Court Of Appeal Upholds Decision To Disallow £1m Additional Liabilities Following Funding Switch


The Court of Appeal has upheld the decision of both Master Rowley (costs judge) and Jay J on appeal to disallow additional liabilities in the form of success fees (for both solicitors and counsel) and ATE premium claimed in the sum of £1,078,972.72.

The decision centered on the reasonableness of the appellant’s decision to change funding from legal aid to a CFA and application of the decision in Surrey v Barnet and Chase Farm Hospitals NHS Trust [2018] 1 WLR 5831.

It had been held by Jay J that the solicitors had made no “obvious effort” to keep within the original funding agreement and were themselves culpable for the state of affairs which had resulted. Furthermore, the decision to discharge the certificate had been taken “without any discussion as to the appropriateness of the change” with the Litigation Friend.

“[w]hat can only be described as a half-hearted attempt to increase the certificate limit for a further short period … was made as a prelude to inviting the LSC to discharge the certificate…. it was incumbent on the solicitors to ensure that the case was run within the contractual costs limits: there was no evidence before the court to show how this case was ever expected to be funded within those limits.”

Giving the lead judgment on this second appeal Coulson LJ rejected an argument that a CFA was “an objectively preferable method of funding, and so obviously superior to legal aid” and that the actual reasons for the change did not matter. Nor did he accept that matters which did not form part of the decision making process could be taken into account in determining whether the switch was reasonable:

“the alleged superiority of CFA-lite, whatever the actual reasons for the change, was not an argument that was advanced before Master Rowley either. It appeared to arise for the first time in the Grounds of Appeal from the decision of the Master. It was rejected in short order by Jay J… The court cannot properly evaluate the reasonableness of the choice without having regard to what the client was told and why, what the background circumstances were, and whether any advice given was erroneous or self-serving. Moreover, it would be impractical to expect, at least as a matter of routine, that the costs judge or the district judge dealing with a costs assessment to embark on a significant counterfactual exercise in which the merits or otherwise of entirely hypothetical reasons for the change, thought up after the event and so not considered at the time, could be relied on to justify the reasonableness of the change that was actually made.”

He identified the actual reason for the change in this case, thus:

“The actual reasons for the change were found to be BBK’s unreasonable failure to limit their spending within the parameters imposed by the LSC. This was part of a wider monitoring issue at the firm. When they sought further funds, they did so in a way that Master Rowley described as “half-hearted”. They decided, without obtaining the instructions of the litigation friend, that they would move to a CFA-lite. Master Rowley found that, in all of this, they had behaved unreasonably. That finding of fact is not appealed.”

And concluded:

“there is no evidence here that, had the appellant’s litigation friend been advised about the features of CFA-lite in advance of any change, he would have chosen to discharge legal aid, which had been running for five years without any apparent problem, and switch to this new system. Nobody can say what the litigation friend might have done, other than perhaps to ask: “If CFA-lite is so marvellous, why have I been funded by way of legal aid for five years?” On that basis, therefore, the appellant has not discharged the necessary burden of proof: she has not shown on the facts that the change to CFA-lite was reasonable.”