“In MGN v United Kingdom(2011) 53 EHRR 195 , para 197 of the majority judgment of the European Court of Human Rights … acknowledged that the CFA with recoverable success fees “sought to achieve the legitimate aim of the widest public access to legal services for civil litigation funded by the private sector”
“A costs order made in any proceedings may, subject in the case of court proceedings to rules of court, include provision requiring the payment of any fees payable under a conditional fee agreement which provides for a success fee.”
“Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in these proceedings, the costs payable to him may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy.”
“(1) Where the court is to assess the amount of costs (whether by summary or detailed assessment) it will assess those costs - (a) on the standard basis; or (b) on the indemnity basis, but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount. … (2) Where the amount of costs is to be assessed on the standard basis, the court will— (a) only allow costs which are proportionate to the matters in issue; and (b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party ….”
“The court is to have regard to all the circumstances in deciding whether costs were … [proportionately] and reasonably incurred ….”
“11.7 Subject to paragraph 17.8(2), when the court is considering the factors to be taken into account in assessing an additional liability, it will have regard to the facts and circumstances as they reasonably appeared to the solicitor or counsel when the funding arrangement was entered into and at the time of any variation of the arrangement. 11.8(1) In deciding whether a percentage increase is reasonable relevant factors to be taken into account may include: (a) the risk the circumstances in which the costs, fees or expenses would be payable might or might not occur; (b) the legal representative’s liability for any disbursements; (c) what other methods of financing the costs were available to the receiving party. … 11.10 In deciding whether the cost of insurance cover is reasonable relevant factors to be taken into account include: (1) where the insurance cover is not purchased in support of a conditional fee agreement with a success fee, how its cost compares with the likely cost of funding the case with a conditional fee agreement with a success fee and supporting insurance cover; (2) the level and extent of the cover provided; (3) the availability of any pre-existing insurance cover; (4) whether any part of the premium would be rebated in the event of early settlement; (5) the amount of commission payable to the receiving party or his legal representatives or other agents.”
“The second flaw is that the party with a CFA generally has no interest in the level of costs being incurred in his or her name. Whether the case is won or lost, the client will usually pay nothing. If the case is lost, the solicitors waive their costs and pay the disbursements, in so far as not covered by ATE insurance. If the case is won, the lawyers will recover whatever they can from the other side either (a) by detailed or summary assessment or (b) by negotiation based upon the likely outcome of such an assessment.”
“Recovery of insurance premiums by way of costs (1) A costs order made in favour of a party to proceedings who has taken out a costs insurance policy may not include provision requiring the payment of an amount in respect of all or part of the premium of the policy, unless such provision is permitted by regulations under subsection (2). (2) The Lord Chancellor may by regulations provide that a costs order may include provision requiring the payment of such an amount where - (a) the order is made in favour of a party to clinical negligence proceedings of a prescribed description, (b) the party has taken out a costs insurance policy insuring against the risk of incurring a liability to pay for one or more expert reports in respect of clinical negligence in connection with the proceedings (or against that risk and other risks), (c) the policy is of a prescribed description, (d) the policy states how much of the premium relates to the liability to pay for an expert report or reports in respect of clinical negligence (“the relevant part of the premium”), and (e) the amount is to be paid in respect of the relevant part of the premium ….”
“Accordingly, we take this opportunity to declare that, with effect from1 April 2013 , the proper level of general damages in all civil claims for (i) pain and suffering, (ii) loss of amenity, (iii) physical inconvenience and discomfort, (iv) social discredit, or (v) mental distress, will be 10% higher than previously, unless the claimant falls within section 44(6) of the 2012 Act ….”
