Changing horses

Steven Davies reports on the ramifications of changing funding from legal aid to a conditional fee agreement

In the eagerly awaited decision of Hyde v Milton Keynes Hospital NHS Foundation Trust [2017] EWCA Civ 399, the Court of Appeal has clarified the position in a long-running case where there was a change of funding from legal aid to a conditional fee agreement (CFA) but the legal aid certificate was not formally discharged.

This was one of a number of recent cases in which changes in funding were more closely examined, particularly where the claimant’s solicitor chose to act in March 2013, the month before the Legal Aid, Sentencing and Punishment of Offenders Act 2012 came into force.

In this case, however, the timing appeared simply to be coincidental; rather, there were many fact-specific issues which were significant in deciding the reasonableness of the change of funding in this case.

Liability had been agreed in the case, though quantum investigations were ongoing. In November 2012, the Legal Services Commission (LSC) refused to increase the funding limit on the claimant’s legal aid certificate. Her solicitors unsuccessfully attempted to persuade the LSC to change its decision. Consequently, the claimant and her solicitors entered into a CFA on 25 March 2013 and took out an after-the-event insurance policy dated the following day.

There was no application to discharge the certificate, but the claimant’s solicitors served a notice of funding upon entry into the CFA. It was the defendant’s case that the claimant would be unable to recover the additional costs following the CFA and as such this was more akin to ‘topping up’ – seeking more money than entitled to under legal aid.

At first instance, Master Rowley suggested that where it was clear that public funding would not cover the entirety of a case, a decision to change to another option “must be a reasonable step to take”.

On appeal, the High Court upheld Master Rowley’s decision, with Mr Justice Soole stating: “Whilst the correct and wise procedural course would have been to obtain a discharge of the certificate, the position was in substance the same as if the authorised funds had been completely exhausted.

“The funds were approaching exhaustion, the LSC had refused further funding and the case could only proceed if alternative funding were obtained.”

Soole J found that the solicitors’ advice to enter into a CFA was “entirely reasonable and proper”.

The court also considered whether the position would be different where the authorised funds were ‘approaching’ exhaustion and the solicitor reasonably concluded that the necessary work could not be carried out without alternative funding. In Soole J’s judgment, it was not.

On further appeal, the Court of Appeal again upheld the earlier decisions. Lord Justice Davis said: “As a matter of reality and substance, the CFA had for all purposes replaced the previous public funding.

“The crucial fact was not, in my view, the solicitors’ own assessment that the work thus far done had reached, or was approaching, the limit set by the LSC. That would not of itself, I accept, cause the certificate to be spent.

“That, however, was simply the motivation for, and reason for, what here was, as I see it, the crucial fact: namely the entering into the CFA.

“The absence of a certificate of discharge, in such circumstances, was evidential: not conclusive. It is quite plain, as the costs judge found on the facts of this case, that the CFA was designed and understood entirely to supersede for all purposes the public funding of the claim.

“As [counsel for the claimant] put it, there had been a ‘definitive switch’. There was no prospect of topping up in such circumstances.”

Ultimately, it was determined that the CFA allowed recovery of base costs and additional liabilities, despite the legal aid certificate not being discharged. Essentially, it was discharged by the claimant’s conduct.

The ruling was perhaps unsurprising. The decisions at first instance and the High Court were sound in their reasoning and applied a common sense logic to the facts as they presented themselves. The case, however, should be considered relatively fact specific, particularly bearing in mind the comments of Lord Justice Davis himself: “In my opinion, the costs judge and Soole J reached the right conclusion, given the circumstances of this particular case.”

The case also follows a number of other decisions where the courts have shown a degree of sympathy to claimants changing funding where they entered into a CFA shortly before LASPO.

Steven Davies is a Council member of the Association of Costs Lawyers and is Head of Costs at the Medical Protection Society.

 

This article first appeared in the New Law Journal in July 2017.

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02 Aug 2017

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