Burgess v J Breheny Contracts Ltd

This case relates to the detailed assessment of the costs payable by the Defendant to the Claimant. The majority of the Claimant’s costs have been agreed by the Defendant. The only items remaining in issue are:

This is an unusual personal injury case which does not fall into any of the standard categories of claim. The brief facts are that in July 2006 the Defendants were instructed by the Environment Agency to carry out excavations for the construction of two lakes. The Claimant’s property in Rainham, Essex backed directly onto the temporary road constructed by the Defendant on the east bank of the River Beam. The work being undertaken was approximately ten metres from the rear of the Claimant’s property.

From July 2006, lorries from the Defendant’s company carried large quantities of ballast and sand from one end of the site to an access point on the A1306 road. Around 50 lorries and trucks per day fully laden with ballast passed the end of the Claimant’s garden. The lorries caused dust to rise when passing and no means of reducing the dust by water on the road surface was used to dampen the surface and therefore reduce the dust. In addition the lorry loads were uncovered causing sand and ballast to escape from them. It was alleged that the sand and ballast had caused dust to be blown into the Claimant’s house and garden and as a result the Claimant suffered breathing problems owing to dust inhalation. Consequently the Claimant claimed that he had sustained breathlessness and congestion caused by dust inhalation. The Claimant was 70 years old at the time of the event which gave rise to his claim and had been a smoker for most of the 50 years which preceded his complaint of restricted breathing. When the Claimant visited his GP in August 2006 complaining of shortness of breath the GP expressed the opinion that the problem had been caused by medication that the Claimant was taking for another condition. The Claimant underwent a lung function test on 3^rd September 2006 which disclosed no evidence of air flow obstruction.

The matter was compromised in the sum of £1,500 damages with costs to be assessed by way of a Part 8 application failing agreement. On 29^th May 2008, District Judge Mullis sitting at Romford County Court ordered that:

The brief chronology of events is as follows:

The Claimant took out after the event insurance with UIA on 13^th July 2007. The policy had a two-stage premium. The base premium was £2,600 plus IPT of £130. An additional sum was payable on allocation but it was conceded that this stage was never reached. The limit of indemnity under the policy was £50,000 on the fast track and £100,000 if the case was allocated to the multi track. The cover included the following:

Mr Doug Christie, a partner in the Claimant’s firm of solicitors provided a witness statement dated 11^th January 2008 dealing with how the Claimant’s solicitors assess insurance premiums with particular reference to industrial disease ATE premiums. At paragraph 6 of his witness statement he says:

“6.

With regard to quantum of the premium our objective since ATE became available has been to ensure that claimants under a CFA have access to insurance provided by reputable suppliers at a reasonable market rate. Our duty to our clients as solicitors is to advise them as to appropriate insurance for their cases. It is part of my responsibility to review insurance products to ensure that our clients are provided with appropriate insurance cover in respect of their claims.”

At paragraph 13 he went on to say:

“13.

It is also important to bear in mind the other risks covered by the insurance with regard to, for example, failure to beat a Part 36 payment, late acceptance of such offers, successful multi defendant cases where adverse costs orders are made etc.

14.

For these reasons, I was impressed that the insurance available with UIA Insurance.

15.

UIA made available an insurance product specifically for our private cases. They had been able to provide an impressive insurance product as it was potentially an attractive option for insurers to have the opportunity to provide insurance in many thousands of private and trade union cases. Having said that, the market for after the event (ATE) insurance has been hard ‘for some time’ such that block purchasing is not necessarily an advantage in these circumstances…. Increases over those years.”

At paragraph 19 he said:

“19.

With these matters in mind the UIA scheme compares favourably to any alternative. The £2,600 premium referred to can be compared to the Law Society premiums of £5,375 (£775) in issued (un-issued) fast track cases respectively.”

The Claimants file of papers disclosed the success fee assessment form dated 5^th January 2007, completed by the Claimant’s solicitors which showed the following:

“State the percentage risk of losing on liability - 35%

Subtotal assessment of risk converted to success fee using Napier Bawdon calculation (i.e. chances of failure divided by chances of success multiplied by 100 equals success fee) – 53%

Then additional risk factors

•

Add percentage for risk on quantum - 5%

•

Add percentage for added risk of multiple defendants - 5%

•

Total success fee before unrecoverable disbursement supplied - 63%

•

Total success fee if case settles more than 24 hours prior to trial - 63%

•

Total success fee if case settles on day of trial - 100%”

The Claimant’s solicitor’s file of papers also disclosed a note signed by the Claimant dated 8^th January 2007 which said:

“I Donald Burgess of 61 Lower Mardyke Avenue, Rainham, Essex, RM30 8PR instruct my solicitors Thompsons to obtain insurance on my behalf to cover my potential liability for the other side’s costs and disbursements in pursuing this compensation claim.

