Recovery of CFA Success Fees & Children

Introduction

As those who deal with personal injury litigation involving minors will know, when heard together, the phrases “Jackson Reforms” and “success fees” have caused significant headaches. The problem which is too often being encountered is the refusal of District Judges to release funds from a child’s damages to satisfy the success fee charged by the Claimant’s solicitors. However, with forthcoming amendments to, among others, CPR Part 21, clarity may at last be on the horizon.

This article shall attempt to review the current position under the Civil Procedure Rules in relation to recovery of success fees; comprehensively set out the forthcoming changes; and finally shall seek to analyse whether those changes are likely to operate in such a way as to remedy the current unsatisfactory position under the Rules.

Brief Background

The Jackson Reforms and the reasoning behind their implementation are, by now, well known and rehearsed by practitioners and this article therefore need only provide a cursory background in order to properly set the scene.

Prior to the implementation of the Jackson Reforms, the success fee charged under a CFA by those acting on the Claimant child’s behalf would be recovered from the Defendant. That was a relatively simple process but one that was considered undesirable and unsustainable by Sir Rupert Jackson.

Following the wide-sweeping reforms which came into effect on the 1st April 2013, solicitors charging success fees in personal injury cases can no longer recover those fees from the Defendant’s insurer but instead, are permitted to recover them from the Claimant’s own damages. By operation of ss. 4 and 5 of the Conditional Fee Agreements Order 2013, at first instance, the allowable success fee is capped at a maximum of 25% of the damages awarded for PSLA and pecuniary loss (other than future loss) net of any sums recoverable by CRU.

The recovery of these fees in cases concerning adults has apparently caused little, if any, difficulty. It is in the cases of children, who require approval from the Court before they can accept any sum of money in satisfaction of their claim, that the real issues arise.

Procedure For Infant Approval Hearings

CPR r. 21.10 requires a child’s settlement to be approved by the Court. The relevant provisions provide:

“Compromise etc. by or on behalf of a child or protected party

21.10

(1) Where a claim is made:

(a) by or on behalf of a child or protected party; or

(b) against a child or protected party,

no settlement, compromise or payment (including any voluntary interim payment) and no acceptance of money paid into court shall be valid, so far as it relates to the claim by, on behalf of or against the child or protected party, without the approval of the court.

[…]

(Rule 46.4 contains provisions about costs where money is payable to a child or protected party.)”

At present, recovery of expenses incurred by a litigation friend on behalf of a child, including the success fee entered into with the Claimant’s solicitors, is sought by way of r. 21.12 (to which this article will return in due course). It is notable that at present, the Court is only permitted to allow payment out of the child’s damages to the extent that it has been reasonably incurred and is reasonable in amount (r. 21.12(1)) and in deciding those issues the Court will have regard to all the circumstances of the case, including the factors set out in r. 44.4(3) (r. 21.12(4)). Reasonableness is to be determined having regard to the facts and circumstances as they reasonably appeared to the litigation friend when the expense was incurred (r. 21.12(5)) and where a claim is compromised for less than £5,000, the total amount the litigation friend is entitled to recover from the child’s damages must not exceed 25% of the sum agreed unless the Court orders otherwise; an absolute maximum of 50% deduction is imposed (r. 21.12(6)).

A Common Issue When Attempting To Recover The Success Fee

One of the most commonly faced obstructions in relation to obtaining a payment out of the Claimant’s damages to satisfy the success fee is the application of CPR r. 46.4 (as it currently stands) – Costs where money is payable by or to a child or protected party. It provides:

“Costs where money is payable by or to a child or protected party

46.4

(1) This rule applies to any proceedings where a party is a child or protected party and:

(a) money is ordered or agreed to be paid to, or for the benefit of, that party; or

(b) money is ordered to be paid by that party or on that party’s behalf.

(‘Child’ and ‘protected party’ have the same meaning as in rule 21.1(2).)

(2) The general rule is that:

(a) the court must order a detailed assessment of the costs payable by, or out of money belonging to, any party who is a child or protected party; and

(b) on an assessment under paragraph (a), the court must also assess any costs payable to that party in the proceedings, unless:

(i) the court has issued a default costs certificate in relation to those costs under rule 47.11; or

(ii) the costs are payable in proceedings to which Section II or Section III of Part 45 applies.

