Introduction to Court Approval for Success Fee Deductions
A recent decision from Cost Judge Leonard has confirmed that it is important for any professional Deputy for property and finances to ensure that Court approval has been obtained before making a payment from a Protected Party’s damages in respect of a success fee or a shortfall. It is not enough to rely on the Court of Protection advising that they do not believe that a Deputy should normally require an order.
Background of the Seth Law Case
The circumstances surrounding this matter are fairly unique and the approach adopted by the Protected Party’s Solicitor left a lot to be desired. The Protected Party was a passenger in an RTA claim and had suffered significant injuries that rendered them a Protected Party. The claim settled for £3.8m and the settlement was approved by the Court in November 2022.
The Claimant’s Solicitors, Seth Law, made an Application to the Court in June 2023 seeking the Court to approve a success fee which had been calculated at 25%. The total amount sought was £73,750.00. However, in July 2023 Seth Law sent an email to the Court requesting the Application be withdrawn because the matter had been “dealt with” by the Claimant’s Deputy.
CJ Leonard requested clarification regarding how the matter had been “dealt with” but, unfortunately, no explanation was provided. As such, CJ Leonard listed a remote hearing in October 2023 requesting a representative of Seth Law to attend. On the morning of the remote hearing a representative of Seth Law sent an email to the Court requesting the hearing be vacated because “the matter has been settled”. CJ Leonard refused to vacate and Seth Law sent a Paralegal to the remote hearing who proceeded to advise that court approval for the payment had already been obtained.
An Order made dated 22/05/2023 made by District Judge Ellington in the Court of Protection was eventually provided. This Order dismissed an application which had been made by the professional Deputy seeking authority to pay costs to Seth Law out of the Claimant’s damages. The Order included the following terms:
“(4) It does not appear that a professional deputy should normally require an order in these circumstances.
(5) Insufficient information has been provided and the application is procedurally incorrect.”
Court of Protection Ruling and Key Findings
CJ Leonard, upon considering the contents of the Order, noted that the contents did not support the point made by the Claimant’s Solicitors and that, without Court approval, the Claimant’s Solicitors were not entitled to take a payment from the Claimant’s damages. CJ Leonard proceeded to list the matter for an assessment in April 2024 and issued directions for the provision of relevant documents and information from Seth Law. Seth Law failed to comply with the directions and through administrative issues, the assessment hearing date was lost. A new assessment hearing was listed for July 2024. Before the hearing could take place, Seth Law was closed down by the SRA with effect from 13/06/2024.
The success fee was initially assessed at nil due to a failure by the professional Deputy and the Litigation Friend to provide the relevant documents requested. However, following an appeal lodged by the professional Deputy, the total deductions from damages was assessed at £16,502.64.
The professional Deputy had already paid Seth Law £73,750.00 and therefore had to attempt to recover an overpayment if £57,247.36 from Seth Law who were in compulsory liquidation. How much could be recovered was therefore significantly in doubt.
Conclusion: Lessons Learned
Whilst CJ Leonard found that the professional Deputy had arranged the payment with the express authority of the Litigation Friend, he found that she had been mistaken about the scope of her discretion and the amount due to Seth Law. CJ Leonard reiterated that “the law requires the court determine the amount to be deducted in accordance with established principles”. As such, this case should be a clear warning to all professional Deputies to ensure that they do not mistakenly pay costs which are not within their discretion to pay.
Need assistance?
Kris Kilsby is a Costs Lawyer at Paramount Legal Costs and a Council member of the Association of Costs Lawyers. For any further questions or queries about Deduction from Damages or if you are interested in further in-depth training on the topic please get in touch at [email protected].
