Peterborough & Stamford Hospitals NHS Trust v McMenemy & Ors, Court of Appeal - Civil Division, November 28, 2017, [2017] EWCA Civ 1941

Resolution Date:November 28, 2017
Issuing Organization:Civil Division
Actores:Peterborough & Stamford Hospitals NHS Trust v McMenemy & Ors

Case No: A2/2016/0926 & A2/2017/0112

Neutral Citation Number: [2017] EWCA Civ 1941




A05LV835 & B00NR492

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 28 November 2017

Before :





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Between :

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Mr Roger Mallalieu (instructed by Acumension Ltd) for the Appellant

Mr Nicholas Bacon QC & Mr Rupert Cohen (instructed by Just Costs Solicitors as agents for Fletchers Solicitors) for the Respondent

Mr Nicholas Bacon QC & Mr Rupert Cohen (instructed by Just Costs Solicitors as agents for Ashton KCJ Solicitors) for the Appellant

Mr Roger Mallalieu (instructed by Acumension Ltd) for the Respondent

Hearing dates : 17th & 18th October 2017

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JudgmentLord Justice Lewison:

  1. These two appeals concern the recovery of After the Event (``ATE'') insurance premiums in clinical negligence cases. In each case the claimant took out ATE insurance as soon as solicitors were instructed. In the event both claimants settled by accepting an offer of compensation before any proceedings were issued and before any expert report was commissioned. Under the terms of each policy the claimants would have no personal ultimate liability to pay the premium. If the claim succeeded, the expectation was that it would be paid by the unsuccessful defendant. If the claim failed, or not all the premium was recovered from the defendant, the insurers would bear the loss. In effect, therefore, although the point may arise in the case of privately treated patients, the contest is between insurers and the NHS.

  2. In its latest consultation paper on Introducing Fixed Recoverable Costs in Lower Value Clinical Negligence Claims, the Department of Health has said that the annual cost of clinical negligence claims in the NHS in England has risen from £1.2bn in 2014/15 to £1.5bn in 2015/16 and legal costs were 34% of the 2015/16 expenditure. In 2015/16, claimant recoverable costs were 220% of damages awarded in claims between £1,000 and £25,000. We were also told that in the year 2015/16 some 15,000 claims for clinical negligence were made against the NHS.

    McMenemy v Peterborough & Stamford NHS Trust

  3. Ms McMenemy suffered a miscarriage in February 2013. In April 2013 she underwent a scan at Peterborough City Hospital and was told there was no retained product. A routine scan on 20 June 2013 revealed some retained product and on 21 June 2013 she had an operation to remove this. Due to the delay she suffered continuous bleeding and prolonged pain, and her depressive symptoms were exacerbated.

  4. On 3 July 2013 Ms McMenemy instructed solicitors and on 5 July 2013 entered into a Conditional Fee Agreement. On 2 August 2013 her solicitors wrote to the Trust. They explained that they were acting for Ms McMenemy ``in relation to a potential clinical negligence case'' and set out brief details of the case. The letter also requested her medical notes. On 8 August 2013 (before receipt of the medical notes) she took out an ATE insurance policy with ARAG. The total premium including insurance premium tax (IPT) was £6,042, of which £5,088 (including IPT) was stated to be ``recoverable from your opponent whilst the remainder is to be paid out of your damages.'' The balance covered own disbursements and the risk of having to pay opponent's costs. The insurance premium itself was also insured in the event that the claim was successful but the insurance premium could not be recovered in full. Otherwise the premium was to become due ``at the end of your claim provided you are successful.''

  5. Ms McMenemy's solicitors received her medical notes in September 2013. They sent a letter of claim to the Trust's solicitors on 28 March 2014 together with a Part 36 offer of £5,000. She had not received any expert medical advice in relation to her claim at that stage. The letter said that the Trust's breaches of duty had caused loss in two respects: she had undergone a surgical intervention which would have been unnecessary and she had suffered unnecessarily prolonged pain and suffering. On 14 May 2014 the Trust admitted breaches of duty, causation in relation to the prolonged period of pain and suffering but not in relation to the allegation that she would have avoided surgical intervention; and made a Part 36 offer of £2,000. On 2 July 2014 the Trust made a further Part 36 offer in the sum of £2,500 which Ms McMenemy accepted on 8 July 2014. She had still not received any expert medical advice.

  6. Ms McMenemy's bill of costs was served on 24 September 2014 totalling £15,795 including disbursements and VAT, of which £5,088 was the recoverable element of the ATE insurance premium. The Trust served points of dispute to which Ms McMenemy responded. The bill was provisionally assessed by DDJ Davies on 30 March 2015 with the premium allowed in full.

