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Hawksford Trustees Jersey Ltd v Stella Global UK Ltd and Another, Court of Appeal, 19 July 2012

16 August 2012
The issues

Costs – after the event insurance – ATE insurance – appeals.

The facts

The distinction between separate proceedings in different courts in the same litigation was recognised and was written into the current rules

The claimant succeeded at trial. ATE cover had not then been obtained. The defendant appealed. At that point the claimant obtained ATE cover. The premium was £394,638.00. It far exceeded the other costs of the appeal on both sides. It increased the Respondent’s costs of the appeal by a factor of six. The policy protected the claimant/respondent against having to pay the appellant’s costs of the action and its costs of the appeal were the appeal to have been allowed. When the matter went to appeal the appellant/defendant lost. The ordinary order would have been that the unsuccessful appellant paid the respondent’s costs. They raised however a point as to the recoverability of the premium. The defendant objected on the grounds that Section 29 Access to Justice Act 1999 did not permit recovery of the premium insofar as it related to the costs of the trial because the cover had to be limited to the risk of incurring the liability in the proceedings in which the costs order had been made. In this case the costs order had been made in the appeal proceedings not the trial at first instance.

The decision

Although it would be natural to think of an appeal as arising from and being part of the same proceedings as the trial, it was clear that trial and appeal had been treated as separate proceedings for the purposes of costs. The language of the cases on this point was echoed by the language in Section 29. The distinction between separate proceedings in different courts in the same litigation was recognised and was written into the current rules. This could be seen from CPR 47.1, CPR 47.2 and CPR 36.3(2) which distinguished specifically between the time before proceedings were commenced and appeal proceedings. CPR 36.3(4) distinguished in respect of the consequences of a Part 36 offer between the consequences in relation to the costs of the proceedings in respect of which the offer has been made, and the cost of any appeal from the final decision in those proceedings.

It had been intended by the legislature that the 1999 Act should operate to improve access to justice for claimants with meritorious claims. It was also intended that the system should operate fairly. Part of that fairness related to the defendant having sufficient notice of a funding arrangement. The clear intention was that it was to be regarded as unfair for a defendant to be put in a position where he proceeded with the litigation in ignorance of his potential liability for the increased costs of the claimant’s funding arrangement.

There had been no breach of the relevant provisions in this case because the ATE arrangement had not been entered into for the purposes of the trial, and the party had not been late in giving notice of the ATE premium obtained in connection with the appeal even if that arrangement was only entered into on the virtual eve of the appeal’s original hearing date.

Secondly, the practice direction had not envisaged that an ATE arrangement in relation to the costs of trial would be entered into for the first time for the purposes of an appeal.

Thirdly, the importance of fair notice being given to the other party of a potential liability was entirely undermined if the premium which the respondent sought to recover in the appeal, so far as it related to the costs of trial, could be recoverable. Where in the course of an appeal a defendant learned for the first time of the ATE premium taken out in the appeal embracing cover for the costs of trial, it was too late for the defendant to do anything. It could not concede the claim because it had already fought the trial. In the court’s judgment such a situation was both unfair and antithetical to the purposes of the Section. The word ‘proceedings’ in the court’s judgment in Section 29 should be given its traditional meaning which distinguished between proceedings at trial and on appeal. The risk that the incidence of costs at trial might be changed by the costs order of the appeal court might be a new risk of the appeal but the costs liability and costs order remained those of the trial. The risk insured against was a risk of incurring a liability in the trial proceedings not in the appeal proceedings. It followed that the costs liability in respect of which the premium had been taken out remained a costs liability in the trial proceedings not in the appeal proceedings. The premium cost could be justified only to the extent that it was the price of insuring against the risk of a costs liability in the 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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