The County Court at London allowed an appeal to a decision to disallow the deduction of an ATE premium from a child's damages in a successful personal injury claim.
In Duffield v WW Morrison Supermarkets Ltd [2025] EWCC 35 (01 July 2025) the Claimant's solicitors appealed a decision to reduce the success fee and disallow the deduction of the ATE premium from the child's damages.
The claim had settled in the sum of £2,250 which was approved by DDJ Walton. The Claimant's solicitors sought approval of a success fee of £450 together with the ATE premium of £675 (equating to 50% of the Claimant's damages). The court allowed a reduced success fee but disallowed the ATE completely. The appeal was unopposed.
HHJ Monty KC expressed concern that the decision reached by the DDJ was not uncommon and therefore elected to provide a written judgment to assist in other similar cases.
If you've any queries or issues relating to deductions from a child's or protected party's damages then we offer a complete end to end service to take the stress away - you can find out more about this here.
Speed Read
The decision can be summarised as follows:
1. Success fees are a matter of contract between the contracting parties.
2. When determining whether a success fee can be deducted from a child's or protected party's damages the court must consider whether there has been informed approval / consent. If the court is satisfied that informed consent was given then the success fee should be allowed, if it not then it should be disallowed.
3. If the deduction of a success fee is allowed it would be wrong to not allow a deduction of any ATE Premium.
4. The principles in West v Stockport NHS Foundation Trust remains good law and proportionality is not relevant to the same. It is not open to the court to say a premium was unreasonable in amount on a case by case basis.
5. Where a claim is subject to QOCs there remains litigation risks with the Claimant at risk of losing damages if an adverse costs order is made.
6. ATE covers more than just adverse costs risks and may include liabilities for other disbursements (i.e. second opinions).
7. It is irrelevant that the solicitor has separately recovered costs.
The Law
The court firstly went through the law concerning deductions from damages for children and protected parties. You can read our previous article on this subject here.
In brief costs or expenses are recoverable from damages in such circumstances so long as they have been reasonably incurred and are reasonable in amount (as per CPR r21.12). There is a presumption of reasonableness where there is express or implied approval of the client and where a sum is unusual in nature or amount the solicitor told their client that such costs may not be recoverable from the paying party as a result.
The judgment takes you through the law concisely:
"11. CPR 21.12(5) and (6) provide:
"(5) 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.
(6) When the court is considering the factors to be taken into account in assessing the reasonableness of the costs or expenses, it will have regard to the facts and circumstances as they reasonably appeared to the litigation friend or to the child's or protected party's legal representative or deputy when the cost or expense was incurred."
12. The amount which may be deducted is restricted where the damages are less than £5,000. CPR 21.12(7) and (8) provide:
"(7) Subject to paragraph (8), where the claim is settled or compromised, or judgment is given, on terms that an amount not exceeding £5,000 is paid to the child or protected party, the total amount the litigation friend may recover under paragraph (1) must not exceed 25% of the sum so agreed or awarded, unless the court directs otherwise. Such total amount must not exceed 50% of the sum so agreed or awarded.
(8) The amount which the litigation friend may recover under paragraph (1) in respect of costs must not (in proceedings at first instance) exceed 25% of the amount of the sum agreed or awarded in respect of—
(a) general damages for pain, suffering and loss of amenity; and
(b) damages for past financial loss"."
The Authorities
The court next turned to a consideration of the relevant case law:
"15. The question of what can properly be deducted from damages has been the subject of a number of relevant decisions.
16. In Herbert v HH Law Ltd [2019] EWCA Civ 527 at [68-71], it was held that an ATE premium is not a disbursement, and it is essentially beyond challenge at solicitor and own client level.
17. In West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220 at [56-57], the Court of Appeal addressed the question of recoverability of an ATE premium inter partes and set out the following relevant principles "applicable to any consideration of the reasonableness of an ATE insurance policy":
"i) Disputes about the reasonableness and recoverability of the ATE insurance premium are not to be decided on the usual case-by-case basis. Questions of reasonableness are settled at a macro level by reference to the general run of cases and the macro-economics of the ATE insurance market, and not by reference to the facts in any specific case.
ii) Issues of reasonableness go beyond the dictates of a particular case and include the unavoidable characteristics of the ATE insurance market.
iii) District judges and cost judges do not have the expertise to judge the reasonableness of a premium except in very broad-brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces.
iv) It is for the paying party to raise a substantive issue as to the reasonableness of the premium which will generally only be capable of being resolved by way of expert evidence."
