Bevan Brittan s Response to the Civil Litigation Costs Review

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1 Bevan Brittan s Response to the Civil Litigation Costs Review Introduction Bevan Brittan LLP has worked for the NHS since its inception in 1948 and has been handling its claims for almost as long. We are currently on the NHSLA Clinical Negligence Panel in all three of our offices (Bristol, Birmingham and London) and have over 20 lawyers dealing with clinical negligence cases on a daily basis. This submission is the work of that team and therefore relates entirely to clinical negligence actions, where every penny spent on paying legal costs comes directly out of patient care. Some of the observations made, however, could equally well apply to handling litigation on behalf of many publicly funded bodies. We have been driven to complete this submission after having seen at first hand the way in which the unjust and excessive enrichment of legal advisors (predominantly on the Claimant s side) has increased dramatically over recent years to the detriment of the NHS and the reputation of our profession. We therefore welcome the review of the Civil Litigation Costs and its potential to bring much needed change to this area. We do not comment on every issue raised in the very detailed preliminary report, but have instead restricted our comments to: Section A Conditional Fee Agreements (CFAs) Success Fees After The Event Insurance (ATE) and One Way Costs Shifting and (in each case) our Proposals for Reform Section B Hourly Rates and assessing Costs a Response to Chapters 8 and 53 Miscellaneous Issues in the Costs Assessment Process Cost Capping - a Response to Chapter 45 Extending Fixing/Budgetting of Costs a Response to Chapter 48 1

2 SECTION A 1: CONDITIONAL FEE AGREEMENTS (CFAs) Chapter 16 of the Preliminary Review raises a number of questions regarding CFAs and comment is invited. The following is our response. Are CFAs in their present form satisfactory? The core aims of CFAs were: to allow access to justice for potential Claimants who did not qualify for public funding but were unable to afford to pursue a legal case privately (the Consumer Association s MINELAS ); to reduce the cost to the Legal Aid system. We do not object to the principle of CFAs for certain cases but we believe that, in their present form, CFAs have resulted in significant windfalls for Claimant solicitors. If, as a matter of fact in clinical negligence cases, the saving to the Legal Aid system has been eclipsed by a similar level of (or even more) public funds being spent but on fewer cases, this would be a total failure of both aims. In our view, the failures of the CFA system include: With even ATE premiums being deferred and even insured themselves, the Claimant under a CFA has the benefit of risk-free litigation, which in our experience provides little incentive to the compromise of actions (the PIBA s conlusions - as set out in paragraph 5.3 of Chapter 16 - are noted in this respect); This in turn leads to an absence of any involvement/interest by the Claimant in the amount of the ATE premium or the success fee claimed by his/her solicitors; The existence of the current cost and risk-free system provides little incentive for BTE insurance, which ultimately could give rise to a much more equitable system of litigation funding (we endorse the conclusions of the Bar s CLAF Group in this respect as referred to in Chapter 13 of the Preliminary Report) If not, what reforms might be made in order to create appropriate incentives for all involved in the litigation process? We set out below suggested reforms to create a fairer system for all parties involved in the litigation process. Re-introduce some incentive for the Claimant to negotiate lower success fees/ ATE premiums Whilst we accept that one principle of a CFA is that the MINELAS generation has access to justice which they could not otherwise afford, if the Claimant is not personally at risk to pay a figure towards their solicitor s costs and/or the ATE premium if they lose, they can essentially pursue litigation risk free. In clinical negligence cases, under the terms of the contribution to the Clinical Negligence Scheme for Trusts (CNST), the Defendant cannot. 2

3 o o If ATE is to be retained (we would recommend that it is not see below), a possible solution to this would be to introduce a clause into CFAs that the Claimant has to contribute to a percentage of any ATE premium whether or not the claim is successful. This could be capped at a relatively low level if unsuccessful (different levels if the premium is staged) or higher in successful cases, but in either event enough to make the Claimant engage in costs. This should introduce some controlling mechanism when the initial contract is entered into. A Claimant will be more likely to shop around before instructing a solicitor (or ensure his solicitor shops around for premiums) to try to get the lowest premium possible. A similar approach could be introduced with success fees, to give the Claimant an incentive to auction his/her case to the solicitor offering to take it at something other than the almost ubiquitous 100% success fee. A market in such cases can only help a more accurate reflection of risk in the success fee. The introduction of a CLAF/SLAS for clinical negligence cases in England and Wales Whilst there are clearly issues (already identified in the Preliminary Report) over the possible introduction of CLAF/SLAS into the jurisdiction, we believe that a key benefit could be improved access to justice. No independent, detailed studies have been undertaken of the portfolio of claims run by Claimant solicitors, indicating the success/failure rates of cases progressed beyond an initial review of the Claimant s medical records. Claimant s solicitors have detailed selection processes for cases (see the comments of Jack, J in Oliver v Whipps Cross and Others [2009} EWHC 1104 (QB)). Whilst it is perhaps possible that (as suggested in that case) roughly 50% of the cases accepted at the initial interview failed, there is no doubt a high percentage that are never progressed beyond consideration of medical records, let alone to Letter of Claim stage. The 50% figure is open to challenge. The view expressed privately (and sometimes publicly) by Claimant s solicitors is that they are good at spotting a winner. We have been told by a Claimant s solicitor that he is unable to obtain an ATE premium unless prospects of success are assessed at least at 60%+ and therefore these are the cases he selects. Whilst Claimant s solicitors refute the allegation of cherry-picking, an analysis of data suggests otherwise: for clinical negligence cases resolved by this firm in the calendar year , only 28% (68 out of 246) resulted in no payment being made to the Claimant. Indeed, the NHSLA s own figures (which will be higher as they include cases that never get off the ground to even Letter of Claim stage and unmeritorious claims presented by Litigants in Person) indicate that only 41% of cases are abandoned NHSLA Factsheet 3 The introduction of a CLAF/SLAS (and the consequent loss of success fees for cases brought by the MINELAS generation) may well serve to improve access to justice by reducing the inevitable economic incentive to pick the winner to ensure any return on the investment of solicitors time. 3

