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Rogers v Merthyr Tydfil County Borough Council, Court of Appeal, 31 July 2006

23 August 2006
The issues

Costs – proportionality – ATE premium – staged premium – procedure to be followed by a Court when assessing reasonableness of an ATE premium in the context of a small personal injury claim.

The facts

The Claimant fell over on the edge of a play area in a local park in Merthyr Tydfil and was cut by glass embedded in the timber edging of the play area. The matter went to Trial on liability and the Defendants were found liable. Damages were subsequently agreed in the sum of £3,105.00 plus interest. Costs were summarily assessed in the sum of £16,821.30 including an ATE premium of £5,103.00 being £4,860.00 premium plus IPT. A 100% success fee was upheld. The Defendant appealed on the issue of costs. On appeal the Judge reduced the costs to £12,628.30, reducing the ATE premium in particular to £900.00. The base profit costs and the 100% success fee were left undisturbed. The ATE product in question had a three stage premium. £450.00 was payable at the outset; a further £900.00 when proceedings were issued; and a further £3,510.00 sixty days before the Trial. The Judge relied on “Litigation Funding”, a magazine, from which he deduced that ATE insurance was available at a cost of between £450.00 and £1,350.00 from a range of companies. The Judge found that nobody conducting litigation reasonably would have agreed to pay a premium of this order if the case did not settle when he could obtain an insurance policy that covered him for the whole of the proceedings for less than was payable at stage two of the policy.

The Claimant appealed.

The Civil Appeals Office, on the instructions of Lord Justice Brooke invited submissions from Allianz Cornhill, Abbey Legal Protection, Brit Insurance Ltd, Lamp Insurance Company Ltd, Temple Legal Protection Ltd, Key Stone Legal Benefits Ltd and the Law Society. Also at the request of Lord Justice Brooke Master Hurst held a Case Management Conference in June and a further Hearing in July, following which he furnished a report for the purposes of the Court of Appeal.

The decision

Three issues arose for decision:-

i) What was the proper approach to proportionality in a small personal injury claim where the ATE premium appeared large in comparison to the amount of damages claimed;
ii) What was the proper approach to evidence of reasonableness in the choice and of the amount of the ATE premium in such cases;
iii) Are both staged premiums and single premiums for ATE insurance legitimate and is it reasonable that such premiums should be wholly or partially block rated?

Proportionality.

If the Court considers that it is necessary to incur a staged premium then it should be a judged proportionate expense. Necessity may be demonstrated by the application of strategic considerations which go beyond the dictates of the particular case and which may include the unavoidable characteristics of the market in insurance of this kind. Once it is concluded that the ATE staged premium was necessarily incurred principle and pragmatism together compel the conclusion that it was a proportionate expense.

Was the ATE premium necessarily incurred?

There is in principle no difference between a two staged success fee and a staged ATE premium. The Court of Appeal has consistently endorsed the merits of a two staged success fee. The situation with regard to an ATE premium for Defendants is no different. Exposure to the greater liability as Trial approaches requires the Defendant to think seriously about the merits of a position before a Trial takes place and this is in accordance with the philosophy of the CPR. On the basis of the evidence collected before the Court of Appeal it was impossible to say that a total premium of £4,860.00 was unreasonable. Indeed it was arguable that it was not fixed at a sufficiently high level to reflect the risk and to provide a contribution to the insurer’s reasonable overheads and profits. It was not legitimate to compare the total premium payable at the third stage of a three stage premium model with a single premium under a single premium model payable throughout the progress of a claim to Trial.

In future, a party who has an ATE insurance policy incorporating two or more staged premiums should tell its opponent that the policy is staged and should set out accurately the trigger moments at which the second or later stages will be reached. If this is done the Defendant’s liability to pay at the second or third stage a higher premium than he would have had to pay if the claim had been settled at the first stage should not prove to be a contentious issue.

As to evidence, it will ordinarily be sufficient for a Claimant’s solicitor to write a brief not for the purposes of the costs assessment explaining how he came to chose the particular ATE product for his client and the basis on which the premium is rated, whether block rated or individually rated.

As Callery v Gray (No. 2) had decided it was permissible and reasonable for the premium itself to be insured by the policy.

An ATE premium may “buy” certain benefits not directly linked with the financial risk faced by the client who takes out the policy. This matter was not before the Court of Appeal in this case. Whether that element of the premium, if it could be identified, that related to those benefits should be chargeable to the unsuccessful Defendant would have to await a further case.

Appeal allowed.

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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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