A question of reason says XDE v North Middlesex University Hospital Trust  EWCA Civ 543
Court of Appeal upholds High Court decision in XDE v North Middlesex University Hospital Trust  EWCA Civ 543.
Back in July 2019, we reviewed the case of XDE v North Middlesex University Hospital Trust  EWHC 1482 (QB).
The claim arose from a delay in the diagnosis of the Claimant’s meningitis with devastating consequences. The issues of liability and causation were concluded by agreement in July 2016 on the basis of a 98%/2% apportionment. Following the agreement in respect of liability, the issue of quantum was compromised for a substantial sum.
The Claimant’s Bill of Costs in connection with liability amounted to £1,008,053.73, including a success fee of £388,568.22. Whilst the Claimant’s ATE insurance premium was not claimed in the Bill of Costs, the Master’s ruling on recovery of the success fee dealt with this too.
The Defendant challenged the funding arrangements after the firm discharged its legal aid certificate in May 2012 prior to entering into a CFA five months later.
In this instance, the legal aid certificate had a costs limit of £55,480.00 at the prescribed legal aid hourly rates of £70 for a solicitor, £50 for junior counsel and £90 for senior counsel.
The Claimant’s solicitors applied for an increase of the total, but were refused unless and until the solicitors prepared a report dealing with various matters raised by the Legal Services Commission. The Claimant had the legal aid certificate discharged and switched to a CFA.
The Master decided that ‘with proper systems in place, which the Claimant claimed that it had installed…, alarm bells should have been set off as soon as the total bill approached the 80% threshold. In fact, they did not start to ring until December 2011’
The Master was critical of the Claimant’s conduct and commented this was ‘what 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. The LSC obliged and the client has entered into a CFA with a 100% success fee and associated ATE insurance as soon as the litigation friend was available to consider the documentation’.
Reference was made to the case of Surrey v Barnet & Chase Farm Hospitals NHS Trust  EWCA Civ 451 where the Claimant was unable to receive the additional liabilities.
The decision illustrated the tight grip the Court holds when attempting to turn ‘the Pre-LAPSO switch’.
The matter proceeded to the Court of appeal in front of Coulson LJ, Floyd LJ and Lewison LJ.
The grounds for appeal were as follows:
- the judge had been wrong to take as his premise the broad equivalence of CFA-lite funding and legal aid funding;
- Surrey had been based on a comparison between the two funding systems which assumed the loss of the Simmons v Castle uplift and so was of no application to the present case; and
- because a CFA-lite was “an objectively preferable method of funding”, and so obviously superior to legal aid, the actual reasons for the change in funding were irrelevant.
The Court broke down the appeal into four elements:
1 – The broad equivalence of identified in Surrey
2 – The reasons for the change.
3 – The alleged superiority of a CFA-lite
4 – Whether the hypothetical reasons can trump the actual reason the change in funding?
On the first issue, the Court found that there was a broad equivalence between legal aid and CFA-lite funding and the guidance in Surrey was of general application in assessing the reasonableness of the costs consequences of a change from one funding regime to another.
On the second issue, the Court found that the actual reasons for incurring costs were material. The court must look at the reasons that the client had for deciding to change funding, to see if they were reasonable in the particular circumstances of the case.
On the third issue, as to the alleged superiority of CFA-lite funding to legal aid and therefore because of that obvious superiority, it was unnecessary for the appellant to do any more to justify the change in funding, the Court found that this failed on every level.
On the fourth issue, Coulson LJ said the following ‘Whilst it seems to me that it would be wrong in principle to rule out entirely a factor that played no part in the decision-making process, it seems to me that an argument based upon such a factor faces two very high hurdles. The first is the weight of the authorities, which stress again and again the importance of the actual reasons for the change in funding. The second is the unlikelihood of such a situation arising in practice; the more obvious the reason for a change in funding, the more likely it is that such a reason will have occurred to the claimant’s solicitors at the time. If the so-called ‘obvious ‘reason did not occur to them or feature in their advice, that may well be because it was not so obvious, after all’.
The decision was upheld with the following closing remarks ‘The decision in Surrey appears to have worked well in practice. It stresses that, in general terms, there is little to choose between legal aid funding, on the one hand, and a CFA-lite arrangement on the other. In disputes about the recoverability from the paying party of additional liabilities where the funding has changed from the former to the latter, what matters is the reasonableness of the decision to change funding. That inevitably highlights the actual reasons for the change.’
Once again, despite his heavy demand, we once again turn to the services of the legal village’s most venerable resident ‘the reasonable person’.