Radical changes to litigation funding

January 2013

Radical changes to litigation funding

The drafts of some of the rules and regulations which will govern a big change in litigation funding have just been published. These include banning no win no fee agreements and referral fees, making after the event insurance irrecoverable from the other side, bringing in damages based agreements, bringing in costs budgeting imposed by the court and a greater consideration by the court when doing so of proportionality i.e. the value of the claim to each side how that compares to the costs are that are going to be incurred in pursuing that claim.

All of these changes are being brought in as a result of a comprehensive report undertaken by Lord Jackson, and published in January 2010, caused by rising concern about the increasing cost of litigation.

Although a lot of focus has been directed at the much criticised no win no fee arrangements, which from 1 April 2013 will be banned, there are also fundamental changes to the way in which the costs of litigation can be recovered and will be managed by the courts.

No win no fee arrangements

No win no fee arrangements were in fact very useful in non-personal injury cases to enable cases to be run which might otherwise not be, with the lawyer sharing the risk with the client. If you think you have such a case and still want to try and launch it under a no win no fee agreement with us, you will have to contact us urgently, since for there to be an effective no win no fee agreement the proceedings will have to be started before 1 April 2013.

Damages based agreements

No win no fee arrangements have been replaced by damages based agreements from 1 April 2013, when it will then be possible for us to agree that we will take our costs from the damages you recover, up to a certain limit which, in the draft regulations, is currently set at 50% in ordinary litigation, and 35% in employment matters.

After the event insurance

This is taken out in order to cover you against the cost of having to pay the other side if you lose, and it is currently to possible to recover this from the losing party as part of your costs if you win. From 1 April 2013, while you can still take such a policy out, you will no longer be able to recover the premium from the losing party.

Costs budgets

Although there are many other changes, the other important change which will affect all types of litigation is the requirement to provide costs budgets at the outset of proceedings and throughout.

When these are provided the court will then impose a budget costs figure on each party, which is what the court will expect them to expend in running the case, and, except in unforeseen and exceptional circumstances, each side will not be able to recover more than this budget figure from the other.

Proportionality

The court will also be looking carefully at the value of cases both in money terms, and in terms of the importance of the case to the parties, in deciding how much costs the court considers that it is reasonable to expend in each case, and which can therefore be budgeted and recovered from the other party. This is the much referred to principle of "proportionality", a concept which is not easy to apply in practice in a predictable manner.

If you have any questions about the best way of funding a case that you want to bring, or any questions arising out of the proposed changes please contact James Couzens.