Costs News

Court of Appeal reverses trial judge’s decision on costs

The Court of Appeal has handed down its judgment on costs in a clinical negligence case which could cause considerable concerns to claimants who have been forced to proceed to trial where defendants have failed to make any attempt to agree issues or make any or reasonable offers. The defendants in the case of Sebastian Marcus v Medway Primary Care Trust & another succeeded in reversing the trial judge’s decision on costs, having previously been substantially successful at trial.

The claimant attended GP consultations complaining of symptoms including pain in his lower left leg. The symptoms were indicative of limb threatening ischaemia, requiring urgent assessment by a surgeon. An urgent referral was not however made.

The claimant was seen by the surgeons some weeks later, and efforts to save the limb were unsuccessful.

The trial

The claimant alleged negligence against two GPs with whom he had consulted, for failing to refer him urgently to the vascular surgeons.

Eventually both defendants admitted breach of duty but argued that even with timely referral the limb would not have been saved. Quantum was agreed at £525,000 subject to causation and trial therefore proceeded on that issue alone.

Regrettably the Judge preferred the defendants’ expert evidence and found that the limb was not capable of being saved from the outset. However, on the basis of an alternative case, the claimant was awarded damages of £2,000 to reflect additional pain, suffering and loss of amenity over a period of no more than 28 days delay in treatment.

Costs

The Judge awarded the claimant 50% of his costs which was funded by a conditional fee agreement and ATE insurance. The defendants appealed the costs order.

The appeal

The appeal came before three Lord Justices, including Jackson LJ.

The Court of Appeal decided, Jackson LJ dissenting, that the defendants were the successful parties. The action was about the requirement for amputation. The award of £2,000 was insignificant in the context of the claim and was in truth a last minute addition to salvage something from an action that the claimant had lost. In this context, the failure to make a Part 36 offer was of no consequence and a technical triviality.

LJ Jackson could not agree with that assessment and considered this was a case in which there always was, on the pleadings, a fall back claim for pain and suffering consequent on the late diagnosis of the claimants ischaemia. He felt the defendants could and should have protected their position by making a Part 36 offer of modest damages, perhaps £2,000 or £3,000. He went on to say that the “blunt fact is that the claimant had a good claim for £2,000 and the defendants were refusing to pay anything. The only way the clamant could recover the £2,000 due to him was by issuing proceedings and pressing on until the defendants agreed or were compelled to pay (a) £2,000 damages and (b) costs assessed on the standard basis.”

He also felt that the case and others involving the effect of Part 36 offers had caused an unwelcome and unnecessary degree of uncertainty. We agree that this is an area of law where the parties need to know where they stand and understand the consequences of their actions. None the less he did agree that the judge at first instance was best placed to make an assessment as to the right level of adjustment given the claimant’s defeat on a very substantial issue in the case. Interestingly he felt the judge had been generous in allowing the claimant 50% of his costs. So despite his dissenting views perhaps he was not very far apart from them in reality. However he concluded his views by clearly expressing that the defendants had made no Part 36 offer in this case and in his own opinion they should accept the consequences and he would dismiss the appeal.

Unfortunately the other two Lord Justices did not appreciate LJ Jackson cost’s experience and the appeal was allowed. To add further insult to injury the trial judge’s costs order was substituted for an order that the claimant pay 75% of the defendants’ costs.

If you would like to know more about the decision or wish to discuss its consequences please contact our David Pipkin at david.pipkin@temple-legal.co.uk

Government introduces draft bill

The Government has chosen to hide its fundamental changes to the civil costs regime within the Legal Aid Sentencing & Punishment of Offenders Bill published on 21 June 2011. It is not clear why the Government has sought to implement this change in civil costs by these means. The cynics amongst you might believe that it is an effort to distract MPs from discussing these issues but rather to concentrate on higher profile issues such as sentencing and criminal legal aid.

