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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Percy v Anderson-Young [2017] EWHC 2712 (QB) (01 November 2017) URL: https://www.bailii.org/ew/cases/EWHC/QB/2017/2712.html Cite as: [2017] 6 Costs LR 1013, [2018] WLR 1583, [2017] EWHC 2712 (QB), [2018] 1 WLR 1583, [2017] WLR(D) 796 |
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2017] EWHC 2712 ( QB) | ||
2MA90026 |
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
2017 |
B e f o r e :
____________________
LISA MARIE PERCY(a protected party by her father and Litigation Friend, Richard Percy) |
Claimant |
|
| - and – |
||
MICHAEL ANDERSON-YOUNG | Defendant |
____________________
Mr Andrew Lyons (instructed by DAC Beachcroft Claims Ltd, Solicitors) for the Defendant
Hearing date: 12 October
2017
____________________
VERSION
OF JUDGMENT
Crown Copyright ©
Mr Justice Martin Spencer:
INTRODUCTION
2017,
DJ Moss ordered the Defendant to pay to the Claimant £82,513.07 for the assessed ATE premium. The Claimant appealed against that Order and permission to appeal was granted by Mrs Justice Andrews DBE on 7 March
2017.
The appeal came before me on 12 October
2017.
SITTING WITH AN ASSESSOR
v
Barnet & Chase Farm Hospitals NHS Trust [2016]
EWHC
1589. However, that was not raised until 3.30pm. I was encouraged to adjourn in order to do so by Mr Lyons, Counsel for the Defendant, but Mr Cox, who represented the Claimant, opposed that course. I informed the parties that I would consider that suggestion when considering my judgment in the matter and if I decided that I should sit with an Assessor, I would inform the parties and make the necessary arrangements including obtaining a transcript of the hearing on 12 October.
view
that the question for me to decide is a pure question of law, for which I do not require the assistance of an Assessor. Nor does the Appeal raise questions of practice and procedure in respect of which an Assessor's knowledge and experience would equally have been
very
useful.
THE RELEVANT FACTS
value
personal injury action arising from the road traffic accident on 19 October 2005. In the accident her friend had been killed. The Claimant suffered a severe head injury, with a period of post-traumatic amnesia of some four weeks. Upon discharge from hospital, the Claimant went to live with her father and stepmother (who happened to be a brain injury case manager). Initially there were physical effects including a right-sided hemiparesis, bilateral ataxia and diplopia but eventually she had made a good physical recovery. However, there were alleged ongoing cognitive problems affecting her ability to work and her mental capacity, causing a need for care, although these were all matters of dispute.
"We have also entered into an insurance policy to which Section 29 of the Access to Justice Act 1999 applies. The name of the insurers is LAMP Services Ltd of Chester House, Harlands Road, Haywards Heath, West Sussex RH16 1LR.
The policy number is: FS 91 11921 and is dated 6 November 2009.
It relates to the same claim as identified above.
The limit of the indemnity under the policy is £50,000.
The premium for the policy is staged.
The stages are as follows:-
£1,114.87 (post proceedings)
£2,675.57 (from 45 days to trial) – all deferred.
We enclose a copy of the Notice of Funding which we are today filing at Court for sealing purposes."
valuation
of the claim.
valuations
of the claim by the parties were a long way apart. The Defendant had served a counter-schedule
valuing
the case at £566,066 and was indicating that as a result of a reconsideration by the Defendant's care expert, Mrs Gillian Conradie, a new counter-schedule would reduce the
value
of the claim to £428,167. In fact, the eventual
valuation
of the case in the counter-schedule was £351,720 – see paragraph 30 below. The best offer made on behalf of the Defendant was to allow the Claimant to accept the sum which had been offered in the Part 36 offer (£755,355.23) whereupon the Defendant would agree to pay the Claimant's costs including those incurred since the making of the Part 36 offer.
Lump sum: £1.1m
PPO for case and case management: £37,500 pa
PPO for deputyship fees: £5,000 pa
On the basis that the Claimant's multiplier at that time was 29.33, this was equivalent to a pure lump sum of approximately £2,356,000.
valuation
of the claim. This Advice forms part of a bundle of privileged documents which was before DJ Moss (and before me) but which have not been disclosed to the Defendant. Given the significance attached to it by DJ Moss, it seems to me that I must refer to it for the purposes of this judgment in considering the conclusion to which I come. It concluded that a realistic
valuation
of the claim on a lump sum basis was in the region £1.3m and no less than £1.06m. Accordingly, the parties proceeded to prepare for trial.
