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The Court of Appeal handed down a judgment today which will lead to an increase in general damages in most civil cases from 1 April 2013

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Neuberger: for-profit funders a useful model

The president of the Supreme Court has indicated his support for some form of contingent legal aid fund (CLAF), using third-party litigation funders as a model.

The idea of the CLAF has been debated for decades and is currently being examined by a working party, set up at the urging of Lord Justice Jackson.

In a speech on access to justice this week, Lord Neuberger highlighted the idea of “a privately funded charitable scheme to enable poorer people and small businesses to obtain access to justice”.

Mooted most recently by Lord Justice Jackson in his 2009 report on civil costs, Lord Neuberger said: “It would have involved a substantial sum by way of ‘seed-corn’ funding followed by arrangements whereby, in return for funding litigation costs litigants agreed to pay a proportion (which many thought would not have to be very large) of their damages or other relief to the fund.

“At the time, I understood that the conclusion of those who looked into it was that this proposal was not financially feasible.

“But I wonder. A similar scheme, funded by the Jockey Club, has been running in Hong Kong for some time, although it is fair to say that I believe that it is on a fairly small scale.

“Further, a number of privately funded non-charitable organisations have been established in London over the past 10 years in order to facilitate (or, depending on your view, to cash in on) litigation in this jurisdiction.”

Lord Neuberger acknowledged that such organisations selected the cases which they fund on the basis of their potential profitability rather than merit, but said they may nonetheless represent “a useful model”.

The cross-profession working party is chaired by Justin Fenwick QC and includes representatives of the Law Society, Bar Council and Chartered Institute of Legal Executives.

Last November, it said the benefits of a CLAF were uncertain, with concerns over the need for substantial seed funding among the problems.

As reported on Legal Futures today, the speech also included a devastating critique of legal aid policy and strong support for the idea of “quick and dirty” online dispute resolution for smaller claims.

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Head of Claims at ARAG, Chris Millward

Head of claims at ARAG, Chris Millward

Leading legal expenses provider ARAG has appointed Chris Millward to the senior management position of Head of Claims, following an extensive recruitment process.

Chris joined ARAG in 2007 and already had more than 6 years of legal expenses insurance experience when he came to the company.

He replaces Paul Upton who has headed up ARAG’s claims function since the company’s UK launch in 2006. While leaving the company as an employee, Paul will continue to work with ARAG on a number of key strategic projects.

Tony Buss, ARAG’s Managing Director, commented on the appointment: “It was important that we conducted a thorough search and selection process for such a critical role in our business, but I am delighted that we have found the outstanding candidate to join our senior management team within the company.”

“I’m equally pleased that Paul will continue to work very closely with us, to help maintain the excellent standards on which ARAG has built its success during his decade of service, at this key stage in our growth.”
Chris took up his new role on June 1st.
He added: “I’m very excited to step up into this important position and appreciate the faith Tony and the ARAG management board have placed in me. I wish to thank Paul for all his help and hard work over the years; I have learned so much from him. I’m now looking forward to building on the fantastic reputation he has established for our claims service.”

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Perrin: statutory regulation doesn’t necessarily bring right answers

American lobbyists against third-party funding were yesterday told that they would be better off trying to reform their own system than creating “a fuss” in a market where participants are “trying to do this right”.

However, the current system of voluntary regulation of funders came under attack for its code of conduct, lack of reassurance for consumers and being part of a “toxic cocktail” that could sent litigation in England and Wales down the road of that in the US.

Leslie Perrin, chairman of the Association of Litigation Funders and chairman of Calunius Capital, told a Westminster Legal Policy Forum seminar on third-party funding that statutory regulation of funders, as pressed for by the US Chamber of Commerce, “doesn’t necessarily bring the right answers”.

He pointed to the statutory regulation of damages-based agreements, which does not make provision like the code of conduct for issues such as termination and dealing with conflicts.

Addressing the Institute for Legal Reform (ILR) – part of the US Chamber of Commerce and sponsor of the event – he added: “Surely your organisation would be better served if you redouble your tort reforms efforts in the US… That would be a better dividend than creating all this fuss about an industry that is trying to do this right.”

Later, closing the conference, Professor Rachael Mulheron, a member of the Civil Justice Council who sat on the working party which drafted the self-regulatory regime, said that the code is “working well and fit for the purpose” it was intended. She emphasised that judicial oversight is a key part of the funding regime in England and Wales.

The ILR’s Mary Terzino argued that with US Chamber of Commerce members employing a million people in the UK, and litigation funding being a global industry, it had a legitimate interest in what is happening in England and Wales.

While the voluntary code “addresses some of the potential problems” with funding, Ms Terzino highlighted a range of concerns about it, including: that the independent advice on the funding agreement can be paid for by the funder; that it makes no provision for disclosure of the existence of the agreement to the court and opposing party; and that there are no effective sanctions for breach.

She argued that as the market grows, less reputable players will come in. “Legitimate players should have nothing to fear from statutory regulation,” she said.

From the floor, Susan Dunn of Harbour Litigation Funding argued that the risk of adverse costs represents a major difference from the US system, and said the security for costs procedure means any defendant lawyer worth their salt will find out how a claimant is funded.

But Ms Terzion’s call for statutory regulation was supported by Nigel Muers-Raby, chairman of the Consumer Justice Alliance, who said that if third-party funding is going to start supporting consumer cases after Jackson, “then they need more reassurance that they won’t be left high and dry”.

Ken Daly, a partner in the Brussels office of US firm Sidley Austin, claimed that unregulated third-party funding is part of the “toxic cocktail” of factors that could make US-style “litigation abuse” more prevalent in the UK – the argument made during the seminar that the courts can stop abuse was used in the US and manifestly failed.

Arguing that statutory regulation is needed to stop frivolous litigation, he said: “If a profit can be turned on a meritless case, it is economically rational to pursue it.”


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Heathcote Hobbins: easing the path to justice

Intellectual property (IP) specialists have welcomed the introduction of a small-claims track for the Patents County Court but said its limit will have to rise quickly.

Currently for cases with damages of up to £5,000, the track aims to provide copyright, trademark and unregistered design holders the option of pursuing basic disputes through an informal hearing.

The new procedure went live last month and is the product of the Jackson report – which identified the problem of high costs in IP disputes – and the subsequent Hargreaves review of IP, which recommended the small claims track. This process also led to the £50,000 costs cap in Patents County Court actions.

Business minister Michael Fallon said: “Lower legal costs will make it easier for entrepreneurs to protect their creative ideas where they had previously struggled to access justice in what could often be an expensive progress. A smarter and cheaper process is good for business and helping businesses make the most of their intellectual property is good for the economy.”

Julian Heathcote Hobbins, general counsel at the Federation Against Software Theft (FAST), welcomed the development. “It promises to ease the path to justice for smaller copyright holders that have been effectively frozen out of the traditional judicial system, which for them is unduly burdensome and complicated,” he said.

Robin Fry, a partner at DAC Beachcroft LLP and member of FLAG, added: “Intellectual property claims have, until now, been unfairly excluded from the small claims court, leaving many creatives, developers and designers adrift without a practical measure to prevent unlawful copying. The judicial system will soon realise that these kinds of disputes can, in many cases, be straightforward and that infringement can be readily identified. Once this is established, the current £5,000 cut-off figure must be raised significantly.”

Mr Heathcote Hobbins added: “Although, in the first instance, a limit of £5,000 seems sensible, keeping the threshold so low for the long-term may risk unfairly excluding many smaller software houses. It’s important that the threshold for claims adequately reflects the reality faced by software companies today, to enable them to resolve their disputes simply and cheaply and relieve the burden of these cases from the courts.

“To boot, the icing on the cake would be to be able to initiate the claim online akin the debt recovery service where claims are slam-dunk.”


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Mastercard: legal uncertainty over appeal

Lawyers for one-time Law Society official and Chief Financial Services Ombudsman Walter Merricks have filed an application for permission to appeal the Competition Appeal Tribunal’s (CAT) decision to dismiss the proposed £14bn collective action against Mastercard.

The claim was a follow-on action after Mastercard was found to have infringed EU law by imposing charges (known as ‘interchange’ fees) on the use of MasterCard debit and credit cards. It was claimed that this increased costs for retailers and consumers.

It was brought on behalf of a class of 46m people who used a Mastercard over a 16-year period, but the CAT dismissed Mr Merricks’ application for a collective proceedings order because it was not satisfied that his experts would be able to get the evidence to show that the illegal fees were then passed on to consumers in the form of higher prices.

Further, it said there was “no plausible way of reaching even a very rough-and-ready approximation of the loss suffered by each individual claimant”.

