Sums paid by the Metropolitan Police in respect of legal fees and insurance as part of a settlement agreement following a legal dispute concerning overtime payments was not a ‘profit’ and so did not represent employment income of a police officer.   

The appellant, a police officer with the Metropolitan Police Service (‘the MET’), and some other officers brought a group litigation action against the MET for alleged unpaid overtime and failure to pay certain other allowances.  

To fund the legal proceedings against the MET, the claimants entered into a damages-based agreement with solicitors and counsel, which provided for legal representation in return for a ‘success fee’ calculated as a percentage of any sum paid by the MET to settle the claim or any damages awarded to the claimants by the High Court. The claimants also took out insurance against the risk of having