Wajid Ali v Rajid Ali (First Defendant) Co-operative Insurance Society Ltd (Second Defendant) Craig Lodge (Third Defendant) Allianz Insurance Plc (Fourth Defendant)

Hearing date: 25 April 2013

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The application

On 10 November 2010, at the conclusion of the trial in this road traffic claim, I made the following order for costs:

"The Second Defendant to pay the Third and Fourth Defendants' costs of the action, it being recorded that it was reasonable for the Third Defendant and Fourth Defendant to be represented separately in the action."

That part of the order which I have underlined constituted in effect a direction to the costs judge ("the costs direction") to approach the detailed assessment of costs on the basis that, in principle, it had been reasonable for the Third and Fourth Defendants to be separately represented in the action. It was, however, accepted by all parties that, despite the costs direction, it would be open to the costs judge to examine each step in the claim and to decide whether, in relation to that individual step, separate representation had been necessary, reasonable and/or proportionate.

The Second Defendant now applies for an order revoking the costs direction on the ground that the information which gave rise to the making of the direction was inaccurate and did not properly reflect the true funding arrangements as between the Third and Fourth Defendants.

On 25 April 2013 I heard oral submissions from Mr Benjamin Williams, counsel for the Second Defendant, and from Mr William Norris QC, representing the Third and Fourth Defendants. There were witness statements from Mr Emerson Wallwork, a partner in Weightmans LLP, solicitors for the Second Defendant, and from Mr Jonathan Bingham, associate solicitor at DAC Beachcroft Claims Limited, solicitors representing the Third and Fourth Defendants.

The claim

On 4 April 2008, the Claimant suffered catastrophic spinal injuries in a collision which occurred whilst he was travelling as a passenger in a car driven by his brother. He commenced proceedings against his brother (the First Defendant) and against the Third Defendant who was the driver of the other car involved in the collision. The First and Third Defendants blamed each other for the collision.

At the time of the accident, the First and Third Defendants had policies of insurance with, respectively, the Second Defendant (Co-operative Insurance Society) and the Fourth Defendant (Allianz Insurance Plc). However, the Second and Fourth Defendants both obtained declarations from the court entitling them to avoid the policies. They were joined in the action as Article 75 insurers and agents for the Motor Insurers' Bureau.

At the conclusion of the trial, I found that the First Defendant had been wholly to blame for the accident. I therefore entered judgment for the Claimant against the Second Defendant (it being agreed between the Claimant and the Second Defendant that this was the appropriate order in the light of my finding). I also made various consequential orders, including the costs order set out at paragraph 1 of this judgment.

The background to the making of the costs direction

The Third and Fourth Defendants were represented by different counsel and solicitors and, during the preparations for trial, it became clear that they intended to have separate representation at the trial. Before the trial started, the solicitors for the Second Defendant raised in correspondence the issue of the Third and Fourth Defendants' separate representation. In a letter dated 5 November 2010, written to the Fourth Defendants' solicitors, they observed that, in view of the common interests between the Third and Fourth Defendants, they regarded separate representation as "wholly inappropriate". They indicated their intention to raise objections to the trial judge if separate representation was maintained. They went on to give notice that, if the court were to allow the separate representation to continue, they would raise objection to the disproportionate costs caused thereby. By letter dated 8 November 2010, the Fourth Defendants' solicitors responded by saying that the Third and Fourth Defendants were entitled to separate representation and that the Second Defendant was not entitled to an order preventing them from having such representation.

In his Skeleton Argument for the trial dated 5 November 2010, Mr Norris, who was then representing the Third Defendant only, addressed the issue of separate representation:

"… D4 sought and obtained a declaration pursuant to section 152(2) of the Road Traffic Act 1988 that it was entitled to avoid the policy on the grounds of material non-disclosure. D4 therefore stands as Article 75 insurer and D3 is potentially at personal risk.

Hence the decision that D3/D4 should have separate representation both as regards solicitors and counsel … However, there is no conflict as regards the analysis of the issues of primary liability and/or contributory negligence and we shall take care to keep to a minimum any duplication of effort as regards advocacy at the trial."

In his Skeleton Argument dated 8 November 2010, Mr Stephen Grime QC for the Fourth Defendant adopted Mr Norris' submissions on separate representation. In the event, no application about the Third and Fourth Defendants' representation was made to me at the beginning of the trial on 9 November 2010 or at any stage up to the time when I gave my judgment.

In oral submissions following my judgment on 10 November 2010, Mr Norris returned to the question of separate representation. He said (transcript at page 14, line 31 et seq.):

"The only possibly controversial issue is whether there may be two sets of costs both for the third and fourth defendants, who are both successful. It is that that I will address, if I may, very shortly, recognising as a reality that, when it comes to assessment and looking at the costs of the third and fourth defendants, there will obviously be debate about, is there any overlap? That is the right time for that to take place. As a matter of fact, most of the costs, most of the solicitors' costs, will be those of the fourth defendant. There is, in fact, no overlap of witnesses, as you can see, between the third and fourth defendants or indeed of experts. But those are matters, really, for assessment when the time comes.

The question of principle that you must decide, we respectfully submit, is whether, as a matter of principle, two sets of costs are justified, both the third and fourth defendants'. I do not know if it is still controversial – it evidently was in the opening – but let me just explain whey we submit it is perfectly clear that each side is entitled to its costs, each successful side, the third and fourth defendants, first, because, the third and fourth defendants are separate parties. There is a potential conflict between D3 and D4 arising out of the fact that D4, like D2, turns out not to have valid insurance. As such, both D3 and D4, if I may use that shorthand, are entitled to be represented, and that is why both D3 and D4 are parties in the action. "

Mr Norris went on to argue that the Third and Fourth Defendants had acted proportionately and had sought to avoid duplication of costs in a variety of ways.

Mr Grime effectively adopted Mr Norris' oral submissions on the need for separate representation (transcript at page 16, line 3–4). He submitted that, had my findings on negligence been different, liability to meet the claim might have been shared between two potential Article 75 insurers, the Second and Fourth Defendants. He said that this possibility (which was unprecedented in his experience) had provided a further justification for separate representation.

Counsel then representing the Second Defendant, Mr Timothy Horlock QC initially sought to persuade to me not to express any view about the separate representation of the Third and Fourth Defendant. He gave the following reasons for this position (transcript at page 17, line 21 et seq.):

"… First, the assertion of a conflict of interest between the third and fourth defendant does not make it so. For my part, I cannot identify at this stage that there is such a conflict of interest as would entitle there to be separate representation. It is correct, as Mr Grime suggests, that there may be issues before the MIB's technical committee hereafter, but those issues arise only after the event and have not arisen yet, and indeed, if your Ladyship's judgment stands, they remain irrelevant because this will never get [to] the technical committee.

The next point is that whatever the third defendant's liability was going to be, pursuant to Article 75, in our understanding, the fourth defendant was obliged to meet it and, that being so, I fail to understand how there can have been a conflict that entitled that separate representation.

The next point is that one would have to consider the retainer and the extent of the retainer, the terms of it, as between the third and fourth defendant because what we do not know and what one cannot investigate at this stage – and I am not inviting the court to; I am just identifying a potential issue. The third...