We were extremely fortunate to have Professor Dominic Regan deliver the keynote speech at our 2012 company conference. Following his speech we were given the opportunity to discuss a number of the changes that are in the process of being implemented and how those changes are likely to affect lawyers in the future. Here’s a summary of some of what he said:
Damages Based Agreements
Q. Under the new rules, are hybrid damages based/hourly rates agreements likely to exist?
A. The system of contingency fees that is to be introduced is based on that which operates in Ontario, Canada. Under that system costs remain recoverable from the losing party on the ‘usual’ basis and any shortfall between the inter partes recovery and the amount payable pursuant to the contingency fee agreement is borne by the successful litigant. Practitioners will need to ensure that Damages Based Agreements are drafted in such a fashion as to ensure that the indemnity principle is not offended when costs come to be recovered on an inter partes basis.
Q. Within Lord Justice Jackson’s final report, he indicates that litigants should be required to seek independent advice as to the suitability of a DBA before entering into the same. Is this requirement likely to become law?
A. A sub-committee of the Civil Justice Council has been appointed to look at the practicalities of DBA's. No decision has been made in this regard to date.
Costs Budgeting and Offers
Q. Is the national roll-out of costs budgeting likely to see an increase in settlement proposals which consist of a global figure for damages and costs?
A. It is important for practitioners to bear in mind that an offer which is inclusive of costs cannot be made pursuant to Part 36. Calderbank offers may become more prevalent, however, such offers are generally not well-regarded by Courts. Parties wishing to benefit from costs protection when making an offer should continue to avoid making global offers.
Proportionality
Q. The new test of proportionality – which will allow the Costs Judge to make further reductions to the bill after a line-by-line assessment – is going to present practitioners with significant difficulties insofar as determining whether an offer for costs made by a paying party is reasonable. How should practitioners deal with this uncertainty?
A. The key is in planning and budgeting. Costs budgets that are approved by Court should provide a good yardstick as to the level of costs that are likely to be recovered on assessment. However, practitioners will be keen for early judicial decisions and guidance in this regard. There is likely to be an element of satellite litigation in relation to the new test of proportionality in order that such guidance can be obtained.
Qualified One Way Costs Shifting
Q. If a Claimant fails to beat a Defendant’s Part 36 offer, the Defendant will be able to recover costs in much the same was as is now the case, save that the amount of recoverable costs will be limited to the amount of the Claimant’s damages. Will Claimants who find themselves having to meet the Defendant’s costs in these circumstances have the safety net of an assessment of the Defendant’s costs?
A. In certain cases, the level of the costs sought by the Defendant will exceed the damages recovered by the Claimant. It will remain open to the Claimant to challenge the costs claimed by the Defendant. Issues in relation to proportionality and reasonableness can still be raised as part of such challenges.
The Future
Q. What do you see as being the important future developments WITHin litigation?
A. There will almost certainly be greater use of technology, which is perhaps evidenced by the moves that have already been made towards e-disclosure. A number of Commonwealth jurisdictions – such as Australia, Singapore and Canada – employ a system of ‘paperless litigation’ and there are a number of influential individuals who would like to see the English and Welsh legal system follow suit.
Provisional Assessment
Q. The provisional assessment pilot scheme is currently being undertaken by Regional Costs Judges in three County Courts. How successful is the scheme likely to be when it is rolled-out nationally and Judges who are not costs specialists are required to deal with the assessments?
A. The comprehensive changes that are being introduced will, naturally, mean that Judges will require training in a number of costs issues. Plans to deliver this training are in hand. The training which is currently being delivered to Judges is focused on costs budgeting and training specific to provisional assessments will be needed before the scheme is adopted nationally.
Alternative Dispute Resolution
Q. Does mediation have a role in costs litigation?
A. There have been suggestions in the past that mediation should be compulsory in all cases, however, this is unlikely to happen. Notwithstanding this, the judiciary are extremely keen on ADR and there is no reason why mediation should not take place within costs disputes.
Interest
Q. Following the Supreme Court’s rejection of the application for permission to appeal in Simcoe v Jacuzzi is the inciputur rule here to stay?
A. Yes.