England and Wales High Court (Senior Courts Costs Office) Decisions

IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE

		Thomas More Building Royal Courts of Justice Strand London WC 2A 2LL
		24/10/2016

Master Leonard:

1. This is the detailed assessment of the costs payable by the Defendant to the Claimant under the terms of an order made on 3 April 2013. The only matters remaining in issue are an After the Event ("ATE") insurance premium incurred by the Claimant, originally quantified at £138,142.91 and now at £144,785.65, and the payment of interest upon the Claimant's costs.
2. The Defendant takes issue first with the fact that an ATE premium was incurred at all, and second with its amount. The Defendant also seeks disallowance of interest under CPR 47.8(3).

The Background

3. The Defendant is a UK distributor of medical devices. Those devices include "Sprint Fidelis" cardiac leads designed to be used with an implantable cardioverter defibrillator ("ICD").
4. In October 2007, the Defendant suspended its UK distribution of Sprint Fidelis leads. On 19 October, the Medicines and Healthcare Products Regulatory Agency announced an official recall of the relevant Sprint Fidelis Defibrillator leads from the UK market.
5. On the 14 October 2010 the Defendant's US parent announced that it entered into an agreement to settle about 3700 US lawsuits relating to the Sprint Fidelis leads. The total settlement sum was US$268 million, including attorneys' fees and administrative expenses.
6. The Claimant was one of a number of UK claimants who instructed solicitors Leigh Day & Co to pursue claims for damages against the Defendant. The basis of the claims was that the leads had fractured, causing electric shocks and personal injury.
7. On 8 April 2011, Leigh Day sent a Letter of Claim to the Defendant on behalf of one of those claimants, Mr Christopher Pitt. The letter incorporated notification of the fact that Mr Pitt had entered into a Conditional Fee Agreement ("CFA"), incorporating a success fee, with Leigh Day on 18 June 2009. With regard to ATE insurance, the letter indicated that Mr Pitt had "the benefit of ATE insurance cover with ARAG Legal Services" and referred to an enclosed Notice of Funding in form N251. The Notice of Funding indicated that the ATE policy had been issued on 9 July 2009, that the premium was staged and that the level of cover was £100,000.
8. Under the heading "Additional Claims" the letter explained that Leigh Day had received instructions from a further 24 potential claimants and attached a list of their names and addresses. That list included the Claimant.
9. The Letter of Claim, with a view to protecting the potential claimants' position with regard to limitation and avoiding the necessity to issue proceedings at that stage, invited the Defendant to agree to a "limitation holiday" to continue until two months after the receipt of the Defendant's substantive response to their claims.
10. The proposed effect of the stay was that the Defendant's rights in relation to time that had already passed would be preserved, but that the running of the limitation period would be frozen from the point of agreement. Acceptance of that proposal was requested by 4 p.m. on 18 April 2011, failing which (Leigh Day warned) proceedings would be issued.
11. With regard to ATE insurance the letter had this to say about the potential claimants:

"Please note that we intend to enter contracts for After the Event insurance to protect our clients in respect of adverse costs and disbursements. In the event that you wish to avoid the additional liability of ATE premiums, this can be avoided if you are willing to provide a guarantee, at this stage, that you will not seek to enforce adverse costs against our clients."

12. The letter concluded with a proposal that the claims be resolved through a settlement protocol "before further legal costs are generated".
13. The Defendant responded through its solicitors CMS Cameron McKenna LLP on 18 May 2011. On the basis that a wholesale limitation holiday would be unnecessary and disproportionate, the Defendant proposed a limitation holiday in relation to those claims in which limitation was due to expire within two months (where medical records had already been obtained) or three months (where they had not yet been obtained).
14. With regard to ATE insurance for potential claimants the Defendant said:

"We note your intention to enter into contracts for after the event insurance in relation to adverse costs and disbursements. Our client is prepared to agree not to enforce adverse costs/disbursements relating to a specific claim against the relevant claimant up to a date 14 days after the date of our substantive response to each claimant's detailed letter of claim in order to give your clients an opportunity to fully consider our client's response in each case. However, we wish to make clear at this stage that in such a case our client will require full supporting medical records and, if these have already been obtained, medical expert reports for each of the prospective claimants in order for it to be in a position to properly investigate the claims. In cases where medical reports have not yet been obtained we would expect the pre-action protocol to apply."

15. The proposal for a settlement protocol was noted, but the Defendant took the position that it was premature at that point to assess whether such an approach was likely to be appropriate.
16. The Claimant entered into a CFA with Leigh Day on 13 June 2011. On 15 June 2011, Leigh Day responded to the Defendant's limitation holiday proposals: discussions with regard to the management of limitation issues in particular cases and categories of case were to continue for some time.
17. The letter enclosed notices of funding in respect of those individuals who had entered into CFAs to that date, including the Claimant.
18. With regard to adverse costs, Leigh Day said:

"We acknowledge your client's offer not to enforce adverse costs/disbursements relating to a specific claim against the relevant claimant up to a date 14 days after the date of your substantive response to their specific letter of claim.

Whilst we believe that your proposal is reasonable in principle, we do foresee some practical difficulties. It can take time to arrange After the Event insurance cover. As such, we feel that a period of one month, as opposed to 14 days, would be desirable to provide us with sufficient time to consider your client's substantive response and for us to arrange suitable After the Event Insurance, if required.

Further, we also take this opportunity to place you on notice that the After the Event insurance premium is likely to be higher should any of our clients be required to enter into such a policy at that later juncture, due to the increased litigation risk."

19. The Defendant, through CMS Cameron McKenna, responded on 19 July 2011 to this effect:

"Our client confirms that it will not enforce adverse costs or disbursements relating to any specific claim against the relevant claimant up to a date one month after the date of our substantive response to the claimant's detailed letter of claim."

