Pre LASPO funding switch from Legal Aid to CFA reasonable? Yes, rules SCCO judge
Claimant permitted to switch to a CFA / ATE arrangement, despite their previously-obtained CLS funding certificate remaining in force
Hyde v Milton Keynes Hospital NHS Foundation Trust [2015] EWHC B17 (Costs)
Background
This costs dispute arose out of personal injury litigation between the parties, which settled (5) in the claimant’s favour once the defendant admitted liability (7).
The claimant’s funding was initially provided via a Community Legal Service (CLS) funding certificate (6). However, during the course of settlement negotiations (8 -11), the Legal Services Commission (LSC) refused to increase the claimant’s funding certificate limit (9). After failing to persuade the LSC to change its mind, the claimant and their solicitor entered into a CFA, as did the claimant and their counsel. The claimant also took out an ATE policy (9). Unusually, the claimant’s solicitor did not ask the LSC to discharge the funding certificate before the alternative funding regime was put in place (12). However, a N251 Notice of Funding was served on the defendant (38).
Dispute
This case focused on two issues. Firstly, the ability of the claimant and her solicitors to fund her personal injury claim via a CFA / ATE insurance policy without formally discontinuing her existing funding via a CLS funding certificate. Secondly, if the claimant was permitted make this funding change, whether it was reasonable for her to do so (1).
Legal arguments in this dispute initially focused on whether taking out a CFA / ATE without formally asking for the CLS funding certificate to be discharged meant the claimant’s solicitor was effectively seeking to “top up” their legal aid fees. This might have been regarded as being conduct unbefitting the profession (12 – 17). However, as Master Rowley made clear during the hearing, he did not regard this case as fulfilling this criterion, because there had been no element of deception (18).
The remainder of the dispute therefore focused on the consequences of the lack of formal notice of discharge of the CLS funding certificate. The defendant’s counsel argued that, although the notice of discharge was not required in every case, exceptions were tightly constrained (19 – 20). Conversely, the claimant’s counsel argued that the two previously identified categories of exceptions should only be regarded as examples of discharge by conduct, and that others were also possible – for example, in this case (22 -23). Specifically, if a matter was no longer “funded by the Commission”, it was argued that would be no prohibition on a private retainer (23). This argument, in turn, sparked a disagreement about whether the claimant’s legal aid limit had, indeed, been exhausted (26 – 27).
Decision
After dismissing the “topping up” argument (28), Master Rowley’s starting position was that “there are sound policy reasons for requiring a formal discharge of a legal aid certificate” – notably that it “gives clarity to the opponent about the ending of the costs protection as well as to the assisted person himself” (33). However, Master Rowley also noted it would not have been an attractive proposition for the claimant’s solicitor to continue to act without the protection of a CFA / ATE arrangement. To do so would mean that “if unsuccessful, all future works will be irrecoverable as against either the defendant or the LSC. Unlike a CFA, there would be no scope for a future success fee to compensate for the risking of fees. The experts’ fees would also be irrecoverable and would, it seems to me, almost inevitably fall at the door of the solicitor who instructed them. Given the risks and lack of any rewards this is an entirely unbalanced agreement in my view” (35).
Turning to the question of whether or not the claimant’s solicitor had discharged the CLS funding certificate by way of conduct, Master Rowley concluded that they had. “In my judgment, where a party has exhausted the costs that can be claimed under a certificate so that it is ‘spent’, they can in principle establish a discharge by conduct in the same manner as certificates in which all of the work up to a limitation of scope has been carried out. The effect of that discharge is to end the services funded by the LSC and enable a private retainer to fund the remainder of the proceedings” (39).
In relation to formalities of notification, Master Rowley concluded that serving of the N251 Notice of Funding (38) on the defendant had satisfied this requirement. However, he rejected the assertion made by the claimant counsel’s that notification was not required in any event. Instead, he ruled that notification was required, in order to deal with costs protection issues (40).
In terms of whether the claimant’s costs limitation had been breached, Master Rowley rejected the defence counsel’s suggestion that a precise finding had to be made. Instead, he took a broader view with regards to the work that had been undertaken, and was still required to be undertaken, in comparison with the costs limitations. On that basis, he concluded that “the work still required could not realistically be completed within the figures allowed for by the LSC (43). Master Rowley also suggested that, where a claimant and their solicitor had kept an eye on costs, and were aware of limitation problems, they should [not] be obliged to continue to use the certificate come what may” (45). In light of this conclusion, he ruled that the claimant was entitled to transfer to a CFE / ATE arrangement.