Developments: Procedure - DAC Beachcroft

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Developments: Procedure

Published On: 1 September 2016

The search for the holy grail of access to justice for everyone at proportionate cost continues at a time of budget restraints and a government policy of austerity. This year we have seen Lord Justice Briggs step into the arena and take up the challenge. He is in charge of the Civil Courts Structure Review, which forms part of the wider HM Courts & Tribunal Service (HMCTS) Reform Programme that is looking at the administration of justice generally in England and Wales.

We look below at some of the central themes of Briggs LJ’s review and other developments affecting civil litigation in England and Wales.

Civil Courts Structure Review: Final Report by Lord Justice Briggs

It is clear from the Reform Programme and Briggs LJ’s Final Report (published in July 2016) that digitisation of court processes is seen as the key to improving the efficiency of the courts. A move to a paperless court to break the “tyranny of paper” is proposed by Briggs LJ, although he accepts that this is likely to take at least four years to achieve. This process has started in the Rolls Building with the CE-file, a new electronic filing and case management system. However, Briggs LJ is proposing a much bolder initiative making use of IT for new or different processes and procedures which are not capable of being carried out on paper; not just an electronic replica of the court file and document storage. If this is to be successful, there will need to be support from court users and a willingness to accept alternatives to the traditional court processes. At present, although documents are being filed electronically on CE-file, parties are reluctant to issue proceedings electronically. Briggs LJ has commented that this may need to be made compulsory to force adoption of a new way of working. This is just an indication of the challenges ahead. Not surprisingly, there are concerns about HMCTS’s ability to deliver such a massive IT project.

Online Court
The main proposal put forward by Briggs LJ in his report is the establishment of an Online Court for civil claims up to L25,000 subject to specific exclusions. Although it would be designed for use by litigants without lawyers, involvement by lawyers would not be banned and Briggs LJ suggests a very limited element of fixed recoverable costs so that litigants can get initial legal advice on the merits of their case from a qualified lawyer and the provision of skilled cross-examination from an experienced advocate in cases which really need it. The value of the upper limit has prompted much discussion with opinions ranging from L2,000 to L200,000. Briggs LJ notes that L25,000 conveniently matches the dividing line between fast track and multi track and would capture the vast majority of civil claims. However, he acknowledges that the Online Court may initially have to start with a ceiling of L10,000. Briggs LJ’s view is that personal injury claims above the small claims limit should be excluded from the Online Court. He also recommends that professional (non-clinical) negligence, intellectual property and possession claims should also be excluded. Briggs LJ also voices concerns about the effect of the government’s plans to raise the small claims limit for personal injury claims, which could leave many more such claims below the limit.

A three-stage process is envisaged: (1) evaluation – investigation and triage, the interactive triage system differentiating the Online Court from the small claims track and digital processes used in other jurisdictions; (2) facilitated attempts to resolve the dispute, including conciliation and other forms of ADR; and (3) resolution by judge, if the other measures fail. Briggs LJ hopes that few cases would reach stage 3 but, if they do, determination could often be on the documents, on the telephone or by video rather than requiring a face-to-face hearing.

Other proposals
Other proposals included the greater use of case officers and increasing the share of work dealt with in the main regional cities rather than in London. Briggs LJ takes the view that no case is too big to be resolved in the regions. Briggs LJ has also identified as a key issue the need to deal with the current workload of the Court of Appeal. A separate consultation has been carried out on this and we provide further details below.

Key developments affecting civil litigation

Fixed costs
In his speech ‘Fixed Costs – The Time Has Come’ in January 2016, Lord Justice Jackson called for fixed costs to apply to all claims valued up to L250,000 and for fixed recoverable costs to be set by the end of the year. Presently, fixed costs apply only to personal injury claims valued up to L25,000. For low value claims, fixed fees will provide certainty for both sides in litigation and also avoid disputes over costs.

Jackson LJ has proposed a single fixed costs grid for all multi-track cases up to L250,000 rather than separate grids for different areas of work. He has gone on to suggest appropriate staged fees, based on his experience and various sources, which range from L18,750 for claims up to L50,000 to L70,250 for claims up to L250,000. Certain factors need to be added to those base figures to reflect the complexity either of a certain type of case or in an individual case. The Civil Justice Council is now looking at how to develop these plans. Fixed costs will inevitably mean there are winners and losers as there will be few claims where the actual costs incurred match the fees set. However, for insurers facing claims, there will be the significant benefit that much more accurate reserves can be set for claimants’ costs.