20. On 5 October 2011 the Claimant, through Leigh Day, sent a formal Letter of Claim to CMS Cameron McKenna on behalf of the Defendant. The letter set out a history of repeated, severe electric shocks suffered by the Claimant on 31 August 2007, following which his ICD was switched off and (on 3 September 2007) the Sprint Fidelis lead replaced. The Claimant's case was that the shocks had been caused by defects in the Sprint Fidelis lead, in particular a propensity to fracture, and that he had sustained physical and psychiatric injury.
21. The letter made reference to the strength of the claim, referring to the history of the US litigation and the fact that the Sprint Fidelis device used by the Claimant had been the subject of a product recall, and invited an admission of liability. It referred to costs and disbursements:

"The Claimant is part of a larger group of individuals who are bringing legal action… under similar circumstances. As you know some of these claims have been issued to protect our clients' positions on limitation. Drafting Particulars of Claim and obtaining expert evidence in each case is proving time-consuming and expensive. Given the strength of the claims as to prospects and causation, we invite you to consider whether or not you require us to serve Particulars of Claim and supporting evidence in each case or, in order to save time and costs, whether you have any alternative proposals for disposing of these cases…

Further to your letter dated 19 July 2011, we note you will not enforce adverse cost disbursements relating to Mr Coleman's claim up until one month after the date of your substantive response to this Letter of Claim."

22. The letter concluded by repeating the proposal for resolving the claims generally by means of a settlement protocol "…before further legal costs are generated".
23. The admission sought by the Claimant was not forthcoming. On 1 November 2011 the Defendant indicated that, for every claim, the relevant claimant should serve Particulars of Claim and supporting evidence in accordance with the Civil Procedure Rules, without which the Defendant said that it could not decide on the merits of the claim:

"… from our experience in dealing with claims concerning products of this type it is clear that each claim will be markedly different and will need to be investigated and handled as such…"

24. As to the proposed settlement protocol, the Defendant said:

"… our client is not in any position to consider the merits of implementing a settlement protocol at this stage in view of the inadequacy of the information you have provided as to your clients' claims to date.

Our client is still actively investigating the merits of these… claims and we are exploring the defences which we consider are open to our client. Based on the… letters of claim provided to date, we do not agree with your assertion that your clients' cases on liability and causation are strong. A settlement protocol is not, therefore, something our client is considering at this time."

25. This response would seem to have been anticipated by Leigh Day given that on 26 October 2011, the Claimant sent a letter by DX enclosing a Claim Form, Particulars of Claim, a Schedule of Loss and Damage, and supporting medical reports from a consultant cardiologist and a consultant psychiatrist. The claim as served was quantified at £140,645.
26. On 3 November 2011 Leigh Day wrote to the Defendant concerning the management of the claims generally (now numbering 26). The letter incorporated these words:

"… in light of your refusal to agree to one-way costs shifting, we will now go ahead and take out ATE insurance."

27. According to a witness statement of Mr Ross Clark (submitted by the Claimant primarily in relation to the amount of the ATE premium) Leigh Day submitted the risk to First Assist (now Burford Capital (UK) Ltd, to which I shall refer as "Burford") on 4 November 2011, although there may have been some discussion before that with regard to group actions generally.
28. On 23 December 2011 the Defendant wrote to Leigh Day "Without Prejudice Save As to Costs" in relation to Mr Pitt's claim. The letter, with a view to achieving settlement, incorporated a proposed timetable for considering the claim and responding. It stated:

"As it is our client's intention, at or before the end of the period up to 23 January 2012, to make a commercial offer of settlement to your client in respect of this matter, our client therefore requests that your client does not take any further steps, or incur any further costs, in this claim during this period…

In relation to the other claims you have notified, where you have provided us with a formal Letter of Claim in accordance with the pre-action protocol, our client's preferred strategy would be to adopt a process broadly similar to the one outlined above in relation to this claim and we will be writing to you separately in respect of those claims."

29. On 24 January 2012 the Defendant wrote in similar terms in relation to the Claimant's claim. Noting that time for service of a Defence expired on 6 February 2012, the Defendant proposed an extension of time for service of a Defence on the basis that a formal response would be provided by 6 February 2012 incorporating an analysis of the merits and quantum of claim and if appropriate a settlement offer. With regard to costs the letter said:

"in light of the above, our client requests that your client does not take any further steps, or incur any further costs, in this claim during this period. We therefore ask you to confirm that your client will not incur any further costs in this period. If, in spite of the contents of this letter, any such costs are incurred, we will bring it to the attention of the Court at the appropriate time on the issue of costs."

30. On 31 January 2012, the Defendant sent to Leigh Day a detailed response to the Claimant's claim. The letter ran to 7 pages and was accompanied by a 15-page "Counter-Schedule and Rationale for Settlement Offer" settled by Toby Riley-Smith of counsel.
31. To briefly summarise the key aspects of some very detailed arguments, the Defendant argued that the claim was statute-barred, the Claimant having had the requisite knowledge, for the purposes of section 11 of the Limitation Act 1980, by about 7 December 2007 at the very latest; that in view of the date of knowledge and the long delay before issue, the Claimant did not have a strong case for the court to exercise its discretion under section 33; that there was insufficient evidence to establish any defect in the Sprint Fidelis lead, which was CE marked in accordance with European product safety legislation; that on the contrary there was strong evidence that it was not defective when placed on the market; and that the "inappropriate therapy" suffered by the Claimant was a recognised and relatively frequent occurrence with ICD therapy. Permanent physical damage was denied, as was responsibility for any psychiatric disorder suffered by the Claimant, which (the Defendant suggested) was more likely to relate to more recent events.
32. The counter-schedule challenged in considerable detail the Claimant's claim for losses and incorporated what the covering letter described as an "early and commercial" settlement offer of £5,703, open for 21 days (defined as the "Deadline") and incorporating strict terms as to confidentiality. The letter concluded:

"If your client does not accept the settlement offer, we reserve the right to bring the contents of this letter to the attention of the court on the issue of costs. In those circumstances, we intend to seek an order requiring your client to pay our client's costs from the expiry of the Deadline, together with interest on those costs from that date until payment."

