Percy v Anderson-Young
This is a case whereby the Court held that an ATE Premium in the sum of £533,107.13 claimed on behalf of the Claimant was recoverable.
By way of a brief background to this case, the Claimant was involved in a road traffic accident in October 2005, when she was just 16, and suffered severe head injuries as a result. Liability for the accident was never in dispute.
The matter settled by way of a joint settlement meeting on 27th September 2013, with settlement approved by the Court in October 2013 owing to the Claimant’s lack of capacity. The agreed Order included a provision that “the Defendant shall pay the Claimant’s costs of the action to be the subject of detailed assessment on a standard basis in default of agreement.”
The parties were able to agree all the costs save for one item, namely the liability of the Defendant to pay the premium for ‘After The Event’ (“ATE”) insurance.
Premium ‘Top Up’
Crucial to the dispute regarding the amount of the ATE premium, was the fact that a PTR took place shortly before the mediation, whereby directions were provided for Trial, which was due to commence on 21st October 2013. Prior to the PTR, costs estimates were filed by both parties, with the Claimant’s total costs to date shown as £428,329.00, and total estimated future costs of £303,673.96. The Defendant’s incurred costs were shown as £290,000.00, with future estimated costs of £290,000.00. Separate case summaries were also filed by the parties which highlighted that the parties were in dispute regarding almost every head of claim, and it appeared that the matter was going to proceed to Trial, despite the fact the parties were obligated to engage in mediation.
Following the PTR, the Claimant’s Solicitor, identified that the existing staged ATE cover which had been taken out when he had taken over conduct of the claim from previous Solicitors, and had a limit of £50,000.00, was not sufficient. This does appear to be a rather late stage to be making such changes, however eventually increased indemnity was agreed by the provider, which was staged. The premium quoted was £319,315.07 up to 45 days before trial and £533,017.13 within 45 days of trial. Notice was given to the Defendant in Form N251.
The matter was progressed to an assessment hearing, where Regional Costs Judge, District Judge Moss, ordered that the Defendant to pay the Claimant the sum of £82,513.07 for the assessed premium. This would surely be a disappointing decision for any receiving party given the premium that had been claimed.
Despite initially deciding that it was reasonable for the Claimant to ‘top up’ the premium, even at the late stage in proceedings, and also that the level of cover was reasonable, District Judge Moss derogated from this approach after considering the authorities of Rogers v Merthyr Tydfil  EWCA Civ 1134, Kris Motor Spares Ltd v Fox Williams LLP  EWHC 1008, Redwing Construction v Wishart  EWHC 19 (TCC), Kelly v Blackhorse Ltd  EWHC b17 and Hahn v HHS England [unreported], reminding himself that, being a standard basis assessment, the burden of proof was on the Receiving Party and any doubt about the reasonableness of the premium had to be resolved in favour of the Paying Party.
District judge Moss decided that the extent of the additional cover and the amount of the premium took the policy outside of the scope of the ordinary kind of ATE policies and additionally the late stage at which the cover was increased was another feature that took the circumstances of the policy out of the ordinary, and was a relevant factor when considering the reasonableness of the amount of the premium.
It was considered that had the Claimant’s solicitors sought to increase the indemnity when they ought to have realised that £50,000 cover was insufficient then additional cover would have been available on more favourable terms than those that were offered in 2013, and the way the policy was structured meant the defendant had no opportunity to settle before the final stage was reached. Having left it so late, it would have been reasonable for the policy to be re-structured so that the defendant had notice of the increase before it was triggered. The defendant would then have had the opportunity to settle before the premium increased, and the final stage should reasonably have been delayed until after the mediation which was just over a fortnight after notice of the increase was given.