18. The court in West v Stockport NHS Foundation Trust said that "Access to justice must therefore be the starting point for any debate about the recoverability of ATE insurance premiums in any dispute about costs": [12]. The court went on to say that "there is a clear risk that an issue (such as the recoverability of a fixed premium), which ought to be the subject of clear guidance with minimal room for debate, is being decided on an ad hoc, case-by-case basis": [28].
19. I have also drawn some assistance from the decision of HHJ Lethem in Master XX v H&M Hennes and another ("Hennes"), an unreported decision of 21 April 2022 on facts which are not dissimilar to those in the present case.
20. Readers of this judgment might also be assisted by the helpful commentary written by Mr Roger Mallalieu KC in Costs & Funding following the Civil Justice Reforms: Questions & Answers (11th Edition), particularly at 9-17 to 9-19."
In short if it was reasonable to obtain the ATE premium then it ought to follow that it is recoverable.
The issues
The court considered the decision to both limit the Claimant's success fee and disallow the ATE premium.
23. I have had the benefit of reading the transcript of the hearing before the judge. The judge accepted - it appears with some reluctance - that there had been a risk assessment pursuant to CPR PD21.11.3(2) by reference to which the success fee had been determined. It is clear from the transcript that the judge was not impressed that the success fee was set at 100%, which they regarded as far too high. The judge then turned to the ATE premium, and commented: "We have got damages of £2,250 and we have got approximately 50% of that being eaten up in success fee and ATE premium. Which is disproportionate." Shortly thereafter, the judge said, "But what I am getting to, is whether it is reasonable - so, any expense such as an ATE premium has to be reasonably incurred. And the question I am grappling with, is whether a £675 ATE premium was reasonably incurred in the context of this claim." Counsel for Ms Matuleviciute, Mr Antanian, submitted that there were two factors to consider. First, whether it was reasonably, incurred, and secondly, whether it is reasonable in amount. Mr Antanian referred the judge to West v Stockport NHS Foundation Trust (as to which see paragraph 17 above), and submitted that as set out in that case, the only real issue from that case was whether the premium was reasonable in amount. The judge then addressed Ms Matuleviciute directly, and asked for her views about the success fee and the ATE premium. Mr Antanian then briefly addressed the judge again, and the judge gave a judgment.
24. The judgment is relatively short, and I will set it out in full.
"DDJ WALTON:
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 Claimant's counsel raised the issue that the reference to Simmons related to a 10% uplift on damages and not costs:
"25. Mr Antanian took the judge to the CFA and explained that it provided for an uplift on base costs, whereas the judge had decided to make a 10% uplift on the damages. The judge explained, "But I am awarding 10% of damages. So, I am following Simmons v Castle [2012] EWCA Civ 1039. So, there, the award is 10% of damages, not 10% of costs." Mr Antanian submitted that this was contrary to the provisions of the CFA, and the judge said, "So, whatever your contract says, is interesting, but it is not determinative to me of how I can assess costs. And so, I assess costs on a different basis. And the basis on which I have assessed the costs is 10% of damages.""
The Appeal - The Success Fee
The court considered both the approach to the success fee and the ATE premium.
On the success fee it was held that the approach taken by the DDJ was wrong. If there was evidence that informed consent had been given to the success fee then it ought to be recoverable:
"33. 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.
39. The correct approach in relation to the success fee should have been that set out in Herbert v HH Law Ltd at [33-36].
"33. It is common ground that CPR 46.9(3) and (4) must be read together.
34. CPR 46.9(3) gives rise to presumptions about the reasonableness or unreasonableness of costs on a detailed assessment of solicitor client costs in the three circumstances specified in CPR 46.9(3)(a), (b) and (c). In the case of (a) and (b) the presumption is that the costs were reasonably incurred and reasonable in amount. In the case of (c) the presumption is that the costs were unreasonably incurred.
