Costs News

07 January 2016
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News in brief 7th January 2016

Insolvency exemption to end

Insolvency litigation is to lose its exemption from the LASPO reforms, the government announced last month, as it revealed that the post-implementation review of the changes will not take place until approximately 2018.

Despite strong lobbying from insolvency and other business groups, civil justice minister Lord Faulks QC said that the exemption will come to an end from 1 April 2016. The exemption had been due to end on 1 April 2015, but the government delayed it earlier this year.

In a statement issued to Parliament, Lord Faulks said: “The government has made a priority of addressing the high costs of civil litigation in England and Wales. To that end, part 2 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 reforms the operation of ‘no win, no fee’ conditional fee agreements. Those reforms came into effect generally in April 2013 but were delayed in respect of insolvency proceedings.

“After further consideration, the government has decided that the ‘no win, no fee’ reforms should now be applied to insolvency proceedings. The provisions will come into force for these cases in April 2016.

“It has already been announced that there will be a post-implementation review of the LASPO Act part 2 reforms between April 2016 and April 2018. The review will take place towards the end of that period. The review under section 48 of the Act in relation to mesothelioma cases will also take place as part of the post-implementation review.”

Courts fees up – but cap stays the same

The government last month decided against doubling the maximum court fee cap to £20,000, but is to press ahead with its planned 10% increase in court fees across the range of civil proceedings.

Justice minister Shailesh Vara said the government accepted that it was “too soon” to understand the full impact of the first round of fee increases introduced in March 2015. These included a new 5% fee on all money claims of £10,000 or more – subject to a cap of £10,000. “We will therefore not implement the further increase at this stage, but keep this option under review.”

However, the Ministry of Justice’s response to its consultation on the new round of fee rises said it did not accept the argument that the 10% general uplift was unjustified and unnecessary.

“The majority of the fees affected will increase by less than £100; the increases are important in making sure that we have a properly funded system of courts and tribunals in the future; and in normal circumstances the court will order the defendant to pay the claimant’s costs, including any fees incurred.”

Mr Vara said: “There remains a need to ensure the courts are not placing too great a burden on the taxpayer. Courts and tribunals in England and Wales cost £1.7bn in 2014-15, but we only recovered £700m in income. That is a net cost to the taxpayer of around £1bn.

“It is, therefore, right that we ask for a greater contribution from court users who can afford to pay more. We have balanced this need alongside the responses we received to our consultation.”

Engeham ruling

Last month we reported on Linda Engeham v (1) London & Quadrant Housing Ltd (2) Academy of Plumbing Ltd (in voluntary liquidation), a case in which the Court of Appeal has found that a claimant won her case for the purposes of her conditional fee agreement (CFA) even though the defendant, which paid her damages, was not named in it.

The article explained that it was based on the Lawtel report of the ruling, with the full judgment not yet available, and ACL Council member David Cooper has clarified that it should not be read as saying that costs against all defendants will be recoverable, even those not named in the CFA.

Where a CFA limits its scope by naming defendants, it only covers claims against those named defendants. It was common ground in the Court of Appeal that because the CFA did not name the second defendant, there was no valid retainer and therefore no recoverable costs for the claim against the second defendant.

However, the CFA did name the first defendant. The second defendant had consented to pay damages and costs of the claim. The Court of Appeal held that the claimant had won against the first defendant, and therefore the second defendant did have to pay the claimant’s costs of pursuing a claim against the first defendant. Ironically, the claimant’s costs of pursuing a claim against the second defendant were not recoverable from the second defendant because of the lack of a valid retainer.

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