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Costs: Claimant penalised for change from legal aid funding to CFA

  • 20 May 2020 20 May 2020
  • UK & Europe

  • Insurance & Reinsurance

The Court of Appeal has rejected an appeal from a Claimant seeking to recover a success fee and ATE premium in a clinical negligence case. The Claimant’s solicitors had switched from legal aid funding to a conditional fee agreement (CFA), yet there had been no involvement of the Claimant’s litigation friend in making that decision.

Costs: Claimant penalised for change from legal aid funding to CFA

XDE v North Middlesex University Hospital NHS Trust [2020] EWCA Civ 543

This decision was found to be unreasonable by the Court of Appeal, effectively denying the Claimant recovery of a success fee and the after-the-event insurance premium (ATE). The change had not been made because of any tangible benefit to the Claimant, rather that the solicitor had exceeded the legal aid budget, and would likely have been unable to secure an increase.


The Claimant pursued a clinical negligence claim, and first instructed a firm of solicitors in May 2002. In February 2006, the Claimant instructed her second firm of solicitors. Although the claim was initially commenced on a private funded basis, then a CFA with second firm of solicitors, as the firm had a legal aid franchise there was an expectation that the Claimant would apply for legal aid, which was subsequently applied for and a legal aid certificate provided

The Claimant's solicitor made a request for further funding when medical reports were being obtained. The Legal Services Commission (LSC) advised further funding could not be agreed but recommended making a formal request for funding.

The solicitor wrote to the Claimant advising that a letter had been sent to the LSC recommending the certificate be discharged so alternative funding could be arranged. The Claimant was switched from legal aid to a CFA-lite. It was accepted that the Claimant was not given a choice in this.

The Claimant's solicitor appealed two previous decisions whereby the judges had ruled that the success fee and ATE premium were not recoverable.

On first hearing, Master Rowley concluded that "it cannot be a reasonable decision to change a funding simply because no obvious effort has been made to run the case within the original funding agreement". He found that the case had been run “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." He did not allow the Claimant to recover the success fee and ATE premium.

On first appeal, Jay J dismissed the Claimant's appeal, upholding the decision of Master Rowley. He found that the "real or operative reason" for the change in funding was that the money available through legal aid had run out. Master Rowley had concluded that the Claimant's solicitors had acted unreasonably, and these were "appropriate evaluative assessments which could not be impeached on appeal."

Court of Appeal

Before the Court of Appeal, the Claimant attempted to distinguish the case from the decision in Surrey v Barnet, where the claimants had been given advice on funding that exaggerated the disadvantages of remaining with legal aid funding whilst not taking into account the disadvantages of entering into a CFA.

The Surrey decision had been reached after the introduction of the Simmons v Castle uplift was introduced, whereas the Claimant's case was brought before this change.

The Claimant also advanced a further argument in this appeal that CFA-lite was "an objectively preferable method of funding" and "obviously superior to legal aid" meaning that the actual reasons for the change in funding were irrelevant.

The Defendant countered that this argument had not been made at the original hearing before Master Rowley and had not been the actual reason for the change in funding.

Giving the lead judgment, Lord Justice Coulson found that the reasons for the change in funding were unreasonable and it was right that the success fee and ATE premium should be disallowed.

Addressing the issue raised by the appeal, Lord Justice Coulson found as follows:

  • Surrey sets out the general approach to be taken in all cases involving a change of funding, and is of “particular application where the change was from legal aid to CFA.”

  • The reasons for the change in funding were unreasonable. The Claimant’s solicitor “knew she would not get an increase in that [legal aid] budget because she could not show a good reason for the increase.”

  • In respect of the submission that CFA-lite funding was preferable and objectively superior, Coulson LJ found this submission failed “at every level", and noted the views of the costs judges in Surrey who found "there was little to choose between the two funding regimes."

The Claimant's appeal was therefore dismissed.

What can we learn?

  • The Court of Appeal made it clear the Surrey case states that "there is little to choose between legal aid funding, on the one hand, and a CFA-lite arrangement on the other" and that "the decision in Surrey appears to have worked well in practice." Practitioners therefore should consider the decision in Surrey where funding arrangements are to be changed.

  • In cases such as this one where funding arrangements have changed "what matters is the reasonableness of the decision to change funding" which "inevitably highlights the actual reasons for the change."

  • The Court also considered the proposition that a valid objective hypothetical reason for changing funding could trump the actual reasons for doing so. This was considered to be an inefficient use of judicial resources in expecting judges to conduct such an exercise. In any event, Lord Justice Coulson held that the authorities stressed the importance of the actual reasons for the change, and that valid reasons for the change would be self-evident at the time, and should not require hypothetical consideration.


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