THE CLINICAL NEGLIGENCE SECTOR LEGAL COSTS SUMMER 2017, UPDATED MARCH 2018.

THE CLINICAL NEGLIGENCE SECTOR (Clin Neg)- SEPTEMBER 2017.

UK pays out twice as much in Clinical negligence as US, per capita, despite NHS being ranked highest in quality and US healthcare lowest, of 20 healthcare systems.

 INTRODUCTION

Jim Diamond has spent over 30 years in the law with most of the time working in legal costs. Jim Diamond has worked in both sectors of the Personal Injury market place, including 4 years in-house for one of the biggest Defendant insurance law firms and ran a Claimant Costs Company for 5 years; cases ranged from road traffic accidents to clinical negligence cases, costs disputes ranged from hundreds to millions of pounds. Overall he has worked on approximately 1,000 PI files.

This report looks at the history of the  Clin Neg cases and the potential catastrophic effects on the NHS of Clin Neg cases in future unless the system changes.  The NHS is the Titanic post hitting the iceberg with very few life boats left. Think that is a dramatic statement, well spend 10 minute reading this report.

A CURVE BALL -100,000’s over charged in last two decades.

I have no agenda, I am not politically motivated, I do what I think is right. Over last two decades I have produced reports and stats on the legal costs system in the UK.  I was asked by the Law Society of England and Wales in 2013, to write the “Tool Kit on Costs Management”.  I presume they believed I was a leading expert in the field of legal costs and costs budgeting.

My first article was published in 1998 edition of Legal500. The article questioned the legality of law billing practices in the 90’s. I for example, questioned how internal photocopying was being claimed on almost all legal bills as a disbursement.  This was an overhead of the legal practice, so unless in exceptional circumstances it should not have been charged to clients. A minor point, one may say, but an indication of the arrogance of law firms billing polices. They honestly believed that as everyone else was doing it, so could they.

The Law Society of England and Wales (“Law Society”) published The Price and Service Transparency Toolkit -7th December 2016, http://www.lawsociety.org.uk/support-services/advice/articles/price-and-service-transparency-toolkit/, which finally dealt with this issue conclusively.

 

Page 5, refers to SRA Handbook-Code of Conduct

(1.21) ensuring that disbursements included in your bill reflect the actual amount spent or to be spent on behalf of the client”.

To which the Law Society, then list such items, which should NOT be described as disbursements i.e.

“Administration charges such as postage and photocopying”.

 

What a shame it took The Law Society, nearly two decades to agree with my view on this issue.  What a disgrace 100,000s of people have been charged for this unlawfully.

Introduction-   “The Costs War”

 Lord Justice Jackson, published his report on the costs of civil cases in 200?

 https://www.judiciary.gov.uk/wp-content/uploads/JCO/Documents/Guidance/jackson-vol1-low.pdf

On page 27, under heading Costs War, he states:

“The “Costs War” has been raging for well over two decades between the Claimant Personal Injury (PI) law firms and the Defendant insurance companies”.

The foundation of the “Costs War” can in fact be traced back even further, to the mid-1970s. The Claimant PI law firms in those days were the traditional High Street legal practices, offering a broad range of legal services with very few having more than 10 partners. The Defendant law firms were usually bigger and dealt almost exclusively with insurance clients. The Claimant law firms saw themselves as “freedom fighters” against the dominant and oppressive position of the corporate insurance companies with deep pockets and a win at all costs mentality.

Scale items of legal costs for successful litigants were still in force until during the 70’s and only replaced in 1986 when the brave new world of discretion on legal costs was introduced. It took 13 further years for Lord Woolf to establish his reforms to the civil legal system, especially his radical and what turned out to be disastrous changes to legal costs.

The best example of the “Costs War” following the introduction of Woolf LJ’s reforms concerned two cases which on technical arguments went all the way to the House of Lords (namely, Callery v Gray [2001] EWCA Civ 1117and Hollins v Russell [2002] EWCA Civ 718) which allegedly involved  over 200,000 cases involving legal costs of over £1 billion.

