England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
His Honour Judge Stephen Davies
0MA30514

		Royal Courts of Justice Strand, London, WC2A 2LL
		19th July 2012

Lord Justice Patten :

1. On 1^st February 2012 we handed down our judgments in this appeal. The normal order for costs is that they should follow the event so that the unsuccessful appellants will pay the respondent's costs of the appeal subject to detailed assessment. That is not resisted by the appellants. But, in their submissions about the form of order, they have raised a discrete point of principle in relation to the recoverability as part of that costs order of an ATE insurance premium for cover which the respondent purchased one working day before the appeal was originally due to be heard on 7^th November 2011. Due to problems about listing, the hearing took place on 29^th November 2011.
2. The total ATE premium is £394,638 and far exceeds the other costs of the appeal on both sides. In its statement of costs served for the appeal the respondent's costs (apart from the ATE premium) were estimated to be £63,650. The appellants' costs were estimated in the sum of £68,502. If recoverable, the ATE cover has therefore increased the respondent's costs of the appeal by a factor of six and has exposed the appellants to a greatly inflated costs liability long after the appeal process commenced and at a time when the appellants could not protect themselves against the increased costs liability even by choosing to discontinue the appeal.
3. For some considerable period of time the respondent remained unwilling to disclose the ATE policy and to provide a comprehensive breakdown of the premium. It served a witness statement by Mr James Blick, the broker of the policy, which the appellants criticise as being self-serving and selective in its detail. Its admission was opposed. But, shortly before the hearing, the policy was disclosed and Mr Stewart QC handed in what is in effect an agreed note about its contents.
4. The ATE policy provides cover, as one might expect, for (1) "Other Side's Costs", (2) "Own Disbursements" and (3) "Own Solicitors' Fees" limited in relation to (2) and (3) to the costs incurred in the appeal itself rather than those at first instance and in relation to (3) to 50% of such costs. It also provides cover for 50% of the "Interim Payment" of costs awarded below. The trial judge ordered the appellants to pay the costs of the claim and to make an interim payment on account of costs of £200,000. That sum has been paid.
5. The policy therefore protects the respondent against having to pay the appellants' costs of the action and its costs of the appeal were the appeal to have been allowed. It is, I think, common ground that in that event we would almost certainly have ordered the respondent to pay both the costs of the action and the costs of the appeal. It also provides the respondent with the more limited cover against its own costs of the appeal and of having to repay the interim payment of £200,000.
6. As mentioned earlier, the premium is £394,638. It is payable 20 days after the "Dispute" (defined as the appeal against the 9^th March 2011 judgment) has been conducted with a Positive Outcome. This means any outcome in the respondent's favour. The respondent was not therefore obliged to fund the premium during the conduct of the appeal and, perhaps more importantly, has no liability to pay the premium at all if no Positive Outcome is achieved: i.e. by the appeal being allowed. In terms of outlay therefore the respondent incurs no expenditure for the cover except in the event that the appeal is dismissed and it is that liability which it now seeks to pass on to the appellants as part of its costs.
7. It is still unclear precisely how the premium is made up but in correspondence the respondent's solicitors have confirmed that the cover to which the premium relates can be broken down into four elements: Other Side's Costs (for the trial and the appeal) of £619,000; Own Disbursements of £50,000; Own Solicitors' fees of £25,000 (at 50%); and Interim Payment costs (50%) of £100,000. The respondent has indicated that it does not seek to recover the part of the premium (£63,600) which relates to the cover for 50% of the interim payment. It therefore seeks £331,038 being the balance of the premium.
8. An order for costs to be assessed on the standard basis requires the court to allow any such costs as are proportionate to the matters in issue and to resolve any doubts as to whether the costs claimed were reasonably incurred or reasonable and proportionate in amount in favour of the paying party: see CPR 44.4(2). "Costs" are defined in CPR 43.2(1)(a) to include "any additional liability incurred under a funding arrangement". This includes an arrangement where a person has taken out an insurance premium to which s.29 of the Access to Justice Act 1999 applies. The Practice Direction which supplements CPR Part 44 therefore contains a list of specific matters for the costs judge to take into account when deciding whether the cost of insurance cover is reasonable: see 44 PD 5 para 11.10. These are matters for the costs judge on the detailed assessment. They are not for us. We are concerned only with the issue of principle as to whether this court can order the unsuccessful appellants to pay as part of the respondent's costs that part of the ATE premium which relates to the costs of the claim up to and including the trial. It is accepted that the premium relating to the risk of having to pay the appellants' costs of the appeal is recoverable.
9. The issue of recoverability is a point of statutory construction relating to s.29. Until that became law the cost of an ATE premium was not recoverable as part of the costs of the litigation. But as part of the government's policy to improve access to the courts, s.29 was enacted and provides that:

"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."

10. The statutory purpose of s.29 was described by Lord Bingham of Cornhill in Callery v Gray (Nos 1 and 2) [2002] UKHL 28:

"Recognition of these defects underpinned the Access to Justice Act 1999 which, building on the Courts and Legal Services Act 1990, introduced a new regime for funding litigation, and in particular personal injury litigation with which alone this opinion is concerned. My noble and learned friend Lord Scott of Foscote makes full reference to these Acts and the relevant subordinate legislation made under them in his opinion, which I have been privileged to read in draft, and I gratefully adopt his account which I need not repeat. The 1999 Act and the accompanying regulations had (so far as relevant for present purposes) three aims. One aim was to contain the rising cost of legal aid to public funds and enable existing expenditure to be refocused on causes with the greatest need to be funded at public expense, whether because of their intrinsic importance or because of the difficulty of funding them otherwise than out of public funds or for both those reasons. A second aim was to improve access to the courts for members of the public with meritorious claims. It was appreciated that the risk of incurring substantial liabilities in costs is a powerful disincentive to all but the very rich from becoming involved in litigation, and it was therefore hoped that the new arrangements would enable claimants to protect themselves against liability for paying costs either to those acting for them or (if they chose) to those on the other side. A third aim was to discourage weak claims and enable successful defendants to recover their costs in actions brought against them by indigent claimants. Pursuant to the first of these aims publicly-funded assistance was withdrawn from run-of-the-mill personal injury claimants. The main instruments upon which it was intended that claimants should rely to achieve the second and third of the aims are described by my noble and learned friend: they are conditional fee agreements and insurance cover obtained after the event giving rise to the claim."

