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	England and Wales High Court (Senior Courts Costs Office) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Senior Courts Costs Office) Decisions >> Ashworth v Peterborough United Football Club Ltd. [2002] EWHC 9004 (Costs) (10 June 2002) URL: http://www.bailii.org/ew/cases/EWHC/Costs/2002/9004.html Cite as: [2002] EWHC 9004 (Costs)

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IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

		Supreme Courts Costs Office Cliffords Inn Fetter Lane London EC4A 1DQ
		10 June 2002

 

Master : Wright

1. The background to this litigation is explained in the narrative to the Claimant's bill of costs. By a Consent Order made in the Peterborough County Court dated 14 June 2001 the Defendant was ordered to pay £66,000 damages to the Claimant and the Claimant's costs of the action to be the subject of detailed assessment on the standard basis if not agreed.
2. The Claimant gave notice of commencement of assessment of bill of costs on 24 October 2001. The bill totalled £104,858.14.
3. Points of Dispute and Replies to the Points of Dispute were served.
4. The Claimant lodged a request for a detailed assessment hearing at the Peterborough County Court dated 10 December 2001.
5. By order dated 30 January 2002 the matter was transferred to be heard by a Supreme Court Costs Judge at the Supreme Court Costs Office.
6. Notice was given to the parties on 15 February 2001 that the detailed assessment would take place before me at 10.00 am on Friday 17 May 2002 at the Supreme Court Costs Office with a time estimate of one day.
7. On 13 May 2002 the Claimants solicitors Hill Dickinson wrote to the Supreme Court Costs Office saying that only two issues between the parties remained unresolved.
8. The remaining issues were:

"(1) Whether the Claimant is entitled to be reimbursed for all or part of the premium he paid for an "after the event" legal expenses insurance policy.

(2) Whether there should be any order relating to the costs incurred since 29 April 2002."

9. The Defendants dispute with respect to the recoverability of the Claimant's insurance premium (item 50 in the Claimant's bill of costs) states:

"50. A premium of £45,937.50 in December 2000 was paid to Saturn Professional Risks Management Limited. No indication has been given that the Claimant had no other pre-existing insurance cover.

Further, it is not reasonable for the Claimant to be reimbursed for this premium, because:

i. The Claimant could have taken out the insurance at the outset. It was obtained in December 2000, long "after the event" when the proceedings were well advanced;

ii. The amount of the premium is disproportionate and excessive, given the risks applicable in this case;

iii. Whilst the Defendants were informed of the proposal to take insurance, the amount of the expected premium was not disclosed. The warning was given as a means of exerting pressure on the Defendant to settle. The market for such insurance was undeveloped in December 1999 and is not yet established for the issue of premiums in cases of this sort;

iv. The risks included a risk that is outside the risk of incurring a costs liability that could not be passed on ie, a Deficiency of Damages."

10. The Claimants Reply states:

"50(i) The Claimant had no pre-existing legal insurance.

The Claimant did not take out after the event insurance immediately, as he was assessing the claim and his potential liability for costs. As the matter progressed, and it became clear that proceedings would become long and drawn out owing to the Defendant's refusal to make a reasonable proposal to settle, it was therefore necessary to obtain the insurance. An application for after the event insurance was made on 20/07/00 shortly after the Defence was filed. Had the Claimant taken out the insurance at the outset and the matter settled within a couple of months, then taking out the insurance policy would only have served to increase costs. The legal insurer's comments upon this point have been sought and are attached. They state that it is unlikely insurance would have been available from the outset as with Breach of Contract cases more detailed information is required to assess the risk and preliminary opinions are of little assistance to the insurers.

50(ii) The amount of the premium was the market rate at the time. The legal insurance company state they would not have provided a policy for any less, particularly as they were providing cover for both sides costs. In fact the legal insurers state that premiums are higher today than when the policy was taken out, since the experience of insurers has been poor and generally the market has suffered huge losses. Many legal insurance companies decline to cover employment law cases. As the Defendant states in point 50 (iii) the market for such insurance was undeveloped so on what basis of comparison can the Defendant claim the amount is excessive?

50(iii) The Claimant is not under any obligation to inform the Defendant of the amount of the expected premium in relation to the legal expenses insurance, in fact, as the Defendant was informed on 26 October 2000, a condition of the policy the Claimant had obtained was that he was precluded from revealing the exact insurance premium figure. However, it was made indelibly clear to the Defendant's Solicitors that the figure was substantial.