Sections 41 to 43 of the Bill make it clear that success fees and ATE insurance premiums will not be recoverable from unsuccessful parties. But, success fees and ‘damages based agreements’ i.e. contingency fees, will be allowed where the solicitors own client will pay the success/contingency fees.

The proposed legislation has an exception for the recoverability of ATE premiums where the insurance policies have been provided for disbursements in clinical negligence claims. This exception is wholly illogical. There is no reason why there would be (a) a viable market for such insurance and (b) only disbursements in clinical negligence cases should be treated in this way. Finally the Bill makes it clear that it will not have retrospective effect.

There is no attempt to provide any legislative framework for the intended increase in damages for personal injury. More importantly, for the qualified one way costs shifting regime that is supposed to be introduced. Presumably the Government intends to do this by changes in the Costs Rules.

The Bill is, of course, only at its earliest stage. However, for those of you who agree that these changes are an unacceptable assault on access to justice, the time has come to make your views known to your MP.

Risk Assessment Update – Personal Injury Slip/Trip cases

We see the outcomes of thousands of cases every year and can spot trends or establish common reasons why cases fail. Some are obvious many less so.

The most worrying trend we have noted is in the personal injury area and involves local authority slip and trip cases. The Judiciary appear to be taking an over sympathetic approach to the "plight "of cash strapped local authorities. The success rate in such cases has fallen dramatically in all parts of England and Wales. The need for independent and objective evidence in such cases is paramount.

Some of the critical factors affecting the success of such cases include:

· Cases where a S58 defence has been pleaded and there is no independent evidence to confirm that the defect has been longstanding and therefore should have been present when inspections were taking place. Such evidence needs to be very clear as it is apparent the Highway Inspectors evidence is to be preferred.

· Claimants who are intoxicated in any way via alcohol and/or drugs

· Defects that are not deemed to be an immediate danger. The previous rule of in excess of 1" is not strictly adhered to by the courts anymore

· Cases where there is an uncertainty as to the exact location or mechanism of the slip/trip

All of these factors may appear straightforward but we raise them because we see them present in the cases which fail. Either they are being missed or disregarded. The cost of losing such claims is rising fast and only too often we find the opponent’s solicitor is retained under a CCFA doubling the exposure to the amount of adverse costs.

If you are concerned about this situation speak with your scheme account manager. Review your current cases and ensure there are no surprises awaiting you. Has the opponent’s retainer changed to a CCFA? Do you have independent witness evidence to support the insured’s case?

If you don’t have local knowledge then make sure you get it as too many times we find that local residents have not been sent questionnaires or local businesses have not been approached for background information about previous complaints or incidents.

These cases can still be won but do not think that a good photograph and "nice client" will see you through.

If you don’t ask you don’t get!

In February in the case of Motto & Others v Trafigura Ltd and Another [2011] EWHC 90201 the SCCO Master Hurst found that the cost of work undertaken by the solicitors, costs draftsmen and insurers in establishing and setting up the CFA and insurance policy was recoverable from the paying party.

We have always believed it is only right for such work to be recoverable. Don’t forget to include it in your claims for costs!

Access Denied

The government announced their intention to implement Lord Justice Jackson’s civil costs reforms in an address to the House of Commons yesterday afternoon. The key points of the reform are that:

· lawyers will no longer be able to recover success fees and after-the-event insurance from losing defendants;

· contingency fees will be permitted in litigation before the courts;

· general damages will rise by 10%;

· success fees will be capped at 25% of damages in personal injury cases.

It will also involve the extension of the ‘RTA Claims Process’ to other areas of personal injury litigation such as employer’s liability and public liability claims.

It is apparent that Ken Clarke has sincere intentions. In his speech to the House, he said: “To many people in this country, the prospect of legal action is an expensive, daunting nightmare and one of the worst features of our compensation culture is that our justice system has increasingly become closed to vast rafts of the ordinary public by legal costs out of all proportion to the dispute or the claim.”