11. Concerns were also expressed in the House of Lords about the court's relative inability properly to assess the reasonableness of ATE premiums. Lord Hoffmann said that:

"[39] The arguments put forward to justify taking out an ATE insurance policy before sending the letter before action are much the same as those for fixing the success fee at the same time. The client is immediately assured that in no circumstances will he be liable for the defendant's costs. He may pay a higher premium than would be individually justifiable if it was known that the claim was admitted, but he insures himself against the possibility that a later premium might be much higher or even unobtainable. And ATE insurers say that they cannot obtain a reasonable premium income unless everyone takes out insurance when they first instruct solicitors. This was the principle upon which insurers such as Temple, in this case, delegated to solicitors the authority to issue policies.

[40] Again, as it seems to me, the Court of Appeal accepted these arguments. They said ([2001] 3 All ER 833 at [67]): 'It is hardly surprising that delegated authority arrangements will only work successfully if the solicitor does not "cherry-pick" by taking out ATE insurance only in risky cases'.

[41] Perhaps that is true. I am certainly not in a position to say that it was wrong. But neither, in my respectful opinion, was the Court of Appeal. Of course it is true that, other things being equal, premiums will rise if fewer people take out ATE insurance. And it is true that when ATE insurance made its first appearance, at a time when it could not be recovered from the defendant and claimants would take out policies only if they were seriously concerned about losing the case, underwriters burnt their fingers. But premiums were then also very low compared to current rates. Now, premiums are much higher and ATE insurers insist upon all claimants taking out policies. Whether the latter is necessary to keep ATE insurers in business at current premium rates is an open question.

[42] Furthermore, it is a question which costs judges are quite unable to answer. When the Court of Appeal asked for the report of Master O'Hare on the question of whether the Temple premium in this case was reasonable, he said ([2001] EWCA Civ 1246, [2001] 4 All ER 1 at 23, [2001] 1 WLR 2142 at 2163 (para 20)): '… I am not convinced these market forces impinge upon the premium levied to the ultimate consumer and claimed by him from his unsuccessful opponent.'

[43] That seems to me obviously right. ATE insurers do not compete for claimants, still less do they compete on premiums charged. They compete for solicitors who will sell or recommend their product. And they compete by offering solicitors the most profitable arrangements to enable them to attract profitable work. There is only one restraining force on the premium charged and that is how much the costs judge will allow on an assessment against the liability insurer.

[44] Again, the costs judge has absolutely no criteria to enable him to decide whether any given premium is reasonable. On the contrary, the likelihood is that whatever costs judges are prepared to allow will constitute the benchmark around which ATE insurers will tacitly collude in fixing their premiums. In its submissions to Master O'Hare, Temple said that the court 'should not arrogate to itself the functions of a financial regulator of the insurance industry' (see [2001] 4 All ER 1 at 23, [2001] 1 WLR 2142 at 2164 (para 22)). I am sure that is right, because the costs judge is wholly unequipped to perform that function. But that does not mean that some form of financial regulation is not necessary. Such regulation is normally considered necessary in those parts of the economy in which market forces are insufficient to produce an efficient use of resources. And that seems to me to be the position in ATE insurance, in which the premiums are not paid either by the claimants who take out the insurance or by the solicitors who advise or require them to do so."

12. Many of these problems are likely to have been resolved by the passage of time. Costs judges have now had a decade of experience in dealing with ATE premiums as part of a bill of costs and will, as a consequence, have a much clearer idea of market rates of cover and the practices of brokers within that field. In the event, the structure of CPR Pt 44 has remained unchanged and clearly contemplates that issues of reasonableness are to be dealt with by the costs judge as part of the assessment.
13. The focus of Mr Stewart's argument is therefore a much narrower one. His case is that s.29, on its true construction, simply does not permit recovery of the premium relating to the appellants' costs of the trial because the cover has to be limited to the risk of incurring a liability in the proceedings ("those proceedings") in which the costs order is made. In the costs order which now falls to be made by this court the relevant proceedings are the appeal; not the trial at first instance. In the alternative, he submits that even if s.29 does permit the recovery of a premium for the costs below, there are particular factors in this case which make it inappropriate for those costs to be allowed.
14. If Mr Stewart is right about the meaning of "those proceedings" in s.29 then this is a limitation which has always existed. There have been no amendments to s.29. There has been some speculation as to whether the present situation in which the respondent was able to obtain cover for the appeal in respect of the appellants' costs both in the Court of Appeal and below is unique but it is impossible to be certain about that. The respondent was unable to obtain ATE cover when it sought it before the trial but, having succeeded at first instance, was able to get cover on the appeal against the risk of having to pay the appellants' costs both here and below. Why, it contends, should it not be able to recoup the cost of such cover following success in the appeal given that had it obtained separate cover for the trial at that time it would undoubtedly (subject to amount) have been able to claim the costs of the separate premiums for insuring at first instance and in the Court of Appeal.
15. The scope and meaning of s.29 was considered by the Court of Appeal in Callery v Gray (No 1) [2001] EWCA Civ 1117 and Callery v Gray (No 2) [2001] EWCA Civ 1246. The particular issue in that case was whether an ATE premium for cover obtained in advance of issuing a claim for costs for personal injuries could be recovered when the claim was settled before the claim form had been issued. In costs-only proceedings under CPR 44.12A the district judge had held that the premium could be recovered as part of the costs of the intended claim even though no proceedings had been commenced. His decision was upheld in the Court of Appeal in Callery v Gray (No 1) but the Court of Appeal considered that it did not have enough information to enable it to decide whether the premium was reasonable and it therefore directed a costs judge to report on that. At a resumed hearing (reported as Callery v Gray (No 2)) the court decided that the recoverable premium could (subject to issues of reasonableness) include the cost of insuring against the risk of the party having to pay his own disbursements. The argument on construction advanced by the defendant was that cover of that kind was not insurance "against the risk of incurring a liability in those proceedings". It was insurance against the risk of not being able to recover a complete indemnity in respect of the claimant's own costs in the event of the failure of the claim. But the court rejected this interpretation of s.29. Lord Phillips of Worth Matravers MR (at paragraphs [57] to [62]) said that:

"[57] There is some force in Mr Birts' submissions. We observe that the combination of the CFA and the ATE cover available to Mr Callery does not afford him complete protection against the risk of liability to pay costs. At the same time we are in no doubt that it is a primary objective of the present scheme that a litigant with an apparently meritorious claim should not be precluded from advancing it by the obligation to pay costs, or the risk of having to do so. If a litigant is precluded from insuring against having to meet his own disbursements, there will be occasions when the cost of these will discourage or preclude him from bringing his claim. Furthermore, it does seem clear that it has always been the intention of the Lord Chancellor, as promoter of the legislation, that own cost insurance should be available as an alternative to the CFA.