In a statement, Mr Merricks’ solicitors, Quinn Emmanuel, said there was “some legal uncertainty” as to whether there was a direct right of appeal to the Court of Appeal or whether it needed to go to the Administrative Court for a judicial review.

“However, given that this is the first ever judgment on an application for collective proceedings, and the very significant public policy issues at stake, Mr Merricks is confident that the case will ultimately end up before the Court of Appeal and that the appeal or judicial review will succeed.”

His counsel are Monckton Chambers’ Paul Harris QC, and Marie Demetriou QC and Victoria Wakefield of Brick Court Chambers.

Mr Merricks acknowledged that he could be in for “a long fight” but argued that Mastercard was trying to argue “both ways” as it also faces claims from retailers, in which he said the credit card company submitted that the retailers passed on the illegal fees to consumers.

He continued: “I believe that the tribunal was wrong in its analysis and in the legal test that it applied. The conclusion that it would not be enough for me to prove the loss suffered by the class as a whole and that I needed to show that I could calculate the actual loss suffered by each individual consumer cannot be correct.

“The government decided that a new regime was needed to allow consumers to recover the losses caused to them by illegal, anticompetitive conduct engaged in by big business. If I can establish the total amount of harm that Mastercard has caused to UK consumers, then why should consumers then get nothing at all if I cannot calculate the precise loss that each individual consumer suffered?

“Rather than allow consumer recovery, this would reward unlawful conduct by allowing companies to keep their ill-gotten gains. An effective consumer redress regime that allows for private enforcement can be a real support to the public enforcement of competition law. This is what the government and the competition authorities wanted to bring about.”

Mastercard has until 8 September to file a response to the application.

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Hurndall: relationships restored

The London Borough of Havering has saved an estimated £240,000 of costs and significantly reduced the time required to resolve three recent disputes, according to arbitrators, the Centre for Justice.

Centre for Justice uses lawyer assessors to investigate and then adjudicate on the case if a settlement is not possible, and claims that the public sector is losing up to 10% of its revenues annually in handling complaints and disputes through the courts.

The three cases, which were all resolved to the satisfaction of all parties, within two months of the Centre for Justice being appointed, represent the wide spectrum of the borough’s legal issues and involved sums ranging from £20,000 to more than £4m.

One case involved the claim to a new tenancy by a local business with a counterclaim for arrears of rent and breach of covenant by the borough. The case was successfully concluded with the business now fully operational with a new tenancy from the borough.

The second case involved a dispute over a contract for the provision of social care services to council adult social care clients, with the supplier, council and clients all as parties. This case was settled amicably, the contract renewed and the clients remain in situ.

The third concerned an alleged error in the council’s registry offices, which was claimed to have resulted in the postponement of a marriage and the costs of postponement.

Alex Cumming of the London Borough of Havering’s legal department said: “The Centre for Justice was cost effective and met all our objectives. I would be very happy to recommend the process and we will be using it again.”

Anthony Hurndall, director of the Centre for Justice, said: “Our form of arbitration does not rely on an adversarial approach to arrive at a result. Our trained arbitrators deal directly with the parties and usually achieve an amicable settlement without the need for a formal award.

“It is evidence of the integrity of the service that, with each of the London Borough of Havering cases, relationships have been restored and the parties continue to do business together.”

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Augusta Ventures LLP

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Augusta provides finance for commercial claims via its Trinity product, which was launched in November 2013. Trinity opens up financing of small to medium claims in England and Wales. It is transparent, flexible and efficient, and aligns the interests of all parties – the claimant, lawyer, financier and insurer.

The on-line application platform allows finance requests to be processed with little fuss, and funds dispatched quickly.  In addition, Trinity can also be coupled with a leading ATE product at a flat 13.2% premium.

Trinity is available in over 150 law firms, and can mean the difference when pursuing your claim.

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Supreme Court: case leapfrogged

Supreme Court: case leapfrogged

The Supreme Court is to return to the issue of recoverability after granting permission to appeal in a case leapfrogged from the High Court about costs in defamation.

Earlier this year, Mr Justice Mitting said the highest court needed to resolve the tension between earlier rulings of the House of Lords and the European Court of Human Rights on whether success fees should be recoverable in publications proceedings.

However, in Miller v Associated Newspapers Limited [2016] EWHC 397 (QB), he ruled that recoverable after-the-event insurance (ATE) premiums are not incompatible with a publisher’s right to freedom of expression, but that will be under the Supreme Court’s scrutiny too after granting Associated Newspapers’ application to appeal.

Successful claimants can still seek payment of additional liabilities from defendants in publications and privacy proceedings.

The case involved proceedings brought by a businessman on a conditional fee agreement against the Daily Mail arising from an article published about his business relationship with the then Commission of the Metropolitan Police, Sir Ian Blair.

The trial took place in 2012 and Mr Miller was awarded damages of £65,000 and his costs. An appeal to the Court of Appeal was dismissed with costs, and permission to appeal to the Supreme Court was refused.

The claimant’s base costs of trial and the appeal were agreed at £633,006 and paid by the newspaper. The disputed success fee and ATE premium amounted to £835,379.

The Senior Costs Judge, Master Gordon-Saker, referred to the High Court the question of whether the award of the additional liabilities to the claimant would be incompatible with the defendant’s article 10 rights.

On success fees, Mitting J said that although he was bound to follow the House of Lords’ 2005 ruling in Campbell v MGN, this conflicted with the subsequent European Court of Human Rights decision in 2011, MGN v United Kingdom.

However, the judge said the ATE premium should not be treated in the same way. There was a different statutory source and the social considerations which meant it was “possible to envisage an outcome in Strasbourg under which the success fee regime remains condemned but the ATE insurance scheme is not”.

The same issue arose the following month in Eight Representative Claimants and Others v MGN [2016] EWHC (Ch), relating to the Daily Mirror phone hacking cases. Mr Justice Mann said it might be “equally appropriate” as in Miller for him to grant a certificate for a leapfrog appeal. However, at this stage it has not been conjoined.

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Sampson: using CFA template should become obligatory

The Legal Ombudsman (LeO) last year ordered remedies totalling nearly £1m in complaints relating to 'no win, no fee' agreements – a result it attributed to the harsh post-Jackson operating environment for law firms.

LeO called on frontline regulators to make the use of transparent, standardised conditional fee agreements (CFAs) a matter of professional conduct, and queried whether the ‘no win, no fee’ label should continue to be used.

A report published today said LeO ordered a total of £944,177 in financial remedies between 1 November 2012 and 30 November 2013, including compensation and fee reductions.

While acknowledging that CFAs were welcome as access to legal aid diminished, and they could “offer customers an affordable and simple solution”, it said there was evidence that firms operating in an “increasingly aggressive” market were prioritising volume over the rigorous vetting of cases.

Altogether 600 CFA-related complaints were made to LeO – 6% of the total. Of these, 70% were in personal injury

LeO revealed it had warned regulators that 'no win, no fee' presented significant potential risks to consumers: “A business model which consistently overvalues the chances of success can drive lawyers into unethical practice in order to avoid financial meltdown.

“It is for these reasons we have made referrals to regulators; to assist them in looking for patterns and risks so they can inform future action to prevent market distortions and consumer detriment.”

Many consumers were not aware, for example, that costs may have to be payable from damages, following the removal of recoverability in the Jackson reforms. “We have seen cases where people have been hit with surprise costs after winning their case. Usually, this entails confusion around the amount payable towards a success fee, but can also involve payment of disbursements and the other side’s costs.”

LeO highlighted the Law Society’s model CFA for use in personal injury and clinical negligence cases as a basis for good practice. Due care on the part of firms should be “standardised… perhaps by enshrining it into regulatory codes of conduct, while universalising” CFA and damages-based agreement contracts.

In what it called “one of the worst cases seen by the ombudsman”, Paul Stacey, aged 42, was told to pay £24,000 to a firm that had pulled out of his case, after it found out that he had represented himself in court and won.

The firm had dropped his case half way through, stating it had no chance of winning. LeO ruled Mr Stacey should pay nothing, and also be compensated.

Other case studies presented in the report included a woman who was charged £15,000 after her PI claim was unsuccessful, despite a CFA being in place; a woman who faced £30,000 in costs in a PPI mis-selling case, after a firm failed to take out an insurance policy on her behalf; and a woman who was compensated after a firm withdrew from her PI case unfairly.

Chief ombudsman Adam Sampson said: “The ‘no win, no fee’ market has become increasingly aggressive, with many law firms competing for cases and sometimes prioritising sourcing a large number of customers over a careful selection process…

“This report raises genuine questions as to whether the ‘no win, no fee’ label should be used at all.”

