News | General

Recoverability Of Success Fees And Ate Insurance Premiums – Post 1 April 2013

15 March 2013

One of the most fundamental reforms to be implemented through the Legal Aid, Sentencing and Punishment of Offenders Act 2013 (LASPO) is the abolishment of the recovery of success fees and ATE insurance premiums from losing parties by sections 44 and 46 of LASPO.  It is this reform that is central to Lord Justice Jackson’s vision of removing “unnecessary costs and to restore balance to the system” through removing what he described as “Super Claimants” with no direct responsibility for costs which place a disproportionate burden on unsuccessful parties.

These changes are finally set to come into force on 1st April 2013 through the Conditional Fee Agreements Order 2013 (CFAO) and The Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings Regulations 2013 (RCIPR).


CFAs entered before 1st April 2013

CPR 48.1 confirms that the CPR rules and practice directions relating to funding arrangements (Conditional Fee Agreements (CFAs); Collective Conditional Fee Agreements (CCFAs) and After-The-Event Insurance policies (ATE)) in force before 1st April 2013 will apply to funding arrangements entered before 1st April 2013.

Pre-commencement funding arrangements entered into prior to 1st April 2013 will still allow for the recoverability of success fees and ATE premiums from the losing party for cases conducted under CFAs with the benefit of ATE cover whilst funding arrangements entered into on or after 1st April 2013, which also now include Damages Based Agreements (DBAs), are governed by the amended CPR which preclude their recoverability from the paying party.  The date of the funding arrangement is therefore determinative in whether any additional liabilities (success fees and ATE insurance premiums) are recoverable from the paying party.

One of the anomalies caused by the new rules relates to the recovery of success fees for Counsel entering a CFA on or after 1st April 2013, in cases where the solicitor has entered into a CFA with the client before the new rules are implemented.  The intention of the rules would seem to be for Counsel’s success fee to also remain recoverable in such circumstances; however the rules can be interpreted in such a way that if Counsel’s CFA is entered after 1st April 2013, the success fee is not recoverable from the opponent as it falls under Article 6 of the CFAO and section 44(6) of LASPO.  This issue has been raised by the Bar Council, which has proposed an amendment to clarify the position.  This is clearly an issue that requires clarification and such an amendment is necessary to avoid satellite litigation post 1st April.

There remain some notable exceptions as to the recoverability of additional liabilities and some classes of case have been designated as exempt from the new rules.  Insolvency, publication and privacy proceedings and Mesothelioma claims are currently specific exclusions from CFAO and RCIPR.  In addition section 46 of LASPO allows for the recovery of ATE premiums for experts’ reports in clinical negligence claims only, but the recoverability of the premium is restricted to the cost of reports determining liability and causation only.  This in essence enables prospective Claimants to investigate the merits of their claim.


CFAs entered into post 1st April 2013

Any CFA entered into on or post 1st April 2013 will now preclude the recovery of the success fee element from the paying party.  This will now become payable by clients to their solicitors from the damages recovered and the maximum success fee remains at 100%.  However, in personal injury cases there is a cap of 25% based on damages recovered (net of CRU reductions) and exclusive of damages for future care and loss but inclusive of VAT. 

The aim of the cap is to ensure that the effect of removing the recoverability of additional liabilities does not impact too heavily on the damages actually received by the Claimant.  This cap does not apply to appeal proceedings.

It should also be noted that the success fee payable by the client will include any additional amount arising from a CFA entered into at a later stage i.e. with Counsel.  Therefore one can envisage some interesting discussions between solicitor and Counsel as to how the success fee should be split when the costs and fees have not been assessed by the court!  Lawyers will be required to provide clear information to potential clients on how success fees are to be calculated to avoid potential solicitor and client disputes at the conclusion of the case.


CCFAs post 1st April 2013


For CCFAs, the determinative date relating to recovery of success fees and ATE insurance premiums is the date when the work began.  It is therefore not possible to claim a success fee in a post 1st April 2013 matter even if the CCFA was signed prior to 1st April 2013.  In brief, if the work began pre 1st April 2013 the success fee is recoverable but if not, it is payable by the client.



These reforms will have a major impact in the way that cases are funded and managed in the future and there is little doubt that the Court of Appeal will be asked to determine many issues.  If you wish to discuss any of these issues please contact one of our Costs Lawyers.