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Accident Group Test Cases, Sharratt v London Central Bus Company, Court of Appeal, 20 May 2004

27 May 2004
The issues

Costs – The Accident Group (TAG) – The Premium – Proportionality

The facts

The latest instalment in the litigation relating to The Accident Group Limited (TAG). Senior Costs Judge had been asked to determine how much of the premium charged by TAG to the client was premium in respect of the risk referred to in Section 29 of the Access to Justice Act 1999; and also whether the fee paid to AIL (Accident Investigation Limited – a sister company of TAG which received a fixed fee of £310.00 + VAT for each case referred to it) was recoverable from the paying party as a disbursement; and whether the amount of the premium once properly calculated was chargeable to the paying party as reasonable and proportionate under CPR 44.4.

The Claimants appealed.

The decision

The Senior Costs Judge had adopted a “deconstructionist approach” to the calculation of the premium. He had started with the sums paid over to underwriters and from those he deducted sums or percentages attributable to risks that did not fall within Section 29. He had then added back commissions paid by the underwriter (except to be a proper element in the premium) and also a sum in respect of “cost of insurance services”. The Senior Costs Judge’s approach was not wrong in principal and indeed was inevitable and the Court of Appeal would proceed on the same basis.

i) The LEAP Issue

TAG had in 2002 made an extra allocation to the Lloyds Syndicate from client fees paid in 2002 of £150.00 per new policy to offset losses suffered by the syndicate on the 2000 year. TAG argued that this amount should be allocated among the policies for 2000 and so lead to an increase in recoverable premiums for those years. The Costs Judge was right to have rejected this argument. The question for him was what premium had been paid by the client who was the recovering party at the costs application and no client for the year had paid a penny more for his insurance because of LEAP.

ii) Cost of Insurance Services

There had been no cross appeal against the Senior Costs Judge’s decision that an allowance should in principal be made under this head. However the Court had considerable doubts on that point. As had been pointed out in the Claims Direct litigation the obligation which the insurer undertook under the contract of insurance was to provide an indemnity and not to provide continuing insurance services. Three points followed from this, namely that the services were provided to the Claimant as well as the insurer; that to the extent that the services were provided to the insurer the cost of them was an expense of the insurer’s business; and thirdly if these expenses could be attributed to the premium under the policy it was unclear how that element in the premium related to the Section 29 risk. However, it was unnecessary to pursue these matters further. In the absence of any evidence on which the Costs Judge could properly act he had no alternative before him to the £30.00 attributed to similar services in the Claims Direct decision.

iii) Reasonableness and Proportionality

The Senior Costs Judge had produced the figure initially arrived at of £608.00 to £525.00 in respect of the premium for the Lloyds year 2001. He did so on the basis of proportionality. The approach of the Senior Costs Judge could not be faulted. He had applied the 5% uplift envisaged in Halloran v Delaney which was at the time of his decision the “going rate”. A percentage uplift meant nothing without reference to the nature of the figure to which the percentage was to be applied.

All the calculations did no more than demonstrate that a broad Judgment such as that conferred on the Costs Judge by CPR 44.4 could not be exercised with mathematical nicety.

iv) AIL

The Senior Costs Judge had found that the AIL fee was a referral fee. He was justified in so doing. The factors pointing in that direction were as follows: –

a) The fee was compulsory for any solicitor wishing to be sent cases by TAG;
b) The amount of the fee was standard in all cases;
c) In the case before the Court the amount of the fee far outstripped any reasonable charge for work done or purportedly done and in common sense must have included a referral element;
d) The very large fee was payable to a sister company of the introducer.

If the AIL fee had not been a referral fee it could only be charged to the paying party if the costs for which the client was responsible or a disbursement made on his behalf. The senior Costs Judge had found that the payment could not have been a disbursement because the work to which it related was completed before the solicitor’s retainer came into existence. He had been right so to find.

Appeal dismissed and Senior Costs Judge’s decision upheld in respect of all grounds of appeal.

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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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