In Knauer (Widower and Administrator of the Estate of Sally Ann Knaur) v Ministry of Justice [2016] UKSC 9, the Supreme Court has held that the correct date as at which to assess the multiplier when fixing damages for future loss in claims under the Fatal Accidents Act 1976 should be the date of trial and not the date of death.

This is a decision of huge significance in the assessment of damages, with the Supreme Court overturning their own judgment (House of Lords) in the age-old case of Cookson-v-Knowles – one that had been good law for decades!

The Court outlined the argument against the long standing approach to take the date of death as the relevant date, for two reasons. Firstly, in many cases the old approach leads to under compensation and therefore offends the aim of damages which is to put the victim insofar as possible in the position he would have been in had the harm not been done. In addition, the previous authorities on this point were handed down in a different legal landscape – one where “the calculation of damages in cases of personal injury or death was wholly scientific.”

So what does the decision mean in practice?

First and foremost, this decision brings the approach in fatal accident claims in line with that in other personal injury cases – a tick for consistency. For claimants, it will also lead to increased damages (though whether the increase is unlikely to be significant in most cases remains open to question!) In the meantime, where schedules have been pleaded on the “old” basis it is expected that figures will have to be revisited and where there are Part 36 offers in place it may be wise for the offering party to satisfy itself that the offer remains appropriate.

TCS

“Remuneration on a time basis rewards inefficiency…”

“This inefficiency combined with the complexity and procedure of modern litigation has resulted in a civil justice system which is exorbitantly expensive…”

“High litigation costs inhibit access to justice and undermine the rule of law.”

Taken from Lord Justice Jackson’s recent lecture, these form (apparently?) the genesis of the current problem with our civil justice system and the foundation of the argument for moving toward a “grid of fixed costs.” Indeed, he believes that the time is now ripe to move towards a fixed costs regime for all cases under £250,000 (and, in turn, for solicitors to think seriously about offering DBAs to a wider variety of clients…)

As he points out, fixing costs is an effective way of ensuring that a party’s recoverable costs are proportionate to the subject matter of the litigation, as well as providing that certainty and predictability that clients desire, and frankly require. Also, a fixed costs regime dispenses with the need for costs budgeting and costs assessment (how much time and expense is focussed on dealing with precedent H?)

Such a regime, Jackson LJ is (unsurprisingly) happy to report, has already worked well in respect of fast track personal injury claims, leading to “the resolution of hundreds of thousands of personal injury cases per year at proportionate cost.”  In addition, such systems work effectively abroad, with the models of Germany and New Zealand held out by Jackson to be particularly good examples.  In the latter, “the fixed costs regime allows a successful litigant to recover 2/3rds of the costs that are ‘deemed’ to be reasonable with reference to the complexity of the issues and the time it would be reasonable to take on the tasks.”

Lord Jackson’s proposed system is not wholly dissimilar. A ‘grid’ would set fixed costs for solicitors’ and barrister’s fees, excluding disbursements, enforcement fees and VAT.  It would divide the course of a case into 10 stages, following the 10 stages in precedent H, and dispense with the need for costs management.  Fixed costs for each stage are then set by reference to four bands, determined by the value of the claim (the sum of the property recovered where the claimant won. Where the defendant won, it would be determined by the amount claimed.)  In the first band (cases worth between £25,000 and £50,000) Jackson LJ’s suggested fixed amount is £18,750.  Under the top band in the grid, cases worth between £175,000 and £250,000, the figure rises to £70,250.

As you would expect, lawyers have given the proposal (which could be implemented within the year if his call for Government action is met) a frosty reception, describing it as a “report from an Ivory Tower that fails to address how the changes will impact on real people.” Indeed, whilst the proposal may (or may not) be a move in the right direction, a single approach for all cases, regardless of complexity, is on first glance oversimplified.

In particular, one could point to the fact that there is no allowance for the complexity of claims as being particularly unsatisfactory. Would £70k really be enough remuneration for the work that goes into a complex £250k claim, and if not would the NZ regime be a better example to follow?  If it is to be the case, however, it seems to be the perfect opportunity for firms to begin offering DBA’s, meaning that whilst there is a ceiling on recoverable fees, they can at least be fairly remunerated for their work!

TCS

Those who read last week’s blog on SBEEA will have noted (we hope!) our suggestion that that firms could seize opportunities to leap into the litigation funding market themselves.

Congratulations, therefore, to Capital Law who became the first law firm in the UK to offer large-scale litigation funding, having created a £50 million investment pot to help its clients pursue litigation.

This innovative move comes not long after FTSE-20 giant BT secured a $45 million deal to fund pending litigation run by the group’s in-house ABS, BT Law.

Both of these demonstrate the pace at which the litigation funding market is evolving and the opportunities it can offer both firms and clients alike. However, neither need venture into the complex market alone – QLP can help!  In recent times we have put together a (kaleidoscopic) variety of innovative funding products, so if there is something you and your clients would like, give us a ring…

SBEEA 2015 is part of a continuing narrative in the UK underpinning its reputation as a pre-eminent centre for law and business.  As with most legislation these days the direction is towards greater harmony with international bodies and laws.  As I awoke bleary eyed at my desk I realised that the Act is never going to trouble the best seller lists but as with other soporific reads the ‘devil is in the detail’.