(3) The court need not order detailed assessment of costs in the circumstances set out in Practice Direction 46.

(4) Where:

(a) a claimant is a child or protected party; and

(b) a detailed assessment has taken place under paragraph (2)(a),

the only amount payable by the child or protected party is the amount which the court certifies as payable.

(This rule applies to a counterclaim by or on behalf of a child or protected party by virtue of rule 20.3.)”

As can be seen, r. 46.4(2)(a) provides that the general rule is a detailed assessment of costs must be ordered where money is payable out of a child’s damages. That very clear statement has led to many Judges refusing to release funds to satisfy the success fee and directing that a hearing be listed for a detailed assessment of costs. Whilst this, in the author’s view, is not the purpose or intention of the Jackson Reforms as they relate to the recoverability of success fees, it is difficult not to have some sympathy with Judges who feel constrained by the very clear wording of r. 46.4(2)(a).

Currently, r. 46.4(3) provides some hope of convincing a Judge who is intent on ordering a detailed assessment that he/she need not do so. The relevant section of the PD 46 provides:

“Costs where money is payable by or to a child or protected party: rule 46.4

2.1 The circumstances in which the court need not order the assessment of costs under rule 46.4(3) are as follows –

(a) where there is no need to do so to protect the interests of the child or protected party or their estate;

(b) where another party has agreed to pay a specified sum in respect of the costs of the child or protected party and the legal representative acting for the child or protected party has waived the right to claim further costs;

(c) where the court has decided the costs payable to the child or protected party by way of summary assessment and the legal representative acting for the child or protected party has waived the right to claim further costs; and

(d) where an insurer or other person is liable to discharge the costs which the child or protected party would otherwise be liable to pay to the legal representative and the court is satisfied that the insurer or other person is financially able to discharge those costs.”

The circumstances in which one is likely to successfully invoke PD46 to avoid a detailed assessment of costs are almost certainly few and far between. The most relevant provision is paragraph 2.1(a) – where there is no need to order a detailed assessment to protect the child’s interests – however the reality of the situation is that, amongst other things, Judges will want to ensure that the litigation friend was properly informed about the funding arrangement; that they understood what they were entering into; the Judge will want to consider whether 25% was in fact an appropriate success fee to charge or whether some lower figure was appropriate (some seem to be suggesting that 10% is appropriate given the uplift provided for by Simmons v Castle [2012] EWCA Civ 1288) etc. PD46 is by no means a satisfactory mechanism, as it currently stands, to obtain the monies owed to the Claimant’s solicitors.

Clearly the intention of the Jackson Reforms was to transfer the burden of paying a success fee from the Defendant’s insurer to the Claimant him/her self. That was supposed to be the case irrespective of whether the Claimant is an adult or a child. The unfortunate current state of the Rules, on a strict reading, arguably does not allow Judges to give effect to the Reforms’ clear intention.

Forthcoming Amendments

Fortunately, the Civil Procedure Rules Committee appear to have been alerted to these difficulties and in the 78th Update to the Civil Procedure Rules, amendments are made to Parts 21 and 47, and Practice Directions 21 and 46, in order to attempt to clarify the position. These amendments come into force on the 6th April 2015. The amendments are contained in SI 2014 No. 3299 (L.36) and are accompanied by a Practice Direction Making Document.

In relation to the amendments which have been published, the Ministry of Justice website states:

“Costs payable by a Child/Protected party from a damages award

Amendments are made to address the growing number of applications at approval hearings for payment out of the child\protected party’s damages to meet the success fee provided for in the conditional fee agreement or entered into between the litigation friend and the solicitor for the child\protected party. The rules are amended to reflect when and how a deduction from damages of a sum to meet any shortfall between the costs recoverable from the other party and the ‘solicitor and own client’ costs payable to the child’s\protected party’s solicitors applies. The amendments are confined to those cases where the award or ordered do not exceed £25,000. Consequential amendments are made to Part 47, PD 21 and PD46. The amendments come into effect on 6 April 2015.”