This period also saw the growth in the claims management sector. The birth, and death of the biggest two claims management companies, Claims Direct and The Accident Group.  In a few years from start to their demise, they both revealed the best and worst of the personal injury sector. Access to Justice for the lay person, grow and profit for the business of law.

Although some of the reforms to the procedure on legal cases were a success in general Lord Woolf’s reforms were a disaster on legal costs and specifically the PI industry as a whole. Pre Woolf hourly rates for PI lawyers were in the £100-£150 bracket for the Claimant sector with the Defendant sector lower as the insurance industry had substantial buying power over their panel members. Post Woolf and over the next 10 years rates, increased and with “No Win No Fee agreements” becoming the industry norm. In simple terms these allowed Claimant PI law firms to claim up to 100% on top of their standard hourly rates. Straightforward road traffic cases saw law firms claiming up £200 per hour as their basic hourly rates with success fees added as high as 100%. Gross hourly rate of £400 per hour for simple PI claims was being claimed at the start of the 2000s. The Clin Neg sector took this system to the extreme with basic hourly rates for partners in central London law firms claiming up to £400+, add success win fee of 100% gross hourly rates were being claimed at over £800+. (JDHS –The Lawyer 2010).

https://www.thelawyer.com/issues/20-september-2010/crunch-busting-magic-circle-ups-fees-by-half/

The Claimants also took out insurance policies to protect them from legal costs of the Defendants on unsuccessful cases. These policies for run of the bill PI cases were effectively small but far higher in Clin Neg cases. A recent decision in the SCCO (Mitchell v Gilling-Smith [2017] EWHC B18 (Costs) saw the costs judge allow an after the event insurance  premium of £10K on a Clin Neg case payable by the NHSR in a case were damages claimed in region of £200K.

The “Costs War”, has seen a huge growth in claims and size of law firms on both sides of the fence. The top law firms in both sectors are now multi-million-pound businesses. The rewards are huge so by the time Lord Justice Jackson was appointed in 2008, to review the civil costs system both sides were entrenched in financial self-interest. Jackson LJ’s review took 5 years to fully implement and resulted in back tracking on a number of Lord Woolf important introductions in his reforms. Specifically, Jackson LJ abolished the additional liability concept in PI cases.

The Jackson reforms were introduced in April 2013, but cases signed up before this date, of which there are thousands, will still be able to claim these additional liabilities for years to come. There is no specific data on the consequences of additional liabilities to the PI market as a whole, but there is little doubt that since their introduction in 1999 such cases will have cost the NHS service billions of pounds.

Clinic Negligence Cases “Clin Neg”

I have to be frank, my research into Clin Neg sector, has even staggered me in regard to figures for damages and legal costs.

In the NHSR (formerly known as the NHSLA) its 2015/2016 annual report stated;

http://www.nhsla.com/AboutUs/Documents/NHS_Litigation_Authority_Annual_Report_and_Accounts_2015-2016.pdf

It would need up to £56.4 billion to cover existing and anticipated liabilities (recent reports have suggested this figure could be in fact be as high as £65billion).  This figure is the equivalent to almost half the NHS’s annual budget, which was £117.2 billion in 2015-16.

The provision has increased significantly from £28.6 billion over this one financial year. By far the most significant factor has been the change in the long-term discount rate (“Ogden Rate”)  set by HM Treasury from +2.2% to minus 0.8%. This change accounts for £25.5 billion of the total increase in the provision alone.

The NHSR received 10,965 new clinical negligence claims in 2015/16, compared with 11,497 received in 2014/15. In the same period, they received 4,172 new non-clinical liability claims, typically employers’ and public liability claims, compared with 4,806 in 2014/15. The number of new clinical negligence claims fell by 4.6% on last year and the number of new non-clinical claims fell by 13.2%. Nevertheless, 15,137 claims is a significant number and represent a challenge for the NHSLA.

