TILBY -v- PERFECT PIZZA 

In this case, the claimant was injured in a road traffic accident on 22 April 2000, her being ultimately settling for £2,000 on 22 October 2000, whereupon the defendant agreed to pay reasonable costs. The costs included the sum of the insurance premium, which, under the terms of the policy, was to be paid upon conclusion of the case. The defendant submitted that they were not liable to pay the premium, and argued that payment of the premium would ordinarily have been due when the insurance was taken out so that to allow the claimant to pay at the conclusion of the case was to provide her with credit. As such the agreement was subject to the provisions of the Consumer Credit Act 1974 and was unenforceable as it had not been properly executed. The claimant argued that the contract of insurance was not a credit agreement, but that it was akin to a no-win no-fee agreement and that upon successfully completing her claim for damages, was notionally liable for the premium. As such, it became a recoverable cost from the defendant. The Court found that there was no deferment of the payment of the premium unless payment was to be deferred beyond the conclusion of the case for a significant period. The agreement was therefore not a consumer credit agreement and was not caught by the provisions of the 1974 Act. The insurance policy was still in force, and was not itself concluded until the costs of the claim were finally assessed.

CALLERY -v- GRAY

A landmark decision, arising out of a claim for personal injury following a road traffic accident. The claimant had instructed solicitors and signed a conditional fee agreement which provided for a success fee of 60%. In addition, the claimant took out an after-the-event ('ATE') insurance policy for a premium of £350 exclusive of IPT. Liability was very quickly admitted and the claim eventually settled for £1,500, subject to payment of reasonable costs. Following an assessment hearing, 40% was allowed for the success fee (20% having been conceded as it related to delayed payment of fees and accordingly was not recoverable from the paying party) and £350 for the ATE insurance premium. On appeal the defendant's insurers argued that the premium could not be taken out before the issue of proceedings on a proper construction of s. 29 of the Access to Justice. The appeal was dismissed on both points. The Court of Appeal held that s.29 of the Access to Justice Act conferred jurisdiction to include an ATE insurance premium in an award of costs and that, in this particular case, the premium was reasonable, although each premium had to be assessed considering the evidence of the relationship between the premium, the risk and the cost of alternative cover. The Court of Appeal reduced the success fee to 20 per cent as being reasonable in the particular circumstances, but accepted that it was reasonable to fix a success fee on the first meeting with a client so that a degree of certainty on both parts could be obtained. This was itself appealed in the House of Lords, where the appellant argued that the arrangements as they stood allowed claimants and solicitors to enter into conditional fee agreements and ATE insurance at an inappropriately early stage such that defendants' insurers often had to bear the costs of inflated success fees and unnecessarily incurred ATE insurance premiums.

Although the House of Lords stated that the province of these issues lay with the Court of Appeal and not the House of Lords itself, it was held that the issues arose at a very early stage in the practical development of the new funding regime when reliable factual material was sparse, market experience was scant and as a result trends were hard to discern. The Court of Appeal was correct therefore to give only provisional guidance to be reviewed in the light of increased knowledge and developing experience. Further, the House of Lords directed that the new funding system should not be allowed to become unbalanced or unfairly prejudicial to liability insurers and to the general body of motorists whose insurance policy premiums provided the money with which liability insurers met personal injury claims and costs.

ROGERS -v- MERTHYR TYDFIL COUNTY BOROUGH COUNCIL

The Court of Appeal gave its first consideration to staged ATE Insurance Premiums.  It found that staged premiums were permissible. It also found that proportionality of the premium should not be measured as against the damages.  The Court of Appeal cautioned Judges on relying on evidence from Litigation Funding.  It also gave guidance as to how matters should dealt with in the future in that Solicitors with staged premiums should advise their opponents that the premium is staged and should set out accurately the trigger moments when the second or later stages will be reached.

ABLE UK LIMITED -v- RELIANCE SECURIRY SERVICES LIMITED

Following this commercial litigation the Defendant was ordered to pay £285,000 damages to the Claimant together with the Claimant’s costs on the standard basis to be assessed if not agreed. The Bill of Costs totalled £154,601.26 of which most elements were agreed save for the After the Event Legal Expense Insurance premium which was claimed. At the hearing in the Supreme Court Costs Office before Master Wright the Defendant argued this premium of £60,000 equated to 30% of the limit of indemnity. The Claimant should have contacted other insurance providers in an effort to mitigate costs since it was likely had these quotations been obtained, the other two would have seen the prospects of success as being 75% rather than 70%. The Claimant argued that it was clear the claim would be strongly defended and referred to section11.7 of the Costs Practice Direction, providing that when assessing an additional liability the court will have regard to “the facts and circumstances as they reasonably appeared to the solicitor when the funding arrangement was entered into.”

Based on the information available at the time the Senior Technical Underwriting Manager had considered that a premium of 30% of cover was reasonable and borne out of the way the claim had been defended. The Defendant had defended strongly and no offer to settle had been made until shortly before the date fixed for trial. Master Wright considered that although the future history of the action was irrelevant to the assessment of risk when the funding arrangement was entered into it nevertheless served to confirm the Claimant’s view that the claim would be strongly defended and it was therefore reasonable for the Claimant and its advisers to accept the premium based on 30% of cover with 70% prospects of success. However the more difficult question to answer was whether it was incumbent upon the Claimant to obtain more than one quotation. The judgement of Lord Phillips MR in Callery v Gray was referred to:

When considering whether a premium is reasonable the court must have regard to such evidence as there is, or knowledge that experience has provided, of the relationship between the premium and the risk and also the cost of alternative cover available.

Master Wright considered the Claimant’s submissions that it would have been more expensive for the Claimant to purchase the insurance cover in support of a Conditional Fee Agreement with a success fee. The Claimant’s advisers had considerable experience of commercial After the Event insurance policies and the Defendant had not rebutted the evidence that the Claimant had made a reasonable choice of After the Event insurance. To insist that the Claimant go in search of alternative insurers would have failed to have regard to the overriding objective, bearing in mind the additional expense this would incur.