The Court of Appeal has stripped a claimant firm of £270,000 in costs after dismissing its attempts to move cases to a more profitable regime ahead of costs reforms.
Defendants objected after Irwin Mitchell had switched three clients, with claims against different NHS trusts, from legal aid funding to conditional fee agreements in March 2013.
The legal aid certificates, which had been signed up to seven years earlier, were discharged just days before the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act came into force and the recoverability of solicitors’ success fees and ATE insurance premiums was abolished.
In S v Barnet and Chase Farm Hospital NHS Trust, AH v Lewisham Hospital NHS Trust and Y v Doncaster & Bassetlaw Hospitals NHS Foundation Trust, Lord Justice Lewison upheld the rulings of the original costs judges in each case, effectively saying clients were not given adequate advice about funding changes.
Lewison said: ‘The bottom line is that in each of the three cases the advice given to the client had exaggerated (and in two cases misrepresented) the disadvantages of remaining with legal aid funding; and had omitted entirely any mention of the certain disadvantages of entering into a CFA.’
Lewison said one of the advantages of entering into the CFA was Irwin Mitchell’s prospective entitlement to a substantial success fee, but this arrangement could not be made without the ‘fully informed consent’ of all parties.
The judge said that in each case, the claimant’s litigation friend was not told by solicitors that moving to CFA funding would result in them losing the benefit of a 10% uplift in damages. The defendants accepted their liability to pay the claimant solicitors’ base fees but objected to additional success fees and ATE insurance, which came to around £270,000 extra in total.
NHS Resolution said it noticed a number of law firms changing their clients’ funding arrangements before LASPO and considered this unreasonable.
Chief Executive Helen Vernon said the decision shows how important it is for claimants to be properly informed when it comes to their legal costs.
‘Having detected this issue and taken the decision to challenge it through the higher courts, we were able to save significant sums for the NHS whilst ensuring that claimants receive the compensation they are entitled to.’
A spokesman for Irwin Mitchell said the firm still believes the switches were reasonable and is considering its position on appeal.