This document is often not provided during infant approval hearings where deductions are sought, despite being required by the rules: –
Part 21.12(10)(f) a copy bill or informal breakdown of the solicitor and own client base costs incurred;
A claim for a success fee deduction does not require a formal bill preparation, as stated in 11.3(4A). Regardless of whether the Claimant’s Solicitors intend to deduct from the damages for a successful outcome or a contribution to the shortfall (the difference between the costs received and the base costs incurred), they need to provide details of the incurred costs.
What is an informal breakdown (in the form of a schedule)?
While the White Book and CPR do not define it, CPR distinguishes between a copy bill and an informal breakdown. Therefore, it can be as simple as:
Base costs 20 hours @ £111 = £2,220
VAT @ 20% = £444
Total = £2,664
This allows the judge to review the hours worked and rates charged, providing an informal breakdown that improves the solicitor’s chances of receiving payment.
Why is a schedule of costs or informal breakdown important?
The success fee is calculated on the base costs, not the amount of damages. Prior to 2013 the success fee was recoverable from the Defendant and was calculated on the base costs, for example: –
RTA Base costs + VAT = £5,500
Success fee 50% + VAT = £2,750
Total costs = £8,250
The “cap” on general damages and past losses is a limit on the amount that can be deducted from the damages awarded to the Claimant. It is not used as a formula for calculating the success fee because the party cannot charge a success fee that exceeds the base costs that the Claimant is liable for (known as the “indemnity principle”). the damages.
For example, imaging an RTA claim settles for £3,000 at stage 2 with a 50% success fee.
| Damages | Fixed Costs | Base Costs |
| £3,000 (PSLA) | £600 (inclusive of VAT) | £1,800 (inclusive of VAT) |
25% of the damages is £750. That is the ‘cap’, the maximum that can be deducted from the Claimant’s damages.
As the success fee is 50%, the maximum success fee is £900 (50% of the base costs incurred). However, as the maximum you can deduct from the Claimant is £750, you cannot deduct the full £900.
Therefore, a Court must see at the very least, an informal cost schedule.
Imagine the same scenario, but base costs are £1,000 inclusive of VAT: –
| Damages | Fixed Costs | Base Costs |
| £3,000 (PSLA) | £600 (inclusive of VAT) | £1,000 (inclusive of VAT) |
With the 50% success fee the maximum success fee is £500 inclusive of VAT. Therefore, if you try to seek the full 25% deduction of £750 you are breaching the indemnity principle by £250 because the maximum success fee is £500.
In this situation, even though the maximum deduction can be £750, you can only deduct £500 (unless your CFA allows for the deduction of monies to contribute towards the shortfall – discussed later).
Therefore, the rules (and the Courts) are reluctant to allow deductions without a cost schedule.
The Court may still reduce the amount you can deduct from the Claimant’s deductions, because: –
- They may deem the success fee is too high (so for example they may say the risk from the outset did not warrant a 100% success fee, and reduce it to 20%)
- They may deem that the base costs are too high and are unlikely to be what a Judge would award if they were to assess the base costs by way of summary or detail assessment.
The second situation is less likely to be an issue because the rules allow for an informal breakdown. In my view, the Court is more concerned in making sure the Solicitors are not claiming a success fee purely on the basis that it amounts to 25% of the damages.
So now imagine that your client’s case proceeds to an IAH.
Damages are £6,000
Base costs are £2,000 inclusive of VAT
Success fee is 100%.
You file your informal schedule setting out the base costs incurred. 25% of the damages is £1,500. That is fine because if your success fee is 100% of your base costs (£2,000) so there is no breach of the indemnity principle. Even if your success fee was 75%, that would still be £1,500 so again, no breach of the indemnity principle.
The Judge at the hearing considers the risk assessment and determines that 100% success fee was wrong because the Claimant was a passenger in a car but recognises the other litigation risk and decides to allow a 50% success fee.
50% of your base cost is £1,000 inclusive of VAT. Therefore, the Court will not allow the full deduction of £1,500 because at a 50% success, you are only entitled to up to £1,000.
If the Court did not have the cost schedule, they would not be able to tell whether the deduction sought was not in breach of the indemnity principle. Therefore, not filling a cost schedule means you are more likely to end up with nothing.
Can’t the success fee be based on the amount fixed costs received?