33. Mr McDonald for the Defendant says that, this letter having been sent, the agreed stay would have expired at the end of February 2012. He advises me that following service of the Claim Form and Particulars of Claim, the parties agreed a stay of the proceedings until 20 February 2012 in order to explore settlement.
34. On 10 February 2012 (their letter being misdated 2011) Leigh Day wrote to the Defendant about the claims generally (excluding that of Mr Pitt) in these terms:

"We write to advise you that we have now obtained a quotation for After the Event insurance cover in respect of these claims. The cover offered is on the deferred basis, with a minimum premium payable.

In the event that your client wishes to avoid the additional liability of an ATE premium, this can be avoided if your client is willing to agree to unqualified one-way costs shifting.

In the event that we do not hear from you by close of business on Friday, 17 February 2012, we confirm that we will go ahead and take out the policy."

35. CMS Cameron McKenna responded briefly on (Friday) 17 February 2012 confirming that they were obtaining instructions and expected to respond on (Monday) 20 February 2012.
36. On 20 February 2012 CMS Cameron McKenna wrote two letters to Leigh Day. The first proposed a protocol for the settlement of all "non-serious" claims, a category which excluded that of the Claimant (the parties did subsequently engage in such a process with a view to extending it to more complex claims). Notably, with regard to a proposal for a Group Litigation order, they commented:

"… We think it particularly pertinent to remind you… that we considered that these claims were likely to be highly individual in nature and therefore better resolved on a case by case basis…"

37. The Second Letter dealt with the proposal for one-way costs shifting:

"We understand from your letter that, with the exception of Mr Christopher Pitt, none of the claimants or prospective claimants who have instructed you have the benefit of After-the-event (ATE) insurance cover… We further understand from you that there are currently 27 claimants in total.

We also understand that you now consider that it is necessary for each of those claimants or prospective claimants to obtain ATE insurance to indemnify them against any adverse costs orders that our client may obtain in any current or prospective litigation.

You suggest that your clients would not seek such cover if our client agrees to "unqualified one-way costs shifting" in each of those cases. You have not, however, explained exactly what you mean by such a phrase. We assume that you ask our client thereby to agree to waive all of its rights to recover in relation to any costs in any of these claims (whether individual are common costs) that are incurred in the future. It is not clear, however, whether you also ask client to waive any entitlement that it might have in relation to costs that it has already incurred in any of these claims or prospective claims…

We consider that there is no good reason why your clients should be exposed to this further expense at this time. We do not consider that it is necessary, reasonable or proportionate in any of these cases, irrespective whether proceedings have been issued or are merely prospective…"

38. Under the heading "Claims where proceedings have been commenced" the Defendant wrote:

"… our client has not yet served any defence in any of these issued proceedings. In order to facilitate our general discussions in settlement of all of these claims, our client proposes that these five claims be stayed generally, terminable upon one month's written notice by either party to the proceedings.

In the four of these cases that do not yet have ATE insurance (that is, all save Pitt) we are also willing to offer a temporary costs amnesty in order to obviate the need for such insurance. For the avoidance of doubt, this offer is as follows. In any of these four cases in which your client forebears obtaining ATE insurance until the conclusion of the period of the stay, our client will agree to waive its right to recover the individual costs that it has incurred, or will incur, in that case until the conclusion of the period of the stay-save that our client reserves all its rights to seek recovery of any costs it incurs in this period of stay in responding to any steps taken by any of the claimants in their respective proceedings, or in responding to any GLO application or other litigation started on behalf of an individual claimant collectively with others. In the interest of clarity, our client again reserves its right to seek to recover its costs against any claimant by way of a Bill of Costs in any action brought by an individual, or against the claimants collectively.

In the light of the above, we cannot see that it is necessary or reasonable for your clients to incur the cost of any ATE insurance. In the event therefore that any of your clients' costs claims proceed to detailed assessment, we shall bring this correspondence, including our client's offer as to costs above, to the attention of the costs judge and will strongly resist recovery of any such premium(s), quite aside from any objections we may wish to make with regard to the level of any premium and its calculation…"

39. Mr McDonald advises me, and the Points of Dispute state, that on 27 February 2012 the Claimant agreed to stay his claim until 5 April 2012.
40. Leigh Day responded to the Defendant's costs proposal by letter of 2 March 2012:

"… Whilst your client has offered a temporary costs amnesty, it is not an irrevocable one way costs shift. If in the future your client withdraws its temporary offer, then our clients will potentially face an adverse costs liability.

Further, with respect to disbursements, our clients remain at risk. After the Event insurance is a recognised means of protecting against this risk, and we cannot see how our clients would be criticised for protecting their position.

The policy that has been offered to our clients is a group Pursuit policy… In the event that your client is willing to agree to full one-way costs shifting… We would look to obtain a policy to cover disbursements alone. However, on the current terms offered, our clients continue to be at risk of adverse costs and it remains in their interests take out full cover…

We confirm that we will accept the policy quotation unless you confirm by 9 March 2012 that your client will agree to full one-way costs shifting."

41. CMS Cameron McKenna replied on 9 March 2012:

"… We refer to the disbursements to which you state that your clients remain at risk… Insofar as you mean your clients' future risk of having to pay for our client's disbursements, the temporary costs amnesty, as set out in our letter of 20 February 2012, applies to both costs and disbursements… Insofar as you intend to provide insurance cover for your clients against liability for their own disbursements, we consider purchasing ATE insurance an unreasonable step to take, especially in light of the settlement discussions afoot…"

42. On 12 March 2012 Leigh Day, for the Claimant, responded to the Defendant's 31 January offer of £5703, counter-offering to accept £85,000 (plus costs) in full and final settlement of his claim.
43. On 23 March 2012 the Defendant requested cost information with regard to the Claimant's claim and proposed that it be stayed until 4 May 2012, time for a defence being extended until 18 May 2012. Mr McDonald advises me that on 28 March 2012 the Claimant agreed a stay until 13 April.
44. He further advises me that on 30 March 2012, settlement of the Claimant's claim was discussed in a meeting; that one of the other claims (expedited by reason of the relevant claimant's ill-health) was settled in April 2012; and that the Defendant requested a further stay on 25 April 2012, which the Claimant refused.
45. On 27 April 2012 a Defence was served denying liability. In a covering letter the Defendant stated:

"… As we explained by letter dated 25 April 2012 and over the phone, we strongly consider that permitting the extension that we had asked for would have been in the interest of both parties as it would have provided an opportunity for potential early resolution pending the conclusions of the expert reports. We do not consider that your client would have suffered any significant prejudice by agreeing to such extension, particularly as in any event we consider expert reports will be required in order for the court to rule… We also consider that such extension would have assisted in the costs-efficiency of this case…"

46. On 11 May 2012 the Claimant took out the First Assist policy. Notice of Funding was served on the same date.
47. In due course the defence was (by agreement) amended and a reply served; the claim proceeded to a CMC on 30 May 2012; disclosure was given; witness statements were exchanged; and the Defendant served its own expert evidence in relation to the claims for physical and psychiatric injury. A trial window for hearing along with another claim (that of Mr Pitt) was first set in May 2013, but moved by consent to October - December 2013 with a three-day time estimate.
48. The Defendant made a Part 36 offer of £37,500 on 27 November 2012, which was not accepted. According to the Claimant's chronology, in an RTM held on 11 January 2013 the parties agreed that it would be necessary for the Claimant to be reassessed by experts before any further progress could be made toward settlement. The claim settled for £60,000 on 27 March 2013.
49. The Defendant did not admit liability at any stage, in this claim or in any of the other claims brought by Leigh Day. It did eventually agree, in (according to Mr McDonald) May 2013, to one way costs shifting in all claims but this and one other already covered by legal expenses insurance.

The Conditional Fee Agreement

50. The Claimant's CFA with Leigh Day is a "CFA lite" under which expenses are payable in full but basic charges, success fee and counsel's fees are payable only to the extent they are recovered from another party.
51. The CFA provides for a staged success fee of 50% if the claim is settled before issue; 75% if settled after proceedings are issued and before a defence is received; and 100% if the claim settles after a defence is received. The stated reasons for setting the success fee at that level include that the Sprint Fidelis device had been voluntarily recalled from the UK market; liability had not been admitted; no generic expert evidence had as yet been obtained regarding the Sprint Fidelis device; no medical evidence as yet been obtained; and that it was difficult to assess the strengths and weaknesses of the claim without a causation report.
52. The CFA incorporates Leigh Day's right to end the CFA if the Claimant does not comply with obligations of cooperation and reasonable conduct, and if Leigh Day believe that it is uneconomic to continue to pursue the claim (meaning that it would not be reasonable for a client paying the legal costs regardless of outcome to continue, having regard to the benefits to be gained by continuing and the risk of losing).

The ATE Policy

53. The ATE policy is dated 11 May 2012 and comprises a policy schedule, policy wording and one endorsement, which are expressly to be read as one document. The policy schedule names as the insured "Allan Coleman & Others", and as "the Opponent" the Defendant. The limit of indemnity is £2 million. The premium rate is 80% plus IPT with a minimum premium of £100,000.
54. The endorsement provides for further claimants to be added provided that certain conditions are met, including that, in the event that primary liability is established against the Defendant, the prospects of the particular individual's claim being accepted as having merit is no less than 60%. Express prior written consent is required if the number of insured individuals is to exceed 100 or of any client is to be added to the policy after 1 July 2012.
55. The policy's schedule defines "success" in these terms:

"The Insured recovers money or obtains the right to recover money or the right to money or the Insured in any way derives benefit measurable in monetary terms from pursuing the Legal Proceedings, whether by way of judgment or settlement or by any other means."

56. This is supplemented by a definition in the policy wording to this effect:

"… Legal Proceedings will be deemed Successful if the Insured is offered or obtains at any time a net entitlement to money and/or damages and/or costs which, taking into account any counter-or cross-claim in the Legal Proceedings, equals or exceeds the definition of Success as shown in the Schedule…"

57. There was some argument, before me, about whether the definition of success in the policy schedule should be taken to have precedence over that provided for in the policy terms. Given that the policy expressly provides that the policy wording, the policy schedule and any endorsement are to be read as one document it seems clear to me that they are to be read together.
58. An unsuccessful claim is one that fails to meet the definition of success and extends to a claim successful at first instance but not on an appeal defended at the insurer's insistence. The insurer indemnifies the insured in respect of adverse costs and expenses "Where and to the extent that the Legal Proceedings or a part of the Legal Proceedings is Unsuccessful".
59. The policy incorporates general exclusions in relation to misrepresentation or material non-disclosure by the Insured or the Insured's solicitor; the insolvency of the Opponent; costs incurred as a result of unreasonable failure on the part of the Insured or the Insured's solicitor to attend the hearing, or to mitigate a liability in respect of costs or expenses; costs and expenses incurred as a result of the insured failing to provide instructions or otherwise failing to cooperate with the solicitor or the insurer; and expenses that have been incurred unreasonably or unnecessarily. An exclusion of expenses incurred outside the period of insurance is deleted by the endorsement.
60. The definitions incorporated in the policy wording confirm that the figure used for the calculation of the policy premium shall be the total costs the Defendant may seek to recover under an order for costs or other entitlement, as certified by the Opponent's Solicitor if appropriate (in the absence of which the figure is to be estimated on the best information available). Cover commences either at the inception date shown in the schedule or, if later, the signing of a CFA. It ceases when the relevant proceedings were concluded, or in other circumstances including where the CFA is terminated.
61. The policy may be terminated without payment to the insured if the insured or the insured's solicitor terminates the CFA; the insured fails to comply with the terms of the CFA; the insured does not follow the solicitor's recommendations as to the conduct or settlement of the claim, or the insurer's recommendations as to settlement; if the insured fails to comply with the terms of the policy; or if the insured fails to give proper instructions so that the solicitor may do so. There is a specific obligation to undertake reasonable investigations in relation to the Opponent's funding arrangements and in particular to advise the insurer where the Opponent has entered into a CFA or procured a legal expenses insurance policy.
62. The endorsement expressly provides that the insured must not, without written consent, accept, or instruct the solicitor to accept, an offer from the Defendant that settles the case on terms that the Defendant pays no legal costs, or any offer which could in any way affect the prospects of the insured achieving a more favourable overall settlement or which might prejudice recovery of the insurance premium.
63. The endorsement also contains these specific provisions in relation to successful and unsuccessful individual claims:

