Sir Rupert Jackson last week told justice minister Lucy Frazer that the government was wrong to tread with caution over reforming the regime for damages-based agreements (DBAs).
He said there was “no possible reason” why hybrid DBAs were not allowed under the rules put in place in 2013 when hybrid conditional fee agreements were.
The former Court of Appeal judge was addressing a seminar organised by the Civil Justice Council to inform the Ministry of Justice’s post-implementation review of part 2 of LASPO.
Ms Frazer outlined the Ministry of Justice’s initial views, as encapsulated in a preliminary assessment published the day before.
In this, it said about DBAs: “It is worth emphasising that the government has sought to tread carefully in implementing reforms: the Access to Justice Act 1999 regime resulted in substantial and costly unintended consequences.
“As such introducing a new form of funding, particularly one that may be best suited to very high value claims, deserves caution.”
Speaking after her, Sir Rupert – now an arbitrator and adjudicator at 4 New Square – told the minister that he could not agree with this approach.
DBAs could be used in small claims as part of group actions, he said. “Why the call for caution? There are some jurisdictions where DBAs are the main way to fund litigation.”
He also questioned the Ministry of Justice’s assertion that DBAs may be more suited to “niche areas, where damages are high relative to the costs, or where costs are not recoverable”. He pointed out that they have been used successfully in low-value employment tribunal claims for many years.
As to the suggestion that they could fuel speculative litigation, Sir Rupert said: “The same could be said of third-party funding.”
He also called for the technical amendments to the DBA regulations proposed by a Civil Justice Council working party in 2015 to be implemented.
His comments were echoed in a session on DBAs later in the seminar. Hardeep Nahal, a litigation partner at McGuire Woods, said he could not see “a reason of principle” for why the regulations did not accommodate hybrid DBAs.
He said it was also “strange” not to allow them where third-party funders enabled a way around the regulations with so-called ‘synthetic’ DBAs that involve back-to-back agreements between the funder and the lawyer, and the lawyer and the client.
Barrister Mark Friston, author of Friston on Costs, supported Sir Rupert’s call for less caution, saying that the current situation meant that “less transparent arrangements” were being put in place.
Meanwhile, M Ali Akram, managing partner of London litigation firm Lexlaw, highlighted the need to amend the DBA regulations to be clearer about what happened on termination, recounting satellite litigation he had to bring against a former client who had terminated his DBA when he knew an offer from the defendant was coming.
Professor Rachael Mulheron, who chaired the working party, stressed the need to redraft the regulations. “It’s simply not good enough that lawyers and clients don’t know how to draft a DBA to comply [with them].”
She added that the current position which meant that counsel’s fees formed part of the fee paid out under the DBA was “problematic”, because as counsel’s fees rose, the solicitor’s fell, raising potential conflicts of interest.
The working party had recommended that counsel’s fees be treated as an expense instead.