Margaret Kelly and Another v Black Horse Ltd
| Jurisdiction | England & Wales |
| Judge | Senior Costs Judge Hurst |
| Judgment Date | 27 September 2013 |
| Neutral Citation | [2013] EWHC B17 (Costs) |
| Court | Senior Court Costs Office |
| Docket Number | Case No: PTH 1300060 |
| Date | 27 September 2013 |
[2013] EWHC B17 (Costs)
IN THE SENIOR COURTS COSTS OFFICE
TRANSFERRED FROM WANDSWORTH COUNTY COURT
Royal Courts of Justice
London, WC2A 2LL
Senior Costs Judge Hurst
Case No: PTH 1300060
Mr Tyler (Costs Lawyer) (instructed by Black Lion Law LLP) for the Claimants
Mr Daniel Saoul (instructed by SCM Solicitors, Barnet) for the Defendant
Hearing date: 1 August 2013
In 2001 the Claimants took out a loan with Black Horse Ltd and purchased payment protection insurance at the same time. In 2011 the Claimants brought an action on the basis that the insurance had been mis-sold. That claim was fully defended and went to a trial before Deputy District Judge Dagnall, who, after a full day's hearing, ordered that the current balance outstanding from the loan agreement between the parties of £5,202.63 be written off by the Defendant, that the Defendant should re-pay the Claimants the sum of £6,000 and that the Defendant should pay 70% of the Claimants' costs to be subject to detailed assessment if not agreed. The detailed assessment came before me on 1 August 2013, when the majority of issues were dealt with. One of the outstanding issues concerned the level of the ATE premium, which, including IPT at 6%, was claimed at £15,900.
Given the great number of PPI mis-selling claims which are currently before the courts, and given also that I was told that the issue of ATE premiums recurs constantly, I decided to reserve judgment and hand down a written judgment in the hope that this may assist in resolving future disputes in this area.
The Claimants' bill including disbursements, success fees and ATE premiums totals £46,661.22 (70% being £32,662.85). The base costs were between £13,000 and £15,000 (depending upon which party's measure one adopts). The Defendant points out that their own costs, including counsels' fees, amounted to a total of £5,837.10.
The success fee had been claimed at 100%, but Mr Tyler, who appeared on behalf of the Claimants, had to accept that the risk assessment was entirely meaningless. Having heard submissions as to the level of risk when the CFA was entered into, I formed the view that the prospect of success was 65%, and accordingly the success fee should be 53.85%.
SUBMISSIONS
In their Points of Dispute the Defendant pointed out that the insurance policy covers adverse costs and the Claimants' own disbursements. Accordingly, excluding the Claimants' Solicitors' and Counsels' own fees, the Claimants' disbursements totalled £1,406.20. This, added to the £5,837.10 Defendants' costs, meant that the insurer was facing a potential liability of £7,243.30 in respect of which the Claimants have paid a premium of £15,900. The Defendant submits that as a result of the detailed assessment the ultimate exposure would be far less than the figure I have mentioned. Given that the detailed assessment is still continuing, I do not think it appropriate to speculate as to the possible ultimate exposure, but to proceed on the basis of the estimated maximum liability (EML).
In the Points of Dispute the Defendant argued that since the premium was significantly more than the damages recovered, it was disproportionate, and asked for disclosure of the calculation which had been undertaken in order to arrive at the premium claimed. No such disclosure was provided.
Mr Saoul relies on: the decision of the Court of Appeal in Rogers v Merthyr Tydfil County Borough Council [2006] EWCA Civ 1134, my decision in Motto & Ors v Trafigura [2011] EWHC 90207 (Costs) and the Court of Appeal decision in the same case [2011] EWCA Civ 1150, and Redwing Construction Ltd v Wishart [2011] EWHC 19 (TCC) Akenhead J. Mr Tyler also relied in part on these judgments. Below I quote selected passages from the judgments. Although there is a great deal more in them than appears in this judgment, no useful purpose would be served in reciting the judgments more extensively.
