Harvey v East Kent Hospitals NHS Trust

The issue for decision in this case is the percentage to be allowed as a success fee in a clinical negligence claim which, on any view, was complex, was expertly presented by the Claimants’ Solicitors, and was vigorously opposed by the Defendant until shortly before the date fixed for trial.

The Claimant had undergone surgery in December 2002 and had suffered adverse consequences as a result. The first solicitors whom she contacted about this matter stated that they would require a payment by her of £3,000 to cover investigative costs. As she was unable or unwilling to raise this sum, the fee earner to whom she spoke at that firm recommended her to apply to her current solicitors. That fee earner had previously been employed by them and knew that they would not require an upfront payment.

The Claimant’s first contact with her current solicitors was in October 2004. Just over a year later her solicitors wrote to the Defendants intimating her claim for compensation in general terms and inviting them to agree to an extension of the primary limitation period by approximately six months to June 2006. This the Defendants agreed to, and the full letter before claim was not sent until April 2006. Further extensions of the limitation period were then agreed in May (extending time until September 2006) and in September (extending time until December 2006). In fact, despite that last extension, the claim form was issued in September 2006 and was served on the Defendants in January 2007. The statement of value contained in the claim form was for compensation exceeding £15,000 but not more than £50,000 in total. The claim form was served together with a schedule of special damages (valued at about £8,000) and the Particulars of Claim (a draft of which had first been sent to the Defendants with the letter before claim some eight months earlier).

Extensions of time were agreed for service of the defence, which, was in fact served in April 2007. The main thrust of that defence was that the surgeon who had performed the operation had taken the correct approach and could not have avoided the injury which had been suffered.

The claim was allocated to the multi track and, at a case management conference heard by telephone in June 2007, trial directions were given with an estimate for trial of four days to take place within the trial window of 3 March 2008 to 31 May 2008. Next came a skirmish about the late service of a reply (the costs of which skirmish were awarded to the Defendants). Afterwards, substantial difficulties were encountered in setting an agenda for a meeting of experts.

On 1 April 2008 the Defendant changed solicitors to their present solicitors and, two days later, the first offer to settle was made by the Defendants (£42,000). Within a few days thereafter the claim had settled for £50,000 plus costs.

The CFA between the Claimant and her solicitors specifies a success fee of 100%. At the detailed assessment I reserved judgment on this item having heard substantial argument as to it. The success fee specified is what is known as a “single stage success fee”, as opposed to a “two-stage success fee” or discounted success fee. A single stage success fee is a fee which the client has agreed to pay however quickly or slowly the claim is resolved. A two stage success fee usually specifies the maximum percentage, 100%, but with a reduction to a lower figure should compensation be recovered under a settlement agreed pre-trial.

In my experience a single stage success fee of 100% is not frequently allowed save in cases which never had any prospects of reaching a favourable settlement without a trial on liability (for example, test cases) and cases in which, at the time the CFA was made, there was no further opportunity to reach a favourable settlement without a trial on liability (for example, a CFA entered into only just before that trial). A single stage success fee of 100% is also provided for in certain types of employers’ liability claim relating to a psychiatric injury alleged to have been caused by work related psychological stress or work related upper limb disorders alleged to have been caused by physical stress or strain excluding hand/arm vibration injuries. In these cases the success fee of 100% is fixed by rules: CPR 45.23(3)(d) and 45.24(2)(b).

In making the claim for a 100% success fee in this case the Claimant had the powerful support of a recent decision of Mr Justice Jack, sitting with assessors, in Oliver v Whipps Cross University Hospital NHS Trust [2009] EWHC 1104 (QB). That case was also a clinical negligence claim brought by the same solicitors as the claimant in this case instructed and the CFA terms, and the process by which those terms were agreed, were very similar in both cases. In Oliver the Costs Judge had allowed a success fee of 67% but the Claimant’s appeal from that decision was allowed and the success fee was restored to 100%.

The dispute as to success fee before me proceeded on the basis that the CFA terms had been arrived at in accordance with the Claimant’s Solicitors usual procedure as described in the Oliver case. This basis was not challenged by the Defendant’s representative and, to an extent, was brought into formal evidence by the witness statement of Mr Roger Roland Wicks, dated 21 October 2008, which was before me at the hearing.

