COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHESTER COUNTY COURT
District Judge Wallace
London, WC2A 2LL
Wednesday 19th September 2001
B e f o r e :
LORD JUSTICE BROOKE
LORD JUSTICE LONGMORE
| IMRAN SARWAR
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Geoffrey Nice QC and Nicholas Bacon (instructed by Messrs Amelans for Imran Sarwar)
Peter Birts QC and Peter Goodbody (instructed by David Higginson for Muhammad Alam)
(ii) Other interested parties
Richard Drabble QC & (Mr A Cooke) (instructed by The Law Society)
Stephen Irwin QC & (Miss O Hocdsworth) and Richard Hermer (instructed by the Association of Personal Injury Lawyers (APIL))
John Leighton-Williams QC (instructed by Messrs Barlow Lyde & Gilbert for the Association of British Insurers (ABI))
Anna Guggenheim QC (instructed by A E Wyeth & Co for the Forum of Insurance Lawyers (FOIL))
Benjamin Williams (instructed by Messrs Colman Tilley Tarrant Sutton for the Motor Accident Solicitors Society (MASS))
Peter Birts QC (instructed by Messrs Beachcroft Wansbroughs for the Liability Insurers Group)
Philip Brook-Smith (instructed by Messrs Rowe Cohen for the ATE Group)
Jeremy Stuart-Smith QC (instructed by Messrs Lyons Davidson for DAS Legal Expenses Insurance Co Ltd)
Jeremy Morgan (instructed by Messrs Russell Jones & Walker for the TUC)
Crown Copyright ©
This is another appeal concerned with the new arrangements for financing the cost of personal injuries litigation which came into effect last year. Legal aid is now no longer available for most litigation of this type. In Callery v Gray, the Court of Appeal was concerned two months ago with issues relating to the appropriate size of a success fee in a conditional fee agreement made in connection with a small claim for personal injuries suffered in a road traffic accident which was settled quite quickly without any need to bring court proceedings. In that case a passenger in a car had made a claim against the driver of the other car involved in an accident. The court was also concerned with the appropriateness of taking out "after the event" ("ATE") insurance in connection with such a claim, and the reasonableness of the ATE premium claimed in that case.
The present appeal is concerned with a similar claim brought by a passenger against the driver of the car in which he was travelling. The courts below had disallowed the recovery of an ATE premium on the grounds that the claimant ought to have inquired into the availability of "before the event" ("BTE") legal expenses insurance which formed part of the cover provided by the driver's insurance policy, and then made use of that cover. This policy covered the costs and expenses of both sides in a claim brought by a passenger in the car against the insured driver himself up to a limit of £50,000.
The Court of Appeal allowed the appeal on the grounds that the policy did not provide the claimant with appropriate cover in the circumstances of this case. Representation arranged by the insurer of the opposing party, to which the claimant had never been a party, and of which he had no knowledge at the time it was entered into, and where the opposing insurer through its chosen representative reserved to itself the full conduct and control of the claim, was not a reasonable alternative to representation by a lawyer of the claimant's own choice, backed by an ATE policy (paras 52-58).
The court suggested that the position might be different if BTE insurers financed some transparently independent organisation to handle such claims, and made it clear in the policy that this is what they were doing (para 53).
The court said, however, that if a claimant making a relatively small (ie under about £5,000) claim in a road traffic accident had access to pre-existing BTE cover which appeared to be satisfactory for a claim of that size, then in the ordinary course of things he/she should be referred to the relevant BTE insurer (para 41-43). The court gave guidance as to the nature of the inquiries a solicitor should make in this class of case into the availability of BTE cover and the insurance policies and other documents the solicitor should ask the client to produce (paras 45-49). It stressed, however, that this guidance should not be treated as an inflexible code, and that the overriding principle was that the claimant, assisted by his/her solicitor, should act in a manner that was reasonable (para 50).
1 Introduction 1
2 The facts of the case 5
3 The judgments in the courts below 8
4 Funding options and the solicitor's duty to the client 11
5 The intervenors in the appeal 18
6 LEI/BTE insurance 20
7 The practice of an LEI insurer 27
8 The CIS/DAS arrangements 33
9 The conflicting concerns about BTE cover 39
10 The appropriateness of BTE cover for small accident claims 41
11 Proper practice for a solicitor inquiring about BTE cover 45
12 Motor accident claims where the passenger blames the driver 52
13 The concerns of the ATE Group and the TUC 59
14 How this judgment fits in with the judgment in Callery 60
15 Why we differ from the judge 61
Lord Phillips MR : This is the judgment of the court.
2. The facts of the case
"For the purposes of this Section
(1) 'We', 'us' and 'our' means DAS Legal Expense Insurance Company Limited, who administer this insurance on behalf of CIS.
(2) 'Insured Person' means you and, with your agreement
(ii) any passenger
whilst in or on the Insured Vehicle.
If any accident occurs which results in ..
