Churchill Insurance Company Ltd v Fitzgerald & Wilkinson

This is the judgment of the court on issues of costs. The judgment on the appeal was handed down on 24 August 2012 and the order of that date dealt with all outstanding issues apart from costs. The order stated that the parties were to exchange and file written submissions on all costs issues and that the court would deal with those issues on paper. It will be recalled that, after the first appeal to this court, which resulted in the reference to the CJEU, the court ordered that all issues on costs should be reserved.

In Churchill Insurance Co Ltd v Wilkinson, in which the question of the compatibility of section 151(8) of the Road Traffic Act 1988 with the European Directives and case law was raised in the preliminary issue tried by Blair J, Churchill submits that it is entitled to all its costs at all stages because it has won on the appeal from Blair J’s judgment. It therefore asks for the costs of the present appeal, the costs of the reference to the CJEU ordered by this court on the first appeal, the costs of the first appeal to this court and the costs of the preliminary issue before Blair J. Churchill submits that these costs should be paid for by the claimant and should be the subject of detailed assessment if not agreed.

On behalf of Wilkinson it is submitted that Churchill should pay all Wilkinson’s costs of all the proceedings so far.

In Evans v Equity Claims Limited, in which the compatibility issue was not raised (at least not fairly and squarely between the present parties), it is argued on behalf of Evans that she has won her appeal from HHJ Gregory. Evans therefore seeks the costs before HHJ Gregory and all aspects of the appeal, including the costs of the reference to the CJEU. Equity accepts that Evans has “succeeded to a certain extent”, because the order of HHJ Gregory has been varied, but submits that this success is only a qualified one. Equity asks that this court should (i) not interfere with the costs before HHJ Gregory; and (ii) grant Equity a significant proportion of the costs thereafter. Equity argues that the overall result of the first appeal to this court, the reference to the CJEU and the second appeal to this court is that Equity should be regarded as the “successful” party, within CPR Pt 44.3 (2).

The Secretary of State for Transport, Intervener, argues that the Secretary of State should have his costs, to be paid for by the Claimants in each case.

All parties have, in their submissions, pointed out that there have been some changes of position along the course of this litigation. Thus, for example, the claimant insureds point to the fact that (a) the insurers did not advance the “proportionate”  argument until March 2012 and (b) they had opposed the matter going to the CJEU on the first appeal. It is suggested that such changes of position should be reflected in any costs order. However, there are some disputes about precisely what position was being adopted by whom and at what stage.

Under CPR Pt 44.3(2) the general rule is that if the court decides to make an order about costs, then the unsuccessful party will be ordered to pay the costs of the successful party. But the court can make a different order. In deciding what order to make the court must have regard to all the circumstances, including the specific ones mentioned in CPR Pt 44.3(4)(a)-(c).

The first question is, therefore, which party (if any) is to be characterised as the “successful party”.  Before this court on the second round of the appeal,   the insurers have been successful because this court accepted that the insurers’ “construction” of section 151(8) is the one to be preferred.  However,  this may turn out to be a pyrrhic victory because there will have to be an assessment of whether,  in the circumstances of the two individual cases,  the insurers are entitled to make any recovery back from the insured/passenger/victim.  

Having considered all the submissions we have concluded that the correct order on costs in the Churchill v Wilkinson case is as follows:    (i) Churchill will recover from Wilkinson 50% of Churchill’s costs before Blair J. This order is made on the footing that Churchill has successfully overturned Blair J’s order and his construction of section 151(8). However, Churchill has not succeeded entirely because Blair J was correct about the general relevance of the European Directives and case law to the construction of section 151(8)  whereas Churchill had argued that they were not relevant.   (ii) Churchill will pay 50% of Wilkinson’s costs of the first appeal to this court, because it lost its primary argument that the obligation to meet a judgment could be separated from the insurer’s right of recovery; see para 12 of Waller LJ’s judgment.   (iii)  Churchill will pays 50% of Wilkinson’s costs in the CJEU because (although the CJEU did not put it in these terms)  Churchill lost on the argument that section 151(8) was compatible with the Directives. Because the CJEU left the working out of its ruling to the national court,  Wilkinson should not recover all his costs before the CJEU. (iv) With regard to the costs of the second appeal to this court, Wilkinson should pay 50% of Churchill’s costs. It is only 50% for two reasons. First, it does appear that Churchill’s final stance was only adopted in March 2012; and secondly, ultimately Churchill may not recover any sum from Wilkinson under section 151(8).

With regard to the costs in Evans v Equity, the orders will be as follows: (i) the costs order before HHJ Gregory should not be disturbed. This is because the present parties did not argue the present point before him. (ii) The costs of the first appeal to this court, the reference to the CJEU and the second appeal to this court should be the same as for Churchill v Wilkinson.

In all cases the costs will be on the standard basis and they will be subject to a detailed assessment if they cannot be agreed. There will be no question of any attempt of a “net” cost paying party attempting to recover from the Secretary of State the costs that it has had to pay to the other party.

As for the costs of the intervention of the Secretary of State, the submission is that it was the Secretary of State who first argued that section 151(8) could be “read down” so as to be compatible with the European Directives and it was the Secretary of State who first proposed the formulation that has been adopted by this court. Therefore, it is said,  the Secretary of State should have his costs,  which should be paid for by the claimants.   

It is accepted that the Secretary of State’s intervention (both before the CJEU and on the second appeal before us) was very helpful. However, it is now agreed that the legislation, in the form of section 151(8), when read literally is not compatible with the European Directives. That is neither the fault of the claimants nor the insurers. Therefore we think the just result, so far as the Secretary of State’s costs are concerned, is that there should be no order.

The parties must draw up a draft order to reflect the terms of this judgment.