In 2008/09 that figure were only 2,373.

The Defendant (Market sector)

 It is far easier to criticise the Claimant market sector, the sensational comments of “Ambulance Chasers” and “greedy lawyers” continually scream out from the public and press alike.  But reality and in my practical experience, shows me all sectors in the industry have issues.

Over the last 3 decades, the contentious work in Clin Neg has been outsourced to the Defendant insurance sector. This sector has consolidated into less approximately 15 law firms. These law firms go through a panel process to remain a contracted supplier. The start of the 2000s saw some of these firms offering fixed hourly rates no matter what level of fee earner dealt with the work. The commercial sector attempted this “Blended Rate” approach at the start of the 90s, which proved unworkable. The tendency was to keep lower grade fee earners on cases when at times higher grade fee earners would have been more efficient. Also, a cynic may say, that this also gave rise to an increase use of counsel, as their hourly rates were not included in the blended rate calculations. Also a partner may charge 2x or 3x what a junior lawyer charges, but his or her wisdom may far outweigh these simple economics. What is relevant is these major Defendant law firms are now substantial legal practices with revenue running into multi-million pounds. Jackson LJ’s approach to costs management was well versed in his Interim Report, published in June 2009. There seemed to have been little initial appetite to embrace these reforms and develop budgeting/costs management into an efficient way of from both Claimant and Defendant sectors.

I met the former CEO of the Medical Defence Union (MDU) in about 2011, at a Civil Justice Council forum. I explained my views to her that an early budget of the likely costs of defending a Clin Neg case could be hugely beneficially in streamlining the process. I was subsequently invited to present my Legal Costs Budget software program to them. The program was developed to produce costs budgets for the various stages of a case. The software included a personal injury function.  I attended the MDU’s offices, to be met by a junior member of their staff. He explained there was no one else available and meeting rooms were full. He invited me to do my presentation at a coffee bar around the corner from their offices. The MDU did not take up my offer of my software!

The following year The Law Society of England and Wales (“Law Society “) request that I produce a “Tool Kit on Costs Management”.  The Tool Kit was published in November 2013 and remains on the Law Society’s library as an industry standard

http://bookshop.lawsociety.org.uk/ecom_lawsoc/public/saleproduct.jsf?catalogueCode=CMBT001 .

Part of The Tool Kit I developed, included the budget software I had previously presented to the MDU in that coffee bar around the corner form their offices. MDU was offered my budget software for FREE.

In 2017 there are changes planned for the Clin Neg market place, with the Health Secretary, Jeremy Hunt MP, as reported in The Law Society Gazette;

https://www.lawgazette.co.uk/news/nhs-litigation-authority-rebranded-to-focus-on-early-case-settlement/5060366.article

“That the NHS Litigation Authority is to get a new name (NHS Resolution) and a new mission – to settle negligence cases early rather than fight them. Hunt, in the House of Commons, said: ‘I can inform the house that the NHS Litigation Authority will radically change its focus from simply defending claims to the early settlement of cases, learning from what goes wrong and the prevention of errors.’

The NHSR at the end of 2016, developed mediation schemes following what they describe as a successful pilot scheme”.

https://www.lawgazette.co.uk/news/nhsla-confirms-mediation-service-after-pilot-success/5059084.article

Two-year contracts were awarded to the Centre for Effective Dispute Resolution, Trust Mediation, and Costs Alternative Dispute Resolution. The NHSLA did not reveal the value of the contracts but said it had secured the ‘highest quality mediation services for the NHS at the lowest possible cost’. The outcome of this scheme will shape Clin Neg cases in the future. However, I am concerned this just amount to window-dressing as a case referred to on social media last month from a Claimant solicitor acting on a Clin Neg case against the NHSLA stated:

“Dealing with a low-value medical negligence claim at the moment.