[58] As we pointed out at the outset, the provisions of s 29 are imprecise. The September 1999 consultation paper stated:

'…the Act only provides the legislative framework. The detail of the changes to conditional fees will be provided through secondary legislation, while the operation of the recoverability of the success fee and insurance premium will be informed by Rules of Court and Practice Directions.'

The provisions of the rules and practice directions are of particular importance in clarifying and delimiting the circumstances in which an insurance premium can be claimed under s 29.

[59] The provisions of section 11.10 of the Costs Practice Direction clearly anticipate that insurance cover that falls within the ambit of s 29 may provide alternative protection to that provided by a CFA coupled with insurance. Such cover will necessarily include own cost insurance. That practice direction cannot, of course, confer on the court a jurisdiction that falls outside that conferred by s 29. The question is whether s 29 can and should be interpreted so as to treat the words 'insurance … against the risk of incurring a [costs] liability' as meaning 'insurance against the risk of incurring a costs liability that cannot be passed on to the opposing party'.

[60] We have concluded that s 29 can and should be interpreted in this way. We believe that such an interpretation will do no more than give the words the meaning that would be attributed to them by the reasonable litigant. It will also give the words a meaning that accords with the legislative intention and with the overall scheme for the funding of legal costs.

[61] The circumstances in which and the terms on which own costs insurance will be reasonable, so that the whole premium can be recovered as costs, will have to be determined by the courts, when dealing with individual cases, assisted, if appropriate, by the Rules Committee.

[62] In the case of Mr Callery's policy, the right to recover the costs of disbursements is tied to the situations where the protection afforded by the CFA would come into play. It is arguable that the disbursements that are covered are disbursements of a kind that would be recoverable as costs. We cannot see that there is any objection in principle to this cover forming part of that afforded to Mr Callery by his legal costs insurance and consider that the whole of the cover can be considered as falling within the description 'insurance … against the risk of incurring a liability' within s 29. In this context our only reservation arises in relation to the premium rebate provision in condition 6. As we have indicated, however, this is of no practical significance in the present case and we consider that it is better that the issue of whether the cost of such cover is recoverable under s 29 should be dealt with in a case where this matters."

16. From the judgments in Callery v Gray I derive the following propositions in relation to the construction of s.29:

(1) the proceedings referred to in s.29 are the substantive proceedings in which the relevant order for costs is made;

(2) the reference to the "risk of incurring a liability in those proceedings" is not limited to an adverse order for costs. It means the "risk of incurring a costs liability that cannot be passed on to the opposing party" and therefore includes cover in respect of a shortfall in the insured's own costs;

(3) it matters not whether the ATE cover is purchased before or after the issue of the substantive proceeding or even whether the substantive claim was ever commenced. In the latter case the costs of the ATE premium can be recovered in costs only proceedings under CPR 44.12A.

17. The issue which we have to consider has never arisen for decision and therefore falls to be determined as a matter of the construction of s.29 having regard to the purpose of the legislation in promoting access to justice in the way described in Callery v Gray. If Mr Stewart is right and "proceedings" is to be given a meaning which differentiates between the trial of the claim and any subsequent appeal it will follow that a claimant who, like the respondent in this case, is either unable or fails to secure ATE cover for his opponent's costs of the action prior to the trial, will not be able to pass on the cost of such cover even if it becomes available and is taken out to protect him against the reversal of the trial judge's order in the Court of Appeal.
18. In terms of language Mr Stewart points to the need for the risk of incurring a costs liability covered by the policy to exist in the proceedings ("those proceedings") in which the favourable costs order is made. Whilst he accepts that this test is satisfied in respect of the costs of the appeal itself, it does not extend, he submits, to the costs below which the Court of Appeal can only deal with by exercising its powers under s.15(3) of the Senior Courts Act 1981 so as to exercise the powers of the judge of the lower court.
19. In terms of statutory purpose, he contends that the recovery of ATE premiums was intended to prevent a meritorious claimant from being deterred from bringing his claim by the risk of being made to pay costs. That purpose has no obvious application to a party such as the respondent which was not in fact deterred by the risk of having to pay the appellants' costs and prosecuted its claim to a successful conclusion without the benefit of ATE cover. The legislative purpose is not served by allowing the respondent to recover as part of the costs of the appeal the premium for cover against the costs of the trial which it had not insured against at first instance. In fact the recoverability of that premium will act, he says, as a deterrent to the appellants who brought the appeal knowing that there had been no premium to pay as part of the respondent's trial costs but then find themselves potentially exposed to that liability in the event that their appeal fails.
20. As further support for his argument Mr Stewart drew our attention to CPR 44.3B which (as amended) provides that:

"(1) Unless the court orders otherwise, a party may not recover as an additional liability-

(a) any proportion of the percentage increase relating to the cost to the legal representative of the postponement of the payment of his fees and expenses;

(b) any provision made by a membership organisation which exceeds the likely cost to that party of the premium of an insurance policy against the risk of incurring a liability to pay the costs of other parties to the proceedings;

(c) any additional liability for any period during which that party failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order;

(d) any percentage increase where that party has failed to comply with-

(i) a requirement in the Costs Practice Direction; or

(ii) a court order,

to disclose in any assessment proceedings the reasons for setting the percentage increase at the level stated in the conditional fee agreement;

(e) any insurance premium where that party has failed to provide information about the insurance policy in question by the time required by a rule, practice direction or court order."

