Switching from legal aid to a CFA: can a claimant recover the success fee and ATE premium?
Surrey v Barnet & Chase Farms Hospitals NHS Trust [16.03.18]
The Court of Appeal has confirmed that if liability has been admitted, a claimant who has instructed solicitors on legal aid and switches to a CFA, cannot then recover the success fee and ATE premium.
The case involved three claimants, all eligible for their clinical negligence claims to be funded by legal aid. Liability was admitted. Shortly before the implementation of the LASPO reforms in 2012 – which abolished recovery of additional liabilities from the losing party – they all switched to CFAs. These ensured that the claimants’ solicitors (Irwin Mitchell) could only get paid the costs that were recovered but provided for a success fee with ATE.
The change in funding meant the defendant faced potential additional costs in excess of £270,000.
At first instance, different judges gave different decisions on the reasonableness of the switch. Of significance was the decision by one of the costs judge who found that the decision to switch was made in the absence of important advice being properly provided to the claimants - specifically with regard to the loss of the Simmons v Castle  uplift of 10% of general damages.
The Court of Appeal was asked to determine whether the switch of funding gave rise to costs which were reasonably incurred – which involved looking at the reasons why the claimant incurred the costs.
The Court of Appeal held that if the advice on why a litigant should switch funding was not sound, the reasonableness of the decision could be tarnished.
In this case, the court was satisfied that the claimants had not been given a fair appraisal of the options and held that the advice provided to the claimants had:
- Exaggerated (and in two cases misrepresented) the disadvantages of remaining with legal aid funding.
- Omitted entirely any mention of the certain disadvantages of entering into a CFA.
- Enhanced Irwin Mitchell’s own prospective entitlement to a substantial success fee.
Accordingly, the court agreed the switch was not a reasonable one. The extra cost faced by the defendant as the paying party could not be justified and the claimants could recovery their base fees only.
This is an important decision – not only to healthcare providers but to all potential compensators. Whilst the outcome will, as is always the case, turn on the specific facts, compensators will welcome the clarity around their strength of position in those instances where liability has been admitted and there has been a switch in funding.
Defence practitioners have long been frustrated by the tactic of switching funding in circumstances where the real beneficiary appears to be the legal representatives rather than the claimant himself. The Court of Appeal rightly recognised that such motivation can place a “crushing burden of costs” on defendants.
Whilst the tail of cases which switched from legal aid to CFA will diminish in time, a significant amount of money is still involved.
Those giving counsel to an injured party must ensure complete transparency over the funding options available and be prepared to demonstrate that their advice was full and sound. It is hoped that this practice will ensue more widely than has been experienced to date and in turn help control legal costs, particularly in the field of clinical negligence claims.