MRN’s ‘how to’ guide on getting your success fee deduction right
Prompted by the recent decision in SJ (a minor suing by his mother and Litigation Friend AJ) –v- DGJ Tanner t/a Sopley Farm [2025] EWCC 17, which highlighted that Solicitors are struggling with this issue, here’s MRN’s ‘how to’ guide on getting your success fee deduction right.
The first thing you need to know when calculating the amount of success fee to be taken from a client’s damages is what does your conditional fee agreement actually say? Some conditional fee agreements also entitle you to take your shortfall in basic charges from the client’s damages (and that shortfall may be subject to the cap referred to below). Dealing with the success fee only, often, post-LASPO, the success fee is 100%, but not always. More importantly, however, is the fact that the success fee is usually to be applied to the basic charges. In order to calculate your success fee then, you will need to know what your basic charges are.
Once you have established what your basic charges are (whether by using your time-recording software or having a bill of costs drafted), then you can calculate the amount of your success fee. If your basic charges are £12,000 and your success fee is 50%, then the amount of your success fee is £6,000.
Post LASPO, in personal injury matters at first instance, the amount that can be deducted from the client’s damages is limited to 25% of the client’s general damages and damages for pecuniary loss, other than future pecuniary loss, net of CRU. Therefore in order to assess whether your success fee needs to be limited, you need to know what has been recovered in respect of general damages and past pecuniary loss, separate from future pecuniary loss.
Using easy examples, if the Claimant’s claim settles for £100,000, net of CRU, with no future pecuniary loss, 25% of that would be £25,000. If using the example above, your success fee is £6,000 then you can charge your client £6,000 plus VAT. If, however, the Claimant’s claim settles for £10,000, net of CRU, with no future pecuniary loss, 25% of that would be £2,500, so your success fee would be limited to £2,500, inclusive of VAT. If Counsel has been instructed and charges a success fee, that success fee is also included within that figure.
In the SJ –v- DGJ Tanner t/a Sopley Farm case mentioned above, the minor Claimant’s claim settled for £3,600.20 and the Claimant’s Solicitor sought a deduction of £900.05 for the success fee at an infant approval hearing. Having read the witness statement of the Litigation Friend which was included within the approval bundle, District Judge Lumb raised a concern regarding the advice given to the litigation friend, specifically her statement confirming she was aware that Express Solicitors would deduct 25% and the cost of the ATE premium from the Claimant’s damages, given it could not have been known at the outset whether the cap would have applied. District Judge Lumb noted that expressing the success fee as automatically 25% of the damages would be an unlawful contingency fee.
The success fee in the CFA was 100%, however District Judge Lumb assessed a reasonable success fee to be 20%. He then considered the Solicitor’s basic charges, noting with concern that these were said to be £29,641.80, with the work having been done by 14 different fee earners all at hourly rates which were higher than the SCCO guideline rates for Manchester. He therefore directed a detailed assessment be carried out on paper and ordered the Solicitor lodge their full file of papers with the Court to determine the level of reasonable basic charges.
Following review of those papers, despite noting concerns as to “costs padding”, he determined a reasonable amount of basic charges would have exceeded £5,000 (20% of £5,000 being £1,000 and therefore higher than the success fee being sought) and therefore he did not undertake a full detailed assessment and approved the success fee.
This is nonetheless a cautionary tale for Solicitors that it is imperative that Solicitors understand how the 25% cap operates with reference to the success fee. A Claimant’s solicitor is not entitled to simply deduct 25% of the total damages and take that as their success fee. In the example given above, if a £25,000 success fee had been taken instead of a £6,000 success fee, the client would have been overcharged by £19,000.
Following the Supreme Court decision of Oakwood –v- Menzies [2024] UKSC 34, last year, once you have calculated your success fee, you should seek agreement from the client to that sum before deducting it from the damages for effective payment of your final bill.