"You will see from the enclosed Counsel's Advice that the Defendants had no real intention on settling this matter.The only offer they would come up with [was] the same as the original Part 36 offer which had been rejected on Counsel's advice."
various
applications and cross-applications were heard. Directions were given for the future conduct of the matter which was to be listed for trial before a High Court Judge in Manchester on the first available date after 7 September 2012, with a PTR before the Designated Civil Judge on the first available date after 23 July 2012. The Defendant was ordered to make a further interim payment to the Claimant in the sum of £100,000, the court dismissed the Defendant's application for trial of a preliminary issue in relation to the Claimant's capacity and the Claimant was refused permission to rely on neuro-rehabilitation evidence. The Directions were subsequently
varied
by the court on 23 July 2012 and further Directions were given at a Case Management hearing on 27 September 2012. These Directions were
varied
yet again on 10 April 2013 when it was ordered that there be a PTR on the first available date after 5 July 2013 and it was recorded that the parties had agreed to attend mediation. The trial was listed for 2 weeks beginning on 21 October 2013 before a High Court Judge.
view
of the Claimant because it gave some insight into the Defendant's approach to the claim.
"Issue in relation to quantum and capacity
4. She has given birth since the accident to two healthy children, in June 2011 and December 2012 by her partner Adam with whom she has been with for three years. She has maintained she would like to have up to six children.
5. It is agreed that she made avery
good physical and functional recovery from the injury (for example she has returned to wall climbing) and needs no future physical therapy. Her life expectancy has not been affected.
6. The debate is over the extent of her non-physical injuries, the extent of cognitive damage and residual problems with executive functioning that she has been left with. This in turn leads to considerable debate over (amongst general quantum issues) how much if any of her previous ability to work she has lost, how much support/care she has needed in the past and will need in the future and whether she in fact has (and has had) the capacity to conduct her own litigation and manage her own property and affairs for the purposes of the Act.
Estimatedvalue
![]()
Claimant £178,500 general damages
£4,157,370.000 special damages
Defendant £47,750 general damages
TBA- special general damages (but substantially less than the claimantsvalue)
![]()
The important issues of facts and law
The parties are in dispute in relation to almost every head of claim. In particular there is a dispute in relation to the severity of the claimants brain injury and its long term impact. Particularly in relation to the need for support/ care and case management. The parties are also in dispute in relation to the issue of capacity, the reasonableness of past care and case management and the claimants employment prospects. …
Costs
27. Total claimants costs to date = £428,329.90. total estimated future costs = £303,673.96 (excluding mediators fees because these are not yet available). The costs to date figure includes the costs incurred by both Arneson (?) and Co and Scott Duff and Co. the figures for both costs to date and future costs are inclusive ofVAT
but exclusive of additional liabilities (i.e. success fee and insurance premium).
28. The defendants total costs to date = £290.000 approximately. Total estimated future costs= £290.000 (excluding the Mediator's fees because these are not available yet). The estimate of costs to date in future costs excludes the uplift to the Court approved hourly rate where the defendant is seeking to cover its costs from the claimant. The figures for both costs to date and future costs are inclusive ofVAT.
![]()
Likelihood of settlement prior to trial
29. As stated above, a date has been agreed for mediation of 27th September 2013. there have been two failed attempts at negotiated settlement thus far. There can be no assumption that the case will settle. Parties are significantly apart in their respectivevariations."
(a) that there had been two unsuccessful attempts to settle the matter by JSM;
(b) that there was a mediation on the 27th September but that he was "not expecting much from the mediation";
(c) that the Claimant's and Defendant's case summaries for the PTR set out the position better than he could that these should be read by the insurers on the basis that this gave them the present position;
(d) that the case summaries included estimates for both costs;
(e) that within the Claimant's costs, the Claimant's disbursements stood at £144,943.61;
(f) that this (the case summary for the PTR) was the first time he had been notified of the Defendant's costs and that cover was now far too low;
(g) that any increase in premium was to relate to continuing cover from the original policy of the 13th November 2009."
"13. The Defendant's case summary gave immediate cause for concern. It was apparent that this was a complex, highvalue
and hard fought case on almost all issues apart from liability and was heading for a ten day trial with a leading counsel and a battery of expensive experts.
14. Although there was a mediation scheduled, the Defendant's case summary echoed the Claimant's solicitors pessimism as to settlement. I know from experience that just because there is to be a mediation, it is not uncommon for a party to seek to use the mediation as an opportunity to put forward or explain their own case in more detail and not to increase on any offers".
