CPR IMPLEMENTATION OFJACKSON REFORMS

- THE FINAL COUNTDOWN!

KAREN TROY & IAN TUCKERWITH ALFRED WEISS, JOHN WAITING & LISA FENG

EXCHANGE CHAMBERSCOMMERCIAL BARRISTERS

Introduction

• Materials– Power Point Presentation

–Summary of Source Materials

–CPR Implementation Table

Introduction contd.

• Scope of presentation– Cultural Changes

– Implementation in CPR (commercial cases)• Allocation, Part 36, and costs rules• Disclosure and evidence (factual and expert)

– Funding Future Litigation

Cultural Changes

• Proportionality

• How the courts will ensure proportionality– “Robust” case management– Costs budgeting for multi-track cases– Sanctions and restricted relief from sanctions

• Conclusions

The new Overriding Objective‘(1) These Rules are a new procedural code with the overriding objective of

enabling the court to deal with cases justly and at proportionate cost.(2) Dealing with a case justly and at proportionate cost includes, so far as is

practicable –(a) ensuring that the parties are on an equal footing;(b) saving expense;(c) dealing with the case in ways which are proportionate –

(i) to the amount of money involved;(ii) to the importance of the case;(iii) to the complexity of the issues; and(iv) to the financial position of each party;

(d) ensuring that it is dealt with expeditiously and fairly;(e) allotting to it an appropriate share of the court’s resources, while

taking into account the need to allot resources to other cases; and(f) enforcing compliance with rules, practice directions and orders.’

Proportionate Costs• No case management order will be made

without also knowing and approving its cost, and the court holding that the cost is proportionate

• Fact sensitive • No further guidance intended to be given

at this stage – Lord Neuberger

Guidance on proportionate costs CPR 44.3(5)

(5) Costs incurred are proportionate if they bear a reasonable relationship to—

(a) the sums in issue in the proceedings;(b) the value of any non-monetary relief in

issue in the proceedings;(c) the complexity of the litigation;(d) any additional work generated by the

conduct of the paying party; and(e) any wider factors involved in the

proceedings, such as reputation or public importance.

Wider Factors• A new phrase • Distinct from “all other circumstances”?• Suggest that it includes:

– importance to parties– conduct generally– … others

Proportionate costs – neither reasonable nor necessary …

CPR 44.3 – Assessment of costs“(1) Where the court is to assess the amount of costs (whether by summary or detailed assessment) it will assess those costs—

(a) on the standard basis; or(b) on the indemnity basis,

but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.(2) Where the amount of costs is to be assessed on the standard basis, the court will—

(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or

reduced even if they were reasonably or necessarily incurred; and(b) resolve any doubt which it may have as to whether costs

were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.”

Proportionate costs – neither reasonable nor necessary …

• A reversal of Home Office v Lownds [2002] EWCA Civ 365?

“The policy which underlies the proposed new rule is that cost benefit analysis has a part to play, even in the realm of civil justice. If parties wish to pursue claims or defences at disproportionate cost, they must do so, at least in part, at their own expense”

- Jackson LJ

• Clear that costs which are both reasonable and necessarily incurred are not inevitably recoverable.

Case and Costs Management • How the courts will ensure that litigation is

conducted at proportionate cost -

“the court should manage both the steps to be taken and the costs to be incurred by the parties to any proceedings so as to further the overriding objective.”

CPR 3.12(2)

Costs BudgetsA ‘prima facie limit on the amount of recoverable costs’

- Moore-Bick LJ• They can be agreed or approved• They relate to phases of litigation • They can only be resiled from for “good reason”

“If, as is the intention of the rule, budgets are approved by the court and revised at regular intervals, the receiving party is unlikely to persuade the court that costs incurred in excess of the budget are reasonable and proportionate to what is at stake.”

Henry v Newsgroup Newspapers Ltd [2013] EWCA Civ 19 (under defamation cost pilot)

Sanctions• More readily imposed

• The courts are expressly given fresh power in CPR 3.1(8) to “…contact the parties from time to time in order to monitor compliance with directions. The parties must respond promptly to any such enquiries from the court.”

