On 26 July 2012, in the case of Simmons -v- Castle, the Court of Appeal held that as of 1 April 2013 general damages in civil cases would increase by 10%. This would have meant that all claimants whose cases were decided on or after 1 April 2013 would benefit from the increase. The date was not arbitrary. This is the date when most of the long awaited (and criticised) costs reforms of the Lord Justice Jackson are due to be implemented. See the Law Society’s summary of these reforms. Most relevant to personal injury claimants is the abolition of the right to recover success fees from the paying party. Claimants may still be responsible for paying a success fee to their legal representatives at the conclusion of a successful claim. The idea of increasing general damages by 10% is to compensate claimants for some of what they may lose from their damages in meeting these cost liabilities.
However, the Association of British Insurers (ABI) applied to have the case re-opened arguing that claimants who entered into conditional fee agreements (CFAs) which provided for a success fee prior to 1 April 2013 would have the benefit of being able to claim the success fee from the paying party and have the 10% increase in general damages. They saw this as a windfall. The Association of Personal Injury Lawyers (APIL), on the other hand, pointed out that the decision provided an even playing field. It was always intended that the increase would apply to all claimants and not just those who are paying a success fee out of their compensation (not all personal injury claims are funded by CFAs). The alternative was to have claimants receiving different amounts of compensation on the same day for the same injury dependent upon whether and when a CFA had been entered into. It is generally thought that compensation for injuries in this country is too low anyway.
Following the application of ABI, the Court of Appeal heard submissions from the ABI, APIL and the Bar and its revised decision was given on 10 October 2012. Under the new ruling, the 10% increase will not apply to claimants who have the benefit of a CFA entered into before 1 April 2013. Essentially, if the claimant has the benefit of being able to claim a success fee from the paying party, they will not benefit from the increase in general damages. The increase will only benefit claimants who entered into a CFA after 1 April or who funded their case by some other method (irrespective of when they instructed their solicitor).
One aspect of the revision is the dilemma this might in theory cause a claimant solicitor about when to offer his client a CFA. 1 April 2013 is only a few months away. Even if a client approaches a solicitor now, some investigation may be needed to assess the risks of the case before offering a CFA. Does that solicitor offer the CFA before 1 April 2013 thereby protecting his client from having to pay a success from their own compensation? Or does he offer a CFA after 1 April 2013 thereby ensuring his client has the benefit of an increase of 10% in general damages? This could be a moot point if the increase does indeed balance out the liability a client has in relation to the payment of success fees. However, in practice, in the vast majority of cases, the likely success fee will be much more than the likely benefit of a 10% increase in damages for the injury and so in most cases it will be in the client’s interests to sign the CFA before the changes take effect.