“6. Ms Stanford-Tuck … relates that in February 2013 all “case handlers” were asked by partners in Irwin Mitchell to review their legally aided cases in light of the forthcoming changes being brought into effect by … [LASPO]. There was a concern that existing clients might potentially be adversely affected by the provisions of LASPO. 7. The specific question was asked of Ms Stanford-Tuck as to whether: “…there was likely to be sufficient cover to fund all of my cases until conclusion, including a trial or assessment of damages hearing. If it was considered by the fee earner that there was to be any future, potential difficulty with the funding of the case until conclusion; and further if the fee earner felt the Claimant would be in a better position with a CFA with ATE funding, then the advice was that funding should be switched in advance of1 April 2013 , in order to avoid the potential adverse [effects] of LASPO.”” “…there was likely to be sufficient cover to fund all of my cases until conclusion, including a trial or assessment of damages hearing. If it was considered by the fee earner that there was to be any future, potential difficulty with the funding of the case until conclusion; and further if the fee earner felt the Claimant would be in a better position with a CFA with ATE funding, then the advice was that funding should be switched in advance of1 April 2013 , in order to avoid the potential adverse [effects] of LASPO.””
“I also accept the observations of Mr Innes regarding the atmosphere in early 2013 and the endless debate about how to fund cases pre and post the implementation of LASPO.”
“… An adult person of sound mind is entitled to decide which, if any, of the available forms of treatment to undergo, and her consent must be obtained before treatment interfering with her bodily integrity is undertaken. The doctor is therefore under a duty to take reasonable care to ensure that the patient is aware of any material risks involved in any recommended treatment, and of any reasonable alternative or variant treatments. The test of materiality is whether, in the circumstances of the particular case, a reasonable person in the patient's position would be likely to attach significance to the risk, or the doctor is or should reasonably be aware that the particular patient would be likely to attach significance to it.”
“88. It seems to me that the test of materiality in this context is very similar. There is no evidence before me to indicate whether the claimant or his Litigation Friend would have considered the abandoning of up to£20,000 , which was more or less guaranteed, in return for peace of mind regarding future funding. They may have decided that the system that had apparently worked for 7 years was unlikely to break down in the final stages and they would rather have the money and risk the funding issues. They may have taken the view that QOCS protected them sufficiently not to incur an ATE premium. The possibilities for speculation are endless. What is certain however, is that the Simmons damages were of significance and so should have been explained to the claimant’s Litigation Friend so that informed consent to a change in funding could be given. The absence of any evidence from the Litigation Friend on this point, to my mind, speaks volumes. 89. In the absence of being informed of these issues it seems to me impossible to say that the claimant can have made a reasonable choice to change funding arrangements. Consequently, I find that the additional liabilities flowing from the new arrangements are unreasonably incurred and as such are not recoverable from the defendant.”
“64…in the end the outcome drills down into a relatively short point on the facts. Was this claimant's choice objectively reasonable based upon the advice she was given by Irwin Mitchell, taking all relevant circumstances into account? 63. I conclude that it was not because it was premised upon advice that was more than merely “incomplete” … [a] very significant component was missing. What the client should have been told was that "if you move to a CFA you will forfeit immediately the right to an additional 10% of the general damages you recover, which we estimate could£175,000 , so as much as£17,500 ". It was therefore advice that was unreasonable. 64. As Mr Hutton points out, we do not know what the client would have said had the Simmons advice been given. It could have been "It is worth giving up£17,500 to have the certainty that under a CFA, I will be litigating in a risk-free costs environment in which I will keep all the damages". On the other hand, it could also have been "A settlement discussion has been opened over the telephone, an offer has now been made, we are very close, and£17,500 is a lot of money to give up. As it is, I have the protection of the legal aid certificate. Thank you for giving me this advice but let's play it safe and stick with what we have got as it looks as though we may be able to agree terms before long". 65. Irrespective, it was a material and important factor about which, as Ms Cumberland accepts, her client should have been told. 66. That is not conclusive for the defendant however because Mr Marven submits that materiality is not part of the reasonableness test and, with respect, he is critical of Master Rowley's decision in Surrey. He contends that the limit of the test is to decide whether the cost was reasonably or unreasonably incurred. Mr Hutton's riposte is that materiality is all. If the extra 10% would have been but a few hundred pounds, that would have been immaterial but where, as here, the sum in question could have been as much as£17,500 , that was a figure to which the client would have attached significance, and was, accordingly, material. Put another way, the amount in question might have made the client's mind up for her and was therefore material. That is the reason why the cases upon which Mr Hutton relies all focus on the adequacy of the advice and if the client relies on it, then it is material. 67. I agree with Mr Hutton on this issue for the reasons he has given. The Simmons v Castle point was a factor which might have tipped the balance of choice one way or the other had the claimant known about it. It follows in my view that a component which is capable of influencing an outcome must be one that is material to the decision that is taken, in the same way that one that is incapable of doing so because it is immaterial, is not. By way of example, had the extra 10% been£175 and not£17,500 it would have had no bearing on the client's decision because it was de minimis, but where, as here, it could have been as much as£17,500 , it is likely to have been a factor, if not the factor, critical in persuading the claimant whether or not to move from legal aid to a CFA. The reason? The 10% was material to her choice. I accept Mr Hutton's submission on this point. It follows that the claimant’s decision, based as it was upon advice that was flawed in a material way, was not objectively reasonable and the claims for the success fees and ATE premium therefore fail.”
