Please note this a combination of previous posts consolidated into one post, with some minor updates/adjustments
Success fees & Shortfall Contributions in Infant Personal Injury Cases – Why are cost schedule so important?
A claim for a success fee deduction does not necessitate the preparation of a formal bill, as outlined in CPR 21.12(10)(f). Whether the Claimant’s Solicitors plan to deduct from the damages for a successful outcome or for a contribution to the shortfall (the difference between the costs received and the base costs incurred), they must provide details of the incurred costs.
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.
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.
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.
Why some PI firms are changing to success fees based on Fixed Recoverable Costs, rather than hourly rates
I have had instructions in the past where the instructing firm ask me to seek a deduction from a child’s damages in respect of the success fee. Naturally, whilst Judges and clients might find this to be a harsh request, personal injury firms take financial risks on both cash flow and profit when taking on cases on a CFA.
Whilst the biggest bugbear by the Judiciary is the generic risk assessment, it is usually the size of the statement of costs of hourly rate undertaken. A Judge needs to assess the basic costs undertaken on the matter because the success fee is based on the basic costs.
If the percentage of the success fee is not reduced, the basic costs may be reduced and this will limit how much the success fee will be. In some cases, I have solicitors calculate the success fee based on the fixed recoverable costs when the CFA expressly states basic costs are calculated on an hourly rate basis. This meant the Judge could easily dismiss the request for a deduction for the success fee because no hourly rate costs schedule had been provided. However, some firms actually have specific terms in their CFAs that base their basic costs on what is recoverable in Fixed Recoverable Costs at the time settlement.
I will discuss why this is a good idea, especially with the extension of the Fixed Recoverable Costs regime.
Pre Jackson Success Fees
I started working in personal injury just before the introduction of the Jackson Reforms. I actually became a fee earner with a case load with 85/15% post-Jackson reform cases so I dealt with success fees where it was recoverable from the Defendant. It is easy for me to understand how success fees were calculated.
I very much appreciate that junior fee earners today may not know or understand how success fees are calculated. They simply understand the concept that a success fee comes from deductions from the compensation and are up to 25% of damages. It does cause problems. I will receive instructions and I try to get the evidence to justify the success fee arranged but sometimes I am asked to simply ‘do my best’.
For those junior fee earners with no pre-Jackson reform experience. Your success fee would be calculated on the standard costs you’ve incurred. So if your client goes to trial, succeeds and you’ve got 100% success fee and £12,000 costs, then your success fee is £12,000.
Nothing changed post-Jackson reforms, merely that the Claimant could not recover the success fee from the Defendant and the maximum deduction from the damages was 25% of the PSLA and past losses.
Why base costs based on fixed costs works better?
Basing your basic costs on fixed recoverable costs, rather than hourly rates, give certainty to both the claimant and the law firm. There is no need to prepare a bill of costs (alternatively informal costs schedule or N260), there is no need for an assessment of costs and those costs will be proportionate to the stage of the proceedings.
Imagine you have a case which is pre issue, the medical reports are relatively straightforward and negotiation is quick and painless. If you submit a £4,000-£5,000 Phil, seeking a 50% success fee then you are going to be faced with the proposition of justifying that amount on assessment. That is before the consideration of whether or not a 50% success fee is reasonable.
Instead what happens is that you spell out in your client retainer the level of costs at each stage of the proceeding. You set out the range of success fees depending on the circumstance and you decide to justify a 25% success fee at it settles ex portal pre issue for £3,000 (RTA). That’s £840 in costs and the success fee is £210 inclusive of VAT. If proceedings are issued then it is £2,112 and the success fee will be £528.
These are moderately low sums and but one has to remember that with £3,000 (presuming this is not made up of any future costs) the maximum deduction is £750. Whilst a Judge could still reduce the success fee from 25%, the overall amount is modest and is more likely to be accepted as reasonable.
Of course it is also representative of the value of the case. Yes, you will have limited success fee on a £20,000 case that settles in the portal compared with if it exits. However, the client is full informed, it is proportionate and will reasonably top up the overall profit costs.
Whilst most instructions I receive are base costs calculated on hourly rates/units, I am seeing more and more CFAs using the fixed recoverable costs base cost model.
It may be preferable to seek either a success fee or a shortfall contribution, rather than both.
