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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Peterborough & Stamford Hospitals NHS Trust v McMenemy & Ors [2017] EWCA Civ 1941 (28 November 2017) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2017/1941.html Cite as: [2018] WLR 2685, [2018] 1 WLR 2685, [2017] 6 Costs LR 973, [2017] WLR(D) 787, [2018] Med LR 145, [2017] EWCA Civ 1941 |
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ON APPEAL FROM LIVERPOOL COUNTY COURT & NORWICH COUNTY COURT
HIS HONOUR JUDGE PEARCE & DISTRICT JUDGE ROGERS
A05LV835 & B00NR492
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE BEATSON
and
MR JUSTICE HILDYARD
____________________
PETERBOROUGH & STAMFORD HOSPITALS NHS TRUST |
Appellant |
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- and - |
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MARIA McMENEMY |
Respondent |
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And between |
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MICHAEL REYNOLDS |
Appellant |
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- and - |
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NOTTINGHAM UNIVERSITY HOSPITALS NHS FOUNDATION TRUST |
Respondent |
____________________
Mr Nicholas Bacon QC & Mr Rupert Cohen (instructed by Just Costs Solicitors as agents for Fletchers Solicitors) for the Respondent
Mr Nicholas Bacon QC & Mr Rupert Cohen (instructed by Just Costs Solicitors as agents for Ashton KCJ Solicitors) for the Appellant
Mr Roger Mallalieu (instructed by Acumension Ltd) for the Respondent
Hearing dates : 17th & 18th October 2017
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Crown Copyright ©
Lord Justice Lewison:
McMenemy v Peterborough & Stamford NHS Trust
Reynolds v Nottingham University Hospitals Foundation Trust
"I am very sorry that the senior house office (sic) failed to neither identify the DVT nor request diagnostic test to rule out or confirm such a diagnosis."
"Dr Petrie [the attending SHO on 5 November 2013] is very sorry that Mr Reynolds had come to potentially avoidable harm, due to him making an incorrect clinical diagnosis. Dr Petrie would like to offer you both his unreserved apologies for the subsequent suffering that Mr Reynolds has endured…
"As your complaint is well founded we would like your written agreement to publish the enclosed summary on the Trust's internet site."
The previous regime
"Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in those proceedings, the costs payable to him may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy"
"11.10 In deciding whether the cost of insurance cover is reasonable, relevant factors to be taken into account include: (1) where the insurance cover is not purchased in support of a conditional fee agreement with a success fee, how its cost compares with the likely cost of funding the case with a conditional fee agreement with a success fee and supporting insurance cover; (2) the level and extent of the cover provided; (3) the availability of any pre-existing insurance cover; (4) whether any part of the premium would be rebated in the event of early settlement; (5) the amount of commission payable to the receiving party or his legal representative or other agents."
Recoverability of ATE premiums under the old regime
"In each case the claimant suffered minor injuries in a road traffic accident and instructed solicitors to claim damages from the defendant under a conditional fee agreement, with an agreed success fee of 60% in the first case and of 30% in the second case. In the first case the claimant also paid £350 for after the event insurance to cover the costs he would be liable to pay if the proceedings failed. Both claims settled quickly, without proceedings being issued, and the defendants agreed to pay the claimants damages and reasonable costs."
"Including success fees in recoverable costs has the general effect of shifting from the legal aid fund to defendants, or their insurers, the costs incurred by litigants whose claims fail. In the first instance the claimants' solicitors shoulder the risks in relation to these costs, in exchange for uplift. But the fact that the uplift in successful cases is transferred to the unsuccessful defendants results, if one takes a global view, in the burden of unsuccessful claimants' costs being born by unsuccessful defendants."
"Permitting ATE insurance premiums to be recovered as costs has the effect of shifting to unsuccessful defendants the costs which the insurers will have to pay to successful defendants. Under the old regime successful defendants would not normally recover their costs where claims were legally aided. Thus, in bearing the burden of meeting ATE insurance premiums, defendants in general are paying for cover that will ensure that their costs are paid if they succeed."
"[98] The defendants contend, however, that it is unjust to saddle defendants with the costs of the ATE insurance premiums and success fees without giving them a fair chance to identify those cases where liability and quantum is not disputed so that success is assured.