He describes how LAMP were being asked to take on
very
significant risk that the Part 36 offer would not be bettered, a risk of more than £1m if the premium (premium cover being included in the policy) is included. Mr Strange describes how LAMP were reluctant to take on the risk at all.
"20. As a general proposition, if a case is approaching trial it can be assumed by an underwriter that the risks are finely balanced (i.e. that both sides think they have a reasonable chance of success) so the risk to the insurer is significant. Where, as here, there is a Part 36 offer, the crucial risk is that the Part 36 offer is not bettered. That is the trigger event which would have led to payment by LAMP.
21. Turning to the specific material available at the time, the Defendant's case summary was a key document. My assessment of the prospects was that they were marginally better than 50% but it was not a case which I was keen to top up. The matters set out were the complexity, hard fought issues and imminent ten day trial were significant risk factors."
"23. Looking again at the premium remains, having regard to my experience, a reasonable if not over generous (i.e. too low) assessment. As I have noted, I was reluctant to take on the additional risk at all."
"Are the insurance premiums staged?"
the answer is "yes" with the notice stating as follows:
"a 25% will apply to the "45 days to trial" premium if the matter settles more than six calendar days in advance of trial beginning and subject to the premium being paid within 21 days of settlement being agreed. 15% discount will apply to the "post proceedings" premium. The matter settles with more than 45 days to trial and the premium is paid within 21 days of settlement being agreed."
In particular, unlike in relation to the Notice of Funding for the £50,000 indemnity, the Defendant was not told of the premium up to 45 days before trial and within 45 days of trial, nor was the Defendant given any opportunity to settle the case before the premium was uplifted at 45 days before trial as the insurance was only taken out within 45 days of trial. The Defendant was not given an opportunity to settle the case before the additional insurance was taken out: a potential liability of over £500,000 in a case like this might have made a significant difference to the Defendant's approach to settlement. As, potentially, the knowledge that by settling the case at the mediation on the 27th September 2013 the Defendant would make himself liable to pay the £533,000 insurance premium, to have been told this might have affected his willingness to settle at the mediation.
valuation
table setting out the heads of loss and the amounts claimed in the schedule and allowed in the counter schedule in respect of each head of loss. The
valuation
table is as follows:
| HEAD OF LOSS | CLAIMANT (£) | DEFENDANT (£) |
| PSLA | 188,500 | 47,750 |
| Interest | 17,719 | 00 |
| Past earnings | 98,115 | 22,546 |
| Care/case management | 349,550 | 22,320 |
| Rehabilitation | 57,315 | 48,805 |
| Accommodation | 21,792 | 00 |
| Travel | 21,833 | 00 |
| Court of Protection | 32,825 | 00 |
| Miscellaneous | 3,288 | 6 |
| Interest | 67,538 | 00 |
| Future earnings | 399,420 | 80,000 |
| Pension | 81,755 | 00 |
| Care/case management | 1,927,250 | 129,933 |
| Accommodation | 187,367 | 00 |
| Rehabilitation | 128,070 | 00 |
| Travel | 61,464 | 360 |
| Holidays | 64,140 | 00 |
| Court of Protection | 360,409 | 00 |
| Total | 4,068,350 | 351,720 |
"So far as the ATE insurance is concerned I am now under an obligation to inform you of its terms.
They are as follows
"These terms will replace those already provided.
The new premium is £319,315.07 (post proceedings) and £533,017.13 (from 45 days to Trial).
A 25% discount will apply to the "45 days to Trial" premium if the matter settles more than six calendar days in advance of trial beginning and subject to the premium being paid within 21 days of settlement being agreed.
A 15% discount will apply to the "post proceedings" premium if the matter settles with more than 45 days to trial and the premium is paid within 21 days of settlement being agreed."
The information about the discounts was already known to the Defendant's solicitors as that had been included in the notice of funding form. What would have been new information to the Defendant was that the ATE insurance premium payable was £533,017.13.
The Decision of DJ Moss
"reasonableness of increasing cover in 2013
48. It was reasonable for the Claimant to have increased the cover, even at thevery
late stage in the proceedings and without first notifying the Defendant, from £50,000 to £500,000. An increase in that amount does not seem to me to be properly described as a "top-up". Nevertheless, the Claimant is entitled to recover a reasonable premium for the additional cover."
"I have to look at the amount of costs at risk and the size of the claim."