50(iv) The legal insurers were specifically asked whether the premium was affected by insolvency of the Defendant, deficiency of damages by Judge's indemnity, items (d), (e) and (f) on the policy schedule and the legal insurers stated it was not."

11. At the hearing on 17 May the Claimant was represented by Mr Wright who is a costs sman from the Claimant's solicitors Hill Dickinson. The Defendant was represented by Counsel, Mr Friston, instructed by Pothecary & Barratt.
12. Mr Friston said that the Defendant now accepted that the Claimant did not have any pre-existing insurance cover and that the policy did not provide for any rebate of premium.
13. There was an agreed bundle of relevant correspondence and other documents. Where necessary I shall refer to the documents in the bundle by the page numbers given.
14. The proposal form was signed by the Claimant on 17 December 2000 and countersigned by the Claimant's solicitor on 20 December 2000 (pages 145 and 146).
15. The proposal form states that the damages would amount to approximately £75,000 and that the prospects of success were put at 70-79%. It remarks (at the foot of page 145) that Counsel's opinion had previously been sent to the prospective insurers who were Saturn Professional Risks Limited ("Saturn").
16. The proposal form states that the Claimant's estimated costs to trial were:

Solicitors costs £25,000

Counsel's fees £20,000

General disbursements £2,000

Total £47,000

 

17. The Defendant's estimated costs to trial were stated to be similar to the Claimant's.
18. The trial date is stated to have been set at 11 - 18 June 2001.
19. The overall sum insured required was stated to be £125,000 to cover:

"A.	Defendant's costs
C.	Insured legal representatives fees and/or profit costs and disbursements.
D.	Insolvency of the Defendant (insured legal representatives disbursements).	) 25% ) of ) sum
E.	Deficiency of damages.	) insured
F.	Judge's indemnity	)"

20.  
21. The premium is put at: £43,750

plus 5% IPT: £2,187.50

Total: £45,937.50

22. The application also states that the matter had been presented to another insurer and declined.
23. The policy document was sent to the Claimants solicitors by Saturn on 22 December 2000.
24. The Claimant's solicitors had written to Greystoke Legal Services Limited with a proposal form on 2 May 2000 (pages 149 to 152).
25. The proposal form states the proposer's prospects of success at 80% and the level of cover for his own costs and disbursements at £50,000 with the same figure for the opponent's costs and disbursements. The general damages sought were stated to be £75,000. The proposer's statement and a copy of the proposed particulars of claim were enclosed.
26. The proposal was rejected by Greystoke by their letter of 23 May (page 153).
27. A proposal form was sent to Saturn on 20 July 2000. This was accompanied by the Particulars of Claim, the Defence, the Claimant's Statement, a copy of the contract dated 1 June 1999 and party and party correspondence (page 154).
28. On 31 July 2000 Saturn wrote asking to see counsel's opinion addressing the prospects of success in percentage terms. It also asked when the case was expected to reach trial and whether or not it was being run under a conditional fee agreement (page 156).
29. Counsel (who had by this time drafted the Particulars of Claim and the Reply) was on holiday until the end of August (page 157).
30. On 1 September the Claimant's solicitors wrote to Counsel's clerk asking for counsel's opinion on the merits of the claim in percentage terms (page 158).
31. The letter mentioned that witness statements had now been obtained from seven named witnesses and that they were all supportive of the Claimant's case with the exception of part of Mr Castle's statement which said that some of the senior players did complain about the Claimant's coaching methods in the weeks preceding his dismissal. However Mr Castle, Mr S Davies (who is one of the players who wanted a transfer to Tottenham Hotspur) and Mr A Davies (his father) were unwilling to sign their statements.
32. The letter added that a tape of the meeting on 2 January 2000 had been disclosed to the Defendant and that it had been agreed that the comments attributed to Mr Boizot (the Chairman of the Defendant) were made.
33. Counsel was asked to bear in mind when giving his opinion that the solicitors had already estimated the prospects of success as 70-79%.
34. Mr McParland's opinion dated 4 September 2000 (pages 198 to 212) was sent to Saturn on 4 September (page 159).
35. Saturn acknowledged receipt on 5 September but asked again for the additional information requested in their letter of 31 July (page 160).
36. On 6 September the Claimant's solicitors wrote to Saturn:

"We have a trial window from January to June 2001. We are currently waiting for a trial date from the court. The case will be heard at either Peterborough or Northampton County Court.

