Parker v Seixo

The Claimant’s bill of costs sets out the background as follows:

“The Claimant sustained injuries and consequential losses arising out of an accident which occurred on 23 August 2004 whilst visiting a petrol station in Streatham Hill.

The Defendant negligently reversed his vehicle into the Claimant knocking him to the floor. As a result the Claimant suffered a fractured leg which required surgery and included the insertion of metalwork.

Funded by way of an After-The-Event insurance policy issued by Keystone on 13 October 2004, the Claimant instructed legal representation. Liability was admitted without delay and the Claimant proceeded to obtain medical evidence. The Claimant’s injuries were complex and further surgery was required. Proceedings were issued and served in order to protect the Claimant’s claim from becoming statute barred.

The parties were initially unable to agree quantum of damages and the matter proceeded towards a quantum of damages trial which had been set for 20 October 2008. On 9 September 2008 the parties reached agreement in respect of quantum and the trial set for 20 October 2008 was vacated.

Damages were agreed at £120,000 with the Defendant paying the Claimant’s costs to be assessed in default of agreement.

The parties have been able to agree the Claimant’s base costs [£30,708.82 including VAT] but the Additional Liability (After-The-Event Insurance Premium) remains in dispute.

The Keystone Insurance Policy provided the Claimant with both own solicitors costs and disbursements cover [this has now been agreed – see the Witness Statements of Mr Christopher James Marden and Mr Julian David Oldfield dated 14 January 2010 and the Defendant’s Supplementary Submissions dated 19 January 2010] and also Adverse Costs and Disbursements Cover. This enabled the claim to be conducted without the need for a CFA and Success Fee. The Keystone policy is individually assessed and underwritten and it incorporates a staged approach to reflect the Claimant’s exposure to risk at any given time. The premium is calculated on the basis of bespoke individual risk underwriting.”

The full relevant chronology is as follows:

The Claimant’s letter notifying the Defendant of the ATE policy and the premium stages dated 26 January 2007 says:

“In accordance with the Access to Justice Act, we put you on notice that the Claimant additionally seeks to recover their Legal Expenses Insurance Premium Tax and any applicable interest. The details are as follows:

Insurance			:	Europ Assistance Insurance Ltd
Cover			:	Own and adverse costs and disbursements
Cost effective from			:	Midday 13.10.2004
Limit of Indemnity			:	£50,000.00
Premium Stages			:
Stage 1	-	Inception to service of Defence or Judgement in Default
Stage 2	-	Service of Defence until 28 days pre-trial
Stage 3	-	From 28 days pre trial to Trial. The Trial Premium will be rebateable by 75% if the case settles prior to commencement of the Hearing.
Stage 4	-	In the event of Part 8 Costs Proceedings.

Yours faithfully

Bakers Personal Injury Solicitors”

The Defendant’s Points of Dispute and the Claimant’s Replies in so far as they relate to the ATE Insurance Premiums are as follows:

The Claimant’s “brief note” explaining how he came to choose the Keystone ATE policy states:

“Following the guidance of the Court of Appeal on paragraph 117 of Rogers v Merthyr Tydfil County Borough Council, the reasons why the Keystone policy was endorsed are as follows:

A)

Keystone are a reputable and established provider of ATE insurance. They launched their own ATE scheme several months before the Law Society’s “Accident Line Protect” product. The policy is individually rated. They generally underwrite all categories of personal injury litigation. They have developed a significant market position in underwriting cases that are perceived as difficult, or that have been rejected by other ATE providers. It was important to recommend an ATE provider in which both the Claimant and his solicitor could have confidence.

B)

The policy has an adequate level of indemnity.

C)

Premiums are deferred and the client is not required to take out any loan or interest.

D)

Keystone provide an efficient and helpful service, particularly where decisions need to be made during the currency of a case. They adopt a flexible approach.

E)

There is no application fee payable.

F)

Keystone do not impose rigorous reporting controls.

G)

Unlike most other ATE Policies, Barristers fees are covered.

Dated this 1^st day of May 2009

Signed Bakers Solicitors

Solicitors for the Claimant.”