Having referred to the authorities of Rogers
v
Merthyr Tydfil [2006] EWCA Civ 1134, Kris Motor Spares Ltd
v
Fox Williams LLP [2010]
EWHC
1008, Redwing Construction
v
Wishart [2011]
EWHC
19 (TCC), Kelly
v
Blackhorse Ltd [2013]
EWHC
b17 and Hahn
v
HHS England [unreported], District Judge Moss reminded himself that, this being a standard basis assessment, the burden of proof is on the Receiving Party and any doubt about the reasonableness of the premium had to be resolved in favour of the Paying Party.
"49. The extent of the additional cover and the amount of the premium take this policy outside the scope of the ordinary kind of ATE policies with which the court was concerned in Rogers.
50. The late stage at which the cover was increased is another feature that takes the circumstances of this policy out of the ordinary. It is a relevant factor when considering the reasonableness of the amount of premium."
"55… because of the way the policy was structured, the defendant had no opportunity to settle before the final stage was reached. Having left it so late, it would have been reasonable for the policy to be re-structured so that the defendant had notice of the increase before it was triggered. The defendant would then have had the opportunity to settle before the premium increased from £319,350 to over £533,000. The final stage should reasonably have been delayed until after the mediation which was just over a fortnight after notice of the increase was given. The effect of the late stage at which notice was given was to fix the defendant with an unreasonably high premium. It is not a satisfactory answer to the lateness point to say that the defendant must have known that £50,000 cover was too low or that the premium increased from 45 days to trial."
very
good underwriting reasons why such a restructuring was not feasible at such a late stage before the trial and if this was to form the basis of a significant reduction in the premium (as it did), the Claimant should have been given an opportunity to deal with it, by at least asking Mr Strange about it and by seeking permission from Mr Strange to be called to give evidence.
"However the insurer appears from the evidence before me not to have given proper weight to advice from counsel on thevalue
of the claim".
He then referred to the opinion from counsel dated 30th November 2011 which followed the first JSM. This opinion was, of course, almost 2 years out of date. There had been no further opinion since then. The District Judge went onto say:
"61. Whatever the conclusion the insurer reached about the exposure that it faced, informed by the pessimisticview
that was taken by the solicitor the chances of settlement at mediation (which is put more neutrally in the case summaries), there appears to have been no reasoned assessment of the risk of failing to beat the Part 36 offer at trial. Based on leading counsel's opinion that risk was
very
substantially lower than identified by Mr Marsh and Mr Strange in their statements.
62. The evidence is that significant weight was placed on the case summaries, the failed JSMs and the length of trial. Far more important for the purpose of assessing the risk was counsel's reasoned opinion on thevalue
of the claim and therefore the likelihood of beating the offer.
63. Failure to attach the appropriate weight to counsel's advice and therefore to properly assess the chances of beating the offer fundamentally undermines Mr Cox's submission that I should not go behind the risk assessment of the insurer.
64. The difficulty with Mr Cox's criticism about the absence of underwriting evidence from the paying party as to the risks in 2013, is that the defendants were not privy to the advice the claimant had received about thevalue
of her claim. …
67. In all the circumstances I conclude that the premium of £533,000 was unreasonable and wholly disproportionate to the risk faced by the insurer. The premium in 2013 insured costs limited at £450,000 (plus the premium itself). The premium did not properly represent the risk that the Part 36 offer would not be beaten. I must therefore adjust it to a figure that better reflects the risks that the claimant actually faced of not doing better than the offer. There is no expert evidence. I do not have the expertise to assess a reasonable premium in other than broad brush terms. Doubt must be resolved in favour of the paying party. Having regard to the likely effect on the premium of the stage of which it was increased and the proximity to the mediation, I take as a starting point the premium before the final stage. In my judgment the risk faced by the insurer was a fraction of that reflected by a premium of more than the insurer amount (before the premium itself is taken into account). I allow the premium 25% of £319,350.17 which is £79,837.50 in addition to the full premium claimed for the first £50,000 of cover."
Legislative background
v
Lawrence [2015] UK SC 50. Recoverability of ATE premiums is covered by section 29 of the Access to Justice Act 1999 which provided:
"where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in those proceedings, the costs payable to him, may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy."
"The Government's policy on the recoverability is to ensure that the expense of shifting all or part of the risk of costs, whether to the solicitor under a conditional fee agreement or an insurer under an insurance policy, are usually met by the losing party and not out of the damages or the pocket of the winner…"
"(1) Where the court is to assess the amount of costs…it will assess those costs-
(a) on the standard basis or
(b) on the indemnity basis,
But the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount."
"(1) The court is to have regard to all the circumstances in deciding whether costs were-
(a) if it is assessing costs on the standard basis-
(i) proportionately and reasonably incurred; or
(ii) proportionate and reasonable in amount….
