9 May 2017Print This Post

Insurer loses bid to appeal indemnity costs issue in unusual case where expert agreed to cover its costs

Costs: no benchmark in case like this

An insurer has failed to convince a judge that a medical expert who agreed to cover its costs in a whiplash case should be ordered to pay on the indemnity basis.

Ageas Insurance appealed against the ruling at Liverpool County Court, but the appeal was rejected last month by the High Court.

Dr Grace Kerali agreed to pay the costs after being accused of exaggerating medical evidence, and she subsequently explained that she decided to do so “on a commercial basis to simply bring matters to a close”.

The claimants first abandoned Dr Kerali’s medical report and then the claim in its entirety. She had voluntarily joined herself as an interested party to the action. The defendant insurer sought its costs from her, but shortly before entering the witness box, Dr Kerali instead agreed to pay them.

The case was described by trial judge, HHJ Wood QC, as “highly unusual” and possibly unique.

Although the claims made by the accident victims were said by the judge not to be worth more than “a few thousand pounds for each”, counsel for Ageas argued that Dr Kerali should make an interim payment of £75,000.

HHJ Wood said that if the indemnity basis was used, not only would the question of proportionality be removed, but the burden of proving whether they were reasonable would be transferred to the paying party.

He said “substantial costs” had undoubtedly been run up by the insurer “in an attempt to challenge the evidence of Dr Kerali” and to show she was in breach of her duties; “many cases up and down the country” were stayed pending the outcome of this case.

The judge said that whether costs were awarded on the indemnity basis depended on whether the facts of the case or conduct of the parties took the situation “away from the norm”.

He said the difficulty was that in this “highly unusual” case there was “no benchmark by which the norm could be assessed”.

HHJ Wood said Dr Kerali’s conduct for many months was to defend her professional standing, and he was “uncomfortable at being invited to come to the conclusion, in the absence of any other precedent for this highly unusual order to be made, that Dr Kerali’s conduct in seeking right up to the eleventh hour and fifty-ninth minute, to protect her professional standing is such that would take this case out of the norm”.

He went on: “She is already ‘out of the norm’ by agreeing to pay costs when she has had no meaningful involvement in the litigation since the previous court order.

“Her role was very limited; it was that of an interested or intervening party, and little more than that.

“She has never been in a position to protect herself by making Calderbank or part 36 offers, or seeking to deflect the inevitable course of this litigation.”

HHJ Wood ordered that the costs which Dr Kerali agreed to pay should be assessed on the standard, and not on the indemnity, basis.

In a transcript of the discussion in court which followed, he rejected a request by counsel for Ageas for an interim payment from Dr Kerali of £75,000, and reduced it to £40,000, adding that it “no way reflects my opinion as to what costs may be recovered because it is completely outwith my competence, expertise and understanding”.

Ageas appealed to the High Court, but Mrs Justice Andrews rejected the application for permission to appeal last month.

In the order, seen by Litigation Futures, Andrews J said: “The appellant insurers in the present case were and are arguing for a position in which the requirement for their costs to be proportionate is removed.

“That is essentially a matter for the trial judge, rather than an appellate court, to resolve, on a case by case basis.

“The ability of the costs judge to preclude the recovery of disproportionate expenditure is extremely important, and therefore the jurisdiction to award indemnity costs, especially against third parties, should be sparingly exercised.”

By Nick Hilborne

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