21. This rule came into effect in July 2000 after the Access to Justice Act took effect in April of that year and is said by Mr Stewart to reflect a deliberate policy of ensuring that a party who is at risk of incurring an additional liability as defined is put on notice within the relevant proceedings of that risk so as to be able to decide whether to proceed. The necessary information has to be given within the letter of claim or within 7 days of entering into the funding arrangement whichever is later: see CPR 44 PD 19.2. These rules do not deal with the case where no ATE cover for the trial is taken out until the appeal and indicates that this was never anticipated. The purpose of the provisions about notice would be frustrated if it were possible to obtain and recover the cost of cover against adverse trial costs at the appeal stage.
22. A distinction between the trial of a claim and any subsequent appeal is also said to be well established in the context of the rules relating to costs. Under CPR 47.1 and 47.2, for example, the general rule is that the detailed assessment of the costs of any proceedings or any part of the proceedings are not to commence until the conclusion of the proceedings but detailed assessment is not stayed pending an appeal unless the court orders otherwise. This is said to illustrate that for the purposes of costs an appeal is treated as a separate proceeding from the case below. Further examples can be found in CPR 36.3(2) and (4) and in CPR 25.15.
23. Mr Stewart also referred to the decision of this court in Wright v Bennett [1948] 1 KB 601 which concerned the cost of providing junior counsel with the documents in a case which came on appeal from the High Court. At the trial the junior had held only a noting brief but was then instructed to act as junior counsel to Mr Devlin QC who had appeared alone as a junior at the trial before taking silk. The taxing master had disallowed the costs of the documents supplied as part of the noting brief but an attempt was made to recover them as part of the costs of instructing junior counsel for the appeal.
24. It was conceded that both junior and leading counsel needed to be supplied with the documents for the purposes of the appeal and the taxing master allowed them as part of the costs of the appeal. On appeal to this court the costs were disallowed because they had been incurred as part of the disbursements in connection with the noting brief in the court below. Following the earlier decision in Masson Templier & Co v De Fries, [1910] 1 KB 535, it was held that since the documents came into existence for the purposes of the trial, no new disbursement was necessary to enable them to be used in the Court of Appeal. Somervell LJ (referring to the decision in the Masson Templier case) said at page 606:

"That decision seems to me to be plain, and, though I do not think that it contains an express reference to Or. 65, r. 1, of the Rules of the Supreme Court, it appears to me to follow and construe the words of that rule, which are: "Subject to the provisions of the Act and these Rules, the costs of and incident to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the court or judge." Those words "of and incident to" appear in s. 50 (1.) of the Supreme Court of Judicature (Consolidation) Act, 1925, except that the words there are "costs of and incidental to all proceedings." The wording of that rule, coupled with the decision to which I have referred, shows that one has to treat proceedings below as a separate proceeding, for this purpose, from the proceedings here. It seems to me that Mr. Salmon has a strong case for saying, applying that decision, that these costs were incurred in respect of the proceeding below and, therefore, cannot be recovered under the order of the Court of Appeal as to costs."

25. Mr Stewart submits that s.29 falls to be construed against this background and the court's general procedural approach to issues of this kind. The "proceedings" in which the relevant costs order falls to be made are the appeal and the recoverable premium is therefore limited to cover for the risk of incurring a costs liability in those proceedings.
26. Mr Bacon QC says in response that consistently with the court's approach in Callery v Gray (No 1) we should give the word "proceedings" a wide and flexible meaning which embraces both the appeal and the hearing below. The costs liability which may arise on an appeal necessarily include both the costs of the appeal itself and the costs below in the event that the appeal is allowed.
27. CPR 52.10 confers on the Court of Appeal all the powers of the lower court which it may exercise in relation to the whole or part of an order of the lower court. These include the power to make a costs order: see CPR 52.10(2)(e) and (4). But when it exercises these powers to vary the costs order below it does so in its capacity as the Court of Appeal and as part of the order made on the appeal. Both are costs liabilities in the appeal proceedings.
28. He also submits that the appellants' construction would lead to unfairness. A party in the position of his client who is unable to obtain cover for the trial will, as a consequence, be debarred from recovering the cost of cover against the risk of having to pay the other side's trial costs even though he could have recovered the premium for both the trial and the appeal had he been able to obtain cover below. As a consequence, he would be forced to appeal or to respond to the appeal without the benefit of Other Side cost cover for the trial costs unless he was prepared to pay for it himself. This would be inconsistent with the policy considerations which underline s.29 of the 1999 Act.
29. He challenges the appellants' submission that his client chose to fight the case at first instance without the benefit of ATE cover. This was simply because no such cover was available. Nor, he submits, is it relevant. The fact that the costs at first instance have been incurred and the claim has ended successfully for the respondent is not in itself a reason for denying it the right to take advantage of the cover which is now available. The appeal created new risks for the respondent in respect of costs which it was entitled to seek protection against. The appellants, by contrast, could have limited themselves to paying the costs below without any ATE premium but chose instead to appeal. In doing so they exposed themselves to the risk that they would face an insured respondent. If the complaint is one of amount then that is something which can be taken up with the costs judge on the assessment.
30. In relation to Wright v Bennett, Mr Bacon accepts the general rule that it is not possible to recover in one set of proceedings costs which were incurred in another set of proceedings. But the premium here was paid to cover the costs risks presented to the respondent by the appeal and it was expenditure incurred exclusively in the appeal: not in the court below. The premium was part of the costs of and incidental to the appeal within the meaning of s.51(1) of the Senior Courts Act and is therefore recoverable as part of the costs of the appeal save to the extent that its recovery is expressly restricted by s.29 itself.
31. Despite Mr Stewart's submissions, I am not persuaded that it would be right for us to give the word "proceedings" in s.29 the restricted meaning for which he contends. It is important to bear in mind that this was legislation designed to expand access to the courts via the use of CFA's and ATE insurance and the purpose of s.29 was to reverse the existing state of the law under which such premiums were not recoverable as costs. At that time cover of this kind was therefore in its relative infancy and it was accepted that the quantum of recovery would be a matter for the costs judges to determine by applying the broad criteria contained in the Practice Direction to CPR 44 which would obviously be refined over time in response to experience.
32. In these circumstances, it seems to me most unlikely that Parliament intended to lay down a rule ab initio that proceedings at first instance and those in the Court of Appeal should be treated as separate "proceedings" within the meaning of s.29 to the end that it should be impossible to recover any part of the cost of ATE insurance against having to meet the costs below as part of the consequences of being an unsuccessful respondent to an appeal. The fact that the s.29 power is made expressly subject to rules of court strongly suggests that Parliament intended the power to be widely framed with the potential for it to be restricted later in the light of subsequent developments or experience. This was certainly the approach to the construction of s.51 of the Senior Courts Act 1981 which the House of Lords adopted in Aiden Shipping Co Ltd v Interbulk Ltd [1986] 1 AC 965 at 975 E-G where Lord Goff of Chieveley said that:

