Are you ready for the arrival of the Jackson reforms on 1 April 2013? We now know the substance of the new costs, case management and funding rules although some points of detail have still to emerge. We remind you of the main changes and conclude with a checklist of crucial dates.

Costs management

  • The costs management pilots will be extended to all multi-track cases in the county court, Chancery and Queen’s Bench Divisions begun on or after 1 April 2013. This does not apply to the Commercial and Admiralty Courts, and will not automatically apply to claims in the Chancery Division, Technology and Construction Court and Mercantile Courts where the sums in dispute at the first case management conference (CMC) exceed £2 million, excluding interest and costs. The budgeting rules will not apply to applications for judicial review in the Administrative Court.  
  • Where required, a costs budget on Precedent H must be filed and served by the date specified in the notice of proposed allocation or, where none is specified, by 7 days before the CMC. If no budget is filed, it will be treated as including court fees only unless the court orders otherwise.  
  • The new tougher proportionality test, under which proportionality trumps reasonableness and necessity, will apply to the assessment of costs in claims issued on or after 1 April 2013 and affect all case management decisions. Pre-action costs incurred before that date will be assessed in accordance with the present proportionality test.  
  • Where detailed assessment proceedings are begun on or after 1 April 2013, provisional assessment on paper will apply automatically where the costs claimed do not exceed £75,000.  

Case management

  • Relief from sanctions where deadlines have been missed will become much harder to obtain where the application is made on or after 1 April 2013 (see new CPR 3.9 and Fred Perry Holdings Ltd v Brands Plaza Trading Ltd). Note that under CPR 23.5, an application is made when the court receives the application notice. Expect a policy of zero tolerance from the courts.  
  • A new disclosure procedure, requiring the parties to file a disclosure report before the CMC, will apply in multi-track cases (excluding personal injury claims) where the first CMC takes place on or after 16 April 2013.  
  • The costs of expert evidence will be controlled by the court. The estimated cost of expert evidence on particular issues must be provided at applications for permission made on or after 1 April 2013.  
  • The court is likely to limit the number of witnesses and length of witness statements. Costs incurred on unnecessary or partially irrelevant statements will lead to adverse costs orders (see Cummings v Ministry of Justice).

Funding and costs recovery

LASPO Act

The Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 abolishes recoverability, introduces a new form of contingency fee agreement (damages-based agreements or DBAs) and imposes an additional penalty on unsuccessful defendants under Part 36. The Act also removes legal aid for many types of claim and prohibits payment and receipt of referral fees in personal injury cases.

Recoverability

After the event insurance premiums and success fees will cease to be recoverable from the losing party.  

  • This will not apply to certain insolvency claims until 2015 and there is also a moratorium concerning diffuse mesothelioma claims and publication and privacy proceedings.  
  • Premiums to cover the cost of expert reports determining liability and causation in clinical negligence cases will still be recoverable.  
  • Premiums and success fees will continue to be recoverable where the policy or conditional fee agreement is entered into before 1 April 2013.  

Damages-based agreements and conditional fee agreements

DBAs will be extended beyond the scope of employment claims to all civil disputes. The lawyer is paid only if his client succeeds and the payment is calculated as a percentage of the damages awarded to the client. There will be a cap on the payment under a DBA in personal injury cases of 25 per cent of damages (excluding damages for future care and loss) - the same cap applies to the success fee in personal injury cases brought under a CFA.

A cap of 50 per cent applies to the DBA contingency fee in all other cases (as compared to a 100 per cent cap on the success fee) except in employment cases where the 35 per cent cap remains unchanged. Counsel’s fees are included in the DBA cap (except in employment cases) but other expenses such as court fees are not.

Costs will be recoverable against opposing parties on the conventional basis (hourly rate and disbursements) and not by reference to the contingency fee. However, the indemnity principle will apply so that a party may not recover, by way of costs, more than the total amount payable by that party under the DBA.

Note that the caps on the success fee under a CFA or the payment under a DBA only apply to first instance proceedings and not to appeals. Partial or hybrid CFAs, where a reduced hourly rate is payable whatever, plus a success fee in the event of success, will continue to be allowed (see Gloucestershire County Council v Evans). By contrast, partial or hybrid DBAs may fall foul of the new regulations.

Qualified one-way costs shifting - QOCS

In personal injury cases, including clinical negligence, a claimant will in general no longer have to pay the defendant's costs if the claim fails, but the defendant will continue to have to pay the claimant's costs if the claim succeeds. There is no means test or minimum payment for claimants to qualify for QOCS but it will not apply where the claim is found to be fundamentally dishonest or is struck out. In the limited circumstances in which a claimant benefiting from QOCS will be liable to pay costs to the defendant, the claimant’s liability for costs will in general be capped at the level of damages recovered.

General damages increase

To make up for the fact that an injury claimant will no longer be able to recover a success fee or premium where they enter into a CFA or take out ATE insurance on or after 1 April 2013, there will be a 10 per cent increase in general damages. The 10 per cent increase does not apply where the claimant has entered into a CFA before 1 April 2013. It applies to claims for pain and suffering, loss of amenity, physical inconvenience and discomfort, social discredit, or mental distress (Simmons v Castle).

Additional Part 36 sanction for defendants

Defendants who do not accept a claimant's reasonable offer made on or after 1 April 2013 which they fail to beat at trial will be subject to an additional sanction equivalent to 10 per cent of the value of the claim or, for non-damages claims, 10 per cent of costs. It will be tapered down for claims over £500,000 and the maximum sanction is £75,000.

Tracks and portals

  • The small track limit will increase from £5,000 to £10,000 (except in personal injury and housing cases, where the ceiling will remain at £1,000) for claims issued on or after 1 April 2013. Further increases are also being considered.  
  • The road traffic accident (RTA) claims portal, presently for claims up to £10,000, will be extended to some other injury claims from the end of July 2013. Draft pre-action protocols for personal injury claims up to £25,000 in RTA and employers’ liability and public liability (EL/PL) claims have been published. Portal fees will be reduced from a maximum of £1200 to £500 from the end of April 2013.

Checklist of crucial dates

  • If you know you are about to miss a deadline or have already done so, apply for relief from sanctions before 1 April to try and avoid the stricter approach under the new CPR 3.9.  
  • CFAs with solicitors and counsel must be entered into, and ATE insurance obtained, before 1 April 2013 for the success fee and premium to be recoverable from the losing party. Notification must be given to the court and other parties within 7 days.  
  • If you wish to avoid provisional assessment of costs, bring detailed assessment proceedings before 1 April 2013.  
  • The costs budgeting regime applies to most multi-track cases issued on or after 1 April 2013. It is unclear whether it may be applied to cases begun immediately before that date. Where required by the notice of provisional allocation ensure you file a satisfactory costs budget in Precedent H format by the specified date.  
  • Claimants’ offers must be made on or after 1 April 2013 to qualify for the 10 per cent additional sanction.  
  • Ensure you have an estimate of the costs of expert evidence when applying for permission on or after 1 April 2013.  
  • Where the first CMC takes place on or after 16 April, you must file a disclosure report on form N263 no later than 14 days before the CMC. This applies to all multi-track claims (except those for personal injury) including those begun before 1 April 2013.  
  • Issue claims between £5,000 and £10,000 before 1 April 2013 if you wish to avoid the small claims track, or on or after 1 April if you don’t.