The facts underlying both Oliver and this case are very similar and therefore I should allow the same success fee as the learned Judge allowed unless I am satisfied that the circumstances of this case are substantially different. Having considered this matter in great detail I think the correct success fee for me to allow is 80% and I am satisfied that the circumstances of this case are substantially different from the Oliver case. I shall set out below the factors and case law guidance I took into account in arriving at these decisions.

The Claimants’ solicitors specialise exclusively in clinical negligence claims on behalf of claimants. The firm employs two nurse advisers whose primary role is to screen all new enquiries by taking details about the potential claim from the enquirer and thereafter reporting to one or other of two partners so that a decision can be made as to whether or not the firm will take the case on. In the case before me one of the nurse advisers took details of the claim from the Claimant by telephone, and prepared a form entitled “New case screening form”. I deduce from that form that the telephone call took place on 13 October 2004. Curiously, in the relevant part of the form, a date one year earlier has been inserted, in handwriting; 13 October 2003. In my experience documents which are dated at the time they were prepared never misstate the year in which they were prepared except of course, sometimes, when they were prepared in the month of January. However, in this case I heard formal evidence which left me in no doubt that this document was prepared contemporaneously with the telephone call in October 2004 even though it was then dated October 2003.

The next documents on the file are dated 18 October 2004 which was a Monday. There is a record of time spent by a partner

Next comes a copy of a letter dated 19 October 2004 which the nurse adviser sent to the Claimant which, amongst other things, confirmed that “we will be very pleased to act for you in connection with your potential clinical negligence claim” and confirmed an appointment for a home visit to the Claimant on 3 November 2004 and enclosed a guide headed “Funding the claim”. This guide included, amongst many other things, a specimen of the firm’s usual form of conditional fee agreement.

The form actually used as the CFA in this case was prepared and signed by a partner on 22 October 2004 and was signed by the Claimant at the meeting on 3 November 2004. A confirmatory letter dated 4 November 2004 was sent to the Claimant which put on paper the many complicated matters which must have been discussed at the meeting, in particular the reasons for setting a success fee which are set out in paragraphs 35 and 36 of the agreement. These paragraphs are as follows:

I see from the judgment in the Oliver case that the sub-paragraphs (a) to (h) which I have just quoted also appeared in the CFA in that case. In that case there was also a paragraph (i) which was particular to that case just as paragraph (i) in the CFA before me is particular to this case. I am in no doubt that paragraph (i) in this case is derived from the manuscript notes made on a page entitled “Decisions made at screening meeting” and is probably in the handwriting of the nurse adviser. This is consistent with the case presented by counsel for the Claimant as set out in the skeleton argument which it is convenient to quote here:

After being sent the letter dated 4 November the Claimant then received a letter from the fee earner to whom the case had been assigned and a meeting at the solicitor’s offices was arranged for December 2004. At that meeting a client statement was taken and this was subsequently sent to the client for amendment and approval. By mid December medical records were sought from various organisations and, in January 2005 some chasing letters were sent and some documents missing from the GP’s records were sought. The paper chase of medical records continued through February, March and April. In April a letter was sent to the client stating that the base costs to date were £6,444 and also specified revised hourly rates for the future.

In mid May 2005 the Claimant attended her solicitors for an interview which lasted 90 minutes. At that interview the medical records were discussed and it was agreed that expert advice should now be sought. Shortly thereafter a case summary was prepared and a letter was sent to the chosen expert, Mr Tweedle asking him if he would be willing to assist. In June full instructions to Mr Tweedle were prepared and he arranged an appointment for the Claimant on 26 October 2005. By mid October the Claimant was informed that the base costs to date were £9,410 plus some £227.66 in disbursements.