[99] We see the force of this submission, but we have concluded that, at least in the circumstances of the two appeals, the prejudice to defendants is not as clear as is suggested and that it is outweighed by the legislative policy and by a number of practical considerations. Thus:
(i) If the new regime is to achieve its object, the legal costs of claimants whose claims fail should fall to be borne by unsuccessful defendants in the manner described in paragraph [93] above. On these appeals the court has to decide whether to permit liability for success fees to be apportioned in relatively small amounts among many unsuccessful defendants, or to insist on an approach under which they will be borne in much larger amounts by those unsuccessful defendants who persist in contesting liability.
(ii) If the latter alternative is adopted, the defendants who contest liability will not share liability for costs in a manner which is equitable. Where there is a strong defence which it is reasonable to advance, a larger uplift will be appropriate than where a defendant unreasonably persists in contesting liability despite the fact that the defence is weak. Thus the more reasonable the conduct of the defendant, the larger the uplift that he will have to pay if his defence fails.
(iii) In relation to claims arising out of road accidents, where defendants will be insured, the same insurers will often be sharing the costs involved, whether in the form of many uniform small uplifts or fewer large uplifts.
(iv) So far as insurance premiums are concerned, these will produce cover which benefits the defendants, for they will ensure that costs are awarded against unsuccessful claimants and that such awards are satisfied.
(v) Defendant interests, with the assistance of the court, should be able to restrict uplifts and insurance premiums to amounts which are reasonable having regard to overall requirements of the scheme. In saying this we are contemplating a position where there will be adequate data to enable informed judgment of the amount of uplift and the size of insurance premium that are reasonable in circumstances such as those before the court. We are well aware that that position has not yet been reached and that, on these appeals, we are faced with doing our best on very sketchy data. We have had particular regard to the fact that the representations and evidence submitted after the hearing have not been tested or analysed in the course of oral argument.
(vi) Claimants naturally want to know at the outset that a satisfactory arrangement to cover the costs of litigation has been made which provides sufficient protection for them, no matter what the outcome.
(vii) Claimants incur liabilities for costs to their legal advisers as soon as they give them instructions. Once a defendant starts to incur costs in complying with a protocol, the claimant will be exposed to liability for those costs if proceedings are commenced.
(viii) Solicitors and claims managers are anxious to be able to offer legal services on terms that the claimant will not be required to pay costs in any circumstances. This will assist access to justice.
(ix) There is the overwhelming evidence from those engaged in the provision of ATE insurance that unless the policy is taken out before it is known whether a defendant is going to contest liability, the premium is going to rise substantially. Indeed the evidence suggests that cover may not be available in such circumstances.
[100] For these reasons we have concluded that where, at the outset, a reasonable uplift is agreed and ATE insurance at a reasonable premium is taken out, the costs of each are recoverable from the defendant in the event that the claim succeeds, or is settled on terms that the defendant pay the claimant's costs."
"The correct approach for costs assessment purposes to the question whether an item of expenditure by the receiving party has been reasonably incurred is to look at the circumstances of the particular case. The question whether the paying party should be required to meet a particular item of expenditure is a case specific question. It is not a question to which the macro economics of the ATE insurance market has any relevance. If the expenditure was not reasonably required for the purposes of the claim, it would, in my opinion, be contrary to long-established costs recovery principles to require the paying party to pay it."
"Once one invokes a global approach designed to produce a reasonable overall return for solicitors, one moves away from the judicial function of the costs judge and into the territory of legislative or administrative decision."
The current regime
"There are two objectives which have to be borne in mind in relation to this area of litigation. First, patients who have been injured as a result of clinical negligence must have access to justice, so that they can receive proper compensation. Secondly, this huge area of public expenditure must be kept under proper control, so that the resources of the health service are not being squandered unnecessarily on litigation costs."
"(1) Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant."
i) No ATE premium should be recoverable if liability was admitted during the protocol period;
ii) No ATE premium should be recoverable for the risk of failing to beat a Part 36 offer; and
iii) Premiums should be capped at 50 per cent of damages.