Court of Appeal consultation
Over recent years, the time required to conclude proceedings before the Court of Appeal has increased significantly as the court’s workload has risen, whereas the number of Lord and Lady Justices has not. In January 2016, the court was noted to be disposing of 1,042 appeals per year, giving a deficit of 179 appeals per year, with the total backlog equated to a full year’s work of the court. Since then the backlog has got worse.

The Civil Procedure Rule Committee has consulted practitioners on changes in the court’s process, intended to enable it to deal with cases more quickly. Closing on 24 June 2016, the consultation did not include the question of increasing the number of judges, which had been canvassed in the 1997 Bowman report. Instead, it proposed raising the threshold for permission to appeal to the Court of Appeal to “a substantial prospect of success” in place of the current “real prospect of success”, removing the automatic right of oral renewal for applications to appeal (replacing it with a discretion for the court to decide whether to hold a hearing or to make a decision on the papers) and removing the automatic right to an oral hearing for reconsideration of decisions of other applications made in the course of proceedings in the Court of Appeal.

It is clear that action needs to be taken if the Court of Appeal is to progress appeals in a timely manner. The benefit of any changes, combined with the recent change in rules which sees the transfer of first appeals in County Court cases to the High Court, will, however, need to be weighed against their impact on access to justice.

2015 Autumn Statement
The pre-referendum purdah may have delayed the release of the government’s consultation, but it has not dampened its enthusiasm to tackle the ongoing issue of whiplash claims frequency – a problem the LASPO reforms have failed to address.

With soft tissue injury claims adding L90 to the average motor insurance premium, the government is intent on proceeding with reforms set out in the Chancellor’s 2015 Autumn Statement, to bring down the cost of motor insurance for consumers. It plans to raise the small claims track limit to L5,000 for soft tissue injury claims (if not wider) and set a minimum threshold below which minor whiplash injuries are not compensatable.

In attempting to get the second limb of its proposed reforms over the line, the government will inevitably face a co-ordinated challenge from the claimant personal injury lobby, who will argue the fundamental right to compensation and allege a further erosion of access to justice.

Civil Justice Council activity
The Civil Justice Council (CJC) is continuing to monitor the impact of the Jackson reforms by setting up a new working group which will review selected specific topics. Starting in April 2016, the group’s initial focus was to be on the ‘hot-tubbing’ of experts, the role of BTE insurance, Qualified One-way Costs Shifting and private nuisance claims. The focus on funding is obvious. Meanwhile the CJC’s working party on Noise Induced Hearing Loss claims, chaired by Andrew Parker of DAC Beachcroft, has completed phase 1 of its work on creating a structure for fixed costs, including proposed improvements in the handling of such claims. A final report is expected in September/October 2016.

Litigation funding
Introduced by the Jackson reforms, damages-based agreements (DBAs), a form of ‘no win, no fee’ agreement where recoverable fees are calculated as a percentage of any damages recovered by the client, have remained unpopular due to insufficient detail in the DBA Regulations 2013 and uncertainty about their operation in practice.

In November 2014, the government asked the CJC to review the Regulations, and in September 2015, the CJC published its recommendations. These are being considered by the government and draft legislation is expected imminently.

It is anticipated that the new legislation will allow ‘sequential’ forms of funding, where a DBA is one of the funding methods used by the client during the course of litigation, but not allow ‘concurrent-hybrid DBAs’, where a firm receives funding through both a DBA and some other form of retainer concurrently. Commentators suggest that these reforms will not go far enough and that DBA uptake will remain low.

With DBA difficulties, and the inability to recover CFA success fees and ATE premiums now firmly embedded, third-party funding (TPF) has seen rapid growth in recent years and the value of assets managed by UK funders is now reported to stand at L1.5 billion. TPF, where funds for litigation or arbitration are advanced by funders to claimants usually in return for an agreed share of the claim proceeds, can be a sensible option in appropriate cases.

Some concerns have been raised recently that the backing of litigation for ‘investment’ should be regulated by the Financial Conduct Authority. Funders defend their selfregulated status as providing a valuable means of access to justice and for now, at least, it seems the industry will escape formal regulation, with willing funders opting to subscribe to the Association of Litigation Funders’ code of conduct instead.

Given the growth of TPF, Lord Justice Jackson gave a keynote speech in February 2016 reviving his proposal to create a contingent legal aid fund. This would be a fully self-financing scheme run by the Law Society, Bar Council and Chartered Institute of Legal Executives. It would pay the claimant’s costs if unsuccessful and take a share of the proceeds of action if successful. The Bar Council, the Chartered Institute of Legal Executives and the Law Society have followed his recommendation and set up a joint working party to examine the viability of this proposal. Recommendations are expected by the end of 2016.