Whilst he hopes to “restore proportion and confidence for both claimants and defendants”, it appears that Mr Clarke has been poorly advised. His reforms aim “to stop the perverse situation where fear of excessive costs sometimes forces defendants to settle even when they know they are in the right”. That same situation also applies to claimants when the strength of the liability insurers or corporate defendants outweighs the financial strength of Joe Public. That is why the current system of transferring that risk to insurers is fundamental in allowing access to justice. Without that protection, the ordinary public will simply not be able to litigate for fear of the cost of losing. In abolishing the recoverability of ATE premiums, the government will be denying access to those people whom they profess to protect.

By announcing their intentions only weeks after receiving around 6,000 responses to the consultation, the government has failed to take any notice of the views and responses provided and instead have pushed forward with their own agenda in which the only winners appear to be the large liability insurers. The consultation clearly was a sham.

It is without doubt that the vast majority of the general public will suffer as a result of these reforms and that the government has effectively removed access to justice for anybody other than the extremely rich or the extremely poor.

It is enormously disappointing that these reforms have been introduced on the back of blinkered views and extreme examples of litigation costs and ATE insurance premiums in what is an otherwise very fair and just system enabling ordinary people to be compensated for their losses caused by the negligent acts or omissions of another party. This decision has also been made without any proper evidence of proposed benefits being produced, or any properly conducted impact assessments.

Another serious concern is that there is no detail provided on how complex systems such as qualified one-way costs shifting will be implemented and properly policed and that no timetable has been given for the implementation of these reforms. The only indication of time given was that they would be implemented "as soon as parliamentary time allows" although a White Paper could well be published in April or May this year. Once this has been produced it is highly unlikely that the necessary legislation would follow for at least another 12 months.

Chris Wait

Managing Director

‘Employer Protection Scheme’ brochure now available!

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Our scheme enables your firm to offer an up to date employment advice and support service, backed by insurance.

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A Cautionary Tale

The Green Paper of 14 February 2011 on Lord Justice Jackson’s ‘Proposals for Reform of Civil Litigation Funding and Costs in England and Wales’, indicates that it is the intention of the Government to introduce many of the proposals, including the removal of the principle of recoverability of success fees and ATE premiums.

If implemented, the proposed changes may deprive many personal injury claimants from access to legal representation, as it will be uneconomic for lawyers to act for parties in litigation under CFAs, except in very high value monetary claims. This will inevitably lead to an increase in the number of litigants in person, who can easily find themselves at the mercy of defendant insurance companies, who do not have the interest of the claimant as their principal aim.

As Thompsons Solicitors Civil Litigation Costs Review points out:

“PI cases usually involve complex issues of causation, liability and evidence and are too complex for most people to handle without help from a solicitor. Defendants will usually be represented by an insurance company receiving expert advice. Many claimants will not pursue the matter because the evidence is complex and an insurance company may be pressuring them to drop a claim or settle.”

The case below illustrates just such a situation.

In this case the claimant suffered an injury due to a defective product. The defendant’s well known insurance company admitted liability and advised the claimant that they would deal directly with her. The claimant litigant in person trusted the insurers to look after her, as they had been so helpful when she initially contacted them.

The insurers organised a medical appointment for the claimant and then made her an offer of £4,000 but did not give any explanation of how the injury was valued by them, nor crucially, did they advise her to obtain any independent advice.

Fortunately the claimant spoke to a friend who advised her to contact Stephen Gowland of Independent Legal Services Solicitors in Durham. Once the claimant had the benefit of legal representation, the insurers increased their offer to £6,540.00 and then to £7,000.00. They would not increase their offer further on the basis that the report they had commissioned did not support the claimant’s care claim.

ILS solicitors accordingly obtained their own report and instructed the expert to specifically comment on the level of care required, as the insurance company should have done. Once this evidence was obtained, the defendant insurers increased their offer to £12,750.