We estimate our total fees will be £50,000 which includes our fees; court fees; disbursements, including counsel's fees; but excludes VAT. The Defendant's allocation questionnaire lodged with the court estimates their minimum total costs at £22,500 exclusive of disbursements, court fees and VAT. We can only estimate the cost for the Defendant's counsel at trial but it is likely to be in the region of £20,000.

We would therefore suggest total cover of £125,000.

The file is currently being funded on a private client basis." (Page 161)

37. On 10 October Saturn replied:

"We are pleased to advise we are happy to offer cover in this matter. For a total sum insured of £125,000 where the matter is conducted under the usual private client arrangement the premium required will be £43,750 plus insurance premium tax (IPT) at a current rate of 5%. The total sum insured should be sufficient to take the matter through to trial.

This quotation is valid for a period of 30 days from the date of this letter. If cover is required at a later stage it may not be available although it would depend on the circumstances at the time.

Any material change in circumstances or new information obtained affecting your client's chances of success should be notified prior to requesting the case be placed on risk.

 

In order to issue a policy we require a completed proposal form, premium cheque and confirmation there have been no adverse change of circumstances affecting insurer's liability of which we have not been notified.

Please note this quotation may not be disclosed to the defendants or any other third party until such time as the premium is paid to and accepted by Saturn Professional Risks ...

We return the part of the proposal form previously completed together with a complete proposal form." (Page 162)

38. On 16 October the Claimant's solicitor Mr Upton had a telephone conversation with Derri-Ann Clark at Saturn asking various questions. Particularly the note says:

"You say that the insurance premium is calculated at 35% of the sum insured due partly to the advanced stage in the case when insurance has been taken out. In addition, the case has been categorised as complex and even if we had taken insurance pre-issuing proceedings the lowest premium that would have been offered would be 25% of the sum insured." (Page 164)

39. It is perhaps worth noting that at this stage the Claimant's bill shows that the solicitors' work started in December 1999 but that it was not open to the Claimant to recover the premium in respect of an insurance policy such as this if the policy was taken out before 1 April 2000. This only became possible when the Civil Procedure (Amendment Procedure No.3) Rules 2000 came into force on 3 July 2000 together with a new Practice Direction about costs.
40. On 26 October Mr Upton had a further telephone conversation with Derri-Ann Clark at Saturn. She informed him that there was no charge on the premium for Sections D, E and F. These are the sections of the policy which cover insolvency of the Defendant, deficiency of damages and Judge's indemnity (see paragraph 19 above). However, she pointed out that each of those sections only pay out 25% of the sum insured in the event of a claim (page 166).
41. On the same day (26 October) the Claimant's solicitors wrote to Saturn setting out their understanding of the way in which the insurance cover would work and asking if there were any other factors affecting the operation of the policy that their client should be aware of and asking if there was a detailed policy handbook to which he could refer before committing to the policy (pages 167 and 168).
42. Again on the same day (26 October) the Claimant's solicitors wrote to the Defendant's solicitors a letter in which they said:

"In the meantime, we should inform you that our client is in the process of taking out Legal Expenses Insurance to cover the costs of the trial of this matter. As a condition of the quote he has received, we are precluded from revealing the exact insurance premium figure given to our client, but we are sure you will be aware the figure will be substantial, given the costs estimated in our respective allocation questionnaires.

 

In addition, for the purposes of the quotation we obtained an estimate of our counsel's fee for conducting the trial and it appeared that our counsel's fees in the matter would be similar to our own. We have assumed the same for your counsel.

We felt it prudent to inform you of our client's intended course of action, before he actually commits to the policy.

Finally, the quotation is not open for an indefinite period and our client is required to commit to the policy by 9 November 2000." (page 169).

43. On 7 November Mr Upton telephoned to speak to Mr Warren of the Defendant's solicitors. He left a message saying that he was calling about his letter of 26 October regarding the legal expenses insurance. (page 179)
44. On 10 November the Claimant's solicitors wrote to the Defendant's solicitors:

"We have made numerous attempts to contact you over the previous few days to discuss our letter to you of 26 October (a copy is attached for easy reference).