By early November 2005 the solicitors had received a written report from Mr Tweedle which was favourable and his fee note of £1,300. On 9 November the solicitors wrote to the Defendants seeking the extension of the primary limitation period to 1 June 2006: this was needed to enable the Claimant’s solicitors “to complete our investigations before serving a letter of claim …” and also to enable them to defer the purchase of ATE insurance. On 17 November 2005 the solicitors wrote to the Claimant stating, amongst other things:

Once the extension to the primary limitation period had been agreed the next main event was a conference with counsel which took place on 12 January 2006 and was attended by the solicitor, the claimant and Mr Tweedle. Counsel was instructed on non CFA terms on the basis that he would be paid whether the case was won or lost but payment would be deferred until the claim concluded. If the claim concluded in a win those costs would be claimed from the Defendants. If the claim concluded unsuccessfully those costs would be paid out of the ATE insurance which the Claimant’s solicitors were intending to arrange. I infer from this that, at the time counsel was instructed, the Claimant’s solicitors were intending to issue proceedings unless the claim was conceded by the Defendants.

At the conference, counsel went through the draft Particulars of Claim he had already prepared and, on the basis of the discussions which then took place, gave it as his opinion that the claim had a 50% to 60% prospect of success. Revised Particulars of Claim were settled that month as was a slightly revised report from Mr Tweedle. The letter before claim was sent on 5 April 2006 together with a copy of the draft Particulars of Claim and an invitation to extend the limitation period further, until 29 September 2006. By mid April 2006 a further letter to the Claimant stated that the base costs at that stage were £20,160 plus disbursements of £3,310.

In July 2006 the Defendants requested and were granted an extension of time to respond to the letter before claim but, when by September 2006 they still had not instructed an expert witness, the Claimant’s solicitors decided to issue proceedings anyway. As noted above, the claim was for a sum up to £50,000 and was served in January 2007.

At the hearing before me the objection made to the success fee claimed was of a familiar sort: although the Defendants had opposed the claim throughout it was in fact a straightforward claim and had always had strong prospects of success; these were estimated at 70% and therefore a success fee of 43% was suggested. I have already quoted at length some of counsel’s submissions in reply to this challenge. Counsel also reminded me that I should not use hindsight in assessing the fee but should consider the facts and circumstances as they reasonably appeared to the solicitor when the funding arrangement was entered into. In this case the CFA had been entered into at the outset of instructions. Counsel placed reliance on several passages from the decision of the Court of Appeal in Callery v Gray [2001] 1 WLR 2112, paras 91 to 100. Particular emphasis was placed on the following words which appear in paragraph 96:

It is clear from the judgment in Oliver that both of these points, early entry into CFA terms and the non use of hindsight in assessing reasonableness, were instrumental in the decision which Mr Justice Jack made. Paragraph 12 of his judgment states this:

In Callery v Gray [2001] 1 WLR 2112 the Court of Appeal gave guidance on three main issues:

the jurisdiction issue (i.e. whether an ATE premium can be recovered in costs only proceedings;

the prematurity issue (i.e. the stage of a dispute at which it is appropriate to enter into a CFA or an ATE policy); and

the reasonableness issue (the amount the court should allow in respect of success fees and insurance premiums).

The two cases before that court were both modest claims in respect of road traffic accidents where the liability was unlikely to be in issue and where the question of damages was unlikely to create complexities. In those sorts of cases it will almost always be reasonable to conclude CFA terms at the outset since the likely expense of any investigation is almost bound to be disproportionate to the value gained or to the value of the information obtained or to the value of the claim. However, even in the smallest cases it may be unreasonable not to make some investigation. This clearly appears in paragraph 104 of the judgment in Callery:

The reference in that paragraph to seeking further information about the Defendant’s response was no doubt made in relation to the submissions made by the Defendants in that appeal that neither CFAs, nor success fees, nor ATE premiums should be fixed until the end of the pre-action protocol stage. It would be quite wrong to assume from this paragraph that no other forms of investigation can ever be reasonably required. In another case, a different form of fact investigation was suggested as reasonable even in a straightforward, if comparatively large, road accident claim. In Ellerton v Harris, which is reported along with Atack v Lee [2005] 1 WLR 2643, a claim was made for compensation for a pedestrian who was injured when the Defendant’s vehicle reversed into her in a car park. The CFA claimed a success fee of 60% which the District Judge allowed at 30% and which the Court of Appeal reduced to 20%. A factor which influenced the District Judge into allowing more than the Callery measure of 20% was that the driver had disappeared after the accident and therefore there might have been difficulties in identifying and tracing him. In fact the Claimant’s solicitor knew the driver’s name and knew that the police possessed details of an independent witness. I quote from paragraph 49 of the judgment of the Court of Appeal:

