1 June 2022

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Judge who allowed litigation friend to recover success fee but not ATE contradicted himself

Solicitors say county courts often fall into error by refusing expenses to litigation friends who seek reimbursement

A deputy district judge contradicted himself by allowing a litigation friend to recover from damages a success fee in recognition of the risk in a personal injury claim but then not allowing recovery of the after-the-event insurance (ATE) premium, a leading circuit judge has held.

His Honour Judge Lethem, an honorary vice-president of the ACL, said Deputy District Judge Blake in Bromley was also wrong to approach the matter on the basis that the ATE premium was unreasonable.

The claimant’s solicitors, Express Solicitors in Manchester, said county courts commonly fell into error in refusing expenses to litigation friends who sought reimbursement of their liability to pay success fees and ATE premiums.

Liam Wheeler was 11 years old and at an H&M store in Bromley when he caught his right eye on a clothing pole-edge. His mother, Rachael Harris, instructed Express under a conditional fee agreement with a success fee of 100% and an ATE policy. Liability was admitted and damages of £1,750 agreed, subject to court approval.

At the approval hearing, DDJ Blake allowed Ms Harris to recover from the damages the maximum success fee of £437.50 but not the £336 ATE premium. He found that the cover was unnecessary because there was no liability risk and the cover protecting from part 36 liabilities was very unlikely to be used.

On appeal, HHJ Lethem, sitting at Central London County Court, considered how rule 21.12 (expenses incurred by a litigation friend) meshed with the costs rule part 46.9.

“It seems to me that there is a conscious reference to the provisions of part 46.9 in rule 21.12(4),” he explained. “That it is there for a reason. However, it is plain that the provision simply enjoins the court to have regard to the provisions of 46.9. In other words, the judge is to have regard to the fact that were there to be an assessment between the solicitor and the litigation friend, then that would be on an indemnity basis and the presumptions to which I have referred apply.

“It is not a provision that makes part 21.12 subservient to rule 46.9. Rather, it seems to me that the court has to recognise that insofar as it departs from the provisions of rule 46.9, it is rendering the litigation friend vulnerable to being personally liable for costs which are not permitted under part 21.12 but are not open to challenge as between the litigation friend and the solicitors under CPR 46.9, because of the way in which 46.9 operates.”

The effect of this was that the court was likely to start from a presumption that providing the litigation friend has approved the costs, they have been reasonably incurred and were reasonable in amount. Secondly, the judge was likely to start from the assumption that the costs were proportionate.

But while it was open to the judge to depart from that initial starting-off point, HHJ Lethem held that the court could not simply say that the premium was unreasonable in amount on a case-by-case basis (following West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220).

He went on: “I accept [claimant counsel’s] submission that the approach to the quantification of ATE premium has now been resolved by the West decision and that it is not open to a district judge to consider quantum on a case-by-case basis, closing his or her eyes to the overall operation of the market.

“Indeed, West makes clear, any challenge to an ATE premium will be conducted at a macro as opposed to a micro level. Thus, I consider that the deputy district judge fell into error insofar as he was seeking to quantify the amount of the ATE premium.”

HHJ Lethem said that, in considering the reasonableness of the matter, the DDJ approached the case “without the presumptions and assumptions that arise under a proper interpretation of rule 46.9 in his mind. The point of departure should have been that these costs were reasonable, both in being incurred and in quantum, whereas the judge approached the matter on the basis that they were unreasonable and simply supportive of that position”.

He said that, by approving the success fee, the DDJ had accepted there was “an appreciable and significant risk in the litigation” but considered the risk to be de minimis when it came to the ATE premium. “I thus consider that the deputy district judge failed to properly apply the operation of rule 21.12(4) and failed to have a proper regard from the assumptions and presumptions that arise from that provision via CPR 46.9. This was a failure to properly apply Rule 21.12 and an inherent contradiction in factual findings.”

HHJ Lethem ordered that the litigation friend was entitled to have the £336 deducted from the children’s damages.

The judge also said it was not possible to challenge ATE premium figures on a solicitor-own client basis (following Herbert v HH Law) and that it was appropriate for litigation friends to be joined to as a party for appeals in such instances, so they could make submissions.

Daniel Slade, senior partner of Express Solicitors, said: “We have found that courts up and down the country have adopted an inconsistent approach to litigation expenses claims involving infants. This decision will serve as useful guidance to those courts, namely (i) starting with the presumption the expense is reasonable, (ii) appreciating the need for even less risky cases to be insured and (iii) that there is no test that litigation friends need to satisfy in seeking a direction for reimbursement of expenses where they are more than 25%, but not more than 50% of damages.”

P Hughes appeared on behalf of the claimant. No appearance by or on behalf of the defendant.