Judicial conscience on the District Bench can quite often follow a reticent approach when it comes to deductions from a child’s personal injury damages. They see a child who has sustained injury as a result of another person or organisation’s negligence. Any reasonable person can see why there would be hesitancy in making such a direction, even where the litigation friend has consented. There can be some circumstances where there is no good reason but generally speaking, litigation is expensive and is not without risks.
Having worked on files that originated in a pre-Jackson universe, I am well-versed in After The Event (‘ATE’) insurance and its role in personal injury litigation, both pre- and post-Jackson reforms.
It has most certainly given me a better understanding as to why ATE premiums, that are no longer recoverable from the Defendant, ought to be deducted from the Claimant’s damages.
What is ATE insurance?
For those who do not know, ATE insurance is a policy that is tailored for litigation. Whilst many enjoy the benefits of, what is commonly referred to as Before The Event (‘BTE’) insurance through policies such as home insurance or credit credit benefits, many do not have access to such policies (or the policy does not cover the intened action).
Ultimately, if insurance doesn’t exist, the Conditional Fee Agreement (‘CFA’) system (introduced to cover the removal of legal aid in personal injury) cannot function, as CFAs will only protect the client against their liability for legal fees.; not the disbursements and any prospective third party fees.
CFAs would usually say somethign on the line of :-
If you lose, you do not pay our basic charges or success fee, but we will require you to pay our disbursements.
ATE insurance is not front-loaded. Therefore, a premium isn’t charged or payable from the outset. In fact, if the case were unsuccessful, the premium wouldn’t be charged at all, and it would pay out for the liability, finally protecting the client. However, if successful then the premium is charged.
Understandably, this meant that ATE Insurers would usually only insure cases where there was a good prospect of success. So how did this work in the pre- and post-Jackson world?
In the pre-Jackson personal injury world
Before the term ‘Qualified One-Way Cost Shifting’ was thrown around the PI world as both a sword and shield, personal injury cases just followed the usual cost consequences; costs follow the event, the Claimant would usually pay the Defendant’s costs up to the date of discontinuance and liabilities such as success fees and ATE premiums were recoverable from the Defendant.
ATE and BTE insurance policies were an absolute must. A Claimant couldn’t possibly risk proceeding with the risk. The cost of ATE premiums was high because they would have to cover not only the Claimant’s own disbursements but also the Defendant’s costs and disbursements. Given that the cases were primarily subject to standard costs, these costs could be high even on a fast-track matter.
Before the introduction of Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPO’), the Claimant would be able to recover the ATE premium, providing the could demonstrate that they had exhausted all other options, such as BTE insurance policies.
An interesting side note, ATE insurers tended to require advice on liability to demonstrate that the prosepcts of success were sufficient to warrant indemnity by the ATE premium. In a way, it would vet cases to ensure those with good prospects proceed. However, the insurance industry was concerned about the cost of covering ATE premiums for cases (in addition to the standard costs).
Further, it was an important clause that the insurer was to be advised of any Part 36 offers received from the Defendant. If the insurer believed the Part 36 was too much of risk, they would end indemnity.
Then the 1st April 2013 arrived.
The post-Jackson personal injury world.
LASPO removes the recoverability of the ATE premium from the Defendant. The cost of the premium is now borne by a Claimant (or the litigation friend), but (subject to a finding of FD or another reason for the Court to disapply QOCS) the Defendant cannot recover any costs from the Claimant where the Claimant is unsuccessful.
In Jackson LJ’s opinion (as set out in his reports), the need for ATE would be practically eradicated thanks to QOCS (whilst recognising the need for protection from own disbursement liability). However, the actual reality is that QOCS merely controls the enforcement of a cost order. The moment that damages and costs are agreed or ordered by the Court1, any Order to pay the Defendant’s costs becomes enforceable. Given that this would usually be set off against any liability to the Claimant, this would reduce the damages and costs recovered by the Claimant.
