Page 1 of 8 Author – Mark Walmsley – Managing Director Propus Law Ltd
11.08.15
Clinical Negligence – Fixed Recoverable Costs Proposals
Necessary or Not?
Introduction
In July 2015 we published a paper regarding the NHS Litigation Authority Report and Accounts 2014/2015 (“the Report”) which looked at the legal cost headlines created by that report and which posed some (limited) initial questions from a costs management perspective.
Matters are now moving at a pace toward a consultation process regarding the introduction of fixed recoverable costs for clinical negligence cases, as against the backdrop of what has been suggested by the NHS Litigation Authority (“NHSLA”) could be annual savings of £80m if fixed recoverable costs were introduced for claims up to £100k.
The government appears to be wishing to go further, suggesting that £100m savings are being targeted on the basis of fixed recoverable costs being introduced for claims up to £250,000.
The rationale for seeking to create a fixed recoverable costs regime within the clinical negligence arena is based upon the following:-
“in the experience of the [NHSLA], significant costs are often incurred by claimant lawyers in the pre-litigation and pre-notification period and are not subject to costs budgeting requirements. There is also evidence of claimant solicitors attempting to claim costs well in excess of the current guideline hourly rates, and considerably higher than the NHSLA pays its defence solicitors.
“This results in a disproportionate costs claim compared with the damages payable and means that more money is paid to lawyers – in lower value claims – than to the patients who were harmed by negligent care.”1
Page 2 of 8 Author – Mark Walmsley – Managing Director Propus Law Ltd
11.08.15
The Headlines
The headlines within the Report are:-
For the year 2014/2015 defendant solicitors were paid £109.9m
For the year 2014/2015 claimant solicitors were paid £199.6m2
The proportion of costs to damages ranges from circa 3 x damages in cases where damages are less than £10,000.00 to circa 0.17 x damages in cases where damages are £1m plus
Excessive claims for costs are presented by some firms
NHSLA has seen an average 33% saving on costs claimed -v- costs settled
Questions arising from the Headlines?
Questions arising from the Report:-
a. In addition to the £109.9m paid to its own lawyers, what is the actual cost of the NHSLA itself?3
b. What part of the £109.9m paid to defendant solicitors related to profit costs? i.e. excluding expert fees, other disbursements and VAT
c. What was the makeup of the figure of £199.6m paid to claimant’s solicitors? i.e.:
1. How much related to solicitor base profit costs?
2. How much related to solicitor success fees?
3. How much related to counsel base fees?
4. How much related to counsel success fees?
2 Excluding non-clinical claims 3 Relative to clinical negligence claims
Page 3 of 8 Author – Mark Walmsley – Managing Director Propus Law Ltd
11.08.15
6. How much related to ATE insurance premiums?
7. How much related to VAT?
d. Additionally, of the £199.6m paid to claimant solicitors:
1. How much related to additional costs incurred as a result of Trust failings to provide medical records in accordance with protocol?
2. How much related to additional costs incurred as a result of Trust requests for extensions of time for service of a Reasoned Response?
3. How much related to additional costs incurred as a result of Trust failings to provide full information/documentation in support of denials of breach of duty/causation?
4. How much related to additional costs of the Detailed Assessment process?
5. How much related to interest paid on costs?
d. How many of the cases making up the £199.6m paid to claimant’s solicitors were pursued under the pre LASPO4 funding regime and how many were
pursued under the post LASPO funding regime?
e. How many of the cases making up the £199.6m paid to claimant’s solicitors related to the costs of unsuccessful appeals pursued by defendant trusts?
f. How many of the claims presented with a damages value of £100,000 or less were settled after initial denials of breach of duty and/or causation?
g. How many of the claims presented with a damages value of £100,000 or less were lost by defendant trusts at trial?
All of the above questions remain relevant.
Page 4 of 8 Author – Mark Walmsley – Managing Director Propus Law Ltd
11.08.15
Some History
Jackson LJ, as referred to within his Final Report5 was presented with data from the
NHSLA6 that the total sums paid out by the NHSLA in clinical negligence cases over
the last three years were:
Jackson LJ was alive to the headline nature of those figures on the basis of their being
total sums paid out as opposed to being based upon cases settled in the year, the
data for which indicated:
2008/09 Total - £455,744,000, broken down as to:-
Damages paid to Claimants - £312,454,000 Costs paid to Claimant’s Solicitors - £103,632,000 Costs paid to Defendant Solicitors - £ 39,638,000
Continuing with its theme of providing data based upon total sums paid out, the NHSLA reported7
Unfortunately the data supplied by the NHSLA does not:
provide data based upon cases settled in the year,
includes figures that are inclusive of interim payments.