The inequality of arms created by the proposals is likely to lead to an increase in undesirable situations like this, but without the ‘happy ending’. Stephen Gowland feels so strongly about the issue that he has written personally to Lord Neuberger to highlight this problem. If you have a similar experience to share, please get in touch with Stephen Gowland on stephen.

Madeline Wright

Senior Underwriting Assistant

“Overcoming Challenging Times” at the Royal College of Surgeons, Lincoln’s Inn Fields (London) on 17th May 2011

Temple is proud to announce a conference entitled “Overcoming Challenging Times” at the Royal College of Surgeons, Lincoln’s Inn Fields (London) on 17th May 2011.

The legal industry is facing challenging times with some firms expected to struggle against possible changes in legislation and increased competition brought about by the Legal Services Act. Whilst the emerging legal landscape poses serious challenges for traditional providers, it also presents a wealth of opportunities for those firms who are willing to make the most of the changes.

The ‘Overcoming Challenging Times’ is aimed at senior litigators and managing partners and intends to provide guidance on how firms can stay competitive and meet these challenges head-on.

The conference will involve four speakers covering separate key issues; the ‘Legal Services Act’ Challenge, the ‘Jackson’ Challenge, the ‘Costs’ Challenge and the ‘Brand’ Challenge.

Registration and refreshments begin from 12 noon and the conference will end with a drinks reception in the prestigious Hunterian Museum at the Royal College of Surgeons.

The conference will attract 3 hours of CPD points and places are available for £100 + VAT (with a 50% discount for firms with a Temple Delegated Authority Scheme).

To book your place at the conference please contact Temple by emailing conference@temple-legal.co.uk or by calling 01483 577 877.

Green light given to insurers to protect their capacity

Last week’s Court of Appeal ruling on the case of Sousa versus the London Borough of Waltham Forest has given the green light to underwriters and insurers to make full use of CFA’s and After The Event legal cover in order to protect their capacity.

Indeed the judgement indicates that the underwriters who are serious about keeping down the claims costs and thus staying competitive in an ever hardening market can no longer be without the facility to minimise the risk to themselves when proceeding with subrogated rights claims.

The judgement, which confirmed the right of insurers to take out Conditional Fee Agreements with their lawyers, on behalf of their policyholders, when seeking recovery of an insured or partially insured loss, agreed that it would not be surprising if premiums were set at levels that took account of arrangements such as CFAs.

It stands to reason therefore, that in future, underwriters in any class of business, who may find themselves seeking to recover losses from negligent third parties, will struggle to set rates competitively if they fail to pass on the costs of such actions to the said negligent parties where ever possible. At the same time, underwriters can take advantage of After The Event Insurance to cover against those costs and disbursements, often including the other sides costs, where these are not covered by the CFA provided by their solicitor.

George Beevor

Claims Manager

10 February, 2011 11:53

MGN Limited v UK Government

The European Court of Human Rights (EHCR) ruling that recovery of success fees by lawyers in privacy and defamation cases represent a violation of freedom of expression is likely to have a detrimental effect on access to justice.

Mirror Newspapers having lost their defence of an action brought by the model Naomi Campbell in 2001, then embarked on a lengthy legal battle to try to overturn the decision.

However, the decision relating to success fees leaves considerable doubt as to whether a “wealthy person” is able to avail themselves of a CFA type retainer with their lawyer. CFAs do not mean the claimant will not be out of pocket if successful. Ms Campbell was liable for substantial own legal costs which were not recovered from the opponent.

Much has been made in the media about the unfair effect of CFAs on the media but it should be noted it was Ms Campbell’s privacy that was breached and that she was the innocent party.

Many lawyers may be less willing to offer CFA arrangements leaving less wealthy claimants with no access to justice.

Generally, CFAs provide a means by which tens of thousands of ordinary citizens can litigate meritorious claims often against large and powerful organisations. This decision can only cloud the real issue surrounding the merits or otherwise of CFA retainers.

David Pipkin

Director – Underwriting Division