By Legal Futures Associate ARAG
Introduction – The extension of fixed recoverable costs
1. Pursuant to Sir Rupert Jackson’s proposals from 2017, the civil litigation landscape has recently faced imminent change vis-à-vis fixed recoverable costs (‘FRC’), namely, the amount of legal costs that a winning party can recover from a losing party.
From 1 October 2023, the FRC regime has not only extended to the fast track for cases of up to £25,000 in value, but also to a new, ‘intermediate’ track comprising of cases valued between £25,000 to £100,000. The long-awaited changes were accepted by the Ministry of Justice (‘MoJ’) in September 2021 and subsequently signed off by the Rules Committee and Parliament, implemented as The Civil Procedure (Amendment No. 2) Rules 2023.
2. The overarching reason for such changes, according to Jackson’s proposals, stemmed from the fact that many cases were sufficiently straightforward, but disproportionately subjected to the costs budgeting and assessment process. Accordingly, the extension of FRC to such cases sought to create a greater degree of predictability and proportionality than costs management can achieve, by reducing overall litigation costs, encouraging efficient working, creating a transparent costs structure and promoting access to justice for some individuals and SMEs who may otherwise be unable to litigate.
FRC reforms in practice for low value clinical negligence claims
3. From 31 January to 22 April 2022, the Department of Health and Social Care (‘DHSC’) ran a Consultation on its policy proposals for FRC for Claimant legal costs in low-value clinical negligence claims with a value of £1,501 to £25,000.
The Consultation aimed to propose a way forward regarding the recoverability of disbursements for all claims within the Lower Damages Clinical Negligence Claim FRC Scheme (‘LDFRC’), and the Scheme was intended to operate alongside the MoJ’s FRC reforms.
4. It was noted that on the latest figures, Claimant costs for low-value clinical negligence cases had doubled to circa £23,200 per case, rendering legal costs disproportionate in comparison to the levels of compensation. Accordingly, the driving force behind the LDFRC Scheme was to strip out a layer of costs incurred in clinical negligence claims through the implementation of a new Protocol, entitled the Pre-action Protocol for the Resolution of (Low Value) Clinical Disputes (‘LVCD Protocol’). The LVCD Protocol plans to operate as follows:
(a) All clinical negligence claims with a value at settlement or following judgment between £1,501 and £25,000 will be subject to fixed costs unless they qualify for a ‘specified exclusion’. If a specified exclusion applies, the claim will not be limited to the fixed costs under the LDFRC Scheme or be required to follow the LVCD Protocol; instead, the existing Pre-Action Protocol for the Resolution of (Low Value) Clinical Disputes (‘PAPRCD’) will be followed. Specified exclusions include where:
i. the Claimant is a litigant in person;
ii. the claim involves a stillbirth or neonatal death;
iii. there are to be more than three medical experts addressing breach of duty and causation;
iv. the Defendant raises limitation as an issue; or
v. there are two or more Defendants and the allegations of negligence against them are materially different.
(b) If a claim is initially overvalued, but subsequently settles within the £1,501 to £25,000 range, it will be subject to costs under the LDFRC Scheme (irrespective of whether the process set out in the LVCD Protocol has been followed for that claim). It will therefore not be advantageous for Claimants to overvalue a claim at the outset. Further, there may be cost sanctions if the claim has not followed the processes and deadlines set out in the LVCD Protocol and the CPR. Claims should therefore be valued, managed, and budgeted prudently and reasonably by Claimant legal representatives.