If you are not prepared to discuss the implications of the letter with us, will you at least acknowledge receipt." (page 180)

45. On 15 November Mr Upton spoke to Mr Warren and informed him that the Claimant wanted to inform the Defendant before he took out the Legal Expenses Insurance to cover the costs of the litigation as the premium was a substantial figure. Mr Warren enquired about the figure for the premium and Mr Upton explained that it was between a third and a half of his client's net claim.

Mr Upton said that the Defendant had previously offered £10,000 but that the Claimant was seeking offers in the region of £60,000.

Mr Warren asked for a few days to look at the position on insurance premiums to decide whether his client would be liable for the premium in the event that the litigation was lost or settled and also for time to speak to his client.

Mr Upton said he would need to hear by the end of the week as the insurance company were applying pressure on them to accept the quote. (page 181)

46. In the meantime, on 7 November, Saturn sent the Claimant's solicitors an up to date policy wording and said:

"Your understanding of the policy appears to be correct." (pages 170 to 178)

47. On 16 November the Defendant's solicitors wrote:

"If the premium quoted by the insurers is substantial, then it indicates that the insurers do not think much of your client's case. It is unreasonable to incur a premium that is disproportionate and to expect recovery from the defendant for the cost of covering risks that ought properly to be borne by your client.

Whether he insurers his legal expenses or not and the extent of the cover is a matter for your client, but we reserve our client's position in relation to the reasonableness of your client's decision in the circumstances and generally on the matter at any taxation that might take place in due course."

There is a manuscript postscript to the letter which says:

"ps. Presumably the policy contains provision for rebating the premium, if the matter does not go to trial?" (page 182)

48. On 22 November the Defendant's solicitors telephoned Mr Upton to say that they were to meet Mr Boizot the following week and asking what the Claimant was expecting to recover at trial. Mr Upton indicated on a without prejudice basis that the Claimant might accept a figure less than that specified in the schedule of loss (page 184).
49. On 1 December the Claimant's solicitors wrote to Saturn:

"Our client now has a definite completion date for the sale of his house, this date being 8 December 2000.

Our client will be in a position to commit to the insurance policy and fund the premium, once funds are received after this date." (page 185)

50. On 1 December the Claimant's solicitors also sent a fax to the Defendant's solicitors saying that they had a final extension of time to accept the insurance quote and must therefore resolve the matter before close of business on 7 December 2000. The letter ends:

"If your client is minded to improve its offer of settlement, we suggest it does so before 7 December." (page 186)

51. On 12 December the Claimant's solicitors sent a fax to the Defendant's solicitors referring to the postscript to their letter of 16 November. They said:

"For the avoidance of doubt we do not think your presumption is correct. We have not identified a term in the insurance policy providing for a rebate of the premium in the event that the matter does not go to trial." (page 187)

52. On 18 December the Defendant's solicitors replied to the fax:

"We reserve our clients' right to assert that the obtaining of any insurance is unreasonable and that its cost is unreasonable, were your client to obtain an order for costs against our clients in respect of this claim." (page 188)

53. On 20 December 2000 the Claimant's solicitors wrote to Saturn with the completed litigation insurance proposal form together with the Claimant's cheque for the premium in the sum of £45,937.50 and asking them to acknowledge safe receipt.
54. As has been stated (paragraph 33 above) Counsel's opinion is dated 4 September 2000 (pages 198 to 212) and was sent to Saturn on that day.
55. Having outlined the facts as he saw them at that time, Counsel ends his opinion:

"Conclusion: Merits

On the evidence I have seen to date, I believe that the Claimant is likely to succeed. Obviously, there is an element of uncertainty in any litigation where the ultimate finding of fact may depend on the Judge's decision as to recollection of conversations. However, Mr Ashworth's version of events is by far the most consistent with what the club were saying to the press and to common sense.

In my opinion, I would put the prospects of success as being in the percentage range of 75% - 80%."