(3) The court will also have regard to-
…
(b) The amount orvalue
of any money or property involved;
(c ) the importance of the matter to all the parties;
(d) the particular complexity of the matter or the difficulty or novelty of the questions raised
(e) the skill, effort, specialised knowledge and responsibility involved;
(f) the time spent on the case; and
(g) the place where and the circumstances in which work or any part of it was done."
"11.1 in applying the test for proportionality the court will have regard to Rule 1.1 (2) (c ). The relationship between the total of the costs incurred and the financialvalue
of the claim may not be a reliable guide…
11.2 In any proceedings there will be costs which will inevitably be incurred in which unnecessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute…
11.5 In deciding whether the costs claimed are reasonable and (on a standard basis assessment) proportionate, the court will consider the amount of any additional liability separately from the base costs.
11.7 subject to para 17.8(2), when the court is considering the factors to be taken into account in assessing an additional liability, it will have regard to the facts and circumstances as they reasonably appeared to the solicitor or counsel when the funding arrangement was entered into and at the time of anyvariation
of the arrangement."
"11.10 In deciding whether the costs of insurance cover is reasonable, relevant factors to be taken into account include:
(1) where the insurance cover is not purchased in support of a conditional fee agreement with success fee, how its costs compare with the likely costs of funding the case with a conditional fee agreement with a success fee and supporting insurance cover;
(2) the level and extent of the cover provided;
(3) the availability of any pre-existing insurance cover;
(4) whether any part of the premium would be rebated in the event of early settlement;
(5) the amount of commission payable to the receiving party or his legal representative or other agents."
The argument on behalf of the Claimant
v
Merthyr Tydfil. He also relied heavily on the decision of the Supreme Court in Coventry
v
Lawrence. He submitted that, at the time the additional insurance was taken out, there was a significant quantum risk, the parties were at daggers drawn and they were approaching a long, expensive trial with many experts. He submitted that this was perceived by the underwriter, correctly, as a high risk, high cost case. In relation to Coventry
v
Lawrence, he referred to the review by the Supreme Court of the cases that had arisen over the previous 13 years. He referred to the meaning of proportionality in this context as discussed from paragraph 29 of Coventry, and in particular the adoption by the court below of the formulation in Home Office
v
Lownds [2002] 1 WLR 2450. There, the Court of Appeal had said:
"In modern litigation, with the emphasis on proportionality, there is a requirement for assessment at the outset of the likelyvalue
of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which would be necessary and appropriate [to] spend on the
various
stages in bringing the action to trial and the likely overall cost. While it was not unusual for costs to exceed the amount in issue it was, in the context of modest litigation such as the present case, one reason to seek him to curb the amount of work done and the cost by reference to the need for proportionality."
Then at paragraph 28, they said:
"The reference in 11.2 [Practice Direction] to costs "which are necessary" is the key to how judges in assessing costs should give effect to the requirement of proportionality. If the appropriate conduct of the proceedings makes costs necessary then the requirement of proportionality does not prevent all the costs being recovered either on an item by item approach or on a global approach."
v
Lawrence, the Supreme Court had observed, at paragraph 37, that the introduction of additional liabilities made the proportionality issue more acute. The court referred to Rogers
v
Merthyr Tydfil and it endorsed the decision of the Court of Appeal that a premium is recoverable as a proportionate expense if it was "necessarily incurred" even if the amount was large in comparison with the amount of damages reasonably claimed. Reference was made to Rogers at paragraph 105 where it was stated:
"105. In this case it might be thought that all the considerations urged on the court by Mr Bartlett which favour the course taken by Mr Cater, the appellant's solicitor, might go to demonstrate the reasonableness of his bill of costs - specifically, the ATE insurance stage premium - but not its proportionality: precisely because they have nothing to do with the quantum of the claim. But we did not think that is right. If the court concludes that it was necessary to incur the stage premium, then as this court's judgment in [Lownds] shows, it should be adjudged a proportionate expense. Necessity here is, we think not some absolute litmus test. It may be demonstrated by the application of strategic considerations which travel beyond the dictates of the particular case. Thus it may include, as we are persuaded it does, the unavoidable characteristics of the market in insurance of this kind. It does so because thisvery
market is integral to the means of providing access to justice in civil disputes in what may be caused the post-legal aid world.
106… Once it is concluded that the ATE staged premium here was necessarily incurred, principle and pragmatism together compel the conclusion that it was a proportionate expense. We turn therefore to the question whether the ATE stage premium was necessarily incurred."
