Callery v Gray (No. 2)
| Jurisdiction | England & Wales |
| Judge | Lord Phillips MR,LORD PHILLIPS M.R. |
| Judgment Date | 31 July 2001 |
| Neutral Citation | [2001] EWCA Civ 1246 |
| Docket Number | Case No: B3/2000/0540 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 2001 |
[2001] EWCA Civ 1246
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHESTER COUNTY COURT
His Honour Judge Edwards
District Judge Wallace
Royal Courts of Justice
Strand, London, WC2A 2LL
COURT OF APPEAL
ON APPEAL FROM THE CHESTER COUNTY COURT
Lord Phillips M.R.
Lord Justice Brooke
Case No: B3/2000/0540
Case No. 2001/0540/33
MC002977
Peter Birts, QC and David Holland (instructed by Beachcroft Wansbroughs for the Appellant)
Geoffrey Nice, QC and Nicholas Bacon (instructed by Amelans for the Respondent)
Representations by Other Interested Parties: Allan Gore (instructed by Pattinson & Brewer for the Association of Personal Injury Lawyers)
John Leighton Williams QC (instructed by Barlow Lyde & Gilbert for the Association of British Insurers)
Timothy Dutton QC (instructed by Rowe Cohen on behalf of the After Event Insurers' Group Forum)
William Norris QC (instructed by Colman Coyle on behalf of Claims Direct Ltd)
Cyrus Katrak (instructed by Andrew Gardner Partnership on behalf of Motor Accident Solicitors Society)
Carine Patry (instructed by Anthony Brooks of The Law Society)
Summary
(This summary does not form part of the judgment)
In its first judgment on this appeal the Court of Appeal (Lord Woolf CJ, Lord Phillips MR and Brooke LJ) explained why they were not then able to deal with one issue in the appeal. This related to the reasonableness of the "after the event" insurance premium of £350. The court had invited Master O'Hare, a costs judge, to inquire into the make up of premiums of this kind. His inquiry revealed that there were disputes between the various parties about the recoverability of certain elements of such premiums. For convenience, his report has been annexed to this judgment, subject to a warning as to its status (see para 4). In Lord Woolf's absence on official business the court reconstituted itself as a two-judge court to determine these disputes before the end of the current legal term.
In this judgment the court has held that the words "insurance against the risk of incurring a costs liability" in section 29 of the Access to Justice Act 1999 mean "insurance against the risk of incurring a costs liability that cannot be passed on to the opposing party" (see para 59). The court is satisfied that this interpretation accords with Parliament's legislative intention and with the overall scheme for the funding of legal costs (see para 60). In Mr Callery's case the whole of the cover, including the small element of cover for "own costs insurance" could be regarded as falling within the description of insurance against the risk of liability within section 29 (see para 61) and the premium of £350 was reasonable (see paras 70 and 73).
In relation to other policies the circumstances in which and the terms on which "own costs" cover will be reasonable, so that the whole premium can be recovered as costs, will have to be determined by the courts when dealing with individual cases, assisted, if appropriate, by the Rules Committee (para 61). Other issues mentioned in Master O'Hare's report will fall to be judicially determined as and when they arise in individual cases. The Court of Appeal is anxious that issues of general importance shall be brought before it for authoritative determination as quickly as possible and will give expedition to cases that raise such issues (para 4).
INDEX
| Paragraph | |
| Introduction | 1-3 |
| The status of Master O'Hare's report | 4-5 |
| The statutory framework | 6-10 |
| The test of what is reasonable | 11-17 |
| The terms of the ATE cover | 18-19 |
| Issues identified by Master O'Hare | 20 |
| Costs and expenses | 21 |
| The burning cost | 22-23 |
| Risk/Profit cost | 24 |
| Administrative costs | 25 |
| Distribution commission | 26 |
| Benefits | 27 |
| Costs awarded by the court to the opposing party | 28-31 |
| Collateral benefits | 32-33 |
| Own costs cover | 34-47 |
| Parliamentary material | 48-54 |
| The overall scheme | 55-57 |
| The Civil Procedure Rules and the Practice Direction | 58-62 |
| The cost of the premium | 63 |
| Deferred payment of the premium | 64-65 |
| The effect of BTE insurance | 66 |
| Is £350 too much? | 67-73 |
This is the judgment of the Court.
