General damages to increase by 10% from next year, Court of Appeal confirms

The announcement, made as part of a court ruling earlier this week, reflects the recommendations of Lord Justice Jackson's wide-ranging review of civil litigation costs. Many of Jackson's other recommendations will also come into force next year as part of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO).

The increase will, according to Lord Judge, apply to personal injury cases, nuisance, defamation and "all other torts which cause suffering, inconvenience and distress for individuals" where judgment is given after 1 April 2013. He said that early notice was being given of the change to "enable all parties engaged in or contemplating litigation to be aware of the impending change" and prepare accordingly.

"It seems to us that, while it can be said that this conclusion does not achieve perfect justice in every case, the same thing can be said about any other answer to the question, particularly in the light of a number of the forthcoming changes being made to the costs regime pursuant to Sir Rupert's recommendations," he added. "Our conclusion has the great merits of ... providing simplicity and clarity, which are both so important in litigation."

Among other changes LASPO will abolish the recoverability of success fees in conditional fee agreements (CFAs) – so-called 'no win no fee' cases under which a successful party's lawyer can recover a "success fee" of as much as 100% on top of their usual charges from the losing party. Instead the successful party will have to pay this fee, which will be capped at 25%, from any damages they receive. The Act will also ban the payment of referral fees relating to personal injury claims.

The rise in general damages in most actions was an "integral part" of Jackson's new costs regime; however it is generally the Court of Appeal, rather than Parliament, that issues costs guidelines. This is because the Court of Appeal is the tribunal best-qualified to set guidelines on damages and ensure that guidance is kept up to date, according to the ruling.

"With the exception of the ten per cent increase in general damages, the great bulk of [the report] has been adopted in full by the legislature in an Act sponsored by the executive, on the clear understanding that the judges would implement the ten per cent increase," Lord Judge said. "It would therefore be little short of a breach of faith for the judiciary not to give effect to the ten per cent increase in damages recommended by Sir Rupert."

He added that the court had "not merely the power, but a positive duty" to monitor the guideline rate for general damages and make changes where appropriate.

The Ministry of Justice welcomed the judgment, which it described as "an important part of a package of measures" to reform the civil litigation costs regime.

"Under the Government's changes to no win no fee deals, valid claims will be resolved at more proportionate cost, while unnecessary or avoidable claims will be prevented from being pursued," a spokesperson said. "The Legal Aid, Sentencing and Punishment of Offenders Act will ensure that claimants will have an interest in the costs being incurred on their behalf and reduce costs for defendants."