What happened?
The Defendant was to pay the Claimant's costs of a claim for personal injury that started life in the MOJ Portal, but settled prior to allocation to the Multi-Track for £40,000. An agreement on costs was not possible so the Claimant applied for an order for payment of fixed costs.
The dispute on costs was in relation to the fee for a pain management report obtained via Premex for £2,916. The Defendant requested a breakdown of the invoice but Premex declined stating:
"It is not our practice to provide breakdowns of our fees. There is no obligation, and it is not necessary, to provide a breakdown in order to assess the reasonableness and proportionality of the fee claimed".. …."The [fee] is not calculated on a case-by-case basis and full consideration of any breakdown provided would require a detailed and complex analysis of the macro economics of the wider medical reporting market, which is disproportionate …”
The Defendant made an application for further information regarding a breakdown of the agency fee following their Part 18 Request.
The decision
HHJ Saggerson recognised the problem with an established system of simply passing invoices to the compensating Insurer and refusing to provide a breakdown, he observed; "transparency is a matter of some importance, not least of all because commissioning solicitors should, and are certainly entitled to, assess the reasonableness of the agency fees rather than simply (metaphorically) shrugging and saying: “that’s the system”, assuming someone else will pay for it. This would be, and is, a recipe for fee-farming by the agencies and is to be deplored."
The absence of transparency caused a great deal of scepticism about vague claims of "macro-economic” factors and Premex's stance that disentangling the agency fee from the total fee would be disproportionate led to…
17. ….. The unavoidable suspicion is that the absence of transparency indicates that the agencies have something to hide…."
HHJ Saggerson concluded that without a breakdown he could not assess proportionality so he had to err on the side of caution. An order was made for that the fee be reduced to £750 + VAT should a breakdown not be provided.
What this means for Insurers?
All too often at Summary Assessments a Court accepts a Claimants submission to use a broad-brush approach that overlooks agency charges. Indeed the Clamant invited the Court to adopt such an approach here, but HHJ Saggerson rejected it outright stating "This grimly arithmetical approach does violence to the very concept of multi-factorial proportionality".
HHJ Saggerson correctly recognised mischief might occur where there are unknown and unknowable factors, and that an adjudication on proportionality required a breakdown of the agency fee charges.
We can only speculate what those unknowns might be, as there is an unavoidable suspicion that agency fees may contain collections for…..
- A write off provision(one agency openly advertises a "Write off facility for failed cases") - That must mean that some of the agency fee on each matter is collected and saved 'in a pot' for failed claims - much like (after the event) insurance.
- Interest for deferred payments to the conclusion of a claim (we are often presented with a "request for payment" being several years old rather than VAT invoices/receipts) - much like interest on disbursement funding loans.
Both ATE insurance and disbursement funding interest are not recoverable between the parties.
…… but without breakdowns being given we can only speculate (for now).
It is not clear what the incentive is for Claimants Solicitors to use agencies that refuse to assist them or their client in justifying agency fees. HHJ Saggerson also expressed surprise that the Claimant's Solicitor in this instance did not want that information.
Going forward this judgment will be of use in the new Intermediate Track. The phrase "the cost of obtaining" that currently allows for medical agency fees in the Fast Track/old FRC regime does not appear in the Intermediate Track Rules. A breakdown will be essential to ensure the Claimant is not recovering a disbursement for work already subsumed within the FRC (Powles v Hemmings revisited).
Of course, Claimants Solicitors could instruct an agency/make it a term of instructing an existing agency that it will assist and provide a breakdown to avoid the Solicitor and their client being caught in the cross-fire. If they fail to do so then they can expect to be in the cross-fire until practices across change as the tide has turned with breakdowns being routinely ordered in Detailed Assessments, and now likely to be routinely ordered in Summary Assessments.
How can DWF Costs help?
This decision will be discussed at DWF Costs' Roundtable event with Leading Costs Counsel for Insurers/Paying Parties to attend on 17 May 2024 with a view establishing a holistic approach across the industry. Remaining spaces are limited.
For further information, please contact Simon Fisher.
