Kerry Underwood

FIXED COSTS CASES: MEDICAL AGENCY FEES RECOVERABLE AS DISBURSEMENTS

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The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Beardmore v Lancashire County Council ,Liverpool County Court 1 February 2019, Case No E10LV801

a Circuit Judge on appeal allowed the claimant to recover medical agency fees in an employers’ and public liability case that had exited the portal, and where the issue of disbursements was covered by CPR 45.29I.

This was a public liability claim that settled for £3,500 after leaving the portal and the defendant paid the relevant legal costs and the actual costs of the GP notes and hospital notes, but refused to pay the additional charges levied by the medical agency for obtaining those records.

The central issue was whether the solicitors could avoid some of the work in a fixed cost claim by passing it to an agency which could then charge that work as a disbursement, effectively leaving the solicitor with fixed costs for doing less work.

The court sets the issue out clearly at Paragraph 6:

“6. The use of a “medical agency” is commonplace with many claimant firms who handle this kind of litigation in bulk. It provided a one-stop shop, and from the altruistic point of view made some sense; these agencies have a lot of experience, which enables the solicitors’ time to be freed up, and where bulk work is handled, bookings and record requests can be made en bloc. However, from a more cynical perspective it might be said that it was a means of maximising solicitors’ profit when they were already squeezed on the fixed costs regime. Requesting medical records and arranging medical appointments would normally be part of the solicitors’ retainer responsibilities and no cost could be recovered over and above the fixed fee, whereas if there was a separate company undertaking this work as an agent (and in which the solicitor had a financial interest) the cost could potentially be recovered as a disbursement and dealt with separately.”

CPR 45.29I(2)(a) allows as a disbursement “the cost of obtaining medical records and expert medical reports…”

In

Woollard & Anor v Fowler [2005] EWHC 90051 (Costs) (24 May 2006)

the court had held that the word “obtaining” meant that the agency costs of obtaining the records, rather than simply the direct cost to the record holder itself, could be recovered as a disbursement.

Furthermore CPR 45.29I now limits the “cost of obtaining” to medical records and expert medical reports, where previously it covered such matters as engineers’ reports and DVLA searches, and in relation to those matters it is now only “the cost of” such items which can be recovered, and not the “cost of obtaining”.

Thus the drafters of the rules have specifically preserved the cost of obtaining medical reports, and that recognises the recoverability of the agency fee.

The judge here found that matter of only limited assistance and said he should approach the matter afresh.

Furthermore the words “cost of obtaining” still appear elsewhere in the rules in relation to matters such as a police report, and therefore no significance should be read into the change of wording in this particular rule.

The judge held that CPR 45.29I clearly allowed an agency fee as a disbursement in a road traffic accident claim, but capped the costs at £30 by reference to CPR 45.29C.

The key issue was whether it followed from the inclusion of a specific reference to RTA claims, that EL/PL claims were excluded from the agency fee recovery scheme as a disbursement, or whether all that the RTA provision did was to limit the amount of those agency fees in RTA claims.

Had the rule drafters intended to exclude EL and PL claims, then there would have been a clear provision to that effect.

Nor are cases such as

Crane v Canons Leisure Centre [2007] EWCA Civ 1352 (19 December 2007); or

Stringer v Copley (Kingston Upon Thames County Court 17 May 2002)

relevant, as although they held the work which could properly be done by solicitors, albeit delegated to an agent, was properly included in the solicitors’ base costs and not disbursements, the fact was that the rule specifically allowed for a separate medical agency fee recoverable as a disbursement in RTA cases.

The judge then had this to say:

53. I do not believe that this court should be drawn into direct or indirect criticism of the use of medical agencies even those which are closely connected with bulk claims solicitors such as the Claimant’s solicitors in the present case. It is the nature of modern litigation where there are increasing pressures on profit margins and limits of cost recovery for solicitors to be ever more creative in maximising the return from these claims. I can understand why paying parties should be cynical where such a connection exists, and it appears as though it is merely an additional payment to the receiving party solicitors which would not otherwise be recoverable, and the restrictions are being circumvented.”

That was a matter for the rule makers of Parliament, and not the courts.

In a public liability case, in my judgment, the appropriate measure for the disbursement recovery is the reasonable and proportionate cost of obtaining the medical records.”

The judge then allowed £30 as the agency fee, that being the maximum allowed for a medical agency fee in relation to an RTA claim.

Comment

This is a correct decision, but it is a curious rule to put it mildly.

Clearly the fixed costs should represent the appropriate legal costs for doing the work, without what are clearly legal costs, being redefined as disbursements in the rules, so as to allow additional costs.

This will become much more important as fixed costs spread to all civil claims of £100,000 or less.

The relationship between law firms and medical agencies, and the potential profit made by law firms, and indeed this case, may be seen to be Pyrrhic victory.

The rather muddy waters in relation to these matters, and also ATE premiums etc., have allowed the government to bring in the Civil Liability Act, which will reduce damages awards in most personal injuries claims by around 75%, and will wipe out many claimant personal injury firms.

 

VAT, Medical Agencies, Search Fees And Travel: A Court of Appeal Decision 

In

British Airways Plc v Prosser [2019] EWCA Civ 547

the Court of Appeal held that, where a medical agency is instructed in relation to the obtaining of medical records and/or reports, VAT may be charged on the total cost, and not just on the agency’s administration fee.

This was on the basis that the agency was performing a service which allowed the solicitor to perform its service to the client, rather than the agency simply acting as a post-box.

The Court of Appeal said that in low value claims, where the amount of any VAT is not substantial, payment of VAT on the full amount was a cost that was “reasonably and proportionally incurred” and  “reasonable and proportionate in amount” so as to satisfy the requirements of CPR 44.3, regardless of whether the agency was obliged to charge VAT or not.

The Court of Appeal said that the position may sometimes be different and if “the VAT element were substantial, VAT should not in fact been imposed and the receiving party or his lawyers ought to have been aware that there was real doubt as to the VAT position, a Costs Judge might well conclude that the receiving party should not recover VAT.”

The decision also reviews the case law on related matters, such as VAT on travel expenses incurred by solicitors, and VAT on searches in conveyancing matters.

I am grateful to Steven Turner, the barrister who successfully represented John Prosser in this matter, for information concerning this case.

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Written by kerryunderwood

March 5, 2019 at 12:00 pm

Posted in Uncategorized

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