"… should the Court reach a decision at trial, such that fewer than 50% of members at that time of the Insured obtain an award which equals or exceeds the Definition of Success the Premium will be reduced pro-rata and the Policy will meet claims made by Unsuccessful members of the Insured in like manner to an Unsuccessful outcome…

this Policy covers the Insured as a whole. The individuals agree that if some members of the Insured wish to accept an offer following which the remainder or part of the remainder of the Insured is advised by the Solicitor to discontinue as a result of the prospects of their individual claims not being sufficient, 50% of any damages awarded to the Insured must be used to pay any costs the Opponent may be entitled to by virtue of any such discontinuance(s). The Insurer will only indemnify the Insured, subject to the other Terms and Conditions of the Policy, in respect of any costs of the Opponent which remain to be met following the exhaustion of 50% of the damages recovered by other members of the Group…"

64. I am advised by Mr McDonald that no additional parties were added to the policy after 11 May 2012.

The Evidence Given on behalf of The Claimant

65. Ms Jill Elizabeth Paterson, a partner at Leigh Day, has provided a witness statement explaining the reasoning behind Leigh Day's advice to the Claimant, following service of the defence, that it would be necessary to take out ATE cover.
66. At that point, she says, the Defendant had settled only one of the claims, on compassionate grounds (according to a chronology offered by the Claimant, emphasising that its offer of settlement was in no way intended to set a precedent in relation to any other claims). In this particular case, the defence served (as had previous responses to the claim) denied liability, including on limitation grounds.
67. The temporary costs amnesty offered by the Defendant had terminated with service of that defence and the Defendant had, to that point, declined the Claimant's suggestion of unqualified one-way costs shifting. The only settlement offer that had been received, £5730, was she says "derisory": a nuisance offer made on the basis that the Claimant would not establish liability. In itself that offer added to the costs risk faced by the Claimant. There was, says Ms Paterson, a real risk that settlement discussions would prove unsuccessful, and that the matter could reach trial. Under those circumstances, she says, ATE cover was an absolute necessity.
68. As for choice of cover, Leigh Day had a long-standing relationship with First Assist and were aware that they were willing to offer cover for complex claims where a high level of indemnity might be needed, in particular on high-value complex group claims of this kind. The intention was to cover the whole group of (at that point) 27 claims. In the event, only the Claimant's name was entered on the policy because the Defendant ultimately agreed, "at the eleventh hour", to unqualified one-way costs shifting.
69. The First Assist policy was judged suitable because it offered unlimited cover, with a long stop of £2 million avoiding the need for a further top-up; it offered cover for both adverse costs and disbursements; premiums were deferred, and only payable if the claim was successful; and Leigh Day's long-standing working relationship with First Assist would help in the swift securing of ATE cover and with the swift resolution of any claims made under the policy.

Submissions on whether the ATE Premium should have been Incurred

70. In the Points of Dispute, the Defendant argues that it was disproportionate, unreasonable and unnecessary for the Claimant to incur an ATE insurance premium. He did not, say the Points of Dispute, face an adverse cost risk, a costs amnesty being in place at the time. By 30 March 2012 a settlement protocol had been agreed for both simple and complex claims, a key purpose of which was to avoid unnecessary costs including ATE insurance. A defence was filed because the Claimant unreasonably refused the Defendant's request of 25 April 2012 for a further stay in order to obtain expert evidence. The Claimant's refusal was particularly unreasonable bearing in mind that one "simple" claim had settled on 26 April 2012 and that that was followed by settlement of the rest of the simple claims.
71. The Points of Dispute to which I have referred are not, as phrased, entirely accurate. As will be evident from the summary of events I have outlined above, the costs amnesty offered by the Defendant had expired at the time that ATE insurance was taken out by the Claimant. A settlement protocol had been agreed only in relation to simple claims and only one of those simple claims had settled at the time ATE insurance was taken out. On the evidence before me, it would seem that the others settled much later.
72. On a fairly elastic interpretation of the Points of Dispute, the Defendant's real point would seem to be that it was open to the Claimant, as at 25 April 2012, to extend the life of the temporary costs amnesty offered by the Defendant by agreeing to a further stay, although (other than an indication that the point was to allow the Defendant to obtain expert evidence) the Points of Dispute say nothing about the proposed period of extension.).
73. Mr McDonald says that the Claimant should have agreed a further stay to extend the costs amnesty. At the very least, in the two-week period between service of the defence and inception of the policy, the Claimant should have given the Defendant an opportunity to extend the costs amnesty, rather than taking out ATE insurance without further consultation when settlement discussions were continuing: thousands of cases in the USA had already settled.
74. The parties had, he submits, previously engaged in extensive correspondence to avoid precisely that expense and the Claimant, he argues, has given no valid reason for a sudden change of approach. Instead, he says, Leigh Day unnecessarily and inefficiently sought to progress both the Claimant's and Mr Pitt's claims as "lead" cases and in consequence the Claimant incurred the cost of an ATE premium unnecessarily, unreasonably increasing his costs, as at 11 May 2012, by a minimum of £100,000. Mr McDonald contrasts the other 24 extant claims, which had at the time been stayed and remained stayed until settlement.
75. Mr Williams, for the Claimant, refers me to the detailed and robust response to the claim set out in the Defendant's letter and counter-schedule of 31 January 2012, settled he says by counsel with a pre-eminent reputation in claims of this kind. The defence served on 27 April 2012 simply built on that letter which, he says, provided the obvious basis for the Claimant's decision to litigate.
76. In that letter the Defendant undertook a very full analysis of the merits and risks attendant on the claim and made an offer of less than £6000, representing a 20% prospect of success on the Defendant's quantification of the claim. The obvious implication was that the Defendant would only negotiate on the basis that the claim was highly unlikely to succeed. This left the Claimant with the choice of accepting (on any basis) a massively discounted offer, bearing the disbursements he had incurred in the meantime, or proceeding to litigation.
77. Mr Williams argues that the costs amnesty offered by the Defendant after 31 January 2012 left the Claimant, in any event, at risk as to costs. He submits that, properly interpreted, the Defendant's letter of 20 February 2012 and subsequent correspondence reserve the right to claim costs incurred, even during the period of amnesty, should the Claimant not settle within that period: hence both parties' references to a "temporary costs amnesty", not irrevocable, which could be withdrawn leaving the Claimant and other clients to face an adverse costs liability.
78. Further, the amnesty offered related only to individual costs. Common costs, such as for example those associated with a round table meeting, were not covered.
79. The US litigation is, submits Mr Williams, entirely irrelevant. Given that the US system incorporates different laws and product liability risks; an entirely private medical system; jury trial of civil claims; punitive damages; and no cost recovery regime, the criteria for success in civil claims are he argues quite different, as is any quantification of damages.

