Deductions from Damages: A Practical Guide
Practice Guides — 2026-08-10
A practical guide to court approval and assessment of CFA success fees, ATE premiums and solicitor and client shortfalls from damages recovered for children and protected parties.
Deductions from damages in cases involving a child or protected party require court authorisation. The route depends on whether the proposed payment is a CFA success fee, a damages based agreement balance, an ATE insurance premium, an unrecovered solicitor and client costs shortfall, or a combination. Each engages CPR 21.12 and CPR 46.4 differently.
The starting point is the Senior Costs Judge's December 2021 Practice Note on deductions from damages. It is an unusually useful procedural document. It explains the routes available in the Senior Courts Costs Office and includes model orders covering waiver, summary assessment, directions for detailed assessment and authority to release money held in client account.
This guide explains how those routes fit together, when an application may be decided on the papers, and what evidence the court will expect.
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Why the Court Controls Deductions from Damages
A child is a person under 18. A protected party is a party who lacks capacity within the meaning of the Mental Capacity Act 2005 to conduct the proceedings. They are separate legal categories, although the same protective costs jurisdiction applies to both.
A protected beneficiary is a protected party who also lacks capacity to manage and control the money recovered. That distinction affects how the fund is administered and who may be authorised to release a payment.
Under CPR 21.11, money recovered by or for the benefit of a child or protected party must be dealt with in accordance with the court's directions and not otherwise. Holding an amount in client account pending a decision is prudent, but it does not itself confer authority to pay the solicitors. The eventual order should identify the amount authorised, the recipient and the person permitted to release the money.
CPR 21.12 permits a litigation friend who has incurred costs or expenses on behalf of the child or protected party to recover them from the money recovered, but only on application and only to the extent that they were reasonably incurred and are reasonable in amount.
That distinction between costs and expenses is important:
- A CFA success fee, DBA balance and unrecovered base costs are costs.
- An ATE insurance premium is expressly treated as an expense under CPR 21.12(3).
- A solicitor and client shortfall is not automatically recoverable merely because the retainer makes the client liable for it.
The court is exercising a protective jurisdiction. Agreement by the litigation friend, a deputy or counsel is relevant, but does not replace the court's independent assessment.
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First Identify What the Proposed Deduction Contains
The procedure depends on the composition of the deduction. A single figure described as a "deduction from damages" conceals the very distinction the court needs to make.
CFA Success Fee or DBA Balance
Where the costs payable comprise only a CFA success fee or the balance payable under a damages based agreement, CPR 46.4(5) allows the court to disapply the ordinary assessment procedure and assess those costs summarily.
For a child in a personal injury claim, there is an additional restriction. Under the current CPR 21.12(2)(b), the summary assessment route is available only where the damages do not exceed £25,000. The December 2021 Practice Note refers to the same provision by its former numbering, CPR 21.12(1A).
Summary assessment does not mean that 25% of the relevant damages is automatically payable. The court must first decide the reasonable solicitor and client base costs and the appropriate percentage success fee by reference to the risk when the CFA was entered into. The resulting success fee is then subject to the applicable cap. The cap is a ceiling, not a tariff.
ATE Insurance Premium
An ATE premium is an expense for the purposes of CPR 21.12. The question is whether taking out the policy was reasonable in the circumstances as they appeared at the time, and whether the amount claimed is reasonable.
The ATE premium can be determined alongside a summary assessment of the success fee, although it is not itself brought within CPR 46.4(5) by being described as a cost. The evidence should address the risks insured, the funding advice, the policy selected and why the premium was reasonably incurred.
Unrecovered Base Costs or Other Solicitor and Client Costs
If the solicitors seek the difference between their solicitor and client base costs and the amount recovered from the paying party, the claim is a genuine shortfall claim. It takes the case outside the simple CPR 46.4(5) route because the costs payable no longer comprise only a success fee or DBA balance.
The general rule under CPR 46.4(2) is then that the court must order a detailed assessment of the costs payable by, or out of money belonging to, the child or protected party. The court may dispense with detailed assessment under Practice Direction 46, paragraph 2.1, including where there is no need for assessment to protect the person's interests. That exception must be demonstrated by evidence. It is not a route to light touch approval of an agreed figure.
The same caution applies to "pure" solicitor and client work which was not included in the claim against the opponent. The court will consider whether the work fell within the retainer, whether it was work on the litigation, whether the client gave informed approval and whether the time, rates and disbursements were reasonable.