Invited the Defendant to settle prior to issue for £12,000 with costs at £5,500. 

Total outlay, therefore, being £17,500.

Offer rejected and no counter offers were forthcoming.

Forced to issue proceedings. About to go to CCMC and Defendant has now offered £7,500 and our costs are now £16,000.

Total outlay, therefore, being £23,500. Offer is unlikely to achieve a settlement.

Just an example of many occasions where Defendants drive up the costs of litigation, not the Claimant.

Really hoping that the reformed NHSR  considers cases like this more carefully”.

Claimant (Sector)

 Why not just “kill off” this sector as they are all “ambulance chasers” and “money grabbing lawyers”.

Well this approach has one fundamental flaw.  Who will represent anyone with a legitimate claim!

Whilst the “Costs War” has raged for coming up to two decades the general public still needs a legitimate, cost effective, efficient legal service to protect their rights.

An individual without this, even in the world of “Google Lawyers” will have, in most cases very little chance of being successful and even less chance of achieving the right damages without proper legal assistance.

So far as the problems this sector has, well we have discussed as above the problems created by Lord Woolf’s reforms and now being reversed by the Jackson LJ reforms. But other basic fundamental problems are still not being dealt for example, hourly rates for Clin Neg cases.

In 1993, in   case of Re A Company, the Central London Law Societies  produced a set of statistics to show the court hourly rates allowed to the successful law firms and payable by the losing side was wholly inaccurate and was damaging the legal system. In ball park figures the courts were allowing  for Central London law firms between £80-£100 per hour. This equated to about one-third/one quarter of the actual hourly rates charged to clients by the most of the top London law firms.  Overnight after the success of Re A Company hourly rates claimed by winning law increased substantial. The  central London law firms could no claim rates of  up to £171 per hour for a partner. They could add percentage uplifts to these figures. In my personal experience I saw cases in which uplifts of 200% were awarded by the court. So that’s £171 per hour plus a further 200% of this figure for case running from 80’s to early 90’s.

So started calculations on hourly rates through regional Law Societies around the country to show the courts hourly rates allowed by them was out of kilter to the commercial world of running a legal practice. However, High Street law firms working in the civil legal aid system for clients were doing this work at varying hourly rates depending on the classification of the work.  At the start of the 90s basic preparation work was ranging from £40-£60 per hour and items such as travelling and waiting were less than £30.

Move on a decade or so and the courts produced guideline hourly rates for law firms around the country based on the firm’s geographic location.

The present rates are set out in the following  report

https://www.gov.uk/guidance/solicitors-guideline-hourly-rates

The highest hourly rate is £409 per hour for a solicitor and legal executive with over 8 years’ experience working in central London. The lowest hourly rate is £111 per hour for a trainee, paralegal or other fee earner in any location in England and Wales.

These guideline rates do not differentiate between complex commercial cases or ordinary PI cases.

Here lies this fundamental problem, namely in a large percentage of PI work including Clin Neg cases, the processing of documents, administrative work should not be charged at anything close to these hourly rates, if at all.

The Lawyer Magazine, in September 2010, produced the following article on hourly rates, upon receipt of the (JDHS”)

https://www.thelawyer.com/issues/20-september-2010/crunch-busting-magic-circle-ups-fees-by-half/

“The most staggering figure within Jim Diamond’s 2010 hourly rates survey was ­highlighted earlier this year by Lord Justice Jackson’s review of civil litigation costs. This revealed that some London-based clinical ­negligence lawyers earned as much as £900 an hour for advice. Compare that with the hourly rate paid to junior doctors, who work up to 60 hours a week for less than £20 an hour”.

Claimant clinical ­negligence lawyers argue that the figure includes a success fee, which is only included when cases are won under the conditional fee arrangement regime.

