Civil litigation cost reforms to be delayed until 2013, Government confirms

Part two of the Legal Aid, Sentencing and Punishment of Offenders Bill will make those who win their court cases pay their own lawyer's 'success fee' and the cost of taking out a legal expenses insurance policy to cover their own costs in the event of a defeat. They will pay these out of any damages award.

The Government had intended to bring the changes into force in October this year. But the delay, which had been predicted by the legal profession, was confirmed by Liberal Democrat peer and Advocate-General for Scotland Lord Wallace of Tankerness in a House of Lords debate on the proposals yesterday.

The first part of the Bill, which proposes cuts to legal aid for most civil cases, has already been delayed until next year to give the Ministry of Justice (MoJ) more time to prepare for the change.

"We wish to make sure that we get the details of these regulations and rules right, and that will inevitably take some time. We are also conscious that stakeholders will need appropriate notice of when the changes will be implemented and how the details will affect them," Lord Wallace told the House of Lords.

The Ministry of Justice confirmed the delay. "This will require changes to legal rules and regulations and we want to give sufficient time to get the complex details right," said a statement from the Ministry. "We are also conscious that legal businesses will need sufficient time to plan for the changes, alongside other forthcoming regulatory and funding changes to the industry. We will therefore implement the new measures, subject to Parliamentary approval, in April 2013.”

Legal costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that the delay was not unexpected due to the complexity of the reforms, although he said that Lord Justice Jackson, who proposed many of the changes as part of a wide-ranging review of civil litigation costs in 2010, wanted them brought into force as soon as possible. Lord Justice Jackson remains actively involved in the implementation of the changes.

"Lord Justice Jackson is fully committed to the implementation of these reforms, as outlined in his original report. Although the Ministry of Justice has now confirmed the delay, it has stressed that this is due to the complex nature of the reforms. These will almost certainly go ahead as planned," Levene said.

Other measures due to be introduced when the Bill comes into force include a 10% increase in general damages, intended to cover a successful claimant's extra costs, and a system of 'qualified one way costs shifting' (QOCS). This will mean that in almost all cases personal injury claimants who lose their action will not be liable to pay the other side's legal costs. Referral fees paid to claims management companies and insurers by personal injury lawyers will also be banned.

The Government also plans to lift the current restriction on the use of contingency fees or damages-based agreements (DBAs), which are fees calculated as a percentage of the damages won by a party. Fees will be capped at 25% in personal injury cases, with a higher cap in commercial cases currently being debated. DBAs are already permitted in Employment Tribunal cases.

The Bill is currently being debated in the House of Lords, and remains subject to Parliamentary approval.

Lord Justice Jackson has also acknowledged that the reforms will likely lead to an increase in third parties agreeing to fund civil court cases in return for a share of any award. In November, a Code of Conduct was issued for such funders wishing to join the newly-established Association of Litigation Funders of England and Wales.