Adjudging that the instructing Solicitor had been overly pessimistic when seeking to increase the indemnity of the policy, and that the underwriter had not given enough weight to Counsel’s advice which had predated the date of increase by some 2 years, the District Judge concluded that, despite the fact he did not have the expertise to assess a reasonable premium in other than broad brush terms, the premium of £533,000.00 was unreasonable and wholly disproportionate to the risk faced by the Insurer, and awarded £82,513.00 as recoverable from the defendant in respect of the policy.
The Claimant appealed against the order and permission was granted in March 2017.
The matter was then heard by Mr Justice Martin Spencer sitting in the Manchester District Registry.
The Claimant’s Submissions
It was argued by the Claimant that at the time the additional insurance was taken out by the Claimant, it was necessary for him to do so in order to protect the Claimant’s position so far as costs were concerned, should the Claimant fail to exceed the amount of the Part 36 offer. We would have to question here whether such late steps to incept an increased premium could have been foreseen earlier and addressed at that point.
A further important point made by Mr Cox on behalf of the Claimant was that, on his submission, the analysis of the District Judge started at the wrong place, by looking at the position of the underwriter rather than the position of the Claimant.
The Defendant’s Submissions
The Defendant relied on the principle that an appeal court should be reluctant to interfere with findings of fact and submitted that, on review, the approach of the District Judge was unimpeachable. It was pointed out that the District Judge had appropriately directed himself and that the extent of the additional cover and the amount of the premium took the second premium outside the scope of the ordinary kind of ATE policies.
Thus, it was submitted that the District Judge was fully entitled to find that, in considering the insurance risk, the underwriter had failed to give proper weight to the only advice from counsel which existed at the time that he made his decision.
Upon hearing submissions for both parties, Mr Spencer decided that there was an important distinction between a case where a Cost Judge decides whether the level of cover is too high and a case such as the present where the suggestion is that the underwriting decision is flawed.
Siding with the Claimant, it was further added that District Judge Moss had set himself up as better placed than the underwriter to identify the financial risk which the insurer faced, and if such a large reduction were to be applied, then directions ought to have been provided for oral evidence to be given on behalf of the ATE provider.
Criticism was also directed towards the District Judge’s failure to correctly apply a broad brush approach to the reductions made to the ATE policy, instead using flawed calculations to reduce the policy. We often receive attempts from the paying party to apply various calculations to reduce a premium which are often considered flawed and would consider it necessary for the same to be addressed by the ATE provider on every case.
It was finally added that “it could be said that the Defendant was treated unfairly in that he was given no opportunity to settle the case (as he did at the mediation) before the additional insurance liability was incurred. Thus, having taken a reasonable approach to the claim at the mediation, he finds himself penalised by an eye-watering premium as part of the costs. However on appeal it was considered that sympathy towards the Defendant was misplaced. The Defendant chose to fight this claim bullishly, indeed arguably aggressively, and gave every indication to the Claimant that he was going to fight the case to trial behind the Part 36 offer. The Defendant chose not to settle this case until a very short time before trial – he could have made an additional Part 36 offer at any time in the years following the abortive JSM in November 2011, but chose not to. Any Defendant who settles late, particularly this late before trial, must know that he thereby significantly increases the costs risk. An experienced Defendant will know that a reasonable Claimant will probably take out additional ATE insurance, and the Notice of Funding dated 10 September 2013 will surely have come as no surprise. Furthermore, the Defendant should have anticipated that the premium would be significant” This is a welcome decision for receiving party representatives who have no choice but to press on with a claim where the Defendant seeks to fervently defend a claim to trial (or very close) but then expresses ‘surprise’ at the amount of costs (including the premium) that are incurred as a result!
As a result the premium was allowed as claimed.
The case highlights the importance the Court’s place on meaningful offers of settlement throughout the litigation process, and emphasises further that early, well judged offers in settlement have a significant effect on the assessment of costs, and not just when they are beaten. We fully endorse the decision of the Courts in this instance, and endorse the fact Defendants should bear the consequences of failure to make ‘sensible’ offers prior to the lead up to a Trial.