5 Page 231
6 Annual Report and Accounts 2009 7 NHSLA Annual Reports and Accounts
8 Excluding £97.5m referred to at Fig. 10 of the Report
Report Year Total Sums Paid Out
2006/07 £ 567,391,000
2007/08 £ 633,325,000
2008/09 £ 769,225,000
Report Year Total Sums Paid Out
2009/10 £ 786,992,000 2010/11 £ 863,400,000 2011/12 £1,277,300,000 2012/13 £1,258,900,000 2013/14 £1,086,300,000 2014/15 £1,072,100,0008
Page 5 of 8 Author – Mark Walmsley – Managing Director Propus Law Ltd
11.08.15
1. In terms of total sums paid out the variations are as follows:-
The 2011/12 year increase is not explained but would appear to be a high water mark.
All subsequent years are showing reductions which, from the 2011/12 year, are down by £205,200,000.
2. In terms of costs expenditure the reports suggest the following:
Report Year Claimant
(£m) Equivalent9 2015 Defendant (£m) Equivalent 2015 2004/05 84.9 120 59 83.3 2005/06 90.6 124.2 54.5 74.7 2006/07 83.2 111 49.4 65.9 2007/08 108.6 140.3 56.5 73 2008/09 103.6 128.4 39.7 49.2 2009/10 121.4 144.7 42.2 50.2 2010/11 196 234.7 61.3 73.4 2011/12 182.7 209.2 48.1 55.1 2012/13 No data No data No data No data 2013/14 259.2 273.3 92.5 97.5 2014/15 199.6 204.3 109.9 112.5
In real terms the costs expenditure has increased from 2004 by the following multiples:-
9 Prices and Inflation Calculator – This is Money.co.uk
Report Year Variation on Previous Year
2006/07 Starting Point 2007/08 ↑ c.12% 2008/09 ↑ c.22% 2009/10 ↑ c.2.25% 2010/11 ↑ c.9.75% 2011/12 ↑ c.48% 2012/13 ↓ c.1.45% 2013/14 ↓ c.14% 2014/15 ↓ c 1.4%
Page 6 of 8 Author – Mark Walmsley – Managing Director Propus Law Ltd
11.08.15
Claimant Defendant
1.7 1.32
3. In terms of costs savings the report suggests the following situation:
Report Year Claimed
(£m) Settlement Level (£m) Costs Saved (£m) 2014/15 297 199.6 97.4
The above figures demonstrate that the NHSLA has effective procedures in place to deal with excessive, unreasonable or disproportionate claims.
Discussion
1. The data demonstrates that the total sums paid out have been falling during the past three years.
2. There is no huge or unexplainable disparity between costs paid to Claimant Solicitors and the NHSLA’s own legal teams.
3. There is no huge or unexplained real term costs expenditure increase differential between Claimants and Defendants over the last 11 years.
4. In global terms, the above data clearly demonstrates that on the basis of the NHSLA’s own comparison of costs v damage the costs being paid to Claimants’ Solicitors are wholly proportionate to the overall damages being paid to Claimants.
5. The above data clearly demonstrates that the NHSLA has in place effective controls to deal with excessive, unreasonable or disproportionate claims for costs and that the Civil Procedure Rules, as currently and previously constituted, support those controls.
6. The fact that costs paid on behalf of claimants is only 1.82 x the amount of costs paid to their own defence teams is somewhat surprising, particularly given that:
a. The NHSLA is in the envious position of possessing huge buying power and as such is in a position to drive down the costs of its own suppliers
Page 7 of 8 Author – Mark Walmsley – Managing Director Propus Law Ltd
11.08.15
instructions to external lawyers
c. The NHSLA is not paying success fees and/or ATE Insurance Premiums to its own lawyers
d. The NHSLA does not carry the Claimant burden of proof
One might reasonably expect that ratio to be far higher.
7. The ratio of costs to damages is not a proper test of proportionality in any event. The figures quoted by the NHSLA demonstrate the long understood and self-explanatory position that the lower the value of the claim the higher the proportion of costs will be to damages and the fact that costs may even exceed damages.
8. The figure of £199.6m is likely to be high water mark, given that the LASPO implementations of April 2013 will continue to trickle down resulting in gradually diminishing numbers of costs claims containing success fees and/or full ATE Insurance Premiums.
9. The impact of the April 2013 changes will also continue to have increasing impact upon cases from the perspective of costs budgeting and the new test of proportionality.
10. Our own experience demonstrates that the majority (not all) of the NHS costs representatives find it impossible to separate out those truly genuine and reasonable claims from those that are unreasonably excessive, with the effective tarring of every claimant firm with the same brush. This results in unnecessary extensive additional Detailed Assessment costs being incurred by the NHS.
11. Similar to 10 above, reasonable attempts are not made to make significant payments on account of costs which, given a current Judgment rate of 8% per annum from the date of the authority for costs, reflects another unnecessary and significant expense being incurred by the NHS.
Page 8 of 8 Author – Mark Walmsley – Managing Director Propus Law Ltd
11.08.15
Conclusions
The headlines from the Report are attention grabbing, but less so when analysed in a little detail.
There are significant questions remaining unanswered.
The impact of the LASPO changes of 2013 are not yet fully understood nor accounted for within the NHSLA’s reports.
The race to seek to place clinical negligence claims into a Fixed Recoverable Costs regime is not set against the background of any significant changes over the past 11 years that would warrant such a radical step.
