COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CARDIFF COUNTY COURT
His Honour Graham Jones, sitting as a Deputy Circuit Judge
Deputy District Judge Sandercock
Strand, London, WC2A 2LL
B e f o r e :
Vice-President, Court of Appeal (Civil Division)
LORD JUSTICE LAWS
LADY JUSTICE SMITH
| JONATHAN LUKE ROGERS
|- and -
|MERTHYR TYDFIL COUNTY BOROUGH COUNCIL
Benjamin Williams (instructed by Messrs Dolmans) for the Respondents
Nigel Cooksley QC (instructed by the Law Society) for the Law Society (as interveners)
Richard Drabble QC (instructed by Coleman – ctts) for Temple Legal Protection Ltd & Keystone Legal Benefits Ltd (as interveners)
Hearing dates: 17th – 18th July, 2006
Crown Copyright ©
|1.||The proceedings in the courts below||1|
|2.||The preliminary proceedings in this court..||6|
|3.||The evidence before Master Hurst: Appellant's witnesses: (1) Christopher Cater||16|
|4.||The evidence before Master Hurst: Appellant's witnesses: (2) Phillip Bellamy||30|
|5.||The evidence before Master Hurst: The DAS 80e Product||39|
|6.||The evidence before Master Hurst: The Respondents' witnesses||58|
|7.||The Law Society's submissions to Master Hurst||60|
|8.||The experiences of Temple and Keystone||61|
|9.||The Law Society's evidence||74|
|10.||Allianz Cornhill's experience||83|
|11.||The evidence from LAMP||84|
|14.||The Liability Insurers' Group's submission||93|
|17.||The legitimacy of a staged premium model||107|
|18.||The size of the premium in the present case||108|
|19.||The Respondents' submissions||113|
|20.||The procedure to be followed in future||116|
|21.||Evidence justifying the ATE premium claimed||117|
|22.||Self-insurance of the premium in the event of failure or only partial success||118|
|23.||An issue we have not decided||119|
|Annex by Lady Justice Smith||123|
Lord Justice Brooke: This is the judgment of the court.
1. The proceedings in the courts below
2. The preliminary proceedings in this court
3. The evidence before Master Hurst: Appellant's witnesses: (1) Christopher Cater
i) The insurance provider must be reputable and one in whom he and his clients could have confidence;
ii) If a claim failed at trial the insurer must be relied on to pay out under the policy without argument and without seeking to decline cover. When asked why he thought DAS would be less difficult to deal with than X, Mr Cater said that he was aware that DAS was a major underwriter in the BTE market, and that when he had asked about their 80e procedure he was satisfied that they would not take the same negative approach as X.
iii) There had to be an adequate level of indemnity. DAS 80e provided a limit of indemnity of £100,000 which he considered ample for the cases with which he would be dealing. He agreed in cross-examination, however, that £25,000 would have been sufficient for a fast track case.
iv) He wished to ensure that the premiums were deferred and that the client was not required to take out any loan or to incur any interest. He was also keen that it should not be necessary for the client to enter into any agreements to which the Consumer Credit Act ("CCA") would apply, since he thought that the signing of CCA forms might cause a client undue concern.
v) He was seeking an efficient and helpful service from the ATE provider, and also a flexible approach, particularly when decisions had to be made during the currency of a case. In this context he was very impressed by the DAS representative, both at that meeting and later, because he always offered a friendly and helpful service which Mr Cater thought ideal for his clients.
"The Firm agrees to sell 80e products as their preferred provider and agrees not to supply any after the event product using another provider, unless the Claim has first been offered to and refused by 80e."
4. The evidence before Master Hurst: Appellant's witnesses: (2) Phillip Bellamy
"As to the information contained in Litigation Funding and The Judge website, this is no more than an indication of policies which might be available in certain circumstances. As [counsel] points out, the premiums on his website are 'indicative only' and the website contains further warnings. Litigation Funding has similar warnings and reservations. I can derive no firm data from these sources."
5. The evidence before Master Hurst: The DAS 80e Product
i) Claimant's disbursements estimated at £2,000;
ii) Opponent's profit costs estimated at £3,000;
iii) Opponent's disbursements estimated at £1,500;
iv) Total EML £6,500.
i) DAS 80e: £1,033 plus IPT;
ii) Brit: £1,270 plus IPT;
iii) Allianz: £950 plus IPT.
i) The total premiums due would be £101,377;
ii) The total paid out in respect of lost and discontinued cases would be £57,779;
iii) Total uncollectible premiums would be £28,718;
iv) There would therefore be a gross profit (prior to expenses) of £14,880.
i) At Stage One the totals paid out ranged from £482.50 to £1,776.52;
ii) At Stage Two they ranged from £2,121.50 to £11,224.59;
iii) At Stage Three they ranged from £8,119 to £13,348.13.
