REUTERS | Ezra Acayan

Unintended consequences: protected parties and approval of costs

Since the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) reforms in 2013, the end (for the most part) of additional liabilities being recoverable between the parties has required practitioners to adapt to seeking these costs from their client. Whilst in the majority of cases this has not proved to be problematic, significant care still needs to be taken, particularly in cases involving a protected party. The law has a duty to protect those who are in no position to protect themselves, and the court takes this duty very seriously. CPR 21 sets out the measures to be taken when a party who lacks capacity to litigate is involved in litigation.

Specifically, CPR 21.10 states that no settlement, compromise or payment on behalf of such a party is valid without the approval of the court. This provision naturally extends to the question of additional liabilities (CPR 21.12 allows the protected party’s litigation friend to recover both a success fee and the expense of an insurance policy from the damages recovered) and how much is to be paid.

CPR 46.4 applies to any proceedings where a party is a child or a protected party and money is going to be paid to, by or for that party. It sets out a general rule that the court must order a detailed assessment of the costs payable by such a party, and also of any costs payable to that party (unless a default costs certificate has been obtained, or costs are fixed by Section II or Section III of CPR 45: CPR 21.10 allows the court to simply assess the costs in such matters).

Where the costs payable comprise only the success fee, CPR 46.4(5) provides that the court may order these costs to be assessed summarily. This is a useful provision for those solicitors whose practice contains a significant number of protected party cases. However, care should be taken at all stages of the procedure to ensure that the court has sufficient information to be satisfied of the reasonableness of the proposed costs to be sought. Failure adequately to assist the court is likely to result in a full detailed assessment at best, and, at worst, may cause the court to rule that the success fee is not recoverable from the client.

If the solicitor intends to retain monies from their client’s damages in relation to the success fee and after the event (ATE) insurance premium, they will need approval to do so at the conclusion of the substantive action. The court will not assess or approve these figures at the approval of damages hearing (it will not be able to, as the success fee will not have crystallised yet), but it will rely on the solicitor’s estimate of what these figures might be and permit the solicitor to keep a suitable sum back from the client.

The solicitor for the protected party then submits a bill of costs to the paying party and the parties negotiate in the usual manner. From this bill, it will be possible to calculate the level of success fee to be sought, subject to the so-called Jackson cap of 25% of damages for pain, suffering and loss of amenities (PSLA), and past losses. Upon conclusion of the inter partes assessment procedure, the solicitor will need to apply to the court and seek approval of the success fee and ATE premium. As has been previously mentioned, this can be done summarily if the court is so minded. PD 44.9 sets out general provisions for summary assessment, and PD 44.9.5 sets out the parties’ duty to assist the court in making such an assessment. It would be prudent for the solicitor to assist the court by supplying witness evidence as to the reasonableness of the figures sought. Indeed, recent practice in the Senior Courts Costs Office (SCCO) has seen both witness evidence and the independent opinion of a costs lawyer/costs counsel being ordered by the court to assist with the approval of payments from protected parties, although it is doubtful that any independent advice would be required in the majority of cases.

Despite LASPO’s introduction now being five years behind us, the inevitable delay in these cases settling and moving through the costs procedure means that approval of additional liabilities remains a relatively new proposition to be navigated with care. The pragmatic approach of the SCCO to develop an effective process is to be applauded. However, practitioners should be aware that the burden remains on them to justify the payment from a protected party and should ensure they prepare accordingly.

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