Claimants did not act unreasonably in switching funding from a damages-based agreement (DBA) to a conditional fee agreement (CFA) shortly before trial, even though the defendants are now facing a much larger bill, a costs judge has ruled.
Master James ruled that the defendants had not raised a “genuine issue” over the reasonableness of the decision.
In Dial Partners LLP & Anor v Eastern Airways International Ltd & Ors  EWHC B1 (Costs) , under the DBA signed in March 2015, the claimants’ solicitors, specialist City litigators Candey, were to receive 50% of the proceeds of the claim. In November 2016, less than two weeks before the date listed for trial, this was replaced by a CFA.
The claim settled on the eve of trial for £625,000 inclusive of VAT and interest, but excluding costs. The defendants’ liability under the DBA would have been a maximum of £250,000 plus disbursements other than counsel’s fees. Under the CFA, however, the claimants were seeking costs of £523,000.
The defendants were notified of the DBA but not the switch to the CFA. A defendants’ £300,000 part 36 offer was open at the time of the switch.
Master James said: “The claimants’ case is that this change from DBA to CFA was not a mere tactical step to take advantage of a near-certain settlement; as far as they were concerned, the matter might well have fought on to trial and the outcome thereof could not be predicted merely because a defendants’ part 36 offer had been made; I have to say that based upon the facts and figures above referred-to, I accept that submission.
“The claimants did not receive an offer of £300,000, craftily change their retainer and then accept that offer a day later; they received an offer of £300,000, changed their retainer but fought or at least negotiated on for almost two more weeks, until the eve of trial when they settled over the weekend for more than double what the defendants had on the table at the time that the retainer was changed.”
In Surrey v Barnet and Chase Farm Hospital and others  EWHC 1598, Mr Justice Foskett ruled that a paying party has to raise a “genuine issue” before any investigation into the reason for a change in funding would be undertaken.
Master James found that the defendants had not raised a “genuine issue” as far as reasonableness was concerned.
She said: “It is not that the claimants would wish to ‘punish’ the defendants by incurring an extra costs burden just in order to pass it on to them, but why should the claimants not take the opportunity to ensure that their solicitors were paid (and that the defendants were liable to pay) something much closer to what the case actually cost to run?…
“In fact, if the case had settled at above a certain figure (Candey put it at £950,000) they would actually be worse off than had they stayed with the DBA.”