The Senior Costs Judge fell into the trap of considering an individual after-the-event (ATE) insurance premium rather than the basket of risk when he slashed a premium by 60% because he considered it unreasonably high, a senior circuit judge has ruled.
HHJ Karen Walden-Smith, the designated civil judge for the county court in London, said Master Gordon-Saker failed to follow the Court of Appeal’s guidance in the leading case of Rogers v Merthyr Tydfil CBC in 2006.
Banks v London Borough of Hillingdon concerned a claim for damages and loss after the claimant slipped on compacted snow and ice in Uxbridge town centre. Her solicitor acted on a conditional fee agreement and arranged ATE through DAS. At trial the claimant was awarded damages of £6,890.
Costs were agreed except for the ATE premium, for which the claimant sought £24,694. On provisional assessment, Master Gordon-Saker ruled that this was disproportionate.
He said: “It would be unreasonable to assume that the estimated maximum liability would exceed £15,000. The risk at trial would be no greater than 50%. The burn premium would be 0.5 x £15,000 = £7,500. Adding 25% for expenses and overheads produces £9,375.”
HHJ Walden-Smith – sitting with District Judge Lethem as assessor – said Rogers supported the ‘book-based’ approach to the calculation of premium. “There is not a determination of risk on a case-specific basis but on a ‘basket of risk’ with the successful cases supporting those that are lost.”
She said it was not for the master to re-calculate the premium without access to the whole basket of risk, and that he “misdirected himself in determining that Rogers permitted him to judge the reasonableness of the premium in very broad brush terms”.
The evidence before Master Gordon-Saker was clear that the premium was calculated on the basis of the basket of risk, and so by considering instead the prospects of success, he had taken the wrong approach.
HHJ Walden-Smith said: “The fact that a party has the benefit of a staged ATE insurance premium does not mean that the court is prohibited from intervening in determining the reasonableness of the costs of such insurance. However, as is clear from the judgment of Simon J (as he then was) [in the 2010 case of Kris Motor Spares v Fox Williams], it is necessary for there to be some evidence upon which the district judge or master can rely…
“In this case, the defendant, as the paying party, failed to adduce any evidence to support a challenge to the size of the premium, despite being challenged to do so by the claimant. In the absence of that evidence, the costs master did not have the evidence upon which he could resolve the challenge in the defendant’s favour…
“The master had fallen into the error of considering the individual case rather than the basket of risk.”
She ordered the parties to submit an appropriate agreed order for consideration and sealing, or she would give directions leading up to trial.
Costs firm A&M Bacon acted for the claimant on behalf of DAS.