 Under proposals put forward by Jackson LJ, the recoverability of the success fee would be abolished and the hourly rate cut dramatically. But claimant lawyers warn this could have the unintended effect of blocking access to justice because lawyers would be more choosy about the cases they take on.

 “We just wouldn’t be able to afford it,” one litigator claims. “The success fee pays for cases we lose.”

But Jackson LJ has rejected such a notion.

 “No evidence has been produced during the costs review to demonstrate that success fees at the levels currently charged are ­necessary to cover the cost of ’lost’ cases,” he has stated.

 The review is currently being considered by the Government and changes are likely to be made to the system Lord Woolf introduced in 1999 – but it will not happen without a fight. The days of the £900 hourly fee look to be numbered.

2017 statistics –UPDATE- 

 https://www.lawgazette.co.uk/news/claimant-legal-costs-edge-towards-500m-for-nhs/5062017.article

The Law Society Gazette ran the story on the publication of the July 2017 statistics;

“Sharp rise in claimant costs for medical negligence cases is likely to swell calls for action to restrict legal fees. While the number of clinical negligence claims brought against the NHS in 2016/17 fell 2.5% year-on-year, claimant legal costs rose 19% from £418m to £498.5m. Defence costs increased by 5% to £125.7m, according to NHSR’s latest annual report.

 The organisation, which replaced the NHS Litigation Authority in April, received 10,686 claims in the year, down from 10,965 the previous year. Claims numbers are now down 10% over the past three years.

 However, the overall costs of clinical negligence payments continued to rise, by 15% to £1.7bn in 2016/17. The increase, at a time when claim numbers fell, was explained by payments on claims from previous years.

 Damages paid to claimants tipped over the £1bn mark in 2016/17, rising from £950.4m to £1.083bn. Damages made up 64% of the overall cost of claims, the same figure as in 2015/16.

 The increasing costs involved in handling clinical negligence claims will fuel calls for curbs on the costs available to lawyers, with the government currently considering a fixed costs regime”.

The report does, however, note that the percentage of claimant costs in relation to damages, for claims worth less than £100,000, fell during the year.

The average claimant legal costs for these cases were 53.45% of the damages received, down from 54.83% in 2015/16. The percentage had previously risen every year since 2004”.

The Courts

One cannot look at the problem without referring to the present court system. The Guardian reported in February 2016, that a further 86 courts in England and Wales were to be closed over a period of 18months;

https://www.theguardian.com/law/2016/feb/11/ministry-of-justice-close-86-courts-england-wales

A quite astonishing number, especially in comparison with the massive increase in court fees the year before. They rose as much as 600 per. To issue a claim for £200,000 the court issue fee alone is £10,000. Should not this have a completely opposite effect, in that this proposed extra revenue should enable further courts to be opened? Clearly not, and the system is grinding to a halt with one set of courts in the South East of England announcing in 2015, that they had such backlogs that correspondence would now take 10 weeks to be replied too. A disgrace and an embarrassment to the UK legal system was complete when in mid-2017 according to latest published figures HMCTS turns in £100m civil justice ‘surplus’ as fees add up.

“Fee income from civil courts reached almost £800m in the last financial year, new figures have revealed. The annual report of HM Courts and Tribunals Service, covering the year ending March 2017, states that the service brought in £186m from family justice fees charges and £602m from civil justice fee charges”.

Claims management companies (CMCs)

CMC’s have earned a staggering £6bn+ in the past decade, according to figures published by the  Claims Management Regulator (CMR) have shown. The  anniversary report to mark 10 years of regulation stated; of the over £6b turnover ,  £2.8bn was generated in the PI sector.

https://www.gov.uk/government/publications/claims-management-regulator-10th-anniversary-report

Kevin Rousell, head of management at the CMR  stated; he was “pleased to have had the opportunity to play a role in trying to bring order to and raise standards in an industry often likened to the wild west, at least initially, and to help ensure consumers with valid claims were helped and not hindered in obtaining appropriate redress”.