At the hearing of the detailed assessment the Claimant was represented by Mr Robert Marven and the Defendant by Mr Jamie Carpenter. I am grateful to them for their written submissions and for their submissions at the hearing.

Mr Carpenter submitted that the Court of Appeal in paragraph 117 of Rogers did not rule out the disallowance of part of an ATE premium. The court said that it would ordinarily be sufficient for a claimant’s solicitor to write a “brief note” explaining how he came to choose the particular ATE product for his client and that District Judges and Costs Judges do not have the expertise to judge the reasonableness of a premium except in very broad brush terms.

He submitted that this observation simply reflects the fact that Costs Judges do not possess the expertise to decide to a nicety whether a premium is reasonable, but it is not intended to make ATE insurers the sole arbiters of what is a reasonable premium. If a premium is obviously unreasonable, because it bears no relationship to the insurer’s risk or because an individually assessed premium has been assessed on the basis of wrong information from the solicitors, then the Costs Judge is entitled to – and should – disallow it on assessment.

He pointed out that the Court in Rogers itself conducted a broad brush cross check (at [109] – [110]) and in Smith v Interlink Express Parcels Ltd [2007] EWHC 90095 (Costs) the Senior Costs Judge reduced the first stage premium under a Temple policy on the basis that the premium seemed to be too high given the likely exposure and risk at that stage. Further, he submitted that the Court in Rogers did not address a particular feature which arises in this case, namely that liability was admitted at the first opportunity and yet the premium continued to be payable as if liability was in dispute. Furthermore the level of indemnity (£50,000.00) was inadequate to cover both sides’ costs had the matter proceeded to trial on liability. The total of both sides’ estimates of costs to trial was a little under £67,000.00. Even allowing for a reduction in the Defendant’s costs on assessment, that would have left a shortfall of around £15,000.00. Had liability been disputed with the Defendant’s costs commensurately higher – the shortfall would have been even larger. Quite conceivably it would not have covered the Claimant’s profit costs at all.

Mr Carpenter referred to paragraph [107] of the Court’s judgment in Rogers. The Court’s support for staged premiums was, he submitted, predicated on the fact that they gave an incentive to a defendant to admit liability at an early stage, thus justifying the fact that the later stages of the premium would generally exceed a one stage premium payable at the outset. This rationale was wholly negated if the defendant has to pay the entire premium, despite having admitted liability at the earliest possible opportunity. He submitted that such a result would be perverse and that a staged premium is per se unreasonable if it makes no allowance at a subsequent stage for the fact that liability had been admitted before that stage is reached Each stage of the premium must reflect the actual risks pertaining at the time.

He referred to the examples of ATE policies mentioned by the Court in Rogers. He said that it was striking that, whereas in those policies the Stage 2 premium is generally around twice the Stage 1 premium, in this case it was 17 times, in a case in which liability had been admitted. He said that there is no explanation for that astonishing disparity. He submitted that either the approach to rating was unreasonable or it was based on information from the Claimant’s solicitors which bore no relationship to reality.

Mr Carpenter referred to the risks faced by the Claimant in this case. He submitted that the total conceivable loss referable to Stage 2 was both sides’ costs between the defence and 28 days before trial. From the Claimant’s listing questionnaire estimate, this seemed to have been about £30,000.00. From the Defendant’s equivalent, this seemed to have been about £14,000, so the maximum potential loss was around £44,000.00.

However, this loss could only occur if the claim failed completely during Stage 2, ie, if the Claimant simply abandoned the litigation. Given the admission of liability, the likely value of the claim and the fact that the Claimant had received interim payments of £14,000.00 which would have to be repaid if he gave up the litigation, the chance of this happening was infinitessimal.

