The Court of Appeal, on 16th March, reversed the decision of Foskett J in Surrey, AH & Yesil v Doncaster and Bassetlaw Hospitals NHS Foundation Trust  EWCA Civ 451. The three cases involved medical negligence claims where the funding was switched from legal aid to conditional fee agreements shortly before the LASPO reforms came into effect on 1 April 2013, wherein the recovery of success fees and ATE insurance premiums were restricted.
In a unanimous decision, it was held that Irwin Mitchell were not entitled to recover the success fees and insurance premiums from the Defendant on the basis that, as was the case in all three instances, the solicitors failed to advise of the 10 percent uplift in damages in accordance with Simmons v Castle, thereby, creating a doubt as to whether the decision to switch funding arrangements was a reasonable one; that doubt having to be resolved in favour of the paying party on a standard basis assessment.
The solicitors involved in each of the cases prepared witness statements explaining why they had advised the Claimant to switch from legal aid to a CFA. [It is worth noting that in each of the cases, at the time the funding arrangements were switched, the Claimants were already in receipt of legal aid and the defendants were, in principle, the paying party]. Among the reasoning the advice given to the client had [at 60] “exaggerated (and in two cases misrepresented) the disadvantages of remaining with legal aid funding; and had omitted entirely any mention of the certain disadvantage of entering into a CFA. Moreover, one of the advantages of entering into the CFA was Irwin Mitchell’s own prospective entitlement to a substantial success fee…This is a reflection of the fundamental principle of equity that where a person stands in a fiduciary relationship to another, the fiduciary is not permitted to retain a profit derived from that fiduciary relationship without the fully informed consent of the other”.
Lord Justice Lewison, in dissecting the costs judges and the judge’s decisions, determined that the costs judges had been correct in deciding that the receiving party had the burden of showing that the inadvertence in referring to the Simmons v Castle uplift would have changed the position, and that any doubt regarding the same was to be resolved in favour of the paying party. This was different to the approach adopted by Judge Foskett, wherein, he placed the burden on the paying party to demonstrate that the decision would have been different had the uplift been referred to. He went on to state that the comparison that the judge made between the overall damages claim and the Simmons v Castle uplift was not the right one…“The right comparison was one between the amount of costs for which the individual claimant might have been liable on the facts of the particular case, balanced against the amount of the Simmons v Castle uplift, as DJ Besford correctly held”.
The judgment signals a huge win for the Defendant resulting in enormous savings across the board. Conversely, the ramifications for a number of firms who have entered into similar agreements, without fully advising the client, will be significant and perhaps, in some instances, damning.