Conclusions on the Reasonableness of Incurring the ATE Premium

80. I agree with Mr McDonald that, on the correspondence properly interpreted in context and as a whole, the Defendant agreed, until service of the Defence on 27 April 2012, not to seek to recover any of the costs of this particular claim incurred during the period of costs amnesty, whether or not it was settled within that period. I appreciate that, as Mr Williams says, some of the passages to which I have referred above can, read in isolation, be interpreted differently, but overall the position seems to me to be tolerably clear.
81. Mr Williams put a great deal of emphasis on the word "temporary" as repeatedly used by the Defendant, but in context that word seems to have been used to emphasise the fact that the costs amnesty, in contrast to the Claimant's request for a complete, unqualified and permanent one-way costs shifting agreement, applied only for a limited period.
82. That said I do not believe that there is any proper basis, in the circumstances of this case, for concluding that it was unreasonable for the Claimant to take out ATE insurance when he did.
83. As Mr Williams points out, the amnesty offered by the Defendant did not on its face extend to common costs, and the Claimant had been incurring disbursements which, ultimately, were covered by the ATE policy. All that is relevant, but even if it were not I would still take the view that the Claimant's actions in May 2012 were not unreasonable. I say that for these reasons.
84. As at 11 May 2012 the Claimant had repeatedly warned the Defendant that, in the face of any exposure to costs, he would take out ATE insurance. The Defendant's costs amnesty lasted as long as the agreed period of stay and on the understanding that the Claimant would not obtain ATE insurance during that stay period. The agreed stay having come to an end, the agreed temporary costs amnesty had also come to an end and the Claimant now faced the usual risks as to the costs of his continuing claim. That was, or should have been, equally clear to both parties. The Defendant was in a position to expect that, absent some further agreed amnesty, ATE insurance would now be taken out.
85. There is to my mind no substance in the suggestion that, before then taking the decision to take out ATE insurance, the Claimant should have referred back to the Defendant to give it another chance to extend the costs amnesty. If the Defendant had been willing to extend the costs amnesty beyond the end of the agreed stay (in that way heading off the known risk of incurring liability for the cost of any ATE insurance taken out by the Claimant) it only had to say so. It did not, and it had made it clear that it would seek to recover any costs not covered by the amnesty.
86. It seems to me that the real point remains whether it was unreasonable for the Claimant to reject the Defendant's suggestion of a further stay, which if agreed would have extended the costs amnesty automatically.
87. I have identified no evidence to the effect that that any particular period of stay was mooted, on 25 April 2012, by the Defendant. I know that the Defendant proposed an extension of time for service of the defence sufficient to allow the Defendant to obtain its own obtain expert evidence. On that basis the further stay would, judging by the chronology before me, have extended to several months.
88. Whatever the period of stay proposed by the Defendant on 25 April 2012, the request came some six months after service of full Particulars of Claim and supporting expert evidence upon which the Defendant had insisted for the purposes of assessing the merits of the claim.
89. I can find no substance in the Defendant's argument that it was unreasonable for the Claimant to treat this claim, and the claim of Mr Pitt, as "lead cases". There was no reason to suppose that any prospect of resolving smaller, simpler claims under an agreed protocol would have any real bearing on the prospects of settling the larger, more complex claims. On the contrary, the Defendant was at pains to indicate that each case had to be judged on its own merits and that the settlement of one claim on compassionate grounds had not set any kind of precedent.
90. The Defendant, as it was entitled to do, had by 11 May 2012 taken the position that if this particular claim was to be settled it would have to be settled at a tiny fraction of its pleaded value. I have seen no evidence to the effect that any indication to the contrary was ever offered at the relevant time. I respectfully agree with Mr Williams in that the prior settlement of US claims offered no useful guide to the likelihood of successful settlement in this case, as the Defendant's response to the claim made only too clear.
91. On the evidence the parties were, in May 2012, still poles apart: the settlement sum that had been offered by the Defendant was less than 10% of the amount for which the claim ultimately settled. There was no good reason for the Claimant to suppose, in May 2012, that settlement without recourse to further litigation was so likely as to justify any more delay in pursuing his claim. Any such supposition would have been remarkable in the circumstances. It would also, as subsequent events demonstrate, have been wrong.
92. The Overriding Objective in the Civil Procedure Rules places particular emphasis upon the cost-effective resolution of disputes: it also requires that cases are dealt with expeditiously. It was not, in my view, incumbent upon the Claimant to put his claim on hold for as long as the Defendant was willing to extend a costs amnesty.
93. It is evident that the Defendant devoted considerable resources to minimising the potential cost and negative publicity attendant upon the events which led to the 27 claims managed by Leigh Day. It seems to me that, by May 2012, the Defendant was also attempting to exert a degree of control over the terms and timing of the dispute resolution process which it was not in the Claimant's best interests to accept.
94. For those reasons, my conclusion is that it was not unreasonable for the Claimant, in April and May 2012, to take the view that he should require the Defendant to serve its defence; that his claim should then be taken forward; and that in those circumstances he should, in the usual way, take out ATE insurance to protect his costs position.
95. The next question to be considered is whether the amount of the premium incurred by him was reasonable and proportionate.