“The same question is I believe relevant to a solicitor. Would a reasonable client believe that the information was significant and relevant? Where a claimant pursues a claim for financial compensation, the issue of an additional£20,000 plus is I believe a significant piece of information.”
“80. On the point of advice, [Counsel for the claimant] argued that the failure of the solicitor to give material advice was not relevant to the consideration as to whether this decision was reasonable. If the advice was deficient, or even negligent then that was an issue between the solicitor and claimant. 81. I accept that it is not necessary for the solicitor to slavishly go through each and every option or scenario. Furthermore, clients are entitled to receive advice that ‘leans’ one particular way. That is the reason they consult professionals, not for them to ‘sit on the fence’. However, even where the solicitor ‘leans’ one way, the client is entitled to have some understanding as to why. In my judgment it is inconceivable that a client would not consider the option of an additional 10% uplift on general damages a material factor. The omission to raise this factor, even if the claimant immediately rejected it, seriously calls into question the adequacy of the advice given. Irwin Mitchell would appear to have been not so much ‘leaning’ one way, as giving advice tailored to a decision they had already made. Where one of two or more options available to a client is more financially beneficial to the solicitor, the need for transparency becomes ever greater. 82. Whilst there may be reasons to switch, as I have commented there are equally reasons not to. Further, the choice was not necessarily limited to a choice between Legal Aid and a CFA especially when the existing limit of Legal Aid funding had not been exhausted. For the reasons set out in Surrey when having regard to the additional 10% available, a post LASPO CFA may not have been unreasonable. 83. The limited evidence available to the court from Irwin Mitchell would suggest that the primary reason for the switch was based upon erroneous information. Whilst a decision to switch may be reasonable if funding had been or was shortly to be exhausted, it does not follow that absent that reason the decision remains reasonable. On a standard basis, without cogent evidence that the decision to switch from one type of funding to another was a reasonable decision, then a doubt is raised which should be exercised in favour of the paying party. 84. Further, there was no suggestion prior to the review that a switch was appropriate or necessary. Irwin Mitchell argued that LASPO prejudiced the client in not being able to recover the additional liabilities, hence the need to switch prior to April 2013. However that presupposes that a need to switch from Legal Aid would arise in the future. The action was well advanced and on the agreed Legal Aid figures it was unlikely that any need to switch would arise for funding reasons. 85. Further, any shortfall for solicitor/client work would need to be weighed against the additional 10% which was introduced with the intention to offset any such prejudice. 85. Whilst [there] may possibly be risks that the claimant may have to pay something out of his damages, the available evidence from Irwin Mitchell is not sufficiently real to justify the loss of substantial additional benefits. The reality may well have been that the additional damages received may have more than met any deduction. The risk of exceeding the Legal Aid budget was minimal and there is a lack of particularity of the ‘other circumstances’ referred to in the witness statement. Again as Master Rowley stated in Surrey, ‘The possibilities for speculation are endless’ 86. In my judgment, I find myself entirely in agreement with Master Rowley in Surrey. It is for the claimant on a standard basis to show that the decision to switch funding, at the time it was made was a reasonable decision to take. The limited evidence before the court to explain the decision was based on an erroneous premises that the cost limit was shortly to be reached. Further, the solicitors have produced no evidence either by way of file notes, copy letters or even a witness statement from the client as to the advice tendered. In my judgment, the decision to switch was not self-evident or transparent.”