"It is, I consider, important to remember that section 51(1) of the Act of 1981 is concerned with the jurisdiction of the court to make orders as to costs. Furthermore, it is not to be forgotten that the jurisdiction conferred by the subsection is expressed to be subject to rules of court, as was the power conferred by section 5 of the Act of 1890. It is therefore open to the rule-making authority (now the Supreme Court Rule Committee) to make rules which control the exercise of the court's jurisdiction under section 51(1). In these circumstances, it is not surprising to find the jurisdiction conferred under section 51(1), like its predecessors, to be expressed in wide terms. The subsection simply provides that "the court shall have full power to determine by whom . . . the costs are to be paid." Such a provision is consistent with a policy under which jurisdiction to exercise the relevant discretionary power is expressed in wide terms, thus ensuring that the court has, so far as possible, freedom of action, leaving it to the rule-making authority to control the exercise of discretion (if it thinks it right to do so) by the making of rules of court, and to the appellate courts to a establish principles upon which the discretionary power may, within the framework of the statute and the applicable rules of court, be exercised. Such a policy appears to me, I must confess, to be entirely sensible. It comes therefore as something of a surprise to discover that it has been suggested that any limitation should be held to be implied into the statutory provision which confers the relevant jurisdiction."

33. This approach is also, I think, consistent with the decisions in Callery v Gray (Nos 1 and 2) where an equally liberal construction was applied to the wording of s.29.
34. I accept, of course, that the section requires the costs order to be made in the proceedings in which the potential liability to costs arises. But there is nothing in the word "proceedings" which prevents it, as a matter of language, from being used in a composite way to describe the claim in all its stages including any appeal. The fact that an appeal is treated for the purposes of some of the costs rules as separate proceedings is not conclusive of the matter. It simply indicates that in a particular context the word may be given a narrower meaning.
35. Nor do I think that CPR 44.3B really assists. In most cases ATE cover is likely to be taken out (if at all) prior to the trial. Appeals are not a normal feature of most cases. But the absence of any express provision for a case like the present does not enable me to say that Parliament never intended to allow full recovery of a premium in the present circumstances. It simply shows that the Rules Committee has failed to deal with the matter. That could be for no other reason than the incidence of cases like the present is likely to be very small.
36. Mr Stewart's construction of s.29 would also have some odd consequences even in a case where a party has obtained ATE cover at the trial stage. If he loses at trial but then successfully appeals the Court of Appeal will be unable to award him the costs of his first instance ATE premium when it reverses the trial judge's order for costs because those will be part of his costs in proceedings other than the appeal. The solution to this problem would be to treat the Court of Appeal's order in respect of the costs of the trial as an order of the High Court in the sense that the Court of Appeal is exercising the powers of the lower court under s.15(3) of the Senior Courts Act 1981 and CPR 52.10(2). But, by the same process of reasoning, it must be possible to treat any order in this case that the respondent should have the costs of insuring against having to meet the appellants' costs of the trial as an order made in the High Court in respect of costs. It therefore satisfies the statutory test. The treatment of the trial of the matter and the appeal as separate proceedings gets one nowhere.
37. There are, of course, arguments which can be mounted to the effect that the very substantial additional liability in costs which the recovery of the premium will place upon the appellants operates as an injustice and a positive disincentive to pursue what may be a wholly meritorious appeal. I am not unsympathetic to those arguments. But they are, I think, inherent in many aspects of the 1999 reforms. Conditional fees and ATE premiums, whilst enabling a claimant to litigate, may impose a crippling burden on the defendant and a strong disincentive to continue to defend the claim. Many of these considerations lie behind the imminent costs reforms under the Legal Aid, Sentencing and Punishment of Offenders Act 2012. But I do not believe that one can construct out of this current state of affairs an argument that Parliament intended to impose only a restrictive regime back in 1999.
38. For these reasons, I have reached the conclusion that the full amount of the ATE premium falls within the terms of s.29 notwithstanding that part of the cover relates to the costs below. We have not been asked to rule on issues of discretion or quantum which remain matters for the costs judge on the hearing of the detailed assessment.

Lord Justice Rix :

39. I am grateful to Lord Justice Patten for setting out the material and submissions relating to the dispute which has arisen, following the decision of this court about the merits of an appeal, concerning the incidence of costs in the form of an ATE insurance premium which the successful respondent has incurred, for the first time in connection with the appeal, in respect of its liability for the costs of trial. However, I regret to say that I respectfully part company with the conclusions which he derives in his discussion and decision from [31] onwards of his judgment. I shall try to explain briefly why in my judgment the respondent is not entitled to that part of the premium claimed, in the amount of £331,038, which represents cover for its potential liability in respect of the appellant's costs of trial. As Patten LJ has accurately defined the issue, we are concerned with whether this court can order the unsuccessful appellant, Stella Global UK Limited, to pay as part of the respondent's costs that part of the ATE premium which relates to the costs of the claim up to and including trial.
40. That issue raises a question of interpretation of the relevant section of the Access to Justice Act 1999, namely section 29, which provides as follows:

"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 into in respect of the premium of the policy."