The Calculation of the ATE Premium

96. The ATE premium claimed in the bill of costs is £138,142.91. The Points of Dispute take issue with the amount of the ATE premium on these grounds. It is asserted that it was highly unlikely that this claim would be unsuccessful, so it should have been rated as low-risk; one claim had already been settled; a settlement protocol had been established for simple claims, with a view to extending the process to more complex claims; and Leigh Day had asserted that the Claimant's case was very strong, bearing in mind the previous UK product recall and settlement of US claims. The staged success fee in the Claimant's CFA, starting at 50%, was say the Points of Dispute lowered in later claims to 33%. A premium of £56,781.73 is proposed as reasonable and proportionate: it is not clear to me how that figure has been calculated.
97. Before me, the Defendant took issue with the amount of the ATE premium on two grounds. The first was that the amount of the Defendant's costs, by reference to which the premium was calculated, needs to be adjusted. The second is that, as the Points of Dispute say, the risk faced by the ATE insurer was much smaller than provided for in Burford's calculation of the premium: the Defendant suggests a figure of 15%.
98. As I have mentioned the Claimant has provided evidence relating to the calculation of the ATE premium from Mr Ross Clark, chief Risk Officer of Burford. Mr Clark also explains Burford's method of calculation of the amount of premium by (broadly speaking) assessing risk, calculating an appropriate percentage of potential exposure by reference to the insured's chances of winning or losing is defined in the policy, and adding an additional element to represent profit/administration, sales, marketing and other costs and expenses.
99. Mr Clark confirms that Burford's assessment of the prospects of the Claimant's overcoming the stated limitation defence, succeeding on primary liability, causation and quantum, and of beating the existing and any future offer, was 60%.
100. Burford's formula for calculating the ATE premium is not in issue: its assessment of risk is.

The Amount of the Defendant's costs

101. The ATE policy provides for the premium to be calculated by reference to the total costs the Defendant might have sought to recover had it established an entitlement to its costs. Mr Clark confirms that the ATE premium has been calculated based on an opponent's costs figure of £164,957.37. This figure was supplied by the Defendant on 3 February 2015, altered from a figure of £157,374.34 previously supplied by the Defendant on 13 September 2013.
102. On 28 July 2016, the Defendant wrote to the Claimant explaining that the figure of £164,957.37 was incorrect. Of that sum, some £44,709.29 represented costs and disbursements attributable to this claim and incurred by the Defendant during the period of the costs amnesty.
103. The Defendant presents this as, in effect, an amendment to the Points of Dispute. The Claimant does not take issue with this late amendment (subject to argument about costs) but resists the adjustment of the Defendant's costs figure. The Claimant says that the figure of £164,957.37, properly included in the bill on information provided by the Defendant, is correct because the Defendant had reserved its right, should the claim not be settled within the amnesty period, to claim all of its costs including those incurred during that period. That argument is, says Mr Williams, supported by the fact that the Defendant itself appeared until very recently to assume that it might, in the right circumstances, have been entitled to claim its costs during the period of amnesty.
104. I have already explained my reasons for concluding that the Defendant effectively and permanently waived any right to its specific costs of this claim during the amnesty period. The Defendant's failure, until a very late stage, to deduct its costs for the amnesty period from the figures provided to the Claimant was simply, as Mr McDonald says, an obvious error. It has no bearing upon the Defendant's previously agreed arrangements with the Claimant.
105. The ATE policy provides for the premium to be calculated only by reference to total costs the Defendant might have sought to recover from the Claimant had it become entitled to do so. The costs incurred during the amnesty period do not fall within that total.
106. For those reasons I am satisfied that the figure upon which the ATE premium should be based is the adjusted figure of £120,248.08 now certified by the Defendant.

The Calculation of the Premium: Evidence and Submissions

107. In his evidence Mr Clark makes it clear that the primary risk assessed by the ATE insurer at the relevant time was that of the Claimant's claim being unsuccessful by reference to the terms of the policy. The possibility of joinder of other claims was provided for in the policy terms, but the Claimant's claim and Mr Pitt's claims were treated as lead cases and the risk assessment was based primarily upon the prospect of success of the Claimant's case as the only insured. This is further illustrated by the broad provision for other claims to be joined provided that they had a minimum prospect of success of 60%.
108. Mr Clark argues that Burford, as insurer, ran additional risks to those undertaken by a solicitor acting under a CFA. He cites, as examples, the risk of being unable to recover the premium even in the event of success; the fact that for an unsuccessful claim, an insurer will have had not only to forfeit the premium but to pay adverse costs and expenses; and various ways in which an insured or an insured's solicitor can let an insurer down.
109. The Defendant also encourages me to look beyond the risk of success or failure of this particular claim. Mr McDonald points out that the policy provided for other claims to be joined, and that only one of those potential additional claims had to succeed for the ATE premium to become payable. He also refers me to the policy's provisions for reducing the insurer's obligation to pay the costs of unsuccessful claims by appropriating part of the damages received in successful claims.

