News: Conditional Fees – the Government Responds to the Consultation

The Government has published its “Response to proposals for reform of civil litigation funding and costs in England and Wales”. It has decided to implement the reforms to no win no fee conditional fee agreements (CFAs), proposed as a package of measures by Lord Justice Jackson.   Under these proposals “success fees” and “After the Event” (ATE) insurance premiums will no longer be recoverable from the other party to litigation.  Instead, any success fee will be paid by the CFA funded party. 

The “associated measures” in the package include

• an increase in 10% in non-pecuniary damages in all tort cases – this will include defamation and privacy claims;
• the maximum success fee will remain 100% – this will be paid from the damages recovered and, in defamation and privacy cases there will be no “cap” – in other words, lawyers will be able to take all the damages to cover the “success fee”.
• there will be “qualified one way cost shifting” but only in personal injury cases – in other words, CFA funded litigants in defamation and privacy cases will be liable to pay the other party’s costs in full;
• “Damages based” agrees (DBAs or “contingency fees”) will be available in all categories of case.

This appears to be complete success for the media in their campaign against the current regime for defamation and privacy CFAs.   Unsuccessful media defendants will no longer be required to pay either success fees or ATE premiums.  Successful media defendants will be entitled to seek all their costs against claimants.   A “chill” on freedom of speech will be removed.  The cost in terms of access to justice remains to be assessed.

The consultation appears to have rejected the suggestion made by a number of consultees that success fees should continue to be recoverable by defendants – as these obviously cannot be recovered from damages.   For example, in its response to the consultation, media law firm Carter-Ruck raised this point, drawing attention to the fact represented scientist Professor Henrik Thomsen and journalist Hardeep Singh on defendant CFAs. The issue is not discussed in the Government’s Response to the Consultation –  defendant CFAs appear simply to have been treated in the same way as those available to claimants.

The discussion of the consultation responses is interesting.  On Question 1: “Do you agree that CFA success fees should no longer be recoverable from the losing party in any case” was answered by 556 respondents, 396 (71%) of whom disagreed that the recoverability of success fees should be abolished, and 160 (29%) agreed.    The MoJ was clearly not swayed by mere numbers.   Unsurprisingly perhaps “all general liability insurers, respondents from the media and local authority responses answered ‘yes’“.  The majority of law firms and ATE insurers, and all trade unions answered ‘no.’   It was noted that

“The media respondents disagreed with arguments for recoverability being presented under the banner of access to justice, which in their view were arguments for ‘access to profit for lawyers.’”

On Question 7, whether the maximum success fee should remain at 100%, there were 496 responses with 338 (68%) agreeing that the maximum success fee should remain at 100%.  The MoJ noted that “Many of the 158 (32%) who answered ‘no’ were on the defendant side of the debate, such as general liability insurers, the media and local authorities”.

The same number answered Question 11 – on the recoverability of ATE premiums – with 341 (69%) favouring continued recoverability.  Once again, all the general liability insurers, media and local authorities were against recoverability.

Finally, and again unsurprisingly, the Response noted that

“The media respondents thought that the majority of proposals would be good for newspapers, government bodies and large corporations”. [254]