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Sirius International Insurance Corporation & Others v ERC Frankona Ruckversicherungs Aktien-Gesellfschaft

21 August 2002
The issues

Costs – proportionality

The facts

This claim had 12 parties. It involved re-insurance protection to the Claimants, the risks attaching after the 1st January 1992. The issues related to the extent of cover provided, the nature of cover and the basis on which cover was made (whether including bodily injury and property damage on a losses occurring or claims made basis). There was a counterclaim.

Master Hurst described the claim “as a simple claim for declaratory relief in respect of a re-insurance contract”. It was likely to exceed 3.5 million US Dollars plus interest.

A Trial on preliminary issues was fixed for 29th October 2001. Just before the start of the Hearing (6 working days) a settlement approach was made by the Defendant and a settlement was finally negotiated 2 working days before the start of the Trial, whereby the Defendant conceded the preliminary issue and abandoned its counterclaim. Costs of nearly £500,000.00 were claimed. The matter went to a preliminary issue on the question of proportionality before Master Hurst.

The decision

1. There was no necessarily reliable link between financial value and total costs incurred.

2. In Lownds -v- The Home Office, Lord Woolf had indicated that costs that were necessary and proper for the attainment of justice should be allowed. If the appropriate conduct of proceedings had made costs necessary, then the requirement of proportionality did not prevent all the costs being recovered, either on an item by item approach on a global approach.

3. The issues in this case had been clearly and quickly ascertained, such that it was possible to refine them into a preliminary issue. The evidence had been limited and the documents few in total. There had been only 4 trial bundles. Counsel’s fees amounted to £25,000.00. The Claimant’s Solicitors claimed a total of just under 1,800 hours for the preparation and perusal of documents alone. Even though the claim is likely to exceed 3.5 million US Dollars, that is not the determining factor. Costs will only be allowed which are proportionate to the matters in issue (Civil Procedure Rules Rule 44.4 (2)(a)). Doubts as to whether costs were reasonably incurred or reasonable and proportionate must be resolved in favour of the paying party (Civil Procedure Rules Rule 44.4(2)(b)). The Bill of Costs as a whole was disproportionate and the Detailed Assessment will be conducted on the basis that reasonable costs will be recovered only for the items necessary if the litigation had been conducted in a proportionate manner.


Master Hurst’s Judgment serves as a useful reinforcement of the decision in Lownds.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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