Holly Tibbitts on Surrey v Barnet: Costs on switching from Legal Aid to CFA

In the case of Surrey v Barnet & Chase Farm Hospital NHS Trust [2016] EWHC Civ 1598 (QB), the High Court considered the correct approach to the recovery of success fees and ATE premiums where there had been a change from Legal Aid funding to a CFA shortly before 1^st April 2013.

The court heard three costs appeals brought by claimants who had been refused an award of their success fees and ATE premiums following a successful conclusion of their claims. In each case the claimants were left with severe disabilities as a result of clinical negligence, leading to very substantial settlements. The claims were initially funded by Legal Aid but shortly before 1^st April 2013 the litigation friends signed CFAs with their solicitors. It was accepted that the litigation friends were not advised that this would result in them not being entitled to the 10% uplift on general damages given effect in Simmons v Castle [2012] EWCA Civ 1039. This would have made a difference of at least £16,695 in one case and at most £28,000 in another.

At first instance the Defendants argued that the ATE premium and success fee should not be recovered because the decision to move from Legal Aid to a CFA was based on materially unreasonable advice. It was asserted that the reasonable person in the position of the litigation friends would have attached significant weight to the fact that the 10% uplift would be lost if they entered into a CFA. As costs were being assessed on the standard basis the burden was for the receiving party to establish whether a cost was reasonably incurred, and as it was unknown what decision would have been taken had proper advice been given the claimants had not discharged that burden.

On appeal Mr Justice Foskett considered the correct test to be applied. Following Wraith v Sheffield Forgemasters [1998] 1 WLR 132, he held that the court should consider whether the omission to refer to the 10% uplift would have made any difference to a reasonable claimant or his litigation friend in the circumstances prevailing in that case. However, this question must be seen in the context of the difference that the 10% uplift would have made to the overall claim. In these cases it would have added between 0.026% and 5% to the value of the claim. In claims where broad brush discounts are often given to take into account litigation risks, the judge considered that no reasonable litigation friend would have held out for the additional 10% of general damages in the kind of circumstances arising in each of these cases. He observed that in the vast majority of cases the failure to mention the 10% uplift would have made no difference applying the Wraith test.

The judge set down a new procedural approach to cases involving what he termed the “Simmonds v Castle 10% issue”:

1. In any case where the claimant has changed funding from Legal Aid to a CFA between 26^th July 2012 (the first judgment in Simmons v Castle) and 1^st April 2013, the claimant’s solicitors should say in the narrative bill whether the claimant or litigation friend was advised of the 10% uplift.
2. The court will go behind this statement only if there is a genuine issue as to whether it is accurate. Even if there is a genuine issue, a claimant or litigation friend should never be required to attend for cross examination and it would be difficult to anticipate a circumstance in which it would be helpful for the claimant’s solicitor to do so.
3. If the defendant wishes to argue that the change from Legal Aid to a CFA was unreasonable it must be included in its points of dispute. If the argument is pursued, the claimant’s solicitor must identify the value of the 10% uplift and reply as to why the decision was reasonable. If it is not obvious, the capitalised value of the agreed or court award must be made clear.
4. If the issue is to be decided at a detailed assessment hearing, the court should endeavour to decide it on the points of dispute, with there being consideration of oral evidence only in the most exceptional cases where there is some suggestion of impropriety.