41. It appears from the words "in those proceedings" (emphasis added) that section 29 requires that the "costs order" has to be made in the same proceedings as the proceedings in which a costs liability may arise, the risk of incurring which has been insured against. Three questions have therefore arisen on the facts of our case: (1) For these purposes are a trial and an appeal from that trial the same proceedings or different proceedings? (2) Is the risk that the incidence of costs at trial might be changed by the costs order of the appeal court a risk of incurring a liability in the appeal proceedings or a risk of incurring a liability in the trial proceedings? (3) In that connection, what is it that must occur in the same proceedings: is it the risk of incurring a costs liability, or is the costs liability, the risk of incurring which has been insured against? The second and third questions disappear, and do not need to be asked, if the answer to the first question is that trial and appeal are both part of the same proceedings. Patten LJ has concluded that they are and that, subject to the assessment of the costs judge as to reasonableness and quantum, the respondent is entitled to claim the disputed premium as part of its costs.
42. In my judgment, it is possible to conceive that "proceedings" could either embrace both trial and appeal or else be interpreted as referring separately to trial and appeal. Although it would be perfectly natural to think of an appeal as arising from and being part of the same proceedings as the trial from which the appeal is taken, it is nevertheless clear that trial and appeal have been treated as separate proceedings for the purposes of costs.
43. In this connection I refer to Masson Templier & Co v. De Fries [1910] 1 KB 535 and to Wright v. Bennett [1948] 1 KB 601 discussed by Patten LJ above. In Masson Templier, where there were appeals from the county court to the divisional court and thence to the court of appeal, Vaughan Williams LJ said (at 538): "But, as I understand, according to the practice on taxation, no disbursements are allowed but such as have been actually made for the purposes of the proceeding in respect of which the order for costs was made." Farwell LJ said (at 539): "I understand it to be the settled practice in the taxing office not to allow as costs of a proceeding costs of documents used in a prior proceeding". In Wright v. Bennett Somervell LJ cited these passages (at 605), commenting that "the use of the word "proceeding"…in its context clearly indicates that the court were dealing with two separate and distinct proceedings. The hearing before the Divisional Court was a proceeding and the appeal to this court was a proceeding". In Wright v. Bennett this court applied the rationale of Masson Templier to the words of section 50(1) of the Supreme Court of Judicature (Consolidation) Act ("costs of and incidental to all proceedings") and to RSC order 65, rule 1 ("Subject to the provisions of the Act and these Rules, the costs of and incident to all proceedings…shall be in the discretion of the court or judge"). Somervell LJ said (at 606): "The wording of that rule, coupled with the decision to which I have referred, shows that one has to treat proceedings below as a separate proceeding, for this purpose, from the proceedings here."
44. In the area of costs, therefore, there is an entirely legitimate reason for thinking that the same litigation, when conducted at trial and on appeal, is to be regarded as split between different proceedings. Moreover, there is an echo in section 29's "Where in any proceedings a costs order is made…a liability in those proceedings" of the language with which the point as to the meaning of "proceedings" was dealt with in those earlier cases: eg in Vaughan Williams LJ's words "for the purposes of the proceeding in respect of which the order for costs was made".
45. This distinction, between separate proceedings in different courts in the same litigation, is still recognised and is written into current rules. Patten LJ has given instances of this distinction above. Thus CPR 47.1 provides: "The general rule is that the costs of any proceedings or any part of the proceedings are not to be assessed by the detailed procedure until the conclusion of the proceedings…"; while CPR 47.2 states: "Detailed assessment is not stayed pending an appeal unless the court so orders." CPR 36.3(2) distinguishes between a time before "proceedings are commenced" and "appeal proceedings"; and CPR 36.3(4) provides:

"A Part 36 offer shall have the consequences set out in this Section only in relation to the costs of the proceedings in respect of which it is made, and not in relation to the costs of any appeal from the final decision in those proceedings."

46. Separate orders may be made for security for the costs of an appeal (CPR 25.15).
47. In these circumstances it seems to me that the interpretation of section 29 can legitimately go in either direction: either "proceedings" refers to the litigation as a whole, or it refers to the trial or appeal proceedings separately. Indeed, it might even be said that in the context of costs there is good reason for thinking that it should have the latter meaning. But whether that is so or not, it is standard wisdom in such a situation to ask which meaning would better answer the purpose and aims of the legislation. In asking that question, it is proper to begin by consulting jurisprudence for any light that it may be able to throw on the subject.
48. The leading cases, cited by Patten LJ above, are Callery v. Gray (No 1) [2001] 1 WLR 2112 and Callery v. Gray (No 2) [2001] 1 WLR 2142, both in this court, and the conjoined Callery v. Gray (Nos 1 and 2) [2002] 1 WLR 2000 in the House of Lords.
49. In Callery v. Gray (No 1) one of the issues was whether the cost of an ATE premium incurred before the commencement of proceedings was recoverable. The parties settled their dispute (it was a standard low value personal injury claim) without the need for litigation, save that they could not agree about liability for costs. CPR 44.12A, first introduced in 2000, permitted costs only proceedings to be commenced under Part 8 in such circumstances, and that is what happened. The defendant argued that the ATE premium could only be recovered by a costs order in substantive proceedings, but this court held that the Part 8 proceedings sufficed. What is relevant for present purposes is that a submission that "Where in any proceedings" should be given the extended meaning of "Where in [respect of] proceedings, [whether commenced or contemplated]" was rejected (see at [49]-[55]). It was accepted that, in the absence of CPR 44.12A, a relevant "costs order could only be made in the action in which substantive relief was claimed. It was to meet this procedural shortcoming that CPR 44.12A was added to the Rules" ([50]). The relevant proceedings became the Part 8 proceedings, in which the parties had agreed that their costs were to be dealt with: see also Lord Scott of Foscote in the House of Lords at [104]. Thus the word "proceedings" was not given an expanded meaning for the sake of the regime.
50. In Callery v. Gray (No 2) an issue was raised as to the meaning of "a liability in those proceedings". It was common ground that such a liability had to be a costs liability. But the question was raised whether such a liability extended to a liability to pay one's own costs or disbursements, or was limited to a liability to pay the other party's costs or disbursements. It was held that the former was the correct answer, both as its natural meaning and in part because it accorded with "the legislative intention and with the overall scheme for the funding of legal costs" (per Lord Phillips of Worth Matravers MR at [60]. The legislative aim was "that a litigant with an apparently meritorious claim should not be precluded from advancing it by the obligation to pay costs, or the risk of having to do so" (at 57]).
51. In the House of Lords, Lord Bingham of Cornhill also spoke about the legislative aim of section 29. He said (at [2]):

"A second aim was to improve access to the courts for members of the public with meritorious claims…it was therefore hoped that the new arrangements would enable claimants to protect themselves against liability for paying costs either to those acting for them or (if they chose) to those on the other side".

However, he concluded his speech with these observations (at [10]):

"…I would not wish to discount either the risk of abuse or the need to check any practices which may undermine the fairness of the new funding regime. This should operate so as to promote access to justice but not so as to confer disproportionate benefits on legal practitioners or after the event insurers or impose unfair burdens on defendants or their insurers."

52. In my judgment, it was plainly intended by the legislature that the new regime should operate to improve access to justice for claimants with meritorious claims, but also to operate fairly. For this purpose, rules of court were introduced to ensure that the potential liability for inter alia the ATE premium should not bear unfairly on defendants who were not informed of the existence of such a funding arrangement. CPR 44.3B was therefore also introduced in 2000. It contains the following requirements:

"(1) Unless the court orders otherwise, a party may not recover as an additional liability –

…

(c) any additional liability for any period during which that party failed to provide information about a funding arrangement in accordance with a rule, practice direction or order;…

(e) any insurance premium where that party has failed to provide information about the insurance policy in question by the time required by a rule, practice direction or court order…"

CPR 44 PD 19.2 contains the relevant practice direction, to the effect that the claimant must provide the necessary information either with the claim form (where the funding arrangement is entered into before the commencement of proceedings) or otherwise within seven days of entering into the funding arrangement concerned.

