- Why does it cost so much?
- Why aren’t the Courts managing the costs?
- What does LJ Jackson propose?
- What can we take from this?
The summer is upon us, the England cricket team have beaten Australia at Lords, and potential readers of the Lord Justice Jackson Review of Civil Litigation Costs may be forgiven for reaching for the Pimms rather than this 679 page tome. However, those who favour summer idling will miss out on an interesting and important analysis of the relationship between costs and access to justice in clinical negligence.
Lord Jackson’s objective is:
“To carry our an independent review of the rules and principles governing the costs of civil litigation and to make recommendation in order to promote access to justice at proportionate cost.”
Unfortunately, it is common ground that the Woolf Reforms have failed in one of their key aims – to reduce the costs of litigation. In fact, in the field of clinical negligence and personal injury, costs have never been higher. It is commonplace for costs to outweigh the damages recovered and there appears to be little that the courts are able (or willing?) to do at present to control this. Claimant costs are twice that of defence costs on average and the gap between the two has progressively widened over the last 7 years, since the introduction of the new style Conditional Fee Agreement. The Jackson review considers the evidence and the views of many stakeholders and reaches some interesting conclusions.
The review confirms that the increase in costs and costs disproportion is largely due to the combined effect of hourly rates and the method of funding. Both are reviewed and particular attention is given to the new Conditional Fee Regime, contrasting it with the previous regime (where success fees were more often 25% than 100%) and funding by BTE insurance, private funding and the Legal Services Commission.
The Advisory Committee on Civil Costs found in their survey of 2007 costs that in Personal Injury and Clinical Negligence cases defendant hourly rates are 20-35 percent below claimant solicitor rates. The discrepancy is closer to 50% in pure clinical negligence. The Guideline Hourly Rates for summary assessment published by the Supreme Court Costs Office (“SCCO”) allow recovery of £402 per hour for a London based partner and exceptional rates above that figure are often claimed in clinical negligence matters. It is also interesting to note the research that where the Claimant has BTE insurance or has CLS funding costs are 10-20% less on average. These rates are a reflection of the different market forces which operate. Defence solicitors are retained by a small number of professional organisations comprising the NHSLA, the Medical Defence Organisations and various insurers who exert an effective downward pressure on rates and step away from the SCCO Guideline Hourly Rates. Market forces simply do not operate in this way to bring down fee rates for Claimant solicitors.
The paying party, which is usually the taxpayer, is also responsible for the success fees and associated ATE premiums which are part and parcel of the current CFAs. With a now almost standard 100% success fee this means recovery of up to £800 + per hour, there can be no doubt in any one’s mind that clinical negligence litigation is an expensive product, with cost capping powers rarely used by the Courts, little by way of case management of costs during the course of an action and none beforehand, the ability to control costs is very limited.
There is also very little incentive for a Claimant on a CFA with
a deferred ATE premium to exert control over the costs expended on
his behalf. In many instances, he can litigate at no personal
risk meaning that they are just not interested in the costs being
incurred or the size of the deferred premium – they will never have
to pay them. This means that Defendants and insurers bear all
the costs of all cases run on a CFA.
How disproportionate are the costs?
The report incorporates an impressive range of empirical research from within and outside the UK including statistical data which was submitted by the NHSLA. There is much to ponder in the sixteen graphs provided but it is particularly noteworthy that of claims settled for less than £1m in the first nine months of 2008/9, claimant costs represented 62% of the value of damages. The defendant figure was 24%. Within that there are extreme cases; one claim for instance saw costs at 750% higher than the damages awarded and it remains the case that costs are frequently 2-3 times the value of damages recovered.
LJ Jackson acknowledges that the decision to make success fees recoverable from Defendants has promoted access to justice but has also "massively increased the costs burden upon Defendants".
The Review shows that the effect of this goes beyond costs in themselves. There is a clear causative relationship between exposure to cost risk and the method of funding and the rate of settlement. The overriding objective to the Civil Procedure Rules was to do justice between the parties and a Defendant should be entitled to its day in Court as much as any Claimant. The success rate for Defendants at trial (on the latest NHSLA figures available) is 68% with a further 6% settling mid-trial. Overall, less than 100 cases a year got to trial. The question to be asked in Phase 2 of the review is whether Defendants have equal access to justice or whether the high cost of litigation is forcing the settlement of cases which might very reasonably be pursued to trial and won by the Defendant.
