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Litigation update: major changes to the litigation landscape

Dispute resolution specialist Simon Jackson outlines the wide-ranging reforms to the litigation process which were implemented on 1 April 2013.

Resolving commercial disputes through the courts is usually the option of last resort as litigation can be a painful, uncertain and expensive process.

In recent years, the courts have been concerned to try to make the process more efficient and cost-effective. This concern has led to wide-ranging reforms to the litigation process being implemented on 1 April 2013. Simon Jackson summarises some of the key features of the new regime.

Funding of litigation

For some time, the courts, lawyers and litigants have been getting to grips with a growing range of options for funding litigation. The new rules restrict some of the existing options and introduce new opportunities. In particular:

Controlling the costs of litigation

Judges are being encouraged to manage the costs of litigation more proactively than they have done in the past. In more complex “multi-track” cases, the parties will be required to exchange formal costs budgets at an early stage and then keep them under review. The court will scrutinise this process. Parties are likely to be tied to their formal budgets and will have to find good reasons to recover unbudgeted costs.

Whilst this new approach was adopted with good intentions, already the courts are recognising that it may give rise to real difficulties in practice. The power of the new reforms has been watered down by early case law and by various divisions of the High Court opting out of the rules. The new system will be stress-tested in earnest over the coming months and years.

In addition, the underlying principles around recoverability of costs have been revisited. When the courts consider the question of “proportionality” of cost, they will look more closely at whether budgeted amounts are within a reasonable and proportionate range in regard to the amount at stake.

Settlement offers

The courts are encouraging formal settlement offers, by increasing the severity of the consequences for a party who rejects a settlement offer and then fails to do better than the offer at trial. A party who finds itself in this unhappy situation will now face not only adverse costs consequences and a penal award of interest, but also an additional sum calculated as a proportion of the damages awarded at trial, up to a maximum of £75,000. All litigants should be encouraged to make sensible settlement offers and to consider carefully their potential exposure if they reject their opponent’s offer.

Managing the litigation process

The new rules include changes to the process designed to control the parties and to ensure that cases are managed justly and proportionately to the sums in dispute. In particular:

Early views on the reforms

It is too early to assess how much of an impact the new rules will have in practice. The details were revealed in full only at a late stage prior to their introduction and it will take time for court users and the courts themselves to adjust.

The overriding aim of the reforms is to control more effectively the litigation process and the costs associated with it. It is clear that the courts want lawyers and their clients to focus on these issues more closely and at an earlier stage. If all concerned embrace the new regime fully, the financial risks inherent in litigation should become more transparent and allow litigants to assess the relative merits of fighting or settling more readily.

This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.

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