I confirm that I do not have any legal expenses insurance that will cover the costs of pursuing this claim.”

The Defendant’s evidence consisted of a witness statement from Matthew David Hoe, employed as a legal assistant with the Defendant’s solicitors dated 8^th October 2008. The statement supports the second limb of the Defendant’s argument raised in respect of the Claimant’s ATE premium in the points of dispute namely that if the court finds that the premium is recoverable a reduced amount should be allowed. At paragraph 7 of his witness statement Mr Hoe said:

“7.

I have carried out investigations as to the possible availability of ATE insurance in respect of cases where liability has been admitted and the dispute relates to quantum. This included consideration of various reported judgments, consultative material and material published by various companies on the internet. I have not been able to identify ATE policies tailored to cases in which liability has been admitted already. I suggest that lack of availability implies lack of demand.”

He went on to say at paragraph 9:

“9.

ATE policies not tailored to cases where liability had been admitted do appear to be available generally at a premium lower than the £2,600 plus IPT paid by the Claimant.”

At paragraph 11 of his witness statement he said:

“11.

In my work I encounter many claims for ATE premiums. McCullagh and Co. acts for many defendants in detailed assessment proceedings. My file allocation is approximately 175 at any given time. My experience has lead me to believe that the figures for ATE premiums quoted in paragraphs 39, 40, 64 and 68 amongst others of Rogers –v- Merthyr Tydfil [2007] 1 WLR 808 [2006] EWCA Civ at 1134 are representative of the cost of actual policies purchased by many claimants in many cases and therefore offer a reliable source of information to the court as to what is the reasonable market level for the cost of ATE.”

Finally at paragraph 15 he went on to say:

“15.

The premium insures own disbursements and third party costs…. Based on the observations of cases such as Rogers and Smith –v- Interlink Express [2007] EWHC 90095 (Cost) I have considered the level of premium that would correspond. To that total figure a multiplier should be applied to represent the risk that the claimant would face. The notable risk was that the claimant would fail to beat a Part 36 offer, would be liable for the defendant’s costs for a period of the claim and unable to recover his own disbursements for that same period. In light of the fact that liability has been admitted I would commend 5% as an appropriate multiplier following the logic in the judgment of Haines –v- Sarner [2005] EWHC 9009 (Cost). Allowing for a nominal self insurance element and administrative overheads I suggest an allowance of £650 plus IPT would be the maximum reasonable amount to allow.”

The relevant law is:

“Rule 44.4 CPR basis of assessment;

(1)

Where the Court is to assess the amount of costs (whether by a summary or detailed assessment) it will assess those costs;

(a)

On the Standard basis; or

(b)

…

But the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.”

It was common ground that the costs in this case were to be assessed on the standard basis and accordingly Rule 44.4(2) is relevant:

“(2)

Where the amount of costs is to be assessed on the standard basis the court will;

(a)

Only allow costs which are proportionate to the matters in issue; and

(b)

resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party.”

The factors which are to be taken into account in deciding the amount of costs on detailed assessment are set out in Rule 44.5 CPR which I do not propose to repeat at length in this judgment save to say that they have been considered by me.

Of relevance is s. 11 of the Costs Practice Direction which provides:

“Section 11.7 When the court is considering the factors to be taken into account in assessing an additional liability it will have regard to the facts and circumstances as they reasonably appear to the solicitor or counsel when the funding arrangement was entered into and at the time of any variation of the arrangement.”

Also of relevance is s. 11.10 which states:

“11.10

In deciding whether the cost of insurance cover is reasonable relevant factors to be taken into account include:

(1)

…..

(2)

The level and extent of the cover provided;

(3)

…..

(4)

Whether any part of the premium would be rebated in the event of early settlement;

(5)

…..”

The first limb of the Claimant’s submissions related to whether it was reasonable to take out ATE insurance. Mr Ghaly submitted;

The second limb of the Claimant’s submission concerned whether or not the amount of the premium was reasonable. In this regard Mr Ghaly referred me to the judgment of Brooke LJ in Rogers –v- Merthyr Tydfil [2007] 1 WLR 808:

“105.