56. On 17 July 2001 the Court of Appeal gave judgment in the case which has become known as Callery v Gray (No.1). Its neutral citation number is [2001] EWCA Civ 1117.
57. That judgment was followed on 31 July 2001 by the Court of Appeal's judgment in what has become known as Callery v Gray (No.2), its neutral citation number is [2001] EWCA Civ 1246.
58. These judgments are reported in Costs Law Reports 2001 Service, Part 2 as case 15 and case 16 respectively.
59. On 21 March 2002 the Court of Appeal gave judgment in the case of Home Office v Lownds. Its neutral citation number is [2002] EWCA Civ 365.
60. On 16 May 2002 the Defendant's counsel lodged a skeleton argument.
61. In his very helpful and persuasive submissions at the hearing on 17 May Mr Friston referred to his skeleton argument and to Home Office v Lownds, Callery v Gray (No.2) and Master O'Hare's Report dated 23 July 2001.
62. He said that in run of the mill cases it was not appropriate for the court to delve into how the premium was calculated. The test was simply whether the receiving party had made an adequate search for a premium at reasonable rates.
63. However where, as in this case, a "bespoke" policy had been purchased, the court should enquire further. Even if there was very little evidence which could be put before it, the court should not be deterred from taking a view having regard to market forces even without the benefit of direct evidence.
64. In the Court of Appeal's judgment in Callery v Gray (No.2), the court said:

"11. It was common ground, and rightly so, that the court, when considering whether to award an insurance premium by way of costs, has to consider whether the premium is reasonable. It was also common ground that, insofar as the court finds that the premium is not reasonable, it can and should reduce it. There was debate as to the appropriate approach to the application of the test of what is reasonable."

65. Mr Friston submitted that it was up to the receiving party to show that the amount paid for the premium was reasonable and where, as in this case, the assessment was on the standard basis, the benefit of any doubt should be given to the paying party.
66. He submitted that the court should apply the proportionality test (following Home Office v Lownds) and if the court considered that the premium was disproportionate, the test of necessity as well as reasonableness should be applied. It was necessary however to have in mind Section 11.5 of the Costs Practice Direction:

"11.5 In deciding whether the costs claimed are reasonable and (on a standard basis assessment) proportionate, the court will consider the amount of any additional liability separately from the base costs."

67. In this case the premium charged of very nearly £46,000 amounted to nearly two thirds of the amount of expected recovery of £75,000. Therefore Mr Friston submitted the premium must be disproportionate.
68. He referred to the judgment of the Court of Appeal in Callery v Gray (No.2). The court had to consider whether the benefits provided by the policy were reasonable (and necessary if the court found the premium to be disproportionate), and whether the benefits were by law recoverable from the paying party.
69. CPR 43.2(m) defines "insurance premium" as:

"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."

70. In the present case the benefits provided by the policy were:

Benefit 1	Cover against the Defendant's costs.
Benefit 2	Cover against own costs.
Benefit 3	Collateral benefits providing: cover against the insolvency of the Defendant. Cover against deficiency of damages. Judge's indemnity.

 

71. The policy covered Defendant's costs and own costs in similar amounts being £47,000 for each. Accordingly the premium could be split equally between these two benefits ie, £21,375.50 for each.
72. Although the Claimant says that Benefit 3 is provided at no cost, the Defendant says there must have been some cost.
73. Mr Friston conceded that that part of the premium which was applicable to Benefit 1 was reasonably incurred and recoverable at law. The court only had to decide whether the quantum applicable to it was reasonable.
74. Section 11.7 of the Costs Practice Direction states:

"11.7 Subject to paragraph 17.8(2), when the court is considering the factors to be taken into account in assessing an additional liability, it will have regard to the facts and circumstances as they reasonably appeared to the solicitor or counsel when the funding arrangement was entered into and at the time of any variation of the arrangement."

75. Section 11.10 of the Costs Practice Direction states:

"11.10 In deciding whether the cost of insurance cover is reasonable, relevant factors to be taken into account include:

(1) Where the insurance cover is not purchased in support of a conditional fee agreement with a success fee, how its cost compares with the likely cost of funding the case with a conditional fee agreement with a success fee and supporting insurance cover.

(2) The level and extent of the cover provided.

(3) The availability of any pre-existing insurance cover.

(4) Whether any part of the premium would be rebated in the event of early settlement.

(5) The amount of commission payable to the receiving party or his legal representatives or other agents."