The Supreme Court in Coventry
v
Lawrence then continued:
"40 In other words, the court did not ask whether the premium was proportionate to the importance of the case and what was at stake. Instead it adopted the Lownds approach. If the premium was necessarily incurred, it was proportionate. And it was proportionate even though it was disproportionately high when compared with the amount of damages reasonably claimed. ATE insurance was integral to the fundamental objective of improving access to justice in civil litigation. A premium that was reasonable in amount (having regard to the litigation risk) was necessary and therefore proportionate."
v
Lawrence. That paragraph concerns success fees rather than ATE premiums, and was directly concerned with whether it was open to the Supreme Court to read down paragraph 11.9 as was being contended by counsel for the Respondent. However, the Supreme Court said this:
"As the Bar Council points out, the Court of Appeal actively shaped the law relating to additional liabilities throughout the period from 2000 until 2013. It was implicit in all of the cases that success fees (often substantial success fees) were recoverable. In none of the cases did the court disallow or reduce the amounts payable in success fees on the grounds that they were so high as to amount to a breach of the paying party's Convention rights. In these circumstances, litigants and their lawyers had a legitimate expectation that the court would not (at least without reasonable notice) decide that these fees were in principle incompatible with the Convention."
"Evidence justifying the ATE premium claimed
117. If an issue arises about the size of a second or third stage premium, it will ordinarily be sufficient for a claimant's solicitor to write a brief note for the purposes of the costs assessment explaining how he came to choose the particular ATE product for his client, and the basis on which the premium is rated – whether block rated or individually rated. District judges and costs judges do not, as Lord Hoffmann observed in Calleryv
Gray (Nos.1 & 2) [2002] 1 WLR 2000, had the expertise to judge the reasonableness of a premium except in
very
broad brush terms, and the
viability
of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces. Although the claimant
very
often does not have to pay the premium himself, this does not mean that there are no competitive or other pressures at all in the market. As the evidence before this court shows, it is not in an insurer's interest to fix a premium at a level which will attract frequent challenges."
v
Gray (see Rogers at paragraph 118).
v
Fox Williams LLP [2010]
EWHC
1008 (
QB),
where the learned judge stated as follows:
"44. I have concluded that in a case where the issue is raised as to the size of the premium there is an evidential burden on the paying party to advance that the sum material in support of the contention that the premium is unreasonable. I have reached this conclusion in the light of the cases which I have cited, and in particular Rogersv
Merthyr. Despite the doubts about the operation of the Market, the Court of Appeal was satisfied that it was not in the insurer's interest to fix a premium at a level which would attract frequent challenges; and that a master was not in a better position than the underwriter to rate the financial risk that the insurer faced. Where a real issue was raised the court envisaged the hearing of expert evidence as to the reasonableness of the charge. If an issue arises, it must be raised by the paying party. This is not to reverse the burden of proof. If, having heard the evidence and the argument, there is still a doubt about the reasonableness of the charge that doubt must be resolved in favour of the paying party, see (for example) Lord Scott of Foscote in Callery
v
Gray at [126]."
The argument on behalf of the Defendant
v
Lawrence and Rogers
v
Merthyr Tydfil as well as Kris, and he endorsed the District Judge's comment that the extent of the additional cover and the amount of the premium took the second premium outside the scope of the ordinary kind of ATE policies with which the court was concerned in Rogers. Thus, he submitted that the District Judge was fully entitled to depart from paragraph 117 of Rogers in this case. He submitted that the District Judge was entitled to find that, in considering the insurance risk, the underwriter had failed to give proper weight to the only advice from counsel which existed at the time that he made his decision, namely that of November 2011, and in any event nothing of any significance had happened since November 2011 to change the force of that advice. Mr Lyons submitted that the insurer should have appreciated that the risk of the Claimant actually having to pay the Defendant's costs was low, even at the time that the second premium was assessed, and given that the risk was low, the second premium was unreasonable and disproportionate, as assessed by the District Judge. He submitted that the District Judge had every right, and indeed duty, to exercise his discretion and reduce the premium in broad brush terms.
v
Barnet and Chase Farm Hospitals NHS Trust [2016]
EWHC
1598 (
QB).