Lynsay Taff, director of communications for the Advertising Standards Authority, said: “‘No win, no fee’ claims can be misleading because sometimes the client is liable for undisclosed costs, such as insurance, if they lose their case. That’s unfair and can be financially damaging to a consumer.

“We’ve banned ads that have failed to give that kind of information upfront and we advise any advertiser making such a claim to ensure that the commitment is genuinely without cost.”

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Imran Akram, CEO, Asons Solicitors

Founded in 2009 by brothers Kamran and Imran Akram, Asons Solicitors employs over 250 staff at its Bolton HQ and has established itself as one of the north-west’s largest law firms.

As a new start up, Asons needed to find a way to compete with the many well-established giants of the personal injury sector. Investment in technology was required in the form of a case management software solution that was user-friendly, adaptable and would allow for the consistent management of high volumes of cases with the utmost quality and efficiency.

A Proclaim Case Management system was chosen as it provided a centralised desktop solution with a consistent look and feel for all of Ason’s case types, not just personal injury but also other areas they may choose to go into. The integrated Proclaim development toolset also ensured the system would be future-proof as it allowed for straightforward expansion creating confidence for ambitious growth plans.

Proclaim has been fundamental in giving Asons a competitive edge. Staff numbers have grown from 3 to over 250 (8,200% growth) since its inception. All routine tasks are now automated allowing fee earners to fully focus on client relationships rather than non-value adding administration. As a result of this, 88% of the firm’s staff are revenue generating fee earners with only 12% dedicated to ‘support’ functions.

All claims are processed and stored 100% digitally, even including the scanning in of all incoming hard copy documentation. Proclaim’s integrated reporting suite has proved essential for providing performance intelligence and monitoring business KPIs, ensuring profitability is maximised.

“Proclaim has provided us with the power to continually enhance our processes, drive out waste and increase margins”, says Imran Akram, CEO.


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Rob Crompton of this rapidly expanding Leeds based practice talks about how Proclaim enables service excellence and rapid file progression.

About Michael Lewin Solicitors:

  • Employing 150 staff
  • Specialising in litigation work including injury claims and debt recovery
  • Experienced 700% growth since implementing Proclaim

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Vernon: costs of claims last year would have been double without NHSLA

NHS Resolution, formerly the NHS Litigation Authority (NHSLA), is planning to set up a Faculty of Learning to bring all its internal and external training schemes together, it has emerged.

The organisation is also considering how to extend its new early notification process for high-cost maternity claims to cover other high-cost claims, according to its business plan for 2017-18.

Meanwhile, it intends to continue providing “expert input” to the Department of Health (DoH) plans to introduce fixed costs for clinical negligence claims worth up to £25,000. It emerged in February this year that the NHSLA was pushing for an upper limit of £100,000.

NHS Resolution intends to provide further “expert input” on the DoH consultation, launched last month, to introduce a rapid resolution and redress scheme for severe, avoidable birth injuries.

Health secretary Jeremy Hunt told the House of Commons last month that the former NHSLA would “radically change its focus” following the name change, helping the NHS become the “world’s largest learning organisation”.

According to the business plan, the Faculty of Learning would “bring together all of our internal and external training offerings into one accessible repository”.

NHS Resolution went on: “The faculty will be responsible for signposting and delivering an expanding suite of solutions, delivered directly or in partnership with key system partners.”

In its first year the faculty would focus on “effective local dispute resolution”, learning from inquests, “effective delivery of candour” and supporting trust boards with the “governance and management of performance concerns”.

NHS Resolution said training provided by the faculty would help reduce the number of “frustration claims” – claims only pursued because of a failure to address the matter appropriately at an earlier stage.

The business plan set targets for the new early notification process for high-value maternity claims.

Where liability is admitted, it said that from 2018 onwards liability costs should be cut by 20% and the time between the incident and admission of liability should be reduced by one year.

On mediation, NHS Resolution said it wanted to have successfully mediated at least 50 cases through its claims mediation service by April 2018. After that, a further target would be set on reducing “frustration claims”.

During this financial year, the organisation said it would be carrying out “deep dives” into the priority areas of learning from inquests, mental health, ambulance service claims and further analysis of maternity claims linked to the early notification scheme.

By the end of the year, NHS Resolution said it would “capture learning data” from 95% of maternity incidents, reported via the new notification procedure.

In their introduction to the business plan, Ian Dilks, chair of NHS Resolution, and chief executive Helen Vernon said: “Whilst court proceedings remain inevitable for intractable cases or those involving points of principle, we believe that resolution is possible in many cases without formal and costly litigation.

“The financial challenges currently facing the NHS mean that we must take every opportunity to save money and remove unnecessary expenditure.

“Without our interventions in 2016/17 to negotiate claims values, defend claims where there was no liability and challenge excessive legal costs, we estimate that the costs of claims to the NHS would have been at least double.

“Significant costs would have accrued to the service as a result of the suspension of practitioners due to performance concerns and millions of pounds of legal costs expended on protracted contractual disputes.”

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Grant: amended Table B

The government yesterday unveiled its proposals for the new fast-track fixed fees – and with the basic RTA portal fee set to be slashed by more than half, they were even worse than claimant lawyers had feared.

Meanwhile, personal injury cases that fall out of the portal are to be subject to fixed fees in line with Lord Justice Jackson's recommendation but at lower levels than he put forward.

The portal fee for RTA cases worth up to £10,000 will fall from £1,200 to £500 next April depending on the results of a stakeholder consultation released by justice minister Helen Grant yesterday.

Litigation Futures has spoken to several personal injury firms that were modelling the work on the basis of £600, and it remains a possibility that the fees will reach that figure after the consultation.

The fee will be £800 for RTA claims worth £10,000 to £25,000 in the new extended part of the portal.

The planned fees for the horizontal extension of the portal to employer’s and public liability cases (EL/PL) are £900 for cases up to £10,000 and £1,600 for cases up to £25,000.

The current stage 3 fee of £250 for a paper hearing and £500 for an oral hearing will remain, and also apply to EL/PL claims at stage 3.

Ms Grant said that for claims which exit the portal, she has decided to introduce “a matrix of fixed recoverable costs based on Jackson’s Table B but amended both to take account of inflation since the table was first produced (in 2009), and reduced throughout by an amount intended to reflect the forthcoming ban on referral fees”.

This is likely to cause significant anger among claimant lawyers as there was no suggestion that referral fees were built into Lord Justice Jackson’s figures.

Where Table B suggested, for example, that the fee for RTA cases that settle before issue should attract a fee of £800 plus 20% of the damages, the government’s proposal is the greater of £550 or £100 plus 20% of the damages. There are similar cuts all the way along the litigation process, with Table B’s figure of £3,250 plus 20% of damages for an RTA settling post-listing and pre-trial reduced to £2,655 plus 20%. The only fees that have been brought over from Table B without alteration are those for advocacy at trial.

In tweets yesterday, the Association of British Insurers hailed the figure as good news for all motorists. “Reduced legal fees strips the fat from system and strikes a blow to the ambulance chasing compensation culture,” it said.

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Brennan: portfolio continues to mature

Listed third-party litigation funder Juridica is to pay $16m (£10.6m) in dividends early next year after securing gross cash proceeds of $17.5m from one of its investments.

In a statement released yesterday to the London Stock Exchange, the AIM-listed company said the proceeds “represent a realised gain on the company’s investment and not a return of capital. The return generated is in line with the company’s expectations, as previously reflected in the unrealised profits of the company”.

Payment is due at the end of the year, and the dividend of 10p per share will be payable on 15 January 2014 to shareholders registered at 13 December 2013.

The statement said: “This latest successful investment return for Juridica continues the company’s strong record of investment selection and brings the lifetime gross proceeds achieved by the company to $105m. After payment of the dividend… Juridica will have returned $64m (or approximately £42m) to shareholders in the form of $54m in dividends and $10m as a result of the September 2010 share buy-back scheme. Juridica has so far raised £115m ($210m) of capital in two tranches.”

Lord Brennan QC, Juridica’s chairman, said: “We are pleased that the portfolio continues to mature and deliver cash proceeds. The board anticipates making dividend payments to shareholders over the next 12 months if the portfolio develops as expected; and will continue to pursue the company’s objectives of dividend income and NAV [net asset value] growth.”

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Royal Courts of Justice: decision time

Litigation Futures is now publishing a monthly summary of key costs-related court decisions. These are provided by CaseCheck

Cummings & Ors v The Ministry of Justice [2013] EWHC 48 (QB)

Application by defendant for costs incurred in consideration and preparation of struck-out witness evidence disclosed by the claimants at a pre-trial review.

