Daniel Slade, senior partner at Express Solicitors
By Daniel Slade, senior partner of Legal Futures Associate Express Solicitors
Since the changes to recoverable additional liabilities in personal injury claims in 2013 shifting the expense of litigation from the wrongdoers to injured victims, I have been concerned about the unintended consequences upon injured children.
In cases of damages under £5,000 in the county courts, some judges have been trying to help children by refusing expenses applications from parents, particularly for success fees and after-the-event (ATE) insurance premiums. However, the consequence has been that many firms will act for adults only.
Fortunately, it seems clear that the tide has turned and that the appeal courts are making clear to first-instance judges that they have been routinely falling into error in refusing expenses applications for success fees and ATE premiums.
Mistake corrected
On 21 December 2022, His Honour Judge Richard Hedley, the designated civil judges for Northampton and Leicester, corrected the order of a district judge who had wrongly refused expenses in the case of AAA v DFS Trading Ltd.
This matter concerned a child, aged 10, injured at home when his leg caught a spring from a sofa supplied by the defendant. The defendant disputed liability, the matter was allocated to fast-track and subsequently his parents secured a settlement of £6,500.
The matter first came before Leicester County Court for approval of compromise and application by his parents for the success fee and the ATE premium they had incurred prosecuting the claim. The district judge considered the ATE premium of £650 plus IPT and said: “In a standard RTA I would allow for £50-60. This is extremely high… I have to be pragmatic and pick a figure. I allow £250 including IPT.”
On appeal, HHJ Hedley considered the authorities of West, Rogers and Kris and the examination of those authorities by former regional costs judge, His Honour Judge Lethem (in the appeal case below) and found that the district judge “fell into error in imposing her own discretion”.
He corrected the mistake by replacing her order and approving the expense in full sum of the ATE premium claimed.
Starting from the right premise
HHJ Lethem, on 21 April 2022 in X v H&M Hennes sitting in the Royal Courts of Justice, on appeal from Bromley County Court, considered the law comprehensively and again corrected the order made at first instance. The appeal judgment is lengthy, with helpful analysis of Herbert v HH Law Ltd, West v Stockport NHS FT and BCX v DTA. Furthermore, CPR 21.12, 46.9 and 44.4(3) were examined in detail in reaching the decision.
This matter concerned an 11-year-old who on 9 February 2019 was at an H&M store in Bromley and caught his right eye on a clothing pole-edge. His mother pursued his injury claim with the benefit of a conditional fee agreement and ATE policy, for which she sought the expense on application to the court.
The claim was resolved for £1,750, the success fee was approved at £437.50 (25%) and a further 19% was sought by way of ATE premium (£336). This amounted to 44% of the damages. The judge at first instance refused the ATE premium on the basis it was an unnecessary expense entirely.
In the appeal judgment, HHJ Lethem found that the district judge was wrong in starting from the premise that the expense was unreasonable, rather than reasonable.
Four important principles followed from the appeal namely:
- It is appropriate for litigation friends to be joined as a party to such cases for the purpose of appealing, so they can make submissions, see NA Holdings Ltd v George Wimpey UK Ltd [2008] 1 WLR 1649. Dyson LJ (with whom Lloyd LJ agreed) held that a person can be an appellant within the meaning of CPR 52.1(3)(d) notwithstanding that he was not a party to proceedings in the lower court.
- The logic in Rogers should be followed in that the insurance market depends on insuring the less risky cases, to pay for the more risky ones.
- The court should not arbiter the premium figure, being a matter of insurance underwriting.
- ATE premium figures were not possible to challenge on a solicitor-own-client basis (per the decision of Herbert v HH Law Ltd).
This useful decision also reaffirmed that there is no artificial threshold to overcome in seeking a direction that expenses may be more than 25%, so long as they are less than 50% of damages. CPR 21.12(6) requires a direction for expenses of more than 25%, so long as less than 50%, but it is clear there is no burden/threshold to overcome in such a direction being ordered.
Twists and turns
The law surrounding solicitor-client deductions from compensation for costs has taken some interesting twists and turns, particularly following the 2020 decision in Belsner v CAM Legal Services Ltd [2020] EWHC 2755 (QB) (later overturned by the Court of Appeal), considering what amounted to consent for the purposes of CPR 46.9(2).
