A mixed bag: Implications of the latest proposal to impose fixed recoverable costs in clinical negligence claims worth up to £25,000
Tom Semple considers the Department of Health’s latest revision to its proposal to introduce fixed recoverable costs in clinical negligence cases.
In August 2015, the Department of Health ('DoH') announced its proposal to introduce a fixed costs regime for clinical negligence claims worth up to £250,000. Following a delayed consultation, the DoH has announced it now intends to consult on such a regime for claims worth up to £25,000 only
The intention behind the original proposal was to reduce the NHS’s increasing liability for legal costs in successful claims. The NHS Litigation Authority (‘NHSLA’) paid over £291m in claimant legal costs in 2014/15 alone. The reasons cited by the NHSLA for the increasing costs included a rise in NHS patient numbers, an increase in low value claims, and disproportionate claimant legal costs. In 2014/15, the average legal costs were higher than the value of the claim for claims worth less than £50,000.
The response from claimant practitioners generally was that the higher costs reflected the complexity and the importance of expert evidence in clinical negligence cases. Introducing fixed costs would make the running of such cases unsustainable, which would in turn restrict access to justice. Further, defendants have been accused of delaying the settlement of claims by taking unreasonable stances on liability, which then drives up costs.
In many respects, the new proposal appears to be a significant victory for claimants. The most obvious being that medium to high value claims do not look like they will be subjected to fixed costs in the near future. Although not always the case, higher value claims are often the more complex. Avoiding fixed costs will ensure running these cases remains sustainable for many claimant practitioners.
Further, the proposal remains just that. There is scope to refine the applicability of fixed costs with further criteria to ensure that only the uncomplicated cases are covered. The Association of Personal Injury Lawyers (‘APIL’) has already suggested that fixed costs should only apply to cases where liability has been admitted and where only one expert discipline is required.
The apparent policy change should still, however, offer some reassurance to defendants. Fixed costs on all clinical negligence cases worth up to £25,000 would cover approximately 60% of claims. It is these lower value cases that the NHSLA cites as having the most disproportionate legal costs. A lower maximum threshold for fixed costs would still go some way in reducing the sums it pays out in costs.
Defendants will also benefit from knowing their maximum liability for legal costs from the outset. Rather than having to guess what costs will have been incurred by claimants, often at differing rates depending on their representatives, defendants will be able to accurately assess the financial risk in challenging claims early on. However, a good Part 36 offer by a claimant under a fixed costs regime could lead to the defendant paying indemnity costs if the court awards a higher sum to the claimant at trial. Indemnity costs are not fixed costs; see the article by Sophie Firth commenting on this point following the Court of Appeal the decision in Broadhurst v Tan  EWCA Civ 94.
Having originally sought to introduce fixed costs in clinical negligence cases by 1 October 2016, a further consultation will postpone any such regime for the short term at least. With Brexit negotiations underway, civil litigation reforms are not likely to be given priority. One potential benefit of the delay could be that there will be more data on the impact of costs budgeting in reducing legal costs, which is arguably still in its infancy. A strict approach to costs budgeting could significantly reduce defendants’ liability to claimants’ legal costs. If this were the case, this potentially would achieve the same aims as introducing fixed costs without the risk of restricting access to justice in lower value claims.
There remains much uncertainty with the DoH's proposed fixed costs regime. It is not known what fees practitioners will be able to claim, when the regime will be implemented and whether claim value will be the only criterion. Lord Justice Jackson has made clear he considers it would be appropriate for fixed costs to apply to all civil claims worth up to £250,000. If this were indeed the trend, fixed costs in clinical negligence would appear to be unavoidable. A £25,000 claim value limit might be the best compromise for the time being.
3 November 2016