6. The evidence before Master Hurst: The Respondents' witnesses
7. The Law Society's submissions to Master Hurst
8. The experiences of Temple and Keystone
|Premium (a) – prior to issue of proceedings||Premium (b) – after issue of proceedings but more than 45 days before trial||Premium (c) – case settled 45 days or less before trial or at trial itself.|
|Fast track road traffic accident||£350||£750||£1800|
|Fast track Accident at work||£750||£1200||£2,700|
|Fast track Public liability||£850||£1,500||£ 2,700|
|Multi-track Road Traffic accident||£650||£1,100||£3,500|
|Multi-track accident at work||£980||£1,900||£4,200|
|Multi-track Public Liability||£1,150||£2,800||£5,500|
Industrial Disease £750-£950
9. The Law Society's evidence
10. Allianz Cornhill's experience
"Only then can any true judgment be made. With respect, it is questionable whether a judge can make an adequate assessment given the complexities.
The case serves to highlight the difficulty faced by ATE insurers and helps to explain why in actuality there are few underwriters of [ATE] insurance. The uncertainty of securing a recovery of the full premium some years down the line is very difficult to actuarially model. The judiciary applying hindsight underwriting is likely to arrive at a very different view of the suitability of a given premium. These decisions can drastically alter the actuarial model and make the difference between underwriting at an acceptable profit and making a loss. Additionally this uncertainty increases the amount of capital an underwriter needs from its shareholder (the more risk equates to a greater need for capital). This leads to margins being harder to achieve, risk appetite diminishes, and underwriters become more selective."
11. The evidence from LAMP
12. Brit's submissions
13. Abbey's observations
"A … weakness with regard to recoverability has arisen because of the practice of some courts of assessing proportionality of premiums to the value of the damages in a case. Whilst this concept is clearly familiar in the assessment of costs, it disregards the whole basis of insurance which calculates the risk in terms of both the chances of loss and the cost of loss. The damages play no part in that calculation."
14. The Liability Insurers' Group's submission
i) What is the proper approach to proportionality in a small personal injury case where the ATE premium may appear large in comparison with the amount of damages reasonably claimed?
ii) What is the proper approach to evidence of reasonableness of the choice and of the amount of the ATE premium in such cases?
iii) Are both staged (or stepped) premiums and single premiums for ATE insurance legitimate for the purposes of the recoverability of an ATE premium by a successful claimant, and is it reasonable that such premiums should be wholly or partially block-rated?
"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."
In Parts 44 to 48, unless the context otherwise requires –
(1) (a) 'costs' includes … any additional liability incurred under a funding arrangement …
(k) 'funding arrangement' means an arrangement where a person has –
(ii) taken out an insurance policy to which section 29 of the Access to Justice Act 1999 (recovery of insurance premiums by way of costs) applies; or
(m) 'insurance premium' means a sum of money paid or payable for insurance against the risk of incurring a costs liability in the proceedings, taken out after the event that is the subject matter of the claim;
(o) 'additional liability' means … the insurance premium ...
(1) A party may not recover as an additional liability –
(c) any additional liability for any period in the proceedings during which he failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order;
(1) Where the court is to assess the amount of costs (whether by summary or detailed assessment) 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.
(2) Where the amount of costs is to be assessed on the standard basis, the court will –
(a) only allow costs which are proportionate to the matters in issue; and
(b) resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party.
(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) were proportionate and reasonable in amount, or
(3) The court must also have regard to –(b) the amount or value of any money or property involved; …
In applying the test of proportionality the court will have regard to rule 1.1(2)(c). The relationship between the total of the costs incurred and the financial value of the claim may not be a reliable guide. A fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain whether or not the costs are proportionate.
In any proceedings there will be costs which will inevitably be incurred and which are necessary 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.
Where a trial takes place, the time taken by the court in dealing with a particular issue may not be an accurate guide to the amount of time properly spent by the legal or other representatives in preparation for the trial of that issue.
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.
In deciding whether the base costs are reasonable and (if relevant) proportionate the court will consider the factors set out in rule 44.5.
Subject to paragraph 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 any variation of the arrangement.
In deciding whether the cost 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 a success fee, how its cost compares with the likely cost 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 representatives or other agents.
"(2) Dealing with a case justly includes, so far as is practicable –
(c) dealing with the case in ways which are proportionate –
(i) to the amount of money involved;
(ii) to the importance of the case;
(iii) to the complexity of the issues; and
(iv) to the financial position of each party."
"31. [W]hat is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Part 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This is turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner."
In Simms v The Law Society  EWCA Civ 849 at  Carnwath LJ stated that "the 'reasonableness' of the costs… in practice may overlap with issues of proportionality". With respect we think this observation needs to be treated with some care: reasonableness and proportionality are conceptually distinct. However we apprehend that Carnwath LJ was saying no more than that reasonableness may be a necessary condition of proportionality, and we are sure that is so.
17. The legitimacy of a staged premium model
18. The size of the premium in the present case
19. The Respondents' submissions
"4(1) If a solicitor recommends that a client use a particular firm, agency or business, the solicitor must do so in good faith, judging what is in the client's best interest. A solicitor should not enter into any agreement or association which would restrict the solicitor's freedom to recommend any particular firm, agency or business."
20. The procedure to be followed in future
21. Evidence justifying the ATE premium claimed
22. Self-insurance of the premium in the event of failure or only partial success
23. An issue we have not decided
ANNEX BY LADY JUSTICE SMITH