The Court of Appeal reinforces principle in Callery v. Gray

Joe Rose

Joe Rose, Costs Lawyer and London Office Manager at PIC reports.

The Court of Appeal has recently been asked to consider whether Courts should decide on a case by case basis, whether it was reasonable for a Claimant to have taken out insurance to cover expert reports.

In Peterborough & Stamford Hospitals NHS Trust v McMenemy & Ors [2017] EWCA Civ 1941, the Defendant asked the Court to depart from the principle in Callery v Gray [2002] UKHL 28 (27 June 2002) that entering into block-rated ATE policies for this purpose, at the same time as entering into a CFA, was a reasonable approach to litigation.

In his Judgment, Lord Justice Lewison considered that the post LASPO era had not changed the approach that had been taken, up until now:-

“It is clear from the Government’s formal response to Sir Rupert Jackson’s recommendations that ‘for reasons of public policy’, the Government decided to exclude ATE insurance premiums, relating to the cost of expert reports in clinical negligence cases, from the general abolition of their recovery.

“The concern was that Claimants might not be able to afford the ‘upfront’ costs of such reports, and thus that access to justice might be unduly restricted”.

Lewison LJ also considered the argument that an earlier draft of the rules barred Claimants from such practices, but inferred that the decision to omit such a change from the rules, should be considered to be indicative of the decision to allow this practice to continue, in order to allow access to justice:-

“The government knew, as Sir Rupert had reported, and as the case law made clear that ATE policies were taken out at the same time as a potential Claimant entered into a CFA and must have intended not to disturb that practice…”

Conflicting decision had been taken by previous Courts in relation to the two premiums claimed. The Court of Appeal also criticised this approach, reiterating the notion that the courts should not interfere with attempting to calculate what would be a reasonable ATE premium, a principle set out in Callery v Gray and reinforced in Rogers .v. Merthyr Tydfil CBC [2007] 1 WLR 808;

District Judges and Costs Judges do not, as Lord Hoffmann observed in Callery v Gray (Nos. 1 and 2) [2002] 1 WLR 2000 paragraph 44, have the expertise to judge the reasonableness of a premium except in very broad brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces. Although the claimant very often does not have to pay the premium himself, this does not mean that there are no competitive or other pressures at all in the market. As the evidence before this court shows, it is not in an insurer’s interest to fix a premium at a level which will attract frequent challenges.”

Lewison LJ took account of this in his Judgment by stating;

“The case law has also emphasised that Costs Judges do not have the expertise to second guess the insurance market, still less to deconstruct a policy that is offered as a package into its constituent parts… There was simply no evidence on which he could have come to the conclusion that any such limited ATE insurance was available in the market.”

However, Claimant Lawyers should be aware that paying parties are still able to argue whether or not the type of premium taken out, was reasonable in the circumstances;

“The old practice direction directed consideration to the question whether any part of the premium would be rebated on early settlement, and it may be that it would be unreasonable in some cases to take out a single premium policy rather than one with stage payments; or one with the possibility of rebated premiums.

“But those questions go more to whether the amount in question was reasonable or proportionate rather than to the question of principle whether ATE insurance may be taken out at all at the outset.”

Claimant lawyers should therefore continue to consider whether or not the appropriate type of ATE premium proposed, would ultimately be recoverable on an inter partes basis.

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