Having considered the facts and submissions as carefully as I can I have reached the conclusion that a single stage success fee of 100% is not justified in this case. I accept of course that it is not mandatory for solicitors to acquire a greater knowledge of circumstances than their client can provide before they enter into a CFA with that client. However, they do so at their own peril as to quantum of success fee in a case in which it was unreasonable to attempt to assess the success fee without first obtaining further information. Although, as Jack J stated, it is normally reasonable for a CFA to be concluded at the outset of instructions, it is not always reasonable to do so. In my judgment the Claimant’s solicitors should have undertaken more investigation of the claim before entering into a CFA expecting to recover the maximum 100% as a single stage success fee. Whilst in many cases enquiries made of the intending claimant will suffice, in some cases further enquiries will be necessary. Clinical negligence claims such as this one, concerning events which took place whilst the Claimant was under general anaesthetic, will comprise basic facts and circumstances about which the intending claimant knows little and understands less.

Conducting an assessment of risk requires a reasonable level of enquiry in order to reveal facts and features concerning the intended claim which may throw light upon the prospects of that claim succeeding or failing. In this case the solicitors knew very little about the claim save that which the Claimant had described in her telephone call. They knew it was a clinical negligence claim resulting from a bile duct operation. They knew that the surgeon had reacted to an emergency and that a tumour had been discovered; but that was about all. Most of the reasons given for the success fee are on the basis of facts which the Claimant’s solicitors did not know rather than on the basis of facts they were aware of. The last reason given (sub-paragraph (i) which is set out in paragraph 15 above) merely states the hazards which this case presented and did not assist them in the assessment of the risk of those hazards occurring.

It is usual for a solicitor who has experience of particular types of case to start his risk assessment by identifying an appropriate success fee for the generality of such cases and then to look for factors which justify a substantial adjustment to that standard figure upwards or downwards according to the specific features of that case. This was the approach taken by the District Judge in Atack v Lee (see paragraph 30 of that judgment) which was upheld both by the Circuit Judge and by the Court of Appeal. Evidence as to claims experience was given in the Oliver case; see paragraph 5:

Some evidence consistent with that was given in the witness statement of Roger Wicks which was before me: see paragraph 4:

Counsel for the Claimant in this case came close to arguing that a single stage success fee of 100% is appropriate for the generality of clinical negligence claims unless there are special features indicating a lower figure (for example, in cases concerning a retained swab or the amputation of the wrong limb). I would not adopt so high a figure unless persuaded to do so by clear supportive evidence. The facts mentioned to Jack J and the facts deposed in the witness statement before me are slightly different. Although both refer to a non acceptance rate of 85%, in the Oliver case the rejection is attributed to the lawyers at the meeting whilst in my case the appropriateness of rejection is said to become immediately obvious during the course of the screening process undertaken by the nurse advisers. Secondly, although in Oliver the failure rate of accepted cases is said to be 50% that figure was not given in the evidence before me. Instead it was said that 20% of the cases accepted never in fact begin.

In my judgment it would not be appropriate for me to infer from the paucity of the information available to me, either from the Oliver judgment or in this particular case, that the prospects of success in the average clinical negligence case taken on by specialist firms of solicitors are as low as 50%. Moreover, I do not believe that, as a general rule, 15 cases cherry-picked out of a random group of 100 cases are, on average, unlikely to achieve more than borderline prospects of success.

I accept that clinical negligence cases do have a higher failure rate than other types of personal injury claim. In the absence of persuasive evidence to indicate the average prospects of success for these cases solicitors would be well advised to accept the guidance repeatedly given by the Court of Appeal that a two stage success fee should be adopted. Such a CFA could provide for a success fee of 100% discounted to a lower figure if the case settled early, for example before service of a defence. In the circumstances of this case, had there been such a two stage success fee, I would have readily allowed the 100%, following the guidance given to costs judges in U v Liverpool City Council [2005] 1 WLR 2657 (see paragraphs 21 and 57).

