A London firm has failed to persuade the High Court to overturn a judgment depriving it of £1m in costs.

In XDE v North Middlesex University Hospital Trust Mr Justice Jay supported a cost judge’s assessment that clinical negligence specialist Bolt Burdon Kemp had acted unreasonably in switching the funding of a case. The firm had appealed the decision of Master Rowley to disallow its success fees and ATE premium after the firm changed from legal aid funding to conditional fee agreement. 

Jay J said the Master made an appropriate evaluation when he inferred that ‘no obvious effort’ had been made to keep within the original funding agreement. BBK, said the judge, was ‘bound by’ rather than ‘beholden’ to its legal aid contract, and its application for more funding was ‘improperly constituted and inadequately formulated’.

The underlying claim was for a delay in the diagnosis of meningitis where liability and a ‘very substantial’ sum of damages had been agreed.

But the Master took issue with the funding arrangements after the firm discharged its legal aid certificate in May 2012 before entering a conditional fee agreement five months later.

The court heard costs had been limited to £55,480 in January 2009, and in 2011 the firm asked for an additional £10,000 to cover extra work. On discharging the legal aid certificate, the firm said an increase in funding could not be approved and it would be unable to progress the case to the end of the next stage within the current limit.

But the Master decided that ‘alarm bells’ should have run long before the firm asked for extra funding, and the 2011 request was ‘plainly inadequate’. He added that the litigation friend’s lack of involvement in the decision was ‘fundamental as a defect’.

The claimant firm said its case was different to that in Surrey, where Irwin Mitchell had been stripped of costs after changing to a more profitable regime ahead of costs reforms. BBK said it did not give misleading advice, was not self-serving, and had still been disputing causation. In any case, CFAs brought security and autonomy of funding and greater costs protection. The defendant said there had been no explanation for the overspend prior to 2012 and a ‘half-hearted’ attempt to secure more finance in 2011.

In a statement following the judgment, BBK said: 'The test as laid down in Surrey v Barnet and ultimately applied in XDE imposes a retrospective set of rules which were not obviously applicable at the time these decisions and advices were made. There is inherently some injustice in applying new standards to past events retrospectively but the law is seemingly rigid in this particular situation.

'The way in which the NHS exploits technical challenges and the impact it is having has been recently reported here.

'This judgment marks yet another avenue which the NHS’s representatives, Acumension, are seeking to exploit on highly technical grounds with the ultimate aim of avoiding paying for costs which are incurred in pursuing justice for those most vulnerable in our society and whom have sustained the gravest of clinical injuries.

'Clinical negligence law firms rely on success fees to compensate those cases which lose, accordingly a success fee of this magnitude being avoided in the way in which it has sends a disheartening message as regards access to justice.

'It is of course seen as welcome news that the court at both levels in XDE accepted that this was not a case of Bolt Burdon Kemp making self-serving decisions and further that the advice given was done so in good faith.'