The cost of claims – control through proportionality

If you have ever been unfortunate enough to receive a letter of claim, you will be aware of how stressful the process can be. Another aspect is the often high sums of money involved. Stephen Preater, costs adviser at Medical Protection, is part of an expert in-house team that is dedicated to controlling the amounts sought by claimants

The sums paid out in compensation to patients can often be eye-watering. However, while six and seven figure settlements might grab the headlines, they are often only the tip of the iceberg when it comes to the overall amounts involved in a successful claim.

The law in England and Wales states that generally, once a compensation payment has been made by the defendant (Medical Protection and, by extension, members), the claimant (the patient and their solicitors) is entitled to their legal costs, which the defendant must pay. The claimant will send Medical Protection a hefty Bill of Costs for the work that they have completed in bringing the successful claim.

It is not uncommon to see a claimant recover damages of less than £10,000 and their solicitors to then present Medical Protection with a Bill of Costs for upwards of three times this amount. The purpose of this article is to give you a glimpse into the issues surrounding claimant costs, and in particular the overarching issue of proportionality.

Striking a balance

As part of our Striking a balance campaign, we are committed to tackling the rising costs of clinical negligence. A key step in doing this is the work of our in-house costs team. Entirely comprising qualified, highly experienced costs lawyers, the costs team is a dedicated unit that specialises in the law and practice of legal costs.

While their work can be varied, the team’s remit is to look at successful claims made against members and reduce the costs where possible – saving considerable amounts of money for the wider membership. Once a claimant sends their Bill of Costs to Medical Protection, it is the costs team that assesses and negotiates reduced settlements on the Bill, sometimes involving the court where the parties are unable to reach a settlement.

We are the only medical defence organisation to have such a specialised in-house costs team, which underlines our commitment to providing a world-class service to members, and being a leader in the market.

Proportionality in costs – the new test

It has been widely recognised that solicitors’ costs need to somehow remain proportionate to the amount of damages that their clients are seeking to recover. In April 2013, significant changes were made to civil litigation and the test of proportionality. Previously, it was possible for a claimant’s solicitor to recover their legal costs if they could show that costs were reasonably and necessarily incurred. The new test for proportionality states that the court may disallow disproportionate costs, regardless of whether they are reasonably or necessarily incurred.

Proportionality in the courts

So what are disproportionate costs? In a recent court case, the claimant’s damages were agreed for £25,000. The claimant’s solicitors presented the defendant with a Bill of Costs for a staggering £208,000. The court reduced the bill to £100,000 on the basis that some of the work was unreasonable or unnecessarily incurred.

However, the court was of the opinion that £100,000 was still a disproportionate sum for the claimant to incur against damages of £25,000. Therefore the court reduced the costs to £35,000 on proportionality grounds, which were increased to £75,000 on appeal. In this example, the Court of Appeal decided that it was reasonable for the claimant’s solicitors to recover costs that were three times the amount of the awarded damages.

Recent cases at MPS

As can be expected, the issue of proportionality features heavily for the costs team when dealing with claimant solicitors’ legal costs. Uncertainty around how the court will apply the proportionality test in each case affects the way the team assesses which cases have the best prospects of succeeding at a costs hearing – and which would be most cost-effective to settle through a negotiated agreement.   

In October 2018, the costs team had success with a proportionality argument. The claimant’s damages claim was settled for £8,500. However, the claimant’s solicitors asked for £28,000 of legal costs. The parties could not agree on costs and the matter was heard at court.

The court slashed the claimant’s costs to around £17,500 and ordered the claimant to pay Medical Protection £2,500 of costs for failing to accept the earlier offers, thus reducing the final costs even further.

Unfortunately not all cases are this straightforward. In a different case, where the claimant’s damages were settled at £3,000, the claimant’s solicitor claimed costs of £40,000. At assessment the court awarded recoverable costs of £30,000 – which was still ten times the damages. It was held by the court that due to the complexities of the claim, this figure was proportionate – despite the low value of the claim.

Fighting disproportionality

It goes without saying that the current costs climate, particularly in relation to proportionality, provides little surety for Medical Protection as we seek positive results for members. However, our dedicated costs team will continue to fight disproportionate claims for costs, in order to establish a firmer control of the escalating costs associated with clinical negligence claims.