To my mind it is not reasonable for solicitors to stipulate for a single stage success fee of 100% on the basis that he has not undertaken any proper assessment of the risks in that case. To do so would enable him to investigate the risks and prospects at the Defendant’s expense and, if the claim later succeeded, would entitle him to that high success fee even where the investigations proved that it was too high. I am fortified in that view by the knowledge that many firms specialising in clinical negligence work will often undertake some initial fact investigation going beyond the client’s statement. Some routinely require the claimant to put up funds to cover this work, as did the first firm of solicitors whom the Claimant in this case approached. Where clients are financially eligible for legal aid, an application can be made for legal help and then, if there seem to be some prospects of success, investigative help .

If the assessment the Claimant’s solicitors purported to make is unreasonable it then falls to me to apply my mind to what I consider would have been a reasonable figure to agree. In doing so I take into account the information the Claimant’s solicitors were likely to have obtained if they had taken reasonable steps in investigation. I note that this was a factor which Jack J took into account in the Oliver case. In that case the junior counsel for the claimant in the main proceedings (who was also counsel for the claimant in the appeal) had prepared a note for the assessment describing what the case had involved and in the course of it stated:

In the particular circumstances of this case I do not think that the Claimant’s solicitors’ decision not to seek the Defendant’s views on the matter could be described as unreasonable. The chances are they would most certainly have denied liability. To my mind what would have been reasonable would have been a collection of some of the main medical records and a consideration of them by a retained expert. In this case that had been achieved by November 2005 but at an expense of base costs exceeding £9,410 and disbursements exceeding £1,500. It is not, of course, reasonable to expect the Claimant or the solicitor to expend money at that rate in investigating the facts. In legal aid cases, investigative help can be obtained (subject to heavy restrictions these days) up to normally £3,500 plus VAT. That might comprise £1,500 on expert’s fees and 25 hours of a solicitor’s time at legal aid rates. The solicitors in this case appear to have spent twice as long as that. I am not presently persuaded that the figures for base costs notified to the Claimant in October 2005 are likely to be upheld as reasonable if they were incurred solely on risk assessment. I therefore think I should value the prospects of success according to the information which was available to the solicitors in November 2005. At that time they had received a favourable report from their chosen expert. The prospects of success cannot have changed significantly between that date and the date of the conference in January 2006. At that conference counsel gave it as his opinion that the case had 50/60% prospects of success. Whilst I consider that assessment to be somewhat over-pessimistic I cannot say it was unreasonably so. From that assessment the success fee would be calculated as falling somewhere between 100% and 67%. The figure I have selected, 80%, lies a fraction over a 56% prospect of success.

I turn now to explain why I think my allowance of a success fee of 80% is appropriate in this case even though it appears to be inconsistent with the decision made by Jack J in the Oliver case, the facts of which were similar. The assessment of the amount of success fee to allow must always be a question of discretion based upon a proper appreciation of the facts, evidence and arguments presented to the court. In Oliver, the Costs Judge rejected as a matter of principle the evidence he was given that, at the Monday meeting, the lawyers had assessed the prospects of success at 50%. In paragraph 30 of his judgment he stated:

On appeal Jack J decided that the Costs Judge was wrong to have rejected the Claimant’s solicitors’ evidence. That meant the discretion as to the amount of success fee fell to be exercised again and, in doing so, he was persuaded by the arguments he had heard that the case was one in which the prospects of success were indeed borderline:

In the next paragraph of his judgment the learned Judge gives an indication of why, as a matter of discretion, he thought the proper success fee to allow was the maximum, 100%. He points out that a solicitor is entitled to enter into a CFA at an early stage. Implicit in that finding appears to be a finding that it was reasonable for the solicitors to do so in the case before him. In the case before me I have decided that it was unreasonable for the solicitors to enter into an agreement for a maximum success fee without attempting properly to assess where in the spectrum of riskiness this case was likely to fall.

In my judgment had a proper assessment of risk been made before the CFA was entered into the Claimant’s solicitors would not have been able to justify a single stage success fee exceeding 80%. Although the solicitors were entitled to enter into a CFA early the relevant circumstances which were, or which should have been, known to them before entering into that CFA do not justify a 100% success fee.