Anyone involved in the defence of medical malpractice litigation will have noticed the increasing claims spend required, which results predominantly from claimants’ costs.

As the monopoly responsible for claims within the NHS, the National Health Service Litigation Authority (NHSLA) handles the largest body of claims brought against practitioners and hospitals. As such, it provides a very useful statistical barometer. Last month the NHSLA released its annual accounts for 2010/2011. In 2010/2011 the NHSLA paid damages in 5,398 claims. The bill for associated legal costs came to £257m (an average of over £47,000 a claim), with 76% (an average of almost £36,000) of that expenditure being paid to the claimants’ lawyers. This clearly shows the disparity between the level of claimant and defendant costs in medical malpractice litigation. This disparity has been heightened by claimants’ solicitors’ use of conditional fee agreements (CFAs) as the preferred funding model. Through the success fees which they pay on those claims which succeed (whether at trial or settled), insurers and uninsured defendants are meeting the cost of the pursuit of unsuccessful and unmeritorious claims. How can it be right that, even when unmeritorious claims are successfully rebutted, the effect of the success fee system is that these costs are still effectively being met by defendants?  

Change

In medical malpractice cases, it has remained possible for claimants to recover high success fees through an early assessment of the claim. In David Ian Oliver (Executor of the estate of John Frederick Oliver deceased) v (1) Whipps Cross University Hospitals NHS Trust (2) Waltham Forest Primary Care Trust [2009] EWHC 1104 (QB) the court agreed that the success fee (set at 100%) could be maintained since the CFA had been agreed before the claimant’s solicitor had sufficient evidence to consider the merits of the claim. At that early stage, the case (which in fact was quite strong) merited an assessment of a less than 50% prospect of success. However, in personal injury cases the courts have been much more proactive in cutting down success fees. The most extreme example of this was in Pankhurst v Lee White Motor Insurers Bureau [2010] EWCA Civ 1445 where the court described the 100% uplift claimed as “grotesque”. The CFA contained a staged success fee which increased to 100% if the case went to trial. The case did go to trial purely for a determination on contributory negligence. By then, primary liability had been admitted, and the claimant was guaranteed to receive an award and a recovery of costs.

The planned implementation of the Jackson reforms will mean that claimants are no longer able (i) to recover success fees from defendants and (ii) to pass on the cost of after the event insurance premiums (save where the cover is for expert fees), both of which will be payable by the claimant. In part to provide for this, and to protect claimants from losing a proportion of any damages agreed or awarded, there will be a 10% increase in general damages and a cap on success fees (as is already the case with contingency fees), whereby the success fee cannot exceed 25% of general damages and past losses.

Effect

What impact could this have?  

  • Claimants may think twice before starting a claim, particularly if they know that they will have to pay the cost of any after the event insurance premium.  
  • The uplift to their solicitor’s charges if they win will come out of their damages, reducing the potential benefit.  
  • A claimant may take a new interest in and scrutiny of their solicitors’ rates and fees. Claimants’ solicitors may be forced to reduce their uplifts (or even take cases with none) as claimants demand that they take a lesser or no percentage with a view to increasing the damages that they will retain. The effect of competition and market forces may drive success fees down.  
  • As a result of lower uplifts on successful cases (which at present subsidise the time spent on unsuccessful cases), claimants’ solicitors may be less inclined to take on “borderline” cases.  
  • Claimants may look for alternative mechanisms by which to attribute blame, such as internal complaints procedures or through other means, such as a coroner’s inquest.  

The Association of Personal Injury Lawyers (APIL) and claimant organisations have suggested that the change will limit access to justice. It would seem though that precluding the recoverability of success fees and ATE premiums will still afford a claimant, with a meritorious claim, the opportunity to pursue it. It may cause claimant solicitors to think twice about the cases they pursue, because they will be less able to take cases with poor prospects in reliance on the heightened income that they were previously able to achieve from the winning ones.

It may be thought that, on the whole, the reforms are “defendant friendly”. However, they come with a considerable sting in the tail, in the form of qualified one way costs shifting. Claimants will not be required to meet defendants’ costs when they are unsuccessful, unless there are exceptional circumstances. One way costs shifting does not only enable a claimant to bring a claim with no fear of liability for the defendant’s costs. It also removes very largely the need to purchase after the event insurance, the main purpose of which is to protect the claimant against such liability. One way costs shifting will change the whole dynamic of litigation in England and Wales, which has always been (save for publicly funded cases), winner takes all. The effect of costs shifting remains to be seen in practice. It is possible that this will be less than may be feared. There are already many instances when defendants are forced to agree to discontinuance on the basis that the claimant will not be required to meet their costs, or where they walk away from pursuing cost recovery. Reasons for this vary, but include the cost of assessment and enforcement proceedings, the claimant’s lack of funds or simply a wish to avoid adverse publicity.

The planned changes may bring a time lag penalty for defendants. The proposed bill ends the recoverability of success fees but does not do so retrospectively. This means that where CFAs already exist, defendants will still be liable for the success fee and any ATE premium. It is unclear, however, whether a claimant under the old CFA regime will still enjoy the 10% uplift in the general damages award.  

The Government has a very full agenda of proposed legislation and it is far from clear when the Jackson proposals are likely to become law. There could still be many changes either of substance or of detail. The purpose of the Jackson reforms is to cut the cost of legal claims. It will be interesting to see in future years whether the figures within the NHSLA annual accounts reflect success or failure in this aim.