4 2: SUCCESS FEES This section applies equally well to put forward recommendations for dealing with success fees on cases where a CLAF/SLAS will not provide cover (based on whatever selection criteria are applied) or, if the current model for CFAs with success fees is retained. When dealing with Claimants costs, we usually see a claim that the base hourly rate that would be applicable to a level of fee earner in a particular area should be enhanced because of the specialism involved in clinical negligence cases. If a 100% success fee is applied to this (as is almost invariably the case), the publicly funded Defendant can face a claim in excess of 800ph. It is therefore unsurprising that bills for relatively modest cases frequently run into hundreds of thousands of pounds (and occasionally reach seven figures). This cannot be the best use of public money. We need to focus on the actual aim of the success fee; there is considerable confusion between this and the purpose of the hourly rate. We have seen it argued, erroneously in our view, that the function of the success fee (or part of it) in a particular case is to reward the Claimant s solicitor if the issues are particularly complex. Our understanding of the history of the success fee (see Oliver, above) is that this is not the case and rather than being relevant to any particular case, it is a wider blunt tool to compensate Claimant solicitors for losses they suffer on cases that are not pursued/won (and where their costs are not paid). The standard success fee we see claimed on clinical negligence cases is 100%. By way of example, in a recent claim Claimant s counsel was asked to advise on the merits of a case after receipt of medical records and a report (critical of the Trust s care) by the Health Care Commission (HCC) after a review of the case during the complaints procedure. The case was at that stage privately funded. Before considering the papers, claimant s counsel applied an 82% success fee (perhaps surprisingly suggesting only a 55% chance of success despite the HCC report). We presume that he recommended pursuing the case (as it was pursued and compensation paid). After receipt of that (positive) advice from Counsel, however, the Claimant s solicitors then entered into a CFA with a 100% success fee, despite the fact that they had more positive information than counsel had. This approach reflects what we would say is the norm in Claimant circles. On the true basis of assessing success fees, for the system to be fair, a Claimants solicitors firm should lose as many hours work as they win. It is not sufficient to simply look at the number of cases that are lost/discontinued with no recovery of costs v- cases won, as many cases discontinued will be weeded out at a very early stage where much fewer hours will have been incurred than on cases won at a later stage. Where the system currently falls down is that it is not clear that Claimants solicitors firms do lose significant hours on lost cases and if not, the 100% success fee is providing them with an unjust enrichment. We have discussed above the function of success fees and whether they are to compensate Claimants solicitors for the cases that they investigate and do not take forward/win, so as to make their businesses viable, or alternatively, whether individual cases justify a success fee for the risk of running that particular case or the complexity of it. Clarity is required. We suggest the rationale should be the balancing of successful/unsuccessful cases taken on by Claimant firms. Our suggestions are: 4