I typically wouldn’t be able to read the variety of conditional fee agreements (‘CFA’) of other law firms. However, I have received instructions from a wide range of law firms when seeking approval for a deduction in an infant approval case. This gives me the opportunity to consider them.
Although the fundamentals remain the same for ensuring compliance with CFA, there are some differences, mainly in the remuneration sought by the law firm from the Claimant’s damages.
When seeking approval for deductions from a child’s damages under CPR 21.12, instructing firms often fail to comply with CPR requirements, resulting in the deductions being disapproved before the starting pistol is even pulled. However, there are issues once the ‘race’ has commenced.
The variations
The remuneration usually comes in the form of either a success fee or a shortfall contribution. For ease, I will use the term ‘damages cap of 25%’, but it is of course only applicable to past losses and PSLA.
A combination of both
What some law firms will do is seek a combination of both, which the CFA allows for. It is accepted by the Claimant law firm that the total amount the can be deducted cannot 25% of damages.
So let’s presume a case where the fixed recoverable cost regime takes place, the success fee is limited to 10% and the CFA allows for a recovery of both a success fee and shortfall contribution.
| Damages £15,000 |
| Base costs £3,000 |
| Fixed costs recovered £1,740 |
| 25% damages cap £3,750 |
| 10% success fee on base costs £300 |
| Shortfall between base costs and fixed costs recovered £1,260 |
| 10% success fee + shortfall contribution £1,560 |
In some cases, the shortfall may provide a reasonable top-up and in other instances fill the gap where a success fee has been reduced considerably. The difficulty I have faced is that quite often, the Judiciary take issue with the combination of both. Sometimes it has been inappropriately described (at least, in my view) as a backdoor attempt to get around issues with the success fee.
I have found that success fees and shortfall contributions are more effective when pursued separately, rather than as a package deal. It is common for me to receive instructions with CFAs that include both provisions, but typically the law firm representing the Claimant chooses to rely on one deduction over the other.
I do find that my success in a combination of both is few and far between. That is not to say there is no success in such an appropriate, but Claimant law firms need to ensure CPR 21.12(10) is complied with, and the amounts are appropriately justified.
Can the Court reduce or refuse to allow the success fee – Duffield v WW Morrison Supermarkets Ltd [2025] EWCC 35
The case concerned a child (Master Brendan Duffield), who was injured at a Morrisons supermarket in April 2022. His mother, Ms. Matuleviciute, served as his litigation friend. The claim commenced with the litigation friend entering into a Conditional Fee Agreement (CFA) with a 100% success fee uplift, along with an After The Event (ATE) insurance policy costing £650 plus IPT (12%).
The Judge approved a damage settlement of £2,250. Whilst the Judge allowed a success fee, they had reduced the success to £225 and refused the ATE Premium, given the following Judgment:-
1. Therefore, there are two separate deductions from the Claimant’s agreed sum of damages that I am asked to consider. The first is a success fee of £450 under a form of conditional fee or damages based agreement. The second is a premium under a costs based insurance policy of £675.
2. Under CPR 21.12, a Litigation Friend who incurs costs or expenses on behalf of a child is entitled to recover the amount of any such cost or expense to the extent that it has been reasonably incurred and is reasonable in amount. In deciding whether any cost or expense was reasonably incurred and reasonable in amount, I am required to have regard to all the circumstances of the case including the factors set out in CPR 44.4(3) and 46.9.
3. However, stepping back and focusing on the broader picture, I am presented with a situation where the Claimant acting through his Litigation Friend has accepted an award of damages of £2,250 and yet I am being asked to approve deductions from those damages which amount to approximately 50% of the total sum of the Claimant’s damages. As mentioned, that is £450 for a success fee and £675 for an ATE premium.
4. In relation to the deduction constituted by the proposed success fee of £450, I have taken into account the requirements of CPR 21.12 (10) which I found are met, although I focussed particularly on the risk assessment form which, as I have said, does not appear to be a particularly comprehensive risk assessment. It seems to say what has not been done rather than what has been considered. However, I am willing to accept that a risk assessment in name, albeit not a particularly helpful or considered one, has been provided for the purposes of CPR 21.12 (10).