• This must be read in the context of the new overriding objective, which makes “enforcing compliance with rules, practice directions and orders” a factor to be taken into account (CPR 1.1(2)(f))

Relief from Sanctions• Harder to obtain relief under new CPR 3.9(1) -

"On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider the circumstances of the case, so as to enable it to deal justly with the application including the need -

(a) for litigation to be conducted efficiently and at proportionate cost; and

(b) to enforce compliance with rules, practice directions and court orders.”

• There is a belief that that both courts and parties have become lax. The guidance is to expect “robust” case management decisions.

Fred Perry (Holdings) Ltd v Brands Plaza Trading Ltd[2012] EWCA Civ 224, Jackson LJ

Conclusions on Cultural Changes

• Renewed emphasis on proportionality • Likely to lead to more restricted costs, with an

impact on case management decisions• The courts will more readily impose sanctions

to ensure that cases proceed proportionately • Conduct will become more important than ever

– Costs incurred due to the other side’s conduct are likely to be proportionate

– A way to obtain indemnity costs – which are more desirable than ever

Allocation• Part 26

– References to “an allocation” questionnaire (throughout the CPR) become references to “a directions” questionnaire, which will be more detailed (although no precedent has yet been made available)

– A court officer will make a provisional track and venue allocation and then serve on the parties a notice of proposed allocation that specifies a date (not less than 14 days later for the small claims track and not less than 28 days later for fast track and multi-track claims) for the return of -• in all cases, a completed directions questionnaire; and• In fast track and multi-track cases, proposed directions; and• for multi-track cases (probably) a costs budget

CPR 26.3

Allocation contd.• Parties cannot vary the date for compliance with the document filing requirements of

a notice of allocation – CPR 26.3(3A)

• Failure to comply with a notice of allocation in relation to a designated money claim will result in the service of an “unless” notice allowing a further 7 days to comply, followed by automatic strike out of the party’s statement of case for continued non-compliance – CPR 26.3(7A)

• For all other claims, following initial default the court can make directions, strike out a statement of case (and enter judgment in default) or list the case for a CMC – CPR 26.3(8)

• As before, a defaulting party will generally bear all costs of obtaining relief from any sanction for non-compliance, or of attending a consequential CMC but be aware that, because of the changes to the Overriding Objective and CPR 3.9, the availability of relief might be more restricted -CPR 26.3(10)

Scope of tracks• The upper limit for the small claims track is raised to £10,000 – CPR

26.6(3), subject to special £1,000 limits for PI and L&T claims

• Note the deletion of CPR 26.7(3), as a result of which the court will not require the consent of the parties to allocate a claim worth in excess of £10,000 to the small claims track, and the deletion of CPR 27.14, as a result of which the parties will not in that event be able to agree that the fast track costs provisions are to apply

• Contrary to the recommendation of Jackson LJ (and of Lord Woolf before him), there has been no introduction of a fixed costs regime for fast track cases, which also are not subject to costs budgeting

Multi-track docketing• There has been judicial recognition of the desirability

of a case docketing system, i.e. the assignment of each case to a designated judge who will manage the case from issue to trial, for at least the more complex multi-track cases

e.g., JIL 9, Lord Neuberger• Budget cuts across government departments render

it doubtful that the judicial and/or Court Service resources needed to support a widespread docketing system will be available any time soon

Multi-track costs budgets• Costs budgets mandatory for multi-track claims

except– Commercial and Admiralty Courts– Chancery Division valued at £2 million + @ first CMC– Mercantile Court/TCC valued at £2 million + @ first CMCCPR 3.12(1); Costs Management Announcement 18.02.13

• To be filed as soon as 28 days after allocation notice and no later than 7 days before first CMC

CPR 3.13 and 26.3(6)(b)

Multi-track costs budgets contd.• Successful pilot in Manchester Mercantile Court

and TCC suggests “broad brush” review• Budget to be completed on Precedent H• See, Guidance Notes on Precedent H• Set out assumptions in detail• Build in sensible contingenciesWhatever else you do, do not fail to file on time – CPR 3.14, “deemed” budget limited to applicable court fees

Costs Management Orders (CMO)• CPR 3.15 has potential pitfalls, e.g. –

– If parties agree costs budgets at hourly rates that the court considers excessive can the court refuse to record the parties’ agreement to the budgets in a CMO (if it does so, are costs to be assessed without regard to budgets)?