"There is no justification for requiring defendants, either collectively or individually, to pay claimants' disbursements in cases which they lose. Defendants will be making a more than sufficient contribution in such cases by bearing their own costs."
"Refinement to the proposals for public policy reasons
The Government is aware of specific concerns in relation to the funding of expert reports in clinical negligence cases. These expert reports can be expensive and we need to provide a means of funding them to ensure that meritorious claims can be brought by those who cannot afford to pay for these reports upfront. To address this, the Government is making one change to Lord Justice Jackson's key recommendations. The Government intends to have a tightly drawn power to allow recoverability of the ATE insurance premiums to cover the costs of expert reports only in clinical negligence cases. The details would be set out in regulations. The Government will continue to engage with claimant and defendant representatives and general liability insurers to ensure that joint expert reports can be commissioned wherever possible so that ATE insurance is not necessary."
"(1) A costs order made in favour of a party to proceedings who has taken out a costs insurance policy may not include provision requiring the payment of an amount in respect of all or part of the premium of the policy, unless such provision is permitted by regulations under subsection (2).
(2) The Lord Chancellor may by regulations provide that a costs order may include provision requiring the payment of such an amount where—
(a) the order is made in favour of a party to clinical negligence proceedings of a prescribed description,
(b) the party has taken out a costs insurance policy insuring against the risk of incurring a liability to pay for one or more expert reports in respect of clinical negligence in connection with the proceedings (or against that risk and other risks),
(c) the policy is of a prescribed description,
(d) the policy states how much of the premium relates to the liability to pay for an expert report or reports in respect of clinical negligence ("the relevant part of the premium"), and
(e) the amount is to be paid in respect of the relevant part of the premium.
(3) Regulations under subsection (2) may include provision about the amount that may be required to be paid by the costs order, including provision that the amount must not exceed a prescribed maximum amount.
(4) The regulations may prescribe a maximum amount, in particular, by specifying—
(a) a percentage of the relevant part of the premium;
(b) an amount calculated in a prescribed manner.
(5) In this section—
"clinical negligence" means breach of a duty of care or trespass to the person committed in the course of the provision of clinical or medical services (including dental or nursing services);
"clinical negligence proceedings" means proceedings which include a claim for damages in respect of clinical negligence…"
"(1) Subject to paragraph (2), a costs order made in favour of a party to clinical negligence proceedings may include provision requiring the payment of an amount in respect of the relevant part of the premium of a costs insurance policy taken out by that party which insures against the risk of incurring liability to pay for one or more expert reports in connection with the proceedings (or against that risk and other risks).
(2) A costs order may not require the payment of an amount in respect of the relevant part of the premium which relates to the liability to pay for any expert report if—
(a) the report was not in the event obtained;
(b) the report did not relate to liability or causation; or
(c) the cost of the report is not allowed under the costs order."
"(1) A costs order made in favour of a party to clinical negligence proceedings who has taken out a costs insurance policy may include provision requiring the payment of an amount in respect of all or part of the premium of that policy if—
(a) the financial value of the claim for damages in respect of clinical negligence is more than £1,000; and
(b) the costs insurance policy insures against the risk of incurring a liability to pay for an expert report or reports relating to liability or causation in respect of clinical negligence (or against that risk and other risks).
(2) The amount of the premium that may be required to be paid under the costs order shall not exceed that part of the premium which relates to the risk of incurring liability to pay for an expert report or reports relating to liability or causation in respect of clinical negligence in connection with the proceedings."
i) The removal of the absolute bar against recovery of ATE insurance premiums in the event that the expert's report was not in fact obtained;
ii) The introduction of a minimum financial value of the claim before an ATE insurance premium was capable of being recovered; and
iii) The removal of the contemplation that the cost of the report might not be allowed under the costs order.
"… enables the costs of an insurance policy, taken out by a party to insure against the risk of having to pay their opponent's costs and their own disbursements if they lose their case, to be recovered from the losing party should they win their case."
"ATE insurance protects the claimant from having to pay certain legal costs. It is a type of insurance taken out after an actionable event has occurred. It is often taken out where a conditional fee agreement (CFA) has been entered into. CFAs are a type of 'no win no fee' agreement under which lawyers do not receive a fee from their client if they lose a case, but can charge an uplift (a 'success fee') on top of their base costs if they win. Success fees and ATE insurance add substantially to the costs payable by the losing party."
