In a recent case it was determined by the Court that success fees and ATE premiums relating to Claimants were recoverable where there had been a change from Legal Aid funding to Conditional Fee Arrangements (CFA) shortly before 1 April 2013. This issue was determined by the Court in the case of Surrey v Barnet & Chase Farm Hospital NHS Trust [2016] EWHC Civ 1598 (QB) and Others. Stuart Wallace, Solicitor at DAC Beachcroft LLP, explores the reasons behind that decision and its implications in practice.

The Claimants in three separate cases had recovered damages from the NHS Litigation Authority as a result of clinical negligence. The claims were funded by Legal Aid, however shortly before 1 April 2013 (this being the date from which it was no longer possible to recover success fees and ATE premiums with a CFA) their lawyers (Irwin Mitchell) advised converting their funding to CFA's. Conversion to CFA's with success fees had the effect of considerably increasing the costs that the Defendant had to pay to the Claimants. Their lawyers did not advise, however, that this would deprive the Claimants of a 10% uplift on general damages. The issue to be determined by the Court was whether the success fees and ATE premiums were recoverable from the Defendant.

Decision at first instance

The lawyers for the Claimants accepted that advice was not given on the 10% uplift prior to the funding switch. The main concern for the lawyers was whether there would be sufficient cover to fund the litigation in light of impending changes to the legislative regime on legal aid funding.

The Defendant argued that the decision to switch to a CFA was based on materially unreasonable advice, and that the reasonable person would have attached significant weight to the fact that the 10% uplift would be lost if they entered into a CFA. The Defendant made a comparison with the law on informed consent in the medical profession (Montgomery).

The Court held in all three cases that the additional costs were unreasonably incurred and were not recoverable from the Defendant. In one of those decisions the Court said: “What the client should have been told was that 'if you move to a CFA you will forfeit immediately the right to an additional 10% of the general damages you recover, which we estimate could be £175,000, so as much as £17,500.' It was therefore advice that was unreasonable.

The lawyers for the Claimants appealed against the decisions of the Court that it had not been reasonable for them to change the funding arrangements of their claims, with the result that the success fees and ATE premiums claimed were not recoverable.

Decision on appeal

The Court (Foskett J) allowed the substantive appeal. The issue for the Court was whether the additional liabilities had been reasonably or unreasonably incurred by applying the test in Wraith, and not by reference to Montgomery. That test is wholly objective but applied in the context of the individual circumstances of the Claimant. The question therefore was whether the omission to refer to the 10% uplift would have made any difference to a reasonable Claimant in the circumstances in that case. While in each of those high value cases, the 10% uplift was worth about £20,000 to £30,000 (which each of the judges had held was a significant sum that would have informed the clients decision), what was held to be important was not the actual figure, but that the 10% uplift would have only added between 0.026% and 5% to the overall value of the claims. The Court observed that, in the vast majority of cases, the failure to mention the 10% uplift would have made no difference applying the Wraith test.

Implications in practice

The Court has set down a new approach to such cases:

  1. The bill should state whether the Claimant was advised of the 10% uplift where the Claimant has changed funding from Legal Aid to a CFA between 26 July 2012 and 1 April 2013.
  2. The Court will go behind this statement only if there is a dispute as to its accuracy. Any arguments about the reasonableness of such a conversion must be included in the points of dispute. The Claimant’s solicitor must identify the value of the 10% uplift and reply as to why the decision was reasonable.
  3. The issue should be resolved at Detailed Assessment by reference to the points of dispute, without any need for oral evidence (unless in exceptional cases where there is some suggestion of impropriety).

It is understood that the Defendant has sought permission from the Court of Appeal to take this issue further. Alexander Hutton QC (who appeared for the Defendant) observed that “It was Foskett J’s focus not on the actual sum which the Claimants were giving up by writing off the 10% uplift by entering a pre-April 2013 CFA/ATE - £20,000 to £30,000 is a lot of money to most people – but it as a percentage of the overall damages, which took everyone by surprise since this was not an argument run by the Claimants. We will see if the appeal court wishes to interfere.” It therefore remains to be seen whether the approach envisaged by the High Court will stand the test of time.

In the interim, and pending the outcome of that appeal, it is only right that the additional costs as a result of such conversions in other cases continue to be objected to. Further, Mr Hutton stated from a Defendant’s perspective: “Where you face a conversion from legal aid to CFA, consider what the downside to the Claimant might be as a result: the focus must be on the interests of the Claimant. This might be the loss of the 10% uplift, although if Foskett J’s decision is undisturbed this is unlikely to get you anywhere, but it also might be the fact that the claimant could suffer a significant shortfall in recovery of an ATE premium out of their damages which could make the conversion a bad and unreasonable choice for them and still result in a disallowance of the additional liabilities.”