– If court makes a CMO by reference to parties’ agreement on costs budgets, does the court thereafter have “control” over the budget, regardless of the parties views?

• In any event, if circumstances change, request a budget increase before incurring additional costs as the court has no discretion retrospectively to approve “incurred” costs

PD3E, para. 2.4

Expanded Part 36• To encourage more (and more focused) Part 36 offers, a new CPR

36.14(3)(d) gives an additional amount, up to a limit of £75,000, to a claimant making a winning offer

• Amount awarded will be 10% of first £500,000 damages and 5% of the next £500,000 damages for money claims or the same %s of costs awarded for non-money claims

• This provision does not in terms implement a proposal of Jackson LJ, who was opposed to valuing the additional amount to be awarded in respect of non-money claims by reference to the amount of costs awarded to the claimant, as this would provide a perverse incentive to incur higher costs and reward the costs profligate

New package of costs rules• From 01.04.13 new Parts 44-48, in Schedule 1 to The Civil

Procedure (Amendment) Rules 2013, will be substituted for current CPR Parts 43-48

• However, there in fact are only a limited number of changes of substance (versus re-arrangement), in part due to the new emphasis on proportionality and cost control but also to implement the restrictions introduced in LASPO on the recovery from paying parties of CFA % success fees and related insurance premiums

Same principles on liabilityand bases of assessment

Under new Part 44 (which incorporates the substance of current Parts 43 and 44), there is no change to the scope of the court’s discretion on what costs order to make, or to the available bases of assessment, but, new CPR 44.3(2) will introduce significant changes to the factors to which the court “will” (not may) have regard when assessing costs on the standard basis, i.e.

– Only proportionate costs allowed– Disproportionate costs disallowed even if reasonably

or necessarily incurred(Proportionality will not be taken into account, and a party’s costs budget is not a limiting factor when costs are assessed on the indemnity basis – CPR 44.3(3))

Fixed costs for small claims track• Part 45 will continue to govern fixed costs, with few

changes of substance• The LASPO limits on recoverability of any CFA “add on”

mean that current provisions for fixed % increases in RTA and for fixed % increases and recoverable success fees in employers’ liability claims are deleted, with re-numbering of rules

• Fast track trial costs have been moved from Part 46 (now covering special cases) into Part 45

• Part 45 now also deals with Aarhus Convention (environmental judicial review) claims

Costs – special cases• Part 46 replaces current Part 48 on special cases

(pre-action and third party disclosure, children and protected persons, wasted costs orders, etc.)

• CPR 46.11-13 will now deal with shifts between costs regimes on allocation and re-allocation

• CPR 46.14 will deal with costs-only proceedings, formerly dealt with in CPR 44.12A-12C

Detailed assessment• Part 47 will continue to govern detailed assessment

• The most notable changes are –

– in CPR 47.15, the introduction of a “paper” provisional assessment procedure for cases in which the costs claimed are £75,000 or less. A party requesting an oral hearing after being notified of the result of the provisional assessment will bear the costs of the oral hearing unless it achieves an adjustment of at least 20% in its favour as a result of the hearing

– in CPR 47.20, the extension of Part 36 to the costs of detailed assessment proceedings, resulting in potentially significant costs benefits to a receiving party who makes a successful Part 36 offer in respect of these costs

Phasing out of pre-Jacksonfunding arrangements

• Part 48, as substituted, contains transitional provisions in relation to the elements of CFA remuneration that will no longer be recoverable from a paying party after 01.04.13, i.e. success fees and insurance premiums, preserving recoverability of those elements under CFAs (and union funding arrangements, etc.) concluded before 01.04.13

• Note that the pre-Jackson CFA recoverability rules will continue to apply to mesothelioma claims, insolvency related proceedings and “publication and privacy” proceedings (all defined in new CPR 48.2) until ss. 44 and 46 of LASPO come into force for them

Disclosure

• CPR 31.5(1) – standard disclosure, as under the current CPR, will continue to be the default disclosure order for fast track claims and PI claims assigned to the multi-track

