Fight Now Or Pay Later:
Fight Now or Pay Later:
Litigation costs reforms tilt balance in defendant’s favour.
The government has recently approved a raft of reforms (recommended within Lord Justice Jackson’s green paper) to rules governing civil litigation costs. Whilst the reforms are primarily designed to curb perceived excesses within areas of law such as personal injury and libel, they will also have a massive impact upon commercial litigation.
The current system is based upon the ‘loser pays’ principle, which means that a successful party is entitled to recover all of their reasonably incurred costs, including ‘success fees’ and ATE premiums, from their opponent.
Conditional Fee Agreements (“CFA”) provide for solicitors to recover a ‘success fee’ of up to 100% of their normal costs when a case is won, in exchange for accepting a reduction of up to 100% of their normal costs when a case is lost.
After the Event (“ATE”) insurance covers the insured for the legal costs of their opponent in the event of defeat. Premiums are usually calculated as a percentage of the opponent’s legal costs.
Proposed Reforms
One of the fundamental aims of the reforms is to reduce the overall costs of civil litigation, by redressing the balance between claimants and defendants in favour of defendants. Primary, this goal is to be achieved by the following measures:
- CFA success fees and ATE insurance premiums will cease to be recoverable from defeated defendants.
- Successful claimants will be liable to pay both their lawyer’s success fees and any applicable insurance premium from their own damages. This will be subject to a maximum of 25% of any damages award.
Whether or not the proposed reforms reduce the overall costs of litigation, they will almost certainly increase those costs in respect of claimants, whose recovered damages are likely to be cut, in almost all cases, from 100% to 75%.
Perhaps the most revolutionary (and controversial) feature of the new system is that (when compared with the old system) it will financially penalise successful claimants, whose claims are upheld by the courts, and will reduce the financial burden on those parties who are found by the courts to have been at fault.
It is not intended that the reforms will have retrospective effect; therefore, all CFA’s and ATE policies signed up before they are brought into law will remain effective.
The message to claimants is very clear,
“Act now, because if you have a just claim and delay its prosecution, you run the risk of substantially reducing the overall value of your recovery.”
If you wish to speak to one of our litigation experts in regard to a potential claim, please contact Patrick Tedstone or Michael Smyth on 01785 223440 or e-mail Mike.Smyth@orj.co.uk or Patrick.Tedstone@orj.co.uk.
Avoiding A Bank Guarantee
Lenders do not always treat guarantors fairly in the eyes of the law. When this occurs guarantees may be avoided.
The First Rule
If you have given a guarantee and are called upon to pay it, do not do so until you have taken legal advice. By paying the guarantee, you may waive any right you have to avoid it.
Your obligations as Guarantor
Most bank guarantees seek to make the guarantor a ‘joint obligator’.
If your guarantee does not make this clear, and if arrangements between the borrower and the bank are altered without your permission, then your guarantee may be void.
Has your company been treated badly by the bank?
Most bank lending is covered by a facility letter. This is the contract between bank and borrower which governs the terms of the loan. If the bank breaches the facility, they can be held liable. It can be argued that it is an implied term in any guarantee that the bank will not breach its own facility terms. All too frequently banks act in breach, which may discharge the guarantee.
Banks make mistakes – what they say is not always true
It is often assumed that a bank can be trusted, which is not always the case. In a recent court action, a senior bank manager swore in an affidavit that my client had not been given a £20m banking facility. This was surprising as I had a copy of the document in my possession.
Help yourself
If you are presently the subject of a guarantee, particularly where you are leaving a business, take the trouble to consult the terms of the guarantee and serve notice on the bank to be discharged.
There is always negotiation.
When you have analysed your circumstances, consider negotiation.
A client of mine, who was the subject of a £2m guarantee given to Barclays Bank, recently compromised that guarantee by the payment of 10 monthly instalments of £20,000 .
Unfortunately, commercial litigation and disputes with banks are sometimes a fact of commercial life; never give up hope, even in the toughest of circumstances there is often a way forward.
If you genuinely believe that your case is just, take the time to have a lawyer consider it carefully.