Further reform for the damages based agreements regulation

Further reform for the damages based agreements regulation

The Damages Based Agreements Regulations Reform Project 2019 held a conference on Thursday 17th October to present the newly drafted 2019 Damages-based Agreements Regulations (2019 DBA Regulations). Drafted by Professor Rachael Mulheron and Nicolas Bacon QC, who were invited by the Ministry of Justice to conduct an independent review of the existing Damages-Based Agreement Regulations 2013 (2013 DBA Regulations), the draft regulations mark a significant shift in approach with some key changes intended to address the criticisms levelled at the existing regulations. Feedback on the 2019 DBA Regulations is welcome and must be provided by Friday, 15 November 2019. 

Background to this third version of the regulations

The initial DBA Regulations were only available for employment matters. However, in 2013 the DBA regime was extended to commercial and personal injury cases by the 2013 DBA Regulations. The rationale for this arose from the Jackson reforms, that came into force in the same year. Reforms to limit cost recoveries under conditional fee agreements and after the event insurance were meant to be balanced by the extension of the DBA regime. However, widespread criticism of the 2013 DBA Regulations within the commercial and personal injury sectors resulted in very limited use of damages-based agreements.

In 2015, a review of the regulations was conducted by the Civil Justice Council working group chaired by Professor Rachel Mulheron and draft 2015 DBA Regulations were prepared. However, these were not progressed. Subsequently the Ministry of Justice invited an independent review of the 2013 DBA regulations by Professor Rachel MulHeron and Nicholas Bacon QC. This has resulted in the 2019 DBA regulations.

 Key changes in the 2019 regulations

The 2019 DBA regulations followed the structure of the 2013 DBA regulations but make some significant changes:

 •            the 2013 DBA regulations were based on the so-called ‘Ontario model’. The 2019 DBA regulations have moved away from this to a ‘success fee’ model. The result is that the legal team will be paid the DBA percentage payment together with their recoverable costs. Under the Ontario model the recoverable costs were offset against the DBA payment

•            changes to it has been suggested that the maximum caps, expressed as percentages, for recovery are to be reduced in commercial cases from 50% to 40% and in personal injury cases from 25% to 20%. This is to redress the imbalance between the legal team and the client that results from the introduction of the success fee model

•            hybrid DBAs will be permitted—the inability under the 2013 DBA regulations to enter into hybrid DBA’s was seen as a key factor in the failure of the legal profession to engage with the use of DBAs. However, the Ministry of Justice has continued to express concerns about their use

•            provisions in the DBA Agreement to address termination of the agreement by the client and the solicitor will be permitted under the 2019 DBA regulations. This had been another stumbling block to the use of DBAs by legal teams

•            the 2019 DBA regulations address cases in which the result will not involve monetary damages by providing a definition for money or money’s worth that covers consideration reducible to a monetary value

Insight into the changes to the regulations and the way forward

An explanatory memorandum has been prepared by Professor Rachel Mulheron and Nicholas Bacon QC. The introduction explains:

 ‘This memo draws out the key points of the draft Damages-based Agreements Regulations 2019 (the 2019 DBA regulations); explains why various departures from the Damages-based Agreements Regulations 2013 (the 2013 DBA regulations) have been made in the draft; and notes for further consultation may be necessary.

These draft 2019 DBA regulations do not purport to be the final word on this complex and controversial area of civil justice. Rather, it is to be hoped that the text will move the area forward by addressing the key issues which have arisen in relation to the 2013 DBA regulations and by providing an opportunity for feedback act, and following, the conference on Thursday, 17 October; and by further consultation, should the government wish to take the matter forward via the execution of a new version of the damages-based agreements regulations.’

Where can I access the draft regulations and explanatory memorandum?

The draft regulations, together with the accompanying explanatory memorandum and worked spreadsheets (for illustrative purposes) are available on the Queen Mary University website.

The work spreadsheets are available for both commercial and personal injury claims. The figures inputted for the facts can be adjusted so providing an insight into the payments that would be available under different factual scenarios.

The website helpfully provides links to other relevant documents referred to as part of the review and a letter from Sir Rupert Jackson with his perspective on the review undertaken.

Ability to provide feedback

Any feedback must be provided by Friday, 15 November 2019.

Feedback can be provided in the following ways:

 •       email to r.p.mulheron@gmul.ac.uk

•        by post to Prof Rachael MulHeron, School of Law, Queen Mary University of London, Mile End Road, London, E1 4NS

Feedback on the 2019 DBA Regulations will be anonymised and collated into a separate and supplementary report to be provided to the Ministry of Justice by the end of December 2019.

 Employment cases

The intention is that employment cases will not be included in the 2019 DBA Regulations. Instead employment cases will continue to be subject to the 2013 DBA Regulations or the 2010 DBA Regulations, which were employment specific, maybe invigorated.


 

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About the author:

Janna is a dispute resolution lawyer. She deals primarily with cross border issues and is active in the work being undertaken in relation to the implications of Brexit for Dispute Resolutions lawyers. Janna also heads up a LexisNexis costs team bringing together expertise from across the company to deal with the costs issues facing the profession.