5 Link success fees to data for each individual Claimant s solicitor firm o More information is required from Claimants solicitors to ascertain the correct level of success fees rather than the standard 100% that we now see claimed. We consider a number of questions need to be answered in order to assess what percentage would be fair. For example; How many new potential claims do Claimant solicitors take on in each financial year under a CFA/proposed CFA? Out of the claims they initially investigate, how many are not pursued? Of those that are not pursued, on how many were the initial investigations to reach that decision stage funded privately (and so the Claimant s solicitors did not lose out) and how many did the Claimant s solicitor actually not recover costs for the hours spent. A breakdown of the number of hours spent on clinical negligence cases in each financial year that had to be written off because the case was not won (rather than written off in costs proceedings in the normal way) v- the number of hours which recovered a success fee? We do not think this should be particularly onerous with the right computer software. o One way to manage this could be that all firms who wish to undertake CFA funded NHS clinical negligence cases on behalf of Claimants must produce to an independent body (for example the CLAF/SLAS administrator) the answers to the above questions every 3 years. On review of these statistics, that body would set a realistic success fee for that particular firm. Overall, if a particular firm sets very demanding criteria for taking on CFA funded cases, it should have a lower success fee than a firm that is more willing to take on riskier cases. It is arguable that the latter firm is providing more access to justice for the public a case with a 51% chance of success may be turned down by some Claimants firms but that denies access to justice on a case that satisfies the legal test for negligence. No success fee where liability has been admitted o What risks does a Claimant s solicitor face on a particular case once liability has been admitted in order to justify a success fee thereafter? The concept of this on a case by case basis is particularly unpalatable where the CFA is entered after liability has been admitted. An admission of liability essentially means that the Claimant has won and will be paid something (although the extent of that figure may be disputed). This brings into sharp focus the function of a success fee should it relate to that particular case or be part of a wider function to spread risk across all cases? If success fees are not to be viewed as a broad compensatory tool for each Claimant firm (as suggested above), but looked at on a more individual case by case basis, the role of a liability admission becomes important. o In this scenario, we would argue that as soon as an admission of liability is made, the success fee should come to an end, as there is no real risk of the Claimant s solicitors not recovering their costs on that case. A Claimant may argue that they are still at risk in quantum only cases as they may ignore what turns out to be a successful Defendant Part 36 offer/lose certain issues at trial about which the Court makes issues-specific orders on in the Defendant s favour. We do not think this is a valid argument. The risk of paying the Defendant s costs is covered by the ATE premium. The decision to ignore a Part 36 offer is part of litigation management however a case is funded and it could be argued that if a good offer was ignored, does a Claimant s solicitor deserve a success fee anyway? Such a decision will have led to significant further costs being incurred before a matter concludes, later than it should have done. 5

6 o If part of the argument for the success fee is the risk of not recovering costs in a specific case, there is no justification for an uplift on the costs of preparing/checking a bill (or indeed any work done once a settlement has been agreed/award made). Whilst there is a risk that some costs will not be recovered, this is an inter-partes matter in the same way that any bill of costs is scrutinised, regardless of the method of funding. 3: ATE PREMIUMS and ONE WAY COSTS SHIFTING Our primary submissions We would endorse the adoption of one-way costs shifting in clinical negligence cases, which would of course obviate ATE premiums. Our experience of cases is set out above, with only 25% of cases we see (ie almost inevitably those at or beyond Letter of Claim stage) being dropped. In the majority of those cases the Claimant is legally aided and one way costs shifting already exists. The cases in which there is a recovery of costs by Defendants are few and far between. The views of the Preliminary Report expressed at paragraph 3 of Chapter 25 are wholly endorsed. We also do not perceive a significant issue over unmeritorious claims being advanced, for the reasons expressed in paragraph 3.4 of Chapter 25. Our secondary submissions If ATE premiums are to be retained, however, we would make the following points: Premiums can be so disproportionate that Defendants are deterred from taking claims to trial, and on purely economic grounds decide to settle before the final instalment is due. If this is happening, unmeritorious claims are on occasion compensated and this distorts the justice system. For example, we recently faced a claim on which shortly before trial, we were told the final stage of the ATE premium would be in excess of 100,000 not far off our realistic assessment of quantum. When taken with the 100% success fee, costs vastly outstripped realistic damages. Our decision to settle the claim (at a heavy discount and without allowing for any success fee on reported costs to date) was heavily influenced by this ATE premium. Even though we felt there was a good prospect of defending the claim, when considering the public purse overall, we had to advise our client to be pragmatic given the premium. Even in staged premiums, the early payments are often relatively small and often appear reasonable but Claimant involvement in the process of determining which insurer/premium is taken out on his behalf (as set out above) would bring market forces into play, and should reduce premiums to a level that more accurately reflects the market. By the Claimant facing the risk of paying a percentage if he/she loses, even if this is then capped at a relatively low level, there would be an incentive for the Claimant to choose a lower cost premium, and insurers would be forced to compete more. Also, if the Claimant is at risk of paying part of the high final stage premium, the Claimant will be forced to take part in the decision making process whether that claim does actually go to trial and start to take some of the risk that the Defendant has to. It can perhaps be validly argued by insurers that the level of the final stage of the premium cannot be set until fairly close to trial (currently usually 3 weeks before trial). There is 6