The Explanatory Note at the end of SI 2014 No. 3299 (L.36), states that the new rules amend the CPR by:

“[a]mending rule 21.12, which concerns expenses incurred by a litigation friend, so that it covers the position where full recovery of costs from the other party to the proceedings is not achieved or is not possible by virtue of the changes brought about by the Legal Aid, Sentencing and Punishment of Offenders Act 2012(b)”.

The author has also been specifically informed by the Secretary to the Civil Procedure Rules Committee that further amendments, which were omitted from SI 2014 No. 3299, are to be announced in the coming weeks. These will be further amendments to Part 21, and complementary amendments to Part 46, and will be contained in another Statutory Instrument.

The fact that the Rules Committee has only been able to tackle this issue in two amendments to the rules perhaps demonstrates how unfit for purpose the current rule framework is.

However two key questions remain: (1) Will the amendments collectively operate to finally give effect to the obvious intention of the Jackson Reforms and give Judges power to satisfy success fees entered into by litigation friends on behalf of child claimants out of the child’s damages? And (2) Will they require Judges to authorise a payment out of the child’s damages to satisfy a success fee?

The Rules Compared

It is important to first look at r. 21.12 and the amendments made thereto. Whilst the rule in its current form has been briefly summarised above, it is instructive to set it out in full:

“Expenses incurred by a litigation friend

21.12

(1) In proceedings to which rule 21.11 applies, a litigation friend who incurs 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.

(2) Expenses may include all or part of:

(a) a premium in respect of a costs insurance policy (as defined by section 58C(5) of the Courts and Legal Services Act 1990); or

(b) interest on a loan taken out to pay a premium in respect of a costs insurance policy or other recoverable disbursement.

(3) No application may be made under the rule for expenses that:

(a) are of a type that may be recoverable on an assessment of costs payable by or out of money belonging to a child or protected party; but

(b) are disallowed in whole or in part on such an assessment.

(Expenses which are also ‘costs’ as defined in rule 44.1(1) are dealt with under rule 46.4(2).)

(4) In deciding whether the 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).

(5) When the court is considering the factors to be taken into account in assessing the reasonableness of the 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 when the expense was incurred.

(6) 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.”

On the 6th April 2015 when the amendments come into force (both those already published and those which are to be published shortly), the rule will be in the following form (amendments already published in SI 2014 No. 3299 are shown in red, the additional amendments which are due to be published shortly are shown in green):

“Expenses incurred by a litigation friend

21.12

(1) In Subject to paragraph rule (1A), in proceedings to which rule 21.11 applies, 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.

(1A) Costs recoverable under this rule are limited to:

(a) costs incurred by or on behalf of a child and which have been assessed by way of detailed assessment pursuant to rule 46.4(2); or

(b) costs incurred by or on behalf of a child by way of success fee under a conditional fee agreement or sum payable under a damages-based agreement in a claim for damages for personal injury where the damages agreed or ordered to be paid do not exceed £25,000 where such costs have been assessed summarily pursuant to rule 46.4(5).

(2) Expenses may include all or part of –

(a) a premium in respect of a costs insurance policy (as defined by section 58C(5) of the Courts and Legal Services Act 1990); or

(b) interest on a loan taken out to pay a premium in respect of a costs insurance policy or other recoverable disbursement.

(3) No application may be made under the this rule for costs or expenses that:

(a) are of a type that may be recoverable on an assessment of costs payable by or out of money belonging to a child or protected party; but

(b) are disallowed in whole or in part on such an assessment.

(Expenses which are also ‘costs’ as defined in rule 44.1(1) are dealt with under rule 46.4(2).)

(Costs and expenses which are also “costs” as defined in rule 44.1(1) are subject to rule 46.4(2) and (3).)

(4) 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 rule 46.9.

(5) 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 when the costs or expense was incurred.

(6) Where Subject to paragraph (7), 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.

(7) 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 pecuniary loss other than future pecuniary loss,

net of any sums recoverable by the Compensation Recovery Unit of the Department for Work and Pensions.