53. The note in Civil Procedure with reference to CPR 44.3B (at 44.3B.1) states that "Recovery of additional liability is not possible for any period where the party has failed to provide information about a funding arrangement." The clear intention is that it is to be regarded as unfair for a defendant to be put in a position where he proceeds with litigation in ignorance of his potential liability for the increased costs of a claimant's funding arrangements. (There are similar provisions for a defendant giving notice of his funding arrangements.) The following observations are apposite. First, there was no breach of these provisions by the respondent in this case, for it did not enter into an ATE arrangement (it tried but failed to obtain cover) for the purposes of the trial, and it was not late in giving notice of the ATE premium obtained in connection with the appeal (even if that arrangement was only entered into on the virtual eve of the appeal's original hearing date). Secondly, the practice direction did not expressly contemplate that an ATE arrangement in relation to the costs of trial would be entered into for the first time for the purposes of an appeal. Thirdly, the importance of fair notice being given to the other party of a potential liability in additional costs is entirely undermined if the premium which the respondent seeks to recover in the appeal, so far as it relates to costs of trial, could be recoverable. For the defendant would have incurred all the costs of trial together with its potential (but retrospective) liability for the respondent's ATE premium in ignorance, necessarily so, of what was coming round the corner when it appealed. When, however, in the course of its appeal, it learns for the first time of the ATE premium taken out in the appeal embracing cover for the costs of trial, it is too late for the defendant to do anything. It cannot concede the claim – it has already fought the trial. And if it concedes the appeal, then, if the respondent is correct in its interpretation of section 29, it will have to pay the ATE premium for the costs of trial. This is despite the fact that, in obtaining an appeal, it has persuaded the trial judge or the court of appeal that permission to appeal should appropriately be granted to it (while there is no similar hurdle in the standard case of a domestic claim form). In my judgment, such a situation is both unfair and antithetical to the purposes of the section. Moreover, although the matter was not debated before us, it is not clear to me that such unfairness can be dealt with as a matter of the question which arises before the costs judge of "whether the cost of insurance cover is reasonable" as a matter of quantum: see CPR 44 PD 11.10. The present issue is rather a matter of principle and jurisdiction.
54. It follows that the situation which the respondent submits is provided for by section 29 in this case would arise even though the respondent risked the relevant costs of trial knowing that that risk was not covered by ATE insurance for its costs liabilities at trial. Thus ex hypothesi there would be no need to impose a liability on a defendant for such additional costs in order to provide access to the court.
55. It is suggested nevertheless that the relevant costs are properly part of the costs potentially dealt with in the court of appeal's costs orders, and that therefore, even if trial proceedings have to be regarded as separate from appeal proceedings, section 29 can still operate in the respondent's favour in this case. This suggestion invokes the second question raised at [3] above. It seems to me however that this submission is mistaken. The premise is that the ATE premium, to the extent that it covers a liability for the costs of trial, arises under a "policy against the risk of incurring a [costs] liability in [the appeal] proceedings": because, it is said, the court of appeal, if it allows the appeal, may reverse the order for costs below and order them to be paid in favour of the appellant defendants. However, in my judgment, such an order is not in respect of a "[costs] liability in [the appeal] proceedings". It concerns a costs liability in the trial proceedings. Costs orders of the court of appeal distinguish between the costs of appeal and the costs below. In as much as the court of appeal deals with the costs below, it does so because it is empowered to exercise the powers of the judge of the lower court pursuant to section 15(3) of the Senior Courts Act 1981 (see also CPR 52.10).
56. It is suggested that, unless section 29 is given the meaning for which the respondent contends, then a claimant who takes out ATE insurance at the commencement of his litigation, loses at trial, but succeeds on appeal, will be unable to recover his ATE premium by reason of the court of appeal's order. However, it seems to me that he can recover his premium because the order for costs below is properly to be understood as an order made in the trial proceedings, even if affirmed by the court of appeal exercising the powers of the trial judge.
57. It is suggested that, by parity of reasoning, where the court of appeal dismisses an appeal and upholds the order of the judge below including its costs order in favour of a claimant, as here, then, were it to accede to an application to include the (reasonable) costs of the ATE premium in respect of the costs below, it would be similarly exercising the trial judge's powers, so that the costs order and the costs of insuring against the risk of incurring a costs liability would arise in the same proceedings. In my judgment, however, that is not so. Where an appeal is dismissed, in the absence of a costs only appeal, the costs order below is not disturbed. If (not this case) an ATE premium had been incurred at trial, that would fall within that costs order, and would be debated before the costs judge for its reasonable quantum in the ordinary way. Where, however, the cost of an ATE premium in respect of the costs at trial is incurred for the first time at the appeal stage, it is not a cost incurred in the trial, but in the appeal. It therefore has to be dealt with as part of the costs of appeal. However, although it is a cost only incurred at the appeal stage, it arises out of a policy "against the risk of incurring a costs liability" in the trial proceedings, not in the appeal proceedings. It may be true that the risk of reversal of the costs liability at trial is a new risk arising out of the appeal, but it is a risk which relates to the costs liability of the trial, to a "liability in those [trial] proceedings". That would be my answer to the third question raised above.
58. In sum, the broad interpretation of the word "proceedings" advocated by the respondent is unnecessary to achieve the object of the statute, runs counter to a well known distinction, made in the context of costs liability, between costs of trial and costs of appeal where trial and appeal are spoken of as different proceedings, leads to a result which was clearly not contemplated by the ancillary practice directions, and undermines the fairness of the regime. There is no evidence before the court that this situation has ever arisen before. In my judgment, the word "proceedings" in section 29 should be given its traditional meaning which distinguishes between proceedings at trial and on appeal (my first question). The risk that the incidence of costs at trial might be changed by the costs order of the appeal court may be a new risk of the appeal, but the costs liability and costs order in question remain those of the trial: the risk insured against is a risk of incurring a liability in the trial proceedings not in the appeal proceedings (my second question). It also follows that the costs liability in respect of which the premium has been taken out remains a costs liability in the trial proceedings, not in the appeal proceedings (my third question).
59. In effect, the cost of the premium arises only in the appeal, and can be justified only to the extent that it is the price of insuring against the risk of a costs liability in the appeal, when in truth it is the price of insuring against a costs liability in the trial. The costs liability in respect of which the respondent has insured remains a costs liability in the trial. The result is that the costs concerned, which can only be, if anything, costs in the appeal, under the statute are justifiable as neither costs of the appeal nor as costs of a trial which had already terminated. If it were otherwise, costs of trial could in effect be increased retrospectively, to the prejudice of the opposing party.