76. Mr Friston said that Section 11.10(1) of the Costs Practice Direction was only applicable to Benefit 2 which is dealt with further below.
77. With regard to the level of the premium attributable to Benefit 1, Mr Friston said that the court had to consider the costs and expenses of the insurer funded by the premium.
78. In paragraphs 21 to 26 of the judgment of the Court of Appeal in Callery v Gray (No.2) the court explains the four elements identified by Master O'Hare in his Report. These are the burning cost, the risk/profit costs, administrative cost and distribution commission.
79. Mr Friston referred me to paragraphs 36 to 40 of Master O'Hare's Report which deal further with these matters.
80. Mr Friston submitted that with regard to Benefit 1, the element of burning cost (on the basis of counsel's assessment of the chances of success) should be 20% of £60,000 (ie, £47,000 plus elements for VAT and other expenses) discounted by 20% for the likely reduction in the detailed assessment process. The resultant figure was £9,600.
81. The risk of profit cost should, he submitted, be roughly 10% of the burning cost (see paragraph 36 of Master O'Hare's Report).
82. Mr Friston suggested that the element of administrative costs/commission in a policy such as this could be put (generously) at £5,000.
83. The total amounted to £15,560 which he considered to be a reasonable sum to represent that part of the premium attributable to Benefit 1.
84. With regard to Benefit 2 (own costs) Mr Friston pointed out that the litigation was very well advanced by the time the policy was taken out on 22 December 2000. He submitted that no part of the premium should be allowed to cover the period before 1 April 2000 because premiums were not recoverable between the parties before that date.
85. He further submitted that the Defendant should not be obliged to pay for any part of the premium which was attributable to the period 1 April 2000 to 22 December 2000 because the Defendant was prejudiced by not knowing that its costs liability would become retrospectively increased. He accepted that nothing in the Civil Procedure Rules, Practice Directions or Regulations prohibited an insurance policy from having retrospective effect. However he submitted that the retrospective element of the premium should be disallowed because it was unreasonable of the Claimant to change his method of funding in this way.
86. With regard to that part of the premium which relates to the period after 22 December 2000, Mr Friston pointed to Section 11.10(1) of the Costs Practice Direction. He said that whether or not the Claimant was able to find a solicitor who would take his case on a conditional fee agreement at that time was irrelevant. The court had to determine how the cost of the insurance cover compared with the likely cost of funding the case with a conditional fee agreement with a success fee and supporting insurance cover.
87. Mr Friston said that, based on counsel's estimate of the Claimant's chances of success in the action, he had worked out that the success fee would reasonably have been calculated at 25% of the costs of the action after 22 December 2000. He did not have exact figures, but if those future costs were £18,000, the success fee would be £4,500. He suggested that the part of the premium attributable to Benefit 2 should therefore be £4,500.
88. He submitted that if the court did not accept that the premium should be so limited, the proportion of the premium attributable to Benefit 2 should be £10,560 (the element of administrative costs/commission having already been attributed to Benefit 1.
89. With regard to Benefit 3, Mr Friston said that the Claimant alleged that they had cost nothing but the Defendant did not accept this. If the submissions already made as to Benefit 1 (£15,560) and Benefit 2 (£4,500) were to be accepted by the court, then Benefit 3 would become irrelevant. However if these submissions were not accepted the Claimant would have to disclose evidence to establish whether these collateral benefits had indeed been provided without charge.
90. The Court of Appeal in Callery v Gray (No.2) had said at paragraph 16:

"16. In the meantime, where an insurance premium is challenged it must be open to the insurer, whose position is akin to a subrogated underwriter, to place evidence before the court in an attempt to demonstrate that the premium is reasonable having regard to the costs that have to be covered. Satellite litigation involving such an exercise is, however, unsatisfactory. The Judge can only be expected to give broad consideration to such evidence, for it is not part of the function of a judge assessing costs to carry out an audit of an insurer's business."

91. Mr Wright, the costs draftsman representing the Claimant, submitted that the test of proportionality which Mr Friston had said should be applied was not the right test. CPR 44.4(2) states:

"Where the amount of costs is to be assessed on the standard basis, the court will -

a. only allow costs which are proportionate to the matters in issue; and

b. resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party."