As well as looking at methods of funding, LJ Jackson has considered the current mechanisms available under the CPR to control costs.
One mechanism is costs capping although the Courts have shown a disappointing lack of enthusiasm for this tool overall. CPR 3.1(2)(m) and, as of April 2009, CPR 44.18, allow capping from an early stage. In fact judges have acknowledged the benefits of capping costs early rather than assessing later on in suitable cases. The case of Smart v East Cheshire NHS Trust  sets the test as: A “Real and substantial risk” that without a capping order costs will be disproportionate or unreasonably incurred, this risk cannot be dealt with by conventional case management and detailed assessment after trial and it is just to make the order. The Courts have so far taken a restrictive approach to capping outside of some class action type cases despite ample evidence that case management/detailed assessment are failing, hence the Jackson Review. However, LJ Jackson says that due to the divergent views on this topic it is unlikely that this will be progressed further than as an adjunct to active case management.
Defendants consider that detailed assessment alone simply fails to deliver proportionality because the Court is faced with a fait accompli and the Review suggests that the process itself is too complex and expensive.
The review is far from complete but a number of options for reform have been identified.
LJ Jackson records a provisional view that “ following the retraction of legal aid, either CFAs or some other system of payment by results…must exist in order to facilitate access to justice” and for him the issue is not whether there should be CFAs but how CFAs or alternative “no win- no fee arrangements” should be structured. Thus, CFAs in some form are likely to be here to stay.
However, the recoverability of success fees and ATE premiums is under close review. LJ Jackson has asked for comments on both the levels of these and whether they should be recoverable at all. The Jackson Review acknowledges that Claimants will still need some form of costs protection if ATE premiums were no longer recoverable. There are several possibilities to deal with this issue which may be fairer for Defendants. In fact, the recoverability of these additional costs at all is "the source of some surprise overseas" in other jurisdictions. Potential measures to provide this protection include:
- One way cost shifting - Defendants never recover their costs and there is no need for ATE;
- Capping the proportion of damages that might be taken as a success fee. Previously, the 25% cap worked satisfactorily;
- Ring fencing future care costs from deduction; this would operate either where a contingency fee arrangement was in place or when the Claimant failed to beat a Part 36 offer and, in the absence of insurance cover, costs were recoverable out of the damages award.
- Raising levels of general damages; this would provide a greater cushion for the Claimant who may have to pay some costs from his award of damages.
- Introducing a Contingency Legal Aid Fund (CLAF) or Supplementary Legal Aid Scheme (SLAS) as discussed in the 2007 Civil Justice Council report. In short, a CLAF is a fund which, once set up, becomes self financing by, for example, taking a cut of damages recovered. A SLAS is usually supplementary to an existing legal aid scheme to cover those who may not be eligible.
Hourly Rates and Detailed Assessment
So far as hourly rates and detailed assessment are concerned, the following options are considered:
- The current SCCO guideline rates could be extended, with a more robust process, to be suitable for detailed as opposed to summary assessment.
- Hourly rates could be assessed by reference to the pre-1999 regime whereby costs were assessed on an individual basis by reference to the cost of delivering the service plus an uplift to reflect the complexity and importance of the matter was applied.
- The detailed assessment process could be improved by simplifying the bill of costs, restricting points of dispute and/or introducing provisional assessment or a ‘broad brush’ short form assessment process akin to summary assessment.
Lord Justice Jackson has identified that the purpose of the costs rules as between the parties is threefold:
- To apportion the total costs of the litigation in a manner which is just
- Within the confines of what is possible (and accepting that legal services must be paid for) to promote access to justice.
- In the context of the Civil Procedure Rules to provide incentives for all parties to (a) conduct the litigation economically (b) to make or accept reasonable settlement offers in respect of the substantive litigation and (c) to agree the proper assessment of costs with minimum Court involvement.
That these objectives are not being met is acknowledged. For Defendants in clinical negligence litigation, the cost burden is heavy and access to justice for the Defendant Trust and its clinicians or staff is impaired by this. However, it is a detailed and wide ranging review across the spectrum of litigation. There is now a further phase of consultation where interested parties have been asked to comment on the findings by 30 July 2009. The analysis so far is encouraging and it is to be hoped that there will be reforms which redress the balance of access to justice between the parties. The final report is due for publication in December 2009.