Costs News

29 April 2020
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Claimant solicitors “acted unreasonably” in switching from legal aid to CFA-lite

Another ruling from Master Rowley (pictured) that claimant solicitors had acted unreasonably in switching clinical negligence clients from legal aid to conditional fee agreements (CFAs) has been upheld by the Court of Appeal.

Lord Justice Coulson said that the decision to change when it did potentially allowed London firm Bolt Burdon Kemp (BBK) “to have their cake and eat it too”.

In XDE v North Middlesex University Hospital Trust [2020] EWCA Civ 543, Master Rowley ruled that the claimant’s success fee and after-the-event (ATE) insurance – together nearly £1.1m – were not recoverable. This was upheld, with Master Haworth sitting as an assessor.

The legal aid certificate covered all stages up to mutual exchange of expert evidence, and thereafter part 35 questions and a conference with counsel and experts. BBK had applied on the basis of using three experts, but ended up instructing five without seeking permission from what was then the Legal Services Commission (LSC).

When BBK sought to increase the costs limit, the LSC refused what was initially an informal request. The firm then said the certificate should be discharged. BBK told the claimant’s litigation friend that they would “be broadly in the same position” under a CFA.

A key issue before the Court of Appeal was whether its approach in the earlier switching case of Surrey v Barnet was relevant, as Surrey was a case after the Simmons v Castle uplift was introduced, while XDE was from before.

In Surrey, also one of Master Rowley’s decisions, the appeal court found that the advice given to the client had exaggerated the disadvantages of remaining with legal aid funding and omitted the disadvantages of entering into a CFA.

Lord Justice Coulson in XDE ruled that the approach in Surrey was not limited to cases where the Simmons v Castle uplift applied.

“It was setting out an approach which started with the general equivalence of legal aid and CFA-lite (which was what was meant by the expression ‘level playing field’), before then going on to look at the individual circumstances,” he said.

Surrey, therefore, is of general application in cases where the reasonableness of a decision to change funding is in issue, and of particular application where the change was from legal aid to a CFA.”

Coulson LJ noted that BBK decided to move to a CFA-lite without instructions and there was no evidence that, had the litigation friend been advised about the features of CFA-lite, he would have chosen to switch.

“On that basis, therefore, the appellant has not discharged the necessary burden of proof: she has not shown on the facts that the change to CFA-lite was reasonable.”

Coulson LJ nonetheless went on to consider and dismiss BBK’s new argument that a CFA-lite was so obviously superior to legal aid that it did not require any more to justify the switch.

He continued: “In my view, BBK had a very good reason for changing from a CFA to legal aid in 2007. Moving to legal aid at the outset of a potentially complex case meant that, win or lose, BBK would be paid. That was a beneficial arrangement when a large but potentially difficult clinical negligence case was getting underway.

“Five years, an admission of breach and many experts later, it would have become clearer that the claim was more likely to be successful. That may have seemed a good time for BBK to lose the restraints of legal aid and change to an arrangement that gave them a success fee as well.

“It is not, therefore, unfair to say that changing to CFA-lite at that point potentially allowed them to have their cake and eat it too.”

Sam Hayman, a partner and head of costs at BBK, said they would look to appeal to the Supreme Court.

“The judgment sends a chilling message against access to justice and seemingly imposes a stricter duty upon solicitors when advising their clients than has ever previously been the case.

“The watering down of Sarwar v Alam effectively removes any reliance being placed on the unspoken knowledge and experience of the solicitor when decisions are made on behalf of or with clients. Instead, solicitors are expected to spell out the minutiae of their thinking when advising in relation to funding.”

He argued that it was “questionable” whether the large majority of lay clients would be willing or able to make such a decision.

“There is also further potential uncertainty created by this judgment in the context of recoverable ATE premiums. Previously, following the ratio of Sarwar v Alam, a party could rely on the fact that the decision made was reasonable from the perspective of the client. Now the shift in law seems to suggest the decision must be reasonable from the paying party’s perspective as well as requiring a catalogue of the decision-making process and information relied upon. This seems to me to be exactly the sort of ‘treasure hunt’ Sarwar was keen to deplore.”

Ben Williams QC (instructed by Bolt Burdon Kemp) for the appellant/claimant. Alex Hutton QC (instructed by Acumension) for the respondent/defendant.

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