• CPR 31.5(2) – for all other multi-track claims, the preferred approach will be to select from a “menu” of disclosure options, no later than 14 days prior to the first CMC

Multi-track disclosureCPR 31.5(3) – parties to file and serve disclosure reports, verified by a statement of truth, not less than 14 days before first CMC

Heavy onus on parties and their lawyers to give consideration to the scope of the disclosure available, and needed, and to the potential costs of the disclosure exercise, from the outset (with a concurrent “front loaded” costs burden)

Multi-track disclosure contd.• CPR 31.5(7)-(8) set out the new disclosure menu

options, e.g. no disclosure, staged disclosure, standard disclosure, or “any other [appropriate] order”, e.g. a “key to the warehouse” order

• Parties are required to have discussed and, if possible, agreed a proposal for disclosure “that meets the overriding objective” not less than 7 days before the first CMC

• The court retains ultimate discretion as to the scope of disclosure directed

Factual witness evidence

New CPR 32.2(3) introduces a discretion in the court to make directions:

(a) identifying/limiting issues to be addressed in factual evidence;(b) identifying the witnesses who may be called or whose evidence may be read; and(c) limiting the length or format of witness statements.

Of these potential directions, (c) appears to be the most likely to cause concern to parties

Expert evidence

The amendments to CPR 35.4 reflect a dual concern:• to reduce costs by focusing, and providing clear

guidance on, the scope of the expert evidence to be adduced; and

• to limit the fees paid to experts, which Jackson LJ viewed as no less troubling in amount than costs paid to lawyers, but which have never previously been subject to assessment

See, JIL 4, s. 2-3

Expert evidence contd.PD35, new paragraph 11.1, further permits the court to give a direction for concurrent expert evidence at trial (a CEED), or “hot tubbing”

CEED pilot in Mercantile Court and TCC in Manchester –• “hot tubbing” popular with judges and experts• independent study suggests little reduction in overall costs of

expert evidence• (unsurprisingly) parties less happy with a regime that vests

control of expert evidence in the judge and reserves little influence to the parties’ counsel

See, JIL 4, s. 4

Funding future litigation• Obvious dilemma following LASPO restrictions on

recoverability from paying parties under CFAs– s. 44, no recovery of % success fee– s. 46, no recovery of costs insurance premium

• Saving in respect of portion of insurance premium covering expert reports on liability or causation in clinical negligence proceedings– The Recovery of Costs Insurance Premiums SI

• Not in force for mesothelioma, publication and privacy, or insolvency related proceedings

Why restrict CFAs?

• “Baby” of general litigation funding thrown out with “bathwater” of finding that NHS (i.e. public purse) was paying 4 times costs of clinical negligence suits (resulting in negative benefit from prior reduction of legal aid budget)?

• Less radical options available, e.g.– capping % success fee recoverable from paying party– regulating ATE insurance providers

Options considered by Jackson LJ• Legal aid• BTE insurance• ATE insurance• CFAs• Third party (litigation) funding• DBAs• Contingent Legal Aid Fund• Supplementary Legal Aid Scheme• Litigants in person (self funding)Final Report, Part 2 and JIL 1, 2, 3 and 6

What in fact was offered in LASPO?• LASPO, s. 45 introduces Damages-based agreements

(“DBAs”), i.e. standard “no win no fee” contingency agreements

• Little comfort for small to mid-sized claims, because coupled with limits on recovery out of client’s damages (inclusive of VAT but net of any recoveries from another party) of 25% (net of future pecuniary loss) for PI claims, 35% for employment claims, and 50% for all other claimsThe Damages-Based Agreement Regulations (Draft)

Can the Jackson reforms achieve affordable justice for all?

Overarching aim is to secure affordable access to relative justice for the many, rather than providing perfect justice for the wealthy few

But, reduced availability of legal aid funding (not due to Jackson), reduced benefit of CFAs, limited benefit from DBAs, high premiums for insurance against adverse costs orders and mere aspirations to supplement legal aid

Perhaps a new wave of commercial litigation funding? If so, at what cost to the client?

POST-IMPLEMENTATION REVIEW

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