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Published 18 February 2016
NHS Resolution (formerly the NHS Litigation Authority) has successfully challenged the transfer of funding from the Legal Services Commission (public funding) to a Conditional Fee Agreement arrangement backed up by After the Event Insurance in two cases recently, which has resulted in a £498,000 saving for the public purse.
Master Leonard, sitting as a Costs Judge in the Senior Courts Costs Office, heard both cases, which involved Claimant’s solicitors transferring funding from LSC public funding to CFA/ATE funding. He has held in both cases, that the decision to abandon public funding was not reasonable and nor were the advices provided to both Claimants by their respective solicitors.
In Arianna Ramos v Oxford University Hospitals NHS Foundation Trust, a case involving Slater and Gordon Solicitors, NHS Resolution objected to paying additional liabilities (a success fee and ATE premium totalling £261,000) arising out of the decision of the Claimant in February 2013 to change her funding from LSC funding to a CFA/ATE arrangement.
The decision to change funding occurred just prior to the amendments to the Civil Procedure Rules and Practice Directions which removed the right of recoverability of a success fee (up to 100% of the base costs incurred), and the cost of ATE premiums (except for the risk of obtaining expert evidence on liability and/or causation) from the unsuccessful party.
In setting out the principles to determine the issue, Master Leonard said in the Judgment: "A decision to choose a CFA/ATE arrangement rather than LSC funding (where available) must have been a reasonable decision. If it was, then the additional cost attendant on that choice will (insofar as reasonable in amount) be recoverable from the paying party. If not, then CPR 44.4 will preclude recovery of the additional costs unreasonably incurred. In Kai Surrey Master Rowley also put some emphasis of the importance of a decision being made on a fully informed basis."
When applying those principles to the specific facts of the case, Master Leonard concluded that:
The Master decided that the decision in February 2013 to abandon LSC funding was not made on the basis of adequate advice, and that it was not made on a fully informed basis; that it was more to the Claimant's disadvantage than to her advantage and it was not a reasonable decision. He ruled the success fee and ATE premium were irrecoverable as a consequence against the Defendant.
In Oliver Davis v Wiltshire Primary Care Trust, a case involving Wolferstans Solicitors, the Claimant had changed from LSC funding to CFA/ATE insurance in 2009, well before any changes to the recoverability of success fees and additional liabilities was mooted (the success fee and ATE premium totalled £237,000).
In fact, the change from public funding to CFA/ATE funding had occurred prior to service of the Letter of Response in which admissions of breach of duty and causation were made!
Master Leonard, in reaching his decision:
In conclusion, the Master determined the switch from public funding to a CFA backed by ATE insurance in November 2009 was not a reasonable decision, nor to the Claimant's advantage. As a consequence, he disallowed both the success fee and the ATE premium in full, which otherwise would have been payable by the Defendants.
Both these decisions handed down in the early part of 2016 highlight the need for Defendants to challenge transfers of funding from public funding to CFA/ATE insurance. In both cases, the Defendant’s solicitor placed the Claimant’s firm on notice that the transfer in funding would be challenged.
Both decisions identify shortcomings in the advice provided by Claimant’s solicitors to their clients, such as to render the transfer of funding unreasonable. Both carried potential risks to the Claimants that outweighed any benefit.
Given the financial advantages to Claimant’s lawyers in entering into pre 1 April 2013 CFAs, enabling recoverability of success fees of up to 100% of base costs against unsuccessful Defendants, there was clearly a commercial incentive on the Claimants' lawyer’s part to proceed by way of CFA/ATE.
There are still a significant number of claims that continue to proceed at present under pre 1 April 2013 CFAs. The mechanics upon which these CFAs have been entered into should continue to be scrutinised closely.
NHS Resolution was represented by Acumension and DAC Beachcroft LLP Winchester.
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