5. So, in considering the amount of the success fee that is proposed as a cost deduction, I take into account the general approach of Simmons v Castle [2012] EWCA Civ 1039 and allow the deduction of a success fee, but, in the circumstances, I will limit that success fee to 10% of the agreed damages. That is 10% of damages which will be £225.
6. In relation to the ATE premium, whilst an expense may include all or part of a premium in respect of a costs insurance policy, I do need to consider whether it was an expense that was reasonably incurred and reasonable in amount having regard to all the circumstances and the factors set out in CPR 44.4(3) and 46.9.
7. I am not persuaded that, in the circumstances of this case, it was reasonable to incur a premium of £675 in relation to a costs insurance policy. This issue is not with the amount of the premium but with the fact that it was incurred at all. This was an accident that Brendan unfortunately suffered on the premises of Morrisons when he pulled a loose cabinet on to his foot. This is a personal injury case in which Qualified one-way cost shifting would apply. In the circumstances, it is difficult to see what, if any, risk could arise of the Claimant being required to pay the Defendant’s costs. The Claimant’s solicitors will have separately recovered an agreed amount of their costs from the Defendant. In addition, in a case such as this, it would be reasonable to expect that Morrisons would settle the case, which indeed they have.
8. So, any potential risk to the Claimant that might have been covered by a costs based insurance policy is not a risk that would, in the circumstances of this case, be one for which it would be reasonable to incur a premium for a costs based insurance policy. In the circumstances, there would be no reasonable expectation of the Claimant being at risk of paying the Claimant’s costs and it is therefore, difficult to see how such a deduction from the Claimant’s damages would have been reasonably incurred.
9. Therefore, I will allow the deduction from the Claimant’s damages of a £225 success fee but not a deduction of £675 for the premium for a costs based insurance policy.
The Judge essentially did what many Judges do (and some Solicitors might argue alternatively): reducing the success fee to 10% of the damages because Simmons v Castle increases PSLA to account for the Jackson reforms. The Judge clearly believed the total amount sought was ‘50%’ of the Claimant’s damages and therefore that the deductions were excessive. Whilst the Judge was satisfied there was a risk assessment, they also said it was not helpful for the purposes of CPR 21.12, but did not say in their decision why, just simply focusing on Simmons v Castle.
The Judge boldly stated that this was a case in which it would have been reasonable to expect Morrisons to settle. This, along with the usual QOCS point, led to the ATE premium not being allowed. She also alluded to the fact that the solicitors got paid regardless as a factor for refusing the ATE premium.
The litigation friend appealed and HHJ Monty KC heard the appeal in the County Court at Central London.
Appeal
The litigation friend appealed on the grounds that the judge wrongly reduced the success fee from the agreed contractual terms, the ATE premium was reasonably incurred and should have been allowed, and the appeal was unopposed, which is understandable given the Defendant had no vested interest at all in how the damages were to be utilised. Judge Monty KC allowed the appeal and set aside the first judge’s order.
Judge Monty KC noted that the Judge had clearly found the success fee to be reasonably incurred, but disapproved with the amount. Judge Monty KC correctly stated that the 10% uplift as per Simmons v Castle had nothing to do with the success fee calculations. He also went further and considered CPR 46.9
36. The court must also have regard to CPR 46.9 and thus the fact that were there to be an assessment between the solicitor and the litigation friend, it would be on an indemnity basis. This means, in my view, that if the court departs from CPR 46.9, it renders the litigation friend vulnerable to being personally liable for costs which are not permitted under CPR 21.12 but are not open to challenge as between the litigation friend and the solicitor. In so finding, I am agreeing with, and adopting the words of, HHJ Lethem in Hennes at [13]:
“Thus the effect of that recognition is that the Court is likely to start from a presumption that providing the litigation friend has approved the costs, they have been reasonably incurred and are reasonable in amount. Secondly, the judge is likely to start from the assumption that the costs are proportionate.”
37. Returning to the success fee, I really cannot understand how it could be appropriate to quantify the success fee by reference to (a percentage of) the damages. Even taking into account the “eight pillars of wisdom”, against the background of (a) a contractual arrangement between the solicitors and Ms Matuleviciute (b) which provides for an uplift on costs not damages (c) in circumstances where Ms Matuleviciute entered freely into the contract and understood its terms, it strikes me as wrong in principle to depart from the contractual provisions, which base the uplift on costs not damages. In any event, the Simmons 10% uplift is to do with damages, not costs as between the litigation friend and the solicitors.