35. There is no longer any dispute between the parties in relation to CPR 46.9(3)(c). The Judge recorded (at [27]) that Mr Andrew Hogan, counsel for HH before him and junior counsel for HH before us, accepted that an irrecoverable success fee could be regarded as a cost of an 'unusual nature or amount' but had submitted that, as the retainer made it clear that the success fee could not be recovered from the other party, the condition in CPR 46.9(3) (c)(ii) was not satisfied, and so there was no presumption under CPR 46.9(3)(c) that it was unreasonably incurred. The Judge agreed with that submission (at [47]). There is no respondent's notice challenging that decision.
36. Accordingly, so far as concerns the success fee, the only issue is whether or not Ms Herbert expressly or impliedly approved the imposition of the success fee and its amount so as to give rise to the presumption in CPR 46.9(3)(a) that it was reasonably incurred and the presumption in CPR 46.9(3)(b) that it was reasonable in amount.
37. Counsel were agreed before us that the Judge was correct to hold that 'approval' in CPR 46.9(3)(a) and (b) means informed approval in the sense that the approval was given following a full and fair explanation to the client (although there was dispute between them as to the reasoning and significance of the Macdougall case cited by the Judge). We agree.
38. There was some debate before us as to whether it is the client who bears the burden of satisfying the court that express or implied approval was not given or it is the solicitor who bears the burden of satisfying the court that it was given. We consider that where, as here, the client brings proceedings under the Solicitors Act 1974 s.70(1), it is for the client to state the point of dispute and the grounds for it. If the solicitor wishes to rebut the challenge by relying on the presumption in CPR 46.9(3)(a) or (b), the burden lies on the solicitor to show that the pre-condition of the presumption, informed approval, is satisfied. Once the solicitor has adduced evidence to show that the client gave informed consent, the evidential burden will move to the client to show why, as a result of having been given insufficiently clear or accurate or comprehensive information by the solicitor or for some other reason, there was no consent or it was not informed consent. The overall burden of showing that informed consent was given remains on the solicitor."
40. In the present case, there was evidence which the judge accepted from Ms Matuleviciute that she had given her informed consent to the success fee. As there was no basis for calculating the success fee by reference to the damages, in my respectful view the judge was wrong in concluding that the success fee should be limited to £225.."
The court allowed, on appeal, the success fee of £450.
The Appeal - The ATE Premium
The court next turned its attention to the ATE Premium:
42. It makes no sense to have allowed a success fee (which the judge did, even though for the reasons I have set out above it was in the wrong amount) but to have refused to allow the deduction of the ATE premium. I agree with Ms Crorie that having held, correctly, that there was a litigation risk in this case, it was not open for them to find that it was unreasonable for Ms Matuleviciute to have insured against that risk. As HHJ Lethem pithily put it in Hennes:
"... there is within the judgment an inherent contradiction and tension between allowing the success fee and then disallowing the ATE premium upon which it was based."
43. In Hennes, HHJ Lethem also said:
"14. However, it is open to the judge to depart from that initial starting-off point, and indeed were that not to be the case, then there would be no reference to Rule 44.4(3) with of course the 'eight pillars of wisdom' which would guide a judge in deciding whether to depart from the initial starting off point. Thus, it may be that there are factors found in 44.4(3) or in any other circumstances of the case that would cause the Court to depart from those presumptions. That would depend on the factors engaged in each particular case. Where there is evidence that undermines the starting off point of proportionality and reasonableness, then the Court is entitled to take into account those factors and to decide that the ATE premium should not be deducted from the child's damages. What is not open to the court is to simply say that the premium was unreasonable in amount on a case by case basis (see West)".
44. Again, I agree. For the reasons set out in West v Stockport NHS Foundation Trust, the premium amount is not to be decided by reference to the facts in any particular case.
45. That same tension is apparent from the judge's judgment. In my view, the judge failed properly to apply CPR 21.12(4) and failed to have proper regard to CPR 46.9. From my reading of the transcript (both before and after judgment) and the judgment, the judge seems to have started from the proposition that the total deductions sought were too high, and then fashioned a way of reducing them. That with respect was the wrong approach.