Having an ATE policy in a post-Jackson world is important regarding the liability of one’s own disbursments. However, it is also important to cover the Defendant’s cost liability where the Claimant’s damages or costs give rise to the Defendant’s costs becoming enforceable.
So how does ATE play a role in children cases?
Funding of claims for children
I was once asked, at an infant approval hearing in the context of seeking a deduction from the Claimant’s damages, if I was acting for the Solicitors or the Claimant. In my view, the advocate is technically acting for the Litigation Friend.
An individual is considered an adult at 18, and prior to that age, they are classified as a “child” and do not have the legal capacity to conduct proceedings. They cannot enter into a legally binding contract. So when one looks at the CFA, it is not with the Claimant, it is the Litigation Friend.
CPR 21.4(3)(c), which is titled ‘who may be a Litigant Friend without a court order’, says that where the child or protected party is a claimant, [the Litigation Friend may act as a Litigation Friend if they] undertake to pay any costs that the Claimant is Order to pay, subject to any right to be repaird from teh assests fo the child or protected party.”
What this tells us is that the Litigation Friend actually bears the financial responsibility of the claim being pursued, both for the Claimant’s own solicitors by virtue of the CFA, and the other party’s costs by virtue of CPR 21.4(3)(c).
So how can the Litigation Friend progress the Claimant’s claim on their behalf without exposing themselves to financial risk? With an ATE policy, which they take out because they are the ones who are financially responsible, even if the claim is on trust and for the benefit of the Claimant.
Can the Court refuse to allow the ATE policy?
The mechanism of CPR 21.10 is to protect the Claimant, along with the right to assessment of any costs under the Solicitors Act 1974. However, as identified in Herbert v HH Law Ltd [2019] EWCA Civ 527, an ATE premium is not a disbursement because it is a premium on a policy of insurance under which the client is the insured, pursuant to a contract of insurance made between the insurer and the client.
This is also confirmed by CPR 21.12(3), which says an expenses may include a premium in respect of a costs insurance policy (as defined by section 58C(5) of the Courts and Legal Services Act 1990).
As such, it is an expense that has been incurred by the Litigation Friend on behalf of a child and as per CPR 21.12(1), the Litigation Friend is entitled to recover the amoutn pay out of any money recoverd or paid into the Court on benefit of the Claimant to the extent that:-
- it has been reasonably incurred, and
- it is reasonable in amount.
So, how does one consider whether they were reasonably incurred?
CPR 21.12(5) says ‘in deciding whether the costs or expenses were reasonably incurred and reasonable in amount, the court will have regard to all the circumstances of the case including the factors set out in rule 44.4(3) and 46.9.‘
We then turn ot CPR 46.9:-
46.9
(1) This rule applies to every assessment of a solicitor’s bill to a client except a bill which is to be paid out of the Community Legal Service Fund under the Legal Aid Act 1988 or the Access to Justice Act 1999 or by the Lord Chancellor under Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.
(2) Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.
(3) Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed –
(a) to have been reasonably incurred if they were incurred with the express or implied approval of the client;
(b) to be reasonable in amount if their amount was expressly or impliedly approved by the client;
(c) to have been unreasonably incurred if –
(i) they are of an unusual nature or amount; and
(ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party.
(4) Where the court is considering a percentage increase on the application of the client, the court will have regard to all the relevant factors as they reasonably appeared to the solicitor or counsel when the conditional fee agreement was entered into or varied.
Therefore, the expense is presumed to be reasonably incurred and reasonable in amount if approved by the client, either expressly or implicitly, unless they are unusual in nature or amount and the solicitors did not tell the Litigation Friend that the costs might not be recoverable from the third party.