Held: Although frequently disregarded, the Queen’s Bench Guide at paragraph 7.10.4 concerning witness statements is clear: a witness statement should consist only of the relevant issues and should be as concise as the circumstances allow; admissible or irrelevant material should not be included (paragraph 7.10.4(2) and (3)).

As such, claimants’ costs of preparation of excluded witness statements or parts of witness statements disallowed and order made for claimant to pay defendant’s costs incurred in respect of that evidence. It was for the costs judge to decide whether any costs should be allowed for the time spent identifying, contacting and visiting witnesses who may, but did not, have relevant evidence to give.

Full ruling here.

Jones & Ors v Secretary of State for Energy And Climate Change & Ors [2012] EWHC 3647 (QB)

Determination of individual and common costs in group litigation arising from partially successful claims for non-malignant and malignant disease caused by exposure to dust and fume in the course of employment.

Held: In order to avoid unnecessary complexity and costs, it was more appropriate to express an award by reference to the percentage of the total costs and not on an issue-by-issue basis. There was no reason to depart from the general rule that the unsuccessful party will be ordered to pay the costs of the successful party be reference to the litigation as a whole.

In the present case, the claimants were successful at trial and prima facie entitled to costs: they had succeeded in establishing that the defendants had been in breach of duty although causation was not proved in some of the lead claims.

It was not appropriate to exclusively consider events at trial when determining reduction of costs. The proper approach was a broad brush assessment of the appropriate percentage reduction based on the course and outcome of the litigation as a whole, taking into account relevant factors identified in the CPR. Appropriate reduction was assessed at 20%.

An application by the claimants for an order that the defendants also pay interest on disbursements from the date of payment deferred, the claimants ordered to disclose provisions of conditional fee agreements relating to the disbursements for consideration at the forthcoming hearing.

Full ruling here.

Re A (A Child) [2013] EWCA Civ 43

A local authority sought a wasted costs order against a firm acting in care proceedings on the grounds that an application for permission to appeal amounted to improper, unreasonable or negligent litigation conduct (s.51(6) of the Senior Courts Act 1981).

Held: Despite poorly conducted litigation, none of the errors were causative of costs being wasted. The law on wasted costs was clear, as expounded in Ridehalgh v Horsefield [1994] EWCA Civ 40 and Harrison v Harrison [2009] EWHC 428 (QB). Such an order is compensatory rather than punitive or regulatory. It would therefore be outside the court’s jurisdiction to award costs simply to mark the court’s condemnation.

In the present case, the lack of full and frank disclosure by the solicitors at the first without-notice hearing, a mis-statement as to the time available for case preparation, a serious and gross failure to disclose material promptly and a failure to send essential reading to an instructed expert did not cause wasted costs.

Further, the manner in which proceedings were pursued was not the result of any improper or unreasonable act or omission of the solicitors but arose almost entirely from the over-optimistic judgment of counsel, who was not included in the application.

Full ruling here.

DD v Durham County Council & Anor [2013] EWCA Civ 96

Appeal against (i) a decision to refuse leave under s.139(2) of the Mental Health Act 1983 concerning the scope of the duty of an approved mental health professional to exercise independent judgment and (ii) part of an order requiring the appellant to pay the costs that the first respondent had been ordered to pay to the second respondent.

Held: The low threshold under s.139 was met: the scope of the duty was a question of law of some importance that required to be remitted to a judge. Regarding the costs order, the appellant should not have been made responsible for the costs of the second respondent.

Although it was reasonable for the first respondent to join the second respondent, the fact that the law was not clear was not a basis for making the appellant pay those costs. The first respondent had failed on the point against the second respondent and should bear the costs on ordinary principles.

Full ruling here.

Knox D’arcy Operations Ltd & Anor v Manches LLP [2013] EWCA Civ 33

Appeal of, among other things, an order requiring a firm, who retained and used money received into their client account from the claimants to settle fees contrary to an assignment, to pay 75% of the claimants’ costs.

Held: There was no arguable basis for a challenge to the costs order. The judge did not err in finding that the claimants indicated with sufficient certainty that there had been an assignment nor in principle in his approach to costs. Although the claimants had failed on their damages claim, they achieved overall a substantial measure of success.

Full ruling here.

Barnett & Ors v Nigel Hall Menswear Ltd [2013] EWHC 91 (QB)

Appeal against striking-out of claim under CPR 3.4(2)(b) raising the issue, among other things, as to whether a cost complaint was a relevant factor in a determination of Henderson abuse ((1843) 3 Hare 100, as further explained in Johnson v Gore-Wood [2000] UKHL 65).

Held: Evidence of the defendant’s financial circumstances, although untested, was relevant: any deterioration in a defendant’s commercial or financial circumstances, including any which occurs in a period of delay in the proceedings, is part of the relevant background, although the weight to be attached is a matter for the tribunal hearing the case.

In the present case, it would not be fair to subject the defendant to the stress and expense of addressing the merits of the claim for a second time, especially when there was evidence that the defendant could not now afford legal representation.

Full ruling here.

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Houses of Parliament

Lord Lang said access to justice review should not be “unduly restrained”

The government’s plan to introduce a stricter test on judicial review outcomes “risks undermining the rule of law”, the House of Lords constitution committee has warned.

In their report on the Criminal Justice and Courts Bill, which will enter its committee stage in the Lords later this month, the peers said judicial review was central to the rule of law.

The current test gives the courts a discretion to reject judicial review applications where they are satisfied that it was inevitable that the decision involved made no difference to the result.

The new test, set out in clause 64 of the bill, would require courts to reject applications where the outcome would not have been “substantially different”.

Peers said the new test changed “the current test of inevitability to a new test of high likelihood”, raising an issue of “both of principle and practical concern”. They said lowering the threshold risked “unlawful administrative action going unremedied”.

Peers quoted from a statement made by Lord Neuberger, the president of the Supreme Court, in his evidence to the committee.

Lord Neuberger said that although some “hopeless applications” got through, because judicial review was so important, people should accept that “inevitably that there will be some applications that are unmeritorious but nonetheless get pursued and hold things up.

“But provided it does not get out of hand—I have no reason to think that it has got out of hand—it is a small price to pay for a healthy judicial review system.”

The constitution committee added that clause 64 could turn the permission stage of a judicial review hearing into a “full dress rehearsal of the substantive hearing”.

Peers also attacked clauses 67 to 70 of the bill, which would impose tougher costs rules on interveners and restrict the ability of the courts to make protective costs orders (PCOs) in judicial review cases.

The committee said that peers may wish to consider, as the bill progressed through the House of Lords, “whether the restrictions in clauses 67 to 70 impose too great a limit on effective access to justice”.

Lord Lang of Monkton, the committee chairman and a Conservative peer, said: “The Criminal Justice and Courts Bill will clearly have a significant impact on judicial review.

“Judicial review is an important means for citizens to challenge the legality of decisions by the state, so access to the process should not be unduly restrained.”

Justice minister Lord Faulks told the House of Lords earlier this year that ministers “firmly reject” the accusation that changes to the rules for payment of legal aid in judicial review cases would undermine access to justice.

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Coulson J: issues “rather different” from ordinary TCC case

The High Court has ruled that an after-the-event (ATE) insurance policy does not provide sufficient security for defendant’s costs of up to £2.75m, because of the risk of insolvency proceedings in a foreign jurisdiction.

The court heard that property developers Harlequin claimed over $60m from accountants Wilkins Kennedy, on the grounds that the defendants were “responsible for the delays and cost overruns” on a resort in the Caribbean.

Coulson J said that construction works on the Buccament Bay development in St Vincent and the Grenadines (SVG) were “significantly delayed and are still ongoing”.

He went on: “There is an investigation into the scheme by the Serious Fraud Office, and there have been a number of different sets of proceedings, some started by disgruntled investors, and some involving attempts to put the claimant companies into liquidation.”

Coulson J said that, under the terms of the ATE policy provided by DAS, there was a “real risk” that if Harlequin became the subject of insolvency proceedings in SVG, “any sums under the ATE policy may have to be paid out by DAS, not to the defendant, but to the claimants’ insolvency practitioner in SVG”.

Delivering judgment in Harlequin Property (SVG) and another v Wilkins Kennedy [2015] EWHC 1122 (TCC), Coulson J said: “That would be significantly detrimental to the defendant’s rights. It could even make the ATE cover worthless for them”.

The judge went on: “Whilst I accept that DAS’ reputation is such that they would not get together with the claimants and commute the policy behind the defendant’s back, it is quite another thing if DAS had a legal liability to pay an insolvency practitioner in SVG rather than the defendant.”

