In the case of Duffield v WM Morrison Supermarkets Ltd [2025] EWCC 35, His Honour Judge Monty KC considered the court’s approach to damage deductions for success fees and ATE premiums in infant proceedings.

Background

The case arose from an accident in the Defendant’s supermarket that injured the Claimant, a five-year-old child. The Claimant’s mother, Ms Matuleviciute, acted as his litigation friend and instructed solicitors under a conditional fee agreement (CFA), also taking out after-the-event (ATE) insurance.

The claim settled for £2,250 in damages. At the infant settlement hearing, Ms Matuleviciute requested a damages deduction of £450 for the CFA success fee and £650 for the ATE premium. This request was supported by a witness statement (in compliance with CPR 21.12(10)) confirming she had made informed decisions regarding both the CFA and ATE policy.

Deputy District Judge Walton approved the settlement but reduced the success fee deduction to £225 and disallowed the ATE premium entirely. Ms Matuleviciute appealed.

Legal Framework

Under CPR 21.12, a litigation friend who incurs a cost or expense on behalf of a child (or protected party) may seek to deduct these from the child’s (or protected party’s) damages. These costs or expenses include:

• Success fees under CFAs (CPR 21.12(2)(b))
• ATE insurance premiums (CPR 21.12(3)(a))

These costs must be both reasonably incurred and reasonable in amount (CPR 21.12(1)). The court must consider all circumstances, including those in CPR 44.4(3) and CPR 46.9. Notably, CPR 46.9(3) provides that if costs were expressly or impliedly approved by the client, they are presumed to be both reasonably incurred and reasonable in amount, unless the presumption is displaced.

Finally, 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 when the cost or expense was incurred (per CPR 21.12(6)).

First Instance Reasoning

At the outset, DDJ Walton took issue with the level of the deduction sought, commenting that “we have got damages of £2,250 and we have got approximately 50% of that being eaten up on a success fee and ATE premium… which is disproportionate”. 

The DDJ accepted that the success fee was reasonably incurred but not reasonable in amount and limited the deduction to 10% of the total damages with reference to Simmonds v Castle [2012] EWCA Civ 1039.

As to the ATE premium, the judge felt this was not reasonably incurred at all and disallowed any deduction. The DDJ’s reasoning for this was that:

• Qualified One-Way Costs Shifting ("QOCS") applied (so there was little risk of an adverse costs order);
• the Claimant’s solicitors would have separately recovered an agreed amount of costs from the Defendant (by way of the fixed costs regime); and
• it was a case in which it was reasonable to expect that the Defendant would settle.

Post judgment, counsel for Ms Matuleviciute took the judge to the CFA to highlight that the CFA provided for a success fee linked to base costs, not damages. Therefore, the decision was contrary to the CFA. The Judge dismissed that this was relevant to the court’s discretion. 

Appeal Decision

The appeal was heard by HHJ Monty KC (Circuit Judge) who concluded that both the judge’s calculation of the success fee and the disallowance of the ATE premium were wrong. This decision was underpinned by a recognition of the importance of CPR 46.9(3) in that departing from this presumption had the possible consequence of rendering the litigation friend personally liable for the costs.

HHJ Monty KC reiterated that success fees are a matter of contract between the contracting parties. Thus, it was not open to the judge to determine the amount of the deductible success fee by reference to a Simmons 10% uplift on damages. While payment out of the damages is subject to the limitation on recovery imposed by CPR 21.12, the basis remains contractual.

As to the ATE premium, HHJ Monty KC found clear inconsistency in a decision that held there was a litigation risk (hence allowing a success fee) while as the same time finding that it was unreasonable to insure against that risk.

HHJ Monty KC further highlighted several flaws in the DDJ’s reasoning:

• QOCS’s significance - 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. Additionally, 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.
• The separate recovery of an agreed amount of costs – considering these costs was incorrectly looking at matters as at the hearing, rather than at the time the ATE policy was taken out when an agreement on costs could not have been envisaged.
• Settlement was likely – it was not reasonable to expect the case to settle at the time the ATE policy was taken out as liability was denied.

Future Approach

At paragraphs 50 – 52 of the judgment, HHJ Monty KC laid down the approach the courts should follow moving forward.

Regarding success fees, they must have been reasonably incurred and be reasonable in amount per CPR 21.12. Proportionality of the premium is not relevant, and the court must follow a structured approach (per Herbert v HH Law Ltd; West v Stockport NHS Foundation Trust). 

Where there is a risk assessment before the court (a requirement under CPR 21.12(10(c)), the court must decide whether reasonable consent was given by the litigation friend so as to engage the presumption under CPR 46.9(3)(a) and (b). 

When it comes to considering a success fee deduction, the court should ask the following questions:

“(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)? 

(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.”

As to ATE premiums, again, the proportionality of the premium is not an issue (Per 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 and it should be deducted accordingly.

Significance

While not binding precedent, Duffield provides strong persuasive authority on success fee and ATE premium deductions in child settlements. It reinforces that where a litigation friend has expressly or impliedly approved a cost or expense, the court should hesitate before denying recovery, particularly as doing so risks unfairly exposing the litigation friend to personal liability.