Lord Justice Jackson this week called for an end to the indemnity principle and for lawyers to lobby the government on the need for hybrid damages-based agreements (DBAs).
In a speech to the Law Society’s civil justice section, the architect of the LASPO costs reforms said the near-zero take-up of DBAs was due to fear of technical challenges arising from the indemnity principle and of hybrid arrangements falling foul of the current DBA regulations.
“It would be immensely helpful if the indemnity principle were abrogated,” he said, noting that he had recommended as such in his final report. “This is a rule of common law, to which there are now numerous exceptions. It no longer serves any useful purpose. It has given rise to a host of problems, as well as much futile satellite litigation.”
On hybrid DBAs – under which the client pays its lawyers a low fee if they lose and a percentage of the winnings if they win – Jackson LJ said he understood that the government “will need to be persuaded that there is a need” for them.
He listed eight reasons why he believed there was such a need, including that it was illogical to allow ‘no win, low fee’ conditional fee agreements but not DBAs, and also to allow third-party funding (TPF) to operate on a hybrid basis where they meet some or all of the litigation costs if the case fails, and receive a share of the winnings if they succeed.
“Indeed, it is worse than illogical. DBAs are a more efficient form of funding than TPF, because only two entities (rather than three) have a stake in the litigation. Therefore the law should not be sidelining DBAs in favour of TPF.”
His final reason was that hybrid DBAs would promote access to justice. “Following the abolition of recoverable success fees, it is important to open up as many other options for funding as possible.”
The judge suggested that opposition to hybrid DBAs is coming from those who dislike DBAs in principle – those on the receiving end of claims. He called for “those in authority” to stand up to “powerful vested interests within the ‘big business’ camp”.
He concluded: “If commercial lawyers wish to see the DBA regulations reformed and such reforms to include provision for hybrid DBAs, it would be sensible to form a working group to analyse the numerous matters of detail on which there is concern, and to assemble the evidence and make out a case for hybrid DBAs.”
Jackson LJ also touched on Denton and warned that “in the euphoria with which some have greeted” the ruling, it was important not to slip back into the “old” culture of non-compliance.