46. In my view, for those reasons, the judge was wrong to have said that the ATE premium was disproportionate (see paragraph 23 above), and wrong in the judgment to have concluded that it was not reasonable to enter into the ATE at all (judgment, paragraphs 7-8). I do of course note that the judge expressly said that the ATE issue was "not with the amount of the premium but with the fact that it was incurred at all". But it does seem to me that the judge's conclusion was affected by the views expressed during oral argument about the amount of the premium and the effect on the damages in the hands of the Claimant.
47. Again, I agree with Ms Crorie that the judgment shows that the judge agreed that there were costs risks against which insurance might be taken out, but was wrong in determining that the risks were so low or unlikely that there was no need for the ATE.
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.
Conclusions
The court concluded thus:
"50. The issue here is what amount is permitted to be deducted from the damages pursuant to CPR 21. The amount has to be reasonable: CPR 21.12. Proportionality of the premium is not relevant, and the court must follow a structured approach: Herbert v HH Law Ltd; West v Stockport NHS Foundation Trust. Where there is a risk assessment before the court (a requirement: CPR PD 21.11.3(2)), which is a document intended to provide material upon which the court can assess the reasonableness of the success fee, the court must decide whether reasonable consent was given by the litigation friend/litigant so as to engage the presumption under CPR46.9(3)(a) and (b).
51. The proper approach should be: (1) is there material before the court that causes it to question whether informed consent was given? (2) if so, what evidence was there that informed consent was given (the burden of proof is on the solicitor for the litigation friend/solicitor)? (3) if the court is not satisfied that informed consent was given, then following Herbert v HH Law Ltd the success fee should normally be disallowed; if the court is so satisfied, the success fee should be allowed.
52. The proportionality of the premium is not an issue: West v Stockport NHS Foundation Trust. If deduction of a success fee is allowed, it would be wrong not to allow deduction of the premium.
53. For these reasons, the appeal is allowed. I will order that Ms Matuleviciute is entitled to deduct from the damages (a) the success fee in the sum of £450, and (b) the ATE premium in the sum of £675. I will vary paragraph 3 of the judge's judgment accordingly and authorise a payment out from the Court Funds Office of £900 (being £675 for the premium and an additional £225 to make up the balance of the £450)."
Practical Implications
The judgment in Duffield affirms the correct procedure and process for the court to follow when considering deductions from a child's or protected party's damages. For solicitors the key is to ensure that informed consent / approval is obtained at the outset to any success fee and ATE premium and that there is contemporaneous evidence of the same. A robust risk assessment will also assist.
The case also highlights an overarching issue about access to justice. The government's decision to introduce LASPO in 2013 means that the costs Claimants have to pay themselves to bring litigation have inevitably increased. Whilst the DDJ's initial decision is plainly wrong many will understand the discomfort felt when asked to approve deductions of 50% (£1,125) against the child's damages of £2,500.
Unfortunately this is the reality of legislative reforms introduced by government and this coupled with the downward pressure on legal costs (particularly where fixed costs apply) means that for many solicitors they have to adopt an approach of deductions from damages to ensure that representation remains viable. If deductions were routinely disallowed then some firms may reassess the viability of bringing such claims.
Under the post October 2023 reforms there is a two tier system between Protected Parties (who are exempt from Part 45 and therefore from fixed costs) and Children (who are not exempt). This may well inhibit the ability of some firms to offer things like a 0% success fee or lower shortfalls where recoverable costs in Children cases will likely be lower than in Protected Party cases. It is certainly not a straight-forward issue.
There is a fine balance and tension which exists between fair remuneration and access to justice alongside the question of who should be paying what. The imperative though remains that access to justice must be maintained for victims, particularly those who are most vulnerable.
Should you have any queries arising from this article or upon costs generally then please do not hesitate to get in touch with our friendly team either via phone 01482 534567 or e-mail info@carterburnett.co.uk. Also find out more information about our Protected Parties & Children recoveries service via the link here.
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