In this post Richard Viney of 12KBW examines the recent case of West v Stockport NHS Foundation Trust and Demouilpied v Stockport NHS Foundation Trust in which the Court of Appeal ruled that block-rated ATE premia will be recoverable for the ‘foreseeable’ future.
Clinical negligence is one of the limited areas where ATE insurance premiums are recoverable by a successful claimant from an unsuccessful defendant, albeit only in relation to that part of the premium that covers disbursements for liability and causation experts.
In low value claims the premium for readily available insurance policies can often exceed the value of the claim.
That has led to substantial costs litigation about the amount of any recoverable premium in low value successful claims. The NHSLA has relied upon proportionality arguments to try and reduce the amount of costs their ‘clients’ have to pay in this respect.
ATE premia have been challenged on a case-by-case basis with results predictably varying from judge to judge. These two cases are the first time the matter has been considered at an authoritative level.
In both cases the ‘recoverable’ element of the ATE premium was £5,088, the policy being an ARAG block-rated policy. The claim in West was settled for £10,000, the claim in Demouilpied was settled for £4,500. The Court of Appeal had to consider on what basis those premiums could be challenged as being either unreasonable or not proportionate.
At the first hearing before the Court of Appeal the parties ‘accepted’ that further evidence would be required and the Court of Appeal referred the matter to Kerr J and Master Leonard to hear evidence and make determinations on various issues which the Court of Appeal considered were necessary to its consideration of the issues.
In dealing with reasonableness the Court of Appeal (in a joint judgment of all three judges) concluded (§§56&69):
– challenges on reasonableness of block-rated ATE premiums should not be decided on a case-by-case basis;
– issues of reasonableness include general market factors as the policies are block-rated;
– DJs and Costs Judges do not have the expertise to judge reasonableness of such policies, absent expert evidence;
– it is for a paying party to establish a substantive issue;
– having found that the premium was reasonable, that the issue of reasonableness has now been settled for the foreseeable future.
The Court of Appeal also had to consider the issue of proportionality where the costs exceeded the values of the claims, partly due to the size of the ATE premiums.
The Court of Appeal gave some guidance on the factors to be taken into account on proportionality (§§70-78), but then concluded that, once it was found to be reasonable, a block-rated ATE premium could not then be considered to be disproportionate.
In considering the correct approach to proportionality the Court of Appeal concluded that costs which were ‘fixed and unavoidable, or which have an irreducible minimum, without which the litigation could not have been progressed’ should be left out of account (§82). The Court of Appeal suggested that this should not disadvantage the paying party as an assessing judge could look at other elements of costs when seeking to reach a proportionate sum on assessment (§84). The Court of Appeal was eager to emphasises that leaving some costs which are fixed and unavoidable out of account when considering proportionality was not reintroducing the Lowndes test of proportionality. Readers who are more astute than I am will be able to see the clear difference between ‘fixed and unavoidable’ costs and the ‘necessary and reasonable’ costs protected by the Lowndes approach to proportionality.
The Court of Appeal then gave guidance as to the correct approach to assessment under the post-Jackson proportionality test. That involved:
– a line-by-line assessment;
– thereafter looking at the total to see if it is ‘disproportionate’;
– if it is disproportionate then a further assessment of the proportionate costs for ‘various categories of cost, such as disclosure or expert’s reports, or specific periods where particular costs were incurred, or particular parts of the profit costs’ should be carried out (§90). That assessment should leave out of account costs which are unavoidable such as court fees and ATE premiums;
– once that exercise has been undertaken the final figure is the amount allowed.
Guidance as to the correct approach to assessment of costs in low value claims where proportionality is a major issues is to be welcomed. However, the intellectual justification for differentiating ‘unavoidable’ costs such as court fees from ‘necessary’ costs such as the drafting of pleadings is difficult to identify. The Court of Appeal has attempted to preserve the move away from Lowndes which the Jackson reforms considered necessary, and the restriction on recovery of costs that are necessary for litigation if they are considered to be disproportionate. It is easy to anticipate that Claimant’s will now seek to classify costs as ‘unavoidable’ wherever possible in assessments of costs in such claims.
For the time-being the Court of Appeal has ruled on block-rated ATE premia. They will be recoverable for the ‘foreseeable’ future.
4 August 2019