A successful claimant cannot recover the cost of after-the-event (ATE) insurance taken out before an appeal to cover the risk of the original ruling and costs order being reserved, a divided Court of Appeal has decided.
The first time this point has been decided on, Lords Justice Rix and Etherton, with Lord Justice Patten dissenting, said the unsuccessful defendant would be unfairly prejudiced if this was allowed, especially as the claimant had not had the benefit of ATE cover in the original proceedings.
In Hawksford Trustees Jersey Ltd v Stella Global UK Ltd & Anor  EWCA Civ 987, the Court of Appeal rejected the defendants’ appeal. While accepting the normal order for costs following the event, they raised a discrete point of principle over the recoverability of the £394,638 ATE premium, which was taken out on the eve of the appeal hearing – much of this was to cover adverse costs for the trial and appeal.
The respondent’s costs aside from the ATE premium were £63,650 and the appellants’ costs £68,502. The policy was brokered by TheJudge.
The case turned on the interpretation of section 29 of the Access to Justice Act 1999 and specifically whether, when it talks about a party taking out insurance “against the risk of incurring a liability in those proceedings”, those last two words referred to just the appeal or to the entire case.
Lord Justice Rix said it could be either – while it would be natural to think of an appeal as arising from and being part of the same proceedings, “it is nevertheless clear that trial and appeal have been treated as separate proceedings for the purposes of costs”.
He concluded that this should be the case here and that to allow the premium to be recoverable in relation to the trial costs would increase those costs retrospectively, “to the prejudice of the opposing party”.
Lord Justice Etherton said that the risk of paying the costs below was one that the claimant accepted at the time; “in that respect an appeal does not create any new risk” and so it was hard to see what “meritorious or logical policy” would be served by allowing recovery of the premium.
Giving the lead, but ultimately dissenting, judgment, Lord Justice Patten argued that it was “most unlikely that Parliament intended to lay down a rule ab initio that proceedings at first instance and those in the Court of Appeal should be treated as separate ‘proceedings’ within the meaning on section 29 to the end that it should be impossible to recover any part of ATE insurance against having to meet the costs below as part of the consequences of being an unsuccessful respondent to an appeal”.
He said he was sympathetic to the potential injustice of this position, “but they are, I think, inherent in many aspects of the 1999 reforms” and are in part behind the Jackson reforms.
Roger Stewart QC and Roger Mallalieu, instructed by Clifford Chance, acted for the appellants, and Nick Bacon QC, instructed by DLA Piper, for the respondent/claimant.