  7. The Trust requested an oral hearing pursuant to CPR 47.15(7) solely in respect of the premium. On 17 July 2015 the matter came before DDJ Holligan who found in favour of the Trust, considering that it was unreasonable for the policy to have been taken out when it was, before Ms McMenemy's solicitors had seen her medical records to confirm the facts, and therefore before there could be any assessment of risk. Given that finding the Deputy District Judge did not go on to consider whether the amount of the policy was reasonable.

  8. On 15 October 2015 Ms McMenemy was given permission to appeal on the ground that the Deputy District Judge had been wrong to hold that she should have waited to ascertain the level of risk before taking out an ATE policy.

  9. HHJ Pearce heard the appeal on 15 February 2015 and allowed it. He held that the premium was recoverable in principle and remitted the case to a regional costs judge for consideration of the amount recoverable.

    Reynolds v Nottingham University Hospitals Foundation Trust

  10. On 23 October 2013, Mr Reynolds suffered a fractured ankle. He was admitted to the Queen's Medical Centre in Nottingham and discharged on 26 October 2013. On 5 November 2013 he returned to hospital in severe pain and was advised to elevate his leg. On 15 November 2013 he suffered further severe pain and shortness of breath, and on re-attending the hospital was diagnosed with a pulmonary embolism. As the blood clot had moved from his calf to his lung he also suffered a chest infection and pneumonia. He remained an in-patient until 26 November 2013. He suffered breathlessness well into 2014 and suffered from discomfort, worry and stress. In January 2014 he wrote to the hospital complaining of the failure to diagnose the pulmonary embolism on 5 November 2013. Two letters in response from the Trust dated 17 and 18 February 2014 were sent. The first of these letters included the following:

    ``I am very sorry that the senior house office (sic) failed to neither identify the DVT nor request diagnostic test to rule out or confirm such a diagnosis.''

    ``Dr Petrie [the attending SHO on 5 November 2013] is very sorry that Mr Reynolds had come to potentially avoidable harm, due to him making an incorrect clinical diagnosis. Dr Petrie would like to offer you both his unreserved apologies for the subsequent suffering that Mr Reynolds has endured...

  11. The second said:

    ``As your complaint is well founded we would like your written agreement to publish the enclosed summary on the Trust's internet site.''

  12. Mr Reynolds instructed solicitors in March 2014, took out ATE insurance with ARAG on 5 August 2014, and entered into a Conditional Fee Agreement on 7 August 2014. As in McMemeny the total premium was £6,042 (including IPT) of which £5,088 was said to be recoverable ``from your opponent''. The remainder was payable out of damages. The wording of the two policies is not identical but the overall effect of the policy was the same.

  13. Mr Reynolds' solicitors obtained his medical records on 18 September 2014. On 7 November 2014 they sent a letter to the Trust notifying it of the potential claim and also wrote to a potential expert inquiring about obtaining an expert report on the issue of causation. The instruction did not proceed as the expert was unavailable. On 25 November the NHS Litigation Authority replied on the Trust's behalf, saying that they would investigate. Mr Reynolds' solicitors responded by saying that their letter of 7 November ``was not a formal Letter of Claim'', but was intended to reduce the cost of investigation. They invited an early admission of liability ``to save the cost of obtaining further evidence''. On 26 January 2015 the Trust admitted breach of duty and causation and made a Part 36 offer in the sum of £10,000. On 16 February 2015 the Trust made a further Part 36 offer in the sum of £12,500 which Mr Reynolds accepted on the following day, 17 February 2015. Mr Reynolds did not in fact commission any expert report; and in the light of his solicitors' correspondence did not make any formal Letter of Claim.

  14. On 10 August 2015 Mr Reynolds served a Bill of Costs in the sum of £13,215.68, including the ATE insurance premium of £5,088. On 2 September 2015 the Trust served points of dispute challenging the recoverability of the premium including on the basis that it was unreasonably and unnecessarily incurred because liability and causation were both indefensible; the amount of the premium was disproportionate; and comparables showed insurance could have been obtained for less. Mr Reynolds served detailed Replies on 18 September 2015.

  15. The Bill was provisionally assessed on 24 November 2015 with the premium allowed in full. On 17 December 2015 the Trust requested an oral hearing pursuant to CPR 47.15 to address the premium and other aspects. On 15 February 2016 DJ Rogers held that it was...

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