(8) Except in a case in which the costs payable to a child or protected party are fixed by these rules, no application may be made under this rule of a payment out of the money recovered by the child or protected party until the costs payable to the child or protected party have been assessed or agreed.”

Of crucial importance are the amendments made to r. 46.4. As stated, such changes have not yet been formally announced but the author has been informed that they are to take the form set out below. The rule as it currently stands reads:

“Costs where money is payable by or to a child or protected party

46.4

(1) This rule applies to any proceedings where a party is a child or protected party and –

(a) money is ordered or agreed to be paid to, or for the benefit of, that party; or

(b) money is ordered to be paid by that party or on that party’s behalf.

(‘Child’ and ‘protected party’ have the same meaning as in rule 21.1(2).)

(2) The general rule is that:

(a) the court must order a detailed assessment of the costs payable by, or out of money belonging to, any party who is a child or protected party; and

(b) on an assessment under paragraph (a), the court must also assess any costs payable to that party in the proceedings, unless –

(i) the court has issued a default costs certificate in relation to those costs under rule 47.11; or

(ii) the costs are payable in proceedings to which Section II or Section III of Part 45 applies.

(3) The court need not order detailed assessment of costs in the circumstances set out in Practice Direction 46.

(4) Where –

(a) a claimant is a child or protected party; and

(b) a detailed assessment has taken place under paragraph (2)(a),

the only amount payable by the child or protected party is the amount which the court certifies as payable.

(This rule applies to a counterclaim by or on behalf of a child or protected party by virtue of rule 20.3.)”

When the amendments are made, it shall stand as follows (amendments are made in green to demonstrate that they are forthcoming, as yet unannounced, amendments):

“Costs where money is payable by or to a child or protected party

46.4

(1) This rule applies to any proceedings where a party is a child or protected party and:

(a) money is ordered or agreed to be paid to, or for the benefit of, that party; or

(b) money is ordered to be paid by that party or on that party’s behalf.

(‘Child’ and ‘protected party’ have the same meaning as in rule 21.1(2).)

(2) The general rule is that –

(a) the court must order a detailed assessment of the costs payable by, or out of money belonging to, any party who is a child or protected party; and

(b) on an assessment under paragraph (a), the court must also assess any costs payable to that party in the proceedings, unless –

(i) the court has issued a default costs certificate in relation to those costs under rule 47.11; or

(ii) the costs are payable in proceedings to which Section II or Section III of Part 45 applies.

(3) The court need not order detailed assessment of costs in the circumstances set out in Practice Direction 46 or in paragraph (5).

(4) Where –

(a) a claimant is a child or protected party; and

(b) a detailed assessment has taken place under paragraph (2)(a),

the only amount payable by the child or protected party is the amount which the court certifies as payable.

(This rule applies to a counterclaim by or on behalf of a child or protected party by virtue of rule 20.3.)

(5) Where the costs payable comprise only the success fee claimed by the child’s or protected party’s legal representative under a conditional fee agreement or the balance of any payment due under a damages based agreement, the court

(a) may direct that the assessment procedure referred to in rule 46.10 and paragraph 6 of the Practice Direction to Part 46 shall not apply, and

(b) may direct that such costs be assessed summarily.”

The Practice Directions Compared

Of equal significance for practitioners are the amendments made to PD 21 and PD 46.

The current relevant section of PD 21 provides:

“Expenses incurred by a litigation friend

11.1 A litigation friend may make a claim for expenses under rule 21.12(1):

(1) where the court has ordered an assessment of costs under rule rule 46.4(2), at the detailed assessment hearing;

(2) where the litigation friend’s expenses are not of a type which would be recoverable as costs on an assessment of costs between the parties, to the Master or district judge at the hearing to approve the settlement or compromise under Part 21 (the Master or district judge may adjourn the matter to the costs judge); or

(3) where an assessment of costs under Part rule 46.4(2) is not required, and no approval under Part 21 is necessary, by a Part 23 application supported by a witness statement to a costs judge or district judge as appropriate.

11.2 In all circumstances, the litigation friend must support a claim for expenses by filing a witness statement setting out:

(1) the nature and amount of the expense; and

(2) the reason the expense was incurred.”