“On a taxation of costs on the standard basis there shall be allowed a reasonable amount in respect of all costs reasonably incurred and any doubts which the taxing officer may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the paying party …”
“… in deciding whether such an objection is sustainable in practice, the focus is primarily upon the reasonable interests of the plaintiff in the litigation so that, in relation to broad categories of costs, such as those generated by the decision of a plaintiff to employ a particular status or type of solicitor or counsel, or one located in a particular area, one looks to see whether, having regard to the extent and importance of the litigation to a reasonably minded plaintiff, a reasonable choice or decision has been made ….”
“It seems to me that the conclusion that one can properly reach from the judgment of Kennedy L.J. is that, whereas it is clear that the test must involve an objective element when determining the reasonableness or otherwise of instructing the particular legal advisers in question, nonetheless that must always be a question which is answered within the context of the particular circumstances of the particular litigants with whom the court is concerned.”
“We have no doubt that, if a claimant possesses pre-existing BTE cover which appears to be satisfactory for a claim of that size, then in the ordinary course of things that claimant should be referred to the relevant BTE insurer.”
“[Counsel for the claimant] submitted that the test of the adequacy of a solicitor's inquiries and advice should be the same as the test applied when determining whether a solicitor has been professionally negligent. Thus the client would either recover the cost of the premium or have a claim against his/her solicitor for breach of duty. We deprecate any attempt to equate the question of reasonableness that a costs judge has to decide with the question whether the claimant's solicitor has been in breach of duty to his/her client. If a solicitor gives advice which proves unsound, it will not necessarily follow that the advice was negligent. The advice will necessarily be based on information provided by the client. If the information is inadequate or inaccurate, the advice may prove to be unsound without any question of fault on the part of the solicitor.”
“The replies state that the “process of securing legal aid funding for every step became more complex and cumbersome, which would have impeded the progression of the Claimant’s case…”
“… I explained the disadvantages of continuing the Legal Aid. The irrecoverable statutory charge costs will be considerable because of the need to prepare costed case plans and deal with the other increasingly bureaucratic procedures that are being required by the Legal Services Commission. The Legal Services Commission can be slow in approving increases to the scope and cost limitation that can lead to delays ….”
“… To be frank, we have a fairly strong preference for working under a conditional fee agreement rather than Legal Aid simply because of the administrative difficulties for us in dealing with the Legal Services Commission who are not very efficient and who are increasingly bureaucratic in their approach. We are not alone in this. Most solicitors are very frustrated by their dealings with the Legal Services Commission.”
“The freedom from bureaucracy if it existed was a benefit to the solicitor not the client.”
“Was the CFA and the attendant ATE policy a reasonable choice for the claimant at that time, having regard to all the circumstances?”