The recoverable fixed costs under Part 45 were never intended to reflect the base costs. They were determined to be a reasonable sum for the likely work incurred. However unlikely success fees, fixed costs do not breach the indemnity principle (Butt v Nizami [2006] EWHC 159 (QB)). This means that if a firm has only done £900 worth of work, they can still receive £1,800 in fixed costs.
I had conduct of a holiday sickness case where I had six Claimants, had recorded around £5,000 + VAT of base costs in total for all six Claimants, but as each Claimant was able to recover £2,600 + VAT the amount of fixed costs we were entitled to recover in total was £15,960 + VAT!!!
This is the same reason why a Court should not calculate a success fee based on the fixed costs (with the exception to retainers that expressly state the base costs are calculated on the fixed recoverable cost regime – see below)
Imaging there is an IAH where the RTA claim settled at Stage 2: =
Damages are £8,000
Base costs are £800 including VAT
Success fee is 100%
The fixed recoverable costs £1,200 inc. VAT (Stage 1, 2, 3A, 3B and 3C). 25% of the damages will be £2,000. The Solicitors acting for the Claimant seek a success fee for £1,200 because they say that it is 100% of the costs recovered from the Defendant but is less than the 25% of the damages.
The above is in breach of the indemnity principle. It might be the case that the Solicitors are entitled to recover fixed costs of £1,200 even though their base costs are only £800, but the success fee cannot exceed 100% of their base costs, which in this scenario is £800.
In the absence of a cost schedule, the Judge may be very reluctant to allow a deduction when PD21 specifically requires a cost schedule setting out the base costs. Providing a schedule that sets out the fixed costs is not sufficient.
I have seen a variation of Conditional Fee Agreements, but they all state the same thing: –
The success fee is set at 100% of our basic charges, where the claim concludes at trial; or up to 100% where the claim concludes before a trial has commenced.
Some firms, however, do have express terms that state that the base costs equate to the fixed recoverable costs that are payable by the Defendant in accordance with what the Court or rules state.
This means that if a claim settles where the fixed recoverable costs are £1,200, with a success fee of 25% then the success fee will not exceed £300. This is actually welcomed by some judges, noting that providing the client has been explained the likely fixed costs at each stage, the client will be able to know what their potential liability will be compared with standard costs.
What is the shortfall approach?
A shortfall approach is a lesser-known approach even though all Conditional Fee Agreements will include provisions that state that the Claimant is liable for any shortfall. The case of Belsner v Cam Legal Services Limited [2022] EWCA Civ 1387 is one of the main authorities where it was determined what was informed consent to a shortfall contribution.
Pretend that for the moment the Claimant is a company who has instructed you to pursue a Defendant for a breach of contract and the sum sought is over £10,000. You succeed on behalf of your client and the Defendant has agreed to pay 90% of the costs. You then issue a bill to your client for the full amount, giving credit for the 90% received by the paying Defendant and then your client pays the remainder.
What some personal injury lawyers sometimes forget is that this is the basis of a Conditional Fee Agreement. The terms of the agreement mean that if you are unsuccessful, you waive your costs. There is usually a term that expressly states the client will be responsible for any shortfall.
What some Solicitors will do is limit the shortfall responsibility to 25% of the Claimant’s damages. An RTA client’s case, where liability was denied, and the matter settled after trial was listed but before trial in the sum of £5,000.
25% of the damages is £1,250
Fixed costs recovered is £4,386 inc. VAT
Base costs are £8,000 inc. VAT
The firm, instead of looking to recover a success fee, allocate the £1,250 deduction as contribution to the shortfall. There is a shortfall because: –
The base costs are £8,000
The costs recovered amount to £4,386
The remaining balance is £3,614
This means that the £1,250 would be lawful because the terms and conditions state the Claimant would be responsible for any shortfall. Relying on the 25% cap of damages increases the prospects of a Court approving the same.
There is a caveat that I fell into before a DDJ in the County Court at Exeter. CPR 21.12(2) states that deductions for infant cases are limited to:-
(a) costs which have been assessed by way of detailed assessment under rule 46.4(2);
(b) costs incurred by way of success fee under a conditional fee agreement or sum payable under a damages based agreement in a claim for damages for personal injury where the damages agreed or ordered to be paid do not exceed £25,000, where such costs have been summarily assessed under rule 46.4(5), or
(c) costs incurred where a detailed assessment of costs has been dispensed with under rule 46.4(3) in the circumstances set out in Practice Direction 46.