Introduction.
On 17 July this Court, presided over by the Lord Chief Justice, gave judgment in this Action and in Russell v. Pal PaK Corrugated Ltd. Each was an appeal against an order for costs made in costs-only proceedings pursuant to CPR 44.12A. The two appeals were heard together as they raised common issues. Those issues arose out of challenges made by the defendant in each action to the recovery of uplift under a conditional fee arrangement (CFA) and, in this Action, to the recovery by way of costs of the premium for an after the event (ATE) insurance policy.
In that judgment the Court ruled that there was jurisdiction, under section 29 of the Access to Justice Act 1999, to include in an award of costs made under CPR 44.12A an insurance premium paid in respect of contemplated proceedings notwithstanding that the claim was subsequently settled before those proceedings were initiated. The Court also ruled that, in principle, in a case such as this it is reasonable for a claimant to take out ATE cover at an early stage of the proceedings and before it is known whether the defendant is contesting the claim.
In issue in this appeal was whether the amount of the ATE premium, that is to say £350, was reasonable. The Court did not consider that it had sufficient information about ATE insurance to rule on that issue. Accordingly it directed that Master O'Hare should, after considering submissions and evidence submitted on behalf of the parties and others with an interest in the issues raised, submit a report to the Court. Master O'Hare has now submitted that report, dated 23 July 2OO1. That report raises issues of general importance in relation to ATE insurance which need to be determined as quickly as possible. For that reason this Court has reconstituted, in the absence of the Lord Chief Justice on official duties, in order to give judgment before the end of term.
The status of Master O'Hare's report.
Master O'Hare's report has been provided to the parties and is thus in the public domain. We have decided to annexe it to this judgment but must emphasise that, by doing so, we do not confer upon it a status which it does not, in law, enjoy. In the course of his report Master O'Hare has identified a number of issues of principle. He has expressed a provisional view in relation to the answer to some of those issues. His views may prove of assistance to those faced with the task of ruling on the recoverability of ATE premiums, but they cannot be treated as definitive. The issues will fall to be judicially determined as and when they arise in individual cases. This Court is anxious that issues of general importance should be brought before it for authoritative determination as quickly as possible and will give expedition to cases that raise such issues. The hearing of this appeal exemplifies that policy.
In the present appeal we propose to address only those issues identified by Master O'Hare which arise on the facts of this case. It would not accord with the interests of justice to express views on other issues without hearing detailed argument on behalf of those directly affected by them in the context of the facts that raise those issues. We shall, in the course of our judgment, identify some of the issues which are not raised by the facts of this case and which remain to be resolved. The principal issue raised by this appeal is whether the cost of insuring against failure to recover ones own costs can be recovered under section 29 of the Access to Justice Act 1999. The statutory framework
The jurisdiction to include in an award of costs an ATE insurance premium is conferred by section 29 of the Access to Justice Act 1999, which provides:
"Recovery of insurance premiums by way of costs
Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in those proceedings, the costs payable to him may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy."
The phrase 'a liability in those proceedings' is imprecise. It does not define the nature of the liability. That the liability is restricted to liability in respect of legal costs is not, however, in issue or in doubt. That restriction can be clearly identified from Parliamentary material admissible under the principle in Pepper v Hart [1993] AC 593. It is also apparent from the rules of Court, subject to which section 29 expressly takes effect.
CPR 43.2, which sets out definitions, provides:
"(k) 'funding arrangement' means an arrangement where a person has -
(ii) taken out an insurance policy to which section 29 of the Access to Justice Act 1999 (recovery of insurance premiums by way of costs) applies;
(m) 'insurance premium' means a sum of money paid or payable for insurance against the risk of incurring a costs liability in the proceedings, taken out after the event that is the subject matter of the claim;"
It is thus necessary, when considering whether, or to what extent, a premium is recoverable by way of costs to ask the question whether it is consideration paid or payable for insurance against the risk of incurring a costs liability in the proceedings.
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