Healthcare providers and manufacturers of medical products will welcome a judgment from the Court of Appeal that found against a claimant for failing to give notice of funding in time.

In cases where a Conditional Fee Agreement (CFA) or After The Event (ATE) insurance policy was entered into before 1 April 2013, the success fee and insurance premium can be recovered from the defendant. However, the claimant must have informed the defendant of the funding arrangement when it was entered into.

The facts of Springer v University Hospitals of Leicester NHS Trust [2018] EWCA Civ 436 concern a claimant who entered into a CFA in 2010 but did not give notice to the defendant NHS Trust at the time. Instead, the Claimant delayed until September 2012 before sending a letter of claim, and notice of a later CFA, to the Trust. Proceedings were served in February 2013 and settled in July 2014. The Claimant sought to rely upon the 2010 CFA when recovering his costs.

In the judgment handed down last month, the Court of Appeal dismissed the Claimant's appeal against an order refusing an application for relief from sanction for failing to serve the required notice of funding at the right time. This meant that the Claimant could not recover the success fee from 2010.

The judgment is welcome news for defendant hospitals and other healthcare providers, as well as manufacturers of medical products dealing with personal injury claims, for three reasons in particular:

1. Not all defendants share Hickinbottom LJ's sense of history

Hickinbottom LJ (who gave the leading judgment) commented that the pre-April 2013 rules on success fees are "to a large extent now of only historical interest". As a result of the Jackson costs reforms, for CFAs entered into on or after 1 April 2013, success fees are no longer recoverable from the other side (save for certain exceptions, such as claims relating to diffuse mesothelioma). This case, by contrast, concerned a CFA entered into before April 2013 where, in principle, the success fee is recoverable against the defendant.

Healthcare providers, manufacturers and their insurers might disagree with Hickinbottom J's view that this is now history. Many such defendants will have long running personal injury claims on their books where CFAs were entered into some years ago but proceedings have not concluded. That may be because limitation "standstill" arrangements have been agreed to allow for investigations and settlement discussions or because claims have been brought on behalf of children (for whom the usual limitation periods do not apply). For that reason, this judgment will be relevant to some cases that are still running.

Practical tip: In claims where a claimant attempts to recover a success fee based on a pre-April 2013 CFA, defendants should require the claimant to demonstrate that they served the required notice of funding when it was entered into (which now will have been some years ago). If notice was not served on time then this judgment can be relied upon to argue that the defendant should not be liable for the success fee after the claim is resolved (which may be a significant saving, especially in particularly complex cases).

2. Court of Appeal recognises a defendant's "loss of opportunity"

The Court of Appeal considered whether the claimant should be afforded relief from sanction, and permitted to recover the success fee, under "Denton" principles. In refusing relief, Hickinbottom J held "the key finding … was that the NHS Trust had suffered significant prejudice as a result of the breach." By not being served with notice of the claim and success fee until two and a half years had passed, the Trust had lost the opportunity to take pro-active steps in investigating and resolving the claim. The Claimant's error was sufficiently serious to mean that good reason had to be shown for the mistake. The Claimant failed to show good reason and so the appeal failed.

Practical tip: When responding to an application for relief from sanction, gather evidence which demonstrates that a claimant's error had a significant impact on the management of the case and so relief should be denied. The facts of this case provide a useful precedent.

3. A lesson in proportionality

In our view, the judgment has wider application than under the "Denton" test alone. Parties to litigation should take account of the principle of proportionality. Defendants can refer to this judgment to argue that a claimant should accept a reduced costs award if his or her conduct means that the defendant has lost an opportunity to resolve litigation at an earlier stage. Many defendants will recognise the exasperation expressed by Hickinbottom J when he noted that the costs claimed from the defendant were double the amount for which the claim was eventually settled.

Practical tip: When it comes to detailed assessment, consider whether costs have escalated due to the claimant's conduct, in order to argue for a reduction in the sums payable by the defendant. At an early stage, defendants can remind claimants to take a proportionate approach to incurring costs. In later negotiations or disputes over costs, defendants can refer to this judgment to argue that the claimant should be held to account (for example over disclosure or the instruction of experts).

The effects of the pre-2013 funding regime are not yet consigned to the history books. Defendants and their insurers may still be dealing with claims under the old costs regime. In any case, this judgment is a timely reminder of the perennial importance of proactive and proportionate management of personal injury litigation.