The only other way the Claimant’s insurer could incur a loss in Stage 2 was if the Defendant made a Part 36 offer which the Claimant rejected and later sought to accept out of time. The chance of this happening was very small – he submitted no more than 5%. In those circumstances the amount of the loss would be the Claimant’s disbursements and the Defendant’s total costs during Stage 2, around £17,500.00 in total (£14,000.00 for the Defendant and £3,500.00 for the Claimant). He submitted that if the reasonable premium was calculated in accordance with the evidence given in Rogers and applied by the Senior Costs Judge in Smith it would be £1,447.00, ie (£17,500.00 x 5%) + 25% (for overheads) + 5% (to self-insure the premium) + 5% (IPT).

Mr Carpenter referred to the evidence in the Jackson Review of Civil Litigation Costs Preliminary Report of the number of personal injury claims that fail between issue of proceedings and trial. He submitted that regard should be had to that evidence if the Claimant’s insurer was entitled to rate the premium at the outset without reference to the fact that liability might be admitted. The figures provided by an insurer with 8% of the market in RTA, EL and PL claims (at paras 2.1 onwards) showed:

He submitted that this data clearly demonstrates the following:

Mr Carpenter submitted that there was therefore effectively no chance that the insurer would incur a liability for the Defendant’s costs during Stage 2 and there was a 4% chance that the insurer would incur a liability for the Claimant’s own costs. A reasonable premium calculated on this basis would be (£30,000 x 4%) + 25% + 4% + 5% = £1,965. Even if 50% were allowed for overheads (as per Temple’s and Keystone’s evidence in Rogers (see paragraph 73 of the judgment) the Stage 2 premiums would be £1,736 and £2,358 respectively.

In the circumstances he submitted that the Defendant’s proposal of a total premium of £3,600 representing £551.25 in Stage 1 and £3,048.75 in Stage 2 (made in the Points of Dispute) was more than reasonable.

Alternatively, he submitted, the court must have regard to the costs that would have been incurred had an adverse costs only premium been taken out and used in conjunction with a CFA (see Section 11.10(1) of the Costs Practice Direction). The fixed success fee would have been £3,162.50 including VAT. A Temple policy (see Rogers at paragraph 64) for a multi-track road traffic accident would have been available for £650 + £1,100 + 5% IPT = £1,837.50 making a total of £5,000. This was about half of the premium claimed in this case.

In his supplementary submissions dated 19 January 2010 Mr Carpenter conceded that the Claimant’s ATE policy was properly to be considered a “both sides” policy in that it provides cover for the Claimant’s own profit costs and disbursements if a Part 36 offer is not beaten. However he submitted that this does not affect the Defendant’s case in relation to the quantum of the premium. The points made at paragraphs 15 to 18 above still held good. The figure of 5% mentioned in paragraph 14 above was probably an over estimate. If the calculations referred to in paragraphs 12 to 14 above were reworked using that 5% chance, taking into account the potential liability for the Claimant’s own profit costs, the reasonable Stage 2 premium would still have been only £3,638.25 including IPT with 25% overheads or £4,365.90 with 50% overheads.

Mr Carpenter submitted that the point made at paragraph 11 above still remained unexplained. Why is the Stage 2 premium 17 times the Stage 1 premium? If there is double the exposure, one would expect a Stage 2 both sides premium in general to be double the cost of a single sided Stage 2 premium. The Stage 2 premium from Temple for precisely this sort of claim (multi track road traffic accident) would have been £1,100 (see Rogers at paragraph 64). Why was this premium more than eight times the cost of that one?

Mr Marven for the Claimant referred to paragraph 117 of Rogers (see the Claimant’s Replies set out under the heading “Assessing the Risk” in paragraph 4 above). He also referred to the note for the purposes of the costs assessment set out in paragraph 3 above. He said that, in summary, the note explains that: Keystone are a reputable and established ATE insurer; the premium is individually rated; the indemnity is adequate; and the policy has various other advantages. In short, he said that it was plain that the Claimant’s Solicitors had acted responsibly in procuring insurance with Keystone.

He submitted that the Defendant was plainly wrong in asserting that unless the insurers disclose their methodology in respect of the premium the court cannot assess that premium. He said that the Defendant was in effect inviting the court to embark on precisely the task which the Court of Appeal said in Rogers should be eschewed by Costs Judges. It was not the task of Costs Judges to second-guess an experienced underwriter.

