforcement of EU law and access to justice for citizens and companies in situations where shortcomings exist under the status quo”. To date, however, no such initiative has been brought forward.
In November the government published its response to the European Commission’s controversial proposal for a Common European Sales Law (see post). It concluded that there are fundamental flaws in both the principle and the practical operation of the proposed law and called on the Commission to reconsider its plans.
This year also saw a number of interesting Court of Appeal judgments on contract issues. For example, in April the court handed down a judgment which illustrates the difficulties that can arise with endeavours obligations, particularly in the context of long term contracts (see post). In November it found that a clause allocating responsibility for third party claims applied (on the rather unusual facts of the case) to claims based on intentional wrongdoing, despite the absence of clear words to that effect. The decision re-emphasises that the court’s function is always to interpret the particular contract in the context in which it was made (see post).