Irwin Mitchell has lost the right to recover success fees and insurance premiums from defendants for a third time after failing to advise on the 10% uplift in general damages, it has emerged.
The three cases all involve medical negligence victims who were switched from legal aid to conditional fees shortly before 1 April 2013, when LASPO restricted the right to recover success fees and ATE insurance premiums.
Master Rowley ruled in September last year that Irwin Mitchell should lose its right to recover because a client was not told about the 10% uplift to general damages introduced by Simmons v Castle before the switch took place. The uplift is not available to claimants who recover their success fees and ATE premiums.
The master concluded in Surrey v Barnet and Chase Farm Hospital NHS Trust  EWHC B16 (Costs) that failure to advise on the post-LASPO landscape and Simmons damages was “insufficient on which to found any proper or reasonable conclusion”.
In Yesil v Doncaster & Bassetlaw Hospitals NHS Foundation Trust, District Judge Besford ruled that the “additional liabilities flowing from the switch of funding” were “unreasonably incurred and are irrecoverable from the defendants”.
The case involved a boy who was severely physically and mentally disabled after being born by emergency Caesarean section. The boy, by his litigation friend, accepted the defendant’s part 36 offer of £2.5m, together with staged periodical payments for life, starting at £89,000.
Irwin Mitchell sought to recover a success fee of £55,500 and insurance premium of £50,680, as part of an overall costs claim for just over £350,000.
The parties agreed that the success fee, originally claimed at 80%, should reduce to 20%. DJ Besford described the 10% uplift on damages the claimant would have received if he had remained on legal aid, in this case worth “an additional £20,000 plus”, as a “significant piece of information”.
DJ Besford went on: “In my judgment it is inconceivable that a client would not consider the option of an additional 10% uplift on general damages a material factor.
“The omission to raise this factor, even if the claimant immediately rejected it, seriously calls into question the adequacy of the advice given.
“Irwin Mitchell would appear to have been not been so much ‘leaning’ one way, as giving advice tailored to a decision they had already made.”
The judge concluded: “In my judgment, I find myself entirely in agreement with Master Rowley in Surrey. It is for the claimant on a standard basis to show that the decision to switch funding at the time it was made was a reasonable decision to take.”
Finally, in AH v Lewisham Hospital NHS Trust, heard by Deputy Master Campbell at the Senior Courts Costs Office, the claimant became seriously ill after day surgery, and was taken to intensive care, where she suffered a series of strokes and irreversible brain damage.
She later accepted a defendant’s part 36 offer of £325,000 plus a payment to the Compensation Recovery Unit of £26,400.
Irwin Mitchell claimed £32,350 for the success fee, £4,380 for counsel’s success fee plus and £18,900 for the insurance premium.
Deputy Master Campbell said the advice the claimant received from Irwin Mitchell was not merely incomplete, but a “very significant component” was missing.
“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 deputy master went on: “By way of example, had the extra 10% been £175 and not £17,500 it would have had no bearing on the client’s decision because it was de minimis, but where, as here, it could have been as much as £17,500, it is likely to have been a factor, if not the factor, critical in persuading the claimant whether or not to move from legal aid to a CFA.”
He concluded: “It follows that the claimant’s decision, based as it was upon advice that was flawed in a material way, was not objectively reasonable and the claims for the success fees and ATE premium therefore fail.”
A spokesman for the NHS Litigation Authority said: “It is disappointing that we continue to receive substantial bills for additional liabilities in these circumstances which means that it is necessary for us to challenge those bills at court.’’
A spokesman for Irwin Mitchell said: “In a short time frame we acted in the best interests of a specific group of clients in order to ensure they were able to pursue their claims to trial fully protected from any costs liabilities under a ‘no cost’ pre-LASPO CFA backed by ATE insurance.
“This protected them from changes arising from LASPO and the vagaries and uncertainties of an increasingly complex and constrained legal aid system, by ensuring their cases would proceed under the new legal framework with a ‘no cost’ agreement. We cannot comment on individual cases due to the ongoing appeals process.”
Howard Dean, partner and director of costs at defendant firm Keoghs, said that in each case Irwin Mitchell “omitted to advise on a fundamental issue, namely that a change to CFA/ATE funding would result in the claimant losing a 10% uplift in general damages of between £17,500 and £28,000”.
He said: “In each case, the court found that the omission was significant or material so as to make the funding decision unreasonable.”
Mr Dean said it was “difficult to overlook the fact that, on just these three cases alone, if successful, Irwin Mitchell would have recovered success fees of £149,380.68 and ATE premiums of £112,412.18 making a total of £261,792.86”.