As reported on Inforrm the Court of Appeal recently announced that from 1 April 2013 general damages in certain categories of cases – including for libel and privacy – will be increased by 10%.   This was originally recommended by Lord Justice Jackson as part of his ‘package’ of proposed measures in his 2010 report on reducing litigation costs, many of which measures are adopted in the Legal Aid, Sentencing and Punishment of Offenders Act (“LASPO”).

Amongst other things, LASPO is set to prevent the recovery of Conditional Fee Agreement success fees for CFAs entered into from 1 April 2013 onwards, and the increase in damages is intended to allow CFA funding to remain viable by helping to provide the means for a CFA backed claimant himself to pay his solicitor’s success fee.   It seems that the damages increase will be applied in all cases, however, and not simply those in which the claimant is represented under a CFA.

On the face of it, any across-the-board increase in damages is likely to be welcomed by claimants – albeit with libel and privacy damages rarely being agreed or awarded in anything more than the low to mid tens of thousands of pounds, the effect is likely to be too modest to be the cause of any great celebration.

However, aside from access to justice concerns as to whether this measure really will preserve the viability of CFA funding, the damages increase raises a number of questions to which neither the judiciary or the government has yet provided any answers.

First, the increase appears to create a disincentive to settle any case or permit it to go to trial before April 2013.  On an extreme view it could lead to a negligence claim from a client if his solicitors allowed damages to be agreed or awarded before this date (albeit it follows from what is said above that any such claim is likely to be for a fairly modest amount).

The other considerable uncertainty which is created is in relation to Part 36 offers.  For example, if a Court takes a view that before 1 April 2013 the appropriate amount of damages would have been £20,000, then from 1 April 2013 it should increase this to £22,000.  It is unclear what the effect would be if a Claimant had in 2012 made a Part 36 offer of £21,000.  Could the Claimant – having in fact been awarded £1,000 more than his offer –  argue that he should nonetheless be treated as having ‘beaten’ it, given the Court’s starting point for the award?

This in turn leads to questions as to whether any new Part 36 offers should (or even can) be expressed to be subject to an automatic 10% increase if the case progresses beyond 31 March 2013, and whether any exiting Part 36 Offers in cases coming to trial after that date need to be reviewed and possibly revoked and increased in order to protect the offeror’s position.

It seems all these questions remain unanswered as yet, and it is therefore to be hoped that the position is clarified well in advance of the implementation date, rather than leaving an unholy mess in the wake of April Fools’ Day.

Isabel Hudson is a partner at Carter-Ruck