7 responsibility on Defendants to settle claims where there is no real intention to proceed to trial before this falls due. Our view is that it is wrong in principle for premiums to themselves be 100% insured as this results in them never becoming due if the Claimant loses, but being more expensive to the paying defendant. Please see our submissions above. 4: CONCLUSIONS The aim of any funding regime should be to maximise the access to justice for both Claimants and Defendants. Not only does this mean the fair investigation of claims and an appropriate recovery of damages for the Claimant where justified, but also that a party paying costs pays a fair amount. We are concerned that the existing system does not fulfil these criteria. In summary our suggested way forward in this particular area for clinical negligence claims is: - The introduction of one way costs shifting for Clinical Negligence claims - Clear guidance that the success fee in CFA claims is not to reward complex work on an individual case, or the risk that particular case posed, but a more global purpose to provide recompense for Claimants solicitors for unrecoverable costs on cases that fail or are dropped. - The appraisal by an independent body of specific data from Claimants firms to assess their specific firm-wide appropriate success fee uplift. - Alternatively, if it is decided that a success fee should be given to reflect the risk of each individual case, the cessation of this after an admission of liability and no success fee on work carried out once a settlement has been agreed/damages awarded by the Court. - The level of success fee should not be set until the Claimant has received a Letter of Response (or Defence if he/she failed to comply with the Pre-Action Protocol). This gives the Defendant the chance of make a full/limited admission which should affect the individual case risk factor. - The re-engagement of the Claimant personally in the costs process to provide an element of control, with a contribution towards the ATE premium if the case is lost, and a contribution if successful and damages exceed a certain amount. 7

8 SECTION B 1: HOURLY RATES AND ASSESSING COSTS- a response to Chapters 8 and 53 What are the problems/solutions in clinical negligence cases? Claimant profit costs, regardless of the funding source, are frequently disproportionate to the level of damages awarded and exceed Defendant Costs. In lower value cases, this is not the exception but the norm. Advisory Committee on Civil Costs (ACCC) Claimant solicitors regularly claim rates which exceed the Advisory Committee on Civil Costs guidelines on hourly rates. When challenged, Claimant solicitors argue that the complexity of clinical negligence cases justifies an enhanced rate, something which is not always disputed by Supreme Court Cost Office ( SCCO ) costs masters. Whilst we would not wish to understate the specialist skills required for clinical negligence work, is clinical negligence really more complex than most other types of litigation when dealt with by someone who specialises in that work? On the whole we think not and we see no justification in the Claimant argument that they should be entitled to exceptional rates, particularly when the rates are contrasted to Defendant hourly rates, which we believe more accurately represent the true market. It is well established that a City of London firm can claim in excess of 800 per hour if acting on a clinical negligence case under a CFA with a 100% success fee, ie about 600 more that a Defendant lawyer doing the same work. By way of illustration, we refer to two examples of bills of costs we have recently received. Example 1 The bill of costs was from a firm in the City of London which was a case largely funded by the LSC. The claim settled for 90,000 after exchange of list of documents. The costs claimed were nearly 130,000, 10 times more than the Defendant s costs. The Claimant s hourly rates ranged from 435 for a consultant to 370 for a solicitor with 10 years PQE who conducted the litigation. The solicitor rate claimed is nearly 39% more than the ACCC guideline rate Example 2 The second bill is from a firm in what is classed by the SCCO guidelines as area National 1. The claim funded by a CFA settled for 30,000, several months before trial. The costs claimed were nearly 173,000, 11 times more than the Defendant s costs. The Claimant s hourly rates are claimed at up to 300 per hour, this is 110% more than the SCCO guidelines for the area. The cases above are not complex brain injury cases but relatively straightforward clinical negligence claims requiring the instruction of two experts on each side and limited witness evidence. The hourly rates claimed (when contrasted with the Defendant rate of 175 per hour) and the uplift (above and beyond the rates envisaged by the SCCO) in these cases serve to confirm that the price of access to justice places a huge costs burden upon Defendants. Whilst we support initiatives to improve access to legal redress for negligence giving rise to personal injury, the quality of the justice delivered is adversely affected if the costs burden is disproportionate. The potential costs consequences of a late settlement or a loss at trial, force Defendants to consider the settlement of cases which might otherwise be reasonably pursued and successfully won at trial. We note with agreement the conclusions of the review at Chapter 9 8