Consequence of court fee rises
From 9 March 2015, the court fee payable on the commencement of claims increased to 5% of the sum claimed (for claims over L10,000 and less than L200,000) up to a cap of L10,000, seeing the fee payable increase by up to 622%.

Unsurprisingly, some claimants and their solicitors have sought to pay a lower court fee than they ought, through undervaluing the claim on commencement of proceedings. This practice was found by the High Court (Lewis & others v Ward Hadaway) to be an abuse of process and, while the claims were not struck out as that sanction would have been disproportionate to the breach of rules, the claims which were delivered to the court on the cusp of limitation without the appropriate fee, and therefore not properly issued until after limitation had expired, were statute barred.

The relevance of this decision to claims involving personal injury is less clear. In Lewis the court did not have discretion under section 33 of the Limitation Act 1980 to extend the limitation period whereas that discretion would be available in injury claims.

Court fees have continued to increase over the last 12 months with a number of civil court fee increases coming into effect in March, April and July 2016.

Shorter Trials Scheme and Flexible Trials Scheme
As part of the HMCTS Reform Programme, two pilot schemes have been launched for cases conducted out of the Rolls Building in London. The Shorter Trials Scheme (STS) and Flexible Trials Scheme (FTS) started to operate on 1 October 2015 and will run for two years. The aim of both pilot schemes is to achieve shorter and earlier trials for business-related litigation, at a reasonable and proportionate cost.

As the name suggests, the STS is designed to offer “dispute resolution on a commercial timescale” and it will be suitable for cases which do not require extensive disclosure, or witness or expert evidence. The aim is that trial will be reached within ten months of issue. The maximum length of trial will be four days, including reading time.

The FTS allows parties, by agreement, to adopt more flexible case management procedures to suit their particular case. The aim is to achieve a simplified and faster procedure than the full trial procedure currently provided for under the Civil Procedure Rules.

The intention is that the schemes will be refined over time. We can expect those aspects of the schemes which work well to be introduced to all civil litigation.

New Financial List and market test case procedure
The new Financial List opened in London in October 2015 to hear financial disputes worth over L50 million, or which require particular expertise in financial markets, or raise issues of general market importance. A pilot scheme has also been launched for a test case procedure to resolve market issues on which there is no previous English authority without the need for an existing cause of action.

With the promotion of speed and efficiency at its core, the List is presided over by 12 judges, all experienced in financial disputes, who are responsible for cases allocated to them from inception to conclusion.

The creation of the Financial List is a positive signal that London remains the pre-eminent venue for international dispute resolution and reflects the important contribution made by the financial services industry to the UK economy.

New bill of costs and J codes
In Jackson LJ’s final report on his review of civil litigation costs in 2010, he recommended that a new form bill of costs be developed. The current model was criticised as being expensive and cumbersome to draw up, not making

use of new technology and not providing a clear picture of what work was done and why. In furtherance of Jackson LJ’s recommendations, ‘J codes’ have been produced. These are a set of standard codes for recording time which categorise work by a structure of phase, task and activity. The phases are similar to those now used in Precedent H, the prescribed form for costs management.

A new bill of costs has now been produced for detailed assessment, adopting the J codes. A voluntary pilot scheme for the new bill began on 1 October 2015. Initially, it was intended to run until the end of April 2016 but it has now been extended until 30 September 2016. Concerns have been raised that the proposed bill is too expensive, prescriptive, complex and time consuming. For the new format to work, solicitors will need to invest in new software. However, they are loath to do so if there is any chance that the new bill will be abandoned. It has now been suggested that the new format be introduced for all work undertaken after a certain date.

Civil Procedure Rules
From a rules and procedural perspective, there have not been many radical changes over the last 12 months. The Civil Procedure Rules on charging orders and attachment of earnings orders have been rewritten and there have been some further changes to the costs management rules.

Costs management
Judges and practitioners are still trying get to grips with costs budgets and the concept of proportionality. Some TCC judges have been taking a firm line with costs that they consider to be disproportionate and excessive, with some budgets being slashed. However, in our experience there is considerable inconsistency in the approach being adopted by different courts and different judges.

Third-party costs orders
Finally, a note of warning to insurers. In Legg and others v Sterte Garage Ltd and another, the Court of Appeal upheld a thirdparty costs order against public liability insurers on the basis of ample evidence that the insurers were acting exclusively or predominantly in their own interests in defending the claims.