Before the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ended recoverable additional liabilities in most personal injury claims, it was commonplace for Claimant Solicitors to waive any claims for costs from protected parties in excess of the amounts recovered from the paying party. Since then, however, there has been an increase in claims for the approval of deductions, not only in respect of success fees and ATE premiums, but also in respect of the shortfall between the Solicitors full costs and those recovered from the paying party.
Any deductions from a protected party’s damages can only be approved following an application under CPR Parts 21. Furthermore, since December 2021, such applications have been subject to additional guidance set out in a practice note issued by the SCCO.
What approach are the courts now likely to take to these applications?
One example can be found in BCX v DTA (Costs Judge Brown, 16 December 2021). In this case the Claimant’s costs were agreed with the paying party in the sum of £330,000, the Claimant’s Solicitor then claimed a shortfall on profit costs of £94,977.38, and £64,780.92 by way of success fees and an ATE premium. The Judge carried out a detailed assessment of all the costs claimed against the Claimant and concluded that the reasonable sum that the Claimant was required to pay his Solicitors was £274,859. As this was less than the amount the paying party had agreed to pay, the claim for a shortfall on profit costs was not approved.
This decision demonstrates that claims for shortfalls on profit costs are likely to be the subject of detailed scrutiny and considerable caution should be exercised before maintaining a claim for a shortfall from a protected party.
This article originally featured in our March 2022 newsletter which can be found here.