“103. The claimant purchased a LitigATE policy underwritten by Allianz and for which Irwin Mitchell have delegated authority. It is a block rated policy and so needs to cater for cases which have barely started as well as cases such as this one, where liability has been conceded and the risks have reduced. 104. Mr Hutton sought to persuade me that I should not take Rogers v Merthyr Tydfil County Borough Council[2006] EWCA Civ 1134 as a bar to considering the reasonableness of the premium. Mr Hutton relied on the decision of HHJ Holman sitting in the Manchester county court in the case of Beasley v St Thomas’s Priory Golf Club (21 August 2008 ). It is one example of cases where the judiciary have felt themselves able to take a different view from the underwriter notwithstanding the exhortations of the Court of Appeal in Rogers (quoting Lord Hoffman in Callery v Gray[2002] UKHL 28 ) that costs judges should be cautious about taking any contrary view, other than in broad terms. 105. I have no doubt that I can take a contrary view to the underwriter if the risk assessment or the level of cover has manifestly resulted in an overly high premium being claimed. But Rogers is very clear authority that the court should be slow to adjust block rate premiums in particular. There are inevitably swings and roundabouts with such premiums and it is not appropriate in my view to be trying to deconstruct the premium here in the way that Mr Hutton sought to persuade me to do. 106. The only aspect which demands some scrutiny is the level of cover which is£500,000 . That is considerably higher than the usual block policy in my experience. It also provides, in my view, considerably more cover than can be required in the great majority of cases. It is well known that the higher levels of cover cost little in terms of premium compared with the cover at the bottom since the higher levels are rarely called upon. It is also well known that one of the purposes of setting a higher level of cover than would be needed in most cases under a delegated scheme is in order to make it administratively simpler. 107. I was referred to the case of Finney v Secretary of State for Health, a case heard on4 February 2015 in the County Court at Hull by District Judge Besford who is a regional costs judge. DJ Besford was persuaded that the level of cover was appropriate. However, he interpreted the wording of the policy to mean that only a stage 3 premium was payable which was£31,800 rather than the£50,681.78 claimed. 108. The circumstances of this case and the case of Finney are identical in that the policy was taken out after liability had been concluded. I do not consider that the policy wording deals with this situation. The description of the start date, in my view, only contemplates a policy being taken out at the beginning of the claim. I regret to say that I do not entirely follow why DJ Besford considered that the policy leapt straight into stage 3, nor that the premium for the earlier stages was not also recoverable. 109. Be that as it may, it does seem to me that the premium allowed by DJ Besford would be a reasonable and proportionate sum to allow in this case. I do not think that it was reasonable to take out a level of cover more than around£250,000 on a block rated basis. Higher levels of cover will be required by so few cases that to include such cover in every policy is not a reasonable cost in my judgment. Very few firms have delegated authority schemes above£100,000 and£250,000 is about the maximum of the policies that I have seen.”
“83. The premium is claimed at£18,881.78 , block rated. Stage two of three stages was reached. Mr Hutton argues that that figure is too high given that it produced a level of indemnity of£500,000 in circumstances were, for part of the claim, the claimant had costs protection under legal aid. He draws attention to the allowance by Master Rowley in Surrey, where the court decided that cover of around£250,000 on the block rated basis was appropriate. On a broad brush approach, Mr Hutton submits that£12,000 would be reasonable for the premium. 84. Mr Marven emphasises that stage 2 had been reached and that, with the expectation of a trial lasting 5 to 7 days, and several experts on both sides, the level of indemnity was realistic. Moreover, in Surrey, stage 3 had been reached, which is not position here. Finally, Mr Marven draws my attention to the authorities that the onus is on the paying party to produce evidence as to the unreasonableness of the premium (Kris Motor Spares Ltd v Fox Williams [2010] 4 Costs LR 620) and the court should be slow to adjust block rate premiums (Rogers v Merthyr Tydfil County Borough Council [2007] 1 Costs LR 77). 85. I agree with Mr Marven that when the premium is challenged, the paying party must produce material to support any attack on its level. Here there is none. That said, given the fact that the claimant had legal aid protection for the costs for part of the case, I consider there should be reduction to reflect this and also for the fact that at£500,000 , the level of indemnity was too high. I would allow£15,000 .”
“If an issue arises about the size of a second or third stage premium, it will ordinarily be sufficient for a claimant's solicitor to write a brief note for the purposes of the costs assessment explaining how he came to choose the particular ATE product for his client, and the basis on which the premium is rated-whether block rated or individually rated. District judges and costs judges do not, as Lord Hoffmann observed in Callery v Gray (Nos 1 and 2)[2002] 1 WLR 2000 , para 44, have the expertise to judge the reasonableness of a premium except in very broad brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces. Although the claimant very often does not have to pay the premium himself, this does not mean that there are no competitive or other pressures at all in the market. As the evidence before this court shows, it is not in an insurer's interest to fix a premium at a level which will attract frequent challenges.”