In this case… If the court concludes that it was necessary to incur the staged premium then as this court’s judgment in Lowndes Case [2002] 1 WLR 2450 shows it should be adjudged a proportionate expense. The necessity here is we think not some absolute litmus test. It may be demonstrated by the application of strategic considerations which travel beyond the dictates of the particular case. Thus it may include as we are persuaded it does the unavoidable characteristics of the market in insurance of this kind. It does so because this very market is integral to means of providing access to justice in civil disputes in what may be called the post legal aid world.”

At paragraph 117 he went on to say:

“117.

If an issue arises about the size of … District Judges and Costs Judges do not as Lord Hoffmann observed in Callery –v- Gray (Nos 1 and 2) [2002] 1 WLR 2000 para 44 have the expertise to judge the reasonableness of a premium except in very broad brush terms and the viability of the ATE market will be in peril if they regard themselves (without the assistance of expert advice) as better qualified than the underwriter to rate the financial risk the insurer faces. Although the Claimant very often does not have to pay the premium himself this does not mean that there are no competitive or other pressures at all in the market. The evidence before this court shows it is not in an insurer’s interest to fix a premium at a level which will attract frequent challenges.”

Mr Ghaly submitted that I should follow the decision of HHJ Inglis in the case of Avril –v- Boultby. In that case the claimant took out an ATE policy in a claim arising out of an RTA. The policy was incepted following a full admission of liability by the defendant. Causation was not an issue.

At paragraph 11 of his judgment HHJ Inglis said:

“11.

A substantial part of the Judge’s reasoning… risks of adverse costs order always exists, for instance on an application to admit expert evidence. That risk was probably modest. The risk of not recovering disbursements is real and will be realised if there are adverse costs orders or a failure to beat a Part 36 offer. The most obvious risk is the failure to beat a Part 36 offer which may give rise to liability both for the opposing party’s costs and the paying party’s costs or at least where there is a CFA, disbursements. Particularly in a case of this type not beating such an offer might have the result in the value of the claim being diminished or even obliterated. That risk is real. It could not sensibly be insured against at a later stage after the offer has been made and rejected. It is not surprising that the defendant before the District Judge and in the written skeleton on appeal wished to argue that it is wrong in principle for a receiving party to be able to insure in a case like this against the consequences of his own misjudgement at the paying party’s expense. That was an argument, though that was, it seems to me, rejected in Callery –v- Gray”

For the Defendant it was submitted that it was unreasonable to enter into the ATE policy when the Claimant did so. Without medical evidence of injury the Claimant had no claim to pursue even with the admission of liability. His position as at 13^th July 2007 was that he was at no risk of paying the Defendant’s costs because no proceedings had been brought and he was at no risk of paying his solicitor’s costs as they had agreed to act on a CFA. His only risk was to pay the doctor’s fee if the doctor’s opinion was unfavourable and the case was droppped. Dr Beccles fee was £910. Mr Edwards submitted what would a reasonable claimant do at this point? Does he incur a premium of £2,730 when he faces a risk of losing £910 or does be say “no that is an unreasonable amount to pay now I will wait and see what the medical report says”? I was submitted by the Defendant that no reasonable claimant would lay out £2,730 against a risk of paying £910. Further, by sending the report to the Defendant and inviting proposals to settle, he incurs no extra risk of paying costs. It is only when the Defendant disputes the claim that it would become reasonable to incur a premium of this size. It was submitted that there was no evidence to explain why, when the Claimant had seen Dr Beccles and was waiting for the report a decision was taken to incur a premium of £2,730. In the light of the large amount involved, when compared with the sum claimed and the costs then at risk, an explanation is called for and without one it was submitted the court cannot say that the premium was reasonably incurred.

In relation to the amount of the premium Mr Edwards referred me to paragraph 65 of the Rogers judgment and submitted that it was for the Claimant to explain why the policy was so out of step with the premiums referred to therein. He submitted that policies issued with premiums stepped to coincide with stages in the proceedings, in particular the stage before issue, result in far lower premiums being payable where cases settle before issue. He submitted that the Claimants should have to justify a premium greater than £850 plus IPT.

