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Civil justice: Costs reforms – Jackson/LASPO update

Monthly round up of progress with the Jackson and associated civil justice reforms including updates on; whiplash, the referral fee ban and costs/case management.


The Transport Committee will publish its Fourth Report of Session 2013–14, Cost of motor insurance: whiplash at 00.01 am on Wednesday 31 July 2013. The report will be available on the Transport Committee’s website shortly after the publication hour has passed.

DWF’s Nigel Teasdale gave evidence at the Committee on behalf of FOIL in June and will be providing his own analysis of the report on Wednesday. For further information, please contact Nigel on 01772 55 4264 or at nigel.teasdale@dwf.co.uk

Referral fee ban

Monitoring & enforcing - regulations now in force

The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Referral Fees) Regulations 2013 (SI 2013/1635) have now been published and came into force on 9 July. The regulations apply various provisions of the Financial Services and Markets Act 2000 (FSMA) to enable the FCA to monitor and enforce the rules against referral fees, contained in sections 56 to 60 LASPO Act 2012. These rules, which came into force on 1 April 2013, prohibit the payment and receipt of any fee for the referral to another person of claims for damages in connection with personal injury or death.

The rules may be enforced against "referral fees authorised persons", which are primarily those conducting insurance and insurance mediation, or those in the same group as such authorised persons. Enforcement action may also be taken in certain circumstances against the approved persons of referral fees authorised persons. The Regulations apply in England and Wales only.

The explanatory memorandum states that no separate consultation exercise was carried out in relation to the Regulations. It also states that the ban on referral fees will be reviewed as part of a wider post-implementation review of the Act. The Ministry of Justice (MoJ) has undertaken to review the Act in three to five years. The MoJ will work with relevant regulators, including the FCA, to develop an impact evaluation. Successful implementation will be judged on the basis of whether the payment and receipt of referral fees continues.

The FCA has published guidance for firms affected by the Regulations explaining how it will supervise them.

Costs/case management

Costs management consultation

A sub-committee of the Civil Procedure Rule Committee (CPRC) has now consulted on the existing exemptions to automatic costs management, with a view to replacing CPR 3.12(1) with a new, definitive rule. The key questions were:

  • Whether the blanket exception to automatic costs management in the Admiralty and Commercial Courts should be retained. The preliminary view of the sub-committee is that the exception may be unnecessary and inappropriate.
  • Whether the current value-based exemption in the Chancery Division, the Technology and Construction Court (TCC) and the Mercantile Court should remain, whether it should be qualified by reference to financial value, and if so, which financial level.
  • Whether or to what extent Part 8 claims (including judicial review) should be excluded from the new costs management regime, given that they are designed to be quick and inexpensive.
  • Whether any other types of claim should be exempted from costs management.

The sub-committee expects to report to the CPRC in October 2013.

DWF Insurance has responded to the consultation – summary of our main responses:

  • We agree with the subcommittee that the blanket exemptions provided to the Admiralty and Commercial Courts, as well as the value based exemptions for the TCC, Chancery and Mercantile Courts, are each inappropriate and unnecessary, and should be removed.
  • In our view, the advantages of costs budgeting and management are of equal application to all types of multi-track claim, even where the proceedings are in a specialist court, whatever the identity of that court.
  • We recognise however the perceived need to continue to be a forum of choice for certain types of international litigation. In our view, this matter can be dealt with by allowing the parties in any multi track case, whatever court the matter was proceeding in, to have the opportunity of asking the court to agree not to exercise its costs management powers in that case, or to exercise them in a way that is consistent with the joint intentions of the parties as to how the litigation should proceed.
  • In relation to judicial review and other Part 8 proceedings, consistent with our proposal that costs budgeting and costs management should be used and to be seen to be being used across the piece, we would advise that no exemption be created for this type of process. Instead, we would see it as a matter of the court continuing to use its powers of costs management at all appropriate stages within those proceedings. We can see the advantage however of particular consideration being given to, for instance in the context of judicial review, how the powers of costs management should best be used. There ought to be opportunity to consider costs management at the time of the first substantial management hearing even within the short form procedure.
  • Looking forwards, we think it would be appropriate to address the obvious lacuna in the current costs budgeting and costs management processes; that is of the costs incurred pre-issue of proceedings. As the court exercises its powers of costs management at the litigated stage of the proceedings, so as to avoid that scrutiny, the temptation is surely to incur more significant pre-issue costs, prior to the claimant taking the matter into proceedings.
  • We would see the need for development of a supervisory regime in relation to pre-action costs as the next step for the CPRC beyond the current consultation in relation to the field of costs budgeting and costs management.

If you would like a copy of our full response please email Alex Fusco at alex.fusco@dwf.co.uk

Useful commentary

Active case management - we draw your attention to His Honour Judge Simon Brown QC‟s very useful articles on post-Jackson costs management in the New Law Journal. The latest is Getting Active! focusing on the active case management expressly required of judges since 1999 and on the duty of parties to “help” the court in the active management task. The key message is that lawyers have strong incentives to acquire case planning and budgeting skills if they are to “survive and thrive”. Further articles in his series on Costs Budgeting can be found at the end of the article.

Indemnity costs warning - Litigation Futures draws our attention to the recent High Court decision Igloo Regeneration (GP) Ltd & Ors v Powell Williams Partnership focusing on the circumstances in which indemnity costs are payable by the losing party rather than merely costs on the standard basis. For this to happen, the judge said, “there must be some conduct which takes the case out of the normal run-of-the-mill.” Here, the conduct was a pattern of behaviour by the claimants which undermined the possibility of settlement on a reasonable and sensible basis.

Professor Dominic Regan also has an interesting new article in the New Law Journal The New Normal? taking a look at the changing nature of the delivery of legal services: “Society needs lawyers. There will always be problems which is why God invented lawyers. The new art is securing that work and performing it in a cost-effective and, yes, proportionate manner.”

For further information or to discuss any of the issues above, please contact Simon Denyer, Strategic Legal Development Partner on 0161 604 1551 or at simon.denyer@dwf.co.uk

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.