The decision in Rogers v Merthyr Tydfil County Borough Council was given on 31 July 2006. The case concerned a DAS 80E ATE policy. The policy was staged and claimed at £5,103, plus IPT. The damages in the case (an injury to a child who fell over in a park) were agreed at £3,105 plus interest. On appeal to the Circuit Judge the ATE premium was reduced to £900. Lord Justice Brooke gave permission for a second appeal, and invited submissions from a number of interested parties, including other ATE insurers. At the request of Brooke LJ, I held a case management conference and took evidence from Mr Bellamy, who was DAS's operations manager and from Mr Carter, the Claimants' solicitor. The Respondents adduced written evidence from three witnesses, none of whom were able to attend the CMC. These were: Mr Mitchell (assistant solicitor in the firm representing the Respondents), Mr Boobier (a partner in that firm) and Mr Hudman (a claims executive with Marsh Insurance Brokers). The Court of Appeal recorded that I had accepted what Mr Bellamy said, in so far as it was factual evidence. His evidence was to the effect that:
"33. For all but the more serious or specialised personal injury claims, ATE insurance is block rated, rather than individually assessed. For block rating to work the insurer needs to be sure that it is receiving a full and fair selection of cases ranging from those where liability is unlikely to be in doubt, to those where it is contested. In order to avoid adverse selection, it is standard practice for ATE insurers to require solicitors to insure all available cases with the ATE provider. In practice, therefore, Claimants' solicitors cannot simply pick and choose from a variety of products and offer different policies to different clients. This approach is in any event incompatible with block rating.
34. The level of premium is not generally … predicated by or related to the amount of damages. It is set by reference to the risk to the insurer and his exposure to costs and disbursements in a failed case.
35. In setting a premium ATE insurers adopt two different approaches. They either adopt a single fixed premium that applies throughout the case whenever it is concluded, or a staged, or stepped, premium (as in this case), where the amount payable increases as the case progresses. Although fast track cases can be insured by single fixed premiums, most providers require multi-track cases to be separately rated."
Paragraphs 39 to 44 of the judgment set out the details of the DAS ATE product:
"43. In the present case the figures passed to the senior underwriter were:
(i) Claimant's disbursements estimated at £2,000;
(ii) Opponent's profit costs estimated at £3,000;
(iii) Opponent's disbursements estimated at £1,500;
(iv) Total EML £6,500.
44. The underwriter is then required to assess the risk and to apply a percentage in order to calculate the premium. In this case liability had been denied and there was no Part 36 offer. The prospects of success had been assessed by case handlers as "acceptable", which in effect meant 51%. Mr Bellamy would not expect prospects of success to be rated much higher than this in a case about to go to trial where liability was still denied. Based on that information the underwriter applied a rate of 54% to the EML, producing a third stage premium of £3,510 plus IPT. The insurers expect to lose about half the cases which go to trial. Defendant insurers will therefore be called upon to pay the Stage Three premium in about 2 1/2% of all cases."
The court went on to consider a reasonable allowance for overheads (paragraph 52 ff).
Having reviewed the evidence, the court stated:
"96. This is the first occasion on which the reasonableness of an ATE premium has been considered authoritatively by this court since its landmark decisions in Callery v Gray (No 1) [2001] EWCA Civ 1117; [2001] 1 WLR 2113 and Callery v Gray (No 2) [2001] EWCA Civ 1246; [2001] 1 WLR 2112. In those two judgments the court was principally concerned to decide whether an ATE premium was reasonable when ATE cover was taken out by a claimant before the first letter of claim was made, and when the defendant's reaction to the claim was still unknown. On the present appeal, three main issues arise for decision:
(i) What is the proper approach to proportionality in a small personal injury case where the ATE premium may appear large in comparison with the amount of damages reasonably claimed?
(ii) What is the proper approach to evidence of reasonableness of the choice and of the amount of the ATE premium in such cases?
(iii) Are both staged (or stepped) premiums and single premiums for ATE insurance legitimate for the purposes of the recoverability of an ATE premium by a successful claimant, and is it reasonable that such premiums should be wholly or partially block-rated?"
Dealing with the size of the premium, the court stated:
"109. In the present case the total EML of £6,500 compared favourably with the actual outturn of £6,875 revealed to the deputy district judge. Given the defendants' determination to go to trial, the handler's assessment of the risk at no greater than 51% was not unreasonable, particularly as DAS's experience was to the effect that more slipping and tripping cases taken to trial were lost than won. And on these figures it is impossible to say that a total premium of £4,680 was unreasonable. Put quite simply, if in two cases insurers face a 50% risk of having to pay out £6,500 on one of them, it is reasonable for them to charge a premium of £6,500 (not allowing for overheads or profit) on each. On the one they win, they will be able to get their premium paid by...
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