Love is in the Air
Published: 12 February 2014
Valentines Day is a celebration of love, but for those who are currently embroiled in a court dispute, there won’t be love in the air this February.
Whilst litigation is sometimes unavoidable, it can be uncertain and expensive. The Jackson reforms, which were implemented in April 2013 in England & Wales in order to address concerns surrounding litigation, has changed the way in which litigation is funded and managed.
The key changes were:
- Conditional Fee Arrangement fees (CFAs) (also known as "no win, no fee" arrangements) allow lawyers to litigate on the basis that they do not get paid if the case is lost, but if they are successful, they will receive their usual hourly rate, plus a "success fee". Success fees are no longer recoverable from the losing party;
- After The Event Insurance (ATE) policies (insurance policies to avoid the risk of having to pay an opponent’s legal costs in the event you lose an action) are also no longer recoverable from the losing party;
- Damages Based Agreements (DBAs) (whereby lawyers receive a share of the damages [up to 50%] where a claim is successful, but get paid nothing if the case is lost), have been introduced;
- Proportionality regarding costs is now a consideration, e.g. when assessing the recoverable costs, the Court will consider whether the costs are proportionate, in addition to whether they were reasonable and necessary;
- Cost budgets were introduced and are exchanged between parties and lodged with the Court during the course of litigation;
- Qualified one way costs shifting (QOCS) means that in personal injury claims, claimants can recover their costs if successful but do not have to pay the defendant’s costs if they lose;
- Small Claims have been increased from £5,000 to £10,000; and
- Part 36 Offers: if a defendant fails to “beat” the Part 36 offer at trial, an additional 10% of damages will apply in addition to the existing sanctions.
Almost a year on the recent cases have highlighted that the reforms are being strictly applied and that non compliance with court rules and deadlines may have serious consequences. For example in Venulum Property Investments Ltd v Space Architecture Ltd & Ors  EWHC 1242 (TCC) the Court refused to grant an extension of time for service of particulars of claim. The Court stated that it is “required to take a much stronger and less tolerant approach to failures to comply with matters such as time limits”. The consequences of failing to file a costs budget means that the defaulting party is deemed to have only budgeted for the court fee (CPR r3.14) and thus solicitors have been prevented from recovering any of their costs in some cases.
To litigate or not to litigate?
Sometimes disputes are unavoidable, however there are alternatives to court proceedings. "Alternative Dispute Resolution" (commonly known as "ADR") can be classified in to four main types: negotiation, mediation, collaborative law, and arbitration.
Negotiation is a process where each party tries to reach agreement which will satisfy their various (usually conflicting) interests. It is aimed at reaching a mutually beneficial compromise.
Mediation (and conciliation, which is arguably a form of mediation) involves the use of an impartial third party who encourages and facilitates a solution to the dispute. Any decision is not binding and does not prevent court action being taken in the future.
In contrast, arbitration is similar to the court process as it involves the imposition of a solution by a third party (the "arbitrator") by whose decision the parties agree to be bound. The decision is legally binding for both parties.
Collaborative law (most commonly used in the UK in family actions) is the process where both parties and their lawyers “sit round the table” in an attempt to reach a settlement which meets the needs of both parties without the need for court. If litigation is required at a later date, the collaborative law process ceases, and both solicitors are prevented from having any further involvement in the dispute.
Whilst you won’t necessarily be able to kiss and make up over a romantic dinner this February, it should be a comfort to know that litigation isn’t the only option on the menu!
Fletcher Day’s experienced litigation solicitors (who are qualified in a number of jurisdictions worldwide) provide sound, practical and commercial advice, pursuing alternative dispute resolution (ADR) where-ever possible, thus keeping costs to a minimum. Contact Jovita Vassallo in the Dispute Resolution Team for more information.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.