(2) injury to an Insured Person
and we accept that there is reasonable prospect of a successful recovery against the negligent party we will at your request:
(i) negotiate to recover the Insured Person's uninsured losses and costs
(ii) pay costs and expenses incurred with our consent together with third party costs for which the Insured Person is responsible
We will not ..
(b) pay more than £50,000 in respect of all claims under this Section, including the legal costs of an appeal or of defending an appeal, arising from any one accident.
If claims from more than one Insured Person are involved the insurance will apply to the aggregate amount and in priority to you.
1. We will be entitled to the full conduct and control of any claim or legal proceedings.
2. We will be entitled to appoint a legal representative where we regard it as necessary. An Insured Person may choose an alternative legal representative only where
(i) we decide to commence legal proceedings or
(ii) there is a conflict of interest
Any dispute as to the choice of legal representative or the handling of a claim will be referred to an independent arbitrator who will normally be the President of the Law Society.
3. An Insured Person must not settle a claim without our agreement."
3. The judgments in the courts below
4. Funding options and the solicitor's duty to the client
"44.4 (1) ..the court will not allow costs which have been unreasonably incurred
(2) ..the court will (b) resolve any doubt which it may have as to whether costs were unreasonably incurred in favour of the paying party.
44.5 (1) The court is to have regard to all the circumstances in deciding whether costs were
(a)(ii) proportionately and reasonably incurred
(3) The court must also have regard to:
(a) the conduct of all the parties
(b) the amount or value of any money or property involved .."
(a) give information about costs and other matters in accordance with a Solicitors' Costs Information and Client Care Code made from time to time by the Council of the Law Society."
"The solicitor should discuss with the client how, when and by whom any costs are to be met, and consider:
(i) whether the client may be eligible and should apply for legal aid
(ii) whether the client's liability for their own costs may be covered by insurance;
(iii) whether the client's liability for another party's costs may be covered by pre-purchased insurance and, if not, whether it would be advisable for the client's liability for another party's costs to be covered by after the event insurance
(iv) whether the client's liability for costs (including the costs of another party) may be paid by another person eg an employer or trade union."
"Discussing funding with client and various options available.
Advising him of the changes due [to] the Access to Justice Act. Discussed the benefit of taking out a ATE policy to protect him against the payment of other side's costs.
Client advised that he did not have the benefit of any other Legal Cover and wished to take out a policy with Temple Legal Protect. Will send out a copy."
"whether the legal representative considers that the client's risk of incurring liability for costs in respect of the proceedings to which the agreement relates is insured against under an existing contract of insurance."
5. The intervenors in the appeal
6. LEI/BTE insurance
"Whereas, in order to protect insured persons, steps should be taken to preclude, as far as possible, any conflict of interests between a person with legal expenses cover and his insurer arising out of the fact that the latter is covering him in respect of any other class of insurance or is covering another person and, should such a conflict arise, to enable it to be resolved;
Whereas the interest of persons having legal expenses cover means that the insured person must be able to choose a lawyer or other person appropriately qualified according to national law in an inquiry or proceedings and whenever a conflict of interests arises "
"The company shall entrust the management of claims under legal expenses insurance contracts to an undertaking having separate legal personality, which shall be mentioned in the separate policy or section referred to in regulation 4.
If that undertaking has financial, commercial or administrative links with another insurance company which carries on one or more other classes of general insurance business, members of the staff of the undertaking who are concerned with the processing of claims, or with providing legal advice connected with such processing, shall not pursue the same or a similar activity in that other insurance company at the same time."
"(1) Where under a legal expenses insurance contract recourse is had to a lawyer (or other person having such qualifications as may be necessary) to defend, represent or serve the interests of the insured in any inquiry or proceedings, the insured shall be free to choose that lawyer (or other person).
(2) The insured shall also be free to choose a lawyer (or other person having such qualifications as may be necessary) to serve his interests whenever a conflict of interests arises.
(3) The above rights shall be expressly recognised in the policy."
7. The practice of an LEI insurer
8. The CIS/DAS arrangements
9. The conflicting concerns about BTE cover
10. The appropriateness of BTE cover for small motor accident claims
11. Proper practice for a solicitor inquiring about BTE cover
12. Motor accident claims where the passenger blames the driver
"Moreover, there are obvious concerns as to conflict of interest in any case where a defendant is being sued via his own policy of insurance. It is not enough to say that any damages recovered will be paid by a liability insurer which is a separate legal entity from the BTE insurer. Where liability is disputed, the defendant may very well have a strong personal motivation in resisting the claim (payment of an excess; loss of a no-claims bonus; a stiff-necked refusal to accept the possibility that he drove carelessly the last can generate remarkable passions). Moreover, it is probable that many claimants would feel uneasy in entrusting the conduct of their claim to the insurer of the opposing party, and would distrust its advice where adverse to their private expectations. Justice should be seen to be done, and the rules of court should support a claimant who elects to fund his claim from a source which is not only neutral and objective, but is seen to be so."
13.. The concerns of the ATE Group and the TUC
14. How this judgment fits in with the judgment in Callery
15. Why we differ from the judge