Turning to the issue of the bill of costs the Defendant in its Points of Dispute contend that it was unreasonable and disproportionate to prepare a Bill for the assessment of the one item in dispute namely the ATE premium. In the circumstances they contend that a formal Bill could have been dispensed with and that I should therefore disallow the costs of preparing the Bill in the sum of £104.90 and the consequent success fee claimed at item 3 of £65.56 representing a 62.5% success fee which mirrors the success fee claimed in the CFA. In his submissions to me Mr Edwards suggested that if I were to allow the item for preparing the Bill bearing in mind that liability had been conceded prior to the inception of the ATE policy a more modest success fee of 20% would be appropriate.

The Claimant in his Replies prays in aid the provisions of CPR requiring a Bill to be served in order to recover costs and that the narrative in the Bill informs the Court about the background to the claim. They submit that the success fee is not in contention having been agreed prior to the service of the Bill.

In my judgment it was reasonable for the Claimant to take out after the event insurance. Section 11.7 CPD requires me to have:

“Regard to the facts and circumstances as they reasonably appeared to the solicitor when [my emphasis] the insurance was entered into.”

I cannot look at the inception of the ATE policy with the benefit of hindsight. At the time the ATE policy was taken out on 13^th July 2007 the Defendant insurer had admitted primary liability although causation was in issue. The Claimant had already entered into a CFA on 20^th March 2007. In my judgment at the time the policy was entered into there were a number of risks against which it was proper to insure namely:

At the time the after the event insurance policy was entered into these were real risks faced by the Claimant. They were not illusory nor fanciful. In the circumstances I prefer the submissions made to me by Mr Ghaly concerning the reasonableness of the Claimant taking out the after the event insurance policy when he did. I concur with the judgment off HHJ Inglis in Avril –v- Boultby at paragraph 11.

The second issue that arises for determination on the basis that I have found it reasonable to take out the ATE insurance policy is whether the amount of the premium is reasonable. In my view, at first blush a premium of £2,600 plus IPT when set against damages of £1,500 appears disproportionate. The premium alone is almost twice the damages recovered and appears to fly in the face of Rule 44.4(2) and the test that I am required to apply following the judgment of Woolf MR in the case of Lowndes.

I had evidence from Mr Christie a partner in the Claimant’s solicitors who set out in clear terms his reasons for recommending the UIA scheme in the context of this type of litigation. I accept his evidence. Conversely the evidence of Mr Hoe for the Defendant failed to adduce any evidence of the level of premiums in disease cases. Furthermore his witness statement failed to demonstrate that any reduction in premium resulting from an unqualified admission of liability is any more than slight. Whilst the premium claimed is high in my view, I have concluded in the words of Brooke LJ at paragraph 117 of the Rogers case that I do not have the expertise to judge the reasonableness of a premium except in very broad brush terms. I bear in mind his comments that the very viability of the ATE market will be imperilled if I were to regard myself (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces. Faced with that very firm judgment of the Court of Appeal and whilst I accept that on the face of it the premium is high, I do not intend to interfere or to attempt to judge the reasonableness of that premium. In those circumstances I have formed the view that it was reasonable for the Claimant to take out after the event insurance cover when he did. I allow the amount of the premium in full.

In relation to the Bill of costs and success fee the overriding objective at CPR Rule 1.1(2)(b) deals with “saving expense”. In my judgment there was no need for the Claimant to prepare a Bill of costs dealing with just one item. The parties had agreed that the only dispute related to the ATE policy. On transfer from the County Court application could and should have been made to me simply to determine the one outstanding issue between the parties and for permission to dispense with a Bill. The preparation of the Bill and the consequent success fee element are in my judgment disproportionate to the only issue at stake. Accordingly item 2 will be disallowed and it therefore follows that item 3 must also be disallowed.

Accordingly in relation to the Claimant’s bill of costs:

In relation to the costs of this assessment I order that the Defendant do pay the Claimant’s costs. The Claimant has provided a schedule of costs and I have the benefit of written submissions from the Defendant which I have taken into account. Accordingly I propose to summarily assess the Claimants costs of detailed assessment in the sum of £2852.25. In doing so I have reduced the solicitors hourly rate to £110 and £116 per hour, allowed a success fee of 20% and reduced Counsels fees to £1250.00. I have applied VAT at 15%.

The Defendants seek permission to appeal and have provided me with written submissions. In the circumstances I grant permission to appeal but do not support any appeal being advanced to the Court of Appeal. I am also requested to stay enforcement of my Order which I do for a period of three months from the date of this judgment.

Liberty to apply as to the implementation of this order.