"However, the Government has allowed for a permanent limited exception for clinical negligence cases, where ATE insurance premiums covering the cost of expert reports will still be recoverable. This is because expert reports are often necessary to establish whether there is a case for bringing proceedings, but can be expensive. Currently ATE insurance can insure against the risk of incurring liability to pay the costs of such reports, but with the substantial withdrawal of legal aid in personal injury (including clinical negligence) cases, a funding mechanism available to claimants to purchase those reports is required. As a result, the practical effect of this exception is that it will allow claimants to purchase expert reports for clinical negligence claims and the premium in respect of incurring the costs of those reports will remain recoverable from defendants."
"In order to control the cost of the ATE insurance premiums, these Regulations restrict the recoverability of the insurance premium to the risk of incurring liability to pay for an expert report or reports determining liability and causation only. The responses to the Government consultation and the department's discussions with stakeholders (see paragraphs 9.1-9.3) suggest that in order to pursue the claim, an expert report or reports establishing liability and causation only is required. By restricting the recoverability of the insurance premium to the cost of these reports (and not, for example, reports concerning quantum), claimants will still be able to progress their claim, whilst ensuring that the costs paid by defendants to cover claimants' ATE insurance premiums are reasonable and proportionate."
Does the recovery of ATE premiums engage the CPR at all?
"Regulation 3 of the 2013 Regulations provides that "a costs order made in favour of a party to clinical negligence proceedings who has taken out a costs insurance policy may include provision requiring the payment of an amount in respect of all or part of the premium of that policy." It is therefore incumbent upon the party seeking costs to request the judge to include the necessary provision when making the order. If no such provision is included in the order, the cost of the premium will not be recoverable. The Civil Procedure Rule Committee decided that there was no need for any further rules in respect of ATE premiums in clinical negligence cases."
"That seems to me obviously right. ATE insurers do not compete for claimants, still less do they compete on premiums charged. They compete for solicitors who will sell or recommend their product. And they compete by offering solicitors the most profitable arrangements to enable them to attract profitable work. There is only one restraining force on the premium charged and that is how much the costs judge will allow on an assessment against the liability insurer."
"Although the claimant very often does not have to pay the premium himself, this does not mean that there are no competitive or other pressures at all in the market. As the evidence before this court shows, it is not in an insurer's interest to fix a premium at a level which will attract frequent challenges."
"A costs order may make provision for the recovery of such premiums, not because they fall within the ordinary meaning of the word "expenses" in the definition of "costs" in the new CPR 44.1(1) but because they are expressly made recoverable in an order for costs by the Clinical Negligence Regs."
Does the new test of proportionality apply?
"(1) Where the court is to assess the amount of costs … it will assess those costs:
(a) on the standard basis; or
(b) on the indemnity basis
But the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.
(2) Where the amount of costs is to be assessed on the standard basis, the court will –
(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and
(b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.
"The regulations relate only to clinical negligence cases where a costs insurance policy is taken out on or after 1 April 2013, so the provisions in force in the CPR prior to 1 April 2013 relating to funding arrangements will not apply."
Does Callery v Gray still apply?
i) How likely is it that the claimant will need to incur the cost of an expert's report?
ii) If such a report is likely to be needed how much will it cost?
iii) In all the circumstances how likely is it that the claimant will either not bring a case at all in the light of the report, or if the case is started that it will be lost?
iv) In the light of the answers to these questions, what will ATE insurance cost?
"The limitation [to expert reports] shows the rationale of the Government behind this exception to the ending of recoverability. Invariably, the questions of breach of duty (rather than 'liability') and causation are investigated first in potential clinical negligence claims. If they can be established then issues regarding quantum can be pursued. The idea of being able to insure the early reports is intended to assist parties to investigate claims without having to expose themselves to a costs risk of unsupportive medical evidence. The theory therefore is that everyone can take out insurance, investigate their claim and then either pay for the medical evidence from the insurance if it cannot be pursued or claim the cost of the insurance from the defendant in due course if it is pursued." (Emphasis added)
Lord Justice Beatson:
Mr Justice Hildyard: