Commercial Dispute Resolution update

Changes are afoot in 2012: Fast track fixed costs; the Jackson Reforms and the County Reforms

David Cameron speaking recently, said that 'it is simply much too easy for no-win-no-fee lawyers to encourage trivial claims against businesses, which end up settling out of court because it's too expensive to fight the case.  It's a huge part of our compensation culture and it must change.'

Reforms are the order of the day. Summarised here are some of the key changes to the court and legal system that may be implemented in 2012:

Fast Track Fixed Costs 

The fixing of legal costs in the fast track is a much talked about topic. David Cameron has announced plans to 'extend the current scheme that caps the amount that can be recovered in small-value personal injury claims'. Legal fees are currently capped for road traffic accident (RTA) claims up to £10,000 and this amount will be extended to £25,000. The scope of this cap will likely be extended beyond RTA claims to include public liability and employers' liability claims, and possibly industrial disease and clinical negligence claims.  

The Jackson Reforms 

Already in the pipeline for 2012 are the changes being made following the Jackson Report to restrict conditional fee agreements (CFAs), set to become law in October.  In summary, the reforms are:

- Success fees in CFAs will no longer be recoverable;

- After the Event Insurance premiums will no longer be recoverable;

- The common law indemnity principle should be scrapped;

- Before the Event Insurance should be encouraged for small and medium enterprises and
  householders;

- Third party funding should be voluntarily regulated, and third party funders should be liable for the
  full amount of adverse costs;

- Contingency fees will be permitted but only conventional costs will be recoverable from the other
  side;

- The test of ‘proportionality’ for legal costs should be applied globally and defined more clearly in the
  Civil Procedure Rules;

- Referral fees for personal injury claims should be banned;

- Regime of qualified one way costs shifting (QOWCS) to be introduced;

- A special streamlined procedure for business disputes of lower value should be considered. A guide for 'small business disputes' should be prepared so that business people can deal with disputes themselves if they wish, without the assistance of lawyers. Assignment of cases to specific judges who will be responsible for managing the whole court procedure.

County Court Reforms

The Government is set to outline their proposals in response to the Ministry of Justice’s paper ‘Solving disputes in the County Court’ this month.  As reported by Penningtons in August, the report suggested reforms including:

- Increasing the small claims track threshold from £5,000 to £15,000;

- Increasing the use of online facilities and telephone appointments;

- Mandatory pre-action directions for money claims under £100,000;

- Encouraging mediation including the telephone mediation service;

- Increasing the minimum high court claim amount to £100,000;

- Providing a more effective enforcement regime.

Taking all this in, 2012 will be a significant year for legal reforms.  Many of the proposed changes mentioned here are seen as controversial by some sectors, but the ultimate aim is to do away with unnecessary legal cost and refocus the legal system on outcomes for those who have suffered loss.  We will be keeping a close eye on these so check back for further updates.

To find out more, please contact Sandie Lyne

Club and society management - a cautionary tale

In the case of Davies v Barnes Webster & Sons Ltd the High Court served up a reminder that committee members of clubs and societies can be held personally liable for contracts with third parties.

In this case a rugby club (an unincorporated association) contracted with a builder to carry out substantial works at the club.  The contract was for an agreed sum 'or such other sum as shall become payable under this contract'.  The works were completed over the course of a year or so and by their conclusion, additional works amounting to £147,000 over and above the agreed sum had been carried out.  This sum remained unpaid and the builder served a statutory demand on the club President, Mr Davies, demanding payment.  Failure to pay would result in the builder being able to apply to make Mr Davies bankrupt. 

There was no dispute as to whether this additional sum was owed under the contract; the issue was by whom was it owed.  Mr Davies applied to set aside the statutory demand, which was refused.  His appeal was likewise dismissed.

The basic position is that prima facie members of an unincorporated association, such as this club, cannot be held personally liable for the acts of those who enter into contracts on behalf of that club.  Liability of a particular member must be determined by considering a club's constitution.

After analysis of the legal issues and the club's constitution in this case the court held that the management committee was entrusted with the management of the affairs of the club, and had duly authorised the Treasurer to enter into the contract. The committee was liable on the contracts which the club entered into and as such, as a committee member Mr Davies is personally liable to meet the liability.  

Considering this case more widely, it is important to understand that an unincorporated association does not have separate legal personality, therefore when contracting with a club one must contract with one or more of its members. Many club's and societies' constitutions will provide for a similar management structure to the rugby club in this case, and if so liability will likely rest with the committee; but this structure is not the only way.  If a club's constitution directly provides authority for members to enter into contracts then potentially all the members can be held personally liable. It is important that members of clubs and societies fully understand their obligations and potential liabilities, particularly anyone elected to a management position, or considering holding such a position. 

Similarly, when contracting with individuals from unincorporated associations it is imperative, amongst other things, to understand the authority on which the individuals are acting, and consider any limits to an individual's liability.  The club's constitution should document these and it is always advisable to obtain a copy before entering into a contract. 

If you are involved in the management of your club or society, or are considering contracting with an unincorporated association, please do not hesitate to contact us if you have any concerns or queries.

To find out more, please contact Hein Le Roux