The Jackson Reforms: ‘The Big Bang’ and how it will affect education
Solicitors’ litigation costs have undergone seismic changes with effect from 1st April 2013. The reform is statutory (under the Legal Aid and Sentencing Punishment of Offenders Act 2012), in conjunction with statutory instruments and far reaching procedural rule changes, all directed towards implementing the recommendations of a major report produced by Lord Justice Jackson in January 2010.
How will this affect education institutions? In this article Head of Dispute Resolution Patricia Hall picks out two aspects of the reforms that are likely to have an impact in this area.
Where solicitors act for a Claimant on a conditional fee agreement (CFA), commonly known as “no win, no fee”, the uplift on costs charged by the solicitors in the event of success, and also the hefty premium for insurance to protect a Claimant against an adverse costs order in the event that they lose (“after the event” or ATE insurance), is no longer recoverable from the opponent, but will have to be borne out of any damages awarded to a successful Claimant.
Until 1st April 2013 Public Liability insurers were under considerable pressure to settle claims funded by CFAs early even where the merits may have been somewhat dubious, because of the potentially disproportionate effect of being at risk of having to pay the success uplift on the solicitors’ charges (up to 100% of normal charges) and the ATE insurance premium (usually staged but, depending on how far the litigation progresses, typically increasing to about 60% of the cover provided).
As can readily be appreciated this regime meant that the potential liability for the opponent’s costs increased exponentially as the case progressed, hence the almost irresistible pressure to settle early. That has now changed.
Indeed, Claimant lawyers would argue that the pendulum has swing completely the other way, so that all the pressure is on a Claimant to settle early for perhaps a lower sum than the case strictly justifies because, as time goes on, the slice of damages that will be lost owing to any success uplift and/or ATE insurance premium increases, potentially wiping out any benefit that might be obtained by pressing ahead. In fact, where a claim is of relatively modest value, it may no longer be feasible for Claimant lawyers to fund it on a CFA at all.
A further change to the availability of funding is that legal aid is no longer available for most claims for damages. Having said that, it does remain in certain areas, notably (from the education perspective):
a) in connection with special educational needs matters arising under Part 4 of the Education Act 1996, and assessments relating to the Skills Act 2000; and
b) for claims for discrimination under the Equality Act 2010.
The second aspect is the new requirement for a detailed costs budget to be prepared at an early stage of every multi track case (currently most claims for £25,000.00 or more).
In virtually all cases the court will then make a costs management order. That means that the budget must be agreed with the opponent and approved by the court, or, alternatively, the court will impose a budget. Budgets must be proportionate amongst other things to the amount at stake and the complexity of the issues.
If a budget endorsed by the court is exceeded without prior approval by the court, then there is a significant risk that the excess will not be recoverable from the opponent in the event of success.
While budgeting is primarily focused on the costs payable between parties, it will have a knock-on effect for costs payable by clients to their lawyers.
While the provision of estimates in advance has long been an important feature of payment for services by public bodies or quasi-public bodies such as educational institutions, the courts’ requirement for routine budgeting on an inter partes basis is likely to mean that lawyers will sharpen up their act in providing accurate estimates, including acquiring purpose-specific software to facilitate this, which should also improve the quality of information that lawyers are able to provide to clients.
In addition, there will be significant pressure on lawyers to remain within budgets, or, if budgets are to be exceeded for any reason, to apply to the court in advance for approval of a variation, because otherwise the recovery of costs from the opponent in the event of success will be jeopardised; the client should, of course, also be kept fully informed in relation to any excess over the budget and the reasons for it and any applications to the court.
Finally, if an order for costs is obtained against an opponent, then, provided that the work has been done within budget, there is every reason to think that all, or the vast majority, of the costs should be recoverable from the opponent (provided the opponent has the money to pay), in contrast with the previous position where often the expected recovery was limited to in the region of 70%.
It should be noted that special rules apply to claims for personal injury, as in those cases the recovery of costs from unsuccessful claimants is severely limited since 1 April 2013; that is, however, a matter of greater concern to PI insurers than to institutions themselves.
About the author
Patricia is a Practising Consultant in the Dispute Resolution team.