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The Three Routes in the Senior Costs Judge's Practice Note
The Practice Note is specifically concerned with procedure in the SCCO after costs have been awarded to a child or protected party and the costs payable by the opponent have subsequently been agreed. It is procedural guidance rather than the source of the court's jurisdiction, but CFB v AXA confirms that its approach reflects CPR 21.12, CPR 46.4 and PD 46. Its three routes are best understood as follows.
Route 1: The Solicitors Waive Any Further Claim
Where the costs payable by the paying party have been agreed and the solicitors waive any claim for costs or disbursements beyond that recovery, the costs settlement can be approved under CPR 21.10. The application is made under Part 23, ordinarily by an application notice in Form N244. Appendix 1 to the Practice Note contains the model order.
The order records the waiver, approves the inter partes settlement and dispenses with a solicitor and client assessment under PD 46 paragraph 2.1(b). This is the simplest route because no money is being claimed from the damages beyond any separately determined additional liability or expense.
Route 2: Only a Success Fee or DBA Balance Is Claimed
Where the solicitors seek only a success fee or DBA balance, and the child-specific £25,000 restriction does not prevent summary assessment, a Part 23 application, ordinarily in Form N244, may seek summary assessment under CPR 46.4(5). Appendix 2 contains the model order.
Where an ATE premium is also claimed, the application should identify it separately as an expense under CPR 21.12 and ask the court to determine whether it was reasonably incurred and reasonable in amount.
Route 3: A Base-Costs Shortfall or Other Costs Are Claimed
Unless an exception under PD 46 paragraph 2.1 is properly established, a request for detailed assessment is required. The Practice Note directs the solicitors to file Form N258 and pay the applicable hearing fee.
The SCCO should be told that the inter partes costs have been agreed and that the remaining purpose is to assess the costs and expenses sought from the child or protected party. The paying party will not normally need to attend because its liability has already been agreed. Appendix 3 contains model directions and Appendix 4 contains the model final order.
The litigation friend and any deputy should be notified and given the opportunity to attend. The Practice Note also indicates that, where they do not challenge the costs or participate in the assessment, the court is likely to make no order for the solicitors' assessment costs beyond any figure agreed with the paying party. Ordinarily, that leaves the firm bearing the N258 fee and its own costs. Neither should be added to the deduction unless expressly allowed by the court.
The final model order is especially useful where money remains in client account. It assesses the inter partes figure, certifies the further sum payable under CPR 46.4(4), and gives the deputy permission to release the specified amount from the client account.
The Practice Note warns that applications merely asking the court to "approve" or "certify" a deduction are unlikely to be appropriate. The application should identify the relevant jurisdiction, the assessment sought and, if detailed assessment is said to be unnecessary, the particular PD 46 ground relied upon.
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Can the Court Decide the Deduction on the Papers?
Yes, but three expressions which are sometimes used interchangeably should be kept separate.
Summary assessment describes the narrow assessment procedure permitted by CPR 46.4(5) where the costs comprise only a success fee or DBA balance.
Determination on the papers describes how the court deals with the application. Under CPR 23.8, the court may determine an application without a hearing where the parties agree or where the court considers a hearing inappropriate.
Provisional assessment under CPR 47.15 is the separate paper procedure ordinarily used for between-the-parties bills not exceeding the current monetary threshold. It should not be confused with either of the routes above.
The authorities show that a deductions application can be decided on the papers:
- In [CFB v AXA Insurance UK plc [2025] EWHC 915 (SCCO)](https://caselaw.nationalarchives.gov.uk/ewhc/scco/2025/915), Costs Judge Brown considered that the success fee and ATE premium presented no obvious difficulty and might have been dealt with on the papers. He also explained at [19] and [62] that deductions and even an assessment may be considered provisionally on the papers, with an affected person given the opportunity to ask for the allowance to be adjusted.
- In [Spicer v Greene King Brewing and Retailing Ltd [2026] EWCC 18](https://caselaw.nationalarchives.gov.uk/ewcc/2026/18), the court adjourned the deductions issue following the infant approval hearing, obtained the complete file and then conducted a paper hearing. The judge summarily assessed the success fee and determined the ATE expense without a further attended hearing.
A paper decision is nevertheless discretionary. A substantial shortfall, inadequate evidence, a dispute about the retainer, possible conflicts, unusual costs or a need to examine the underlying file may justify an attended hearing. Appendix 3 to the Practice Note expressly contemplates a remote hearing where appropriate.