38. It seems to me that the judge was wrong in principle about the quantum of the success fee. This is not a disagreement about the exercise of a discretion. It seems to me that the judge failed to apply the presumptions and assumptions in CPR 46.9. In particular, there is a presumption that solicitor and own client costs have been reasonably incurred if they were incurred with the express or implied informed approval of the client. That was the position here, on Ms Matuleviciute’s evidence. There was nothing to rebut that presumption.
He then referred to Herbert v HH Law Ltd [2019] EWCA Civ 527 and found that as the litigation friend had inforemed consent, the success fee could be reduced by reference to the 10% uplift.
With respect of the ATE premium, the Judge referred to West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220 and said that ATE premiums’ reasonableness is judged by market norms, not case-by-case assessment. He further went on to say that QOCS does not negate the need for ATE insurance, especially when risks like adverse costs orders remain, and (something I have reiterated time and time again), disbursements which are not indemnified by a CFA. The outcome was the success fee and ATE premium was allowed in full.
48. In my view the judge was wrong in the reasons given for disallowing the premium. These are as follows:
(1) Qualified One-Way Costs Shifting (“QOCS”) applies. As Ms Crorie says, QOCS relates to enforcement, not the principle, of a costs order. Even where QOCS applies, a child claimant is at risk of losing their damages if an adverse costs order is made against them.
(2) It was difficult to see how there was any risk of the Claimant having to pay costs. I also agree with Ms Crorie that the risks against which protection is provided by an ATE go further than an adverse costs order, and may include liability for other disbursements such as second opinion medical reports. I further agree that an adverse costs risk is present notwithstanding QOCS – for example, the effect of any Part 36 offer. A similar point was made in BXC v DTA [2021] EWHC B27 (Costs)at [87]. This point also seems to me to ignore the general risk inherent in all litigation.
(3) Express Solicitors have separately recovered their costs. That is incorrectly looking at matters as at the hearing, rather than at the time the ATE was taken out.
(4) It would have been reasonable to expect the case to settle. I am not at all convinced by that. Liability had been denied. I do not think it possible to say with certainty that it was bound to settle.
49. I have no doubt that the ATE was reasonably entered into, and that the judge’s conclusion to the contrary was not just an exercise of discretion with which I disagree, but was wrong. Having assessed the success fee at 10%, that meant that there was a risk attached to the litigation which meant that the cost of the premium was deductible. That being so, I have no hesitation in concluding that the premium ought to have been allowed as a deduction in full.
Commentary
While this decision clearly advances beyond my earlier discussions on judges’ refusal to approve ATE premiums or their reductions in success fees, the core principle remains unchanged: success fees are often misunderstood. Many overlook that the 25% deduction is a cap, and that the amount deducted from damages to cover the success fee can be as high as 100%. It could be 30%, for example. However, if these success fees, when applied to the base costs, amount to more than 25% of the damages, then only 25% can be allowed.
When I make submissions, I always begin by explaining how the success fee is calculated and what it could be, since the base costs might be assessed and reduced beforehand. After that, I consider whether the full success fee can be deducted, given that only 25% of the damages can be deducted.
This judge clearly indicated that deducting 50% of the damages overall was inappropriate. They initially held the view that the costs were not proportionate or reasonable. Instead of presuming that costs are reasonable, the presumption is that they are unless evidence suggests otherwise.
I have always found ATE premiums to be easily justifiable because the main arguments revolve around QOCS issues. Some costs are reasonably incurred with the ATE insurers’ approval and can be indemnified by the policy if damages are awarded or agreed upon, making the order enforceable. However, some costs may be negligently or inappropriately incurred and would not be covered by the ATE. My primary argument for ATE is that the cost of the premium, which the litigation friend would pay if the case is unsuccessful, is usually much lower than the overall disbursement liability. Judge Monty’s reliance on West helps distinguish the premium from a disbursement, since it is an expense directly incurred by the litigation friend and therefore not subject to the same court scrutiny as costs and disbursements.
No doubt, Claimant solicitors and their instructed advocates will be relying on these points going forward.
Information
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.