United States Clin Neg sector.

We are accustomed to hearing reports of huge damages payouts in the US legal system; however few are aware that more than 30 States have some form of caps on damages for clin Neg cases. California has for example legislation on Clin Neg cases. The Medical Injury Compensation Reform Act (MICRA) of 1975, was upheld again in November 2014, keeping a $250,000 cap on non-economic damages in medical liability lawsuits.

https://wire.ama-assn.org/ama-news/medical-liability-damages-cap-upheld

The information on the entire market place is also of interest with Forbes in article on Medical Negligence in the US that

“In 2012, over $3 billion was spent in medical malpractice payouts”.

https://www.forbes.com/sites/learnvest/2013/05/16/10-things-you-want-to-know-about-medical-malpractice/#79d5fe1d416b

By 2016, this figure had risen to $3.9 billion. (£2.9billion) A report produced by Diederich Health care, provided stats on payments out on a State by State basis;

http://www.diederichhealthcare.com/the-standard/2016-medical-malpractice-payout-analysis/

Compare these stats to those for the NHS in 2016. Total payments made were £1,488.5 million, for a total UK population in mid-2016 of 65.5m.

A staggering indictment of the problem, when the NHS is paying out nearly 50% of what the whole of the US is paying out on clin neg cases but with a population of almost 5 times the UK (2016 -323.1m in 2016) .

Conclusion

In a decade or two, we will be walking past derelict hospitals which we can inform our children/grandchildren that these are the mausoleums of what was the National Health Service. One of the greatest achievements of modern UK society.  A free service that each and every one of us used directly or indirectly. We can tell them we were constantly humbled by the sheer professionalism, hard work, and dedication of the majority who work within the NHS. But we will have to tell them that part of the “ice-berg” problem was the damages and legal costs of clin neg cases. We are all to blame if we do not change this up and coming disaster for all of us. We are on last life boat status so whatever needs to be done needs to be done NOW!

UPDATE 20th March 2018.

Tool Kit on Costs Management

The Law Society of England & Wales in January 2018, pulled the 2013, “Tool Kit on Costs Management on basis it was out of date. There are discussions about the possible updating the tool kit.

LEGAL COSTS UPDATE NEWS-SUMMARY

S v Barnet and Chase Farm Hospital NHS Trust, AH v Lewisham Hospital NHS Trust and Y v Doncaster & Bassetlaw Hospitals NHS Foundation Trust

https://www.lawgazette.co.uk/practice/irwin-mitchell-loses-270k-costs-battle-after-moving-clients-to-cfa/5065330.article

Defendants (NHS) objected after Irwin Mitchell had switched three clients, with claims against different NHS trusts, from legal aid funding to conditional fee agreements in March 2013.

The judge said that in each case, the claimant’s litigation friend was not told by solicitors that moving to CFA funding would result in them losing the benefit of a 10% uplift in damages.

Chief Executive Helen Vernon said the decision shows how important it is for claimants to be properly informed when it comes to their legal costs. ‘Having detected this issue and taken the decision to challenge it through the higher courts, we were able to save significant sums for the NHS whilst ensuring that claimants receive the compensation they are entitled to.’

JIM DIAMOND COMMENT.

This judgment will/would have huge consequences on the Personal Injury market place, specifically the clinical negligence/insurance worlds. Irwin Mitchell is one of the biggest providers of legal services in this sector with a turnover in excess of £200million. https://www.irwinmitchell.com/newsandmedia/2017/august/irwin-mitchell-reports-235m-revenue-during-year-of-significant-progress-jq-161831)

If the court had allowed these fee arrangements, then there is little doubt that 100s /1000s of similar cases would have followed. As these 3 cases alone demonstrate the “EXTRA” legal costs amounted to £270K. The potential losses to the NHS could have been in the £10m/£100m+ .

