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Heron v (1) TNT (UK) Ltd (2) Mackrell Turner Garrett (a Firm), Court of Appeal, 2 May 2013

6 September 2013
The issues

Costs – ATE insurance – non-party costs

The facts

Mr Heron had an accident at work on 5 November 2005. He instructed Mackrell Turner Garrett to act as his solicitors and entered into a conditional fee agreement (CFA). No after the event (ATE) insurance was obtained. Mr Heron could not remember it being discussed. His solicitor said that he had suggested to Mr Heron that it would be worth obtaining a quote. When proceedings were served in March 2006 it was clear that there was no ATE insurance in place. After several twists and turns in the medical evidence and Part 36 offers on both sides, both made and withdrawn, that matter came to trial at the Guilford County Court in March 2011. Over that period Mr Heron had paid an invoice for disbursements to the sum of £11,765.52 plus VAT and he had paid an adverse costs order of £1, 500. Shortly before the trial there had been a final conference with counsel in which Mr Herron was told that he would recover £10,000 at most and probably less. This was in the face of interims to Mr Herron of £17, 700. The solicitors to the insurers had already indicated that an application would be made for a wasted or a non-party costs order. At trial Mr Herron represented himself. Judge Reid awarded him £3,000 and ordered Mr Herron to pay the defendant’s costs from the date of the first Part 36 offer. Costs greatly exceeded the damages. The defendant supplied, under CPR 48.2 to join the claimant solicitors for the purposes of a non-party costs order pursuant to Section 51 of the Senior Courts Act 1981. When the matter came back before the judge the defendant’s application was rejected, the judge finding there wasn’t sufficient evidence in the case to take it outside the ordinary run of cases and justify the order sought by the defendant. The defendant appealed to the Court of Appeal.

The decision

A non-party costs order could be made against legal representatives. Such an order was exceptional. The argument of the defendant amount to having to show that the failure by the claimant solicitors to obtain ATE insurance and their subsequent failure to admit that fact to Mr Herron was sufficient not only to give rise to a breach of duty to him but to in addition to demonstrate that the claimant solicitors had become a real ‘party’ to the litigation, the person with ‘the principle interest’ in its outcome, or that they were acting primarily for their own sake. If that was so, every act of negligence by a solicitor in the conduct of litigation which meant that the opposing party incurred costs which might not have been incurred would be sufficient.

The Court of Appeal did not accept that the law went anything like that far. A solicitor was entitled to act on a CFA for an impecunious client whom they knew or suspected would not be able to pay their own or the other side’s costs if unsuccessful. As far as the other side was concerned, whether the solicitor had negligently failed to obtain ATE insurance to protect his client (as opposed to not being able to obtain such insurance) did not impact on costs they would incur unless it was demonstrably provable that the costs would not have been incurred. That was not the case here. Appeal dismissed.

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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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