92. He submitted that the issues involved in the case were complex and the action was very hard fought. There were contested issues as to when and if the Claimant had been dismissed. The Defendant contended that he had not been dismissed at all.
93. There were issues as to the standard of the Claimant's coaching and evidence from professional footballers on that topic.
94. Barry Fry, the Defendant's manager was a very colourful character and two of the players were hoping to be allowed to transfer to Tottenham Hotspur. Fry was applying pressure on them to give evidence against the Claimant by threatening to block their transfers. Witnesses were refusing to sign their witness statements and there were therefore uncertainties as to whether their evidence could be established at trial. There were direct conflicts between the evidence of the Claimant and the evidence of the Defendant's Chairman and the Manager. The case had been listed for a six day trial.
95. There were therefore substantial risks at the time the policy was taken out that the situation could "blow up" in the Claimant's face at any time. He submitted that when the chances of success had been assessed there had not been a full awareness of the politics involved or of the character of those on the Defendant's side.
96. At the time the Claimant was looking for insurance, insurers were very reluctant to enter into such agreements. Saturn was the second to be approached. Greystoke had declined to give a quotation.
97. Mr Wright stressed that the test of proportionality had to be applied without the benefit of hindsight. The market for such insurance was, as the Defendant had said in the Points of Dispute, "not yet established for the issue of premiums in this sort of case".
98. He said that there was no way in which the matter could have been funded under a conditional fee agreement because of the risks involved. The Claimant had to consider some other method of funding because to continue to be represented on a normal fee paying basis was not an option for him.
99. Mr Wright said that there was no rule which prevented the Claimant from claiming reimbursement of the premium where costs previously incurred were covered by the policy.
100. He said that the correspondence showed that the Defendant had been informed of the likely level of the premium before the policy had been taken out and had gained confidence from it.
101. Mr Wright said that if the matter had been funded under a conditional fee agreement it would certainly not have incorporated a 25% success fee. The success fee would have been substantially higher than that.
102. Having heard the submissions of both parties and having considered the documents which were put in evidence in the bundle to which I have referred, I have come to the following conclusions.
103. With regard to the first contention that it is not reasonable for the Claimant to be reimbursed for this premium because the Claimant could have taken out insurance at the outset, I have carefully considered the letter written by Saturn to the Claimant's solicitors dated 26 November 2001 (page 130 of the bundle).
104. The letter says:

"1. Insurance probably would not have been available from the outset since in Breach of Contract cases more detailed information is required to assess the risk unlike for example a typical rear end shunt. Hence our request for counsel's opinion. Please note preliminary opinions are of little assistance to us.

 

2. We do not consider the premium disproportionate and would not have provided a policy for any less, particularly since we were providing cover for both sides costs.

3. The after the (sic) insurance market is still very much in its infancy and continues to develop. However premiums are certainly higher today than in 1999 since the experience of insurers has been poor and generally the market has suffered huge losses.

4. Whilst today we charge separately under D, E & F, when we issued this policy we did not charge any additional premium for these Sections, they were simply included free of charge."

105. It seems to me that Derri-Ann Clark of Saturn wrote that letter having had the opportunity to give the matter careful thought. I think more weight should be given to what she said in the letter than to what she is recorded as having said in her telephone conversation with Mr Upton on 16 October 2000 (paragraph 37).
106. I therefore conclude that on the evidence before me as provided by the insurers, insurance probably would not have been available at the outset. Accordingly this ground of dispute fails.
107. The second contention is that it is not reasonable for the Claimant to be reimbursed for this premium because the amount of the premium is disproportionate and excessive, given the risks applicable in this case.
108. I do not accept the Defendant's contention that it is relevant that the premium in this case is disproportionate when measured against the total sum insured. The Defendant would have to establish that the premium was not proportionate "to the matters in issue" (see CPR 44.4.2).
109. I accept the statement made in Saturn's letter of 26 November 2001 (paragraph 103) that they would not have provided a policy for any less.
110. Since I am satisfied as to that point, I would have to conclude that the Claimant should not have taken the policy out at all if I were to decide to disallow the premium.
111. The judgment of the Court of Appeal in Callery v Gray (No.2) says at paragraph 57:

"At the same time we are in no doubt that it is a primary objective of the present scheme that a litigant with an apparently meritorious claim should not be precluded from advancing it by the obligation to pay costs, or the risk of having to do so."

112. I have, in the course of this judgment, traced through the correspondence the history of the Claimant's search for after the event insurance. This started in May 2000 (shortly after after the event insurance became recoverable between the parties). That application was declined. The Claimant approached Saturn. They required counsel's opinion. It was not until September 2000 that the opinion was provided by counsel and sent to Saturn. They then provided a quotation. The Claimant's solicitors queried the amount of the premium and were provided with further information.

