Proportionality is one of the major issues that we find we are dealing with at the end of a matter, particularly in the small-to-medium-value claims. Why was it introduced? It was considered that the then existing system was not working and that a system needed to be put in place which would “promote access to justice at proportionate cost”. In 2009, Court of Appeal judge Sir Anthony May said: “Assessments which have to concentrate retrospectively on what the winning party has spent will always risk producing a disproportionate result.”
Where does after-the-event (ATE) insurance go from here? If you asked most providers that question in 2013 in the lead-up to LASPO, then you could be forgiven for thinking that there wouldn’t be an ATE market in 2017. If you asked ATE providers now, most would at best be cautiously optimistic about the future.
Before the Jackson reforms, the relationship between proportionality and additional liabilities was clearly defined. One of the key reforms was the introduction of a new proportionality test. Unfortunately, the new rules are silent as to the application of this test to additional liabilities. Unfortunately, the judges at the Senior Courts Costs Office are in disagreement as to the interplay between the new proportionality test and additional liabilities.
As the Association of British Insurers (ABI) supplies a list of excuses akin to ‘the dog ate my homework’ to pass the buck for rising insurance premiums to everybody but insurers, it’s time for a robust examination of the facts. Repair costs are indeed rising prohibitively. The ABI talks of repair costs rising by 32% over three years due to modern cars being more expensive to fix. Let’s not forget, however, the ongoing scandal of repair costs being over-inflated between insurers. Whilst they all try to score a point against each other, every motorist pays through their premium.
There is clear disagreement between masters in the Senior Courts Costs Office on a fundamental element in applying the proportionality test. The situation is compounded by an inability of the judiciary to agree on something as simple as how to apply an appropriate reduction once costs have been found to be disproportionate. How can this uncertainty have anything other than a detrimental effect on practitioners and clients? How can a practitioner provide accurate advice to a client on the application of the test, when the judges themselves cannot reach a consensus?
This year started well for personal injury lawyers with the Court of Appeal’s judgment in Broadhurst v Tan (February). Lord Dyson concluded that a claimant who beats their own part 36 offer at trial is not restricted to recovering fixed costs. Sales LJ inadvertently delivered a shockwave in SAPRD Oil v ADDAX Energy (March) by suggesting that a failure to obtain a recording at the first case and costs management conference that incurred costs in a budget were disproportionate meant those costs could not be challenged at a later date.
So, what are the implications of the decision of Master Leonard in Azim v Tradewise Limited  EWHC B20 (Costs). As reported recently on Litigation Futures, this was a routine low-value personal injury claim for damages caused by a minor road traffic accident in 2011. The claimant instructed three firms of solicitors under two pre-LASPO conditional fee agreements – the second of which was assigned from firm 2 to firm 3. Both provided for a 100% success fee.
Perhaps the alarm bells should have been ringing before AU Insurance Services went into administration last quarter. An uninspiring web presence and the virtual invisibility of company and employees on LinkedIn should not necessarily be cause for concern, but these have been challenging times for after-the-event (ATE) insurance providers.
The dictionary defines pro bono work as work ‘done or undertaken for the public good without any payment or compensation’ – in other words ‘free of charge’. Those three magical words are invariably subjugated by natural cynicism – ‘there’s no such thing as a free lunch’ and ‘you don’t get ‘owt for nowt’ spring to mind. Media-driven perceptions of the legal profession might engender similar sentiments. But no. The legal profession is not just a collection of businesses, it is a public service collective which has justice at its heart, and it is certainly no stranger to working for nothing.
The recent administration of insurance agent AU Insurance Services gave a real-life example of the difficult trading conditions in the post-LASPO era. We have seen law firms cease trading, but until now there have been fewer service providers casualties. Whatever the reason for AU’s failure, it is clear that the effect of the reduction in income post-LASPO is having an impact on a range of services. So what is the impact on a solicitor and their customers when their insurance provider goes in to administration/run off?