Where a paper determination is requested, the draft order should invite a provisional decision with a specified period in which an affected person may request reconsideration. That gives the court a practical route to determine a well-evidenced application without sacrificing procedural fairness.
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What Evidence Must Support the Application?
CPR 21.12(10) requires a witness statement addressing, so far as applicable:
1. The nature and amount of each cost or expense and why it was incurred.
2. The CFA or damages based agreement.
3. The risk assessment used to set the success fee.
4. Why the particular funding model was selected.
5. The funding advice given to the litigation friend.
6. A bill or informal breakdown of the solicitor and client base costs.
7. The costs agreed or recovered from the opponent, or the fixed costs recoverable.
8. The division of the damages between pain, suffering and loss of amenity and past financial loss, net of CRU or DWP recovery.
The Practice Note adds important practical detail. A properly prepared bundle should ordinarily include:
- The settlement approval order and every later order dealing with costs or the fund.
- Any relevant Court of Protection order appointing or authorising a deputy.
- The CFA, all variations, client care documents and relevant attendance notes.
- The contemporaneous risk assessment and evidence explaining the percentage success fee.
- The ATE certificate, policy wording, risk material and advice about the need for insurance.
- The inter partes bill or breakdown used in negotiations and the costs settlement.
- The solicitor and client bill or breakdown identifying each amount sought from damages.
- A clear reconciliation showing how the alleged shortfall has been calculated.
- A skeleton argument addressing the reasonableness of the costs and expenses claimed.
- A draft order stating the precise amount to be released from client account and to whom it is payable.
For a shortfall claim, it is not enough to apply a percentage to the amount unrecovered inter partes. The evidence should identify work which was reasonably undertaken for the child or protected party but was not recoverable from the opponent, explain why it was not recovered, and address the likely outcome of assessment. The court will expect proper engagement with hourly rates, time spent, delegation, duplicated work, counsel's fees, disbursements and the scope of the retainer.
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The Court's Assessment of Reasonableness
Under CPR 21.12, the court asks whether the costs or expenses were reasonably incurred and reasonable in amount. It considers the facts and circumstances as they reasonably appeared when the liability was incurred, not merely with hindsight after the claim succeeded.
For solicitor and client costs, the court must also have regard to CPR 46.9. Costs expressly or impliedly approved by the client may benefit from presumptions of reasonableness, but only where the approval was properly informed. Costs of an unusual nature or amount may be presumed unreasonable where the solicitor did not explain that they might not be recovered from the opponent.
The litigation friend's consent is therefore evidence, not the answer. In CFB v AXA, Costs Judge Brown held that it was not enough for counsel simply to say that the proposed sum looked reasonable. The court had to consider the merits of the claim against the protected party and decide independently whether dispensing with assessment was in that person's interests.
In first-instance proceedings, the amount recoverable in respect of costs is subject to the cap in CPR 21.12(8), calculated by reference to damages for pain, suffering and loss of amenity and past financial loss. Where the total damages do not exceed £5,000, CPR 21.12(7) ordinarily limits the total costs and expenses to 25% of the damages. The court may direct otherwise, but the total cannot exceed 50%. These caps do not convert a maximum deduction into an entitlement. Every component must still pass the tests of liability and reasonableness.
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What the Leading Cases Demonstrate
CFB v AXA Insurance UK plc
CFB v AXA concerned an adult protected party who had recovered £1 million following a severe brain injury. The solicitors sought a success fee of £31,413.80, an ATE premium of £1,680, a base-costs shortfall and further "pure" solicitor and client costs. The proposed inter partes settlement was £378,000 against an electronic bill of £439,167.62.
The court approved the inter partes settlement but refused to dispense with assessment of the shortfall and additional solicitor and client claims. A high percentage recovery did not establish that further reasonable costs were payable. The supporting material did not adequately analyse the points which would arise on assessment, including hourly rates, delegation, time, counsel's fees and whether some work fell within the retainer.
The case is the clearest current warning against presenting a shortfall compromise as a simple approval application. It also provides direct support for provisional paper assessment where the evidence is sufficient.
EVX v Smith
In [EVX v Smith [2022] EWHC 1607 (SCCO)](https://caselaw.nationalarchives.gov.uk/ewhc/scco/2022/1607), a child recovered £225,000. The approval order allowed a £12,500 success fee and £3,920 ATE premium, but directed detailed assessment of the remaining shortfall, approximately £28,113.
