Claimant solicitors acted unreasonably in switching a clinical negligence client from legal aid to a pre-LASPO conditional fee agreement (CFA), the Court of Appeal has ruled.
In the latest switching decision to go against claimants, 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  EWCA Civ 543, Master Rowley in the Senior Courts Costs Office found at first instance that BBK had acted unreasonably in switching the catastrophically injured client from legal aid to a CFA-lite.
This meant the claimant’s success fee and after-the-event (ATE) insurance – together nearly £1.1m – were not recoverable. This was upheld by Mr Justice Jay, 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.
Master Rowley found that the case was run by BBK “with little or no regard to the certificate limits on the assumption that if it became defended, it would have to convert to a CFA in any event. What can only be described as a half-hearted attempt to increase the certificate limit for a further short period was made as prelude to inviting the LSC to discharge the certificate”.
He said the instruction of the two additional experts was not the reason that the limit had been exceeded, and that the appellant had failed to demonstrate the reasonableness of the change in funding.
One of the issues before the Court of Appeal was whether its approach in the earlier switching case of Surrey was relevant, as Surrey was a case after the Simmons v Castle uplift was introduced, while XDE was from before.
In Surrey, 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 with obtaining the instructions of the litigation friend 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 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.
This “fails at every level”, the judge said, starting with the fact that the court in Surrey found little to choose between the two funding regimes, while BBK did not give this as the reason and had actually begun the case on a CFA and then switched to legal aid for nearly five years.
Coulson LJ also went through the supposed advantages of a CFA-lite and rejected them all. Indeed, legal aid provided the “positive advantage” of introducing “a measure of budgetary control” to the client’s benefit in this case.
“In one sense, the proof of the pudding is in the eating,” he concluded. “BBK advised the appellant at the time that she ‘will be broadly in the same position’ under a CFA as she was under legal aid. I agree with that advice; so she was.
“A CFA meant that BBK were potentially in a better position, but they did not advise the appellant of that, and it is in any event immaterial for present purposes.”
Coulson LJ noted that, in any comparison exercise, “what might be said to be the elephant in the room needs to be addressed”, namely the reason why BBK acted as it did.
He explained: “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.”
In concurring comments, Lord Justice Lewison – who gave the ruling in Surrey – said his colleague had interpreted that decision as it was meant to be.
He added: “Although the submissions on both sides ignored what Coulson LJ has called ‘the elephant in the room’, he is right to reveal it. It is a feature of cases like these which, if ignored, is likely to result in vastly increased financial liabilities falling on the NHS.”
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 client’s 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.
“The findings of the court fail to reflect the everyday practice of the solicitor and client relationship in a personal injury context; most clients will not want to be drawn in to a decision on complex funding arrangements, instead wishing to rely on the experience and knowledge of their solicitor to act in their best interest.”