9 which confirm that there is a direct relationship between the costs burden and the likelihood of settlement. It is our view that the costs burden on Defendants is now such that the Defendants access to justice is impaired. This is turn affects not only the NHS purse but the confidence of clinicians and nurses in a system which restricts their ability to put their case and be heard. In our experience, detailed assessment is not an effective tool for dealing with the hourly rate issue. Our primary concern in relation to the process for the assessment of costs is that it comes too late to effectively manage litigation to produce a cost effective outcome in too many cases (Group Actions being the exception). The process itself is a necessary one if there is to be access to fair scrutiny of costs incurred. This is especially so when the Claimant has no financial interest in the costs incurred on his behalf. We comment in more detail on the proposals for reform of the process below. Proposed options for reform - Hourly Rates Paragraph 4.13 suggests two possible options; To revert to the pre-1999 regime whereby hourly rates have to be justified by the receiving party, by reference to the A and B factors formerly used. Alternatively the Advisory Committee on Civil Costs ( ACCC ) could set guideline rates for detailed assessment as opposed to summary assessment only. We consider that there is some merit in the use of the pre-1999 procedure. There is a welcome objectivity in considering the actual costs of delivering the service the user is paying for as opposed to trying to reflect a largely distorted market. We can see no justifiable differential between the relative costs for firms delivering clinical negligence services to Claimants or Defendants. We see no differential between the salary costs of solicitors acting for Claimants or Defendants and all firms carry marketing and business development costs. We note that the Advisory Committee on Civil Costs went some way to consider this issue when completing their survey prior to publishing the Guideline Hourly Rates ( GHR ) to apply from 1 st January The Committee noted that the Defendant s rates in PI/CN cases were 20-35% below the Claimant s Solicitor s rates and it was argued by the Claimants that this was justified because they must pay marketing costs such as referral fees. The extent to which any such fees justify a higher hourly rate could be easily addressed by considering the actual costs of delivering the services. It is clear that the wide scale adoption of the GHR has occurred because of their simplicity and ease of use. It increases the efficiency of assessment and settlement for guideline rates to be in place. We would favour the development of guideline hourly rates but based not on a survey of the market but based on the actual costs of delivering the service together with an appropriate uplift. As indicated above, it is common practice in clinical negligence matters for firms to claim an uplift over and above the existing GHRs on the basis that the work that is undertaken is of exceptional complexity and importance. Given that the current GHR reflects the existing market, this practice results on a year on year extrapolation and upward increase in rates which in our view is not justified. Undoubtedly clinical negligence work can be complex, of significant value and will always be of great importance to the parties. However the truly exceptional case should by definition be a rare one. The practice of bucking the GHR is one that should be discouraged. 9

10 The process of establishing the GHR should in our view be more robust. It is not clear how the sampling frame for the survey undertaken in 2007 was established. Given that the vast majority of Defendant clinical negligence work is undertaken by NHSLA Panel Firms, there is a strong likelihood of under representation from that group as against the broad range of solicitors firms undertaking Claimant work. We also note that the number of responses received was very low. A total of 129 responses were received and used in the analysis of the results giving an implied response rate of just under 8%. Given the importance of the issue we would expect that a more robust process could and should be put in place. We suggest that there are two options:- Option 1 - establish a more robust generic GHR based on actual costs and an appropriate uplift. In addition to the gradings by geographical reference and legal qualification, it may also be appropriate to include some reference to the factors which would go to the issue of uplift. These might be by reference to the value of the damages or more broadly simply whether it was a standard or exceptional case. Option 2 could involve the same exercise as in option 1 but with specific reference to clinical negligence cases. In this instance we think that it would be feasible to build in an additional adjustment to take into account the value of the claim. The NHSLA s cases are prepared by reference to the following categories: Zero value i.e. discontinues or Defendant wins at Trial. 1 50,000 50,001 to 250, ,001 to 500, ,001 to 1,000,000 1,000, ,000,000 + (with periodical payments) We would suggest that similar bandings could be put in place. Linking allowable rates to the bandings would help to operate as a significant fetter on claims which incur disproportionate costs compared with damages recovered. It is accepted that some discretion for truly exceptional cases which are of such importance that disproportionate costs should be disregarded would be appropriate. 10

11 2: Miscellaneous Issues in the Costs Assessment Process Fast Track matrix, scale or tariff We agree that this is appropriate to consider the use of a costs matrix, scale or tariff fees for fast track cases as set out in the options for reform. Points of Dispute In fast track cases, unless and until the matrix, scale or tariff proposals are applied, it would be inequitable to amend the Costs Practice Direction so as to restrict points of dispute to three pages. However, we would agree that the points of dispute should be of reasonable and proportionate length so as to respond appropriately to the bill of costs. Bill Format We agree the current format of a bill of costs needs to be updated to provide clarify and simplicity. Clarity of the bill will allow it to be more easily read and thus potentially simplify the process of providing points of dispute. If the bill format is amended, we suggest that points of dispute could then be drafted to mirror or match the new bill format in a similar fashion to a counter schedule s response to a schedule of loss. Further, and like a counter schedule, the points of dispute should be clear as to what elements of the bill are not in dispute and which are disputed and to what extent. The conclusion of the points of dispute, again like a counter schedule, would set out a summary of issues and a clear costs counter proposal by the paying party. Compulsory Offer Procedure In order to make an offer at the time of serving points of dispute sufficient time should be allowed first, for the points of dispute to be drafted and secondly, for the paying party to take instructions upon an offer. The current 21 day period for service of points of dispute is insufficient for both of these steps to be taken and should be extended to say 42 days. Costs of Detailed Assessment We disagree that success fees should be recoverable at detailed assessment, let alone recovered on a costs draughtsman s fees. The risk to the receiving party (that he/she will not recover full costs as claimed) is not sufficient to warrant such an enhancement. Part 36 We agree that there should be provision to make Part 36 offers on costs to give some weight to offers made and thus we hope to shorten the negotiation process. Issues such as interest, and possibly costs of any detailed assessment, will need to be carefully addressed within the offer letter. Provisional Assessment 11