(c) A dual process will be implemented with two separate tracks, the standard track and the light track, with a dedicated and streamlined process for each track. The overarching policy aim of the light track proposals is to allow a proportion of claims to be resolved more quickly. Thus, all claims expected to settle above the small claims track limit, up to and including a value of £25,000, should be progressed on the standard track unless they meet the following conditions for the light track, namely, where:
i. There has already been correspondence between the parties about the issues and the parties agree that no medical expert evidence on liability is required to determine issues of breach of duty and causation;
ii. the Defendant has made a binding admission of breach of duty (including, but not limited to cases dealt with under the Putting Things Right redress scheme);
iii. the cause of action arises out of a ‘never event’;
iv. the facts indicate that loss, including injury, could not have been caused by any other reason other than negligence;
v. there is a Serious Incident Report which identifies care below a reasonable standard (including investigations under the Putting Things Right Scheme); or
vi. there has been an inquest.
(d) It will be for Claimants to determine which track is most appropriate for the claim to start in. Thereafter, whether a claim will proceed on the light track (following the processes set out for light track claims in the LVCD Protocol and subject to LDFRC Scheme light track costs) will be determined by whether the Defendant admits breach of duty of care, and accepts that the breach resulted in loss, including injury, within the prescribed 8-week period. As such, the light track is designed for claims where it is anticipated that there will not be any dispute over issues of liability or that liability can be resolved quickly.
(e) As to recoverable disbursements, the initial Consultation received scrutiny on the grounds that disbursements had not been made sufficiently clear. The following proposals have therefore been provided in response:
i. For all LDFRC Scheme claims, expert report fees and ATE premiums covering the cost of expert reports will be separately recoverable. Expert fees will include the ‘associated costs of engagement with the Claimant and their legal representatives in the production of the report’, plus the cost of the report itself. There are no current proposals to introduce caps for expert fees or the costs of ATE premiums, but these will be monitored and reviewed once the LDFRC Scheme has been implemented.
ii. For all LDFRC Scheme claims, inquest costs and disbursements will also be recoverable to the extent that they would be in clinical negligence claims not subject to the LDFRC Scheme.
iii. For LDFRC Scheme claims involving protected parties or children, counsel fees and Court fees in relation to Part 8 Approval Hearings will be separately recoverable.
iv. For LDFRC Scheme claims that do not involve protected parties or children, neither counsel fees nor Court fees will be separately recoverable (except in the specific circumstance relating to the fee for issuing proceedings, where proceedings are started by reason of a limitation period that is about to expire).
v. The LDFRC Scheme will allow for recovery of the Court fees for a Part 8 application for pre-action disclosure, as well as Court fees for both issuing proceedings and applying for a stay where proceedings are issued because limitation is due to expire.
Concluding remarks
5. Overall, whilst the LDFRC Scheme was due to come into force in April 2024, the intention is now to finalise CPR amendments in time for inclusion in the summer update cycle, for official implementation in October 2024. The proposals aim to provide faster resolution of cases and legal costs that are proportionate to the value of compensation, and it remains to be seen whether such rules will indeed come into play in October 2024.
6. Readers may note that under the new ‘intermediate’ track, an exception to FRC has been included, namely that FRC will not apply where there is a protected party. However, it is noteworthy that the new ‘standard’ track under the LVCD Protocol includes a number of specified exclusions wherein fixed costs will not apply; accordingly, it appears that the LVCD Protocol has already narrowed the scope for exiting the LDFRC Scheme. It therefore shall be interesting to observe whether there will be an additional narrowing of the potential scope to exit the LDFRC Scheme.
7. In addition, whilst the LDFRC Scheme proposes to fix Claimant legal representative costs, the position in terms of expert fees remains unclear. Accordingly, it remains to be determined how this will operate in practice, given that expert fees innately take up a significant portion of the costs in bringing a clinical negligence claim. It is also critical to note that overvalued claims which settle within the £1,501 to £25,000 range will still be subject to the LDFRC Scheme costs, whether or not they followed the LVCD Protocol.
8. Going forward, practitioners are therefore encouraged to grapple with the upcoming changes so as to accurately understand fixed costs risks, particularly when valuing the claim. Practitioners should also become increasingly diligent in respect of timekeeping; after all, the LDFRC Scheme means that the most efficient representatives will reap the greatest rewards.
