Surrey v Barnet And Chase Farm Hospitals NHS Trust

Whether litigation costs were reasonably incurred is a case-specific question. The court may examine why the receiving party chose the relevant course, including the advice received. Where an already legally aided claimant changes to a CFA and ATE insurance after the defendant has become the prospective paying party, the receiving party must justify that change.

On a standard-basis assessment, any unresolved doubt favours the paying party. Advice which exaggerates the disadvantages of legal aid, or omits the certain loss of a damages uplift, may therefore prevent recovery of the resulting success fee and insurance premium. The court must compare any certain loss with the properly evaluated risks arising in the particular litigation. An appellate court may not replace a costs judge’s reasonable evaluative judgment merely because it would assign different weight to a relevant consideration.

Three claimants pursued clinical negligence claims with legal aid. Before 1 April 2013, after the defendants had become prospective paying parties, their solicitors advised them to replace legal aid with CFA-lite agreements and self-funding ATE insurance. The changes preserved recovery of success fees and insurance premiums from the defendants, but caused the claimants to lose the 10 per cent general-damages uplift established in Simmons v Castle.

The costs judges held that the changes had not been shown to be reasonable and disallowed the success fees and premiums. Foskett J allowed the claimants’ appeals in [2016] EWHC 1598 (QB), reported at [2018] 1 WLR 499. The NHS trusts brought second appeals.

The central questions were whether the costs judges were entitled to examine the reasons and advice underlying the funding changes, and whether Foskett J had been entitled to reverse their evaluative judgments.

1. The appeals were allowed unanimously. Whether costs were reasonably incurred required an objective assessment within the circumstances of each particular litigant and case. A generic comparison of the advantages of legal aid and CFA funding could not answer that question. The costs judge was entitled, and would often need, to examine why the receiving party incurred the costs, including any advice which supplied the reasons for the choice.

2. Where a claimant already had legal aid and changed to a substantially more expensive arrangement for the paying party, the receiving party bore the burden of justifying the change. The choice did not have to be the best choice, but it had to be reasonable. On a standard-basis assessment, any doubt had to be resolved in favour of the paying party.

3. The advice in all three cases exaggerated the disadvantages of remaining legally aided and omitted the certain loss of the 10 per cent damages uplift established in Simmons v Castle [2012] EWCA Civ 1039. In two cases, the advice suggested that legally aided clients might have to make up shortfalls in their solicitors’ costs, although such topping up was unlawful. In the third, the advice incorrectly stated that the legal-aid costs limit was about to be reached and that further funding had been refused.

4. The possible consequences of a Part 36 offer were risks requiring case-specific evaluation. They comprised the cumulative possibilities that an offer would be made, rejected on advice, followed by a trial, and not beaten at trial. Those risks had to be balanced against the certain loss of the damages uplift. The receiving parties had not shown that properly informed litigation friends would still have changed funding.

5. The medical informed-consent analogy drawn from Montgomery v Lanarkshire Health Board [2015] UKSC 11 was a distraction because that case concerned the scope of a doctor’s duty rather than the reasonableness of a patient’s decision. That did not invalidate examination of the litigation friends’ reasons or use of materiality when evaluating the advice.

6. Foskett J had not applied the proper appellate standard. The costs judges had stated the correct test and reached evaluative decisions within the range reasonably open to them. Questions about the weight assigned to relevant matters belonged to the primary decision-makers. The judge had also reversed the burden of proof by asking whether fuller advice would have changed the decision, rather than whether the receiving party had shown that the same decision would have been made.

7. The ATE premiums could not be severed from the success fees. Both formed part of the indivisible funding package adopted when legal aid was abandoned. The costs judges’ orders disallowing those additional liabilities were restored.

1. Court of Appeal (Civil Division): The NHS trusts’ second appeals were allowed unanimously. Foskett J’s decision was reversed and the costs judges’ disallowance of the CFA success fees and ATE premiums was restored: [2018] EWCA Civ 451.
2. High Court, Queen’s Bench Division: Foskett J, sitting with Senior Costs Judge Gordon-Saker as assessor, allowed the claimants’ appeals from the costs judges: [2016] EWHC 1598 (QB); [2018] 1 WLR 499.
3. Costs judges: Master Rowley, Deputy Master Campbell and District Judge Besford respectively held that the changes from legal aid to CFA-lite funding with ATE insurance had not been shown to be reasonable. They disallowed the success fees and insurance premiums.