BELOW ARE EXTRACTS FROM THE JUDGMENT –

https://resolution.nhs.uk/wp-content/uploads/2018/03/Surrey-v-Barnet-and-Chase-Farm-Hosps-NHST-and-Ors-Approved-Judgment.pdf

In Surrey, the relevant solicitor was Ms Stanford-Tuck. She made a witness statement in which she explained why she had advised the switch from legal aid to a CFA-lite. That switch was made at a time when judgment for damages to be assessed had already been entered against the defendant; and no Part 36 offer had been made. Her main point was that there was no guarantee that the LSC would increase the reserve to a sufficient level to fund the assessment of damages hearing. However, she gave no details of what costs had been incurred, what the authorised costs limit was, what further costs needed to be incurred, and how the LSC had reacted to requests for an increase in the costs limit. In short, her discussion was at a very high level of generality.

She also made the extraordinary point that: “There was a risk to the client that there may not be sufficient funding to cover the cost of our work in the future and my client could be exposed to make up the shortfall of any costs not recovered from the Defendant.”

If that was the advice that she gave her client, it was also seriously misleading. It amounts to saying that a legally aided client must make up the shortfall in his own solicitors’ costs if they are not recovered from the other side. But that amounts to “topping up” which is unlawful: Access to Justice Act 1999 s 10 (1) and s 22 (2); LASPO s 23; s 28 (2). On one reading of her evidence the amount of that shortfall might have been as much as £150,000.

If the client was advised of a very substantial potential liability that was in fact unlawful, then he has been misled into making a decision based on deeply flawed advice to the effect that he was exposed to a substantial financial risk which was in fact non-existent.

Although this was one of the reasons that Master Rowley gave for his decision, Foskett J did not refer to it. Having stated the main reasons for the switch, Ms Stanford-Tuck also said that there were “other general considerations” to be taken into account. Among these was the point that legal aid does not protect a client’s damages from the effect of failing to beat a Part 36 offer, or adverse interlocutory costs orders. However, although these risks were mentioned, she gave no consideration to the likelihood of any of those risks eventuating, on the facts of the particular case. 36. Master Rowley was not impressed with Ms Stanford-Tuck’s reasoning. He found at [74] that the solicitors had no concern that they would not recover their fees to date, even though they had ignored the costs limitation imposed by the LSC. At [75] he dismissed the argument based on the alleged bureaucratic approach of the LSC. At [82] he held that the risk of legal aid being withdrawn was fanciful; and the costs limitation was not problematic. He considered at [76] that the strongest reasons for the change in funding were the shortfall issues. There were two potential points about shortfall. One was the risk of failing to beat a Part 36 offer. The other (which he described as modest) was the operation of the LSC’s statutory charge. 37.

In AH the relevant solicitor was Ms Cumberland. She made two witness statements. In her first witness statement she drew attention to the fact that although breach of duty had been admitted, causation had not; and that the bulk of the claimed damages was dependent on a favourable finding on causation. She said that there was no guarantee that the LSC would increase the scope of the costs limit; and that the LSC might have taken a different view on the merits of the claim. She also said that she had been involved in cases where the legal aid certificate had been discharged. She, too, said: Judgment Approved by the court for handing down. Surrey v Barnet & Chase Farm Hospitals NHS Trust & Ors “There was a risk to the Claimant that there might not be sufficient funding to cover the costs of the legal work necessary in the future and the Claimant could have been expected to make up the necessary shortfall of any costs not recovered from the Defendant.” 38. Just as in the case of Ms Stanford-Tuck, this amounted to a suggestion of illegal “topping up”. And as in Surrey, it appears that the client was being advised of a substantial financial risk that was in reality non-existent. This, too, was seriously misleading advice.