12 The option of provisional assessment is potentially attractive. This intermediate step will, we anticipate, cost significantly less than proceeding to a detailed assessment. With the input of a specialist cost judge, we are hopeful that the assessment will provide the parties with a platform from which they can negotiate just upon any outstanding issues even if the figure cannot be agreed. However, if the differences between the parties cannot be reconciled there remains the option of taking the bill to a detailed assessment hearing. Provisional assessment may result in a delay in reaching a detailed assessment hearing first by way of introducing a further step for the negotiating parties to address and secondly, the capacity of cost courts to list assessment hearings maybe stretched by this further procedural step. Despite the concerns about the potential delay in reaching a detailed assessment, if that is what is required for final resolution, it is hoped that provisional assessment, by a specialist costs judges, will facilitate resolution of costs and ultimately speed up the conclusion of costs. Intermediate procedure If negotiations as to costs have been unsuccessful between the parties, we would be concerned if the next step was to proceed to the proposed intermediate procedure. The suggested broad-brush approach seems to offer what might be construed as a half hearted assessment of costs which is unlikely to be an attractive proposition for either party. It may be appropriate for it to be provided as an option where both parties agree. Costs of preparation of the bill/delay/complexity/disclosure We do not have any particular problems with the process of resolving costs per se. The issue of primary concern is the bill itself. That is by the time the bill of costs is rendered the damage has been done. Therefore, our concerns are to address issues prior to the costs resolution process and in that respect we refer to the need for more case management of costs or a process of costs budgeting as set out above. Case Management of Costs A closer involvement, by way of case management by cost judges, during the substantive proceedings is an attractive prospect. We propose that the parties should seek the Court s approval for the costs/fees of experts (hourly rates) and Counsel. This would avoid the need for dispute at the time of assessment of the bill. As we know once costs and disbursements have been incurred it is sometimes difficult then to remedy the situation. We consider that the above role would not happily be taken on by District Judges/Masters/High Court Judges who may not have sufficient practical experience to address issues such as experts fees. This aspect of case management should be addressed by specialist costs judges. We further submit that no costs should be allowed for submissions to the case management cost judges to avoid lengthy (and costly) submissions being made by the parties. The issues could be dealt with by way of written submissions, perhaps in a standard format or form for court 12

13 3: Costs Capping - A Response to Chapter 45 The Issues We would like to propose to the following question for those involved in this Review: If it were possible to have a costs capping or budgeting regime that: was not overly complicated or expensive to implement; delivered costs caps for a category of smaller cases; did not set the budget/cap either too high so as to be useless or too low as to prevent reasonable or necessary steps required to bring or defend a claim; would that be a good or a bad thing for the following: The Courts and the machinery of justice? Claimants personally? Funders, such as the LSC, BTE insurers or ATE insurers? Claimant lawyers? Defendants including clinicians, NHS Trusts, the NHSLA or Medical Defence Organisations/PI insurers? Tax-payers? The public perception of our profession? It seems to us that this would self-evidently be a good thing for all of the above apart from the Claimant lawyers. Aside from Hallett J (as she was then when deciding Sheppard v- Essex SHA [2005] EWHC 1518 QB) the Courts and the CJC have shown a disappointing lack of enthusiasm for this useful tool without any real attempt to see if it could be made to work. We have experience of obtaining a small number of costs capping orders by consent where mutual concerns about disproportionality and indeed private funding or BTE insurance may have played a part in the Claimant s willingness to agree. There were no reported difficulties for either side and there was only one case that led to an application to exceed the cap (granted by consent). We are aware of few clinical negligence cases where a costs cap has been imposed without agreement even in exceptional cases where it was obvious from the Claimants own costs estimates, later exceeded in any event, that disproportionate costs had been incurred (not a risk that they might). Broadly speaking, in our view those that oppose costs capping in anything but group actions fall into one or both of the following categories:- Those (primarily Claimant lawyers) who believe they restrict access to justice. However, the concern can only be warranted if the costs cap is set too low and is not capable of correction. Those concerned about the practicality of when, how and at what level to set the costs cap. We suspect that this group includes many District Judges, Masters and s.9 Judges involved in a high volume of day-to-day case management. This is a genuine concern and needs to be addressed if costs capping is going to become more than an occasional remedy in exceptional cases. We think this concern can be addressed. CPR 3.1(2)(m) and now CPR 44.18, as of April 2009, allowed costs capping from an early stage adopting the test from the case of Smart v East Cheshire NHS Trust [2003] : 1. That there was a real and substantial risk that without the order costs would be disproportionately and unreasonably incurred, and 2. That the risk could not be managed by 13