Two Irwin Mitchell decisions arrived while Belsner was awaiting appeal: BCX v DTA [2021] EWHC B27 (Costs) and EVX v Smith [2022] EWHC 1607 (SCCO).
In BCX, the court said that merely having the client’s agreement was not enough, and it must be informed consent. The court criticised the failure to ask the litigation friends to assess the reasonableness of costs they were incurring on behalf of the claimants.
The court said that litigation friends should be made aware of the consequences of substantial deductions from damages and that these deductions flowed from their agreement to higher hourly rates.
But it was observed that, with informed consent, any assessment of costs would be on an indemnity basis, per CPR 46.9.
In EVX, the court seized on the litigation friend not being advised that the costs claimed by deduction from damages would be subject to an assessment, and how that assessment would work. The court advised that consent must be secured on a full and fair education of the lay person beforehand of ‘unusual costs’ (i.e. irrecoverable inter partes). With this threshold in mind, the court determined there was no consent.
Heavy burden
One might argue that the burden subsequent to these two cases (but pre-Belsner 2022) was so high in terms of reaching the level of ‘informed’ for these purposes, that it had been placed at an almost unreachable level.
However, thereafter the widely publicised Court of Appeal decision in Belsner v CAM Legal Services Ltd [2022] EWCA Civ 1387 demonstrated the more senior court’s clear intention to do away with such hurdles. The Master of the Rolls not only found in favour of the solicitors on every single legal point taken, but also criticised the opportunistic/technical challenges that had become commonplace.
This is all very akin to the difficulties parents face in pursuing expenses claims when bringing personal injury claims on behalf of their children. Those parents are protecting their children’s best interests by ensuring that those cases are brought at a time closest to the accidents and the evidence being fresh, and likewise that the courts are not clogged up with very old legacy cases from infants later turning 18.
Most first-instance judges now properly appreciate how the law operates, but unfortunately there is still a minority where appeals are likely to continue to flow, further absorbing court resources and delaying matters while their orders following expenses applications are corrected.
There is almost a war-chest of different approaches adopted by judges in wrongly denying expenses, such as: “Did you know some firms don’t charge any deductions?” “What are the risks given that we now have QOCS?” “What was the risks if liability was admitted?” “Why can’t ATE be taken out after a part 36 offer?” And even “I just don’t award deductions as a policy”.
Many judges have fallen into error on approaching the principle as though the representative is the party seeking the expense, rather than the parents. Other judges appreciate the difference, but for unknown reasons are compelled into prompting parents to resist (or complain) should any representative enforce their retainers, or their ATE companies enforce their premiums.
Starting point
The problem seems to be the starting approach of the minority of junior courts. The appeal authorities make it clear they should start from the premise that expenses are reasonable, and not venture upon artificial expert-like assessment of underwriting complexities, and should properly examine the authorities on success fees such as Callery, where following a long deliberation the court found a 20% success fee appropriate for a vehicle passenger pursuing their driver following a collision.
This matter seems to trouble the High Court and district registries far less. When considering applications for substantial sums (BCX and EVA aside), they perhaps have more time to consider the law more thoroughly and approach the expenses request from a more appropriate perspective.
In March 2022, the Hon Sir Mark Turner KC, sitting in the Manchester District Registry in AAA v Tyco Electronics (4 March 2022) approved a compromise of £7.6m as well as a success fee of £737,440 and an ATE premium of £157,903.
He appreciated the evidence of the litigation friend, which set out how it was only with the benefit of the ATE insurance that she was able to reject a settlement offer of £4.8m and achieve a further £2.8m in damages.
In the Birmingham District Registry, District Judge Griffith, following approval of damages of £2.25m in Sarfraz v Akhtar [2022] EWHC 2510 (QB), thereafter approved deductions for an ATE premium of £252,000, a success fee of £80,000, and unrecovered base costs of £37,000.
He appreciated that the subject of the expenses claim allowed the Litigation Friend to pursue a claim that had been rejected by numerous previous representatives, and indeed thereafter, to reject a settlement offer of £1.5m and go on and achieve a further £700,000.
Time will tell whether the corrected policy in the majority of the regions will spread to the remaining minority, or whether appeals will continue to flow. It will also be of interest to monitor the effect that the changes surrounding qualified one-way costs shifting have on the above approach; set to take place next month.
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