The Court of Appeal took the opportunity in July to confirm general damages will increase by 10 per cent where judgment is given after 1 April 2013 – whether or not a conditional fee agreement (CFA) is in place and irrespective of when the agreement was signed (Simmons v Castle (26.07.12)).
The Court gave reassurance that early notice was being given of the increase to enable all parties to prepare for the change. It also recognised that its decision would not "deliver justice in every case". However, the Association of British Insurers (ABI) has confirmed that it is to challenge the ruling. Having expressed its concern that the decision upsets the intended aim of the reforms to redress the balance between claimants and defendants, it seems likely the debate between the two camps will re-open.
A pre-trial hearing has been set down for 25 September 2012 to discuss how the matter should proceed.
The recoverability of CFA success fees and after the event (ATE) insurance premiums has been abolished by the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 – which has a target date of 1 April 2013.
However, the abolishment of those success fees is not retrospective. It is assumed, therefore, that with CFAs entered into up to 1 April 2013 that carry, for example, a 100 per cent success fee, the claimant will still recover (up to) a 100 per cent success fee and ATE insurance at the conclusion of the case.
Therefore, in cases concluded after 1 April 2013, and in light of Simmons, defendants face the prospect of funding both an increased payment of general damages plus payment of up to a 100 per cent success fee and an ATE premium. Further uncertainty is added to the mix by the introduction of a 10 per cent "award" (capped at £75,000) under the new Part 36 regime (where the defendant does not beat the claimant’s offer).
Should defendants start increasing their Part 36 offers by 10 per cent now – notwithstanding the new regime is not yet in force? If the defendant does not do so, will the court consider the claimant has beaten its own offer by applying the 10 per cent increase in damages – thereby pushing the award above the level of the defendant’s offer which is higher than the court would award now? If so, will the defendant be faced with lost Part 36 protection plus liability towards the Part 36 "bonus"? We presume so.
Commitment to the cause
There are a number of solutions for the MoJ to consider. One is to amend the Civil Procedure Rules to modify the effect of the Court of Appeal’s ruling by, for example, stipulating the increase in general damages will apply to all accidents on or after 1 April 2013 and/or to cases where the claimant is not represented under a (current version) CFA with a recoverable success fee.
The obvious factor to consider is of course that the ministerial team at MoJ is likely to change today. Ken Clarke has gone. It is also highly likely that Jonathan Djanogly will go as well.
We will continue to monitor developments and will be writing to the new Secretary of State on the issue. There is a clear need to address the interplay of the reforms. As we have advocated from the outset of the reform proposals, there must be an interlocking package of reforms to ensure the intended aim of fairness – and to avoid the risk of satellite litigation, including before the main vehicle for the reforms becomes active.
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