Coulson J said that unless DAS was “contemplating paying the same sum twice over”, the defendant would have no protection.

Mr Justice Coulson said this concern linked back to the “principal difficulty for all defendants faced with the offer of an ATE insurance policy, namely that they are not parties to that policy, and are therefore being offered protection which is, in one sense at least, at arms’ length”.

Earlier the judge said some of the issues in the case were “rather different” from those arising in an ordinary Technology and Construction Court case, “involving as they do allegations of fraud involving both the employer and the contractor, and an allegedly fundamental conflict of interest on the part of the defendant”.

Coulson J agreed with Harlequin’s counsel that there was no “realistic risk” that DAS would enter into an arrangement with the claimants to commute the ATE policy.

“I find that there is no realistic risk that DAS will enter into some arrangement with the claimants in order to deprive the defendant of the security otherwise provided by the ATE policy.

“I can see no basis for saying that it is even a possibility that DAS would risk their reputation in the insurance market by acting in a way that they have expressly disavowed.”

However, he ruled that the defendant’s second ground of objection to the ATE policy, based on the risk that they might not recover anything in the event of insolvency, was made out.

The judge added that he had previously made it clear to the parties that this should not “be seen as some sort of nuclear option, whereby only the payment of a sum into court or the provision of a bank guarantee” would be sufficient.

“It seems to me that the parties have come so far in endeavouring to reach agreement on the basis of the ATE policy that it would be a great shame if they could not go the extra step and deal with the single point that I consider to be outstanding.

“It seems to me that this could be dealt with either by the provision of a direct indemnity, or an endorsement which provided that any costs ordered to be paid to the defendant would be paid directly, without set-off.”

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Young: lawyers generating new work

Young: lawyers generating new work

The only litigation funder targeted at the SME market says it has a £60m warchest that will allow it to fund 150 new cases in 2015.

In its first year Augusta Ventures sank £8m into 36 matters, two of which – one a contested probate and the other a shareholder action – have so far successfully settled (details at end of story).

The company, which first went public with its work last summer, said that in both the claimants could not otherwise have brought their actions.

Among the well-known firms whose clients have already used its Trinity product are Bond Dickinson, Burges Salmon, Fox Williams, Gordon Dadds, Hill Dickinson, JMW, Keystone Law, Stephenson Harwood, Stephensons, Squire Patton Boggs, Harcus Sinclair and Ward Hadaway.

Augusta looks to invest between £10,000 and £600,000 in a broad range of largely commercial litigation matters. It usually expects the claimant to make a financial contribution to their lawyers’ fees, while the solicitors work on a partial conditional fee agreement so that some of their fees are upfront.

Augusta generally receives around 20% of the net proceeds of a successful case. After-the-event insurance – provided by AmTrust Europe at a flat-rate of 13.2%, although claimants can seek other providers – is compulsory where there is an adverse costs risk, but the cost is covered by the financing.

For an additional premium claimants can also protect 90% of their own financial contribution.

Managing director Louis Young said Augusta’s first year showed the demand for funding and that an increasing number of law firms now see it as a way to generate revenue and business growth.

“[They are realising that] funding is not just for those with insufficient funds to run their claim. By introducing financing to all their clients, lawyers are generating new work, as well as retaining matters that would otherwise have disappeared out the door.”

David Gore, consultant at Gordon Dadds, said: “Augusta has realised that not all worthwhile cases are multi-million pound actions… For our firm it enables us to take cases on behalf of clients who otherwise may not have chosen to litigate, while for clients it reduces the impact on their cash flow and accounts.”

Augusta is backed by private funds, a Canadian family office and Metric Capital Partners, a pan-European private capital fund manager whose partners include former Clifford Chance managing partner Peter Cornell.

Its shareholders include David Cheyne, former senior partner of Linklaters, and Martyn Bowes, ex-head of real estate financing at Barclays. It has also formed a case review panel led by former head of dispute resolution at Speechly Bircham, Stephen Dobson, and comprising former High Court judge Sir Raymond Jack QC, Baker & McKenzie’s former global dispute resolution head Nick Pearson, and barrister Richard Davis of Hogarth Chambers.

 Claim 1: Contested probate claim

The claimP was the fiancée of B, who is now deceased. P was left nothing in B’s will, as B had failed to update his will after his divorce as intended. The value of B’s estate, net of taxes etc. is £730,000. P made a maintenance claim against the estate for £300,000.
SolutionAugusta contribution including ATE insurance premium:£80,300
OutcomeThe matter settled within 10 months of financing following mediation with a global offer of £210,000. The amount £140,500 remained after costs.
ReturnsClaimant Return:£95,000
Lawyer Uplift:£16,800
Augusta Return:£28,700

Claim 2: Shareholder dispute

The claimH was a minority shareholder in a company. The majority shareholders treated him unfairly, by refusing to pay him dividends and forcing him out of the management of the company. H brought a claim for unfair prejudice, based on the value of his shares for a maximum of £250,000.
SolutionAugusta contribution including ATE insurance premium:£44,900
OutcomeThe matter settled within 3 months of financing with a compromise agreement that provided for a global amount of £98,000. The amount of £77,482 remained after costs.
ReturnsClaimant Return:£59,324
Lawyer Uplift:None taken
Augusta Return:£18,158

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Jackson: proposals mean strong claims at proportionate cost

Lord Justice Jackson has comprehensively rejected most of the government’s suggested “refinements” to his blueprint to reform the costs of litigation.

Publishing his response to the Ministry of Justice’s green paper to make clear his position to others, the judge told Lord Chancellor Ken Clarke that if he accepts the recommendations to abolish recoverability of after-the-event insurance and success fees, and to raise general damages by 10%, “the package should be implemented in full”.

Sir Rupert continued: “It would be the worst of all worlds to retain elements of recoverability (subject to qualifications and exceptions) thus adding to the present morass of rules and case law. Likewise, it would be a disaster to raise general damages in CFA [conditional fee agreement] cases but not in other cases. Any such approach would create perverse incentives and undermine the structure of the reforms.”

He rebuffed the suggestion that an element of success fee recoverability could be retained for judicial review, housing disrepair and complex personal injury and clinical negligence claims.

He said: “The reality is that the present CFA regime incentivises the bringing of strong claims, but at disproportionate cost and in an environment where the claimant has no interest in controlling costs. The reforms proposed in [my final report] will also incentivise the bringing of strong claims, but at proportionate costs and in an environment where the claimant has an interest in controlling costs.”

Jackson opponents are coalescing around his fallback option of retaining recoverability with various restrictions. Sir Rupert said this would just add further complexity and cost to an already complex and costly system.

He gave various reasons for rejecting the idea that ATE premiums could still be recoverable in relation to disbursements, pointing out that losing claimants or their solicitors are liable for their own disbursements in every other jurisdiction outside England and Wales. “Personal injury cases seem to be causing particular concern in the present consultation. But disbursements in the vast majority of unsuccessful personal injury cases are well within the means of claimants and their solicitors,” he said.

The judge hit back strongly at claims that the 10% increase in damages will be insufficient to compensate serious injured claimants for what they will lose in paying a success fee of up to 25% of damages.

He pointed out that this was “precisely the regime that prevailed before April 2000 and was regarded as satisfactory for non-legally aided cases. This has been confirmed by well informed claimant representatives… Success fees will be highest in those few cases which proceed to trial. In those cases, however, the claimant can dramatically improve his position by making a part 36 offer, reflecting the true value of his claim. If the defendant does not accept that offer, the claimant will make a substantially enhanced recoveryand will be well placed to pay the success fee.”

He was similarly robust over any changes to his recommendations on qualified one-way costs shifting, arguing that they do not increase uncertainty, and that the government’s changes would increase complexity.

He did, however, accept a handful of the government’s proposals, most notably its approach on proportionality, and on various minor issues.

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Besford: no CFA to transfer

The profession should soon have an answer to the question of when a conditional fee agreement (CFA) can be assigned from one law firm to another as the Court of Appeal is hearing a test case today.

Lady Justice Gloster, vice-president of the civil division of the Court of Appeal, Lord Justice Beaton and Lord Justice Davis are hearing the case of Budana v Leeds Teaching Hospitals NHS Trust, which was leapfrogged to the court of Appeal from the decision of District Judge Besford, a regional costs judge in Kingston Upon Hull County Court.

It was one of a series of lower-court ruling last year to address the issue and between them cause confusion in the profession. There was also Webb v LB Bromley, Jones v Spire Healthcare, Azim v Tradewise and Griffith v Paragon.