Lord Justice Etherton :

60. I am grateful to both Patten LJ and Rix LJ for setting out the rival arguments in their equally impressive judgments. I pay tribute to the close analysis of Patten LJ, but I agree with Rix LJ that the respondent's costs of the ATE insurance premium are not recoverable from the appellants. I agree with all the reasoning of Rix LJ, but I add a few comments of my own since we are disagreeing with Patten LJ.
61. We are concerned with the meaning of the phrases "in any proceedings" and "in those proceedings" in section 29 of the Access to Justice Act 1999. The word "proceedings", in the context of court proceedings, is a word of uncertain meaning. It can sometimes mean part of court proceedings, such as being limited to proceedings at first instance or to appeal proceedings, or it can mean the entire course of proceedings from inception to final conclusion. In Wright v Bennett [1948] 1 KB 601, for example, the Court of Appeal held that, for the purpose of applying the costs provisions formerly in Ord 65 r.1 of the Rules of the Supreme Court, the proceedings in the Court of Appeal and below were to be treated separately. The issue in the case was whether the costs of certain documents used at first instance, but disallowed by the taxing master, and then used again on appeal could be allowed as costs of the appeal. Somervell LJ, with whom the other members of the CA agreed, said (at p. 606):

"That decision [viz. Masson Templier & Co v De Fries [1910] 1 KB 535] seems to me to be plain, and, though I do not think that it contains an express reference to Or. 65, r. 1, of the Rules of the Supreme Court, it appears to me to follow and construe the words of that rule, which are: "Subject to the provisions of the Act and these Rules, the costs of and incident to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the court or judge." Those words "of and incident to" appear in s. 50 (1.) of the Supreme Court of Judicature (Consolidation) Act, 1925, except that the words there are "costs of and incidental to all proceedings." The wording of that rule, coupled with the decision to which I have referred, shows that one has to treat proceedings below as a separate proceeding, for this purpose, from the proceedings here. It seems to me that Mr. Salmon has a strong case for saying, applying that decision, that these costs were incurred in respect of the proceeding below and, therefore, cannot be recovered under the order of the Court of Appeal as to costs."

62. A similar distinction can be found in the present procedure rules, for example CPR 36.3(2) and CPR 47.1 and 47.2.
63. It is, therefore, perfectly possible to give the word "proceedings" in section 29 a wide or a narrow meaning. The section would make sense and could work whether the appellants' interpretation or the respondent's interpretation were adopted. I agree with Rix LJ that, in those circumstances, section 29 must be interpreted in a way that will best reflect the legislative purpose. That purpose is well established to be the improvement of access to the courts for members of the public with meritorious claims: see Callery v Gray (No 2) [2001] EWCA Civ 1246, [2001] 1 WLR 2142 at [57] (Lord Phillips), and Callery v Gray (Nos 1 and 2) [2002] UKHL 28, [2002] 1 WLR 2000, at [2] (Lord Bingham) and 49 (Lord Hope).
64. The appellants' interpretation of section 29 is more consistent with that statutory objective than the respondent's interpretation. Where a claimant has not been deterred from making the claim or a defendant from defending by the absence of ATE cover, then the policy objective underlying section 29 is arguably spent, and so no legislative purpose is served by interpreting section 29 to enable ATE cover to be taken out subsequently in respect of first instance costs.
65. Insofar as a similar legislative objective applies in relation to appeals, that is to say, to enable meritorious appeals (for which permission to appeal will almost invariably have been given) to be mounted or to enable them to be defended, the appellants' interpretation is more consistent with the statutory objective. The appellants' interpretation allows both an appellant and a respondent to obtain ATE protection against the additional costs of the appeal. Neither will be in any worse position than they were at the conclusion of the first instance proceedings. If a respondent did not obtain ATE cover for any reason prior to the conclusion of the first instance proceedings, the respondent was always at risk of having to bear the first instance litigation costs without such insurance. On the appellants' interpretation of section 29, such a respondent's exposure to those costs is neither increased nor diminished.
66. On the other hand, the respondent's interpretation would, as in the present case, dramatically change the costs dynamic between parties and could act unfairly against an appellant and as a significant disincentive to an appeal or indeed to the commencement of proceedings in the first place. It has the consequence that a claimant, who unsuccessfully fights first instance proceedings in the knowledge that the defendant does not have the benefit of (and so the claimant will not have to bear the defendant's costs of) ATE cover, and who then appeals with a real prospect of success, faces the possibility of having to meet the cost of the defendant's ATE cover taken out only on appeal but inflated to cover the costs below as well as of appeal. The potentially dramatic rise in the potential financial risk to an appellant is graphically illustrated by the figures in the present case. The respondent seeks reimbursement from the appellants of some £331,000 in respect of an insurance premium covering the respondent's costs of the appeal and the appellants' costs of the appeal and of the trial below, when the respondent's costs of the appeal in its statement of costs served on the day before the hearing of the appeal (excluding the ATE premium) were only £63,650 (i.e. one sixth of the premium) and for both sides in aggregate were only £132,152. As I have said the prospect of such a potential liability, unknown until the appeal stage, might be a deterrent to commencing proceedings or indeed defending them in the first place.
67. Those points against the respondent's interpretation are not displaced by an argument that a respondent, who did not take out ATE cover at first instance, might be deterred from opposing an appeal without ATE cover in respect of the costs of both the appeal and below since, if the appeal were successful, the Court of Appeal might reverse the order for costs below. The risk of paying the costs below was, however, one that such a respondent accepted when he or she defended without ATE cover. In that respect an appeal does not create any new risk. In short, it is difficult to see what meritorious or logical policy the respondent's interpretation of section 29 would serve other than retrospectively to improve the likelihood of a respondent to an appeal recovering costs at first instance in a case which he or she was prepared and able to commence or defend without insurance cover.