 

113. On 26 October 2000 the Claimant's solicitors notified the Defendant's solicitors that the Claimant was in process of taking out legal expenses insurance.
114. The Defendant's solicitors appear to have ignored this for some time. When eventually they did comment on 16 November they said:

"If the premium quoted by the insurers is substantial, then it indicates that the insurers do not think much of your client's case."

115. The Court of Appeal in Callery v Gray (No.2) said at paragraph 14:

"14. Unfortunately, Master O'Hare concluded that the market in ATE insurance was not yet sufficiently developed to enable him to identify standard or average rates of premium for different categories of ATE insurance. He expressed doubt as to whether market forces were yet sufficiently compelling. He received a considerable body of evidence of the costs of individual insurers, proffered in confidence, in an endeavour to form a view of the level of premium that was reasonably needed to cover costs ..."

116. Again at paragraph 68, the Court of Appeal said:

"68. Master O'Hare did his best to investigate premium rates in the market. He found that it was not possible to state standard or average premiums for different classes of business. He also found that results over several years had been uniformly poor, leading to several major increases in premium rates over those years ..."

117. Two paragraphs from Master O'Hare's Report seem to me to be very relevant:
118. In paragraph 17 he says:

"17. As well as noting the different categories and classes of insurance it is necessary to observe also that there are two different schemes, standard off the peg policies issued to all cases within the same class (see for example Abbey and The Accident Group); and one-off insurance policies (eg, policies issued by more specialist ATE providers such as Saturn). Premiums are lower in standard policies than they are in one-off policies. This is because the most difficult cases and therefore the higher risk cases are likely to gravitate towards one off insurance policies (although it was not proven before me to what extent this is true of RTA cases). The most difficult cases are also the ones in which the solicitor will be reasonably entitled to a higher than average success fee."

119. In paragraph 19 Master O'Hare says:

"19. For several reasons it is not possible to state standard or average premiums for different classes or average premiums for different classes or categories of ATE insurance. The industry is still immature and its results over several years have been uniformly poor. Premiums have undergone several major increases over those years. The range of projects offered by the industry and the details of profit costs and disbursements they cover are both extremely varied."

120. I conclude that it would not be reasonable to have expected the Claimant in this case to seek cover from other insurers. Given the market conditions prevailing at the time it seems to me unlikely that he would have found an alternative insurer who would have charged a lower premium. To insist that he should have done so would be to fail to have regard to CPR 1.1(2)(c) and in particular 1.1(2)(c)(iv). The Claimant's conduct in relation to his search for insurance and the efforts he made through his solicitors to try to resolve the dispute as illustrated by the correspondence seems to me to have been good.
121. In view of the complexity of the case the risks and the market conditions prevailing at the time I do not think that the tests suggested by Mr Friston for ascertaining the reasonableness of the premium for Benefit 1 and Benefit 2 are applicable. Furthermore I do not consider that it was unreasonable or unlawful for the Claimant to arrange that the cover under Benefit 2 should be retrospective. It seems to me that if it had been intended to prevent the cost of retrospective own costs cover from being recovered from the Defendant, the Rules, Practice Directions and Regulations would have so provided.
122. The only evidence there is as to the collateral benefits provided in Benefit 3 appears in paragraph 4 of Saturn's letter of 26 November 2001. I accept that no charge was made by Saturn for undertaking these risks.
123. With regard to the third contention, that it is not reasonable for the Claimant to be reimbursed for this premium because the amount of the expected premium was not disclosed, I have in this judgment carefully considered the correspondence and attendance notes in the bundle which are relevant. I am satisfied that the Claimant's solicitors gave the Defendant's solicitors as much information as they were obliged to give and that the Defendant was not prejudiced because his solicitors clearly took comfort from what they had been told about the level of the premium.
124. With regard to the fourth and final contention, that it is not reasonable for the Claimant to be reimbursed for this premium because the risks included a risk of incurring a costs liability that could not be passed on ie, a deficiency of damages, I have already found as a fact that the insurers made no charge for the collateral benefits. Accordingly, the objection has no relevance to the quantum of the premium.
125. I therefore find for the Claimant on the first of the two unresolved issues.
126. The second unresolved issue relates to costs. I would like the parties to let me have a note of their availability for a one hour hearing during the period 20 June to 19 July 2002.

CW\2\Ashworth v Peterborough FC