14 conventional case management and detailed assessment after trial and it is just to make the order. Despite evidence that prospective case management of costs and detailed assessment are failing the Courts have so far taken a very restrictive approach to this test. The paradox is that applications for costs capping need to be made early as the cap cannot fairly be retrospective and the applications must be supported by case specific evidence which usually can only be produced in Court once the horse has already bolted. Without costs capping, case management can and does make small contributions (for instance by ordering joint experts or reducing the amount of expert evidence allowed to that which is reasonably necessary) but in reality this is little more than tinkering with the larger problem. In some cases, poor case management makes the problem worse. By the Detailed Assessment stage, Costs Judges are faced with a fait accompli. Defendants consider that detailed assessment simply fails to deliver. The process itself is too complex, expensive and unpredictable. Our Solution To avoid the present blunting of this useful tool with the need for lengthy applications or the genuine risk of restricting access to justice we propose giving costs capping a fair chance by a trial in relation to claims worth less than 250,000 in the Royal Courts of Justice. It is in the smaller claims within this bracket that costs disproportionality is most extreme and, in our view, difficult to defend. Allocation to one of the two assigned clinical negligence Masters will make implementation and collation of data relatively easy. The High Court User s Group will be able to provide assistance on data. We propose a rebuttable presumption that genuine public interest cases are excluded in the interests of fairness but that the default position is for some costs cap, to be determined by the Master at the first Case Management Conference (CMC) if necessary. If a costs cap can be agreed between the parties so much the better. If not, by the first CMC the Court will have the statement of value endorsed on the Claim Form itself, the pleadings and a preliminary Schedule of Loss supported by a medical report, plus the parties Allocation Questionnaires, costs estimates and draft directions. For many years the LSC has had its own merits test including a ratio of costs v- damages that is well understood by Claimant lawyers. For cases worth up to 250,000, we propose a default position that base costs (including disbursments and VAT) will not exceed damages by more than a factor of x1.5 or even x2 unless permission has been obtained from the Court. This needs to be combined with existing powers to penalise inflated or exaggerated claims, especially if there is reason to believe that this has been deliberate in order to artificially raise the costs cap. However, a cap that is too high will merely be ineffective. Out of pragmatism, we would suggest that the cap on defence costs could be tighter than for the Claimant in the same case, say by a factor of x0.75 compared to damages or parity, although we would dismiss the suggestion often made by Claimant lawyers that it is more expensive to bring than to defend a claim as the work involved is broadly similar, if not greater due to the likely higher number of factual witnesses involved on the Defendant s side. After a period of trial and evaluation, the default ratio may need to be looked at or it may be considered beneficial to expand or retract the initial 250,000 limit. Ideally the proposal would then be rolled out to other Courts. This would be a less dramatic change than one way costs shifting. We do find it odd that costs capping should be effectively side-lined under the present Rules without first trying to make it work. If the idea of a detailed prospective budget system for clinical negligence cases (see below) are rejected as being unworkable due to expense/judicial time demands, an overall cap (which can be 14

15 amended upwards on application appears to be a sensible way of keeping the control of costs in the Court s hands as was arguably originally intended by Lord Woolf. We suspect that there will be a few (if any) law firms that would elect not to work in such an environment, particularly as many have already done so with the LSC s High Cost Case Plans. By comparison, the NHSLA has not achieved improvements in costs proportionality without changes being made and some firms either leaving or joining the panel. We think the service we provide is better for those changes. The fact is that the NHSLA has delivered cost efficiencies without restricting access to justice for the NHS. The law firms on the NHSLA panel run commercial businesses, with sensible profits, and others are keen for the work if they should falter. The propaganda that properly managed costs capping at the right level would result in lawyers deserting injured patients is no more sensible than saying that access to plumbers, accountants, mechanics or other professionals would be restricted if they are not guaranteed a blank cheque to fill in as they please. 15

