Litigation solicitors have called on the government to rethink its decision to rule out “hybrid” damages-based agreements (DBAs) but welcomed further research by the Civil Justice Council (CJC).
DBAs, recommended by Lord Justice Jackson in his review of civil litigation costs, were introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 in 2013. However, they have largely been shunned by litigators owing to a lack of clarity about how they would operate in practice. One much-touted solution to this was to change the law to allow “hybrid” DBAs. However, the Ministry of Justice (MoJ) has ruled this option out as it might encourage a “low risk/high returns approach” to litigation.
The CJC has this week announced it will conduct “detailed” research into DBA regulation. Lord Dyson, Master of the Rolls and CJC chair, said he was “disappointed” that hybrid DBAs will not be permitted.
Francesca Kaye, immediate past president of the London Solicitors Litigation Association (LSLA), says: “It’s great news that something is finally happening on DBAs but a major disappointment that hybrid agreements, which allow clients and their legal teams to share the risk in pursuing a dispute, have been ruled out.
“The decision restricts access to justice, particularly for small and medium-sized businesses with modest claims for whom third party funding is still not widely available. The LSLA agrees with Jackson LJ that hybrid agreements form an essential part of the Jackson reform package and preserve access to justice for businesses whatever their size.”
David Greene, partner at Edwin Coe and NLJ consultant editor, says: “Very few firms are offering DBAs to their clients because of doubts on enforceability and the ban on flexible or ‘hybrid’ DBAs.
“While it is very welcome for the regulation of DBAs to be revisited to iron out the problems, it is disappointing that the concept of hybrid DBAs has been ruled out even before the CJC’s fresh work begins. Hybrid or discounted conditional fee agreements (CFAs) have worked well over the past ten years affording greater access to the courts for those less able to afford to enforce their rights in the courts.”
John Bramhall, partner, DAC Beachcroft, says: "I am disappointed, and I think many London litigators will feel badly let down by this week's news. There was meant to be some level of give and take in the withdrawal of the recoverability of success fees and insurance premiums and part of that process was meant to have been the introduction of contingency fees to safeguard access to justice. That was always going to be of particular importance to consumers and SMEs who may now be shut out from ever litigating their claims.
"While there may be scope within the litigation funding industry to provide more creative funding arrangements for some larger claims, there will still be many to whom access to justice is severely restricted. The sad truth is that vested interests appear to have overly influenced the process and I am afraid that not only was the original legislation poorly drafted so that the take up of DBAs has been almost non-existent, but worse, hybrid DBAs now appear to be off the agenda—and the strong criticism this week from LJ Jackson and Dyson is indicative of a widespread feeling that we have all been misled.
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