That decision considered three separate cases where the ATE premium had been challenged before the costs judge. That decision concerned principally the question whether it was reasonable for solicitors to advise their clients to convert the funding of an action from legal aid to a conditional fee agreement, with particular reference to the potential loss to the claimant of the 10% uplift allowed in Castle
v
Simmons which applies only to cases which are not funded by an "old style" (ie pre-1st April 2013) CFA. The court held that the costs judges below had been wrong in principle to disallow the additional liabilities. However, a subsidiary issue arose in relation to the ATE premiums. In the case of Surrey, the costs judge had reduced the ATE premium from £50,681 to £31,800. In one of the other cases, AH, the reduction was from £18,881.78 to £15,000. In both cases the insurance policy was the same, a block-rated policy providing cover of £500,000 in respect of the legal costs of the other side and the disbursements on the Claimant's side. It was submitted on behalf of the Claimants that the premiums should be allowed in full by reference to paragraph 117 in Rogers
v
Merthyr Tydfil and by reference to the part of the judgment of Mr Justice Simon in Kris Motor Spares cited above.
"116. this guidance was, of course, itself given in 2006 and was based upon the observations of Lord Hoffman in Calleryv
Gray given in 2002 when the new arrangements concerning CFAs were in their relative infancy. That does not diminish the importance of the guidance, but it must be recalled that there is now some 10 years of experience gained by Costs Judges since Rogers. Neither Callery
v
Gray nor Rogers expressly holds as an adjustment of the premium by [a] Costs Judge should not be made on a broad brush basis, but each, in effect, urges caution in so doing.
117. There are two reported incidents where the broad brush has been applied in this context: Redwing Constructionv
Wishart [2011] 2 Costs LO 212, a decision of Mr Justice Akenhead in the TCC and Kelly
v
Blackhorse Ltd (27 September 2013), a decision of then Senior Costs Judge, Master Hurst. I am particularly influenced by the fact that Master Hurst, whose experience in this field is unrivalled, should have felt entitled to intervene in this way.
118. Plainly the application of any broad brush must not be a capricious exercise, but the experience gained by Costs Judges over the years must, if they are to retain the ability to engage in a robust analysis of competing arguments at costs assessment hearings, be permitted to enter the arena. It follows that, in my judgment, each of the Costs Judges would have been entitled to intervene by reducing the amounts recovered in respect of the ATE premium.
119. The basis of the approach of Master Rowley in Surrey is clear from the quotation from his judgment set out above; he considered that cover for £500,000 in the circumstances was disproportionate. I agree. …
120. In AH, again the Costs Judge felt that cover of £500,000 was too much and made the reduction to £15,000 for this reason."
v
NHS England a decision of 3rd August 2015 of which I was provided a transcript. In that case, HHJ Wood QC referred, at paragraph 29, to paragraph 7 of the judgment below where the Costs Judge had said:
"It seems to me that on anyview,
the claimants have identified this as a low
value
fast track claim. The premium that is payable is pretty substantial for the post-issue level that is sought. Having determined that the costs generally are disproportionate in this claim in any event, it seems to me that it was not reasonable to take out a policy with a premium at such a level from what was, on any
view,
even 20 months earlier, a low
value
fast track claim"
HHJ Wood continued (at paragraph 29 of his judgment):
"Has the judge misdirected himself, taking into account an irrelevant consideration and confusing proportionality and reasonableness, as the Claimant contends, or was he effectively making an assessment of reasonableness, as he was obliged to do, and considering as one of the factors thevalue
of the claim as the Defendant/Respondent contends in this case?
"30. It seems to me that the Judge's first sentence cannot be divorced from the second sentence, where he has firmly comes to the conclusion, as Mr Justice Akenhead did in the Redwing case, that this was a substantial and potentially excessive premium, and in coming to his broad brush assessment as to reasonableness, he is using thevalue
of the claim as a significant factor without necessarily revisiting proportionality. Thus, I do not think that he has misdirected himself or confused proportionality with reasonableness, having given this careful consideration. Even if he had, on the state of the law that is relevant, I am not convinced that he would have been wrong to do so, because there is a difference between expenses that have been necessarily incurred and those which had been reasonably incurred. Even if I am wrong about that, in my judgment, in an assessment of this nature, broad brush applies simply that, namely, taking an overview of the claim and expense which is sought to be recovered, in the context of the risk exposure at the time."
