After-the-event (ATE) insurance premiums are not part of the “costs of an appeal” to the Supreme Court, Lord Neuberger has ruled.
The president of the Supreme Court said that, however reasonable it was to have taken out the cover, in the absence of “agreement or specific statutory sanction”, a successful party could not recover it.
Lord Neuberger was ruling on the costs of a Scottish property dispute between a father, who took out ATE insurance to protect him against liability for the other side’s costs if he lost at the Supreme Court, and his son, who was funded by legal aid.
Having won the case at the Supreme Court in 2013, the father sought to recover his costs, but Lord Neuberger said the arguments raised an issue which caused the court “some concern”.
Delivering judgment in McGraddie v McGraddie (Scotland) (Costs)  UKSC 1 , Lord Neuberger said the Scottish Legal Aid Board (SLAB) argued that, as a matter of principle, the father’s £40,000 premium was not recoverable.
Under rule 46(1) of the Supreme Court Rules, the court can make “such orders as it considers just in respect of the costs of any appeal” as long as, under rule 51, they were “reasonably incurred and reasonable in amount”.
Lord Neuberger said that, on the facts of the case, he could not see a “good policy reason” for depriving the father of “reimbursement of the ATE premium” if he would otherwise be entitled to it.
“He was not an especially rich person, and it was perfectly reasonable and sensible to protect himself in this way before embarking on an appeal to this court to establish his ownership of a property and to vindicate his rights, even though it involved a substantial premium.”
However, Lord Neuberger said there was “obvious force” in the SLAB’s argument that the ATE premium was not recoverable as it was “simply not part of the costs of the appeal, as a matter of ordinary language”.
He concluded that, as a matter of principle, in the light of the relevant court rules and “on the basis of consistent judicial authority on both sides of the border”, the law was clear.
“In the absence of agreement or a specific statutory sanction (either expressly or through valid delegated legislation) to the contrary, a successful party to litigation cannot recover an ATE premium, however reasonable it was to have incurred it, as part of his costs or expenses of legal proceedings.”
Lord Neuberger awarded the father his expenses of the appeals both in the Inner House and Supreme Court against the Scottish Legal Aid Board, but “with regret” directed that this should not include his £40,000 ATE premium. Lady Hale and Lord Reed agreed.