On the 6th April 2015 when the amendments come into force, PD 21 will be in the following form (with amendments made in red):

“Expenses Costs or expenses incurred by a litigation friend

11.1 A litigation friend may make a claim for expenses costs or expenses under rule 21.12(1) –

(1) where the court has ordered an assessment of costs under rule rule 46.4(2), at the detailed assessment hearing;

(1A) where the court has assessed the costs to be paid by the child by way of summary assessment under rule 46.4(5)(b), at the conclusion of the hearing at which damages to be paid to the child are assessed or at the hearing to approve the compromise or settlement under Part 21, or at any time thereafter;

(2) where the litigation friend’s expenses are not of a type which would be recoverable as costs on an assessment of costs between the parties, to the Master or district judge at the hearing to approve the settlement or compromise under Part 21 (the Master or district judge may adjourn the matter to the costs judge); or

(3) where an assessment of costs under Part rule 46.4(2) is not required, and no approval under Part 21 is necessary, by a Part 23 application supported by a witness statement to a costs judge Costs Judge or district judge as appropriate.

11.2 In all circumstances, the litigation friend must support a claim for expenses by filing a witness statement setting out –

(1) the nature and amount of the expense; and

(2) the reason the expense was incurred.

11.2 In all circumstances, the litigation friend must support a claim for payment out in relation to costs or expenses by filing a witness statement setting out—

(1) the nature and amount of the costs or expense; and

(2) the reason the costs or expense were incurred.

11.3 Where the application is for payment out of the damages in respect of costs pursuant to rule 21.12(1A) the witness statement must also include (or be accompanied by):

(1) a copy of the conditional fee agreement or damages based agreement;

(2) the risk assessment by reference to which the success fee was determined;

(3) the reasons why the particular funding model was selected;

(4) the advice given to the litigation friend in relation to funding arrangements;

(5) details of any costs agreed, recovered or fixed costs recoverable by the child; and

(6) confirmation 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 pecuniary loss other than future pecuniary loss,

net of any sums recoverable by the Compensation Recovery Unit of the Department for Work and Pensions.”

The current version of PD 46 provides (so far as is relevant):

“Costs where money is payable by or to a child or protected party: rule 46.4

2.1 The circumstances in which the court need not order the assessment of costs under rule 46.4(3) are as follows –

(a) where there is no need to do so to protect the interests of the child or protected party or their estate;

(b) where another party has agreed to pay a specified sum in respect of the costs of the child or protected party and the legal representative acting for the child or protected party has waived the right to claim further costs;

(c) where the court has decided the costs payable to the child or protected party by way of summary assessment and the legal representative acting for the child or protected party has waived the right to claim further costs; and

(d) where an insurer or other person is liable to discharge the costs which the child or protected party would otherwise be liable to pay to the legal representative and the court is satisfied that the insurer or other person is financially able to discharge those costs.”

On the 6th April 2015 when the amendments come into force, PD 46 will be in the following form (with amendments made in red):

“Costs where money is payable by or to a child or protected party: rule 46.4

2.1 The circumstances in which the court need not order the detailed assessment of costs under rule 46.4(3) rule 46.4(2) are as follows –

(a) where there is no need to do so to protect the interests of the child or protected party or their estate;

(b) where another party has agreed to pay a specified sum in respect of the costs of the child or protected party and the legal representative acting for the child or protected party has waived the right to claim further costs;

(c) where the court has decided the costs payable to the child or protected party by way of summary assessment and the legal representative acting for the child or protected party has waived the right to claim further costs; and

(d) where an insurer or other person is liable to discharge the costs which the child or protected party would otherwise be liable to pay to the legal representative and the court is satisfied that the insurer or other person is financially able to discharge those costs. ; and

(e) where the court has given a direction for summary assessment pursuant to rule 46.4(5).”

Analysis & Discussion

Infant approval hearings will still be subject to r. 21.12 on account of the application of r. 21.11.