The litigation friend did not object to the deduction. Costs Judge Brown nevertheless rejected the submission that her agreement was sufficient. The court examined the retainer, informed approval, hourly rates, fee-earner grades and the reasonableness of the solicitor and client charges. The decision illustrates why a base-costs shortfall is materially different from a success fee and ATE application.
Spicer v Greene King
In Spicer v Greene King, the child recovered £10,000 in a straightforward admitted-liability claim. The solicitors sought a £2,500 success fee and an ATE premium of £1,120, relying on 73.1 hours of recorded time across 18 fee earners and a 100% success fee.
After reading the complete file at the paper hearing, the judge assessed reasonable base costs at £3,000, assessed the appropriate success fee at 11%, producing £330 plus VAT, and disallowed the ATE premium. The case demonstrates both that the issue can be determined on the papers and that the court will test the base costs and funding evidence rather than treating 25% as the normal deduction.
Mackenzie Costs has published a separate case analysis of Spicer v Greene King.
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How the Application Should Be Framed
The relief should be tailored to the components of the deduction. Depending on the case, the application or request should seek:
1. Approval or assessment of the agreed inter partes costs figure.
2. Summary assessment of the CFA success fee or DBA balance under CPR 46.4(5).
3. Determination of the ATE premium as an expense under CPR 21.12.
4. If a shortfall is claimed, an order under PD 46 paragraph 2.1(a) dispensing with detailed assessment on specified evidence, or alternatively directions for detailed assessment under CPR 46.4(2).
5. Determination on the papers under CPR 23.8, if appropriate, preferably on a provisional basis with liberty to seek reconsideration.
6. Certification of the amount payable under CPR 46.4(4), where applicable.
7. Express authority for the identified deputy, litigation friend or other authorised person to release the exact approved amount from client account.
The original approval order should always be checked first. It may already have ordered detailed assessment, dispensed with it, or preserved a later application to dispense. The new application must operate within that order rather than starting from an assumed blank slate.
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Common Errors
1. Asking only for approval. The application should identify the rule, the assessment sought and the legal basis for dispensing with any detailed assessment.
2. Treating 25% as the ordinary success fee. It is a cap. Reasonable base costs and the risk-based percentage must be established first.
3. Combining every item into one deduction. Success fee, ATE premium, base-costs shortfall and pure solicitor and client work require separate analysis.
4. Relying on the litigation friend's agreement. Consent is relevant but does not remove the court's protective duty or establish informed approval.
5. Omitting the base-costs breakdown. The court cannot assess a success fee or shortfall without understanding the underlying solicitor and client costs.
6. Producing generic ATE evidence. The statement should explain the actual risk insured and why the selected policy was reasonable when taken out.
7. Failing to reconcile the shortfall. The court needs to see exactly what was claimed inter partes, what was recovered and what remains sought from damages.
8. Assuming a paper decision is guaranteed. CPR 23.8 gives the court a discretion. Weak evidence may generate directions or an attended hearing rather than approval.
9. Releasing money before the order. Retention in client account is not authority to pay it out.
10. Overlooking the child-specific £25,000 restriction. A child and an adult protected party do not have identical access to the CPR 46.4(5) shortcut.
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Practical Checklist
Before lodging the application:
1. Establish whether the claimant is a child, a protected party or a protected beneficiary.
2. Read the settlement approval order and any Court of Protection orders.
3. Verify that the inter partes costs have been assessed, agreed or fixed as required by CPR 21.12(9).
4. Separate the proposed deduction into success fee, DBA balance, ATE premium, shortfall and any other costs.
5. Select the correct Practice Note route.
6. Prepare the CPR 21.12(10) witness statement and supporting documents.
7. If a shortfall is claimed, produce a proper solicitor and client breakdown and reconciliation.
8. Decide whether to request a provisional paper determination under CPR 23.8.
9. Draft the order using the relevant Practice Note appendix and include precise release provisions.
10. Keep the money in client account until the court has authorised payment.
How Mackenzie Costs Can Help
Mackenzie Costs advises on deductions from damages for children and protected parties, including CFA success fees, ATE premiums and solicitor and client shortfalls. The practice can prepare the application, supporting evidence, costs breakdown or bill, shortfall reconciliation and skeleton argument, and provide representation in the SCCO where assessment is required.
Contact Mackenzie Costs to discuss a proposed deduction before funds are released.
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