He referred to Section 11.10(1) of the Costs Practice Direction which invites comparison between the cost of the ATE premium claimed and the costs that would have been incurred if a policy that covered only the other side’s costs had been taken out, along with a CFA which provided for a success fee. The Defendant had asserted that by comparison with a notional “single sided premium” the premium claimed here seemed excessive. Mr Marven submitted that the court should be wary of embarking on a detailed comparison with other premiums and policies (see paragraph 117 of Rogers).

He said that, conspicuously, the Defendant had not attempted to adduce any expert evidence to make good his complaint despite the fact that his insurers had access to all costs estimates together with final amounts claimed. He submitted that the Defendant’s insurers (who were Norwich Union who also insured the Claimant) must have had sufficient resources and expertise to procure such evidence if they had wanted to do so.

Mr Marven denied that the premium claimed by the Claimant was disproportionate. He referred to paragraph 105 of Rogers and submitted that it was necessary here, in the sense of the word used in Rogers to incur a staged premium.

Mr Marven said that the Defendant’s initial offer of £75,000 on 6 November 2007 (see paragraph 2 above) put the Claimant at immediate risk. On 20 November 2007 the Defence was served admitting liability. However the Defence is a robust one and defends the claim both on causation and quantum. The Defendant obtained a Surveillance Report from CSB Surveillance Investigations in December 2007.

He said that the Stage 2 premium had not been fixed when the ATE policy was taken out on 13 October 2004. By the time the Stage 2 premium became payable on 20 November 2007 there had been both a serious offer of settlement by the Defendant and a serious Defence on causation and quantum.

Mr Marven submitted that under the Temple and DAS policies referred to in Rogers Stage 3 would have been reached by the time this case had settled and so a higher premium would have been payable if one of those policies had been taken up. Further there was no evidence of any policy which the Claimant could have purchased at a lower cost in a high value multi-track road traffic act case. Rogers was a low value fast track public liability case and not comparable to this case, where more expert evidence and court management was involved.

He further submitted that it was wrong to try to extrapolate figures from other cases and policies which were so different. The reference to the ratio between Stage 1 and Stage 2 was for that reason unhelpful. It could equally be said that the Stage 1 premium was strikingly low and the Stage 2 premium was strikingly high for perfectly good reasons. There was no evidence that another policy would have been cheaper.

Mr Marven referred to the evidence in the Jackson Preliminary Report (see paragraph 15 above). He said that this was unhelpful and referred me to the judgment of Hoffmann J (as he then was) in Land Securities Plc v Westminster City Council [1993] 1 WLR 286 where he said (at 288 at F):

“In principle the judgment, verdict or award of another tribunal is not admissible evidence to prove a fact in issue or a fact relevant to the issue in other proceedings between different parties.”

Mr Marven also referred me to the Defendant’s assertion that the limit of indemnity of £50,000 in this case was too low and that the policy was consequently inadequate to cover the Claimant’s own costs. He said that there was no reason to suppose that the Claimant would not have arranged for the limit of indemnity to be increased if a Stage 3 premium had to be taken up.

In my judgment the Defendant’s submissions are misconceived. This is not a case where the court should (without the assistance of expert evidence) regard itself as better qualified than the underwriter to rate the financial risk the insurer faced. The judgment of the Senior Costs Judge in Smith relates to costs only proceedings where (in an employment liability case) the damages were agreed at £1,700. Nothing, it seems to me, could be further removed from the facts of this case. Similarly the premiums referred to in Rogers were block rated in respect of situations very far removed from this case which is a high value multi-track claim where the premiums are individually rated and staged (quite properly).

The Claimant’s Solicitors Response to the Defendant’s Supplementary Submissions make the perfectly valid point that the Claimant’s risk of succeeding or failing to beat the Defendant’s offer of £75,000 during Stage 2 was finely balanced because the Claimant was still undergoing medical treatment and medical investigations when the offer was made and when the second stage premium was calculated.

In my judgment, the premiums should be allowed as claimed.