16 4: Extending Fixing/Budgetting of Costs - A Response to Chapter 48 General Issues Access to justice and a litigation process which delivers an adjudication at reasonable cost is fundamentally important. However, the system does not currently manage how or when costs are incurred in an effective way to minimise disproportion. We have had the benefit of seeing the submission of Bertie Leigh from Hempsons advocating the use of costs budgets and would endorse the introduction of some form of costs budgeting. We believe have only a little to that submission (save for our support of it) and therefore restrict our comments to the following paragraphs dealing with specific costs bottlenecks. In our view, if case management of costs is to be effective it must be done at an early stage in litigation. Inevitably, given the laudable aims of the pre-action protocol, both parties will have undertaken a significant amount of investigation and generated the associated costs, for example, of instructing some experts prior to the issue of proceedings. The Court s duty to restrict expert evidence (CPR 35.1) and its power to penalise unreasonable costs is less effective and proportionate when applied retrospectively at the time of assessment. It is easy for a claimant lawyer to argue that they were advised to seek further expert opinion by one of their existing experts and hard to deny the costs associated with such an investigation after the event. Nevertheless, in an exercise of damage limitation, the Court can step in at the first case management conference to take a more proactive approach to managing costs. Costs budgeting is neither unworkable nor unfair. Experts At the first CMC the Court reviews the issues in dispute and makes decisions about the number and identity of the experts required, ordering joint experts where appropriate and denying the Claimant or Defendant the right to add unnecessary experts to their teams. This exercise could easily be extended to considering the appropriate amount of time and money that should be expended on such steps in the case. Applying a fixed costs regime for different stages of a claim may meet justified objection on the basis that this is too inflexible and insensitive a regime for complex clinical negligence cases whose issues can rarely be predicted at the starting gate with any accuracy. However, at the time of the first case management conference both parties should have a very good understanding of their cases and the evidence required to bring or defend the claim. The point about costs budgeting is perhaps best illustrated by an example. In one of our recent cases, at a case management conference on 27 July 2009, Master Yoxall was faced with an argument that an aids and equipment/occupational therapist report was not required to properly assess quantum involving a claimant who, sadly, is in at best a minimally responsive state and is likely to be cared for in hospital for the remainder of his life. If there were to be a claim for any equipment, this would be limited, to, for example, a suitable wheelchair and a small number of related aids. Unfortunately, the Claimant s chosen care expert was unable to review equipment requirements, unlike some experts practicing in this area. In the light of objection on the part of the defendant to an unnecessary accumulation of quantum experts the Master ordered that the cost of the claimant s OT expert report should be limited to 650. It would have been helpful if the Master could also have limited the claimant s solicitor s costs of commissioning and reviewing this evidence to say 400 or two hours work to increase the effectiveness of this tactic in managing costs. It could be argued that this will lead to unnecessarily complex directions orders, but simply adding [costs of instructing this expert to be limited to x, the cost of this report be limited to y] 16

17 would not be onerous and would encourage tight budget keeping by both parties. Rule changes would not be required to extend this practice which is already in its infancy. Early Assessment of Hourly Rates In the context of hourly rates, we would suggest that provisional approval for hourly rates could be given as part of the case management process at a CMC when the future conduct of the action is considered. If a different hourly rate is subsequently considered by either party to be appropriate, this could be the subject of an application. This would introduce certainty and facilitate early settlement of costs by taking hourly rates out of issue. This could be extended to include provisional approval of experts/counsel s fees. Disclosure Whilst some may argue that such an analysis requires too much information to be provided as to the tactics and conduct of a case. We do not see that the level or experience of fee earner could be used to undertake certain steps or the costs of an expert should be matters that are kept confidential to any stakeholder in the costs process. If it was considered that such assessment was inappropriate for the case management Judge, then an alternative may be to require costs budget/elements of the conduct of the case involving costs to be approved by a separate Costs Judge. Penalties for Disproportion We consider that there are currently insufficient incentives to manage cases to avoid incurring disproportionate costs. Whilst CPR 44.2 provides for the Court to make a finding of disproportionately, the consequence of this is only that recoverable costs are limited to those which were necessary are recoverable as opposed to those which are reasonable. The distinction between necessary and reasonable is often difficult to apply in practice and is not meaningful in terms of guiding the decisions that a solicitor makes when conducting a case. In this context, we note the recent discussion in the case of Roach v The Home Office [29 May 2009] where costs claimed were 67, and damages recovered were 10,000. This was a Fatal Accidents Act where the costs of advice and representation at an inquest were claimed as part of/ancillary to the clinical negligence costs. A finding of disproportionally was made and the question arose as to whether briefing Counsel to represent the family at the inquest was necessary. It was held that it was and therefore the costs were allowed notwithstanding the disproportion. It is questionable whether CPR 44.2 is sufficient to really operate as an effective control on disproportionate costs. In the context of hourly rates we would recommend that hourly rates within the GHR should be capable of restriction where costs/damages proportionality is an issue. A possible scale might be as follows: 1. If costs exceed damages by 10%, the hourly rate is restricted by 5%. 2. If costs exceed damages by 20% the hourly rate is reduced by 11%. 3. If costs exceed damages by 30% the hourly rates is reduced by 13% and so on unless the Court finds the case is an exceptional case to which no deduction should apply. Notification to Parties 17

18 As NHSLA Panel Solicitors we are obliged to provide a reserve for the costs that we incur and to confirm no less than on a 6 monthly basis what costs have been incurred to date. We are also expected to reserve for Claimant costs. It is not uncommon for it to be suggested to us by Claimants Solicitors that they are unable or they consider it unfair that they should be asked to provide a costs estimate. On further enquiry we understand that it is the practice of some firms to divide the costs function from the case management function to such an extent that the Solicitor with conduct of the case is unable to obtain the necessary information to provide a costs estimate. We find it alarming that there should be such a disconnect not only between the parties but also the Claimant and their Solicitor. We would suggest that it should be mandatory for the parties to be provided with regular statements of the costs incurred by both parties with estimate of future costs in order to avoid a continuing disconnection between the conduct of the action and the costs incurred. Prospective budgeting (with cost adjudication on increase where necessary) must always be more equitable than retrospective cost-cutting. For further information please contact: Adrian Dagnall Partner Bevan Brittan

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