The relatively risk free ‘no win, no fee’ regime for litigants is under real threat as the government’s civil litigation costs review is carried forward by legislation. Anyone with a potential claim needs to act fast to take advantage of the conditional fee regime, while it still survives.
The “Legal Aid, Sentencing and Punishment of Offenders Bill” was presented to Parliament on 21 June 2011, with the second reading on 29 June.
The Bill, if passed, will implement many of the reforms proposed by Jackson LJ in the Final Report on his Review of Civil Litigation Costs, published in January 2010.
This will mean a radical change to the current system of ‘no win, no fee’ (also known as Conditional Fee Agreements, or CFAs) in civil litigation claims, such that:
“No win, no fee” success fees will no longer be recoverable from an opponent;
‘After the event’ insurance premiums will only be recoverable from an opponent in certain clinical negligence actions;
Damages Based Agreements, also known as contingency fees will be permissible where ‘no win, no fee’ agreements are currently permitted;
Contingency fees will be subject to a % maximum.
The CFA regime has offered a very attractive, virtually risk-free, environment for claimants over the past few years. Claimants who might not have been able to fund the costs of litigation up front – perhaps because their professional let them down and left them in financial peril in the first place – have had access to justice. The revocation of the regime is a significant reverse for claimants without significant funds to take their claim forward, no matter how strong their claim might be.
CFAs have allowed claimants to pass significant costs on to a losing defendant, who pays the claimant’s costs if the case is won. The basic costs are payable, plus a success fee designed to compensate the claimant’s solicitors for those cases lost (where the claimant’s solicitor goes unpaid). To protect the claimant against the risk of losing the case, and having to pay the defendant’s costs, insurance is obtained, the premium then to be borne by the losing defendant. This shifting of significant additional costs, the success fee and insurance premium, to the losing defendant was considered by the costs review to be objectionable, hence the regime may be coming to an end. The counter argument is that defendants did not settle good cases early enough and thus left themselves exposed to inflated costs, but that fierce debate will shortly be resolved as the legislation is considered by parliament. The current indications are that the recommendation to revoke full CFAs will be passed, although precisely what replaces them remains to be seen. The Public Bill Committee will submit a report to the House of Commons on 13 October 2011 after debates before the House of Commons Scrutiny Committee in September, with a House of Lords debate due in December 2011.
As to potential claimants currently unsure of their position or the strength of their case, now really is the last chance to sign up to a full CFA to obtain the benefits offered.
For more information or advice, please contact
Gemma Carson.
