Iron and wine

One of the pleasures of growing old, is seeing many of the same arguments that one grappled with in one’s youth, surfacing again 25 years later. At the current time compensating parties are taking a particular interest in the recoverability and quantum of fees charged by Medical Reporting Organisations (MROs). This is an old issue which has resurfaced again, albeit on a different point this time.

These organisations have become a critical intermediary in personal injury claims. Solicitors typically engage MROs to obtain expert medical reports necessary for assessing injuries. However, the increasing reliance on MROs raises significant questions about cost recovery, particularly in light of the current legal framework.

The central issue lies in the fact that solicitors often defer payment to experts through MROs, thus incurring funding costs, which under prevailing legal principles, are generally irrecoverable in litigation. I will now consider some of the arguments that arise in this context, potential solutions, and their implications for the future.

The Core Issue: What Is Really Going On?

Solicitors engage MROs ostensibly for quality control and administrative convenience, but a deeper analysis reveals that the key driver is the credit provided by MROs. Instead of paying medical experts directly within a standard 30-day period, solicitors can defer these payments for months or years, essentially using MROs to finance their disbursements. This is a cost of funding. This arrangement places the cost of credit on the paying party, which raises a significant legal issue: Should these funding costs be recoverable as part of the claim?

According to existing case law, funding costs in litigation are typically irrecoverable. For example, in Motto v Trafigura and Simcoe v Jacuzzi, the courts confirmed for various reasons and in the light of even older authority, that funding costs are not considered recoverable expenses​. The key argument from paying parties is that the cost of credit provided by MROs is a form of irrecoverable funding cost, and therefore, MRO agency fees should be discounted.

Legal Perspectives: Divergent Analyses

There are two legal perspectives on this issue. The paying party’s analysis focuses on funding costs being irrecoverable, and thus argues that MRO fees should be reduced or discounted to reflect this principle. On the other hand, the receiving party’s analysis notes that  the solicitor does not directly pay the expert or the agent but instead pays the MRO a single fee that encompasses all services, including credit costs. The chain of contracts as far as the claimant is concerned, ends with the fee paid to the MRO.

This model creates a challenging question for courts: How can the costs related to credit be deconstructed from the overall fee charged by MROs? There is I think a potential solution, drawn from an aligned area of practice. A related analogy can made to credit hire rates, referencing Dimond v Lovell, where the courts had to distinguish between basic hire rates (BHR) and credit hire rates​.

The solution adopted in that case, was to strip out irrecoverable elements of damages (including incidentally the cost of credit) by looking at the comparator of a person who was simply hiring a replacement vehicle, not on a credit hire basis but on a spot rate, or open market rate. The difference between the two rates would represent the irrecoverable elements.

My suspicion is that if this exercise was undertaken, there would be no difference between the MRO rate, and the rate chargeable to an individual claimant who only had one case. On that basis the argument that the cost of funding can be deconstructed would simply fall away.

Case Law and Medical Fees: Standard vs Fixed Costs

Two key cases illustrate the ongoing uncertainty in this area. First, in Hoskin v Northampton NHS FT (2024), the court examined whether expert fees claimed were recoverable as part of standard basis costs but limited to the question of whether the expert fees were clearly delineated on an invoice, breaking down the fees and ther other charges. The judgment turned on technical issues relating to Practice Direction 47, but the key question to my mind was that given this was the claimant’s bill who the claimant was liable to pay — the MRO or the medical expert? If the former no question of obtaining deconstructed documents should arise, as there is no requirement in the Practice Direction to do so​. A similar issue arose in Aminu-Edu v Esure, where the court considered whether the claimant would be able to recover MRO fees under fixed costs, further questioning the contractual arrangements involved and directing a breakdown of the expert fees and agency fees. 

The Problem

Many cases now face this problem: what is to be done about MRO fees? On assessment, or determination I think a fundamental problem is the absence of evidence in these cases as to who the receiving party is contractually liable to pay, and on what basis, which forms the basis of the claimant’s claim for costs. Courts are left without sufficient information to conduct a proper contractual analysis of the agreements between solicitors, MROs, and medical experts. In particular, there is no comparative evidence indicating whether there is a material difference between what an expert charges directly versus what is charged via an MRO. Without this evidence, it is impossible to accurately assess whether the MRO fees being claimed are inflated due to irrecoverable credit costs​. The judge’s solution, born out of frustration, will be to order breakdowns they may have no power to order.

Short-Term Solutions

In the short term, receiving parties may need to address these evidential gaps. This can be achieved by:

1. Providing evidence of the contractual arrangements between solicitors and MROs.
2. Submitting comparator evidence showing whether there is a difference between fees charged by experts directly and those charged via MROs.
3. Arguing that decisions like Hoskin and Aminu-Edu were based on incomplete evidence and should be disregarded in future cases.

These measures could help courts make more informed decisions about the recoverability of MRO fees and the extent to which funding costs should be stripped out.

Long-Term Solutions

Longer-term solutions require systemic changes to address the funding issue. Three potential solutions are outlined below:

1. Rule Change on Interest or Disbursement Payments: One approach would be to recognise that claimants need to fund medical reports upfront and to allow for pre-judgment interest on costs to compensate for the deferred payments. Alternatively, the procedural rules could be amended to require earlier payment of disbursements, preventing the accumulation of credit costs​. This is likely to be an imperfect solution.

2. Overdrafts and ATE Insurance: Solicitors could pay medical experts directly from their office accounts, extending their overdrafts where necessary and using after-the-event (ATE) insurance to cover unrecovered disbursements. However, this solution would have a significant impact on the economics of running personal injury cases and may only be viable for larger firms with substantial financial resources​. It is again an imperfect solution.

3. Factoring Model for MROs: A more radical solution involves reversing the current MRO model, whereby MROs would become factoring agents for medical experts. Under this model, experts would submit their fee notes directly, and the MRO would discount the fees, making the credit cost part of the doctor’s overhead rather than the claimant’s recoverable expenses​, thus causing the funding argument to disappear.

Key Points:

1. Irrecoverable Funding Costs: MROs often provide credit to solicitors, but the costs of this credit are irrecoverable under current legal principles.

2. Lack of Evidence: Courts lack adequate evidence to differentiate between recoverable and irrecoverable costs, leading to inconsistent judgments.

3. Short-Term Solutions: Litigators could focus on providing detailed contractual analysis and comparator evidence to ensure accurate cost recovery.

4. Long-Term Solutions: Systemic changes, including rule amendments or restructuring the MRO model, are necessary to address the funding issue sustainably are probably going to be required.

5. Impact on Case Viability: Any long-term solution, particularly those requiring solicitors to fund expert fees upfront, could affect the economics and viability of personal injury claims, particularly for smaller firms.