law 49


Litigation funding – brave new world?


Important changes to the ways litigation is funded came into effect on April 1, writes Jacques Smith, partner, dispute resolution, Blandy & Blandy LLP


The most significant change is the introduction of Damages-Based Agreements (DBAs) as a new form of contingency fee agreement for funding the legal fees of litigation and arbitration in England and Wales.


In essence, under a DBA the lawyer will only be entitled to payment of the legal costs incurred in bringing a case if that case results in a sum of money being recovered in the litigation. Payment of the legal costs is therefore truly conditional on the success of the case.


New regulations set out exactly what is and is not permitted under a DBA. The key characteristics of DBAs are as follows:


• They can be used in commercial claims, employment cases, personal injury claims and arbitration proceedings;


• The fees due under the DBA are calculated as a percentage of the amount recovered in the litigation and are conditional on a payment being recovered from or “payable by” the other party to that litigation;


• The DBA differs from the previous conditional fee agreement regime in that previously the lawyer’s fees (or part of them) were calculated as a percentage of the fees due as against a percentage of the amount recovered;


• The fees under a DBA are subject to a cap. The cap for most kinds of claim is 50% of the sum recovered in the litigation. However the cap in employment claims is 35% and 25% in personal injury and clinical negligence claims. The caps operate in different ways depending on the type of claim. For example the 50% cap for commercial claims includes VAT and counsel’s fees whereas the


employment claim cap is inclusive of VAT but not counsel’s fees;


• DBAs are only appropriate for a client who is making a claim or counterclaim, as against defending a claim;


• It looks as though partial DBAs will not be possible, although this is currently unclear. If partial DBAs are indeed not permitted, it will not be possible to engage a lawyer on the basis that part only of the legal costs are within the DBA and therefore conditional on the outcome, with the remainder being due regardless of whether the case succeeds. It is likely that the question as to the validity of partial DBAs will have to be dealt with by the courts through test cases;


• If the claim is successful, the claimant will still be able to recover costs from the defendant. However


How can UK businesses manage the ever


increasing cost of sickness absence? I have always believed that one of the most valuable benefits that an employer can provide is group income protection, writes Dion Prideaux-Reynolds of Griffins


Employees who are unable to work long term due to accident or illness cannot rely or exist on the low level of state benefits.


Importantly, it not only


protects employees but also the employer. Sickness Absence is costing businesses £6.4 billion a year, one in five employees is likely to contract a long-term illness before retirement and unplanned absence is costing businesses up to 16% of payroll1.


Putting in place a group income protection scheme helps employers mitigate some of the risks and predict the cost of absence.


Employers who recognise the need will put in place a group arrangement. This provides an income to the employee based on a percentage of pre-disability earnings usually through to state pension age (SPA). The benefit is paid after a deferred period, can increase in payment and can provide cover for pension and national insurance contributions. If an employer wished to establish the benefit but did not have the budget there were historically few alternatives.


It covers


the salary costs, reduces recruitment and training costs and frees up valuable Human Resources. Employee assistance programmes can also be included usually at no additional cost thus helping an employer with their duty of care.


For some years now it has been possible to put in place limited term contracts where the benefit is paid for say three, four or five years but this type of cover does not address the income need through to SPA.


Cover is now available which is specifically designed to satisfy the employer’s requirements


THE BUSINESS MAGAZINE – THAMES VALLEY – MAY 2013


but is much more affordable. The policies do not offer the full options of a traditional policy but provide simple core cover based on:


• maximum benefit of 60% of pre-disability earners without a state benefit offset,


• the benefit can be paid direct, so the employee does not have to remain in the employer’s headcount (one of the main employer objections to traditional policies),


• the occupation definition allows greater scope for a return to employment, and


• importantly the benefit is paid to policy termination, usually SPA.


Some select consultancy firms also have access to small scheme arrangements that allow group schemes to be set up for as few as three members with very


valuable free cover limits thus avoiding medical underwriting for most or all members. These arrangements can also cover group life assurance and critical illness.


So employers can now provide a very important and valuable benefit, which is affordable.


Details: Dion Prideaux-Reynolds dion@griffins.co.uk www.griffins.co.uk 01635-551333


1Source: CEBR Research Nov 2011, Institute of Employment Studies, ONS, Holden Pearman Mar 2012.


the claimant will be responsible for paying any shortfall between the amount due under the DBA and the amount recovered from the defendant.


The advent of DBAs therefore offers a new funding model for the costs of litigation, which is intended to assist claimants in securing access to justice. In these early days it remains to be seen how popular DBAs become.


Details: Jacques Smith jacques.smith@blandy.co.uk 0118-9516823


www.businessmag.co.uk


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