Success Fee and ATE not payable where no reasonable enquiries into LEI

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In Peter Evans v Fletchers Solicitors Limited [2026] EWHC 1523 (SCCO) Senior Costs Judge Rowley determined that a success fee and ATE premium would not be payable by the client where there had been a failure to undertake reasonable investigations into alternative funding, such as Legal Expenses Insurance (LEI).

The matter pertained to a successful personal injury claim arising from a road traffic accident (RTA). The Defendant sought to invoice their client for the shortfall and a success fee of just over £30,000. The Claimant brought proceedings pursuant to the Solicitors Act 1974 to seek an assessment of the Defendant’s bill.

One of the central arguments concerned whether the claim should have been funded by LEI rather than by way of a Conditional Fee Agreement (CFA).

The Claimant could not know whether any enquiries were carried out in relation to Before-the-Event (BTE) insurance / LEI, and the Defendant did not present any evidence that such investigations had been undertaken when they commenced work on the case in 2017. It was inferred, therefore, that no such enquiries were made at the outset of the case.

Prior to the issue of proceedings in 2019, the Defendant did undertake investigations into LEI. This saw Zurich provide the Defendant with a policy booklet detailing the process for making a claim under the Claimant’s Legal Expenses policy. The Defendant took the view that they could not establish that the BTE policy covered the Claimant and advised the Claimant to take out an After-the-Event (ATE) policy.

The Claimant instructed solicitors following his claim in respect of the charges raised against him. They enquired with the BTE insurer, who advised that, given the time which had elapsed, they could not confirm whether coverage would have been provided.

The Claimant averred that “the defendant’s activities (or lack of them) has meant that the claimant could not avail himself of insurance he had purchased before the accident. On the face of it, using such insurance would mean a private paying agreement with the solicitor would be backed by an indemnity from the LEI insurer. That arrangement would not require either a success fee or an ATE premium.”

The key points are summarised below:

• The SCCO had to consider four main questions:

  • Were the enquiries into alternative funding unreasonable? - While a solicitor is not required to embark on a "treasure hunt" to establish the existence of LEI, solicitors should generally make enquiries of potential BTE insurers. Enquiries in the case at hand were lacking. Notably, there were no enquiries until two years after the accident, and the response from Zurich was wrongly categorised as a refusal to cover the Claimant. Further enquiries could have been made with Zurich to discover coverage, but that did not occur. Personal injury (PI) solicitors should have been aware that the company dealing with the LEI is not always the same company that deals with, for example, home contents insurance. Fundamentally, a more concerted effort was required to establish the position.

  • Was there LEI/BTE available for the Claimant to use? - It appeared that Zurich’s home policy covered personal injury claims, even if retrospective confirmation from the insurer could not be obtained. Judge Rowley rejected an argument that, even if LEI had been available, the Defendant would not have recommended it given the policy wording. Judge Rowley’s view was that the wording was no different from those generally used in such policies. There was also no evidence of such criticisms from the Defendant.

  • Would the existence of LEI mean there would have been no deduction? - It was accepted that the limit of indemnity of the policy would not have been sufficient to provide coverage to trial; however, it was noted that the ATE policy taken out was similarly insufficient given its limit of indemnity. Moreover, the limit of indemnity could be sufficient if the claim settled early—and Judge Rowley reflected that most claims do. A top-up would have been required whatever the funding mechanism. Fundamentally, "if BTE insurance had been available which covered the Claimant’s solicitors’ costs as well as the opponent’s, then there is no obvious need for either a success fee or ATE policy". The burden of proof was on the Defendant to demonstrate that a CFA with a success fee and ATE would be used in such circumstances. No such evidence was provided by the Defendant.

  • Would the Claimant have used LEI if it was available? - The Defendant contended that the Claimant would have to prove he would have utilised the BTE in place of the CFA. The Defendant contended that they would simply need to show that, on the balance of probabilities, if the Claimant had been properly advised he would have taken a different option. The Claimant contended that had he been aware that it would have been cheaper or resulted in smaller deductions, he would have utilised the BTE policy. Judge Rowley advised that there was no evidence to contradict this. He stated that “It does not seem to me that it takes much to persuade the court that if that option were available, then the claimant was likely to avail himself of it. After all, he had paid a fee for that insurance and could be expected to use it unless he was unable to do so.” The court concluded that the Claimant would have used the BTE policy, whether that was with Fletchers or another firm willing to do so.

• What are the consequences (in short)?

  • The SCCO concluded that:

    • The success fee would be disallowed in its entirety.

    • The ATE policy would also have been disallowed, though did not fall in the scope of the assessment within the proceedings.

    • BBase costs (the "shortfall") would be recoverable, and it was not appropriate to "set off" the limit of indemnity of the BTE policy against such charges.

What are the consequences (the longer answer)?

The SCCO helpfully set out the consequences in detail:

“57.Having decided on the balance of probabilities that there was BTE insurance available which the claimant would have used, what effect does that have on the costs payable by the claimant to the defendant?

58.The claimant contends that all of the defendant’s base costs as well as the success fee (and the ATE premium) should be disallowed.

59.There are two strands to the claimant’s argument regarding the reduction in the base costs. The first is that I should follow the approach of Hickinbottom J, when upholding Senior Costs Judge Gordon-Saker’s disallowance of all base costs in the case of McDaniel & Co (a firm) v Clarke[2014] EWHC 3826 (QB). The second strand is that the claimant ought to receive some benefit from the £50,000 limit of indemnity in the LEI by having that sum deducted from the bill which he now faces.

60.In McDaniel, the solicitors accepted that they had not advised the claimant properly as to alternative methods of funding. In particular, Ms Clarke was a member of a trade union and there was evidence to confirm that the trade union would have backed her claim. On that basis, the judge decided that none of the costs claimed against Ms Clarke were reasonably incurred and so assessed the bill at nil.

61.I do not accept that there is any direct comparison between this case and McDaniel. If the claimant had been able to use the BTE insurance, then he would still have been liable for the solicitors’ base costs: the LEI simply providing an indemnity. That is a very different situation from where a trade union backs its member and the member has, in effect, no direct responsibility. I do not see any scope for the argument that the base costs are not recoverable in principle by the solicitor based on McDaniel.

62.Nor do I think there is any weight to the second argument regarding the use of the LEI’s limit of indemnity. The claimant has been successful in his case and therefore would expect to recover costs from his opponent. All of the costs reasonably incurred would be recoverable. Only those costs which were unreasonable either in the manner in which they were incurred or in their amount would not be recoverable from the opponent. Such unreasonable costs would also not be recoverable under the LEI policy. There might arguably be a reasonably incurred disbursement which was not recoverable, but there is certainly nothing to suggest that the entire limit of indemnity ought to be set against the costs incurred by the claimant in the manner contended for by Mr Carlisle.

63.Nevertheless, based on the reasoning throughout this judgment, it is clearly my view that the success fee would not have been incurred if the BTE policy had been utilised. On that basis, I disallow the success fee in its entirety. The same reasoning would apply to the ATE policy but that item does not strictly fall for assessment within these proceedings.”

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