Throughout r. 21.12, the definition of that which a litigation friend can seek to recover from the Claimant’s damages is extended from simply “expenses” to “costs and expenses”. That is a necessary widening given the wording of r. 21.12(1A) which exclusively deals with recovery of “costs”.

r. 21.12(1A)(b) is the new key provision. It is this rule which gives the Court specific power to allow payment out of the Claimant child’s damages to satisfy the success fee charged. It is subject to a condition that the damages awarded or ordered to be paid to a child must not exceed £25,000, therefore for any case which has damages in excess of this limit, r. 21.12(1A)(b) will not provide any assistance.

However, r. 21.12(1A)(b) only allows the Court to permit a payment out of the child’s damages where the costs of the success fee have been summarily assessed under r. 46.4(5). It is therefore necessary to consider that rule next.

r. 46.4(5) is a brand new provision. It applies where the costs payable, “comprise only the success fee claimed by the child’s or protected party’s legal representative…” The inclusion of the word “only” is important. On a strict reading it would suggest that r. 46.4(5) does not apply where the Claimant’s solicitors seek recovery of an ATE premium and therefore the solicitors would not be entitled to a payment out under r. 21.12(1A)(b) for that disbursement. Such a construction is supported when considering r. 21.12(2)(a) which confirms that, “Expenses may include all or part of – a premium in respect of a costs insurance policy (as defined by section 58C (5) of the Courts and Legal Services Act 1990”. An ATE policy falls within the definition of s. 58C(5) of the Court and Legal Services Act 1990, it is therefore properly an “expense” and not a “cost”. This distinction, whilst technical, does appear to mean that ATE premiums will not be recoverable under r. 21.12(1A)(b). However, there is nothing to suggest that both r. 21.12(1) and r. 21.12(1A) cannot be invoked on the same infant approval hearing. Therefore solicitors will need to seek to recover the success fee under r. 21.12(1A) and the ATE premium under r. 21.12(1), or will alternatively have to bear the costs of the ATE premium themselves. If recovery of the ATE premium pursuant to r. 21.12(1) is sought it will be necessary to satisfy the Court that the cost of the ATE premium was reasonably incurred and was reasonable in amount; r. 21.12(4) and (5) will also then be relevant.

r. 46.4(5) gives the Judge a discretion as to whether to disapply r. 45.10 and PD 46 paragraph 6 – both of which set out the procedure to be followed where the Court is to assess costs payable to a solicitor by their client – and to order a summary assessment of the success fee charged. The retention of a discretion in r. 46.4(5)(b) is clear from the wording in that it provides that the Court “may direct” that the costs of the success fee are summarily assessed. It would have been open to the Rules Committee to state that the Court “must direct” such an assessment is to take place, however they obviously favour the retention of a degree of judicial flexibility. It is obviously to be hoped that Judges will exercise their discretion to disapply r. 45.10 and PD 46 paragraph 6, otherwise a solicitor will be required to serve a breakdown of costs and the client will be given the opportunity to serve points of dispute. Ultimately such a course of action is likely to lead to a further hearing being necessary to deal with the costs payable by the client which would be tantamount to a detailed assessment hearing which would realistically undermine the streamlined process that the rule changes clearly seek to promote. It is also to be hoped that Judges will adopt a sensible approach when considering whether to exercise their discretion to undertake a summary assessment – the cornerstone of the Jackson Reforms is to promote efficient litigation at proportionate cost, that aim is not realistically best served by Courts if they are unwilling to deal with the assessment of success fees at the time of the infant approval hearing.

Returning to r. 21.12, it is interesting to note that r. 21.12(7) is a new provision which transposes the content of s. 5 of the Conditional Fee Agreements Order 2013 into the Civil Procedure Rules.

It is also worth observing that for all infant claims which remain within the MOJ Portal and are therefore subject to the fixed costs regime set out in Section III of Part 45, the application of r. 21.12(8) means it will not be necessary for those acting on the child’s behalf to have agreed the costs of the claim with the Defendant’s representative/insurer prior to the hearing. For all other claims, r. 21.12(8) makes plain that the costs of the action need to be agreed or assessed prior to the court allowing a payment to be make out of child’s damages. It will therefore be essential in such cases to ensure that costs are agreed prior to the hearing so that the Court can order a payment out of the damages to satisfy the success fee.

