Justice secretary Ken Clarke confirms CFA reform

Justice secretary Ken Clarke outlined plans today to overhaul no win, no fee conditional fee agreement (CFA) cases in a bid to ensure defendants are not crippled with lawyers’ fees.

In a statement to MPs, he announced a new system in England and Wales under which the “success fees” charged by lawyers on CFAs would be deducted from damages awarded to the winning client rather than being charged entirely to the loser.

But the damages which could be awarded to a claimant would be increased by 10 per cent to ease the bill.

The reforms would restore “proportion and fairness” to the civil justice system, Clarke told the Commons.

The government also planned to increase the minimum value for a case to be brought in the High Court to £100,000 so the county court jurisdiction was extended and the High Court was reserved only for “genuinely complex or high value cases”.

The reform comes as part of a major package of change which will introduce changes advocated by Sir Rupert Jackson in his review of costs in civil litigation.

Sir Rupert recommended that success fees – which in some defamation and privacy cases have reached 100 per cent, meaning that the claimant’s lawyers have charged double their usual rates – should no longer be recoverable from the losing defendant.

News of the reform will be welcomed by newspapers and other news media that have been campaigning for a change to the CFA system, claiming that the system is abused by the rich and famous to prevent unfavourable stories being written about them.

While the level of damages will be raised by 10 per cent, any success fees paid by a claimant on a CFA will be paid out of the damages he or she is awarded, up to a maximum of 25 per cent of that figure. This will mean that a claimant whose lawyer is working on a CFA will have some interest in the amount of costs his lawyer’s work involves.

Other measures including encouraging parties to make and accept reasonable offers, introducing a new test to ensure that overall costs are proportionate and increasing the costs which can be recovered by people who win their cases without representation by lawyers.

One major criticism of CFAs is that claimants whose lawyers are working on them have no interest in controlling the level of costs their lawyers are racking up.

Clarke said the moves were intended to reverse an “explosion” in lawyers’ fees, cut down the number of cases and make the justice system fairer for defendants who could not afford to defend themselves from no win, no fee lawsuits.

He said the problems stemmed from reforms by the former Labour Government which were intended to make no win, no fee more attractive to lawyers. Most defendants found that they were now paying more in lawyers fee than in damages to the plaintiff, he said.

Clarke said in a statement this afternoon: “With no major reform for 15 years, the civil justice system has got out of kilter. Businesses and other people who have been sued can find that spiralling legal costs, slow court processes, unnecessary litigation and the ‘no win no fee’ structures, which mean greater payments to lawyers than to claimants, are setting them back millions of pounds each year.

“At a time when the government is committed to doing all it can to help businesses to grow and to help ordinary citizens to regard the justice system without fear, I will not allow this to continue.

“Today I am announcing plans to modernise and simplify the civil justice system, make it quicker and more efficient and crucially, to offer more effective alternatives to going to court.”

Justice minister Jonathan Djanogly added: “These reforms will help put an end to the fear of a compensation culture which has put a stranglehold on the activities of businesses and public bodies as well as restore faith in effective justice.”

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