Business Law from Rocket Lawyer UK

The Jackson Effect

This week, I’ve been thinking about some important changes to court cases (or litigation) that are coming up. The changes mean that there are some more options for you to think about when bringing a claim and more choices about how you can pay your legal fees. We hope that more choice will be a good thing for small businesses, but we’ll have to see how things pan out.

I’m sure that one of your main worries about bringing a claim is – how can my business pay for this? The government had the same concerns about the cost of litigation, so they asked a leading judge, Lord Justice Jackson, to look into it – and he came up with some recommendations which are about to become law on 1 April.

You probably know about “no win no fee” arrangements: if you win the case, your solicitor gets a “success fee”, which is their usual fee plus a bit more (an “uplift”) for winning. At the moment, this success fee is paid by the losing side. This arrangement reflects a cornerstone of litigation: the losing side pays the legal costs of the winning side.

But Jackson has changed this. He decided that the way in which “no win, no fee” works is too hard on the losing side and encourages claims. So, from 1 April onwards, if you win the case, the losing side pays the usual fee, but you have to pay the “uplift” part of the success fee. Given that a lot of small business litigation is funded on a “no win no fee” basis, I don’t think this is a promising development. The changes mean that you’ll have to think very carefully before bringing a “no win no fee” claim.

Another important change is that you can now fund your legal fees by agreeing to pay your solicitor a percentage of your damages if you win the case. Until now, this kind of arrangement hasn’t been widely used in theUK (although they’ve been common in the US for a long time). Now you might well ask, does the losing side pay what I owe my solicitor under this arrangement? The answer is: maybe. The losing side only has to pay your solicitor’s reasonable fees as assessed by the court. So, if there’s a shortfall between the reasonable fees and the percentage you agreed to pay your solicitor, then you’re going to have to make up the difference.

I think Jackson means you have to think really carefully about litigation, even if you’ve got a really strong case. Remember if you win, you’re still likely to have to pay some of your legal fees. And of course, if you lose, you’re going to have to pay the other side’s costs and any damages awarded. One thing’s for sure: it’s never been more important to shop around and see who can offer your business the best deal when it comes to legal fees.

Connect with an On Call lawyer if you want to discuss any of the issues raised in this article.

Pieta Das Gupta

Pieta has over ten years’ experience as a company commercial solicitor working in law firms and for businesses.As the Head of Legal for Rocket Lawyer UK, Pieta is in charge of legal content and work with the product development team to create the documents and guidance available on Rocket Lawyer.