Her second witness statement did not correct it. This is not a feature upon which Deputy Master Campbell commented. Mr Williams tried to explain away the references by both Ms Stanford-Tuck and Ms Cumberland to “topping up” as no more than muddled expression; but I do not think that there is any getting away from the impression that that advice must have made on the client in each case. However, like Ms Stanford-Tuck, Ms Cumberland also said that there were “other general considerations” to be taken into account. In words which were almost identical to those in Ms Stanford-Tuck’s witness statement, she referred to the risk that if the defendant made a Part 36 offer, which the claimant failed to beat, the claimant would be liable to pay the defendants costs incurred thereafter, and that those costs could be set off against any costs otherwise recoverable by the claimant, or even against the damages themselves. But as in the case of Ms Stanford-Tuck there was no evaluation of the risks themselves. 39. In Yesil the reasons for the change were set out in a witness statement made by Ms Rowland, the solicitor handling the case. That witness statement was made after Master Rowley’s decision in Surrey, so Ms Rowland eschewed those reasons which he had held to be bad reasons: in particular the suggestion about “topping up”. She said that she had calculated costs incurred so far at legal aid rates as £92,000 as against a costs limit of £94,000. Her perception, therefore, was that the costs were close to the limit. She asked the LSC for an increase in the limit to £240,000 to cover the full costs of the action. The LSC replied that it was “inevitable that you will be recovering your costs inter partes from the other side.” However, the LSC did not refuse outright. Instead it said that if costs could not be contained within typical limits it would require a ”fully costed costs plan”. That would have given a likely maximum of £189,000. 40. Ms Rowland also mentioned the possibility of a Part

“… I find myself entirely in agreement with Master Rowley in Surrey’s case. It is for the claimant on a standard basis to show that the decision to switch funding, at the time it was made was a reasonable decision to take. The limited evidence before the court to explain the decision was based on an erroneous premises that the cost limit was shortly to be reached.

Further, the solicitors have produced no evidence either by way of file notes, copy letters or even a witness statement from the client as to the advice tendered. In my judgment, the decision to switch was not self-evident or transparent.” (Emphasis added) Judgment Approved by the court for handing down. Surrey v Barnet & Chase Farm Hospitals NHS Trust & Ors 47.

What was common to all three cases was that the claimant’s litigation friend was not informed by the solicitors (apparently through oversight) that one consequence of the change from legal aid funding to CFA-lite funding was that the claimant would lose the benefit of the 10 per cent uplift in damages mandated by Simmons v Castle. As I have said, although DJ Besford mentioned this point in Yesil, it does not seem to me that it formed any part of his real reasons for disallowing the success fee and the ATE premium. By contrast in both Surrey and AH, this point was a critical factor. Each of the costs judges in those two cases held that it was impossible to say what decision would have been made if that information had been given. There was therefore a doubt about whether the decision was reasonable, which had to be resolved in favour of the paying party. The success fees and ATE premiums were therefore disallowed.

There are two interesting paragraphs in the lower court decision by Master Jason Rowley

http://www.civillitigationbrief.com/2015/09/04/costs-cfas-additional-liabilities-and-going-outside-public-funding-2-surrey-v-barnet-chase/

Ms Stanford-Tuck’s evidence

Ms Stanford-Tuck is a solicitor at Irwin Mitchell and had conduct of this case in the early part of 2013 when the relevant events occurred. She relates that in February 2013 all “case handlers” were asked by partners in Irwin Mitchell to review their legally aided cases in light of the forthcoming changes being brought into effect by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”). There was a concern that existing clients might potentially be adversely affected by the provisions of LASPO.

It is clear from Ms Stanford-Tuck’s statement that the approach to the Commission was galvanised by the initiative of the partners at Irwin Mitchell to review cases on which legal aid certificates were in existence. The terms of the letter, which appear to me to be written in sufficiently general terms as to have been drafted in a pro-forma fashion, do not suggest that the exceeding of the costs limitation was a matter of concern in itself; merely it bolstered the case for a change in funding for the future. There is no indication in the witness statement or the letter that the costs in this case had got away from the fee earner and the situation needed to be remedied.

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