In Budana, DJ Besford held that the CFA was not validly assigned from Baker Rees to Hudgells Solicitors, as the agreement had been terminated prior to the assignment when Baker Rees closed its personal injury practice.

Writing to its clients ahead of the introduction of LASPO, Baker Rees said: “In light of the impending reforms, we have decided to stop handling personal injury litigation. When making this decision we were concerned to make sure that our existing clients were properly protected. To this end, we have put in place a process to transfer your case to a firm of solicitors who are specialists in personal injury litigation and who intend to continue this type of work.”

DJ Besford said: “In my judgment the letter is unambiguous. BR had ceased to handle personal injury litigation. There was no offer or suggestion that they would continue to act pending her instructions or even that they would give a reasonable amount of time for the claimant to consider the position before ceasing to act.

“In my judgment BR had taken a decision to cease to handle personal injury litigation, probably prior to the letter being sent out. The retainer had been terminated by BR. I entirely accept… that there was no CFA to transfer as of 25 March 2013.”

The judge held that he was bound by the High Court ruling in Jenkins v Young Brothers Transport Ltd [2006] EWHC 151, although he saw “much force” in the criticisms of it made by the defendant’s counsel, Roger Mallalieu.

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European Commission: third-party funding conditions

The government yesterday pressed ahead with plans to allow consumers and businesses to bring opt-out collective actions for breaches of competition law – but indicated that they are not yet a done deal.

The new provisions were included in the draft Consumer Rights Bill published by the Department for Business, Innovation and Skills (BIS) yesterday, following its policy announcement in January.

Any representative group or trade association could take forward an action, and eligible consumers or businesses would automatically be included unless they opted out.

Among the safeguards BIS said will avoid the introduction of US-style class actions, lawyers will not be able to handle collective actions under damages-based agreements, and law firms and third-party litigation funders will not be allowed to initiate the actions.

There will also be strict judicial certification of cases and no treble or exemplary damages, while the ‘loser pays’ rule will stay.

Nonetheless, BIS still said yesterday: “We are aware of strong and different views of stakeholders about the effectiveness and impact of these proposals. We therefore particularly welcome comments and views on this element of the bill’s proposals to help inform a final position and ensure the outcome is as effective as possible.

The CBI has been one of the most vocal critics of collective actions, and Matthew Fell, its director for competitive markets, said: “We will resist any efforts to introduce US-style class actions into consumer redress, which risks fuelling a litigation culture and making the UK a worse place to do business.”

Publication of the bill came the day after the European Commission put forward its proposals for collective redress mechanisms across the EU, which said they should, as a general rule, be based on the opt-in principle. “Any exception to this principle, by law or by court order, should be duly justified by reasons of sound administration of justice,” the commission said.

The commission also opposed the use of contingency fees – which it said risked “creating an incentive for abuses” – but while it has not ruled out third-party funding, it proposed conditions, in particular related to transparency, to ensure there is no conflict of interests.

These would include stopping funders from seeking to influence the claimant’s decisions, including on settlements, from financing an action against a defendant who is a competitor of the funder or against a defendant on whom the fund provider is dependent, and from charging excessive interest on the funds provided.

The court would be able to stay proceedings in the event the third party has insufficient resources in order to meet its financial commitments.

EU states now have two years to implement their collective action regimes.

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Supreme Court: competence decision

The Supreme Court has been asked to decide whether the Welsh Assembly can introduce legislation that allows the NHS to recover the cost of treating asbestos victims from negligent employers or their insurers.

It is estimated that the Recovery of Medical Costs for Asbestos Diseases (Wales) Bill, a private member’s bill introduced by former Thompsons partner and now Assembly member Mick Antoniw, will raise around £1m a year.

However, the competence of the Welsh Assembly to pass the bill – which it did in November – has been repeatedly questioned by insurers, and this week Theodore Huckle QC, the Counsel General for Wales, announced his reasons for referring it to the Supreme Court to decide.

“Before the Supreme Court I will contend strongly that the bill is within the Assembly’s legislative competence,” he said.

“However, making a reference before it receives Royal Assent enables the matter of the bill’s competence to be determined without awaiting what I consider would be the inevitable challenge in potentially far more expensive court proceedings in due course, perhaps when substantial amounts of money had been recouped under the bill’s provisions and would quite likely be subject to repayment were the decision of the courts to be adverse.

“The litigation costs of a reference being made during the intimation period are likely to be less than the costs of any challenge brought once the bill is enacted under the usual judicial review procedure, as Supreme Court rules provide that orders for costs will not normally be made either in favour of or against interveners [such as the Association of British Insurers].

“It is in my view in the public interest for me to take the initiative in seeking the Supreme Court’s decision on the bill as it stands.”

The Welsh initiative has raised questions as to why the Westminster Parliament does not introduce a similar measure for England.

See blog: Justice for asbestos victims moves forward

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Truss: only legally acceptable rate I can set

Lord Chancellor Liz Truss has today cut the discount rate from 2.5% to minus 0.75% but at the same time promised a consultation on whether the methodology needs to change.

The government has also committed to ensuring that the NHS Litigation Authority has “appropriate funding to cover changes to hospitals’ clinical negligence costs”.

The insurance industry has reacted with shock and fury.

Ms Truss said the law was “absolutely clear – as Lord Chancellor, I must make sure the right rate is set to compensate claimants. I am clear that this is the only legally acceptable rate I can set”.

In a statement to the stock exchange this morning, she explained: “The current legal framework makes clear that claimants must be treated as risk-averse investors, reflecting the fact that they may be financially dependent on this lump sum, often for long periods or the duration of their life.

“The discount rate was last set in 2001, when the then-Lord Chancellor, Lord Irvine of Lairg, set the rate at 2.5%. This was based on a three-year average of real yields on index-linked gilts. Since 2001, the real yields on index-linked gilts has fallen, so I have decided to take action.

“Having completed the process of statutory consultation, I am satisfied that the rate should be based on a three-year average of real returns on index-linked gilts. Therefore I am setting it at minus 0.75%.”

The statutory instrument to effect this change will be laid today, and will become effective on 20 March 2017.

Despite having gone through an exhaustive consultation process over the past four years, Ms Truss said the government intended to review the framework under which she set the rate “to ensure that it remains fit for purpose in the future”.

She said: “I will bring forward a consultation before Easter that will consider options for reform including: whether the rate should in future be set by an independent body; whether more frequent reviews would improve predictability and certainty for all parties; and whether the methodology – which in effect assumes that claimants would invest only in index-linked gilts – is appropriate for the future.

“Following the consultation, which will consider whether there is a better or fairer framework for claimants and defendants, the government will bring forward any necessary legislation at an early stage.”

In the meantime, acknowledging the “significant implications across the public and private sector” of her decision, Ms Truss said that in addition to supporting the NHS Litigation Authority, the Department of Health would work closely with GPs and medical defence organisations “to ensure that appropriate funding is available to meet additional costs to GPs, recognising the crucial role they play in the delivery of NHS”.

Finally, she said Chancellor of the Exchequer Philip Hammond would meet representatives of the insurance industry to assess the impact of the rate adjustment.

According to Bill Braithwaite QC, the change could double some damages awards. “For someone in their 20s, lump sum damages would change from £4.8m to £11m. For someone in their 60s, where it impacts less, lump sum damages would change from £3.8m to £6.5m.”

Huw Evans, director general of the Association of British Insurers, described the decision as “crazy”.

“Claims costs will soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK. We estimate that up to 36 million individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year.

“To make such a significant change to the rate using a broken formula is reckless in the extreme, and shows an utter disregard for the impact this will have on consumers, businesses and the wider operation of the insurance market.

“We have repeatedly warned the Government that this could lead to very significant price rises, with younger drivers in particular likely to find it much harder to get affordable insurance. It is also a massive own goal that lands the NHS with a likely £1billion hike in compensation bills when it needs it the least.

“We need a fairer deal for consumers and claimants. We cannot wait until Easter – the Ministry of Justice must commit to alternatives immediately so changes to the law can be included in the Prison and Courts Bill.”

The Association of Personal Injury Lawyers welcomed the decision but said it was “long overdue”.

In a statement, it said: “People already coping with the most severe injuries have been deprived of the help and care they need for years. Meanwhile insurance companies, which have saved millions of pounds in unpaid compensation, have been aware that a decision to change the discount rate has been on the cards for six years, since APIL first began judicial review proceedings on the issue.

“They have had plenty of time to prepare for this change and the fact that many are now saying premiums will have to rise to cover the cost simply beggars belief.”

Jasmine Murphy, a barrister at Hardwicke, tweeted: “Claimant sols will be busy today withdrawing pt36 offers in any case with a significant element of future loss.”