v
Wishart [2011]
EWHC
19 (TCC) as this was referred to in oral submissions by both parties. At paragraph 15, the learned judge drew together the learning and at sub-paragraph (e) he said:
"Having regard to the judgment of Mr Justice Simon in the Kris Motor case (which addressed a detailed assessment of costs), it may well be that somewhat different considerations apply on a summary assessment, particularly in a relatively lowvalue
claim, where it would be disproportionate to expect what would in effect be expert evidence to be adduced as to the unreasonableness of the premium. As he said at paragraph 35 of his judgment, there is no presumption that the premium is reasonable. On a summary assessment at least, one should be able to look at the amount of costs cover provided by the ATE insurance and compare it with the premium to form some realistic
view
as to the assessment risk which must have been taken by the insurer. One must bear in mind that on a standard, as opposed to an indemnity, basis of costs assessment, the burden of proof as to what is reasonable is on the party entitled to the costs to establish what is reasonable. …"
Mr Justice Akenhead then continued:
"16. It is also necessary to consider whether and to what extent CFAs and ATE insurance have any part to play in adjudication enforcement cases, particularly in the TCC. There is no exemption, as such, in the rules for these cases. It must follow that the parties are entitled to enter into such funding arrangements in such types of case. However, it needs to be borne in mind that the large majority of reported cases on adjudication enforcement are successful and indeed almost in every case the claimants are sufficiently confident to pursue summary judgment applications on the basis that there is no realistic defence. It must follow that courts, particularly the TCC which deals withvirtually
all such cases, will think long and hard about allowing substantial CFA mark ups; particularly when there is a summary judgment application by the party with the CFA. It is important that claimants do not use CFAs and ATE insurance primarily as a commercial threat to defendants. It is legitimate for the court to ask itself whether, in any particular case, a CFA or ATE insurance was a reasonable and proportionate arrangement to make."
Discussion
v
Merthyr Tydfil where there was reference to Lord Hoffmans observation in Callery
v
Gray that costs judges do not have the expertise to judge the reasonableness of a premium "except in
very
broad brush terms". However, it seems to me that what the District Judge did in this case was wholly different to what the Costs Judges did in the cases of Kai Surrey and AH. He purported to use his "broad brush" discretion to second-guess the underwriting decision made by the underwriter in the circumstances which the underwriter faced in being asked to give additional insurance at the level requested.
very
surprised that the District Judge did not give Directions for expert evidence and/or for Mr Strange to give oral evidence: in my judgment he should have done and his decision was flawed in the absence of having so done. No-one could suggest that this would have been disproportionate, given the sum at stake. The District Judge would then have had significantly more material and information about the underwriting risk and he would have been in a position, from the evidential point of
view,
to enter the arena, if this was appropriate at all. In my judgment, it was certainly inappropriate for him to do so without such evidence. Mr Strange could then have explained more fully his assessment of the risk.
very
good chance of securing an award within the Part 36 offer. It is true that counsel for the Claimant had advised rejection of the Part 36 offer and nothing had changed to alter that advice. In my judgment, though, an underwriter would be foolhardy to place excessive or exclusive reliance upon such advice when he does not know the terms in which leading counsel may be advising the Defendant and the possible factors being relied upon.
"7.The Parties are in dispute in relation to almost every head of claim. In particular there is a dispute in relation to the severity of the Claimant's brain injury and its long term impact particularly in relation to the need for support/care and case management. The parties are also in dispute in relation to the issue of capacity, the reasonableness of past care and case management and the Claimant's employment prospects….
8. The issues of law in this case include Capacity, mitigation of loss and reasonableness of some of the expenditure and recovery of a loan made by the Claimant's solicitors to the claimant."
v
Merthyr Tydfil. Whilst I, of course, accept that, in the years since Rogers was decided, cost judges have become adept at looking at these matters and adopting a broad brush approach in the kind of way done in Kai Surrey and AH, what District Judge Moss did here was, in my judgment, qualitatively different.
very
well then, I will reduce it by over £400,000". Mr Duff was entitled to assume that the premium he was being quoted was a bona fide and reasonable premium for the risk which the insurer was undertaking, not least because he, Mr Duff, also believed that the prospects of settlement at the mediation were small and that this was a case which was likely to go to trial. If he did not think that the Claimant could possibly take the risk of going to trial without this insurance, why should he have thought that the underwriter ought to have a different perception of the risk? In my judgment, the Claimant in this case had little choice but to accept the quotation from LAMP and the necessity of so doing makes the premium proportionate. In my judgment, the premium was in addition reasonable or at least within the reasonable band of premiums to be quoted at that stage of the litigation given the matters which Mr Strange took into account – in my judgment reasonably - as set out in his witness statement. I cannot see that there is any real evidence, or indeed any evidence at all, that the underwriting risk was misjudged in this case.
very short time before trial – he could have made an additional Part 36 offer at any time in the years following the abortive JSM in November 2011, but chose not to. Any Defendant who settles late, particularly this late before trial, must know that he thereby significantly increases the costs risk. An experienced Defendant will know that a reasonable Claimant will probably take out additional ATE insurance, and the Notice of Funding dated 10 September 2013 will surely have come as no surprise. Furthermore, the Defendant should have anticipated that the premium would be significant.