Having had the best part of a year to digest the Act, coupled with both the prohibition of recoverable success fees and ATE premiums effective April 2016, the insolvency arena has much to contemplate and review in respect of working practices. This includes the ability of officer holders to assign an individual or portfolio of claims which may, as intended, improve the outcomes of unsecured creditors but also mean that administrators and their legal advisers now need to assess the appropriateness of such assignments.

The Act was introduced with a fanfare of worthy aims and introduces one or two practical tools to help office holders at the day to day level. An example of this is ‘deemed consent’ where decisions taken by the Administrator have the assumption of creditor approval and it is for the creditors to object if this is not the case.  By speeding up the decision-making and giving administrators more authority this should positively affect financial outcomes for the majority but not necessarily all creditors (particularly if you are the lone dissenting voice in a roomful of creditors).

As I understand it the Government is seeking greater transparency and within the Act there is quite a lot aimed at directors, particularly those whose conduct falls short when it comes to fitness and propriety. Directors need to be aware of the greater number of potential sanctions, especially those with a questionable track record even if the conduct under scrutiny occurred in a foreign jurisdiction.  Also, the Act allows the possibility of legal action against a person who has caused a director’s ‘unfitness’, culpable individuals could therefore include business advisors who are too close to the ‘smoking gun’ when things go wrong.

Officeholders, Insolvency Practitioners and their legal representatives will now potentially have to contend with more pressure from creditors who understand the increased scope of options to recover monies. My attention is drawn to the fact that an officeholder can assign to another party actions in respect of fraudulent and wrongful trading, transactions at an undervalue and preferences, and extortionate credit transactions.  Once assigned the proceeds of such claims do not go towards the company’s asset ‘pot’ and therefore secured creditors do not benefit.

The Act has eased constraints limiting the ability of unconnected parties from having an interest in insolvency claims. In my view this opens two main arteries of potential beneficiaries.  Firstly, it enables creditors to buy claims, the directors of the company itself do not appear to be prevented from being a purchaser, so why not the  company’s D&O insurers who may have subrogated rights?  Secondly, as the Act enables entities without a prior commercial interest in the company to buy the claims it may ‘commoditise’ these claims, as an example, a third-party funder  (TPF) could purchase from the administrator claims providing a hassle free solution to the administrator and a quick and easy source of money for the creditors.  The TPF can then own the claims under their own name and seek to profit (or not) from future recoveries.  Undoubtedly entities in the market are already considering such proposals and opportunities.

Before SBEEA a proposition from a TPF to an officeholder generally had to be in accordance with the Association of Litigation Funders’ code-of-conduct i.e. investing in the case and providing monies to pay legal costs in return for a profit upon recovery.  This model leaves the running of the case to others and does not allow funders to unduly influence the course of a claim for fear of falling foul of Maintenance and Champerty laws.  However, now a Funder can overtly own the claims in their own right or as part of a package involving other creditors.

The legal industry and law firms have a challenge before them so how do they respond? With the advent of Alternative Business Structures surely it is now possible for law firms to work with the ‘money men’ and set up their own facilities to address this potential market?  It will of course be expected that professional ethical standards are upheld and conflicts are avoided but for a law firm undertaking a decent volume of such work then opportunities will arise to represent a new group of clients or indeed innovate as the TPF market continually strives to do.

Legal commentators, of course, see the Act from differing standpoints but general themes are emerging about the down sides. Namely, directors may think twice before calling in the administrator which could make matters worst when eventually the liquidators hove into view.  Those advising directors before a company enters administration need to take careful stock of the ramifications of their advice.  Also, an assessment of whether or not an Administrator should assign claims needs to be thought through carefully.

Soporific it may be in its unabridged form but SBEEA has the potential to change established practices for better or worse. We would be interested to hear your thoughts so please contact us.

TSD

It is not often that a wardrobe plays a starring role in fiction. A gateway to Narnia, a hiding place perhaps, but rarely the perpetrator of an assault.  Yet, an IKEA wardrobe recently played a starring role as part of a claim at Manchester County Court last month.  According to the claim, a grandmother was forced into using herself as a human shield to save her two-year old grandson from being crushed by the falling item of furniture, suffering injuries to her arm as a result.

The twist in the tale came as the defendant IKEA tried to invoke the defence of fundamental dishonesty, alleging the tale was fiction rather than fact (though there were no lions or witches involved I’m afraid!)

This defence has been available to parties since April last year in an attempt to reduce the number of fraudulent cases, and allows for the dismissal of a claim if the claimant has been fundamentally dishonest. Despite this seeming a little tautological, defendants have used the strategy in their favour since April, with the insurance firm AXA forcing two claimants to drop personal injury claims for neck injuries following ‘light contact’ with a neighbouring vehicle.

In fact, this is one of the first reported cases of the fundamental dishonesty defence failing. Good news to those who feared that the new legislation would be a potent weapon allowing the defendant to discourage genuine claimants. Accidents do happen.