New PD 21 para 11.1(1A) confirms that a litigation friend may make a claim for costs or expenses where the court has assessed the costs to be paid by the child under r. 46.4(5)(b), at the conclusion of an infant settlement hearing, at the conclusion of an assessment of damages hearing, or at any time thereafter.

The crucial provisions of which solicitors must be aware and with which they must familiarise themselves are PD 21, paragraphs 11.2 and 11.3 which set out that the litigation friend must file a witness statement in support of their claim for a payment out of the child’s damages. Paragraph 11.2 sets out in detail the issues which the witness statement must cover. Notably paragraph 11.2(2) requires the witness statement to set out the reason the costs or expense were incurred; this will require an explanation as to why a CFA with a success fee was entered in to.

PD 21, para 11.3 applies specifically in circumstances where payment is sought under r. 21.12(1A). It is fair to say that the requirements are relatively onerous. Of some possible concern is paragraph 11.3(4) which arguably infringes legal professional privilege. However, the stark reality is that if solicitors want to recover the cost of the success fee at the infant approval hearing, a witness statement covering all those issues set out in paragraphs 11.2 and 11.3 must be provided to the Court.

Finally it is worthwhile noting that the whole process of amendment is completed and ‘tidied up’ with an obvious but necessary amendment to PD46 paragraph 2.1, specifically the addition of sub-paragraph (e), which sets out that where the Court has given a direction for summary assessment under r. 46.4(5) it need not order a detailed assessment of costs where money is payable by a child.

I return to the two questions posed: “(1) Will the amendments collectively operate to finally give effect to the obvious intention of the Jackson Reforms and give Judges power to satisfy success fees entered into by litigation friends on behalf of child claimants out of the child’s damages? And (2) Will they require Judges to authorise a payment out of the child’s damages to satisfy a success fee?

It seems that the answers can be briefly stated as follows:

(1) Rule 21.12(1A) finally provides the Court with a specific power to make the necessary payment. The amendments also provide a coherent mechanism for releasing a payment from the child’s damages to satisfy a success fee.

Unfortunately however, those who act for child claimant’s are going to be made to work for their success fees with the requirement to provide a witness statement setting out those issues identified in PD 21, paragraphs 11.2 and 11.3 being a further hoop though which it will be necessary to jump.

(2) Simply put: “No”. Judges will not be required to allow a payment out of the damages to satisfy a success fee. They will retain a residual discretion under r. 46.4(5) to not order a summary assessment of the success fee. It is yet to be seen precisely how Judges will exercise that discretion but it has to be hoped that they will do so sensibly and with the spirit of the Jackson Reforms firmly in mind. Moreover, Judges will also clearly retain the ability to refuse to make the payment where there has been non-compliance or unsatisfactory compliance with the requirements of PD 21 paragraphs 11.2 and 11.3. It is therefore important that solicitors heed the requirements set out therein. Thirdly, Judges will be entitled to refuse all or part of the cost of the success fee if, on assessment, they consider that it was not “reasonably incurred” or “reasonable in amount” as per r. 21.12(1).

What will be interesting is precisely how Judges will go about summarily assessing the success fee. It will still be open to them to conclude that the level of the success fee charged was not reasonable or that there was in fact no need for a success fee at all (one instantly thinks of cases where liability has been admitted before the CFA is formally entered in to and in relation to which there is therefore no risk in relation to the question of liability). It may not be uncommon to continue to hear from Judges statements to the effect that “Simmons v Castle provides for a 10% uplift on damages, so this is the amount that should be charged by way of a success fee”; that would clearly beg the question why then it was considered appropriate to cap success fees at 25%. Again, only time, or guidance from a higher Court will assist in ascertaining what approach Judges are likely to adopt.

Undoubtedly this is a welcome step in the right direction but only time will tell whether the new rule framework is now fit for purpose as far as claims brought by children with success fees are concerned and whether Judges will take a sensible approach to the assessment of success fees in what is an increasingly squeezed sector of the market.

A Microsoft Word copy of the article is available to download.

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Author: Jake Rowley Farrars (chambers@farrarsbuilding.co.uk)

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