Unreasonable changes?

The reasonableness of switching client funding arrangements during litigation has recently come under the spotlight. This
follows appeals of decisions
that found it unreasonable to change from public funding
(legal aid) to conditional
fee agreements (CFAs).

In Hyde v Milton Keynes Hospital NHS Foundation Trust [2015] EWHC B17 (Costs) (a clinical negligence claim where liability had been agreed), due to ongoing quantum negotiations,
a request to increase the funding limitation on the claimant's certificate was made. However, this was refused by the Legal Services Commission (LSC).
The claimant's solicitors therefore switched to a CFA. They did not apply to discharge the certificate but did serve a notice of funding (N251) on the defendant, who argued that a failure to discharge the certificate meant the claimant could not recover the costs generated under the CFA.

Master Rowley disagreed, ruling: 'Where a party has exhausted the costs that can be claimed under a certificate so that it is "spent", they can in principle establish a discharge by conduct in the same manner as certificates in which all of the work up to
a limitation of scope has been carried out. The effect of that discharge is to end the services funded by the LSC and enable
a private retainer to fund the remainder of the proceedings.'

It was held that it was not unreasonable for a claimant, having reached the limit of funding on a public funding certificate, to continue the
case by CFA. The fact the public funding certificate had never been discharged did not prevent the claimant recovering the costs from the defendant.

By contrast, the High Court,
on appeal from the Senior Court Costs Office in Surrey v Barnet and Chase Farm Hospitals NHS Trust [2016] EWHC 1598 (QB), ruled that in cases where claimants were advised to switch from legal aid to CFA funding shortly before 1 April 2013, the claimant should be entitled to recover the success fee and after the event (ATE) premium if the decision to
switch to a CFA represented
a reasonable choice at the
time, having regard to all the circumstances applying to them. This would be determined on a case-by-case basis.

The relevance of the April cut-off date is that the claimant's solicitors can recover 'additional liabilities', for example a success fee of up to 100 per cent of the solicitor's and barrister's costs
on CFAs pre-dating 1 April 2013, but not after.

The claimant's solicitors here had asked all case-handlers to review their legally aided cases ahead of the reforms and decide whether the client would be in
a better position with a CFA
and ATE funding. Therefore,
after damages were agreed
in November 2013, detailed assessment proceedings were begun and within the total costs claimed was a success fee of £57,000 and ATE premium of £51,000. The defendant argued the decision to switch funding was not reasonable.

It was held that the solicitor's advice to the claimant was insufficient as they had failed to advise appropriately, in particular, about the recovery of additional damages following the decision in Simmons v Castle [2012] EWCA Civ 1288.

Since 1 April 2013 success
fees and ATE premiums are largely irrecoverable between
the parties, apart from in limited circumstances. However, claimants must still be advised
of all funding options, including the positive and negative implications for the arrangement.

In light of these cases,
it is vitally important for
lawyers to provide clients with comprehensive and detailed explanations of their funding options in all circumstances. Failure to do so could lead to costs consequences.

Georgia Francis is a member of Tomorrow’s Forum of Insurance Lawyers (TFOIL) and a litigation assistant at Kennedys @FOILlaw www.foil.org.uk

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