“Simply because an ill informed Litigation Friend signs up to a CFA with a success fee of 100% does not automatically mean that a 100% success fee is a reasonable expense for the purposes of CPR 21.12.”
- District Judge Lumb, A (and anor) -v- Royal Mail Group  EW Misc B30 (CC), paragraph 26.
District Judge Lumb, regional costs judge for Birmingham, recently gave his second judgment in the case of Royal Mail Group dealing with the issue of the recovery of success fees and ATE insurance premiums for children (and protected parties).
By way of background the index claims had been straightforward and agreement had been reached with the Defendant. The Court provisionally approved awards of a little over £2,000 for each child. The litigation friend had entered into a conditional fee agreement with the solicitors under which the success fee was 100%.
The application by the Claimant’s solicitors was made pursuant to CPR Part 21, which for eases states at r21.12:
‘a litigation friend who incurs costs or expenses on behalf of a child or protected party in any proceedings is entitled on application to recover the amount paid or payable out of any money recovered or paid into court to the extent that it –
(a) has been reasonably incurred; and
(b) is reasonable in amount.’
The rule continues to clarify that such sums may relate to both success fees incurred pursuant to a CFA or DBA and premiums in respect of a costs insurance policy. The application by the Claimant’s solicitors was capped at 25% of the success fee and for a £195.00 premium.
However in Royal Mail Group the Court refused an application for success fees and ATE premiums to be paid out of damages obtained by children in personal injury settlements.
Initially DJ Lumb had concluded that as there was no real risk of losing, it would not be appropriate to deduct the premium from the children’s damages – essentially that it could not be a reasonable expense reasonably incurred given the lack of risk.
He was unable also to undertake a summary assessment of the success fee as the Claimant’s solicitors had failed to provide, inter alia, a copy of the risk assessment (as required under PD 21 paragraph 11.3). Further DJ Lumb found that the solicitors had failed to adequately advise the litigation friend about funding arrangements and why the funding model had been employed, and had failed to provide details of any agreed costs.
DJ Lumb concluded that Jackson LJ’s idea that deregulation would lead to a competitive market between solicitors had not come to fruition, potentially as ‘the public have not been in a position to make an informed choice to shop around for the best deal.’ (paragraph 24).
DJ Lumb then, at paragraph 25 of the judgment, referred to the Solicitor’s Code of Conduct:
‘There is a professional obligation in the Solicitors Code of Conduct to discuss funding options carefully with the client and to advise the client in accordance with the client’s best interests. Until solicitors incorporate within their marketing an intention to be competitive with other firms concerning success fees Sir Rupert Jackson’s aspirational forecast is unlikely to come to pass.’
He noted that pre-Jackson the average success fee in settled cases was 12.5%, ‘and therefore a success fee in excess of 12.5% could not be justified’, arriving at a reasonable figure of 10%.
This of course is compliant with Jackson LJ’s expectation that the 10% uplift in damages would leave most Claimants no worse off by being responsible for payment of the success fee.
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