Conclusions on the Calculation of the ATE Premium

110. I have been referred to the judgment of Foskett J in Kai Surrey v Barnet and Chase Farm Hospitals NHS Trust [2016] EWHC 1598 (QB), which helpfully summarises, at paragraphs 115-118, the extent to which a Costs Judge should be willing, in the absence of expert evidence, to exercise his judgment to reduce the recoverable amount of an ATE premium. Briefly, such judgment can, in matters where the Costs Judge has sufficient experience and expertise, be exercised on a broad brush basis provided that sufficient caution is exercised. I have kept that guidance in mind when coming to the following conclusions.
111. I am not persuaded by Mr Clark's arguments to the effect that the calculation of risk, for an insurer, is very different to the calculation of risk by a solicitor acting on a CFA. A solicitor on a CFA, like the insurer, faces risks unrelated to the merits of the underlying claim (such as client's or an opponent's insolvency). It seems to me that one must have regard to the risk undertaken by reference to the terms of the relevant agreement rather than attempting to factor in speculative additional risks, and that for the purposes of calculating a premium risk and potential exposure should be treated as discrete factors.
112. The Defendant has referred me to a number of provisions in the ATE policy and made a broad submission to the effect that they demonstrate that the prospect of the insurers having to make a payment, or any substantial payment, under the policy were small.
113. I have two difficulties with the arguments advanced by the Defendant. The first is that I am not satisfied that the provisions to which I have been referred do have that effect. The second is that insofar as they may have some effect, it is not such as to justify the reduction of the recoverable premium by me on a broad-brush basis.
114. Mr McDonald's point that only one claim had to succeed in order for the policy premium to become payable seems to me to be correct. The extent to which it has any bearing upon Burford's risk of having to pay adverse costs and disbursements is another matter. Primary liability, at the time, stood to be established through the Claimant's and Mr Pitt's claims. Mr Pitt was not insured under the policy so the assessment of risk, for ATE purposes, focused upon the Claimant's case. I have no idea of the merits of the other potential insured claims (at the relevant time) other than that they seem likely to have been comparable to the Claimant's.
115. Mr McDonald also submitted that the policy's provisions for indemnity in the event that fewer than 50% of the insured litigants succeed, and for setting off the costs of unsuccessful claims against part of the damages recovered in successful claims, minimised the likelihood of the insurer's having to pay any substantial amount.
116. This is a broad assertion with, as far as I can see, nothing of substance to support it. This argument (like some of Mr Clark's arguments) also seems to me to confuse exposure with risk, demonstrating the hazards of attempting to make a broad-brush adjustment to the premium in the absence of any adequate formula or evidence upon which to base it.
117. The Defendant makes much of the exclusions provided for in the ATE policy, and of the insurer's right to withdraw indemnity under certain circumstances. I accept, as Mr McDonald submits, that it is not open to the Claimant to argue (as Mr Williams wishes to do) that it might have been difficult, for legal and regulatory reasons, for the insurer to enforce the terms of its own contract. It is however accepted by both parties that these are standard terms and that it is, in reality, unusual for cover to be withdrawn.
118. These are necessary terms for the purposes of keeping the matter under a reasonable degree of control, no more, and seem to me to have little real bearing upon the assessment of risk.
119. Mr McDonald invites me to draw an adverse inference from the fact that the Defendant has sought from the Claimant disclosure of (to quote the Points of Dispute) "all material passing between themselves and the ATE insurers which concern the inception of the ATE insurance and the rating of the premium" and that the Claimant has declined to do so.
120. I do not believe that there is a sound basis for drawing any adverse inference. On detailed assessment, the Claimant is obliged to put before me (and, if appropriate, the Defendant) only the information upon which he wishes to rely in support of his claim for costs. There is no procedural provision for disclosure of the kind sought, much less any requirement. The suggestion that the Claimant may be in possession of further evidence that might adversely affect his case seems to me to be speculative. By way of illustration I would refer to Mr McDonald's observation that the Claimant has not disclosed to the Defendant any relevant advice from counsel, which Mr Williams promptly assured me does not exist.
121. For all those reasons, it seems to me that, in considering the assessment of risk of the ATE premium, I should (as Burford did) focus upon the prospects of success of this particular claim, "success" being defined broadly by reference to a net entitlement to monetary benefit (which, as Mr Williams points out, excludes rejected or lapsed offers).
122. On that basis I am unable to accept Mr MacDonald's suggested assessment, for ATE purposes, of a risk of failure of 15%.
123. The Claimant did assert that he had a strong case, relying upon the US settlements and the UK product recall. In response the Defendant emphasised the limitation issue, pointed out that the product recall did not establish liability, argued that the evidence in fact established that there was no actionable defect, and took issue in any event with causation and damage.
124. The insurer's assessment of risk will have taken into account the position taken by the Defendant, as set out at length in its letter of 31 January 2012 and amplified in the defence served on 27 April 2012. The arguments marshalled by the Defendant were not intended to be, nor were they, fanciful and it was clear that the Defendant was ready to put considerable resources into defending its position. The Claimant and the Claimant's ATE insurer were entitled to take the Defendant's arguments seriously and to understand that the claim was liable to be strongly contested.
125. Given that the Defendant could marshal (as it did) cogent and closely argued reasons to assess the Claimant's prospects of success at 20%, it is difficult to see how Burford's 60% assessment can be characterised as unreasonable.
126. Taking all that into account, it seems to me that an assessment of the prospects of success at 60%, for the purposes of this ATE policy, did not fall outside a reasonable range. It follows that my conclusion is that there is no proper basis for reducing the claimed ATE premium other than by reducing the "opponent's costs" figure upon which it is based to £120,248.08. I will leave it to the parties to agree an appropriate figure, but I would be happy to assist should there be any disagreement.

Interest

127. The order providing for the Defendant to pay the Claimant's costs is dated 3 April 2013. Notice of Commencement, in accordance with CPR 47.7, should have been served within three months of that date. It was served on 29 October 2015, more than two years late.
128. The Defendant seeks disallowance of interest upon the Claimant's costs (insofar as not already provided for in the terms agreed by the parties on settling all costs excluding the ATE premium) for the entire period of delay. Mr Williams points to the fact that there were over that period productive settlement negotiations, leading to the resolution of all issues except that of the ATE premium. He reminds me that the Claimant did not receive from the Defendant the information needed to quantify the ATE premium until September 2013. On that basis he suggests that any disallowance of interest should be limited to no more than, say, 12 months.
129. Mr McDonald rightly points out that I have no evidence about the extent to which the Claimant pursued the information needed, but I have no evidence that either party pursued the point with any vigour. Both were aware of the terms of the policy and the information needed in order to calculate the amount of the ATE premium. Both were in a position to move matters along.
130. It seems to me that (given the Claimant was in possession of the requisite information by September 2013,) a bill of costs should in any event have prepared and served by the end of 2013. That being the case, interest is disallowed from 1 January 2014 to 28 October 2015 inclusive.

Summary of Conclusions

131. For the reasons I have given, I have concluded that the ATE premium which the Claimant seeks to recover was reasonably incurred. I have found no sound basis for reducing it other than by reducing the "opponent's costs" figure upon which it is based to £120,248.08.
132. Interest on the Claimant's costs (other than as provided for in the terms of settlement of all costs other than the ATE premium, as already agreed by the parties) is disallowed between 1 January 2014 and 28 October 2015.