Kerry Underwood


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XDE v North Middlesex University Hospital NHS Trust [2020] EWCA Civ 543

the Court of Appeal upheld the original decision of the Costs Judge, itself upheld by the High Court, that on the particular facts of this case it was unreasonable to switch from legal aid to a Conditional Fee Agreement.

Consequently, the success fee and the After-the-Event insurance premium were not recoverable in this case, which predated the abolition of recoverability, except in very limited circumstances.

This was a clinical negligence case and I reported the decision of the Queen’s Bench Division of the High Court in my blog –


which was posted on 28 June 2019.

There is no new law in the Court of Appeal’s decision, but it is a detailed and useful analysis of the law in this area, which is essentially fact sensitive to each case, but lawyers will find this judgment useful in applying the law to the particular facts of any given case.

It also has a very detailed analysis – at paragraphs 62 to 88 of the issue of whether CFA-Lite, whereby the lawyer agrees never to charge the client more than is recovered from the other side, is inherently superior to legal aid.

The court found that that argument “fails at every level.”

As the Court of Appeal pointed out, there is always an inherent problem with this argument in the context of switching from legal aid to CFA-Lite, and that is that if CFA-Lite is inherently superior to legal aid, then why did the law firm advise and obtain legal aid in the first place, rather than going straight to CFA-Lite?

At Paragraph 82 of the judgment, the Court of Appeal referred to the irony of the court system now introducing, through the mechanism of costs budgeting, the sort of control of costs that used to be exercised by the legal aid authorities in legal aid work.

It saw that cost control as a valuable aspect of legal aid for a lay client “without what some see as the additional paraphernalia that goes with costs budgeting.”

It is very clear that the Court of Appeal has not got the slightest clue as to what the legal aid rates are – any idea that they are comparable to costs budgeted costs is laughable.

The statement at Paragraph 83 that:

“Control of the costs being incurred was in everyone’s interests, including those of the appellant.”

also shows a degree of ignorance by the Court of Appeal of legal aid rates.

They are so low that very few law firms indeed now do legal aid.

The logic of the Court of Appeal’s statement is to say that rates of, say, £5 per hour are in everyone’s interests.

Of course they are not, as no lawyer would work for those rates, just as very few good lawyers are now prepared to do legal aid work.

The significance of the Court of Appeal decision is its entirely valid point, that if CFA-Lite is so good, then why did the law firm go for legal aid for their client to start with?

The lesson here is that firms doing legal aid work will be subject to great scrutiny if they change the funding from legal aid to a Conditional Fee Agreement, even a CFA-Lite which involves the client in no expenditure at all.

Firms are perfectly free not to do legal aid, and the vast majority of firms now do not in fact carry out any legal aid work.

That avoids the problem as if the client wishes to instruct that firm, then it will not be on the basis of legal aid. Of course each client must be informed of the availability of legal aid at other firms and given the choice, just as a firm doing legal aid work must explain to a client that they can have it dealt with under a Conditional Fee Agreement.

These cases may become rarer as the driver here was the fact that under the Conditional Fee Agreement regime at the time the success fee and the full After-the-Event insurance premium were recoverable, if the switch was reasonable.

Now that recoverability has been abolished, with the exception of a limited element of the After-the-Event insurance premium in clinical negligence cases, defendants will have no incentive to challenge the switch.

Clients may still do so, but if they are not paying anything, because it is a CFA-Lite, then they will have no incentive to challenge anyway, especially as they have to achieve a 20% costs reduction to win, failing which they pay the solicitor’s costs of the Solicitors Act 1974 assessment. It is rather difficult to achieve a 20% reduction when the original bill is £0.

Although the Court of Appeal rejects the argument the CFA-Lite is inherently superior to legal aid, the effect of this decision is inevitably to drive even more firms away from legal aid.

The Court of Appeal was clearly swayed by the costs of the NHS, as the final sentence of the judgment reads:

It is a feature of cases like these which, if ignored, is likely to result in vastly increased financial liabilities falling on the NHS.”

That may be the case, but that is not actually the law. Any client, properly advised, is entitled to choose whatever funding method that client wants, and this was reflected in the case of

Campbell v. MGN Ltd [2005] UKHL 61

where Naomi Campbell, a very wealthy model, was allowed to recover the additional liabilities under a Conditional Fee Agreement, with the court rejecting the argument that she could have afforded to pay by the hour as having any relevance at all.

That must be the case here as well.

Lawyers need to be very careful of these matters. The reality is that in the current climate, the courts are likely to work very hard to achieve any costs savings for the NHS, even if the funding decision was reached 10 years ago.

This judgment was given on 23 April 2020.

Written by kerryunderwood

April 30, 2020 at 7:50 am

Posted in Uncategorized

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