Of course, the Court still needs to take CPR 44.4(3) into account:-
The court will also have regard to –
(a) the conduct of all the parties, including in particular –
(i) conduct before, as well as during, the proceedings; and
(ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;
(b) the amount or value of any money or property involved;
(c) the importance of the matter to all the parties;
(d) the particular complexity of the matter or the difficulty or novelty of the questions raised;
(e) the skill, effort, specialised knowledge and responsibility involved;
(f) the time spent on the case;
(g) the place where and the circumstances in which work or any part of it was done; and
(h) the receiving party’s last approved or agreed budget.
However, the ‘8 pillars of wisdom’ will be relevant to costs rather than expenses. So how can the Court tell if it is unusual in nature or amount? HHJ Monty KC gave some guidance in the County Court appeal of Duffield v WM Morrisons PLC [2025] EWCC 35.
Duffield v WM Morrisons PLC
HHJ Monty KC, sitting in the County Court at Central London, heard an appeal from DDJ Walton regarding the deduction of the cost of the ATE premium and success fee. This article will focus solely on the ATE premium element.
The DDJ had allowed some of the success fee, but refused the ATE premium in its entirety. The Judgment of the DDJ was short and given verbatim in the Circuit Judge’s judgment. The relevant sections of the DDJ’s judgment is as follows:-
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. Thiswas 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.
The Circuit Judge overturned the DDJ’s submission. He considered West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220 para 56-57:-
- Disputes over the reasonableness and recoverability of ATE insurance premiums are not decided on a case-by-case basis. Instead, they are determined broadly by looking at general trends and the overall ATE insurance market, not by the specifics of individual cases.
- Reasonableness concerns extend beyond individual cases to include unavoidable features of the ATE insurance market.
- District judges and cost judges lack the expertise to judge the reasonableness of a premium except in very general terms. The ATE market could be harmed if they see themselves as better suited than the underwriter to assess the insurer’s financial risk without expert evidence.
- The paying party should raise a genuine issue about the reasonableness of the premium, which usually requires expert evidence to resolve.
The Circuit Judge found that refusing the ATE premium was wrong. The starting point was that allowing [part of] a success fee but rejecting ATE creates a contradiction, as both exist due to litigation risk. The Circuit Judge recognised that QOCS limits risk, but it not remove risk as damages can still be lost. ATE covers other risks, not just costs. You can’t judge an ATE reasonableness case-by-case based on claim simplicity, per the Court of Appeal decision of West. His conclusion was that the DDJ wrongly relied on hindsight, ignoring the time when insurance was taken out.
Concluding thoughts
The understandable knee-jerk reaction to anyone reasonable would be “why on earth would I endorse the reduction of this child’s damages?” The inevitable truth is litigation is expensive, and a Litigation Friend will conduct a child’s claim for no financial gain and with the financial risk.
QOCS can only protect a Claimant to an extent in terms of third-party liability when there is no enforceability (damages or costs awarded or agreed), and most certainly not their own liability to disbursements. In my time as a self-employed CILEX Advocate, I acted for various law firms on infant approvals, and I saw the range of ‘paper-based’ submissions they made to justify the deductions.
The starting point is that the ATE policy was reasonably required in a reasonable amount unless it appears unusual in nature or amount, or the Litigation Friend was not advised it would be unrecoverable in amount. I would say there has to be a very compelling reason why an ATE policy was unusual, and without expert evidence, the Court cannot be in a position to find that the ATE premium was unusual in amount.
So, to answer the question of why the ATE premium should be deducted from the child’s damages, one has to remember that ultimately the Litigation Friend is incurring the time, the expense and the financial risk for absolutely none of the reward. The child would have no damages but for the efforts of the Litigation Friend. Save for CPR 46.9(3)(c), there should be no good reason to refuse the deduction from damages to pay for the ATE premium.
Information
Alec Hancock is a practising Barrister at Magdalen Chambers in Exeter. For instructions on matters, please contact Magdalen Chambers via clerks@magdalenchambers.co.uk or by telephone on 01392 285 200.
- It is important to note that cases issued before 6th April 2023 would have been subject to the old version of QOCS, which limited enforcement only to the damages that the Court had agreed. ↩︎