11 September 2012 #Dispute Resolution
1 April 2013 is an important date for lawyers. It is when the new rules on recovery of legal costs in legal proceedings are planned to come into force.
These follow a lengthy review and consultation undertaken by Lord Jackson into the costs and expense of bringing legal claims in England and Wales. Issues such as “no win/no fee” arrangements, where lawyers take on cases and only receive payments if successful, and after-the-event insurance, where Claimants insure themselves against the risk of losing and recover the premium from the unsuccessful Defendant, were considered real impediments to the orderly conduct of justice. The odds were stacked up against Defendants who found themselves facing Claimants with little incentive to settle and facing increased claims for legal and insurance costs if they did settle.
Lord Jackson’s solution to this problem was to propose that success fees (i.e. the uplift received by lawyers if successful in the claim) and insurance premiums should not be recoverable from unsuccessful Defendants. Instead, there would be a 10% increase in the headline rates of general damages awarded in specified types of claims, with the Claimants left to meet the lawyers’ success fee and their insurance costs themselves out of their increased winnings. Claims included are Personal Injury (pain suffering and loss of amenity), Defamation, Nuisance (unlawful interference with enjoyment of property) and any other claim involving suffering inconvenience and distress. Parliament has legislated to abolish the recovery of success fees and insurance costs, but it was left to Judges to award higher levels of damages.
In anticipation of these rules changes, the Court of Appeal has used the recent case of Simmons v Castle to confirm that guideline rates of damages in these cases will indeed increase by 10% from 1 April 2012. The reason for announcing the increase now is so that parties can make appropriate plans for specific cases. This does leave a lacuna in that, as things stand, Claimants who start their claims before 1 April 2012 will benefit both from the 10% uplift in damages and also be able to recover success fees and insurance premiums from unsuccessful Defendants.
For Claimants, therefore, there is a potential advantage in commencing proceedings before 1 April 2012. Defendants may find it more advantageous to try and settle claims before 1 April 2012, although it is likely Claimants will factor in the rule changes to the amount of compensation they are prepared to accept.
Since the publication of this article, the Court of Appeal has announced that it is reviewing the decision in Simmons v Castle. A further update will be published on the Clarkslegal website when the outcome of this review is known.