Nigel Teasdale, president of the Forum of Insurance Lawyer, said the decision was “extremely concerning”.

He said: “The announcement has all the hallmarks of a rushed decision and the government’s current approach seems disjointed at best.

“On the one hand suggesting that saving the average consumer money on their insurance premium is a priority, then on the other reducing the discount rate which will have a major inflationary effect on premiums now and for many years to come.

“The timing is wrong given the uncertainty in the market, and the decision also fails to reflect how people actually invest their compensation. The reality is that when paid large amounts of money in a lump sum most claimants will invest in a range of assets through an independent financial adviser…

“The most likely outcome in addition to increasing premiums is a return to a more adversarial system of litigation where major heads of damage will be challenged.”

Christopher Malla, a partner at leading defendant firm Kennedys, said such a drastic cut would have “a massive impact” on the value of the most serious claims – adding 30% to the future loss element of catastrophic injury cases, and 50% to high-value clinical negligence claims involving children.

There would also be significant delays in current cases as claimants withdraw part 36 offers to settle.

He said: “This is not about denying injured people the compensation they need. At the same time, claimants should not be over-compensated, especially when it is public bodies, such as the NHS and local authorities, which are paying.

“Unfortunately, in the face of its own research and the fact that the investment climate has changed since the review began in 2012, the government is now at risk of doing exactly that…

“We don’t pretend that this is an easy balance to find but in Europe and the USA, the discount rate is significantly higher than even the old rate, which indicates just how out of step we have now become.”

Daniel Frieze, barrister and head of personal injury at St John’s Buildings, said the new rate was “undoubtedly a positive thing for claimants”, but added: “However, with claims now worth a lot more, the result of a successful claim leaves potential losses at up to double their previous amount.

“As a result, these changes also act as a benefit to insurers to argue for the implementation of fixed costs, which the government has already heavily championed in recent weeks.”

Admiral Group plc told the stock exchange in response that it was postponing the preliminary announcement of its 2016 annual results by a week to consider the impact of the change.

It told investors: “The reduction in the discount rate will have the effect of increasing the cost of personal injury claims, therefore also increasing the ultimate loss ratio for all business written up to the effective date, part of which will be earned and part unearned.

“The majority of the financial impact in respect of premiums earned during 2016 and prior years will be reflected as a one-off charge against 2016 second half profits…

“The estimated total net financial impact of all claims settling at the new rate is £140m to £175m. The estimated net financial impact on 2016 reported profit is £70m to £100m…

“The group anticipates that if market pricing adjusts future premiums to reflect the lower discount rate, there will be no significant impact on future business and its profitability after the change.

“The group is also confident that its strong capital position, along with its prudent approach to claims reserving, will allow it to address the outcome without significant change to its business or long term financial outlook.”

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Thomas: concern over disease claims

Defendants should not worry too much about the risk of claimants triggering the 20% ‘escape’ in the proposed new fixed costs regime, it has been claimed.

Meanwhile, a top defendant lawyer has calculated that the end of recoverability and the new fixed fees should save insurers £1,000 on each routine claim that settles without litigation.

After a claimant costs lawyer suggested last week that the lower fees would make it easier to use the 20% escape, Steve Thomas, director of market affairs at leading defendant firm Keoghs, noted that the current escape from fixed recoverable costs contained in CPR 45.12 and 45.13 requires “exceptional circumstances” and the discretion of the court.

In a client briefing, he wrote: “The key here is the word ‘exceptional’ and history confirms that such a mark-up has only been allowed on very rare occasions. For almost all low-value personal injury claims, this aspect of the table can be ignored and calculations based upon the fixed costs only.”

More generally, Mr Thomas welcomed the Ministry of Justice’s proposed fee levels, but suggested that they may promote the use of damages-based agreements to supplement the level of the fixed fee.

“We do remain concerned that financial incentives remain to litigate and such potential behaviour must be monitored closely as claimant lawyers seek to recover revenue,” he said.

Mr Thomas added that Keoghs has been in touch with the Ministry of Justice regarding disease claims and the statement in minister Helen Grant’s letter to stakeholders that Table B will apply to claims “which exit the protocol process”. He explained: “As many disease claims will not enter that process and so, by definition, cannot exit it, we have flagged immediate concern that the drafting is loose and open to interpretation by the claimant lobby.”

Meanwhile, Anthony Hughes, partner and chief executive of insurance litigation law firm Horwich Farrelly, admitted that the proposed figures are lower than he expected and so he was not surprised that organisations such as the Association of Personal Injury Lawyers are already talking about a judicial review. “If nothing else that would at least flush out the basis for the level of fees that have been set, which has been very opaque to date.”

He continued: “A lot of emphasis has been placed upon the ban on referral fees which I'm afraid in my personal opinion is a red herring and indeed my understanding of the recommendations made by Lord Justice Jackson was that he had ignored the issue of referral fees when making his recommendations regarding the appropriate level of fixed costs albeit these have now been significantly discounted.

“The claimant community will undoubtedly be feeling very sore about this. However, they are an ingenious bunch and my suspicion is that once they have dusted themselves down they will simply adjust their business models and look to ways in which they can continue to operate successfully and indeed maximise opportunities.”

Mr Hughes, a former president of the Forum of Insurance Lawyers, said he feared that driving fees down to a level beyond a ‘tipping point’ will change claimant lawyers’ behaviour and encourage them to be far more adversarial than has been the case since the introduction of the portal.

He added: “There is no doubt that insurers ought to be celebrating. My estimation is that this reduction in costs and the removal of recoverability for both success fees and after-the-event insurance policies will mean that they ought to save over £1,000 per case on routine claims which settle without litigation. The question is, how many can they keep out of litigation in the brave new world?

“Some commentators are already suggesting that this will see a 75% reduction in third-party costs paid by insurers in personal injury cases per se. I do not think that that is wide of the mark so no doubt we can all see cheaper insurance premiums on the horizon.”

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Bogart: integrated into Burford Capital

Leading third-party funder Burford Capital has announced a restructuring for tax reasons that will bring Burford Group – its investment adviser – in-house in a cashless acquisition.

In future Burford Group will no longer be free to advise the AIM-listed company’s competitors.

Meanwhile, a survey commissioned by Burford Group has found that more than half of US litigators have cases suitable for third-party funding but fewer than one in ten of top-200 US law firms have themselves used it.

In a performance update, Guernsey-based Burford Capital also reported it had received a $6.5m (£4m) settlement in one case and a further $4m, to date, of the total $20m proceeds of an investment in another case. That case gave the company an internal rate of return (IRR) of 75%. A further three cases are expected to produce an IRR or at least 50%.

The company boasted that, since becoming publicly listed on the AIM market three years ago, it has generated more than $50m in revenue, committed over $300m in investment capital and up to June 2012 had achieved net returns on litigation investments averaging 70%.

Explaining its restructuring plans, Burford Capital said the company has grown faster than expected and innovative practices – such as investing in portfolios of litigation in order to spread risk – were being constrained by US tax rules.

“As a general proposition, it is difficult to effect many of these newer innovative transactions within the company’s existing US tax structures, and indeed the company has closed certain attractive investments this year outside the US that it simply would not have been able to do in the US for tax reasons…

“Burford Capital will proceed to implement a group structure using various wholly-owned subsidiaries that will enable it to expand the investment structures it can use in the [US] and benefit from the greater flexibility achievable by structuring its operations in a way that can benefit from income tax treaties that reduce levels of taxation (and tax risk).”

As part of the restructuring, Burford Group will be acquired in a “cashless merger”. Chief executive Christopher Bogart and his colleagues will be integrated into the company, resulting in a considerable saving in performance fees. “The entire cash leakage of performance fees is extinguished,” said the statement.

Another benefit of the restructure is that Burford Group “is currently not exclusive to Burford Capital and is free to raise funds and enter into business ventures that could compete with or lessen the market force of Burford”. As a subsidiary, this freedom would end.

Burford Group’s 2012 Litigation financing survey contacted 462 AmLaw 200 litigation partners, non-AmLaw commercial litigators, and general counsel and chief financial officers (CFOs) of large and mid-sized companies. It found that among the first three groups, awareness of external litigation financing was over 90%, but for CFOs it was 62%.

Generally, views of litigation financing among litigators were favourable, with non-AmLaw 200 lawyers particularly enthusiastic. More than three-quarters said they believe it will lead to good cases being brought that otherwise will not and 85% said it usefully levels the playing field between unequal parties.