It is important to note that according to Part 46, a detailed assessment can only be disapplied for a success fee assessment. If you are seeking a shortfall, the assessment must be carried out during the hearing. Providing an informal cost schedule could potentially prevent you from being able to recover a shortfall contribution.
Can a shortfall and success fee deduction be used together?
There is nothing to suggest you cannot. Imagine a situation where the Judge at the approval hearing either determines that the success fee was too high and only awards 10% of the sought deduction. If the remainder of the deduction did not exceed the difference between the fixed costs received and the base costs incurred, then you could then ask the Judge to approve the remainder as a shortfall contribution.
The shortfall and success fee are two entirely different deductions and could be claimed concurrently to ensure a maximum deduction.
Cannot produce a schedule of costs?
I have had some fee earners advise that they have no access to the number of units incurred etc. to be able to prepare an informal schedule. That should not be able to stop you drafting a very basic N260.
An N260 may seem like a very complicated document to complete but for straightforward matters it is quite easy to prepare are:-
A fee earner need only count the amount of units in telephone calls, emails/letters sent to the Claimant, Defendant, and any other person/party (such as medical agencies, counsel etc.) in the appropriate sections. Once you have done this, then you type the contents of the memos in the ‘schedule of work done on documents’ to ensure the remaining work carried out is included such as considering the medical report etc. Brief example below: –
| Attendances on Claimant | |||||
| Personal Attendances | 0 units | ||||
| Letters/email out | 25 units | £11.1 per unit | £277.50 | ||
| Telephone calls | 0 units | ||||
| Attendances on the Defendant | |||||
| Personal Attendances | 0 units | ||||
| Letters/email out | 10 units | £11.1 per unit | £111.00 | ||
| Telephone calls | 0 units | ||||
| Attendances on others | |||||
| Personal Attendances | 0 units | ||||
| Letters/email out | 0 units | ||||
| Telephone calls | 0 units | ||||
| Schedule of work done on documents | |||||
| Description of work | Number of units | At £ per unit | Total | ||
| Preparing CNF | 5 units | £11.1 | £55.50 | ||
| Considering medical report | 10 units | £11.1 | £111 | ||
| Instructions to Counsel re Quantum | 5 units | £11.1 | £55.50 | ||
| Total costs | £610.50 | ||||
| VAT | £122.10 | ||||
| Grand Total | £732.60 | ||||
The costs state above do not exceed the costs which the Claimant is liable to pay in respect of the work which this statement covers.
Signed……………………………………….
Dated………………………………………..
Name ……………………………………….
Name of Firm…………………………………………………….
The N260 suggests that it must be signed by a partner but PD44 para 9.5(3) makes it clear that it can be signed by the party or the party’s legal representative. The definition of legal representative in Part 2.3(1) is: –
(a) barrister.
(b) solicitor.
(c) solicitor’s employee.
(d) manager of a body recognised under section 9 of the Administration of Justice Act 19859; or
(e) person who, for the purposes of the Legal Services Act 200710, is an authorised person in relation to an activity which constitutes the conduct of litigation (within the meaning of that Act),
…. who has been instructed to act for a party in relation to proceedings.
Therefore, a fee earner who is employed by a Solicitor, is a legal representative and can sign the N260. What the fee earner must do is ensure they only include units for work they can see have been incurred. Providing they do this, then it is likely the N260 will only include costs that the Claimant would be responsible for.
One does not have to even complete a N260 as PD44 states that if it follows as closely as possible the N260 (i.e., has the same content) then it will be sufficient for summary assessment.
N260 is by no means an informal schedule, but it is very easy to complete and therefore likely to increase recovery of deductions from infant Claimant cases.
InInformation
AJH Advocacy Limited, a Limited Company which is regulated by the Bar Standards Boards (entity number 190758), ceases trading on the 12th January 2026.
From the 12th January 2026 and onwards, Alec Hancock will practice as a Barrister at Magdalen Chambers in Exeter. For instructions on matters on or after 12th January 2026, please contact Magdalen Chambers via clerks@magdalenchambers.co.uk or by telephone on 01392 285 200.