More than two-thirds of all the people surveyed expected third-party funding to increase over the next 18 months, with 51% of AmLaw 200 litigators and 69% of other litigators saying they have had a suitable case in the past. Further, around one in five said they currently had an active case that could benefit from external finance.


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Brindle: provision will lead to more successful strike-out applications

Brindle: provision will lead to more successful strike-out applications

Claimant solicitors have been warned that they need to review their retainers and advise clients about the implications of the new ‘fundamentally dishonest’ rule being introduced shortly.

Section 57 of the Criminal Courts & Justice Act, given Royal Assent on 12 February, will also shift the burden of proof and potentially discourage claimants with genuine claims, according to barristers at 9 Gough Square.

The section provides that if the court is satisfied, on the balance of probabilities, that the claimant has been fundamentally dishonest, it must dismiss the claim unless satisfied that this could cause substantial injustice.

Jeremy Ford, head of the set’s personal injury team, said that once the implementation date is confirmed, solicitors will need to consider whether their retainers adequately deal with a case being struck out on this basis, and will also have to advise clients on the implications for their funding arrangements should this happen.

More generally they will have to contact their clients to outline the new rule and what actions might be considered in breach of it.

9 Gough Square’s John Foy QC and Simon Brindle acted in the leading case on the term to date, representing the defendant in Gosling v Screwfix, in which a circuit judge ruled last year that a claimant who exaggerated his symptoms was fundamentally dishonest for the purposes of losing the protection of qualified one-way costs shifting.

Mr Brindle said section 57 will both reverse the burden of convincing the court to exercise its discretion regarding striking out the claim, and fetter that discretion: “Under the common law, it is for the defendant to convince the court to exercise its power; under section 57, the court must strike out unless convinced that doing so would cause the claimant substantial injustice.”

There will need to be court guidance on the meaning of ‘fundamental dishonesty’ and ‘substantial injustice’, he added.

“Defendants already have a very many number of weapons in their arsenal to attack dishonest and fraudulent claims. I consider that section 57 not only strengthens that arsenal but could lead to many more successful applications for claims to be struck out.

“As a result, perhaps now more than ever, claimant representatives need to be alive to the need not to present exaggerated claims. Will this, though, lead to somewhat speculative, but otherwise meritorious claims not be pursued for fear of a finding of fundamental dishonesty being made should the claimant not come up to proof? I fear it will.”

  • 9 Gough Square is holding a personal injury seminar on 30 April at which section 57 will be discussed.

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Car crash: should interim damages payment be taken into account?

A recent ruling caused by “shoddy” drafting of the CPR highlights the importance of any extension of fixed costs being accompanied by “a well-drafted and fully integrated set of procedural rules”, a costs specialist has warned.

Lee Coulthard, assistant regional manager in the Leeds office of costs firm John M Hayes, said it would also be important for the rules themselves, rather than the principles behind them, to be put out to consultation.

But he continued: “Sadly, past evidence suggests that this hope is likely to prove forlorn.”

In Jones v Jones, a case in North Shields County Court, an interim payment of £1,800 was made in respect of vehicle damage, and so was not included in the subsequent part 7 proceedings. The defendant made a part 36 offer of £5,850 in respect of ‘the whole claim’, which was accepted.

The issue was whether the £1,800 should be added to the £5,850 to calculate the fixed costs in table 6B (£1,160 plus 20% of the damages as it settled before allocation). The difference amounted to £360 + VAT.

The claimant relied on CPR 45.29C(4)(b), which says: “Unless stated otherwise, a reference to damages means agreed damages.”

The defendant, meanwhile, looked to CPR 36.20: “Fixed costs shall be calculated by reference to the amount of the offer which is accepted.”

Mr Coulthard reported that the court found in favour of the claimant. “The argument that it would be absurd to exclude damages agreed outwith the scope of the final part 36 offer from the scope of costs was accepted, especially as it was obvious that if the vehicle damages had not been agreed pre-action and had been included in the proceedings then the fixed costs would have been on the whole sum.

“The court recognised the problem with the wording of CPR 36.20, and dealt with this by reading the words ‘by reference to’ as meaning ‘having a bearing on’, such that the amount of the part 36 offer had to be taken into account when determining the fixed costs but was not the only relevant sum.

“There was also criticism of the drafting of the rules, as CPR 36.20 assumes that there will only ever be one part 36 offer disposing of the entirety of the claim, but this is clearly not the case.”

Mr Coulthard, who did not act in the case, said the decision was “surely correct”.

He said: “Whilst the defendant’s reasoning is superficially attractive based on a formal reading of the wording of CPR 36.20, the result is so patently absurd that it is no surprise that the court interpreted the provision so as to avoid that consequence.

“Of course, as was recognised by the judge, the problem is caused by shoddy drafting and a failure to ensure that part 36 tallies with the provisions of part 45. This is certainly not the first time that such problems have been caused by a failure of the rules to account of the practical realities of running cases.

“It can only be hoped that any extension of fixed costs is accompanied by a well drafted and fully integrated set of procedural rules. Furthermore, the rules themselves, rather than just the general principle of any extension, should be subject to a reasonable period of consultation. Sadly, past evidence suggests that this hope is likely to prove forlorn.”

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Grant: to meet Labour MPs to discuss small claims limit

The new Lord Chancellor said this week that he “will not be afraid to reconsider” aspects of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 “if it proves that what we have done has created a major problem”.

Taking questions in the House of Commons earlier this week, Chris Grayling was responding to a question from Labour MP Kelvin Hopkins outlining the concerns of the Association of Child Abuse Lawyers about the “drastic changes to the rules on legal costs that are due in April next year”.

Mr Hopkins said: “They believe that those changes could have serious implications for the victims of childhood abuse.”

Meanwhile, justice minister Helen Grant said the government is “about to consult” on its proposals to tackle fraudulent whiplash claims, saying “the increase in whiplash claims at a time when there are fewer reported road traffic accidents is unacceptable”. The proposals include raising the small claims threshold for personal injury claims from £1,000 to £5,000, and creating independent medical panels.

She accepted a request from Grahame Morris to meet with a delegation of Labour MPs to discuss the impact of a higher small claims limit on the victims of workplace accidents and industrial diseases.

Meanwhile, at the second reading of the Enterprise and Regulatory Reform Bill in the House of Lords yesterday, Labour questioned whether the government knew what it was doing with a clause that will abolish a worker’s right to compensation for breach of health and safety regulations; instead they will have to prove that negligence has occurred. The move has come under fire from lawyers.

Opposition spokesman Lord Stevenson of Balmacara said the proposal – which was added to the bill during the House of Commons report stage – needs to be scrutinised very carefully.

He said: “Is it really the government’s intention that a worker injured due to an employer’s breach of a statutory duty within the health and safety at work regulations – such as failing to guard a machine – will be required to prove that the employer knew, or ought to have known, of such a failure in order to gain redress for the injury sustained?

“The requirement to prove foreseeability is a very high bar of proof for an individual injured or killed through no fault of their own. Do the government really think that by proposing this change they are sending the right message to employers about the importance of health and safety? There has been no public consultation on this proposal and what is being proposed goes further than the recommendations made in this area by Professor Lofstedt, in his recent report.”

Several other peers expressed concern at the provision and the lack of consultation and justification for it, including Labour peers Lords Monks, Davis, Whitty, McKenzie of Luton, Young of Norwood Green, and MacKenzie of Culkein, together with crossbench peer Lord Low of Dalston. Lord Whitty said it was the “ugliest” provision in the entire bill.

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Susan Das

Susan Das joins Temple Legal Protection as Senior Sales Assistant

Specialist legal expenses insurer, Temple Legal Protection is delighted to announce the appointment of Susan Das. She joins the company as Senior Sales Assistant and will be based at Temple’s office in central Bristol. Her appointment further strengthens Temple’s sales team supporting new and existing business partners.

Susan joins Temple from Allianz Insurance plc where she had a number of responsibilities within their legal expenses division and brings Temple direct experience in building relationships with After the Event (ATE) and Before the Event (BTE) business partners.

Commenting on Susan’s appointment, Calvin Smith – Sales Director said: “I am very pleased to welcome Susan to Temple’s sales team. We are an experienced team who are decision makers and ready to do business and Susan’s appointment further supports our ambitions as a major player in the BTE market.”


The increasing appetite for third-party funding in Europe

Ross Nicholls

Although investors in common law jurisdictions have for sometime recognised litigation as an asset worth investing in, litigation funding remains less prominent in the civil law jurisdictions of mainland Europe. However, the European appetite is beginning to shift in favour of litigation funding, and many large dedicated funds active in common law jurisdictions such as the US, UK and Australia are starting to provide third-party capital to claimants with strong cases.

April 10th, 2018